[ Page 5401 ]

CONTENTS

Routine Proceedings

Oral Questions

Assistance for Okanagan grape growers. Mr. Barlee –– 5401

Mr. Rose

PCB dump in Victoria inner harbour. Mr. G. Hanson –– 5402

School Canadiana. Mr. Harcourt –– 5402

B.C. Hydro contracting-out. Mr. Clark –– 5402

Residential community calling plan. Ms. A. Hagen –– 5403

Matsqui dump. Hon. Mr. Dueck –– 5403

Environmental Appeal Board. Hon. Mr. Strachan –– 5404

Ministerial Statement

Medical research funding. Hon. Mr. Dueck –– 5403

Mrs. Boone

Hydro and Power Authority Privatization Act (Bill 45). Second reading

Mr. Sihota –– 5404

Hon. Mr. Davis –– 5407

Utilities Commission Amendment Act, 1988 (Bill 46). Second reading

Hon. Mr. Davis –– 5408

Mr. Clark –– 5408

Ms. Edwards –– 5410

Hon. Mr. Davis –– 5411

Mineral Tenure Amendment Act, 1988 (Bill 58). Second reading

Hon. Mr. Davis –– 5412

Mr. Guno –– 5412

Hon. Mr. Davis –– 5412

Miscellaneous Statutes Amendment Act (No. 1), 1988 (Bill 36). Committee stage.

(Hon. B.R. Smith) –– 5412

Hon. Mr. Hagen

Mr. Sihota

Mr. Lovick

Hon. Mr. Davis

Mr. Rose

Miscellaneous Statutes Amendment Act (No. 2), 1988 (Bill 52). Committee stage.

(Hon. B.R. Smith) –– 5415

Mr. Blencoe

Hon. Mr. Couvelier

Ms. Edwards

Mr. Sihota

Ms. A. Hagen

Hon. Mr. Dueck

Mr. Jones

Hon. Mr. Brummet

Hon. Mrs. Johnston

Hon. Mr. Reid

Hon. Mr. Strachan

Mr. Rose

Hon. Mr. Veitch

Mr. Lovick

Hon. Mr. Davis

Mr. Gabelmann

Mr. Clark

Hon. L. Hanson

Family Relations Amendment Act, 1988 (Bill 48). Committee stage.

(Hon. B.R. Smith) –– 5434

Income Tax Amendment Act (No. 2), 1988 (Bill 62). Second reading.

(Hon. Mr. Couvelier)

Hon. Mr. Strachan –– 5434

Municipalities Enabling and Validating Amendment Act (No. 2), 1988 (Bill 54).

Second reading

Hon. Mrs. Johnston –– 5435

Mr. Blencoe –– 5435

Mr. Rabbitt –– 5436

Hon. Mrs. Johnston –– 5436

Committee of Supply: Ministry of Energy, Mines and Petroleum Resources.

(Hon. Mr. Davis) –– 5436

Hon. Mr. Davis

Mr. Guno

Mr. Clark

Mr. Barlee

Hon. Mr. Strachan

Ms. Edwards

Mr. Lovick

Mr. Sihota

Mr. Gablemann

Hydro and Power Authority Privatization Act (Bill 45). Committee stage.

(Hon. Mr. Davis) –– 5460

Mr. Clark

Mr. Lovick

Utilities Commission Amendment Act, 1988 (Bill 46). Committee stage.

(Hon. Mr. Davis) –– 5472

Mr. Clark

Appendix –– 5473

The House met at 2: 10 p.m.

Prayers.

HON. MRS. JOHNSTON: I was delighted to see in our galleries today a former member of our Social Credit caucus staff, a staff member who had been with us for quite some time and who served as my secretary when I came over in 1983. I would ask the House to please give Marcelle Adams a very warm welcome.

MR. VANT: On behalf of the first member for Cariboo (Mr. A. Fraser) and myself, there are a number of visitors from the great Cariboo constituency whom I would like to introduce to the House, First of all, we have two very distinguished gentlemen from the city of Williams Lake. It's a very important city in our constituency; about one-sixth of the population lives there. It's a noteworthy city. It's the home of the famous Williams Lake Stampede. It gives me pleasure to introduce His Worship Mayor Ray Woods and Alderman Hugo Stahl, the chairman of that city's economic development committee.

Also today we have Jan and Ann Wittebrood of Quesnel and Gordon and Isobel Sostad of Hanceville in the Chilcotin. I know we'll want to give them a warm welcome as well.

MR. BRUCE: Mr. Speaker, in your gallery today is the wife of one of our Legislative interns, Martyn Brown: his wife Linda Brown from Shawnigan Lake, here today to view the proceedings — and making sure that Martyn is doing something that is reasonable and respectable. Would you please make her feel welcome.

MR. PELTON: If I may, hon. members, I have two introductions I'd like to make today. First of all, in the gallery we have the leader of the provincial Liberal Party, Mr. Gordon Wilson, and with him is Mr. Kevin Wickham, who is Mr. Wilson's press secretary. Mr. Wilson resides in the constituency of Mackenzie, and his press secretary is from Vancouver. Could they be welcomed, please.

Also, in the members' gallery today we have three visitors from Holland: Els Geus, Bertie Hurwitz and Bertie's son Martin Hurwitz. These three people are visiting with Mrs. Sheri Tromp, who is in the gallery with them. I would ask you to make them all welcome, please.

MR. REE: We have in the west gallery today Mr. Bill Caulfield from North Vancouver, executive director of the Certified General Accountants' Association of British Columbia. I think he's here to watch the proceedings this afternoon. Would you all please welcome him.

MR. RABBITT: It's a great pleasure for me to introduce a couple of colleagues from the heart of the interior. With us today are the chairman of the Thompson-Nicola Regional District and his administrator. I would ask the House to give Jack Lapin and Eric Shishido a very warm welcome.

Oral Questions

ASSISTANCE FOR OKANAGAN GRAPE GROWERS

MR. BARLEE: A question to the Minister of Agriculture. Last December — approximately six months ago — the government announced it would act immediately to cushion the impact of the Mulroney trade deal on Okanagan grape growers, and the government made a similar promise during the Boundary-Similkameen by-election. Will the minister tell the House why the government has not kept its promise and introduced measures to help grape growers, who will be hurt by the Mulroney trade deal?

[2:15]

HON. MR. SAVAGE: We have made some commitments to the Okanagan grape growers, but they're subject to agreement between the provincial and federal governments. The federal government is still consistently working on a pattern of special aid towards not only British Columbia grape producers, but grape producers all across the country. It's gone to three different committees of Treasury; it's been to cabinet once already and is going back one or two more times.

We will not make an announcement other than what we have made through the Minister of Labour and Consumer Affairs relative to the support we have promised in the way of the pricing guarantee — the same price as last year for a wine produced this year. Beyond that, the federal government is expected to make some sort of announcement within the next week or two relative to the federal aid that will be forthcoming, and it will relate not only to British Columbia but also, as I understand it, to Ontario and Nova Scotia.

MR. ROSE: We're very interested in the long anecdote about how difficult it is to work with the feds and how lethargic they are in this matter. I wonder what the province is prepared to do. Is the minister prepared to tell the House what our share of the bargain will be?

HON. MR. SAVAGE: To my hon. critic, I'm not prepared to list the details. because, as I've said many times in this House, delicate negotiations are going on with the federal government, and that would tip our hand.

MR. ROSE: I notice the Premier tipped the hand during the by-election, but I don't suppose you want to do it in here.

I wonder if I could ask a related question of the Minister of Agriculture. We've learned over recent weeks that as many as 160 Okanagan orchardists are really in tough shape –– 3,800 acres have been asked to be removed from the agricultural land reserve because people can't make a living. Two years after their crop has gone to the packing-house, they get a bill from the packing-house: in other words, they were paid too much in the initial payment. I wonder if the minister could tell the House what action is planned, both short-term and long-term, to make a secure living for those people in those orchards before all British Columbians lose that very valuable farmland for future generations.

HON. MR. SAVAGE: To my hon. critic, on the issue of the orchards, as you well recognize, we announced a program for Red Delicious apples. We also announced a program for the farm income insurance advance, which we are now processing, where we have said we will advance the producers 2 cents per pound instead of waiting until the completion of the crop year. As you know, in doing the program for the Red Delicious, before the money can go out, we have to see all the packing-house slips that come in for the amount of product shipped. That's required under financial administration. I'd also like to say that the tripartite program

[ Page 5402 ]

from the federal government has been announced — at, I believe, 1 cent per pound.

So there is some help coming. I think the frustration being exhibited by the producers is that when they go to their financial institutions to secure an operating loan, they are having trouble getting that security. We have announced — and the banks are well aware, as far as I understand — that we will be advancing the 2 cents per pound on the FII program. Subsequent to the Red Delicious program getting the total shipment figures in, we will be addressing that one as well.

MR. ROSE: I don't like to criticize somebody who is trying to do something that I want them to do in the first place, but the amount is not enough. Ten years ago the people were getting 25 cents a pound. The 2 cents on top of the 5 cents is inadequate, and the minister knows it. That's a statement.

PCB DUMP IN VICTORIA INNER HARBOUR

MR. G. HANSON: I have a question to the Minister of the Environment respecting the PCB dump presently being tested in Victoria. It is becoming increasingly clear that there are various sources of information coming forward that need to be brought to bear on this important matter. It is obvious now that the provincial Minister of Environment, the federal Minister of Health, the local city officials, the municipal health officials and Hydro and their consultants should be brought together in an emergency team to coordinate this cleanup, which could be more broad-based than initially thought. My question is: will the minister establish an emergency team bringing these parties together to clean up this hazardous waste?

HON. MR. STRACHAN: To the member: that type of problem — management — is normally coordinated by the waste management branch of the Ministry of Environment and Parks, and I see no reason why it isn't taking place in this case. If it isn't, I will investigate it and get back to the House with a further and fuller answer.

MR. G. HANSON: It is certainly within the power of the Minister of Environment — as the minister responsible for environmental health and safety in the province — to ensure that the emergency team is established. Would he also undertake to this House to compile a complete inventory of hazardous waste in the province, particularly the illegal dumps that are rumoured to be present in various locations in British Columbia'?

HON. MR. STRACHAN: The tracking and identification is going on every day using, among other things, aerial photographs, old city records and any evidence we can gather.

Members must appreciate that in dealing with PCBs, for example, which may have been deposited anywhere in the 1950s or 1960s, they were not identified at that point. They were not deemed to be hazardous. As a matter of fact, they were deemed to be necessary. Insurance companies demanded, in many cases, that capacitors and transformers have this type of oil in them, so identification of PCBs was not required or warranted. Not until 1979 were PCBs deemed to be unsafe and, in some cases, hazardous to health.

The information we have is sketchy, but we are compiling through aerial photographs, city records and old B.C. Electric records — any records that we can find — a complete and comprehensive sketch of what the province looks like in terms of storage of that type of hazardous material.

MR. G. HANSON: It's obvious that there needs to be a body that informs citizens and former employees who now realize the hazard that they were dealing with. In the past this particular substance was regarded as safe and now is, of course, extremely hazardous and carcinogenic. That's all the more reason to establish a body, not necessarily a technical team but something that can hear evidence as well from informed citizens and may assist the province in cleaning this up.

As a site for a hazardous waste facility is imminent, would the minister not agree that he should have an accurate figure of how much is buried throughout B.C. and where it is buried?

HON. MR. STRACHAN: The member is absolutely right; we should do that. As a matter of fact, the amendments to our Environment Management Act, which your party was opposed to, Mr. Member, were passed last spring, and that will enable us to do that type of category and inventory.

SCHOOL CANADIANA

MR. HARCOURT: I have a question to the Minister of Advanced Education. On Friday, School Canadiana was forced to close its doors, an unfortunate victim of unfair cutbacks by this government. Could the minister tell the House where the 40 students from School Canadiana are going to take their ESL courses today?

HON. S. HAGEN: I do appreciate the question; it's a very important issue. I can assure the hon. member opposite that I have been assured by the board of governors of Vancouver Community College that they will not only be able to offer the programs to those students but in fact will offer it to more students than they did last year. As well, they are carrying out meetings with the ethnic groups in and around the city of Vancouver to make sure that their problems are being addressed.

MR. HARCOURT: A supplementary. The minister has said that over the last few weeks, but the president admitted that it was closing down the ESL program because of a shortage of funds. The truth is that because of the government's cutbacks in post-secondary education, 40 Chinese Canadian students are today being denied ESL training. Is the minister prepared to admit that a mistake has been made and restore funding to the Vancouver Community College to reopen the School Canadiana?

HON. S. HAGEN: I can assure the hon. member that I don't think the board of governors made a mistake. They're not shutting down the ESL program. They shut down the School Canadiana, which was a method of delivering that program. The program will continue to be delivered through other resources.

B.C. HYDRO CONTRACTING-OUT

MR. CLARK: A question to the Minister of Energy. As part of the privatization initiative, B.C. Hydro is contracting out more and more services. We had a dispute today, as the

[ Page 5403 ]

minister should know. One of those services, as well, is flag persons. ABC of Business has received three flag-person contracts from Hydro: Burnaby, Quesnel and Kamloops. The contract price is $8.47 per hour to $8.97 per hour, but once again, the women working there make only $5 to $5.50 an hour, and I have some pay stubs to show that. The contractor is pocketing $3 per hour, 40 percent of the contract price. Does the minister think that this is fair, and has he decided to investigate this particular contract?

HON. MR. DAVIS: I'm sure this matter will be resolved in the normal way between Hydro, as the employer, and the employees' representatives or trade union. If they cannot get together, of course, they can refer the dispute to the Labour Relations Board.

MR. CLARK: A supplementary to the Minister of Energy. A trade union? These are poverty wages through contracting out of B.C. Hydro. This company has several complaints outstanding before the employment standards branch for failure to pay even those poverty wages that they were supposed to be paying. If the government persists in contracting out, will you, as the minister responsible, agree to some minimum standards to stop this blatant exploitation of workers that's going on more and more now in this province?

HON. MR. DAVIS: B.C. Hydro has not engaged substantially in contracting out services. It has carried out a few developments which might be described as privatization in order to provide better service at lower cost, but I'm sure that Hydro is not intent on employing people at rates which are substandard, as the hon. member describes them. That's not the intention of the board or of the management of Hydro.

RESIDENTIAL COMMUNITY CALLING PLAN

MS. A. HAGEN: A question to the Minister of Labour and Consumer Services. Mr. Speaker, last week B.C. Tel applied to the CRTC for approval in principle of the residential community calling plan. This plan would drastically reduce free calling zones for consumers in the lower mainland. I'd like to ask the minister if he could inform the House of the government's position on this matter of consumer interest — if, indeed, the government has a position.

[2:30]

HON. L. HANSON: I'm sure the member is aware that the granting of that is a federal responsibility.

The question of whether it would be to the betterment of the citizens as far as having a larger telephone bill and no long distance charges for within those areas is a question that is being addressed by the local governments at this point, and I see no reason for the provincial government to interfere.

MATSQUI DUMP

HON. MR. DUECK: I would like to answer a question I took on notice last week. The question was raised by the opposition House Leader in respect of rehabilitation and cleanup of a landfill site in Matsqui. On April 21, 1984, Anica Contracting applied for and obtained a waste management permit from the Ministry of Environment and Parks to establish a landfill. Selected demolition and construction material and debris for land-clearing was to be deposited.

The site soon became too small, and the owner applied for an amendment. The application was rejected at that time and two charges were laid. The first charge was for contravention of the permit, and the second was for discharge without a permit. The operator was found guilty on both charges and fined accordingly.

At the same time he was ordered by the water management branch of the Ministry of Environment and Parks to remove the debris he deposited in a creek going through his property, and he complied: this material was apparently removed. He has subsequently applied for an amendment to the permit to expand the landfill site. This request has been rejected, and apparently he's appealing it.

Anica Contracting Ltd. has voluntarily ceased operation of this landfill site and the Ministry of Environment has advised Anica Contracting Ltd. that they must meet the standards established by the Agricultural Land Commission and that hopefully the commission is currently formulating a plan that will meet the concerns about cleanup and reclamation of this property, and will ensure that leachate will not be emanating from this particular site.

Mr. Speaker, I would like leave to make a ministerial statement.

Ministerial Statement

MEDICAL RESEARCH FUNDING

Recently my colleague the Provincial Secretary (Hon. Mr. Veitch) awarded the B.C. Health Care Research Foundation $4.5 million from the Lottery Fund. I rise today as president of the British Columbia Health Care Research Foundation to inform the House that, based on recommendations of the scientific advisory committee of the B.C. Health Care Research Foundation, $2.28 million of lottery funds has been allocated for medical research projects in British Columbia. This brings to almost $36 million the total of lottery money directed to medical research projects since the program began almost ten years ago. These funds have kept B.C. researchers on the leading edge of medical research in many different fields.

There are 79 projects receiving funds from this latest allocation. I would like to mention just two of the more interesting ones. A grant of $40,000 was awarded to Dr. Robert Meloche of the department of surgery at UBC. Dr. Meloche is studying a way of improving the acceptance rate of pancreas transplants, which may ultimately lead to a reasonably safe and simple treatment for diabetes. Although these are only the first tentative steps in finding what could amount to a permanent cure for this widespread disease, we are happy to be in on the ground floor of this exciting research.

Another research project with very exciting possibilities will be carried out by Dr. Korbelik of the Cancer Control Agency of B.C., who will receive a grant of $22,000. Dr. Korbelik is investigating the properties of certain light sensitive chemicals that are accumulated by cancer cells. The objective is to develop a way of labelling these cells, which could then be easily identified, thereby providing an early detection screening method for those at high risk of lung cancer. At present, lung cancers cannot usually be detected until they are too advanced to be treated successfully.

I would only add that these lottery funds allocated by the B.C. Health Care Research Foundation represent the second-

[ Page 5404 ]

largest source of funding for health care research in the province, second only to the Medical Research Council of Canada.

MRS. BOONE: I rise on one of my rare occasions to compliment the government and to thank the government for putting this money into the research. We, of course, require as much research as possible in our health care system. We do have a lot of problems. We've made some tremendous gains in the past years. This money will go a long way toward research in helping us find answers to many of the medical problems we have out there.

We do have some fine doctors and physicians in this province, and my only fear is, that we may lose some of them in the next little while. I certainly hope that this money will keep them here to do their research. I thank the minister for his statement, and I thank the government for putting this money into the research.

ENVIRONMENTAL APPEAL BOARD

HON. MR. STRACHAN: I rise to answer a question taken on notice, Mr. Speaker. The other day the hon. member for Surrey-Guildford-Whalley (Ms. Smallwood) asked me a question with respect the Environmental Appeal Board. She ended the question with: "Why has the minister chosen to put financial barriers in the way of citizens' rights to appeal?" She asked further: "Is it now the government's policy that ordinary men and women of this province must unfairly pay thousands of dollars in order to get an oral hearing before the Environmental Appeal Board?" I took those questions on notice.

Let me now give the Legislative Assembly the answer to her question. The question, as I've already indicated, dealt with a letter by the chairman of the Environmental Appeal Board, Mr. Frank Hillier, to the Islands Protection Society. He did request that they, in order to have a full oral hearing, deposit certain sums of money to him. His reasoning is this: the Islands Protection Society has never produced any evidence at any of the appeal hearings to show that the herbicide applications under appeal would cause an unreasonable or adverse effect to mankind and/or the environment. As a matter of fact, the Islands Protection Society, in testimony given on a variety of dates — and I have the dates available for members who wish them — has indicated that they are opposed to herbicides and the use of herbicides on philosophical grounds only. Philosophical argument is very difficult for the Environmental Appeal Board to hear; they are in place to hear technical argument.

The Islands Protection Society has further shown contempt for the Environmental Appeal Board. After applying for appeal on pesticide use permits — the numbers are given in Mr. Hillier's letter here — they failed to present any evidence to support their case. The Islands Protection Society never had the good manners to notify the board of their intentions not to appeal or to show up.

We have calculated that the Islands Protection Society.... Over the last two years the board has spent over $50,000 on the seven oral appeal hearings and three written submissions that they've had. With the other departments of government and the Supreme Court, the estimate is that the Islands Protection Society and their philosophical — not technical — arguments opposed to herbicides has cost the people of British Columbia in excess of $100,000. Mr. Hillier can document that. Therefore Mr. Hillier has said — and I agree totally — that if the Islands Protection Society wishes to have a full hearing on the Queen Charlotte Islands, they will have to deposit $12,000 with the board to undertake the expenses of this type of hearing: $4,850 for the three-man board and recording secretary; the Queen Charlotte travel board, $3,650; and the cost for Miss Taylor and Dr. Kobylnyk, which the board has guaranteed, is another $3,000. They have an alternative, which is an oral hearing in Vancouver. That would be $6,800 in total, again just to protect the taxpayer. And they have a third alternative: a hearing by written submission, for which the board would not require a deposit.

Therefore, to put the whole thing in a nutshell, the evidence that I have, which is public evidence, indicates that the Islands Protection Society has lost all credibility. This is sad, because they had a role to play and they have really abused it, to the extent that the concerns are toothless, unfounded and quite laughable; and the expense to the Crown, the taxpayer of British Columbia, has been considerable. Therefore, if there are to be any further oral hearings by the Environmental Appeal Board with respect to the Islands Protection Society, that society will have to come up with some serious, sound deposit money before the hearing will take place.

Orders of the Day

HON. MR. STRACHAN: I call adjourned debate on second reading of Bill 45.

HYDRO AND POWER AUTHORITY
PRIVATIZATION ACT
(continued)

MR. SIHOTA: To pick up the debate where it was left, the first member from Vancouver East (Mr. Williams) is not here right now, so I want to talk about certain aspects of this legislation, the principles accompanying it, which really only came to my attention very early this afternoon. Really, during the course of a rather lengthy debate with respect to this bill, there has been, as I understand it, no discussion with respect to the matters I intend to raise today. These matters cause me grave concern and will undoubtedly be matters of debate at the next stage of deliberations, when the minister can tell us whether or not our interpretation of the sections involved are accurate.

Buried halfway through this 26- or 27-page bill on page 12 is division 4, which talks about transfers of employees. As I said earlier, I think many of my colleagues overlooked that section when they were speaking on this legislation, and I must confess that I did as well. However, on a second review of the legislation, I must say that the provisions and principles that flow from division 4 are, quite frankly, somewhat contemptuous of the legal process.

The provisions are designed to get around what is now known as the Verrin decision. The Verrin decision, which I will go into in some depth in a few minutes, was a decision that said to the provincial government: if you want to privatize, you have the prerogative to do that, of course; but you can't trade off your employees like we trade hockey players and say that they most go to the new company. The government has an obligation to fulfil its requirement under the collective agreement and to maintain those people in the government workforce.

[ Page 5405 ]

[Mr. Pelton in the chair.]

The consequence of that is extraordinary to the provincial government's privatization initiatives. There really are two pillars that support the government's privatization initiatives. On one hand there is the matter of the sale of the provincial assets — our assets — which brings in some cash flow to the government which it can then allocate for whatever purposes it wants. We already know from the BS fund and the privatization fund what the intention there is. One of the pillars supporting the privatization plan is this quantum of cash that would come into the hands of the provincial government.

The second pillar, supposedly, for the government was that it would reduce the size of the government workforce. By privatizing, it would allow people to go off into the private sector and work with the companies that succeeded in securing the contracts to provide the services which were originally provided by the public service and which are now intended to be provided by the private sector. That second pillar was taken away by the Verrin decision.

The Verrin decision effectively said: no, you must maintain the employees that you've got within the auspices of government; they must remain within the public sector. That really crumbled one of the two foundations of the Premier's privatization initiatives. Since this is sort of the centerpiece of legislation, as it deals with the privatization of Hydro, we were looking with some interest to see how the government would deal with the situation.

[2:45]

Interestingly, when the Supreme Court came down with the Verrin decision on January 18, 1988, the government was, of course, upset and indicated right away that it intended to appeal. The appeal of the Verrin decision was heard in May. I don't have the exact date here, but it was heard in May, at which point the government said, "Look, we're not happy with the decision," went to the Court of Appeal, and several justices of the Court of Appeal heard the arguments for both sides. To date there has been no determination of the Verrin decision, no decision one way or another by the Court of Appeal as to whether it intends to overturn the Supreme Court of British Columbia decision.

We have a situation where the government loses a court case, which undercuts one of the pillars of its privatization initiative. It then appeals that court case, the appeal is heard, and before any decision comes down from the Court of Appeal, we have in Bill 45, buried halfway through, two sections that deal with that decision. Very simply, those two sections say this: once the transfer of the assets of B.C. Hydro — whatever portions of Hydro the government wants to sell — is completed, those employees "cease to be employees of the authority...and become employees of the intermediary company...." The government is saying by virtue of these two sections — and it is a fundamental departure from the law in this province: "Now government employees are going to be traded like hockey players." When a government decides to sell off a portion of Hydro, along with that go the employees. I don't want to get into the issue of whether the certification passes or not, because that's a matter for determination under the Labour Code in front of the Industrial Relations Council. That's not necessarily the issue here, although I'm sure the minister will allude to it during the course of his discussion.

What is of issue here is what the court had to say in Verrin, and I want to quote it. "One of the most fundamental rights we possess as free people is to choose the employer for whom we will work. The importance of this is self-evident; most working people occupy at least half their waking hours in their employment. A law which requires a person to be contractually bound to an employer not of his choosing is directly contrary to this basic freedom of choice."

That's what the court had to say on January 18, 1988. It talked about the basic freedom and right of people to decide to whom they want to contract their labour and that they can't be sold off as was the case in the old master-servant law that we used to have in this province. In fact, just the other day, in keeping with that, the Attorney-General introduced the Law Reform Amendment Act, which I talked about in this House, which eliminated the right of a master to claim for loss of the services of his servant, and that was the end of master-servant law in this province.

Now we see in this legislation an effective reintroduction of that master-servant relationship: the servant remains a servant and is passed off to the new master. The courts found that to be contemptible and a violation of the basic freedom of choice accorded to people in this society, yet the government has now chosen to reintroduce, buried in this legislation, one of the attributes of master-servant law and to say that if the master doesn't want to be the master any longer, you still have to be the servant of the new master.

Not only is it contemptible to the freedom of choice that the court talked about in the Verrin decision; not only is it an affront to the very basic freedom found in that legislation, but above that, it is also contemptible and an affront to the process of law when we have the government on one hand appealing the decision, and on the other, not having the dignity to wait for the court to make its decision, but instead, circumventing the court by introducing this section in Bill 45.

I want to quote a little more, to put this in the perspective of what we are talking about. I want to emphasize that this is not a new piece of legal reasoning that comes because we now have a Charter of Rights in this province. No. Far from that. It is a piece of legal reasoning which has been with us since the turn of the century. Effectively, what the government wishes to achieve by putting this provision in the legislation is to take us back to the turn of the century.

MR. ROSE: Which century?

MR. SIHOTA: To the nineteenth century, if not further.

MR. CLARK: Eighteenth.

MR. SIHOTA: Eighteenth century, if you want to take a look at master-servant law. As far back as the turn of the century — I'll try to find the actual date of the case that I'm going to be talking about; it was in the early 1900s — a case called Nokes v. Doncaster Amalgamated Collieries Ltd., where the Lords in England said: "It will be readily conceded that the result contended for by the respondents in this case would be at complex variance with a fundamental principle of our common law, the principle, namely, that a free citizen, in the exercise of his freedom, is entitled to choose the employer whom he promises to serve, so that the right to his services cannot be transferred from one employer to another without his assent." Here is a principle of law which has predated the Charter, which was embraced by the Verrin decision in 1988, which has survived since the turn of the century, and this

[ Page 5406 ]

government wishes to reverse all that through the provision contained in sections 22 and 23 of this legislation.

In fact, in the Nokes decision, Lord Atkin said this: "I had fancied that ingrained in the personal status of a citizen under our laws was the right to choose for himself whom he would serve and that this right of choice constituted the main difference between a servant and a serf." That's what the courts had to say in 1940 when that decision was considered. It was based on common law within our British jurisprudence which has been embraced by one Commonwealth jurisdiction after another, and which has been supported by the Verrin decision. This government has chosen to turn back that clock by saying in its legislation that on the transfer date set, the employees cease to be employees of the authority and become the employees of a new company.

Do you know what the court had to say in the Verrin decision? It said: "In my view, the taking away of this individual freedom should not be inferred from a statute unless no other reasonable construction of that statute is possible. As was said by Middleton" — who was a justice of the appellate division of the Ontario Supreme Court in a 1928 case — "'...if the Legislature really intended a consequence so grave, one would expect the language used to be incapable of any other construction."'

Here we have it. We have here language that of course is not capable of any other construction, which on the face of it says that we are now going to start trading off employees like we trade off hockey players, without their consent or assent, without respect for the provisions of the labour code, Bill 19, which this government introduced, and without respect to the Verrin decision.

I see the Attorney-General (Hon. B.R. Smith) is in the House, and I don't know to what extent he counselled the government with respect to the provision of this section. I trust he didn't, because the consequences, to use the court's word, are grave. They represent a fundamental departure from the law as it has stood to date in this country, this province and this Commonwealth.

No law, no statute, no principle of common law, no charter of rights will stand in the way of this government's ideological fervour to achieve its privatization goals. That's what this section says. "We don't care what the law is. We don't care what the courts say. We don't care what the principles that have governed this type of society are all about. We want to proceed with a piece of privatization." What's really astonishing when you look at this piece of legislation is that they really don't even know what they want to proceed with. Because of the ideological, right-wing, radical fervour of this Premier, we're now seeing the government saying: "We're not even going to wait until the Court of Appeal comes down with its decision."

The arguments the government, I'm sure, will put forward in support of this piece of legislation, this section, are not going to be new, because a lot of what one would expect the government to have raised was raised during the course of the Verrin case. For example, I'm going to quote from the decision again, on page 15 where the judge says:

"Counsel for the government submitted that an employee involved in the transfer of a business has an option: either he becomes an employee of the new owner, or he can quit. I do not accept this as a real choice. Quitting means both loss of job and loss of rights under the collective agreement. Seniority rights are gone, severance pay has gone, and so has the job that provides support for the worker and the worker's family."

It's not as simple as saying that if you've been playing second base for the Montreal Expos for 15 years and they trade you to the New York Yankees and you don't want to play for the Yankees, you can just quit. That might be true in sports, but it's not true in the reality of the workplace out there, and the court said that very clearly in the Verrin decision.

It went on from that, and I want to quote again what the court decision had to say: "Counsel for the government argued that an interpretation of section 53" — which, by the way, is the section that dealt with successor rights — "that would allow the employees to say yes or no to being bound by a contract to work for the purchaser would interfere with the owner's right to sell his business." I want to pause there just to point out what the government was saying in court. They were saying: "Look. We're entitled as employers to sell our business. Anybody is entitled to sell their business, and if the employees don't go with the business, then what's the value in selling the business?" And the court went on to say — and I quote: "It was argued that the right to sell would be hollow unless the purchaser was assured of getting the employees to operate the business. There is, I think, an unspoken premise to this argument. It is the assumption that at common law, apart from section 53, employees could be obliged, without their consent, to work for the purchaser of a business. That premise, in my opinion, is not correct...." And he cites Nokes v. Doncaster, which is a case I just referred to. "It follows that interpreting section 53 as preserving the employee's right to choose the employer whom he will serve is no more an impediment on the owner's right to sell its business than it was at common law."

What the court is saying there, Mr. Speaker, is that that was an impediment all along. That was always a risk that the prospective purchaser had to contemplate when deciding to acquire a particular business. And that was taken into account during the course of negotiations as part of the price for the transfer of the collective agreement. But this government is not prepared to do that. It's not prepared to take the same risks that apply to the private sector. It's not prepared to embrace the same risks that everybody else has to put up with when they sell their business. No, it wants to eliminate the risks altogether.

That's not the way it has been. That's not what the law has been. That's not what the law has said in the past. Back in March — and I don't have the quote here from the Premier, but I recollect it because it was said in this House — I asked the Premier whether or not the government intended to live up to the Verrin decision, and I'll quote him: "Mr. Speaker, this government always obeys the law."

[3:00]

MR. REE: Hear, hear!

MR. SIHOTA: The member says "hear, hear!" I think the member has been deaf to the comments that I have been making during the course of this debate.

By its own volition, the government has chosen to ignore the law and to substitute for it its own law. It has chosen to say that the law as it stood on January 18, 1988, the law from which the government appealed to the Court of Appeal in May, the law which has served this country since the turn of the century and served the Commonwealth before that, will

[ Page 5407 ]

now be substituted for the law of the Premier. It's not surprising when you consider all of those dictatorial aspects that flood to mind when dealing with this government — about having its own way, about doing its own thing, about not paying any attention to what other people have to say, about all the falsities that flowed from promises of open government, all the falsities that flowed from the so-called fresh start; the breach of faith that British Columbians face and feel.... That's why we have the second member for Boundary-Similkameen (Mr. Barlee) here, because people in this province felt that breach of faith; recognized the fact that this was a government that imposed its own agenda on the people of British Columbia. And here we have a manifestation of the imposition of that agenda in the form of these provisions which are tucked away ever so carefully into the provisions of Bill 45.

We on this side of the House say that's not right. We say it's not right that the government would on one hand try to show its respect for the law by arguing these things in front of the Supreme Court, arguing them again in the Court of Appeal, and then on the other hand, before any decisions are made, turn around and substitute its own laws. We say that's not right.

But more importantly than that, Mr. Speaker, we say that it is not right that employers can tell employees where to go. We on this side of the House say that as a society we have come a long way from the relationship of master-servant. We have set up in this country and in this province a form of collective bargaining. We in this province and in this country have set up a system of rights and freedoms that accrue to people, rights and freedoms that are not designed to be abused but are there as shields to protect people when that protection is deemed necessary. We on this side of the House say that that type of protection is necessary now. It's necessary now because this government is now proceeding in a direction which is not consistent with our democratic traditions and the freedoms that come with those traditions. We say....

MR. PETERSON: What a bunch of baloney! That's not true.

MR. SIHOTA: Well, okay. I'm quite prepared to argue this with the second member for Langley (Mr. Peterson). If the second member for Langley....

MR. PETERSON: Hysteria — the whole works again. Just irrational.

MR. SIHOTA: I want the second member for Langley to listen to this. I want him to listen to what the court had to say. Again, I'll put it on the record: "One of the...fundamental rights we possess as free people is to choose the employer for whom we will work. The importance of this is self-evident. Most working people occupy at least half their waking hours in their employment. A law which requires a person to be contractually bound to an employer not of his choosing is directly contrary to this basic freedom of choice."

Those are not my words, Mr. Second Member. Those are not the words of some academic writing about the Charter of Rights. Those are the words of a judge of this province who, when looking at the government's privatization initiatives in the Verrin decision, uttered those words which became the foundation of the decision. I'm saying that when the government says in its bill: "On the transfer date set by an order under subsection (1), the transferred employees identified in the order cease to be employees of the authority...."

The government is recognizing what the court had to say in Verrin, and now it's substituting its own law for it. It's not a scare tactic from our side. It's a request that this government do what the Premier said he would do, which is to obey and respect the law, instead of substituting its own will and agenda on the people of British Columbia.

It's not a scare tactic. Sure. it's scary to those employees working for the gas division in Victoria. It's scary to them, and it ought to be. It ought to be scary to the people in this province who see how government, through the imposition of these types of provisions, proceeds to force its own will on top of existing law.

If the second member for Langley thinks somehow that is worthy of applause, I would be shocked if he says that. If he hasn't heard, I'll quote what Lord Atkin had to say in a turn of the century decision. I quote again because he didn't hear this earlier on: "I had fancied that ingrained in the personal status of a citizen under our laws was a right to choose for himself whom he would serve, and that this right of choice constituted the main difference between a servant and a serf."

Again, those aren't my words. Those aren't the words of some academic. Those were the words of one of the lords of the House of Lords in Britain when they were looking at a case identical to this situation. where a company chose to sell off or spin off one of its components to another party. The courts have held since the turn of the century that you can't do that. Now we have this section in Bill 45.

I've indicated that I find that unacceptable, and that all of us on this side of the House find it unacceptable. It is one of the reasons why we will be voting against this legislation. We intend to ask some fairly pointed questions to the minister as we get into committee stage on this legislation with respect to this section. It flies in the face of what the Premier had to say when he assured me in this House that the government would respect the law as it relates to Verrin and not try to do an end run around it.

I say in summary — because I see my time is up — that this is not only contemptible to the process of law that we have established in this province, but more importantly, it is the taking away of the rights of individual workers with little thought on the part of the government — that's obvious. We just find that objectionable.

DEPUTY SPEAKER: Hon. members are advised that pursuant to standing order 42, the minister closes debate.

HON. MR. DAVIS: Mr. Speaker. I simply want to cover a few points in closing second reading debate. Essentially they are that Bill 45 provides the Lieutenant-Governor- in-Council with wide powers to make orders or regulations relating to the privatization of only the mainland gas operation, Victoria Gas, rail, and the research and development business of B.C. Hydro.

It also identifies many areas where the Lieutenant-Governor-in-Council is to make such orders or regulations as will allow Hydro to: (1) transfer assets to a subsidiary or intermediary company in which the government, Hydro or both are to be the only shareholders, without being in breach of the Utilities Commission Act or the Gas Utility Act; (2) transfer listed employees to a subsidiary or intermediary company; (3) transfer assets and employees from an intermediary to a

[ Page 5408 ]

private sector owner or successor company while maintaining their pay, seniority, fringe benefits, etc.; (4) place employees not transferred but impacted by the transfer of assets and employees in other jobs in Hydro; and (5) accept transferred employees back into Hydro vacancies, if they are successful applicants, within 12 months of the transfer date. In other words, the employees — or at least, the majority of employees — do have a choice. They are not automatically and inevitably transferred into the private sector as a result of this privatization, as the hon. member opposite was endeavouring to infer.

The hon. member says that he and his party are not endeavouring in engage in scare tactics. I think the main scare tactic employed during this debate was employed by members of the opposition. The scare tactic was that all of B.C. Hydro was for sale, including the massive electric division, which is 94 percent of the total operation. Proof that this is not the case exists in the legislation itself, where there is no reference whatsoever to electricity, the electric division, power plants, power transmission lines, power distribution and so on.

It's interesting that the hon. second member for Vancouver East (Mr. Clark), who has been the recipient of all the papers issued to the companies that expressed interest in privatization, and all the papers subsequently issued to the short listed companies, made no reference to the fact that there was no indication that the electric division was to be privatized. But as I recall, he was at a two-day conference the week previous to his submission to this House that the electric division was for sale, in which the chairman and chief executive officer of Hydro repeatedly talked about its expansion plans under its present public ownership guise; and I repeatedly stated what the continuing and ongoing role of the electric division was. Yet he came into this House a few days later, having heard what had been said in public in front of all of the senior staff of Hydro and all of the private sector people who may or may not have been interested in any private operations on the electricity side, and stated that this bill is an ill-disguised attempt to sell our water to the United States, to sell off power dams, to sell off everything, to use his words, "but the wires" — whatever that means.

So I'd say that the scare tactics are confined almost exclusively to the opposition side, and I wish they'd focus on what really is in the legislation, get down to the issues and pass this bill. I now move second reading.

[3:15]

Motion approved on the following division:

YEAS - 30

NAYS - 18

HON. MR. STRACHAN: Mr. Speaker, I ask leave to refer Bill 45 to a Committee of the Whole House later today.

Leave granted.

Bill 45, Hydro and Power Authority Privatization Act, read a second time and referred to a Committee of the Whole House for consideration later today.

HON. MR. STRACHAN: Second reading of Bill 46, Mr. Speaker.

UTILITIES COMMISSION AMENDMENT ACT, 1988

HON. MR. DAVIS: Bill 46 increases the powers of the British Columbia Utilities Commission. Its principal function is to regulate the activities of monopolies, particularly those incorporated provincially which produce, transport and sell energy; more particularly those in the electricity supply business and in the production and transportation of natural gas.

The definition of regulated projects has expanded to include high-voltage transmission lines, which were previously excluded. It requires in future that an energy project certificate be required both to construct and to operate a regulated project. Two certificates are required at different stages in the development of a new project: one for construction, another for operation.

It states clearly, as a result of these amendments, which persons are excluded from regulation. The exclusion is now clearly limited to persons who produce power primarily for their own purposes. Otherwise, if electricity and/or gas is sold to any number of customers, the operation is automatically regulated.

It provides not only for the wheeling of natural gas by B.C. Hydro or other owners and operators of large-diameter gas pipelines, but also for the wheeling or transportation of electricity in high-voltage lines by B.C. Hydro, Inland Natural Gas and others engaged in that line of activity.

Finally, it requires that anyone who is buying energy from a second party for transmission and redistribution to a number of customers in the province must not only file a copy of the purchase contract with the commission but also have that supply contract approved by the commission.

In other words, the powers of the Utilities Commission, which is responsible for the regulation of energy monopolies, are expanded in particular areas, from the construction of new projects through to the purchase of energy from other suppliers and the commissioning of plant. I move that the bill now be read a second time.

MR. CLARK: I won't be too long on this bill. I see the second member for Kamloops (Mr. S.D. Smith) is appreciative of that.

[ Page 5409 ]

1 want to talk a little bit about some of the things that are to be commended in the bill, but also about some of the concerns I have. There are many things to commend in this bill. It promotes cogeneration and small projects. We on this side of the House have long believed that there is tremendous potential particularly in cogeneration. Pulp mills, for example, and other industrial companies can generate surplus power, and Hydro has always been the block in terms of buying back that power. If we did that and promoted it in a significant way, we could create significant amounts of energy. That, of course, delays the need for megaprojects and the costly overbuilding by B.C. Hydro that we've seen in the past. Megaprojects in the order of $3 billion or $4 billion are incredibly expensive; the interest on those projects is very expensive for the taxpayer of British Columbia. It makes more sense to have a multiplicity of small private power production, using surplus power generated in the industrial process itself.

So we support the thrust of this bill. We also support the move towards small hydro projects, run-of-the-river projects that we've seen sprout up around the province which are very environmentally sensitive and which can create at least small amounts of power and feed back into the system again to delay major power projects. It does make sense, and I know B.C. Hydro's moving to try to eliminate or reduce the need for diesel-generating facilities. Any time we can substitute a more efficient use of power through private generation for those expensive forms of energy, it makes sense.

I want to talk briefly about some of the problems I have. The problem really is not in this bill but with the energy policy which seems to be coming together with the government and how this bill fits in with that energy policy.

In the wrap-up of that bill, the minister said — and he's quite correct — that the government has not mentioned selling off the hydroelectric system, except in the Thorne Ernst and Whinney report and a few other privatization reports; but it has not publicly discussed that option. The problem I have, and that I had when I debated this bill — and I think the minister, to some extent, agreed with me — is that it enabled the privatization of certain assets of B.C. Hydro, including hydroelectric dams. I'm fully aware that there would no doubt be some other mechanisms required, but it seems to me that it paved the way for some of that component to be privatized. I still think that may be the case, and we'll be discussing that more in committee stage later this evening.

When you look at selling the existing assets of B.C. Hydro privately and then through this bill allowing or requiring Hydro to wield that power, it causes me some concern. But more importantly now, perhaps, because of the amendment the minister has moved — I hope he might agree to further amendments later on — I have some concerns with respect to the export agency. We will also be discussing that in estimates, but I'd like the minister to maybe respond in wrapping up debate on this later on this afternoon, because it seems to me that this bill we have before us with respect to private power generation paves the way for large-scale exports of power through B.C. Hydro.

When the minister discussed exporting electricity from British Columbia, he first talked about using private sector power generation — a free and deregulated marketplace. I understand some of the logic of that, because what it says is that a private company is risking its own private capital, and it has to go down to the United States and market the power itself. Hydro would then be required to wield that power down to the United States. I have many concerns about that type of policy, but I understand it. I won't discuss those concerns now, because the minister has already moved to deal with some obvious ones.

[3:30]

The minister has stated that the government is going to create a monopoly power export company, probably a subsidiary of B.C. Hydro. At first blush I agree with that. It's the one-window approach. It means that Hydro, which has the marketing expertise, will in fact buy and sell all power in British Columbia, whether domestically or through the export agency. The problem is that I can see potentially the worst of all worlds with this bill: that is, government intervention essentially to subsidize power exports. The minister has stated in the past that he's concerned about that. but I see nothing in the bill that really comes to grips with that problem.

Here's what I see happening. Let's get some hypothetical numbers. Say B.C. Hydro's average cost of power is 3.5 cents per kilowatt-hour. New thermal generation facilities that the minister has touted repeatedly and the government has talked about....

Just to digress a minute, the minister talked about a conference on energy conservation that I attended. The evidence was quite clear in the United States that thermal power is the most expensive source of new generating facilities possible, particularly coal-fired thermal power. I see the member for Prince George South (Hon. Mr. Strachan) here; they've just talked about wood waste. There are some interesting possibilities there, and I can support the government's move in that direction. I think there are some really interesting possibilities there. This bill helps facilitate those kinds of projects, so I appreciate that.

But I think that with respect to coal, certainly the numbers in the United States are quite enormous. It's very expensive power. What I see happening, and what I fear will happen with the government, is.... If we take the average cost of power — say it's 3.5 cents a kilowatt-hour — and then say that the new thermal plant can produce power for 10 cents a kilowatt-hour, and say that the market in the United States — say California — is 6 cents a kilowatt-hour.... What I see happening under a deregulated environment is....You'd say to the private thermal company: "You produce the power. If you can produce it competitively and sell it in the United States, go to it." Hydro would have to wield that power; that's a fully deregulated marketplace. So you'd have to produce it at something less than 6 cents an hour to be able to sell it in the United States.

What I see happening with this new one-window approach and this bill is Hydro buying that power at 10 cents or whatever a kilowatt hour and feeding it in to its average cost — that would raise our average cost marginally from, say, 3.5 cents to 3.6 cents — and then selling it to the United States at 7 cents and claiming a profit. The minister knows that would be a hidden subsidy from British Columbia for export, because instead of using marginal cost and selling it, trying to be competitive at the margin and allowing that to be exported, there would be tremendous pressure to blend the price and sell it at average cost. I would have a great deal of concern about that, and I know that the minister has in the past talked about some concern with that.

What I see happening with energy policy in British Columbia.... Because Hydro will now be buying all private power and then selling essentially through the subsidiary

[ Page 5410 ]

or otherwise to the United States, and the power is then backed up by the entire B.C. Hydro system, Hydro will be costing that power not at the margin, but at average cost. What that means — and this is what I'm completely opposed to — is that it would be a subsidy by domestic consumers essentially for air conditioners in California, to be a bit glib about it. With this bill, with power export companies and with B.C. Hydro's initiatives, I can see quite a significant increase of private power generation coming on-stream if Hydro buys that power and then blends it with the cheap Hydro electricity that we have today. I don't want that to happen. I think there's some real problems with that. I fear there will be tremendous political pressure to do that.

In the United States, where they have promoted cogeneration and private power, alternative sources of power, they've had some problems. In California, for example, the California energy commission required the utilities to buy all co-generated power. Subsequently they paid extremely high prices for that power, but then blended it in and made it an average price. It has caused a great deal of economic inefficiency in California.

I think there is a tremendous potential in British Columbia for cogeneration, but if the government is going to pay fully avoided or marginal costs for that power, that will generate a lot of activity in the private sector. If it's trying to wield that power in the United States, I don't think it will be competitive in the California market, at least at this point, unless it's blended with our cheap hydroelectricity. That's why I think this bill, although it has many things to commend it, also paves the way for, not an explosion, but a significant degree of private sector power just for export, using essentially a hidden subsidy through the public sector hydroelectric dams. That's where I have a great deal of concern, and I can see that coming in terms of where the policy is moving.

When I look at this bill in isolation, I see a great deal to commend it, but when I look at it in tandem with the other kinds of moves the government is making, I think there's some cause for concern. Although I think the minister has said in the past that he's against that, I have some concern that that won't be the case in the future, given the way the policy is developing in British Columbia. We can maybe get into that more in estimates; I'll leave it now with respect to this bill.

MS. EDWARDS: I want to begin by talking about what I see as a good aspect of this particular bill and to echo the remarks of the second member for Vancouver East, who has applauded the bill's encouragement of small power production and cogeneration. Private power generation can be highly cost-effective, and the province is now into the legislation that will allow small private power generators to sell their power into a grid and therefore be able to produce very small amounts, to have a more efficient operation of the power that they have been doing for other reasons, or even to be able to get into small power generation, which can be highly environmentally acceptable — far more acceptable than some of the megaprojects — and which is also broadly based.

I have been reading a publication called The Private Power Option for Canada. The minister will know what that publication is. Of course, one of the companies that sponsored that report is from my own riding: McDonald Ranch and Lumber Ltd. of Grasmere. I can use that company as an example of why I'm applauding this part of the bill because it was used within the report. This operator, the McDonalds, had already done a minor hydro-generation plant and wanted to do another one and had Energy, Mines and Petroleum Resources come in and do a study for the next small dam that they wanted to do on the creek on their property. The government study told them that in order to produce 400 kilowatts of power, it would cost them $870,000. The Mcdonalds are the type of people who (a) can't afford $870,000 and (b) don't believe that's probably the way it is, so they went out and used refurbished material, local labour and engineering and produced in 1984 the same plant for $90,000.

That's the kind of thing that can happen with small power generators, and we should be encouraging it as much as we can. We have some examples from the U.S. that show that it is a good idea. In 1986 U.S. private power producers had financed or contracted for 16,000 megawatts of new electric generating capacity since the changes in policy in the U.S. I think that's very good and I am pleased that we are following it up.

As for the whole of Canada — and I don't have anything particularly for B.C.; perhaps the minister does — in the next five years the report predicts that private power could generate more than $5 billion worth of investment and create 50,000 regionally dispersed jobs, which is not so bad. It's a lot of investment; it's a fairly expensive job generator, but it's better than some of the megaprojects that we have seen.

However, I also wanted to mention some of the problems that I see with this legislation, and because my colleague has mentioned the possibilities under this bill for the exporting of power, I won't touch on that again. But I think there are a couple of things that need to be mentioned. The fact is that this bill allows a considerable amount of discretion, particularly to the minister, whereas in fact the small power producers have asked for firm, clear and understandable standards for everyone who produces power on a small scale. Under this bill there is a whole lot of discretion allowed and many of the small power producers can be exempted or dealt with individually.

I think that since we are dealing with a policy which is going to encourage a considerable amount of small power producers to be generating electricity, there will be far more than the minister's office is going to be able to deal with on an individual basis. I suggest that means that there is going to have to be some very clear and understandable — accessible, if you like — standards laid out, and I am not sure why this bill doesn't do that. So in principle I am against the discretionary nature of the bill. It should have laid out how some of the standards are going to be dealt with.

Another of the problems I see with this bill is the fees. The minister was talking about the commission being able to...there are new rules for the commission generating its own expenses. In doing so, the commission has almost carte blanche to decide who pays what amount of fees. An amount can be set for different persons for different situations. The fees can be different and exemptions can be decided on the same basis. But strangely enough, even with all of this and this talk about what is in the public interest — which is a key phrase in the legislation — we still end up with no funding for interveners.

Frequently the public interest requires that we have groups of people who represent broad bases of interest within a community and who should be able to come to these hearings and be funded in order to do the research that allows

[ Page 5411 ]

them to make proper presentations to this commission. I object very strongly to the fact that that is not allowed in this particular bill, even though there is a considerable amount of discretion about the fee-setting otherwise. I urge the minister to look at that aspect of it, and I would certainly urge him most strongly to recognize that if the public interest is of such great importance, then he should allow the funding that would permit interveners to have that support and make an intelligent presentation.

[3:45]

HON. MR. DAVIS: First, I would like to address a concern expressed by the member from Vancouver East about the export of electricity. British Columbia to date has never exported electricity on a long-term basis. It has for several decades exported surplus capacity when there was a market in the United States, or indeed when B.C. Hydro and before it B.C. Electric has a surplus. There are occasions when the Americans don't need any power at all, but in recent years they've taken modest amounts in some years and very large amounts in others.

An argument has been made for always having some excess capacity in British Columbia because the excess or the surplus could be sold on a short-term basis if our own needs didn't rise as rapidly as had been forecast. It's been more a fail-safe system of selling short term. There's been a lot of talk, particularly in the last decade, of long-term sales in the United States. The opportunity still hasn't really arisen for long-term sales to be made. It will arise, I am reasonably confident, in the 1990s or certainly after the year 2000.

Unlike the situation in eastern Canada and in the Midwest, the price of electricity immediately south of British Columbia has in general been less than the average price in British Columbia. It's very difficult to export into an area where the price is less than your average cost. Those circumstances are changing; average cost in the U.S. Pacific Northwest today is roughly comparable, roughly equal to B.C. Hydro's average cost and is rising rapidly. If ever they begin to pay off the cost of incomplete nuclear power plants in the northwest, the rates in the U.S. will be well above ours, and then the opportunity genuinely does exist, at least on a price basis.

Naturally, utilities in the United States build their own capacity if they can, so there's not necessarily a market in California. Generally speaking, new power plants use oil or natural gas. The nuclear alternative now seems to have been precluded. Power from those sources is more expensive, certainly, than average costs in Canada. So long-term, there should be an opportunity to export.

The export opportunity, I think, however, should be as much as possible separated from the service to British Columbians. The service in B.C. — largely provided by B.C. Hydro, but also to a lesser extent by West Kootenay Power and others — is a monopoly-type service and must be regulated, and rates, generally speaking, are equal to average cost. In no way should we include in average costs new plants, which may be more expensive, particularly if they are built substantially to serve an export market. An export agency, I think, is desirable. It will begin its life this summer as a subsidiary of B.C. Hydro, simply because Hydro has the personnel and the expertise to do that kind of work without adding unduly to personnel.

In the longer term, I think that agency should not be seen as a child or a part of Hydro. It should deal with long-term export opportunities. The reason for creating an agency — a single marketing desk, if I can describe it that way — is merely to drive a good bargain in the U.S.A. and not have competing B.C. or Canadian projects vying with each other on the U.S. side of the line. We sell from strength, in other words.

That agency would first have to have obtained firm markets of firm contractual commitment to an income flow, and then would turn around and call for tenders in British Columbia. There will be a variety of expressions of interest. I suppose the majority would be private. It's conceivable that Hydro itself might put forward a project which is seen to be surplus for at least several decades to B.C.'s own needs. but is put forward as a non-regulated project — certainly not regulated in its service to British Columbians, but simply a project which can make a profit.

This single-desk agency would have to see a larger income from sales than the costs on the Canadian side. In other words, that operation would have to be profitable.

MR. CLARK: The margin cost?

HON. MR. DAVIS: There would have to be a distinct difference between the income side and the cost side. There would have to be a margin which was the profit from the export sale, and the totality of that operation would be external to any regulated service to British Columbians.

Manitoba Hydro and Hydro-Quebec have engaged in export operations. However, they have not distinguished between plants established for internal use of power and export operations, and I think that distinction is important. Long-term export sale, if and when it occurs, should be in the private sector, but certainly not in the area of regulation aimed at protecting British Columbians as consumers. Clearly the utility serving British Columbians must always have access to the least-cost sites.

Along the lines of the comments from the member from the Kootenays, yes, Hydro is overbuilt. Yes. Hydro can buy surplus energy from pulp mills and sawmills with wood waste, which can generate admittedly modest amounts of energy at relatively low cost. It will give priority to cogeneration and also to demand management, which creates excess capacity simply by reducing the amount of power that existing users use and by using better equipment or better procedures.

Finally, Hydro's largest single source of new power, at least for the next decade, are cooperative arrangements with Alcan, whose costs are about a third of Hydro's, and with Transalta in Alberta, whose costs are lower than ours, believe it or not, and whose thermal power plants will tend to complement our hydro facilities. We have an ability to store energy; they do not. So cooperative arrangements with Alberta, was private power in B.C. and with the big Bonneville Power Administration in the United States can create a lot of capacity at virtually no cost to British Columbia consumers. Those savings must show up in reduced rates or rates at present levels for several decades, hopefully, and will not only benefit B.C. consumers but encourage industrial development activity here.

So the regulated segment will be the monopolistic activities in the province. Non-regulated presumably relates to either servicing a new industry — not an existing one but a new industry in the province — or the export market. But again, I don't expect to see the export market emerge for a couple of years at the earliest.

[ Page 5412 ]

Back to the bill. The final clause deals with the ability of the commission to recover its costs from those who call on the commission's services. In other words, if Inland Natural Gas wants to increase its rates, it will have to pay for all the costs involved in the rate hearings. This doesn't impact very heavily on small producers, because the system, which is laid out and will be implemented in July or August, is on a permit basis. Hydro will pay 85 percent of the cost of the operations of the Utilities Commission simply because it handles 85 percent of the energy. Units of energy will determine the tax or the bill paid by the regulated concerns, and if a small hydro development comes on line selling to Hydro or otherwise, it will pay a fraction of 1 percent of the cost of operating the commission, because its output is so small compared to the total amount of energy falling under the Utilities Commission's jurisdiction.

I know that hon. members will want more information. That will undoubtedly be, forthcoming when we get to the clause-by-clause stage. Mr. Speaker, I move second reading.

Motion approved on division.

HON. MR. STRACHAN: Mr. Speaker, I ask leave to refer Bill 46 to a Committee of the Whole House to be considered later today.

Leave granted.

Bill 46, Utilities Commission Amendment Act, 1988, read a second time and referred to a Committee of the Whole House for consideration later today.

HON. MR. STRACHAN: Mr. Speaker, I call second reading of Bill 58.

MINERAL TENURE AMENDMENT ACT, 1988

HON. MR. DAVIS: Mr. Speaker, the Mineral Tenure Amendment Act, Bill 58, tidies up some oversights, some drafting problems which we had with the extensive legislation passed earlier this year — that is, at the tail-end of the last sitting of the Legislature. I'll run quickly through these changes. They are specific; they don't impact on the general tenor of the bill. Among other things, they simply clarify definitions; expand provisions for resolving disputes — that is, mediation — concerning title for minerals; ensure that existing regulations establishing a mineral reserve also apply to placer minerals; clarify provisions for bringing other than metals under the Mineral Tenure Act; and otherwise clarify that mineral substances are subject to the Mining Tax Act.

I'd call it a housekeeping bill, but since it relates to one piece of legislation and runs to several pages, it's dealt with as a separate bill currently.

MR. GUNO: In looking at this bill, we agree that there is really nothing contentious here, that it is indeed a housekeeping bill which clarifies some of the points in Bill 66. We do have some questions, however, that will come up in committee stage.

MR. SPEAKER: Pursuant to standing orders, I advise the House that the minister closes debate.

HON. MR. DAVIS: Mr. Speaker, I move second reading of the bill.

Motion approved.

HON. MR. DAVIS: Mr. Speaker, I ask leave to refer Bill 58 to a Committee of the Whole House to be considered later today.

Leave granted.

Bill 58, Mineral Tenure Amendment Act, 1988, read a second time and referred to a Committee of the Whole House for consideration later today.

[4:00]

HON. MR. STRACHAN: Committee on Bill 36, Mr. Speaker.

MISCELLANEOUS STATUTES
AMENDMENT ACT (No. 1), 1988

The House in committee on Bill 36; Mr. Pelton in the chair.

HON. MR. STRACHAN: Mr. Chairman, with the committee's indulgence, first of all, I'll point out a couple of items. Committee members will recall that on Friday we had sort of a selective agenda in terms of dealing with this bill, and passed sections indicated on our Orders of the Day. We will be returning now to section 1 of the bill. I think it's appropriate — again, with the committee's indulgence — that we wait until all the appropriate ministers are here. I'm advised that, even as I speak, they are rushing to the assembly.

On section 1.

HON. S. HAGEN: Mr. Chairman, as a result of recent developments in the ongoing discussions taking place between the recognized accounting groups, I wish to withdraw the amendments to the Accountants (Management) Act in section 1 of the Miscellaneous Statutes Amendment Act (No. 1), 1988. This will allow those discussions to continue, and we will await the outcome before proceeding further.

MR. CHAIRMAN: Shall section 1 pass?

SOME HON. MEMBERS: No.

MR. SIHOTA: I'm not going to let that pass without comment. If the minister wants to make that comment, that's great. I take it that it's being stood down. Have we already voted on it?

MR. CHAIRMAN: Yes, we voted on it.

MR. SIHOTA: I thought we couldn't vote until we spoke on it.

MR. CHAIRMAN: I called the vote. Go ahead and speak, hon. member.

MR. SIHOTA: I'm glad to know the government is going to vote against this section. I'm glad to see that the members opposite have finally come to their senses on this matter. I'm sure that Mr. Caulfield, who is up there, will appreciate this,

[ Page 5413 ]

as well as Mary Pattison, the president of the Certified General Accountants' Association of B.C. We look forward to the termination of whatever discussions are taking place, so that there can be some resolution outside the floor of this chamber on this matter. It's the type of matter that I really don't think ought to be here in this fashion.

In our view, more than anything else.... I think I should put this on the record. I know there were a lot of concerns expressed by the certified general accountants with respect to process, the absence of consultation and the way in which all of this came up. I trust now that, with the government's action being what it is, there will be greater heed paid to the need to consult and allow for a process to work itself out, so that all of these representative groups are happy with whatever the eventual result is.

From a process point of view, I think this is the proper thing to do. We're pleased to see the government has now acquiesced to the concerns expressed by us and by the accountants.

Section 1 negatived.

Section 2 approved.

Section 4 approved.

Sections 7 to 13 inclusive approved.

Sections 16 and 17 approved.

On section 22.

MR. LOVICK: My first query is: where is the Minister of Transportation and Highways (Hon. Mr. Rogers)? I have a number of specific questions about this, and I understand the Minister of Energy is going to ride herd on this one. Is that the case?

MR. CHAIRMAN: That's correct.

MR. LOVICK: Okay. I might start with just a simple question. I note that this proposed amendment is justified on the basis of providing increased flexibility to the ministry to utilize other contracting processes. We ought to bear in mind that in this entire section of the bill and in the existing legislation we are talking about scrapping the process of public tendering for contracts, which in itself is obviously an aberration. Here we're talking about further flexibility in that process.

My first question to the minister is: whose initiative was this? Who is requesting this kind of change? Who is asking for more flexibility? Where did this come from?

HON. MR. DAVIS: The request for action essentially comes from within the ministry itself. My understanding is that this amendment does not do away with the call-for-tenders approach. It adds an option and permits the minister, under certain circumstances, to do what other ministers are already able to do under their legislation; that is, in an emergency or when time is short, to make an intelligent decision, accepting what staff recommends as the efficient solution to obtaining a contractor to do a particular job.

The notes I have here say this amendment adds a third exception. Public tender is not required in the instance, "...where the minister determines that an alternative contracting process will result in competitively established costs for the performance of such work." The amendment further stipulates that in such cases the name of the contractor is to be made available to the public on request.

The purpose of this amendment is to permit the use of more flexible request-for-proposals processes so that the ministry can negotiate its contracts. The public tender process precludes negotiations. For example, any changes in contract terms after the call for tenders require a new call for tenders. This ability to negotiate will reduce costs and allow contractors to present innovative ways to do the job. So it is another route in addition to the existing tender route. It provides flexibility and, in my reading of it, allows the minister, on advice from officials, to choose a contractor who may not necessarily have submitted the lowest bid but who offers the greatest value for the money involved.

MR. LOVICK: Well. I appreciate that lengthy and detailed response from the minister. It's certainly good to get that information. I wonder, however, if the focus is indeed supposed to be on an emergency provision, which the minister led off with in his explanation. why we don't stipulate and specify that in the legislation. Certainly, as you know, the amendment to the legislation says nothing about particular causes, Rather, it simply says: "...where the minister determines that an alternative contracting process will result...." In other words, there isn't that kind of specificity.

I began by asking about where this proposed change came from, because my information is that both the B.C. Construction Association and the British Columbia Road Builders' Association have registered their concerns about this particular measure. suggesting that they have not been consulted, that they did not ask for it, and that they have some serious questions about it. I wonder if the minister would care to respond to those two points.

HON. MR. DAVIS: I would say, as a general rule, that tenders would be called. I did say that this process would be the exception rather than the rule. I do recall the minister saying that other ministers have this opportunity — so why not Transportation and Highways? An example might be useful. It's common, I'm told by ministry officials, to be confronted with road reconstruction over soft soils, They would need to relocate underground utilities while accommodating high traffic volumes. Circumstances may dictate that the road construction contract proceed before the design of the utility relocations is complete. To subsequently tender for the utility relocations would result in the second contractor working in the same tight area as the road construction contractor. Work coordination would be difficult and accommodation of traffic would be likely to suffer.

In preference, the Ministry of Transportation and Highways would request the road construction contractor to make a proposal to carry out the utility relocations. If acceptable, the one contractor could achieve work efficiencies, reducing costs and construction time as well as minimizing disruption to traffic. That is one example, I assume, of where this third option might be called into effect.

MR. LOVICK: Again, I appreciate the answer. It seems to me, however, that once again we're confronted on the floor of the chamber with explanations that, at least on the face of

[ Page 5414 ]

it, seem to make some sense. The question, however, surely asserts itself: why haven't we had that explanation in advance? Why hasn't that kind of explanation been given to the interest groups most specifically and directly affected by the measure — namely, those two associations I referred to? Further, why have we not been somewhat more specific in the particular measure that's before us? The amendment obviously allows considerably more than that. It doesn't specify, and thus we have these concerns, Mr. Minister — and I'm sure you can appreciate why that is the case.

The proposal seems, on the face of it, to represent a fairly radical and significant departure from the norm, which is a process that, I might add, has served us rather well. I recall, for example, that in all of MacKay's hearings and deliberations there was never any argument with this particular: the old-fashioned lump-sum price tender method of contracting. That didn't, as I recall at least, come out.

Again, then, our concern is simply that giving up the unit price tender system, or at least creating yet another category where we can deviate from the unit price tender system, is perhaps fraught with some peril, and may indeed cost us more money. As I say, Mr. Minister, I think we aren't comfortable with this, primarily because it appears to be the case that the legislation is written in such a way that much more might be allowed than is actually intended. I'm wondering if you'd care to respond.

HON. MR. DAVIS: Further to the notes I have here, Transportation and Highways is the only ministry having the rigid inflexibility requiring all works to go to public tender. I want to emphasize, however, that the bulk of the work will continue to go to public tender. This is simply to accommodate certain circumstances.

The new process will allow the ministry to negotiate with interested contractors, thus improving efficiency and, in many instances, reducing costs. Most importantly, it allows the bidder to present innovative ways of doing the job. This will allow contractors to submit new concepts, leading to improved construction methods.

The current public tender process does not assure that best public value is obtained. If it's believed that the low bid does not represent best value, the only option at present is to reject all bids and retender. The new option provides the ability to negotiate improvements in the contract.

The new option modernizes the ministry's way of doing business. The amendment stipulates that competitive value must be demonstrated. The value of the contract and the name of the bidding contractor will be publicly available on request. Adequate checks and balances will remain in place. The initiative is designed to obtain the best long-term value for the taxpayer.

MR. ROSE: I'd like to ask the minister a question about this particular clause because he made much of the case for flexibility, and his argument seemed to me to hang on not just flexibility but also emergency. I wonder if he's aware of section 49 — "Tenders" — of the Ministry of Transportation and Highways Act. It says: "....(a) in case of pressing emergency where delay would be injurious to the public interest...." The provision for emergency is already there, so I don't think the addition of a clause (c) is justified, despite what the minister had to say. I'm aware that he's perhaps acting on behalf of someone else.

The other thing is that some of us aren't really relieved very much by the after-the-fact business of section 4: "Yes, we'll give you this contract, but we'll provide you with the details, upon request, after the work is already done." That sounds a little bit like closing the barn door — to coin a phrase — after the horse has escaped.

[4:15]

I think that to make it clear would be redundant. I would like to propose the addition of the words "in cases of emergency." If there are other cases, then I would like the minister to elucidate on what they might be. Otherwise, I'd be prepared to move an amendment which will end up, I freely admit, looking very much like section (a) when we're dealing with section (c).

HON. MR. DAVIS: I did indeed make some reference to emergencies, or saving time — whatever. However, as the hon. member says, that's probably already covered in the legislation. So I don't think an amendment along those lines is really pertinent. In the notes that I reviewed, there was also reference to the ability to continue to negotiate with tendering companies to try and improve their bid or make their bid more approximate the actual public need under the circumstances at the time. Maybe "emergency" isn't so much the word; it's more the expedient way of getting better value for dollars spent by the public.

MR. ROSE: Two things occur to me here. The first one would be that you get bids or tenders and you're not satisfied with them, so you go back and try to wring the boys out a little further. That sounds like part of the aim here.

The other possibility would be to stand the clause until the minister responsible is back, to see why he really wants this. It doesn't appear to have been justified on any great basis, because clauses (a) and (b) seem to give the minister all kinds of freedom, except perhaps to renegotiate tenders. I don't know why he wouldn't have that anyway. I would propose, if the minister agrees, that we stand the clause until the real minister shows up here to give us a little bit more information about why this thing is desperately needed.

HON. MR. DAVIS: I can only repeat that the minister said that all the other ministers have a clause like this, and he wants one. I'm sure it came to his attention as a result of recommendations from the ministry staff, who are concerned about doing the job quickly and at least cost to the public.

MR. ROSE: I would request that the clause be stood until we can get an adequate explanation from the ministry staff. I see no reason why the House couldn't have that kind of explanation from the staff or from the minister, so we can have a little bit more information than we have now.

MR. CHAIRMAN: If we can get agreement from both sides, standing order 84(2) provides for postponement of a clause such as this. Are we agreed?

SOME HON. MEMBERS: Agreed.

Sections 26 to 28 inclusive approved.

Section 34 approved.

The House resumed; Mr. Speaker in the chair.

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

[ Page 5415 ]

HON. MR. STRACHAN: Committee on Bill 52.

MISCELLANEOUS STATUTES
AMENDMENT ACT (No. 2), 1988

The House in committee on Bill 52; Mr. Rabbitt in the chair.

On section 1.

MR. BLENCOE: I wonder if the minister could give me some background to section 1. From what I can gather, it has to do with storage tanks becoming an assessable improvement. As we get into the details of the particular sections of the Miscellaneous Statutes Amendment Act (No. 2), I wonder if the minister could start by giving some explanation of this section.

HON. MR. COUVELIER: I will. This amendment amends the definition of storage tanks. It's designed to deal with an existing ambiguity in the definition of this component of the tax base without imposing an additional tax burden on owners of large tanks.

In the past, storage tanks have been assessable and taxable, and process tanks have been exempt. This distinction has become unclear and has led to lengthy legal disputes about whether a particular tank is a storage tank or a process tank. In order to clarify the situation, the government introduced amendments in late '87 that changed the basis for distinguishing between taxable and non-taxable tanks from storage process to size. The new rule made all tanks with a capacity of more than 4,500 litres taxable. Since that time, concerns have been expressed about the 4,500 litre figure. The question is therefore being re-examined. This amendment reinstates the previous storage process distinction for 1988 and provides for future capacity base distinctions to be set by regulation.

Section 1 approved.

On section 2.

MR. BLENCOE: You can imagine that these assessment changes and new formula are somewhat complicated. I've been trying to grapple with how this new formula and assessment works, and at the best of times it is difficult and complex. I don't profess to be an expert, and I'm sure the Minister of Finance doesn't profess to be an expert.

I know there have been some objections to Bill 67. I suspect that was the reason why we didn't see the phase-in of the new formula, which many communities had hoped to see. We support the new formula. There are some problems with it. My understanding is that some portions of industry have not been happy with Bill 67. I'm wondering if the minister could let the House know of the discussions he has been having with industry and of their concerns. Are we seeing some of these amendments as a result of the lobby by industry to make changes?

HON. MR. COUVELIER: No, Mr. Chairman.

MS. EDWARDS: You indicated to the municipal authorities from my area who are impacted rather heavily by the fact that you are not going to have this bill in place right away that they had better make representations right away, and that if they did, you would be listening. I understand they did: we all did, and you were not listening the way they thought you had meant you were going to be listening. Would you please elaborate on what your time-frame currently is? It is a matter of considerable importance to these communities who are sitting waiting for this new law to be put into effect.

HON. MR. COUVELIER: The earlier question that I answered no to implied that we were being whipped around by lobbyists for industry. The fact of the matter is that both industry and municipalities were troubled by the imposition of these rules in order to hit this taxation year. The problem was — as I explained when I told the House many months ago that we would freeze the initiation this year — that industry would have been compelled to launch blanket appeals, because they would not have had the time to look through the detailed assessment manuals in order to give themselves comfort. That same criticism, to some extent, was made to us by some municipalities, so it wasn't just an industry concern; it was a concern expressed by all those people impacted by the change.

To the suggestion that we have not listened, I would like to assure the House that the reverse is true. By virtue of the representations made to us, we agreed that we would give everyone more time to study the detailed manuals. All of these assessment issues — as the hon. member for Victoria said — are complicated, and we have in practice over the years developed manuals so that the assessors and the people impacted by the decisions have reference materials to set the rules, the guidelines. By virtue of changing the approach we took on assessment matters.... We had to rewrite all the manuals. It was a massive task, a huge task, probably the largest task in a bureaucratic sense that the ministry has ever undertaken. So I am pleased that the process has gone as well as it has, and I am indebted to the staff for doing the thorough job they have done on it.

Coming back to the point made by the member for Victoria, may I just take the opportunity of introducing to the House the assessment commissioner, Mr. Tom Johnstone, who is available at any time to assist members in dealing with the intricacies of their particular concerns. With that general comment, I am happy, with Mr. Johnstone's assistance, to get into some of the specifics. But the House should be assured that we have delayed the implementation this year so that everyone affected feels comfortable with the new manuals and the new rules.

MR. BLENCOE: I appreciate the minister's comments and recognize that changes are difficult, but I don't think they take as long as the minister says they do. I don't think we need this long to study what basically, when it comes down to it.... You know, we've got the experts and the technical advisers. Local government certainly understands the new formula and welcomed it and expected it to be brought in fairly fast. I recognize that there may be a period of study, but I don't think it requires virtually two years of delay before we get this. There are communities — as my good colleague from the Kootenays said — that are crying out for this legislation, and the minister has heard from them. I suspect that what has happened, Mr. Chairman, is that the minister to some degree is probably being whipsawed. I know that: I understand that. But I suspect that industry has been successful in getting a delay. A few months ago the minister

[ Page 5416 ]

suggested that we should have a uniform industrial tax rate. I suspect that that had something to do with an appeasing thought for industry in the province. Who knows?

[4:30]

I would hope that we don't see any more delay. I find it unfortunate. I think we could have had it before 1988, quite frankly. I know it may have meant burning some midnight oil, but we've got the people available to make the information available, and industry is quite capable of understanding. Indeed, I think industry has understood that we do have a fair system. They have taken a look at it, and that fair system may impact on them somewhat. They are obviously looking to lobby government to go the other way. I hope that's not entirely the case.

Can the minister assure this House that for sure we are not going to have any further delay after 1988? There might be some other situations that arise: "Well, we'll put it off for another year or two."

HON. MR. COUVELIER: I am delighted to give the House and the hon. member that comfort. This will be in place in September of this year to be applicable to the next taxation year.

Sections 2 to 4 inclusive approved.

On section 5.

MR. BLENCOE: Section (a), I believe, is housekeeping. Section (b), the way I and those who have done some very good research for this side of the House see it, restricts the ability of the assessment appeal board to vary assessments that are appealed on the cost-less-depreciation aspect of the assessment. The board may now only apply the act to vary the classification of property or the valuation of improvements that have been returned to the assessment rolls as a result of Bill 67.

Am I correct that the board is not allowed to vary the costless-appreciation findings of the assessor?

HON. MR. COUVELIER: The only thing the board will hear this year is the classification issue.

MR. BLENCOE: Just this year?

HON. MR. COUVELIER: That's right.

MR. BLENCOE: What happens in subsequent years?

HON. MR. COUVELIER: This will be implemented then, so they will be able to hear all issues.

MR. BLENCOE: Let's see if we can just get this on the record. Subsection (c) — I used to have fun with this when I was chairman of finance for the city, and I can see we're still having fun with this stuff — states that if a person appeals assessments sent down in March 1988 and any supplementary roll issued in order to replace any assessable improvements that had been removed from the rolls, then whatever ruling the board makes on the first appeal shall apply to both appeals. Am I correct in that assessment, so to speak?

HON. MR. COUVELIER: That is correct.

Section 5 approved.

On section 6.

MR. BLENCOE: If an appeal — let me get this right — was launched before March 30, 1988, and no new appeal has been launched after the Assessment Amendment Act was passed, then the board shall complete its decision on that appeal. Correct?

HON. MR. COUVELIER: That's correct.

MR. BLENCOE: That means then that if the appeal was launched before March '88 and an appeal has been launched under the Assessment Amendment Act, then the board shall merge both appeals. Is that what's going to happen? Those appeals are going to be put together and there will be a decision for both. Is that the intention of this?

HON. MR. COUVELIER: That's correct.

Section 6 approved.

On section 7.

MR. SIHOTA: I just want the Attorney-General to tell us what the intention here is.

HON. B.R. SMITH: I guess these amendments to the Commercial Arbitration Act could be characterized in a general sense as trying to make commercial arbitration more attractive and less inclined to be picked at by legal application to the courts. We're doing this based on experience.

I can deal with specific amendments if the hon. member wants. I'm not sure which ones he wants, but looking at 7(a), for instance, that's a lawyer's amendment. The act, when we passed it originally, was supposed to codify the existing common law grounds for setting aside an arbitration award, not expand them; but it was argued and put forward that because we had said in the original act that such and such words constitute misconduct — "and includes" — that may have actually expanded the grounds for judicial review. To clarify that we hadn't intended to expand the grounds for judicial review, we propose 7(a). We did not want to expand the grounds for judicial review whatsoever. We wanted to make arbitration less judicially intrusive and more attractive to businessmen or to parties in a non-commercial transaction who wanted to decide matters before a tribunal — even decide that that tribunal could make errors in law. We think the amendment will have the effect of clarifying that the grounds for setting aside an award have not been expanded beyond those presently available at common law. At the same time, we haven't taken away common-law grounds. So if you have an error that's so fundamental that it goes to the jurisdiction of the tribunal, then of course you can go to the court; or if you have a fundamental denial of natural justice, of course you can go to the court. We're not trying to take that away.

Section 7 approved.

On section 8.

MR. SIHOTA: Am I correct in that the intent here is to rewrite section 2(l) with respect to its application and to provide a clearer definition of situations in which the act

[ Page 5417 ]

applies? What you've really done is to add 8 (c), which talks about "any other arbitration agreement," and make it as wide as possible.

HON. B.R. SMITH: Yes. The act was always intended to apply to all domestic arbitration, in the non-matrimonial sense — I mean, domestic arbitration broadly; that is, exempting labour and matrimonial matters. Most arbitrations do arise out of commercial matters, but there are some noncommercial matters that are not labour and not matrimonial. We just wanted to be clear that you could arbitrate something other than a commercial agreement; that it was something that could also be arbitrated, and it wasn't labour and wasn't matrimonial. That's all we're doing: clarifying that you can arbitrate more than a commercial agreement. Another kind of agreement could be arbitrated too.

Sections 8 to 10 inclusive approved.

On section 11.

MR. SIHOTA: I may be lost a bit here. Just to get clarification from the Attorney, is this the section that takes away the Judicial Review Procedure Act, or is that coming up later on? That's okay; I found it. Go ahead.

HON. B.R. SMITH: Are you content with that? Do you see what we're doing there? We're trying to make sure there isn't an expanded power on the part of the court to stay legal proceedings in the place of an arbitration agreement. We're enacting some of those sections in the International Commercial Arbitration Act, which contains the court's power to stay legal proceedings. But we're not departing from the original premise that I set out earlier; that is, to try and make arbitration more certain.

Sections 11 to 15 inclusive approved.

On section 16.

MR. SIHOTA: This is the one I was thinking of earlier on. I'm sorry I got all of these numbers mixed up. I'm just wondering why you decided to put in 31.1 here to prevent an application under the Judicial Review Procedure Act. I'm not too sure what the policy reasoning for that is. I'd appreciate an explanation from the minister.

HON. B.R. SMITH: This section simply clarifies that a judicial review of domestic arbitration proceedings is allowed only to the extent provided in this act. So the full ambit of the Judicial Review Procedure Act is excluded from arbitration, except insofar as it's consistent with this act. I think you would have to do that. You would not attract arbitration if it was expressly on the provisions of the Judicial Review Procedure Act, although many of the procedures in here are similar. You could not treat all consensual arbitrations on the same basis as you would an award of a statutory tribunal, or of a court or an inferior court, because if you do that, you're not going to get those cases out of the courts and attracted to commercial arbitration, as you and I have both said in our public utterances we support.

I think this act does contain a very good regime of common-law protections, so that we're just not allowing somebody to make some fundamental error in an arbitration that goes to the whole root of it or to deny someone natural justice. But we're not putting arbitration, as such, under the Judicial Review Procedure Act.

MR. SIHOTA: Okay, but you've left in the current section 31, which seems to allow for appeals on questions of law where either there's agreement or the court gives leave for appeal. It seems that that's what you were trying to achieve in 31(2) of the existing act, because 31(2) says that if it's of public importance, if it affects a class of people or if it's so important that judicial intervention is justified, the courts may grant a leave to appeal.

I can see the government trying, on the front end, to do what the Attorney-General says it wants to do: to try to attract more arbitrations away from the courts and into an arbitrational system. That's why I didn't have a lot of concerns about the provisions which expanded jurisdiction. If on the front end you want to increase the number of people who will utilize this system, you've done that by dealing with the jurisdictional issue.

I don't know why you want to limit the opportunities to go to court on a Judicial Review Procedure Act application. Granted, it would add life to the application or the matter under arbitration, but on the other hand, it would provide people with some very basic rights in terms of appeal. Let's face it. There are some bad arbitration awards. You're really limited under 31(1), which is why I suspect people wanted to go under the Judicial Review Procedure Act, and which is why, I suspect, you've now eliminated that. I think you've opened up the funnel on the front end, but on the back end you've really narrowed it, and I don't see the public policy for that.

If I were going to arbitration, I'd want to know that I could get in, which is what the legislation tries to do, but I'd also want to make sure that there were fair rights of appeal. I think you're unduly limiting those rights, and from that point of view, it would be an argument to dissuade you from utilizing the system instead of persuading you to use it. There has to be fairness on both ends — jurisdiction to get in, but an avenue open to appeal that's broader than what you've got now under 31(1), one which would be captured under the Judicial Review Procedure Act but which can't upset the decision; it can simply order, effectively, that the matter be reconsidered.

[4:45]

HON. B.R. SMITH: I think you're maybe missing the whole thrust, which is that this is not a proceeding that was ever intended to be under the Judicial Review Procedure Act. It is not like a ruling of the Human Rights Commission; it is not like a ruling of a statutory tribunal or an inferior court. It is something that parties, being high, wide, handsome and 21 and at arm's length, have decided: "We want to resolve our disputes as businessmen in a tribunal, maybe with other businessmen, maybe with one non-businessman as chairman. And we're quite happy to give up some of the rights that we would ordinarily have to appeal and some of the rights we'd have under the Judicial Review Procedure Act."

It's all expressed in the old act in 30(3), which says: "Except as provided in section 31, the court shall not set aside or remit an award on the grounds of an error of fact or law on the fact of the award." When I practised arbitration law, for years we used to try and set them aside on error of law on the face of the award. That was the main ground. It was

[ Page 5418 ]

rich business for our profession to go in there and make those arguments.

But we're trying to get stuff out of the courts. We're trying, hon. member, to get those things resolved in arbitration with commercial people resolving their own disputes, not to have a cottage industry for our profession, but to have safeguards in there. There should be safeguards — and there are — that you can appeal and get leave granted to appeal where it's an important matter that justifies the intervention of the court and where points of law are important.

We're not trying to close out the courts; we're trying to narrow the ambit, which is again done by agreement, because you only get to arbitration because you agree to be in arbitration. We're not talking about statutory arbitration which takes you to the successor in title of the labour board; we're talking about commercial consensual arbitration. I think you support that.

MR. SIHOTA: Oh, I have no problem with setting up a regime to allow people to bypass the courts and go to commercial arbitration; obviously I support that. That's not an issue. Nor is the issue whether lawyers are going to get rich from the system. If a matter should appropriately go to appeal, then it should go to appeal; if it shouldn't, it shouldn't. I don't think it's fair to say that we don't want to set up a system that will make lawyers more affluent. I think that diverts from the intent here.

I will grant that the Attorney-General obviously practised in this area a lot more than I did. I did a lot of commercial litigation, to be honest with you, as opposed to arbitration. It seems to me that if, as a commercial litigator, I was looking at the option of arbitration, I would have no problem with that if it was more expeditious, which in many ways it is, and if the jurisdiction was broad, which now you've done. But I would have a problem if I knew that I could not appeal an error of fact on the record, if I could only appeal if the matter was of such import that it raised a general point of law or a point of importance.

I think you're putting the courts in a tough position under section 31.1. There will be situations — I'm sure the Attorney-General is aware of them, because I see them all the time — where the statutory provision just doesn't fit the facts or the law, but where fairness, which often guides judges, demands that something be done. I can see a court bending over backwards trying to get something to fit into 31(2)(b) or 31(2)(c) when it really ought not to be there. But because they realize there's an error that goes to fact — which almost goes to jurisdiction, but doesn't - and warrants a rehearing, they are now going to try to fit it into 31(2). You're going to get all sorts of contorted decisions that really should not fall into 31(2), but because you've tied the courts hands too much, they're going to fit it into 31(2).

So (a), it's going to be a misuse of 31(2) or 31(1), or all of 31; and (b), you will have taken away from them the normal right, the Judicial Review Procedure Act — and if it's legitimate, you should have that option. If you don't, it seems to me it's a factor that mitigates against going to one of those arbitration processes. I don't even think it's necessarily six of one and half a dozen of the other. I think you should allow that option. I don't know how often it's being abused or not.

The other thing is, I don't know if anyone is raising this in front of the Hughes commission, but it may make more sense to wait and see what the Hughes commission says in its report instead of trying to second-guess what it may say on this type of matter.

HON. B.R. SMITH: The principle was all set out in the Commercial Arbitration Act that we passed in the 1986 session. That act makes it very clear that a court will set aside for arbitral error, but that was not intended to be as broad as the provisions of the Judicial Review Procedure Act. If there is an arbitral error that shows there's been a failure to observe the rules of natural justice, or the arbitrator has exceeded his powers, or he's been biased or corrupt or guilty of fraudulent conduct, the court has a direct mandate to set that aside. But there's no mandate to set aside anything for error of law on the face of the award. The parties agree to that.

When I went around to consider bringing in this Commercial Arbitration Act, I heard not only from businessmen in this province, but businessmen all over the Pacific Rim, who said: "If you want us to do arbitration business in British Columbia, Mr. Smith, and have arbitrations, we have got to have a system that lends itself to certainty and not endless applications to the court." All we're doing in this little amendment is to clarify that we never intended to treat it as a statutory tribunal, because there just might be somebody in our profession, whether for good fee or otherwise, who might argue — or who has apparently raised the question — that maybe the Judicial Review Procedure Act hasn't been ousted by this act. It was always intended that it would. It was always intended that the grounds would be narrower for commercial arbitration. Otherwise, we might as well shut down that shop in Vancouver. We won't be open for business. People aren't going to come there.

MR. SIHOTA: You say they're not coming now? Maybe they're not. I haven't asked. I remember asking last year in terms of how many people went to the thing, but I suspect people are coming now.

I think this will be my last shot at it. I think we've both carved out different positions on this thing.

AN HON. MEMBER: It's the minister's last shot for awhile too.

MR. SIHOTA: I won't say that. I'm sure the minister will be Attorney-General well after the cabinet shuffle. I'm the only one who's betting on that, so I hope I'm proven right. I stand to make a lot of money on that.

HON. MR. SAVAGE: Are you gambling?

MR. SIHOTA: You call that gambling? Do you see this gentleman here, the second member for Boundary-Similkameen (Mr. Barlee)? It was 52.9 percent; I was only 0.2 percent off. If you want me to guess your futures, I'll be happy to do that for a small fee.

There may be a couple of cases out there where people have misused the Judicial Review Procedure Act. I would venture to say there aren't that many cases where the Judicial Review Procedure Act has come into play under the Commercial Arbitration Act. That being the case, I would rather have the safety of the Judicial Review Procedure Act than eliminate it on the fear that these things will go on and on forever. I don't think that's happened all that much. I don't think there are a lot of JRPA applications under this. You may get one or two that are illegitimate, but I'd rather have the safety for one that's legitimate, instead of trying to iron out a wrinkle that deals with the one or two that are illegitimate.

Maybe the Attorney-General doesn't think that safety is necessary. I think it is, and I think that's perhaps the best way

[ Page 5419 ]

to crystallize this argument. I'm not convinced that you need to do this.

HON. MR. SMITH: I'm not going to prolong this debate, but thank you for recommending a monumental excavation of endless process, which we reject on this side.

Sections 16 and 17 approved.

On section 18.

MS. A. HAGEN: I'd like to ask the Minister of Health some questions on this section. Could the minister please define for us more specifically the exemptions contemplated in this particular amendment to the Community Care Facility Act? What standards may be affected in the clause in the act that is being amended with this addition?

HON. MR. DUECK: The issue arose because we had some facilities that did not completely comply as to width of hallways and other minor things that pre-empted us from using these particular facilities when remodeling was necessary. Therefore the rules can be somewhat altered if they result in undue hardship. Secondly, if there is no increased risk to health or the safety of the facility, then some of these rules could be altered.

MS. A. HAGEN: From the minister's comments, do I assume that we are talking about exemptions only for facilities that presently exist? Could he be more specific about what facilities he is talking about here? And would this allow the ministry to exempt facilities that may come on line — either being built or being modified — from the standards that presently prevail?

HON. MR. DUECK: If there is a situation where a facility is being built and it is for ambulatory patients who can have certain exemptions, it could be in a new facility also. It must have that criterion very closely observed, which is that there is no increased risk to the health or safety of the patients. Some of the rules were rather onerous in some of the facilities, and we're just saying that rather than it being bureaucratic, it is a matter of looking after some of these seniors in the homes. As long as it doesn't affect the safety or the health of those residents, we should also look at it from a practical point of view and allow it.

MS. A. HAGEN: Let me explore with the minister a possibility. Suppose this is a group home for moderately disabled adults or a care home of some kind for older people, all of whom are presently ambulatory. By having these kinds of exemptions, particularly in new facilities, is not this particular latitude foreclosing on the very kind of flexibility that you might want to have in those institutions around change in the care needs of the population being served? I can see certain instances where there might be exemptions, but it seems to me that it would have to be administered with a fair amount of care if we are not to limit, particularly in new facilities, their potential to serve a clientele whose needs may change as well.

I'm really looking here at how the ministry would see administering that flexibility. I think the idea of there being some flexibility is fine, but it's a very blanket kind of clause. I'd be somewhat concerned that this allows a latitude to relax standards that are there for good and proper reasons around the needs of community care facilities, which are not necessarily static either.

[5:00]

HON. MR. DUECK: The hon. member mentioned the group home, and that is a perfect example. We are speaking of allowing more and more people out into the community, and the problem we are having so often is that it doesn't meet the very high standard that has been put into the regulations for these homes.

Therefore we are saying that there should be some flexibility so that we can have access, as long as there is no risk to safety or health. I think we have gone too far the other way where.... They still must comply, incidentally, with municipal bylaws and all the safety that is built into those regulations. But we are talking about homes that perhaps do not need extreme safety regulations, such as extended care, where it is really a hospital situation. We are talking about homes where people are quite ambulatory. As a matter of fact, we have already been practising this for about a year, and this is just to bring it into line and add credence to what we are doing.

MS. A. HAGEN: Could the minister just identify one or two of the exemptions that would be able to be implemented within the legislation if this amendment passes? That might give me a clearer idea of what may be involved.

HON. MR. DUECK: We had an example about six or eight months ago where this one home was qualified and met all the standards of the day. They had an extra room which was at one time a recreation area and they wanted to divide that into two additional rooms for residents, but the hallway to that section was four inches too narrow, and under our regulations we could not allow or pass it. I think that is bureaucratic and absolutely against any reason or common sense which we are trying to create when we have these homes, so we feel there must be some flexibility.

Surely, if we say there is no risk to safety or health, we are not going to go and have extended care in a situation where they can't be looked after. This is to give us that extra flexibility where it is required, where it is unreasonable to expect an operator to change for a couple of inches. There was room for a wheelchair, for everything, but according to regulation it was just that much shy and we could not pass it under those circumstances. This gives us the opportunity to in fact use that type of facility and also many more that are in the community that we could use for group homes and for the much needed residences for these people who would like to get out of a facility, perhaps for the future also, from Riverview, and on it goes.

MS. A. HAGEN: One final question, a question I think I know the answer to. Pursuing though the line of exemptions and some deregulation regarding the standards, who would be responsible for making those decisions; and if there were concerns on the part of anyone in the community around the relaxation of any of these standards, how would the community express any concern that they might have regarding those standards?

Once the minister answers this question, I suspect my line of questioning is complete. I assume that this applies only to physical standards and there are no modifications

[ Page 5420 ]

around staffing and some of the other aspects that are a part of this particular clause. I am assuming we are talking just about the physical standards of a facility or a group home.

HON. MR. DUECK: That is absolutely correct.

MS. A. HAGEN: Can the minister advise us who will make the decision on these exemptions and what right there is for anyone to question or appeal them or to raise some issue around those relaxation centres, since it's a blanket clause? I appreciate that the minister is really looking at something that smooths out bureaucratic kinds of restrictions, but I want to know, since it is such a blanket clause, what kind of administration and appeal exists if there are any concerns about how this new clause would be administered.

HON. MR. DUECK: We have the two boards. There is the provincial adult care facility licensing board and the provincial child care licensing board, and they would be making that decision. The appeal, I guess, is no different than it was before they were operating, and I suppose the appeal could come forward the same as it did before.

Section 18 approved.

On section 19.

HON. B.R. SMITH: I can't resist saying a word about section 19 by way of praising the Provincial Secretary, and minister of state for three-quarters of our galaxy on the southwest coast and lower mainland, for discovering what was an egregious cartographic error which in fact extended the boundaries of the chairman of this committee to include Asia as well as south and central Europe. While I am absolutely confident that he can handle that responsibility, we decided to narrow his responsibilities a little by taking the line that was described as going eastward instead of westward so he could finally arrive at that watershed — a watershed of geography as well as a watershed of career.

Section 19 approved.

On section 20.

MR. SIHOTA: This section deals with the Court of Appeal, and I know the Attorney-General has a certain desire to be part of the Court of Appeal. Rumour has it that it's bound to happen any day. I'm wondering if the Attorney-General can confirm one way or the other if that's bound to happen any day now. Or am I just hearing...? I just heard it on the radio, and I'm wondering if it's indeed true.

HON. B.R. SMITH: The solicitude for the welfare of the minister in charge of this bill is indeed overwhelming, to say the least.

As you can see, it's a very progressive change in reform of the Court of Appeal Act, one that was requested by the court and one that will probably enable them to administer their affairs even more efficiently than they do now. I think it's probably one of the most efficient courts in the country. It's an excellently run court.

MR. SIHOTA: I'd like to thank the Attorney-General for — properly — not answering that question.

I take it then that this was requested by the court. I was somewhat surprised to see this, because it does add one more step to the process, and that struck me as rather peculiar. But if the court requested it, I'm quite prepared to go along with it.

Sections 20 and 21 approved.

On section 22.

MR. JONES: I don't think we have any major problems with this section of the bill, but I would like to ask a question of, I assume, the Minister of Education. My understanding of section 22 is that it permits the Minister of Education, rather than the cabinet, to determine the amount of a supplementary grant to a school board, that this has been raised by the auditor-general and that it legitimizes past practice. I would like to ask the minister why he was not following this particular section of legislation in his past practice. And could he clarify for me the difference between the supplementary grant referred to in section 22 of the bill and the special aid grant referred to in section 24?

HON. MR. BRUMMET: I guess the first question is: why weren't we following the practice? I guess it's a matter of technicality. For instance, one case of a supplementary grant is where we provide grants on pupil enrolment. When the budget is set, there is a provision that if ten more students show up in the fall, we add that to it. So I suppose, rather than go to an order-in-council every time the pupil numbers changed in each district, it was just done; it was part of the understanding, part of the agreement in other sections. So the auditor-general and the technical people picked up on it and said that technically this could not be done. That's really what we have there. 

In the special aid grant, something unusual may come up in a district. It might be a dormitory cost, it might be a special education item, it might be because of a fire or something of that nature, and there has to be some very special aid on a very interim basis. That isn't part of the formula. In order to allow the district to function properly, those aids and grants will be able to be made — as they have, in effect, in the past.

I hope that answers the member's questions.

MR. JONES: I thank the minister for that clarification, and I have no problem with it.

I might make just a couple of comments that the minister might want to respond to. I'm wondering when an interim act will become an act. This act has been an interim act for six years now, and I assume that at some point it will be considered to be a real act rather than an interim act.

The section on special aid to school districts suggests that these supplementary grants are going to be made under section 22, according to the act, when the minister considers that additional funds are required to avoid "public inconvenience or hardship to the taxpayers in the school district." I assume that if the minister took those words seriously, he could apply that to most school districts in the province, because they are having extreme difficulty in raising what they consider to be an adequate level of funding for the educational operations in their district. Virtually every district in the province, I would suggest, could qualify under this section as requiring a supplemental grant from the minister.

[ Page 5421 ]

I'm very pleased that it's now the minister, who I know is an advocate for education. I hope he will be there as Minister of Education several weeks hence and for many years to come, and that he will take this section of the act very seriously and apply those supplementary grants to the needy school districts in the province.

HON. MR. BRUMMET: Mr. Chairman, I can't resist at least one comment. I hope the member has read the section that talks about "a special aid grant that is in addition to all other grants" already provided under the School Act or the Education (Interim) Finance Act. "Special aid grant" means just that. The argument he is making, I guess, might be more applicable under other areas, and I know that if he were Minister of Education he would double the funding to the school districts because it's politically expedient, without any concern for the taxpayers who pay the bills.

[5:15]

Sections 22 to 24 inclusive approved.

On section 25.

MR. SIHOTA: I think we will support these sections that are coming up, with respect to witnesses whose capacity is in doubt and affirmation. The new section is an interesting one, and I think it's well worth an opportunity to see how it works out.

In principle I agree with what's being contemplated here. There are some risks, and I know that certain members of the bar have talked about those risks. But given some of the legitimate concerns that bring forward this type of section, I'd be quite interested in seeing it enacted, and in seeing how it works out in court and how comfortable both counsel and judges feel about it. I think that sometimes in our profession we're a little resistant to change, because we're used to particular ways of operation. I think the change envisioned here with respect to witnesses and all of the other changes with the Evidence Act are worthy of a spin to see how they work out. I think in the long run they'll work out well, in terms of the administration of justice and the assurance that justice gets done in this province. So we'll support them.

HON. B.R. SMITH: They are quite important and far-reaching. They will make our act correspond with the new federal act. The section that deals with a child of tender years is an important departure from the old law: it specifies persons under 14 years and sets forth an inquiry that the judge or other presiding officer makes with the witness, which is a new form of inquiry, as you've indicated. You find out, first of all, whether the person is under 14 years of age or is a person whose mental capacity has been challenged. If the witness falls into either of those two categories, they have to make a further inquiry to satisfy themselves that the proposed witness understands the nature of an oath or a solemn affirmation and that that person is able to communicate the evidence. Where the answer to both those is yes, then the person can testify. But suppose the person is able to communicate the evidence but doesn't understand the nature of the oath? Then the judge for the first time has the discretion to permit that person to testify. That's very important.

Another important change there — I'm just going to highlight it and then I'm going to sit down — is that the absolute provision for corroboration, which is longstanding, has been taken out of the Canada Evidence Act to encourage children to come forward in sexual abuse cases, and we're doing the same thing. We're paralleling that. It's always important to say that the safeguard is that the judge only gives — or should give — so much weight, as is required, to that kind of evidence. But he may hear that evidence and accept it uncorroborated. I think that's an important step forward to fight cases of child abuse.

Sections 25 to 29 inclusive approved.

On section 30.

MR. BLENCOE: It's the Ministry of Municipal Affairs. Aha! Here is the minister. I wanted the minister to do a little work today, so perhaps the minister could give me some clarification on this.

HON. MRS. JOHNSTON: We've had a request from the municipality of Saanich to bring in this amendment that allows them to add one member to the board, thus giving them equal representation. We have acceded to that request.

MR. BLENCOE: I'm trying to remember. Maybe the minister can refresh my memory. Is this because Saanich has hit a certain population base and they automatically get an extra member, or is this a consensus that Saanich should have another member? Saanich is important, but I don't know if it's as important as Victoria.

HON. MRS. JOHNSTON: I don't have all of the background information, but it's my understanding that the board of the Greater Victoria Water District put forward this request, with the support of Saanich and Victoria, that there would now be equal representation, from two to three.

MR. SIHOTA: I'm sorry, I'm trying to find the Greater Victoria Water District Act here, and for some reason it's....

One of the Clerks is getting me a copy of the act. I'll be working from memory until I see it. Am I correct that this act effectively says that the representatives from the four core municipalities will have representation on that board. Am I correct this is the section we're talking about'? Just putting aside the matter of whether it's two or three, this is the section that says that the four core municipalities will have representation on the board. Am I correct in that understanding'?

HON. MRS. JOHNSTON: According to the notes that we have, the Greater Victoria Water District hired a consultant to examine the structure and representation on the district. As a result of the consultant's interim report, the municipality of Saanich has requested an increase in representation. When the final report is presented, it may result in further, possibly legislative, changes.

You're wanting to know what the make-up of the board is, other than Saanich and Victoria. Was that the question, hon. member? I'll have to get you that information, but it appears that this is a result of an interim report that has been brought forward, and the rest of the representation is unknown to me.

MR. SIHOTA: I think I'm just getting the section here that dealt with it. I want to raise a matter with the minister that not just touches on this amendment. I don't have any problem

[ Page 5422 ]

with Saanich having another rep, I guess, but if I recollect this section properly.... Oh no, it doesn't say....

AN HON. MEMBER: You're wrong again.

MR. SIHOTA: No, this is the 1922 enactment; it's not in there.

What I want to say to the minister is this. When you look at it — and I'm quite sure this is the same section, although the section that's produced in the 1922 act doesn't cover it either.... But I know that Esquimalt, for example, has representatives on there. So do Victoria, Saanich and Oak Bay. That's fair enough. I don't want to take issue with whether or not the number of Saanich reps should be increased or decreased, or whether there should be two or three.

What I want to say to the minister — and I don't want to go off on too long a tangent — is that I've got a lot of problems with the way in which this is set up. The Western Communities, an area that I represent that includes View Royal, Langford, Colwood, Metchosin and Sooke, do not not have any representation on the water board. The water comes from Sooke lake, which is, of course, in my riding. It provides water services to the entirety of my riding, let alone the tidings of the members of Victoria and Saanich. There's been a tremendous growth in population out in the Western Communities. If you look at the development of water services in the area, what you see is that there has been a lot of services provided — upgrading and the like — in the four core areas and out toward the Saanich Peninsula.

I hasten to say — and I say this with some conviction — that one of the reasons that's happening, of course, is that the representation on that board is from those areas, and they tend to get a tremendous amount of service. The peninsula gets better service than the Western Communities, despite the fact the peninsula doesn't have any service, solely for the reason that it's easier to build out on the peninsula, which is flatter land, than it is out in the Western Communities.

My point to the minister is this. It's fine if today you want to introduce this type of section; go right ahead. But what the minister ought to be doing with respect to the Greater Victoria Water District is allowing for some type of representation from the Western Communities. I can tell the minister that it's very, very frustrating trying to get some service out to the Western Communities, particularly out to Sooke. In fact, just this weekend out in Sooke I can tell you that.... You know, people laugh about the quality of the water here. There it's not just the quality; the colour of the water is all dark, the system doesn't have adequate pressure — and that's perhaps out of order in terms of my going into all the depth of the problem.

What I'd like to see the minister do is make a commitment and say that that problem will be addressed as well in terms of adequate representation from those areas that have no representation right now and suffer as a consequence of that lack. So I would like to see the minister move in that direction.

HON. MR. STRACHAN: On a point of order, Mr. Chairman, that's far beyond the scope of the section the member's debating.

HON. MRS. JOHNSTON: I will make this undertaking. I will ensure that a copy of the Blues with regard to the member's statements is pulled and that we respond to his concerns. But I would also like to comment that I don't recall having had any representation from either the member or from the other districts with regard to representation on this body. I would certainly be pleased to address the concerns that have been put forward here today, and will assure the member there will be a response to him without any delay.

MR. SIHOTA: Just on that last matter, I think the minister has forgotten our debate during estimates last year. You will see if you go back to that that it was raised at that time, and you'll also see that I have corresponded with you on it. You'll also see that I think I've.... In fact, I'll produce the letter for you. We have corresponded on the matter, Madam Minister. I think you've just forgotten that; and certainly on the estimates it came up.

Sections 30 and 31 approved.

On section 32.

MS. EDWARDS: This is under the Heritage Conservation Act, as I understand it. Perhaps the minister could clarify for me. It says that section 32 provides for the establishment of provincial heritage properties in Barkerville, Fort Steele and similar locations. As I understood it, Fort Steele, Barkerville and so on were already heritage properties. Perhaps you can clarify what the difference is.

[5:30]

HON. MR. REID: Mr. Chairman, this establishes the administration of heritage properties of provincial significance for the benefit of present and future generations. They are not established as heritage properties at the moment; they are defined as parks. This changes the description to heritage properties.

MS. EDWARDS: Okay. So right now they are heritage parks, as they are currently called — I believe that's the right term, What this allows is for them to be designated as heritage properties, but to exist and be administered as class A parks — which the heritage parks were, because they were administered as class A parks. So this in fact gives them a higher degree of protection, I would gather, as far as being changed and so on. Does it change the type of activity that can go on around the actual resource itself — the buildings, the land and so on?

HON. MR. REID: It allows the name to be changed from a park to a heritage townsite; and it allows, by heritage designation, for each of the buildings to be defined relative to the time constraints of the building. It allows, under the act, very limited changes in the park without application to the ministry.

MS. EDWARDS: So it does clean up some of this transfer, which had the Ministry of Tourism administering the parks and the people who had commercial licences still paying their rents to the parks branch, which I assume they will continue to do but through an administrative branch.... Actually, I suppose they could make their cheques out.... Anyway, that's not important. I'm sure that's an administrative detail.

I do have some other questions though. This act says: "Section 33 of the Park Act applies for the purposes of this

[ Page 5423 ]

section." I noticed in looking at section 33 that it says: the regulations may provide for (a) the administration, protection and development of land, trail, path or waterway...." I'm curious, partly because of groups that have been talking to me, about how trails and paths work under this act. Suppose you were going to establish a heritage designation under this act and it was to be a trail. In other words, it would be administered under the Park Act because you want to designate it as a heritage site for this section. Can you tell me how this would work vis-à-vis a gazetted road, for example? If it's a trail that has been gazetted, who has administrative authority over it? Does the Ministry of Tourism then have authority over the road or does the Minister of Highways still continue to have authority? Do you know how that works?

HON. MR. REID: If the gazetted road is defined by the heritage designation as a portion of the site or on the site or access to it, and it's declared a heritage road or trail, it can't be altered or modified in any way without permission of the minister.

MS. EDWARDS: If you designated a site and a gazetted road went through it, does it still have all the rules and regulations applying to it that a gazetted road does otherwise?

HON. MR. REID: I'm not sure I know what you're getting at. If the road is within the site designated as a heritage site, any alteration to the road for whatever purpose would have to be approved by the Minister of Tourism, Recreation and Culture as the minister responsible for the designation of that particular site.

MS. EDWARDS: Okay. But do all the rules that apply to gazetting continue? In other words, if it's a gazetted road, does it continue to be a gazetted road, and the requirements for the things that you can and can't do on gazetted roads continue?

HON. MR. REID: The only concern — I hope this is the concern you have — is that somebody not do something to a historic road that's been gazetted but must be retained in its current state of historic usage without being paved and so on, in order to retain the quality of the heritage site. It is the responsibility of the minister to make certain that somebody doesn't come along and pave a road across a historic site — one that didn't exist during those days. Without permission of the minister for the site as designated, that could not happen.

HON. MR. STRACHAN: If I could just add to this for the member, the Minister of Tourism, Recreation and Culture has to treat the property as if it were a class A park, and those restrictions are quite restrictive. It gives class A park management ability to the minister — from this minister to that minister. But in terms of administration, nothing can change, nor, as I read these amendments, be lessened in terms of control and management.

MS. EDWARDS: Thank you — to the Minister of Parks.

I would like to push a little further on this because I'm trying to consider as many cases that I've been considering as possible. If there is, for example, a mineral claim in existence, it cannot be designated a heritage site. You don't designate heritage sites that would conflict and you don't establish parks where there are mineral claims. But if there were gazetted roads and if a park were established around a road that continues to be gazetted, who manages that road then? The Minister of Highways or the Minister of Parks or the Minister of Tourism under the Park Act'?

MR. CHAIRMAN: Shall section 32 pass'?

MS. EDWARDS: I wonder if I could get an answer on this. I'm just curious. I don't know if the Minister of Tourism or the Minister of Parks might give me this answer too. I'm just curious how this is going to work with heritage designation and then the administration. I wonder if he'll have an answer.

HON. MR. STRACHAN: If I can just get back to what I said. I wish I had a better technical answer with respect to gazetted roads. Suffice it to say that these amendments simply empower the Minister of Tourism in these locations — Barkerville, Fort Steele and other similar locations — to act as if he were the Minister of Parks and as if he were operating under the Park Act and as if these properties were class A parks. Really nothing changes except that he becomes the minister responsible for these particular properties, as opposed to the Minister of Environment and Parks.

MS. EDWARDS: I understand that — thank you very much — but my question is: if a park is established, in order to do that you don't de-gazette road, do you? If a road proceeds through a park, do all the rules applied to gazetted roads apply within a class A park?

HON. MR. STRACHAN: If there were existing park-use permits for a road, they would be honoured as approved under the Park Act, and it would still be the park-use permit, which is what you must do to have anything happen within a park. You get a park-use permit from the minister, and in this case it's the Minister of Tourism.

MS. EDWARDS: Then the rules of gazetting, I assume, may not disappear. They would be administered, however, by a different minister.

HON. MR. STRACHAN: Exactly.

MS. EDWARDS: Okay. thank you. That's fine.

Sections 32 to 35 inclusive approved.

On section 36.

MR. ROSE: Sections 36 and 46 deal with the same matter, and I wonder if we can debate them together when we reach 46.

HON. MR. STRACHAN: Pursuant to standing order 84(2), section 36 of Bill 32 will be stood down until the passage of section 46. How does that sound?

On section 37.

MR. SIHOTA: I didn't have an opportunity to comment on this, but I think the two appointments that the Attorney-General has made, Mr. Webster and Dr. Pomeroy Autor, are

[ Page 5424 ]

outstanding appointments. That's good news for the bar and the lay benchers, and I think they're first-class appointments. I never did get a chance to comment on that, because I can't remember where I was when the news came out. I thought I'd just put that on the record now and then just ask the Attorney-General when we can expect the third appointment to be made.

HON. B.R. SMITH: This section was, of course, to make it absolutely clear that we didn't have to wait until the terms of all the rest of the benchers expired before we could appoint those two. I think we could, but we wanted to be sure we could, and we did appoint them. I'm very pleased to hear his comments, because they're an outstanding kickoff for the first two lay benchers.

The government is going to appoint the third one fairly soon. We're hoping to appoint someone — not from the lower mainland but from the interior of the province — with an interest in matters of this kind. I think we're open to suggestions.

MR. CLARK: We'll give you a list.

HON. B. SMITH: Well, you don't know anyone outside the lower mainland, hon. member. That's your difficulty. You don't travel beyond the Cassiar connector too much.

Section 37 approved.

On section 38.

HON. MR. VEITCH: I thought this just required a bit of clarification prior to voting upon it.

This section is similar to the re-employment earnings section that we passed in a previous bill of the House that alluded to public servants. What it does is adjust the pension for re-employment earnings for members. It alludes to the highest-paying position that a member obtained during the time that person was a member of the Legislative Assembly prior to retirement and compares it to employee earnings plus the government's portion of the pension. If the two together are in excess of the highest average a person would have earned if they came back and worked for the government at some future time, then a portion is placed in a trust fund and will be paid back to the member after the member ceases reemployment with the government.

MR. ROSE: I don't quite understand. I wonder if you were speaking to 39 rather than 38.

Interjection.

MR. ROSE: I thought you intended to speak to 38, because I'd like to have a little explanation of what 38 is. Is it the repeal, and 39 is a substitute for 38?

HON. MR. VEITCH: Yes.

MR. ROSE: All right.

I have some questions here. I understand that what this does is that certain people who are employed in the public service or collecting a pension — ex-MLAs who are employed by the public service or another employer to whom the Pension (Public Service) Act applies, such as a government corporation, or as an independent contractor.... We have some stellar names that we could perhaps consider here. The former second member for Vancouver-Point Grey is now our agent-general with London. Will he fall under this category? He won't be able to get a full benefit for some time. Are you going to hold that in trust for him so that when he finishes he will get his package rolled over plus interest, and all his heirs and successors will get that as well?

Also, I was thinking of another illustrious name: the former member for Peace River, Mr. Phillips. He acts on behalf of the city of Dawson Creek from time to time. Would he apply'?

[5:45]

Interjection.

MR. ROSE: He doesn't apply. Can the minister tell us of anybody else to whom this applies? I don't understand this whole thing, really. Am I correct in assuming that all this does is hold up the pension according to a particular formula, for it to be granted afterwards in the form of a delayed payment held in trust until he's out of it? In effect it doesn't do anything about collecting the salary twice. It merely retains or postpones the amount paid plus interest. Is that right?

HON. MR. VEITCH: This applies as well to the former member for Vancouver-Point Grey, who is the agent-general in London, and it may even apply to the member for Coquitlam-Moody if he should be here that long and decide to go back and work in the university system or something of that nature. You too would then be able to have a portion of your pension set aside should your pay exceed the amount you have for a pension. It would not apply to the city of Dawson Creek. It would apply to Crown corporations and to places like BCIT, community colleges and things of that nature, hon. member, but not to municipalities.

I can't think of any other members to whom it would apply. I can think of other members who are on pension — Mr. Loffmark and people like that — but I doubt that it would apply to him.

MR. ROSE: Really, it's a device to assist people to lower their eligibility for a certain kind of income tax, because it puts it off in the form of an RRSP until a person can reach a lower salary provision. Therefore it really acts like an RRSP. Is that right?

MR. SIHOTA: Just say yes or no. Is it true or not?

HON. MR. VEITCH: Yes and no, Mr. Chairman. What it does is to set aside a portion of a pension, if the pension and the salary are greater than what the individual received as a highest salary when he was a member of the Legislature, until a future date when that person is not employed in government service.

Sections 38 and 39 approved.

On section 40.

MR. LOVICK: There are a number of other sections in this bill that are worded precisely the same as section 40, which is under the Ministry of Energy, Mines and Petroleum Resources. Another one is section 47, which is Transportation and Highways; as well, 59 and 60. I make that point now

[ Page 5425 ]

not to ask that these all be collapsed into one, because there are differences between them, but rather to emphasize that the questions here perhaps reflect on more than just the operations of this particular ministry. Before we proceed too far, I'm wondering whether the minister might be available — or another one.

HON. MR. STRACHAN: The Minister of Energy, Mine, and Petroleum Resources, plus the Minister of Labour. We will see what we can do. In the meantime, pose the questions and we will try to answer them as best we can as they relate to the four sections. I don't have any problem in dealing with all of them as they are placed in a general basis.

MR. LOVICK: The first of the two parts of this particular section is very straightforward. It talks about right-to-know legislation: making provision for "the disclosure, by labeling or otherwise, of information respecting materials which are dangerous or potentially dangerous to a worker who handles them or works in their vicinity." That is certainly straightforward and self-explanatory, as the note to the bill says and suggests.

The predicament that I have — and I suspect I am not alone in this, Mr. Chairman — is with the second section. The first part says we will provide that protection to the worker by labelling; the second part, however, seems to set in place a mechanism whereby one doesn't have to provide that information. The two are, if not contradictory, at least not consonant. I wonder if we can have an explanation for that apparent discrepancy, that apparent contradiction.

HON. MR. DAVIS: My understanding is that this addition to the Mines Act of British Columbia brings it into line with recent federal legislation dealing with hazardous materials. Essentially, the two sections which on the face of it are contradictory are in the federal act. While the federal act requires that the hazardous material be properly labelled and described to employees as dangerous or potentially dangerous, there is an exemption allowed to, let's say, the mining company or the railway operating company — I believe this also applies to the Railway Act — when a commission gives the employer the authority to exempt the degree of hazard.

I suppose the employee knows it's hazardous; the employee does not necessarily know the precise chemical formula and so on. I understand this is to protect those who own the patents to the particular materials involved, for whatever purpose. It's really protection of patent rights, etc., which is allowed or provided for in the federal legislation. We are merely picking up on the federal legislation and using the federal commission, etc. as the referee in this case.

MR. LOVICK: Is it the case then that there are other provisions in law somewhere that provide adequate protection to people handling those potentially dangerous chemicals and goods, given that there are exceptions whereby they may not be granted the exact chemical formula in order to protect somebody's patent or information? Is there another protection provided to overcome what clearly seems to be an escape clause here which has the effect of negating the first part of this amendment to the bill?

HON. MR. DAVIS: I believe the answer is yes, there are other provisions in the federal Hazardous Materials Information Review Act. I gather that this legislation was reviewed carefully by a federal House committee and that safeguards such as the hon. member is asking about were a necessary part of the legislation or it would not have been passed.

MR. GABELMANN: The report in the executive summary suggests that.... I quote from the last paragraph: 

"Consensus could not be reached on the scope of WHMIS. The...project was set up on the explicit advice of the government administrators that any WHMIS developed or recommended would apply to all workplaces. It was on this understanding that the consensus over WHMIS was accepted by the labour caucus on the project. Industry, on grounds of cost effectiveness, wished it to apply to the manufacturing sector and other areas with a significant potential of benefits, but not to establishments where benefits would be marginal."

Is that why this second clause is in the bill'?

HON. MR. DAVIS: I have a page and a half of notes here which I have yet to read.

This system has been developed on a trip-to-trip consensus. This is what the notes says: Canadian Manufacturers' Association, Canadian Congress of Labour.... The federal legislation was passed in June 1987. I assume that industry, labour and government had an opportunity for input, and these amendments are to be made to the Workers Compensation Act, Workplace Act, Mines Act and Railway Act, federally and provincially in Canada. In this instance, we are carrying out the provincial obligation to cover mines and railways.

MR. LOVICK: I'm not sure I am entirely comfortable with the answer I've heard thus far, but rather than belabour....

Interjection.

MR. LOVICK: Do you want me to really slow this question down so I'll have time to read...? Perhaps the information that the minister has isn't entirely to his satisfaction either.

HON. MR. DAVIS: I was winging it at the outset, and I think I got the essence of the argument. Nevertheless there's a section here headed "Trade Secrets." A key element is a tripartite agreement for the Hazardous Materials Information Review Commission to handle business trade-secret claims for exemption from disclosure requirements. The basic objective is for the Hazardous Material Information Review Commission to provide consistent decisions and have Canada-wide application. This will be of benefit to provinces in not having to set up their own appeal structures.

The Hazardous Material Information Review Commission is being set up by Consumer and Corporate Affairs Canada on a self-financing basis. The B.C. representative on this commission is Mr. A. Riegert of the Workers' Compensation Board. An amendment is constitutionally required to delegate appeals in an area of provincial jurisdiction to the federal agency. The Workers' Compensation Board is developing detailed workplace hazardous materials regulations. A public hearing on was held on April 29, 1988, in Richmond. The workplace hazardous materials information system is scheduled to come into effect across Canada later

[ Page 5426 ]

this year, and section 40 of this miscellaneous statutes bill honours that obligation.

Sections 40 and 41 approved.

On section 42.

MS. EDWARDS: I have to question the minister on this. There aren't many times when we in our comer of the province get jealous of Tumbler Ridge, but it looks at this point as though there is a lot of free money being handed around somewhere. I wonder if the minister could explain just exactly why we are validating an agreement made before. I understand that there is a $600,000 amount in this that is going to be forgiven to Northland Utilities by the district of Tumbler Ridge. I understand that a similar amount is to be forgiven by Quintette Coal to the same Northland Utilities (B.C.) Ltd. I am curious to know the background on this and have some indication of who Northland Utilities is and what it, plans to do with the $1.2 million that they just fell into, so that they can get another grant, so that the gas rates can go down. It's a marvellous story, but can you fill it in?

[6:00]

HON. MR. DAVIS: Tumbler Ridge natural gas rates were the highest in Canada, and a tripartite agreement has been entered into. The municipality, on the one hand, the distributor utility and the coal company — three parties together — have, as a result of a recent arrangement, been able to reduce gas rates to an average level for British Columbia. The problem arose essentially because when the franchise to deliver gas to Tumbler Ridge was advertised, all the parties assumed that the coal company would use gas for drying coal. It subsequently has been using coal to dry coal, and the large industrial load didn't materialize. Residential and commercial users then were saddled with the much higher bill. The tripartite arrangement allows a writing down of the investment in the local facilities so that the rate base is roughly cut in half. It was necessary, however, to give unusual authority to the municipality to allow it to write off its one-third of this write-off. So it is an unusual situation. I think the end result is desirable. It's focused only on the Tumbler Ridge problem.

MS. EDWARDS: What you're saying, Mr. Minister, is that it is just another example of the kind of subsidy that went into Tumbler Ridge in order to create that megaproject called Tumbler Ridge. Who is going to bear the $600,000 of the district'? Is that coming right out of the district's pocket, or is somebody going to hand it to the district of Tumbler Ridge to hand to Northland Utilities? It says it's B.C., so it must be a company that is established here, but is it related to Northland Utilities from Alberta?

HON. MR. DAVIS: Mr. Chairman, the member is correct. Northland Utilities' principal operational base is in Alberta. It competed along with Westcoast and Inland and one other several years ago for the right to have the exclusive franchise for Tumbler Ridge. At the time it was hotly contested because they believed they had the large industrial sale.

To get around to the money, the province is really making Tumbler Ridge, and the municipality whole. Northland is suffering a loss to the extent of its contribution. Quintette, which had put up a bond in any case, has been called to contribute its one-third. So the municipality backed by the province, the utility and the coal company are all contributing to this write-off, which reduces the rate base and makes lower rates possible. But Northland has obviously lost money in the process, as well as Quintette being called on to honour a bond, which was put there in lieu of taking gas — if it didn't take gas it had to surrender the bond. Also, the municipality has been made whole by the province.

MS. EDWARDS: Where does Tumbler Ridge get its $600,000? I know that any of the coal communities that I represent couldn't find $600,000 to do this, because they're too busy trying to deal with assessment problems. I am interested in knowing whether it's the taxpayers of southeast coal who are now paying the $600,000 to Tumbler Ridge so that Tumbler Ridge can compete with them in the coal market.

HON. MR. DAVIS: Mr. Chairman, I think any way you slice it, it's assistance to the municipality of Tumbler Ridge, the residents there and the coal company. Presumably you save some money by using coal, but it has had to forfeit its bond. Northland Utilities have lost a large chunk of their rate base, so they have not been able to make money on the business they obtained as a result of a contest before the Utilities Commission. Substantially, the province makes the municipality whole. To repeat, Tumbler Ridge is being given exceptional treatment because of the exceptionally high gas prices there.

MR. BLENCOE: Mr. Chairman, let's be straight. This is the continuation of the sink-hole we have in Tumbler Ridge of this government's major initiatives to provide infrastructure costing millions and millions of dollars of taxpayers' money. Now we have, slowly but surely, the results of that decision coming home to roost. We have a so-called innocuous section in a miscellaneous statute that is writing off $1.2 million of debt to a company associated with Tumbler Ridge. It was brought in because of this so-called great project of the government of the day — and many of the members still sitting over there were responsible for that decision — and here we have another write-off of public debt. There clearly has been bad planning right from the start with this particular project.

I would like to know from the Minister of Municipal Affairs if this section actually makes legal the contravention of the Municipal Act, which Tumbler Ridge obviously did some time ago when they gave aid to a commercial undertaking. I assume they've already made the $600,000 loan to this Northland Utilities Ltd. Are we in one section making legal the ability to grant this loan and at the same time writing off that loan?

I can't believe the planning behind this thing. No wonder that place got into such trouble. The Chairman can't say anything; I know this is his riding, but maybe the minister can answer that question.

HON. MRS. JOHNSTON: Mr. Chairman, if I understand correctly, the question was whether the end result of the amendment requires the payment to be made. The answer is yes.

MR. BLENCOE: Was the minister or the government or anybody on the government side aware that Tumbler Ridge broke the law when it granted $600,000 to Northland?

[ Page 5427 ]

HON. MR. DAVIS: Mr. Chairman, none of these moneys move until this legislation is passed.

MR. BLENCOE: Let me get this clear, Mr. Chairman. My understanding is that the loan to Northland was already made; it was made in 1983. Correct? The loan was made in 1983 by Tumbler Ridge, a contravention of the Municipal Act. You are now bringing in an amendment to allow them to make that 1983 loan. At the same time you're making it legal, you're also writing it off for Tumbler Ridge. Is that what you're doing here?

HON. MRS. JOHNSTON: I'm having a bit of a problem following the arguments of the member for Victoria. The amendment to the Municipalities Enabling and Validating Act will write off a refundable advance of $600,000 due from Northland Utilities (B.C.) Ltd. I don't know what more we can say. It allows the municipality of Tumbler Ridge to write off the refundable advance which was originally thought to be coming to them.

MR. BLENCOE: Let's start at the beginning. To the Minister of Municipal Affairs or the Minister of Energy, did the town of Tumbler Ridge have the authorization in law to grant the 1983 loan?

HON. MRS. JOHNSTON: Mr. Chairman, I don't really think that's the matter before us at this time, and I don't have that information, but one would assume that they must have.

MR. BLENCOE: It's my understanding that they did not have it. We are validating the loan, and at the same time that we're validating, it we're also writing it off. Not only is Tumbler Ridge writing it off, the mine is also writing off another $600,000 for Northland Utilities (B.C.) Ltd. I think the people of British Columbia really deserve a better explanation, when they're writing off $1.2 million. It's a project that has been in serious trouble for a long time. Millions of taxpayers' dollars have gone into that site. There are still so many unexplained questions to be asked, and yet we have stuck into a miscellaneous statute the writing off.... I think what is happening here is that the authorization of a loan made in 1983, which was clearly not allowed to happen, is being allowed to happen now by law, and we're also writing off the loan at the same time.

No wonder this province is in trouble. No wonder we have such financial debt in the province, when we have this sort of thing before us.

Section 42 approved on division.

On section 43.

MS. EDWARDS: To the Minister of Tourism, as I understand it, this not only reduces the size of the PNE board but changes it. It says that there shall now be 12 directors, eight appointed by order of the Lieutenant-Governor-in-Council, three by the city of Vancouver and one by the Board of Parks and Recreation, which is a change from seven appointed by the Lieutenant-Governor- in-Council, representing the constituencies of agriculture, mining, forestry, fishing, ethnic, artistic, etc. Five had been appointed from the Vancouver city council; one was from the parks board, as now; and three more at that time were appointed by the Lieutenant-Governor-in-Council, representing the community adjacent to the PNE.

I would like to ask the minister why we now have eight instead of seven — or ten, however you add it up — appointed by the Lieutenant-Governor-in-Council and what constituencies they represent. Do they still represent agriculture, mining, forestry, fishing, ethnic, etc.? And is there anyone representing the community adjacent to the PNE?

HON. MR. REID: Mr. Chairman, sure, there is a possibility that the four from the Vancouver area could all be appointed from within a block or two or three or whatever of the PNE, if they wish. That's entirely up to the Vancouver city council, which appoints three. The one appointed by the parks board could also represent the same area.

[Mr. Weisgerber in the chair.]

MS. EDWARDS: You are not going to require that that happen anymore, although it was previously the case.

The other questions are: why are eight to be appointed by the Lieutenant-Governor- in-Council, and what constituencies will they represent?

HON. MR. REID: Because this is a provincial exhibition, the likelihood of a representative from each of the eight regions around the province is likely, depending on the abilities of some of the community areas. But in trying to bring provincial representation to the Pacific National Exhibition.... We did not have it under the previous appointees, but it is the intention to have a provincial perspective on the representation at the PNE.

MS. EDWARDS: I'm just wondering if the minister will still attempt to have a representative of agriculture and a representative, perhaps, of mining, forestry, fishing and the kinds of activities that went on at the PNE. The PNE is primarily an agricultural exhibition. It has to be or it doesn't get federal money — the way that agricultural exhibitions do, right? Right. Are we going to have all agricultural people appointed by the government from each of the eight regions, or is the minister going to also try to attempt a different kind of representation among those eight people? Are we simply going to give back this appointment to the duchies?

HON. MR. REID: I'm sorry, Mr. Chairman, I missed the last comment. Give the appointment back to...?

[6:15]

MS. EDWARDS: Excuse me, I know the minister will have some input. It's the Lieutenant-Governor-in-Council who makes the appointments. I referred to what the minister refers to as the economic regions — is that correct? Economic development regions? I keep forgetting; they are so much like duchies that that was the term I used. So the economic regions....

HON. MR. REID: Mr. Chairman, some of the difficulties with trying to have the Pacific National Exhibition represent.... A provincial perspective has not been available since 1974. This is a chance to have more opportunities by the regions to talk about wanting to have representation — and we discuss the appointments in relation to that — on the agricultural component of which we're talking, which is the Pacific National Exhibition.

[ Page 5428 ]

Secondly, it probably — much to the chagrin of that member, who talked about "within the wastelands of the city of Vancouver" when she made reference the other day to members lost from her community down in the wastelands of Vancouver.... I would take exception to that as a member representing the "wastelands of Vancouver," but four of the representatives to this board will be from the "wastelands of Vancouver," representing the area of the GVRD, and appointed only if they reside in the "wastelands of Vancouver."

MS. EDWARDS: It says now that the chairperson of the board will be appointed by the Lieutenant-Governor-in-Council, and that person will no longer be a director. Is that correct? No? Could you explain how the chairperson will get her or his position, and how that will work?

HON. MR. REID: Mr. Chairman, her position will be an appointment for the same period as the directors and she will be one of the directors.

MS. EDWARDS: Does that mean that she will be one of the eight, one of the three, one of the one, or could be any one of the 12?

HON. MR. REID: Mr. Chairman, she could be any one of the 12 — she or he or it.

MS. EDWARDS: I was advised that this method of appointing the director is supposed to avoid the kind of uproar that we had within the past year about the chairman of the PNE; but what happens is that it will no longer be done in a public way where the board votes and chooses its own chairman. If there's any controversy, it will be well hidden within the confines of cabinet.

I wonder if the minister would like to respond on why he would want those appointments to come straight out of cabinet instead of having a more open process. Even if the appointments are made from the secrecy of cabinet, at least the chairman could be done by the board of directors. That will no longer happen.

HON. MR. REID: Mr. Chairman, the strong suggestion for this process comes from the current chairman of the board, who has been there for somewhere near 17 years and appreciates that the dilemma of board members being appointed and then having to choose from their fellow appointees a chairman created some problems for the board members — not for the government and not for the cabinet.

MS. EDWARDS: If in fact the government is making far more of these appointments to the board than it was before, the board is going to need money, I'm advised as well. Does this mean that there will be any change? Because the government has taken such a close grasp of this board of directors, will there be any change in the relationship between the board of the PNE and the government as far as funding is concerned?

HON. MR. REID: Currently the provincial government provides zero funding to the operation of the Pacific National Exhibition. It is internally funded, and it is not the intention of this to change anything in relation to that. What this intends is that by 1994 the whole structure of the longevity of the land, the question.... Really, this allows a third of the board, which will be representing the city of Vancouver and the parks board, to deal with the ongoing questions of the Pacific National Exhibition in relation to that particular site.

MS. EDWARDS: I know it has been a matter of some pride to the board of the PNE that they have not had any provincial government funding. However, I am also told by various constituents of that great wasteland of Vancouver — as you talk about it....

HON. MR. REID: You said it; I didn't.

MS. EDWARDS: I do indeed. I can get away with it.

I am told frequently that they believe that it is the government's duty, particularly if it attaches itself this closely to the management of the PNE, to perhaps feel some responsibility to provide some funding, because it has now demanded that there be some closer control of the management of the funds. That is my question: would the government feel more willing to help the PNE out? Certainly it has been indicated many times that there are some needs, even if they were just to be able to borrow some money. They can't do that now, and they may be able to if government cultivates a closer relationship.

HON. MR. REID: Even though the question is irrelevant, there has not been, to my knowledge, since I have been the minister responsible, a single request directly to me for funding for any operations of the PNE, either daily, weekly or during the year. But I know the Provincial Secretary (Hon. Mr. Veitch), in his capacity having to do with the Lottery Fund, has provided — not on an annual basis, but on occasion — assistance to the PNE. I think the number in the past has been $250,000. That's the maximum contribution from the provincial point of view, only because the PNE itself, because of its structure, has not had to pay taxes or other expenditures, and has had the benefit of all income and been allowed to manage it in the best way it sees fit. To this point it has not been a problem with the government needing to provide further funds to the PNE.

MR. CLARK: When the Premier made his announcement of restructuring, we all wondered: what is the meat on this announcement? How is this radical restructuring of government going to work? Here today we have found out that you get to appoint one person to the PNE board from each of the regions and that's part of this big restructuring. That's what the minister said: "We're going to appoint them." I thought: my God, that is the true extent of the vision the government has for decentralization. We are going to have eight people, one from each region, for the PNE board. Isn't that something? Now we know what restructuring means; we know what regionalization means. That's what the minister says.

I support the move to reduce the size of the board. I think others do. I could go on at length about what we should do at the PNE, but I won't, because of the time and because of this section of the bill. I hope the minister follows through on the Horsey report and some of the many things.... I know the minister and I share a respect for Mr. Horsey and his ability. I think there are a lot of good things there. I hope you get on with the job of solving this community problem in my community, and I hope — although I'm not sure; I don't think this does that — that this is a step toward helping to

[ Page 5429 ]

resolve that by reducing the size, getting rid of some of the members who have served too long on the board and working with the city to implement a more functional PNE.

Sections 43 to 45 inclusive approved.

On section 46.

MR. LOVICK: By previous arrangement — I believe you were not in the chair at that point, Mr. Chairman — we decided that we would combine sections 36 and 46, given that they have the same impact. I will defer to the hon. House Leader.

HON. MR. STRACHAN: That is correct, Mr. Chairman. For the benefit of Hansard, for you, sir, and for the members of the committee, we did agree earlier that we would stand down section 36 and that it would be deemed to pass when we passed section 46. That's by agreement of the committee.

MR. LOVICK: I don't want to begin the discussion of this particular section in any kind of inflammatory or too passionate a way. I hasten to point out that I make no promise that the ensuing debate might not he inflammatory and passionate — unless, of course, we can have assurances that our suspicions about this particular measure are totally groundless.

Lot me begin my few comments by posing a very simple and direct question. Make it a two-part simple question. Number one, why this measure? Number two, please explain for those of us on this side who do not have long experience what the precise distinction is between deputy minister and associate deputy minister, if we could start that way. I see the Provincial Secretary is going to answer; I look forward to that.

HON. MR. VEITCH: Mr. Chairman, the hon. member for Nanaimo says he is not suspicious. Or did you say you were suspicious? I don't know. What are you suspicious of, hon. member?

This provides for another level of senior management.

AN HON. MEMBER: More bureaucracy.

HON. MR. VEITCH: No, not necessarily.

There will now be an associate deputy minister and assistant deputy ministers. The associate deputy minister will be able to exercise the same authority as the deputy minister, if necessary, and as a result will create greater flexibility in the management of the public service.

It's the old theory of sufficient deputy, hon. member. A deputy minister under the Public Service Act can carry on and can bring into law certain things that a minister can do and has some of the rights and privileges of a minister. Those rights, when necessary, can be transferred to an associate deputy minister. It can be done now through an assistant deputy minister simply by the minister giving notice to that effect, I believe. It's no great departure from present practice.

MR. LOVICK: There are a number of obvious questions that come to mind, of course, Mr. Chairman. First of all, it seems to us, on the face of it, rather difficult to reconcile this government's apparent lean, mean approach to government and its assault on the public service with talking about the need for another level of senior management. That's the first bit of incongruity that strikes us. The more obvious pressing question is: if indeed the ministry has the capacity and the power to appoint those new persons as required, why then this legislation?

The third question I would pose — this is my own and not so obvious perhaps — is whether this role of associate deputy minister has any difference in terms of the public service procedure for appointment. Or are we talking about something qualitatively different from a deputy minister or an assistant deputy minister? So with those three questions I would begin.

[6:30]

HON. MR. VEITCH: As the hon. member understands, at the present time the deputy ministers and assistant deputy ministers are appointed by the Lieutenant-Governor- in-Council by an order-m-council. That is the process that, I assume, associate deputy ministers will be appointed by, as and when they are required.

We're entering a new era and a new age. A government that performed in the fifties and before that in a certain way required different management skills, different levels and different types of management. I see nothing wrong with amending the Public Service Act to allow for another dimension of management. If members on the other side are even a quarter as progressive as they say they are, from time to time, I assume that they would jump up and down and support this action. I'll tell you why later on, if you want, hon. member.

Interjection.

HON. MR. VEITCH: No, no. I'll wait until later or I'll wait for some more questions.

MR. LOVICK: I notice that the minister didn't deal with all three of my questions, but that's all right.

Mr. Minister, you have an uncanny ability to redefine the meaning of progressive and progressivism, you know. You seem to assume that any enlargement or any change, if it emanates from your side of the House, is ipso facto progressive. That is a logical leap which is rather hard to fathom. It ain't the case at all, I hasten to point out.

You talk about a new era of management. Well, given the record of your government, one can only say: "Thank God, let's hope." Of course, I don't mean to be contentious about this. Instead, what I want to ask is: why now? What is it...? I may even sound a little suspicious. Could it be that this kind of measure is unfolding before us on the eve of a major change in cabinet? Could it be that this might have something to do with eight super ministers and the need to expand their staffs accordingly? Please, allay and assuage our fears, Mr. Minister, and tell us this is not at all the case.

HON. MR. VEITCH: I don't blame the hon. member for asking these questions. In fact, the same question has been asked in this House before. On June 24, 1975, the then Liberal leader, Mr. David Anderson, alluded to deputy ministers and associate deputy ministers. He wanted some information made available to him, and he was addressing the question to the late Mr. Hall. Later the same day a Mr. Phillips from South Peace River got into the act and said: "I wanna ask the hon. Provincial Secretary what happened to these associate deputy ministers. Please tell me who they

[ Page 5430 ]

are." And the answer was: "I'm not sure, because I don't have any; my deputy ministers all work." Anyway, it was alluded to, and at one point in time, in early '75, the Minister of Finance for the province of British Columbia had an associate deputy minister.

The New Democratic government of the day seemed to think that having associate deputy ministers was a good thing. If it was a good thing then, hon. member, I guess it's a good thing now. I'm glad you're on side with this; I'm glad you see the need. I'm glad that back then Mr. Hall, even though he couldn't explain what they were, saw the need for associate deputy ministers. I just know you're going to stand up and support this particular section. Apparently the government of the day said they were redefining government, they were streamlining government, and they needed these associate deputy ministers to help them do just that. That was the reasoning back then.

We're redefining government. We're doing a good job today. Times have changed even from 1975, and this province is on the ascendancy. It's changing. We need all sorts of new management techniques in order to deal with it, and hence associate deputy ministers.

MR. LOVICK: History is obviously repeating itself, because lo, these many years later, we have another minister who can't answer the simple question why, beyond invoking the ghosts of past ministers, beyond relying on the wisdom of another government of another time.

I don't mean to be partisan. I don't mean to be provocative, Mr. Minister. My question is very simply: why? Would you tell us what is envisaged? Why is it we need to change legislation'? We're not just talking about creating something called associate deputy ministers; we're also talking about changing two acts — the Interpretation Act and the Public Service Act — in order to give this new creature....

Interjection.

MR. LOVICK: Okay, this newly discovered creature, this new incarnation or new resurrection. We're talking about giving that person or those persons the same powers as only deputies hitherto have had. Again I come back to my simple question, and I'm sure the minister would welcome the opportunity to tell us why.

HON. MR. VEITCH: Before doing that, may I have leave to make an introduction?

Leave granted.

HON. MR. VEITCH: Many members of the House will know my wife Sheila. She has suffered long and hard through many sometimes arduous moments and hours in here with me. My son seemed to have more sense than that. He hasn't been in this place since 1978, when I was Minister of Tourism and Small Business Development. Since then he's progressed a few years and a few courses, and he's just finished his first year in business administration at Simon Fraser University. I'd ask the House to welcome my wife Sheila and my son Greg.

To the hon. second member for Nanaimo, back in 1974-75 I guess the government of the day felt they could appoint these associate deputy ministers without legislation, and apparently did it. We don't happen to think we can. We want to codify things. We believe we now need associate deputy ministers for the new level of management that is required to take this government on through the 1980s, into this new decade and beyond, perhaps into the new century. As we streamline and improve the process of government, we must improve the process within the public service and the senior management. That's why we believe we require associate deputy ministers at this point in time. I'm sure the hon. member believes in streamlining government, streamlining administration, and getting at least into the 1980s. You thought it was a good idea back in 1975, and we think it's a pretty good idea now.

MR. LOVICK: You know, I haven't quoted anybody for some time, but when I listen to that paean to progress I can't resist quoting: "O brave new world, that has such people in't." My goodness, what we're talking about is this marvellous new invention. In the name of streamlining, we're going to add people. That's a whole new definition of language.

I want to pose a very direct question to the minister. Is it the case that we need these extra responsibilities assigned by legislation to people called associate deputy ministers in order to accommodate the decentralization or the regionalization plans of government? Is that what this is for? Is this part of that program?

HON. MR. VEITCH: I understand the NDP philosophy: any time you change a position you just add people; you just keep bringing in more people. In fact, you add people until you've added up to 45,000, or whatever it was in the public service at the time you were in power. You don't necessarily have to add people to change positions. You can sometimes do it with the same people. There is such a thing as promotion in the public service, hon. member.

Why do we need it? Well, I've said why we need it. We need it to accommodate modern management within the framework of a very modern government, a government that's designed, as I pointed out, not only for the 1980s but for the 1990s and beyond into the next century. You may be around to see that, as progressive Social Credit governments take office and continue to provide good management through a top-notch, lean public service for the people of British Columbia. I'm sure that you agree to that.

MR. LOVICK: I can understand that with the proximity of family and people near and dear, the minister perhaps wasn't able to listen to the question. Perhaps I could repeat it. I asked for a simple answer to the question of whether this program is to accommodate the decentralization or regionalization initiatives of your government. Is that the case?

HON. MR. VEITCH: Back in 1975, the government of the day, I guess, presumed that they were progressive and they needed associate deputy ministers to accommodate changes within government, and they did change a lot of things — for the worse, I may add. Yes, this government is embarking in new fields and doing things differently than governments many, many years ago, and we require different types of management and different levels of management to assist the government in that process. Whatever form that may take — it may be helping with decentralization; it may be helping with privatization — it will be for the good of the people of British Columbia, and these people will be there to help them at that time.

[ Page 5431 ]

MR. SIHOTA: Who do all these associate deputy ministers report to?

HON. MR. VEITCH: You know the line of progression: either to a deputy minister or to a minister. Deputy ministers report to ministers and associate deputies or assistant deputies report to deputy ministers. That's the line of progression, and we follow it very closely in the public service.

MR. SIHOTA: Currently all deputy ministers report to the Premier's office.

Interjection.

MR. SIHOTA: Well, if it's not true you can say it.

Is it true that these associate deputy ministers will also be reporting to the Premier's office?

HON. MR. VEITCH: I guess if one tells a fallacy enough times, they begin to believe it themselves. Deputy ministers report to ministers, not to the Premier's office. The hon. member is incorrect again, and I guess that answer answers the other question. These people will be reporting either to a deputy minister or to a minister, as the case may be.

MR. BLENCOE: Would the minister confirm that these associate ministers will be appointed by the Premier's office?

HON. MR. VEITCH: Deputy ministers, assistant deputy minister and, if and when this passes, associate deputy ministers are appointed under the provisions of the Public Service Act through the office of the Provincial Secretary and Minister of Government Services, through the Lieutenant-Governor-in-Council.

MR. BLENCOE: I know the minister is citing — getting around a direct answer to my question.... I have another question for the minister. Will the Premier's office be directly involved in a political way in recommending the appointment of these associate deputy ministers?

HON. MR. VEITCH: The Premier is involved in government as the chief minister, the first minister of government; under our system the first minister is the first among equals in government. As I pointed out to other hon. members, deputy ministers report to ministers; associate deputy ministers will report to either ministers or deputy ministers; assistant deputy ministers report....

They get together the odd time so they can discuss what's happening in this wonderful government in this wonderful province and see how they can better correlate their activities through having meetings and getting together. Deputy ministers from Health meet with the deputy minister from my ministry and the Deputy Minister of Finance. They all meet to discuss how they can do things better in government. Occasionally the chief executive officer of the Premier's office is there. That's how the system works, just for your edification.

[6:45]

MR. CLARK: The minister is correct. We have had associate deputy ministers in British Columbia before, and I think we still do. Maybe the minister can correct me on that. I just wonder why this amendment.... Are you saying this is some kind of oversight that has existed for years in British Columbia? We have had associate deputy ministers who presumably have functioned in British Columbia and who are on the payroll, or have been for the last 15 years. I don't quite understand why you need an amendment now, given that we've had that history in British Columbia.

HON. MR. VEITCH: It's perhaps a little bit of both. If you're going to have a position, you ought to codify it. Certainly it's being codified, and beyond that, the.... As I said before, we have a new type of administration, a new type of government designed for the eighties, the nineties and away beyond that in Social Credit administration. This is just more fine-tuning of the way we operate in government.

MR. CLARK: I don't want to belabour the point, but are you saying that associate deputy ministers, as they functioned in the past...? This will not simply codify what has taken place; you're saying....

Interjections.

MR. CLARK: No. the minister is saying that we have a new government, a new way of doing business, and that's why it's here. I want to know whether this is simply a technical amendment to codify what has taken place in the past or an amendment to deal with something new which is about to take place in the future, that's all.

MR. BLENCOE: Give us a real answer for a change.

HON. MR. VEITCH: The real answer is what I gave at the outset. It's a movement towards streamlining the operation of government. These associate deputy ministers, as and when required and as allowed under the Public Service Act, will have the same rights and obligations as a deputy minister has now.

Maybe if I read this again to the hon. member.... It provides for another level of senior management. The associate deputy minister will be able to exercise the same authority as a deputy minister if and when necessary, and as a result this will create flexibility in the management of the public service for the good of the people of British Columbia. It's not necessarily new people; simply different titles doing slightly different jobs.

Section 46 approved on division.

Section 36 approved on division.

On section 47.

MR. LOVICK: I spoke earlier on section 40 and made reference to section 47. The Minister of Transportation and Highways (Hon. Mr. Rogers) is not in the House. I understand the Minister of Labour and Consumer Services (Hon. L. Hanson) is dealing with it.

I don't think we're going to say anything to hold up this particular measure, because it is identical to section 40, which we passed earlier. However, we on this side will reserve our comments for sections 59 and 60, which deal specifically with workers' compensation. I am simply making the point right now that I have the same reservations about this section of the act as I did about section 40; but we won't

[ Page 5432 ]

hold up its passage, because I think our questions can better and more property be addressed under sections 59 and 60.

Section 47 approved.

On section 48.

MR. JONES: I know the Minister of Education has an important graduation he's missing tonight, and I know he would feel we were remiss if he didn't get a chance to answer some questions on the School Act. I would like to ask the minister, on section 48, the purpose of the amendment that deletes from sections 15 to 17 the words, "without limiting the generality of section 14." Could he explain what that amendment achieves and what the rationale is?

HON. MR. BRUMMET: On 48 or 49?

MR. JONES: Just 48, which deals with sections 15 to 17 of the School Act by amending section 14.

HON. MR. BRUMMET: Now that I've missed the graduation ceremony I have plenty of time.

I'm not going to pretend to fully understand all the ramifications of the technical legal experts, but let me do the best I can. Under this regulation, in section 14 in the School Act, it says: "The Lieutenant-Governor-in-Council may make regulations, and every regulation made under this section and sections 15 to 17 shall be deemed part of this act." Then I go to the Regulations Act, which defines a regulation and then says: "A regulation has no effect unless it or a copy of it is deposited with the registrar." That's in section 3. Then in section 5 it says: "The registrar shall publish in the Gazette each regulation deposited with him...." It gets more complicated after that.

If you read section 15, "without limiting the generality of section 14" means that the generality of section 14 therefore must apply. So under that generality, every regulation made under section 15 becomes ipso facto a regulation, which then must be filed with the registrar and gazetted in order for anything to happen. There is no intent in this — and according to the legal people, not by them either — that anything that is supposed to be formally a regulation shall be deposited and gazetted and all that sort of thing. But if you read, for instance, something like section 16(c), which says, "in case of doubt, determine whether an expense is a capital expense or an operating expense," technically, when the government or the minister makes a decision on that, it becomes a regulation. So I can't even decide whether it's a capital or operating expense unless I file it with the registrar and then have it gazetted and that sort of thing.

As I understand this change, by eliminating the phrase, "without limiting the generality of section 14," from sections 15, 16 and 17, you then start from there, and section 16, for instance, would say: "The Lieutenant-Governor-in-Council may...in case of doubt determine whether an expense is a capital expense or an operating expense" — not required to be posted as a regulation; may make that decision by order-in-council.

That is the best explanation I can give you, after months of research. It still maintains, then, that where it says "shall prescribe" or that sort of thing, it requires a regulation, or where it says "shall make a regulation to this effect," by definition it becomes a regulation under the Regulations Act, which must then be posted, etc.

Is that clear?

MR. JONES: I thank the minister for the answer. I think so. Let me throw it back at him and see if I do have it correctly. What the minister is saying is that what we've had in this section of the School Act for, I suppose, a number of years is an encumbrance that is being removed, the encumbrance being that in order for certain amendments to be made, it requires gazetting and depositing with the registrar of regulations. With this amendment, that will no longer be required, and so the major purpose of this amendment is a streamlining process.

HON. MR. BRUMMET: That's essentially true. In other words, common sense and practice have prevailed and some of these simple decisions have been made, but some legal expert picked up that technically we are not allowed to make any decision under section 15, 16 or 17 by order-in-council or anything without posting it with the registrar. So yes, it clarifies practice and common sense.

MR. JONES: I don't have any major difficulty with that. It seems as though there is a rationale for streamlining this process. Let me just throw out a scenario, though, and maybe the minister could respond to it.

Let's suppose that as a result of the Sullivan commission, the minister and the government want to introduce a yearlong school or change the planning calendars, the start-ups and finishing dates or the hours of service of teachers. He then does not have to gazette those changes and deposit those with the registrar of regulations. So I presume that those kinds of changes would be much speedier in terms of their implementation, and that would make for a more efficient government process. However, at the same time, a speedier and more efficient government operation may not give the public the time required to react to some changes that the education community or the public may not agree with, and so it may not be in the public interest to speed up some of these processes. I wonder if the minister could comment on that?

HON. MR. BRUMMET: I don't think it permits that at all, because where a regulation is required and where it says to prescribe the duties of teachers, prescribe the grades and classes, and so on, that requires a regulation, and it would have to be forwarded as a regulation. It's simply saying that.... I guess the best example is that that would in case of doubt determine whether the expense is a capital expense without having to post a regulation to make that decision. But where it says "prescribed" it will require regulation, as it does now.

MR. JONES: I don't want to belabour this point, but the sections that I chose did not say "prescribe." They said "determine" — determine, for example, the dates of commencement and expiration of school terms, determine the hours in which tuition and instruction shall be given in the public schools, determine the hours of service for teachers. Those examples that I used under section 15 did not have "prescribe" in them, and so I still have the same question to the minister.

HON. MR. BRUMMET: Okay, my legal advisers tell me that where the word "determine" is used, that can be done by

[ Page 5433 ]

order-in-council, and it does not have to then be posted and gazetted as a regulation.

MR. JONES: So we have a speedier process by which there will be less time for the public to react to these things.

HON. MR. BRUMMET: No, we don't have a speedier process. Every one of these — "determine," "prescribe," or whatever — have to be done by order-in-council. The difference is that not every one of them has to be posted and gazetted. I don't know of any order-in-council that has been passed by the government that has been modified by the registrar or refused. In other words, when we pass the order in-council, that's it. All it does is eliminate that need to go through that gazetting and other process; they just do it automatically. It just saves a lot of work, rather than making it speedier or easier to get through.

[7:00]

Sections 48 to 51 inclusive approved.

On section 52.

MR. JONES: I don't see any substantive problem with the intent of the amendment. I have no objection if, during a board of reference, evidence of incidents or matters similar to the matters that are being dealt with under a board of reference are brought forward in determining termination or suspension. But I am wondering why this was brought in.

In particular, as I understand it, under Bill 20 the use of boards of reference in the future is going to be much diminished. We have this amendment brought in that pertains to boards of reference, when in fact boards of reference will not be dealing with the scope of matters that they're dealing with now prior to negotiation of contracts at the local level. I'm wondering if the minister could enlighten the House as to the rationale for bringing in this amendment at this time.

HON. MR. BRUMMET: There are still many decisions made by boards that do not go through the College of Teachers' council. They would still be appealed to the Minister of Education. What this is doing is where written notice is given to a teacher with some reasons in it, and then a board of reference is set up the way the legislation stands right now, if any similar information comes up, it cannot be considered if it was not in the written notice. So in order to deal with a second issue of the same type, you would have to set up a second board of reference. If another item came up of a very similar and like nature, you'd have to deal with a third board of reference if it wasn't spelled out in the original notice.

For instance, a teacher could be transferred to teach grade 7 from having taught grade 4. The teacher may want to appeal that decision, and that would come to the ministry board of reference. If subsequently there was some discussion that maybe he could go to grade 6 instead, that would mean a new board of reference. It could go on in that nature. I am trying to make up some example to clarify it, and I don't know whether I am helping or not. It really allows incidents or matters similar to the incidents or matters cited in the notice referred to in the first written notice to be included. That board of reference can then deal with them, rather than have to set up another board. If they are going to be adding other items, they have to give the teacher seven days written notice,

They still have the same protection, except that one board of reference can deal with the entire issue, rather than having to set up another board.

MR. JONES: Is the minister aware of any cases before boards of references at this time to which this particular amendment would apply?

HON. MR. BRUMMET: It was quite a while ago when this came forward, and it was based on an actual case where something couldn't be considered. But it escapes me right now; I don't remember the incident.

Sections 52 to 55 inclusive approved.

On section 56.

HON. MR. BRUMMET: I would just like to comment very briefly. In the initial legislation, the College of Teachers could deal with a case if it was brought by the board,  or if it was brought by complaint by five colleagues. The College of Teachers went through that and said that could be difficult. We might want to deal with a case that has come to the attention of the registrar, so we would like the College of Teachers to be able to work on that. We agreed with them that it could make it possible to deal with the situation without going out and soliciting five teachers to sign a complaint. So it was at their request that this has been done, and I think it makes it much better.

Sections 56 to 58 inclusive approved.

On section 59.

MR. GABELMANN: I would like to ask the minister whether or not pesticides used in the farming industry would be covered by this legislation?

HON. L. HANSON: No, not at this time. The federal legislation excludes it, actually.

MR. GABELMANN: The farmworkers wrote to the chairman of the Workers' Compensation Board on April 27. The board. through its council and secretary, replied on behalf of the chairman. This is dated May 4, 1988, and he said: "The board will be issuing a statement this month regarding the farming industry." It is now near the end of June, and no statement has been made. Could the minister tell me if there is any connection between that and this particular legislation, and what the status is of those issues now?

HON. L. HANSON: There will be an announcement made within hours, I would think, in regard to that statement. I suppose revealing it would be wrong at the moment, but there is going to be an announcement made very shortly regarding the WCB statement. It doesn't have anything to do with this particular act or legislation, but there is some action being taken with the Workers' Compensation Board and the agricultural industry as to the regulations that we have talked about many times — but not applying to this particular....

Section 59 approved.

Sections 60 to 62 inclusive approved.

[ Page 5434 ]

Title approved.

HON. MR. STRACHAN: Mr. Chairman, I move that the committee rise and report the bill complete without amendment.

Motion approved on division.

The House resumed; Mr. Pelton in the chair.

Bill 52, Miscellaneous Statutes Amendment Act (No. 2), 1988, reported complete without amendment, read a third time and passed.

MR. ROSE: Could I interrupt on a point of order just before we continue. I'm just wondering if the statement of the Chairman to the Speaker in terms of reporting the bill complete without amendments shouldn't indicate "on division." I know that the "on division" is in the Votes and Proceedings, but I wonder if it shouldn't also be in Hansard on the instructions to the Chair by the Chairman.

DEPUTY SPEAKER: The opposition House Leader makes a reasonable point. May I suggest that it be something that the Chair will look into and report back to the House.

HON. MR. STRACHAN: I don't see the provision for a report containing an instruction that the report was approved on division. It's certainly something to think about. I have no problem at all with the last motion, that the committee rise and report the bill complete without amendment, being carried on division. That was a matter of the committee. In terms of the report, however, I don't see how that could be allowed. I don't see why it is really needed. The committee made a decision about how it was concluding itself; it did that, and I think that's sufficient.

MR. GABELMANN: The government House Leader has touched on the point that I wanted to raise. The presentation from the committee was that the bill be reported complete without amendment when in fact that presentation should have been complete with amendment. Section 1.

AN HON. MEMBER: Wrong bill.

MR. GABELMANN: My mistake.

DEPUTY SPEAKER: The member is thinking about Bill 36, yes. All right, we'll proceed.

HON. MR. STRACHAN: I call committee on Bill 48, in the name of the hon. Attorney-General.

FAMILY RELATIONS AMENDMENT ACT, 1988

The House in committee on Bill 48; Mr. Weisgerber in the chair.

Sections 1 to 14 inclusive approved.

Title approved.

HON. B.R. SMITH: I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; Mr. Pelton in the chair.

Bill 48, Family Relations Amendment Act, 1988, reported complete without amendment, read a third time and passed.

HON. MR. STRACHAN: Mr. Speaker, I call second reading of Bill 62.

INCOME TAX AMENDMENT ACT (No. 2), 1988

HON. MR. STRACHAN: I'm going to introduce second reading on behalf of the Minister of Finance (Hon. Mr. Couvelier) and I have prepared notes. Staff are available to take second reading debate. I can respond in second reading and, of course, staff will advise the minister of debate that has been introduced in second reading debate so the minister can reply in more detail when we get to the committee stage of the bill. But I'm pleased to move second reading of Bill 62, Mr. Speaker.

This bill introduces two amendments to the provincial Income Tax Act. These amendments have been requested by the federal government in order to clarify the administrative intent of the act.

The first amendment, applicable to section 8(4), ensures that incentive payments received by a taxpayer in respect of exploration and development work are only taxed once. Revenue Canada has advised that the interaction of certain provisions of the Income Tax Act to Canada and the provincial Income Tax Act work together to cause a doubling up of income. This amendment will ensure that if the incentive payment has been included in income for federal taxation purposes, the same amount will not be included in income a second time for provincial taxation purposes.

[7:15]

In order that this relief from double taxation is available to all affected taxpayers, this amendment is retroactive to May 6, 1974, the effective date of introduction of section 8 of the Income Tax Act.

The second amendment, to section 8(5), is designed to stop a tax leakage which has arisen under provincial royalty tax credit programs. Generally, section 8 of the provincial Income Tax Act has been enacted to allow taxpayers to deduct royalty payments they make to the Crown. However, since the enactment of section 8, certain provinces, as an incentive to taxpayers, have adopted royalty tax credit programs. As a result of these programs, taxpayers are receiving rebates on their royalty payments but are still claiming their gross royalty payments as a deduction from income. This amendment is designed to ensure that taxpayers, for provincial income tax purposes, only claim their net royalty expense. This second provision is effective for taxation years commencing in 1989.

With that said, Mr. Speaker, I move second reading of Bill 62, Income Tax Amendment Act (No. 2), 1988.

DEPUTY SPEAKER: Seeing no one rise, the Chair advises hon. members that pursuant to standing order 42, the minister will close debate.

HON. MR. STRACHAN: Gee, that's wonderful; I'll see if I can whistle a few more through. I move second reading of Bill 62.

[ Page 5435 ]

Motion approved.

Bill 62, Income Tax Amendment Act (No. 2), 1988, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Second reading of Bill 54, Mr. Speaker.

MUNICIPALITIES ENABLING AND VALIDATING
AMENDMENT ACT (No. 2), 1988

HON. MRS. JOHNSTON: Mr. Speaker, it is my pleasure and privilege to contribute to the second reading of Bill 54, Municipalities Enabling and Validating Amendment Act (No. 2), 1988.

Mr. Speaker, Bill 54 contains provisions to resolve a potential conflict in the Regional District of Okanagan Similkameen over the provision of electrical services to specified area H3, known as Eastgate. The legislation will validate the process used by the regional district to provide the electrical service.

I will give you a detailed background because the House must understand why this legislation is urgently needed to avert a serious inequity. Seven beneficiaries of the electrification are applying to court to challenge the process by which electrical service was provided to the area — apparently in objection to the taxes necessary to cover the costs.

The bylaw being challenged was intended to facilitate the construction of a local generator because connection to the B.C. Hydro power grid at that time seemed unworkable. The project was indeed finally accomplished by connection to the grid. However, the wording of the bylaw indicated a generator system and remained unchanged. It would be unfair if those who benefit from the service were able to use this technicality to avoid their fair share of the costs. This legislation will provide a more reasonable resolution.

Other mitigating circumstances also exist. The system installed is certainly costly; but it is no more costly than a generation system. The inspector of municipalities approved the loan of $427,000 necessary to make the connection, with the understanding that the funds were to provide electricity where it was needed. This was $223,000 less than the generator proposal contemplated by the 30 ratepayers who signed the petition, including those now involved in the legal challenge.

This legislation will also avert the possibility of locally elected officials being found personally liable for the costs, even though they have worked exceedingly hard and in good faith to look after the interests of the people they represent. In fact, they guided the ratepayers diligently through the entire process, including advising the ratepayers that they had 30 days to quash the bylaw; no one made a move.

Now, after the system has been built, the dispute over its financing has reached serious proportions. We cannot allow this dispute to continue because of its equity and risk dimensions. We are thus proposing that the regional district board and the petitioners negotiate a cost-sharing formula, approved by me, which will address the concerns of the taxpayers while spreading the costs fairly. This will prevail over other statutory rules respecting cost-sharing in order to avoid future conflicts. The various subsections of this act can be proclaimed individually to create three options: no proclamation which will lead to a risky court case; proclamation of subsections (1) to (4), which implies all costs to be borne by the specified area, or proclamation of all subsections in support of a successful cost-sharing compromise. In this way we hope to move the conflicting parties towards an equitable resolution without unnecessary litigation.

I move that the bill be now read a second time.

MR. BLENCOE: I'm fascinated by the minister's introduction of this piece of legislation. Indeed, if the minister and her staff had been aware, and if the inspector of municipalities had done his job, we wouldn't need this legislation. There is a lot of history behind this piece of legislation; it's no accident that it's being introduced now. It was supposed to be introduced some weeks ago, right in the middle of the Boundary-Similkameen by-election, and it was postponed. Not only was it postponed, but the minister introduced the wrong piece of legislation; we had this legislation actually brought into this House and then pulled back.

What we have here is a piece of legislation that's trying to make right an illegal act that the inspector of municipalities and the Ministry of Municipal Affairs knew about, were told about and even approved. Mr. Speaker, let me give you the history of this sad.... Again, it's another sad story, I think, in terms of this government being asleep at the switch. Interestingly enough, we're talking about an electrification plant, and I use the phrase "asleep at the switch," which I think is appropriate.

The minister is correct when she says that certain residents in the H3 specified area had no electrical service at all. So in 1986 the residents petitioned the regional district for a self-generating electrical scheme, using one of the local creeks. The petition called for the regional district to borrow $650,000 to install a generator, in return for which the area residents would pay specific taxes over 25 years to pay the debt incurred. The regional district accepted the petition for a small hydro plant separate from B.C. Hydro — their own little plant. That was what the petition was for; that was what was supposed to be authorized.

They accepted that petition, but suddenly what happened? B.C. Hydro heard about it, got wind of it, and the regional district was approached by B.C. Hydro, which claimed it could provide a cheaper system by extending its power grid into the H3 specified area. The regional district, on the basis of the petition, then reached an agreement with B.C. Hydro to provide electricity.

But there's a basic problem, Mr. Speaker, a flaw in all this which everybody overlooked — and clearly overlooked on purpose. The regional district's actions in this regard are quite clearly illegal. It's illegal to tax residents for one service — in this case, an extension of B.C. Hydro power lines — when they petition for another service, a self-generating power system, using the petition as justification. That's the problem: the petition was for the self-generating electrification system.

The regional district and the first member for Boundary-Similkameen (Mr. Messmer), who is very much implicated in this mess up there, went to three readings on this piece of legislation, this bylaw to do with the self-generating electrification system. Then suddenly we have Hydro stepping into the situation. They cancel the idea of the self-generating electrification system, accept the petition for the small hydro plant.... You're saying it's good enough to accept B.C. Hydro's overtures. What's apparent is that the regional district

[ Page 5436 ]

knew at the time that these actions were questionable and indeed illegal, because the petition was for something totally different from what the money was supposed to go for. The regional district consulted with the Ministry of Municipal Affairs, consulted with the minister who is introducing the legislation today to try and deal with this mess. Indeed, the inspector of municipalities knew this act was questionable, but we can only assume that somehow nobody would object to using a petition for another purpose.

Now, of course, what we've got is a Supreme Court case, and the minister hopes they'll settle, and she hopes this will do it. But once again what we have is another situation where this Ministry of Municipal Affairs has not at an earlier stage called a halt to something that clearly was a problem. The inspector of municipalities was consulted, the ministry staff were consulted; they took no action, and the process continued. There's no question that the regional district and the first member for Boundary-Similkameen knew exactly what they were doing, and now we have a piece of legislation before us to try and avoid a lawsuit that could have been avoided months ago if the Ministry of Municipal Affairs had been on the ball and called a halt to this thing and said: "Go back to square one. Get the right petition. Tell the people exactly what you want to do." But no, Mr. Speaker, that's not what happened.

AN HON. MEMBER: Tedious and repetitious.

MR. BLENCOE: It may be tedious and repetitious, but we continue to get these kinds of shoddy decision-making processes that reflect very poorly on the problems we have with the Ministry of Municipal Affairs today.

We obviously don't want to see any court action. We obviously hope we can have some negotiated settlement. But when I look at the details behind this specific case and how it ever got to this stage and how we have, again, a piece of legislation to basically correct something that could have been done months ago.... If people had been at the switch and turned the switch on at the right time, we wouldn't have this before us today.

So we're willing to support it, Mr. Speaker. We have no choice. But the B.C. Hydro lines are ready, and all it needs is, literally, for the switch to be flipped.

HON. MRS. JOHNSTON: It has already been flipped.

MR. BLENCOE: It has already been flipped. Well, we have a number of questions to ask in committee stage. Once again we have a situation whereby this Legislature is being used to correct some real errors within the government structure. This issue should not be before us today. It should have been dealt with a long time ago. The minister will of course deny that her staff were involved, but they're clearly implicated in this boondoggle in Boundary-Similkameen.

[7:30]

MR. RABBITT: Mr. Speaker, I feel that on this item of definite importance within my riding I should make some comment, and I certainly want to support the bill and support the efforts made in the past and at the present time by the Minister of Municipal Affairs.

I think that the comments made by the second member for Victoria are totally off base, but I guess that's nothing new. When he talks about people being asleep at the switch, on this one he is definitely asleep at the switch. Nothing has been slipped through; nothing has been crooked. The residents of Yale-Lillooet wanted a powerline. They asked me to assist them. Working through the various ministries, they've got their powerline.

We do have people in this assembly who have a lower mainland or Victoria mentality, but hopefully the government will still maintain a level of mentality that will address the problems of the small rural communities.

The second member for Victoria said on various occasions during his dialogue that there was an illegal act. I tell you that if there was an illegal act, the court would rule such. If there was an illegal act, it was only one of a technicality. I can tell you pointedly, right now, that the people within that community of Eastgate wanted power then and still want power now. Where the argument arose, hon. member, was as to who was going to pay and how it was going to be distributed among the users. That question is still there today.

I would like to point out that in my opinion there was nothing that was done by this ministry or by B.C. Hydro that was unfair or illegal. The people of Eastgate have power. I'm pleased to see that power is in there. For any of you who have lived without power, you know what the value of that is.

MR. BLENCOE: That's not the issue.

MR. RABBITT: Oh, that appears to be the issue, hon. member. I would like to commend the minister for making whatever revisions in this act that have to be made to clarify any misgivings that may have arisen because of any oversights of municipal or regional people in bringing power to my riding.

HON. MRS. JOHNSTON: I think that my preamble really said it all, and I would move second reading.

Motion approved.

Bill 54, Municipalities Enabling and Validating Amendment Act (No. 2), 1988, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Committee of Supply, Mr. Speaker.

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

ESTIMATES: MINISTRY OF ENERGY,
MINES AND PETROLEUM RESOURCES

On vote 28: minister's office, $250,592.

HON. MR. DAVIS: I would like to say a few words introductory to my submission of estimates to the House. In both the energy sector and the mineral sector, we've had for some years excess capacity, depressed prices and an excess ability to deliver the goods. Two years ago Hydro had excess capacity installed in generating plants and in transmission capability of the order of 30 percent. The natural gas producing end in the Peace River could have increased its output and could still increase its output handily by at least 50 percent. On the coal side, we could increase our delivery of coal to

[ Page 5437 ]

foreign and eastern Canadian markets by as much as 50 percent without much difficulty.

Indeed, throughout the entire energy sector, there is an excess of ability to deliver at prices which are reasonably competitive with other sources around the world. Due to the sharp drop in world oil prices two and a half years ago, the price for all forms of energy has dropped. The competitive price is much more difficult to meet. The impact of lower oil prices has been most serious in respect to coal. It has, however, had a substantial effect on the delivered price of natural gas in Canada and elsewhere, and it has impacted on the competitive nature of electricity in this province — other forms of energy, particular gas, being more competitive than previously.

In the mining industry, not only did the volume of our export markets decline, but prices dropped dramatically in the mid-1980s and have only recently begun a recovery in respect to non-ferrous metals like copper, lead and zinc. The only segment of the mining industry which has been reasonably healthy in recent months has been the precious metals side, particularly gold. As a result, most of the new mine developments in the province in the approval stage are for new gold mines, access roads and other infrastructure.

In the energy sector in particular — although this applies also to mining — the principle policy thrust has been one of deregulation: let the markets work; let competition prevail; let the consumer benefit from increased competition between different forms of energy, both from within and without the province. It has been possible as a result of deregulation, for example, for a number of our fuel-using industries, particularly pulp and paper mills and metal smelters and refineries, to buy their energy at lower costs to themselves. The cost of natural gas delivered to pulp mills today is of the order of 60 percent of the cost three and four years ago. That has helped those resource-processing industries to be more competitive in their own particular lines of business. We have permitted industries to go to the source — the gas fields, for example — to buy their own gas supplies. This is general throughout Canada and the United States. The pipeline companies — this applies particularly to natural gas — are increasingly becoming common carriers and not owners of the energy flowing through their lines, in this case natural gas. This movement towards common carrier status has also helped to get prices down to end users in British Columbia and elsewhere.

Our principal effort with respect to minerals, both metallic and non-ferrous, has been to streamline the processes whereby new mines are established, particularly the tax system, which is exceptionally complex. Our taxes in British Columbia in total on mines are still higher than in other provinces, and it's my hope that as a result of tax reform we will be able to make our mining operations in the province more competitive in the future. The opportunities immediately available to the energy and, to a lesser extent, the mineral sector exist partly because of the recovery of the provincial economy. The power requirements of British Columbians, which doubled every decade in the sixties and seventies, levelled off through the early 1980s. The last two years have increased sharply and will increase further as a result of a number of new pulp mills and other developments in B.C., particularly those that are energy-intensive, such as the chemical-mechanical-type plants now being built both on the coast and in the interior and northern regions of B.C.

We have an opportunity, despite our large overhang of capacity, to generate electricity from wood wastes through cogeneration at our pulp mills and from waste coal, particularly in the Kootenays, if it is possible to sign long-term contracts with American power utilities. Really, for the first time then we will be helping both to provide more employment in the energy sector and to clean up our environment — both concurrently — using wastes that were formerly burned to get rid of excessive residue or simply left in unsightly stockpiles around the province.

One development that I think will be seen in the fullness of time to be significant is the signing last year of the agreement between the federal government — particularly federal Fisheries — and the Aluminum Co. of Canada with the province as a third partner. The agreement will allow an additional flow of the Nechako River to be diverted through the Coast Range and additional power produced at Kemano. The safeguards required by federal Fisheries were reasonable and I believe will be honoured. The Nechako salmon and other runs will be protected. Alcan has meanwhile signed off on any additional water flow claims that it might have had, or believed it had, as a result of the 1952 agreement with the province. An additional amount of energy comparable to a Site C will be available in the mid-1990s at perhaps one-third of the cost of a Site C. An additional resource is in sight and available to consumers in British Columbia, at least for a time, as a result of an intercompany agreement between B.C. Hydro and Alcan. In other words, Alcan surpluses will be bought more or less at cost by Hydro and used in British Columbia.

Another development that I think has significance for the future is the production of methanol from natural gas. A plant was built at Kitimat some years ago. It ran far over estimates and was in financial difficulties for some time. Now, as a result of the writing down of the investments and a dramatic recovery in world methanol prices, it's a going concern. It's paying off a loan made to the company by the province some years ago, and it looks as if we will be able to process more natural gas at other tidewater locations to produce that petrochemical.

Most of the methanol being produced at Kitimat today is going to Japan, but it looks as if there will also be substantial opportunities in the United States. Assuming that the state of California goes ahead with its intention of using methanol blends in gasoline to reduce pollution, we should have not one but perhaps several large methanol plants using B.C. produced gas at the coast in the 1990s.

We have several interesting opportunities in the minerals area. A clay deposit was recently discovered near Powell River. I was interested to know that ever since the first paper machine began operations in Powell River, clay had been imported from the southern United States. It's the binder; it's the material that tends to add to the quality of wood fibre, and in the case of really high-grade papers it constitutes as much as 50 percent of the content of the paper. This clay was imported originally from England, then from the United States, and there are only two or three other sources around the world of any consequence. Suddenly we find we have a very large deposit near the pulp mill in Powell River.

[7:45]

There is a non-ferrous metal, an industrial mineral development, of consequence for the future. We are probably going to see one or more new cement plants or cement plants relocated in the lower mainland perhaps moving to locations like Texada. On the non-metal side there are other possibilities, including minerals like potash and so on which could be mined in the Peace River area.

[ Page 5438 ]

I have covered the main prospects for the energy and mining sectors. The ministry, which was trimmed back substantially in the early 1980s, has remained roughly the size of two years ago. Instead of having some 500 employees, it is down around 300 at the present time. We have explored some possibilities of working jointly with the energy and mining industries to cover up some of the industry's particular needs, such as survey information and so on, but for the time being the present organization is to continue.

The total budget for the Energy-Mines component of the ministry is of the order of $30 million for the year, which is of the order of 1 percent of the Health budget. It is also of the order of 1 percent of the gross value of output of the energy and mining industries in the province. So I think we can rightly claim that this particular ministry pays for itself and there is no question that the industry is being overcharged for its services.

MR. SIHOTA: I would like to have leave to make an introduction.

Leave granted.

MR. SIHOTA: Thank you very much. It is quite a pleasure for me to make this introduction. Up there in the gallery is, of course, my wife Jessie and my sister-in-law Debbie. But also coming into the Legislature for the first time to see her father — and she clearly has a voice box as loud as her father's from her behaviour up there — is my little daughter, Karina, who is 19 months of age and is today here for the first time to visit her father and see all of us behave ourselves in the Legislature today. Would all members of the House please join me in giving my little daughter, my wife and my sister-in-law a warm welcome.

MR. GUNO: I am happy to be the one to kick off debate on the estimates of this particular ministry, and I want to thank the minister for his rather succinct overview of this ministry. My colleague will be following me to deal with all matters relating to the energy sector. What I plan to do is to zero in on some very specific components of this ministry with some fairly — hopefully — specific questions.

I want to deal first of all with the effort, as the minister pointed out in the latter part of his remarks, to attempt to involve the industry in the management of this vital resource. I refer to the joint venture operating boards and I want to canvass exactly where that is at.

I gather that in the throne speech of March 15, 1988, the goal was for these joint venture operating boards to encourage industry participation in the management and development of British Columbia's mineral, petroleum and natural gas resources. "My government will investigate the establishment of joint venture operating boards." The proposal was to establish these petroleum and mineral resource boards, and the duties, as I understand it, of these respective boards were to: (1) administer government policy; (2) implement technical regulation; (3) geological data systems; and (4) day-to-day resource management within a government approved policy framework. The financing of each of these boards would be by direct government grant and a levy on the industry.

Specifically, the petroleum resources board would regulate exploration, development and operations, issue well drilling approvals and supervise short-term natural gas removals outside British Columbia. With regard to the mineral resources board, it was mandated to administer requirements for mineral exploration, mine operations and reclamation, administer mineral coal and placer tenures and conduct geological surveys. The remaining ministry operations would be in advising cabinet on policy and so on — monitoring and forecasting the performance of the industry.

As I understand it, the government's motive in doing this was to consolidate the ministry's operation into essential government functions and move the regulatory costs to the industry. This is the first part of my question. I understand that the report on the proposal to create the joint venture operating boards was to be made to cabinet by the end of last month. Apparently this was never made.

It is also my understanding that the joint resource management boards have been criticized by both industry and public interest groups. The concern is that the public interest is endangered if industry has a major say in resource management. The mining industry is concerned, of course, about the higher costs that would entail. The petroleum industry is also skeptical about the ability to resolve conflicts over management.

It seems that the original idea conceived by the ministry is dead or is near dead; although I understand that the government has indicated it is going to work out something better. I understand from the Mining Association of B.C., as expressed by Tom Waterland, the president and chief executive officer, that the provincial government has given confirmation to the mineral industry that it will not proceed with the concept of the mineral resource board. Will the minister confirm whether these concerns are valid or not?

HON. MR. DAVIS: It was the intention that certainly as minister I would explore possibilities of joint operations with the industry, particularly where the industry was asking for additional services or support from the government.

The hon. member referred to joint ventures. Clearly, two parties have to agree before we have a joint venture. The reception from the industry, both on the energy side and the mineral side, to a broad gauge approach covering a number of the facets of operations of the ministry was negative in most areas.

I think properly described, however, the initiative which we had in mind did not include policy, certainly not the formulation of policy. It didn't involve regulation of the industry. I think all hon. members would agree that an industry should not itself be participating in regulation in the public interest. It isn't really practical for the industry to engage in the basics of geological and other surveys, or in the management of titles or, indeed, overviews of management practices. Basically, policy regulation surveys and the title side from the beginning were not at issue.

We seem to be down to a hard core of concerns where both the industries — and I'm speaking more particularly to the mining companies now — have a common interest with the government. Those areas essentially are mine safety, environmental protection and reclamation. Those three areas linked in some fashion may still cover a segment of the operations of the ministry where there is both a common concern and a common desire to develop a joint venture approach to better management: better safety in mines, better environmental protection, better reclamation procedures and processes. On the mining side, I think it's safe to say that the idea of a joint board — I won't call it a joint resource board; it

[ Page 5439 ]

would be a safety and reclamation board, if you like — is still alive and under active consideration. Where the industry requires additional input, generally the government side believes that industry should foot the bill.

On the energy side, until we've spun off the B.C. Petroleum Corporation, I don't think there's any point in our establishing any other kind of resource management board. I must say that in that case, and in the mining case, the working example pointed to by many, particularly some of our senior officials — some still with us and some not — was the Alberta Oil and Gas Conservation Board and now the Alberta Energy Resources Conservation Board, which is substantially funded by the oil and gas industry but carries out many of the functions that in this ministry in this government are carried out by public servants.

We don't intend to go that far. Certainly we don't intend to employ thousands of people to oversee the oil and gas industry in this province.

MR. GUNO: If the concept is still alive and under active consideration, as the minister points out, although with a more limited mandate.... But mine safety, environmental safety and reclamation are still a fairly substantial part of the ministry's responsibilities, and the question arises of accountability. If such a joint board with this kind of mandate were to be struck, what would be the reporting requirements to the Legislature, given that you have pointed out that these are going to be its responsibilities? How are these boards to be accountable? Will they be subject to the same scrutiny that we have today? Would they be published in an annual report? Or would they be subject to audit by the auditor-general?

[8:00]

HON. MR. DAVIS: Were a board along the lines of a mine safety and reclamation board to evolve, I think for the first year or two or three, it would simply be a unit within government with the same reporting responsibilities as we presently have, but with the industry's input taking place through the members on that board. The mine approval process would be the same as it is today. The ministry would have to have inspectors to inspect the inspectors under their set standards for mining operations.

The environmental protection standards would be set in the first instance by the Ministry of Environment, and reclamation, mine acid drainage problems and so on would all have to fall within the purview of existing ministries and be requirements imposed on a board which was concerned much more with the day-to-day operations of going mines. I would say that all the current reporting requirements would continue.

MR. CLARK: This is really quite an unacceptable way of creating policy. The deputy minister has a meeting with his employees and says: "You're all going to be spun off to the private sector under two boards." They have this big fanfare. He says: "Don't tell the press. Don't tell anybody we're doing this major restructuring." Of course, it gets out. Then the minister announces the plan. We still haven't seen any details. It's just in the mind of the minister. He announces it, and ever since then they've been backing up, meeting with the industry, meeting with the Mining Association. Now he says: "We're going to have a little mining resource board, and it's going to have inspectors under the board. Of course, the public sector will still have to have inspectors to inspect the inspectors." This is really foolish, isn't it? I mean, really. If you're going to create policy and radically restructure your department, the minister should come in with some thoughtful policy regarding the direction the government wants to take in this matter, so that we can all debate it, including the industry, whether it's a white paper or a bill or something.

We have this half-baked policy approach, huge announcements, and 200 employees have the fear of God put in them because there are going to be all kinds of changes happening, and now we're backing off completely on both mining and petroleum. Wouldn't it be more appropriate to come in with some kind of policy or White Paper of some force after consultation and discussion with industry? It's in a public domain. We can all debate and discuss it so that we know what we're talking about, instead of coming here and saying: "Well, it's all changed now, but we're still proceeding, and there's still going to be a public sector. The mining industry is upset, and the petroleum industry is upset. Alberta's doing this, and maybe we should do something like that." This is just not an appropriate way to do public policy. Why can't the minister give us some commitment that there will be some discussion paper that we can at least see and discuss in a rational manner, rather than this ad hoc approach to policy? We see this in every ministry, but I didn't expect to see it, quite frankly, in the Ministry of Energy and Mines.

HON. MR. DAVIS: Perhaps I could give a little background. I mentioned the fact that the ministry, in terms of numbers of public servants and budgetary commitment, has been cut back substantially. Some thought was given to improving the resource available back to earlier levels and how that might reasonably be financed and brought about. The Alberta example of joint resource boards was seriously discussed. We took it out to the industry. We've had trouble convincing the mining side that this makes much sense from their point of view, when they learn they might have to pay for part of it.

On the other hand, the energy industry — the oil and gas people — say: "You've got a slim administration in British Columbia. We much prefer to deal with you rather than the Alberta government. Keep it the way it is." Indeed, a few weeks ago the oil and gas industry had a day with Premier Getty and his Department of Energy. At the end of the daylong discussions, they were saying to Premier Getty: "For three years you've been promising a new royalty system for oil and gas. British Columbia has done it in three months. Why don't you just take their new system, streamline this great bureaucracy you have and follow B.C.'s lead?" So while we're looking around at alternatives, we're not going to undertake radical departures without talking to the industry, especially when we're going to ask the industry to pay the shot. And we're not closing our eyes to other possibilities; we're looking at them in turn.

[Mr. Weisgerber in the chair.]

MR. GUNO: I certainly ditto the concerns of my colleague relating to the way this thing is being evolved.

Given the rather incestuous relationship between government and industry, I would like to know just who on the board will be representing the public interest. The minister has said that he will be on these boards. I'm wondering if he will be the only government representative, and just exactly what will be the composition of this board.

[ Page 5440 ]

A little further to that and following up on my colleague's concern, what are the details of the policy framework provided by the government which the boards would have to follow? Will the industry have input into the policy framework that they will be following? Perhaps the minister can respond to those questions.

HON. MR. DAVIS: It's not the intention to have the industry involved in policy formulation in any way. However, if they are prepared to make a financial contribution to have certain surveys carried out or certain safety or environmental provisions reinforced, we're not going to close our minds to the idea.

The minister won't sit on any of the boards. I happen to chair the B.C. Petroleum Corporation, but hopefully we can do away with that in the next nine months.

MR. GUNO: I want to now focus on the mineral resource division engineering and inspection branch. Currently, as I understand it, there are something like 4,400 active mining and exploration properties in British Columbia which require inspection. The branch's professional staff estimate that about 9,100 inspections are needed annually to monitor these worksites. Last year, the branch's 39 inspectors conducted about 2,400 inspections. The number of inspections has increased by 10 percent over the previous year.

The auditor-general's report expresses some concern about the staffing requirements of the ministry, the fact that there are some concerns about a lack of staff or the decrease in staff, the fact that it's now more and more difficult to fulfil the ministry's mandate, and that the branch conducted far fewer inspections than is desirable. Can the minister give us an update of what the staffing levels are right now in his ministry?

HON. MR. DAVIS: I think it's fair to say that in each of the divisions and sections of the ministry our staff is minimal. They're doing a good job. Our resources are strained in some areas. We are shifting some people about to try to make sure the job is done effectively.

The hon. member mentioned some 9,000 inspections per year being desirable; that is a number provided by staff. When asked, "If you had unlimited resources, how many inspections would you carry out...? That, of course, covers inspections of a lot of properties which are idle, which are not in fact being mined, or where no exploration whatsoever is being conducted. So 9,000 is a big number which I think is unrealistic under any circumstances. We are inspecting some 3,000 properties a year. The branch management opinion is that it's coming within a few percent of what is the reasonable target for the industry, given that a lot of properties are not active.

MR. GUNO: Just to follow up on the precise staffing requirements, my question is: which divisions within the ministry have faced the largest reductions in staff, and what staff have been lost? I speak in terms of technical, clerical and professional. Where exactly has the ministry suffered the biggest reduction?

HON. MR. DAVIS: I'm told, Mr. Chairman, that in the last two years the principal reductions have been in finance and administration. That's been possible because of our streamlining of the tax system and computerization. There has been a modest reduction in inspection from 60 to 51; otherwise, the essential elements of the ministry over the last two years have remained at approximately the same numbers as in 1986.

MR. CLARK: Just to follow up on staffing, we see this in every ministry of government, but I don't think we see it as dramatically as in this ministry. By my count we've seen a 30 percent reduction of staff over the last five years. We've seen the auditor-general say that because of staff inadequacies, because they're stretched to the limit, $1.5 million slipped through the hands of the ministry and was given to the natural gas industry — because of incompetence or inability. And we know the minister has admitted on the record — I questioned him on this before — that the amount is really about $7 million. But who knows how big the number is in terms of how much money we've lost because of implementing a complex royalty formula without the appropriate staffing.

We're seeing a gutting of the civil service in this province the likes of which we haven't seen before. Certainly the previous administration cut back dramatically on the civil service, but now we're getting, as Herbert Anscomb.... As any student of history would know, he once said that the government should cut welfare spending to the bone and then scrape the bone. Well, we're seeing in ministry after ministry that the government is scraping the bone, and today we've seen a backhanded admission of that fact, by saying that the ministry has cut back, and that's why you're looking at new sources of expanding services, or providing services through boards or something.

Surely the appropriate way of dealing with it is through improving the staffing levels; not by bringing in legislation that cuts taxes on the mining industry or on anything to do with your ministry, but by taking those resources and using them in your ministry to fulfil the mandate to protect the public interest. It's not acceptable to come in and say, "Well, we've lost staffing and we're stretched to the bone; we've lost all this revenue in natural gas by failure to collect royalties because we don't have the staff," and then to just stand up here, as you did previously, and say, "Well, Treasury Board won't give it to us," when you're the one that's cutting back.

I want to ask some specific questions. Even though we've seen a dramatic cutback in staff, and we're seeing more cuts in your ministry, we're seeing that the cuts are uneven. For example, we see in this budget alone a 42 percent increase in fees for consultants. We see, by my numbers, $3.9 million for 1987-88 and $5.6 million for 1988-89. So we're seeing a huge increase in the budget for consultants at the same time as the minister says, "We don't have the staff to carry out day-to-day operations and collect royalties" — the kind of routine stuff that should be done in this ministry. Maybe the minister would like to deal with that specifically. What is it those extra consultants are doing and why can't they use that money that's going towards consultants to hire permanent staff to do the kinds of normal, routine work which should be done by this ministry?

[8:15]

HON. MR. DAVIS: The principal reason for an increase in consultants' fees is the rewriting of the royalty system for oil and natural gas and the rewriting of the tax regime for mining. That's a one-shot operation. Outside consultants can better be employed on a one-time or once-around task like that, rather than taking on people on a permanent basis.

[ Page 5441 ]

The hon. member mentioned money lost, to use his words, as a result of the overly elaborate — complex, certainly — oil and gas royalty system. That's true; the ministry has now gone back to the companies that didn't pay what they should perhaps have paid under that complex system. The moneys are not lost. They are being recovered, admittedly late in the game. By simplifying our financial systems, simplifying our tax system, streamlining administration through the use of computers and so on, the same staff is able to cover a lot more ground, be a lot more efficient and do a lot better job than a larger staff did in the past.

MR. CLARK: Maybe the minister can clarify this: I understand that only $1.5 million identified by the auditor-general is being recovered, but the previous $4.5 million or so that was lost before the audit took place is not able to be recovered.

HON. MR. DAVIS: I am told that the $1.5 million is recoverable as a result of a six-month period of improper assessment. If you multiply that by the several years during which the same complex royalty system was in effect, you get up to a number like $7 million, and that sum is totally recoverable.

MR. CLARK: The minister said that the consultants' fees were for rewriting the royalty primarily. Surely that was written last year and wouldn't show up in this budget. We've seen the legislation implementing the flat-rate fee. Why would we see $2 million or more in this year's budget?

HON. MR. DAVIS: We received authority last fall to rewrite the royalty system, but the rewrite has in fact occurred during recent months and is being finalized now. It's just being implemented this month.

MR. CLARK: Okay. If that accounts for some of the increased costs, what does the other $4 million that last year was paid to consultants cover essentially? What's the major focus of that cost?

HON. MR. DAVIS: The province's geological survey effort, which was never very large, was reduced from the early 1980s on. We are in the process of reviving the activities of the geological survey of the province. Because we didn't have approval for bodies — FTEs — individuals were hired under the heading of consultants last year to begin to build up the provincial geological survey effort.

MR. CLARK: What you're saying is that the government is contracting out work which previously used to be done in-house?

HON. MR. DAVIS: I have difficulty explaining this. I gather that the ministry had more bodies than it had authority for FTEs, so they were paid under the heading of consultants. Their pay was finally approved under the heading of consultants' fees, if I can put it that way, but I am told we never laid off a geologist. All we did was keep them at home. They weren't in the field as much as they were in earlier years. Now the money is available for them to carry out their duties as formerly. Indeed, the total survey effort is being substantially augmented again this year and will be increased further next year.

MR. CLARK: The money is made available now every year as if they were on staff, but they are really consultants working at home. Is that correct? We are going to see this continue on at this pace?

HON. MR. DAVIS: I am told that the consultants' fees are time-limited and that the reporting of salaries, wages, etc., will be under the proper headings next year.

MR. CLARK: So you've been given approval to add FTEs for next year?

HON. MR. DAVIS: The answer substantially is yes.

MR. CLARK: I prefer a little better breakdown, because what we're seeing here, just to look at some of the numbers.... The minister said originally that we need consultants because we're doing the study on the royalty structure. Then he said it's also because we're trying to improve the way we operate. Then I see in the budget a 40 percent increase for data word processing, which is what you said was covered. Clearly, that's now covered in another budget. We see a roughly $2 million increase — or 255 percent — for computers. We're seeing a whole range of increases in the area of contracts being let; at the same time, we're seeing a shrinking of the ministry essentially. Is that correct?

HON. MR. DAVIS: Substantially, the computerization is a one-shot development. The preparation of the software and so on is being supplied by private contractors. Once their job is complete, they are gone. The numbers of employees in the ministry will remain roughly as they are now, but the computerization should enable the administration to do a much better job of its various assignments because of the additional supports made available by these computer experts and the installation of the necessary equipment.

MR. CLARK: Can the minister explain why we have a 1,000 percent increase in the advertising budget in your ministry — from $33,000 to $364,000?

HON. MR. DAVIS: We have a very modest advertising budget, and I assume that a thousand fold increase still doesn't give us much of a budget. I'm told it's largely because of this new Mineral Tenure Act that totally rewrites the title arrangements not only with respect to hard rock mining, but also placer mining in the province. It puts them on a compatible basis and uses modern methods, terminology and so on.

MR. CLARK: The problem I have is that the minister has admitted he's short-staffed. The auditor-general has identified that you're short-staffed. There are serious problems. You have let go several million dollars in natural gas revenue that should have accrued to the Crown. Now you're trying to recapture them. At the same time, you have a real crisis. You're dramatically increasing your consultant fees by $2 million and 42 percent. You're increasing your advertising by 1,000 percent. You're increasing your data word-processing budget by 40 percent.

Really, what we're getting a sense of here is the priorities of the minister. I'm having difficulty understanding that rationale, given the minister's comments that they're strapped to the limit. The auditor-general is saying manage-

[ Page 5442 ]

ment are doing clerical staff because the government won't replace clerical staff. We've got all these basic things that aren't being done; at the same time, we're seeing huge increases in budgets like advertising. I've got real problems with that.

Maybe the minister could answer a couple of specific questions. How many employees took early retirement under the early retirement plan?

HON. MR. DAVIS: I think some 20 employees have taken early retirement.

To return to the 1,000 percent increase in the advertising budget, is that from $100 to $10,000? I don't have a number here.

MR. CLARK: The budget increased from $33,000 to $364,000.

HON. MR. DAVIS: That includes the government personnel services division budget.

MR. CLARK: I don't believe it does. Maybe you could check that. As I understand it, we're looking at vote 29, ministry operations, Energy, Mines and Petroleum Resources. There is a vote 33 called government personnel services. I'm not looking at government personnel services, which we'll deal with later on. I'm looking at the minister's office. We see an increase from $33,000 to $364,000 in the advertising budget. That, for the minister's information, is number 40, which is defined at the beginning of the estimates as advertising.

If you look under vote 29, page 44 of the supplementary estimates, you'll see that the dramatic increase to $229,000 comes in mineral resources.

HON. MR. DAVIS: I'm told that that's a statutory requirement. It's publication of mining, minerals, geological survey and other information for general use. I'm at a loss on this side, because I don't think we've got a publicity budget for the ministry. We certainly don't.... It's publications, I'm told — $229,000, 40, items for mineral resources publications.

MR. CLARK: Maybe the minister could undertake to clarify this matter, because I have here $33,000 for '87-88 and $364,000 for '88-89. If it was routine publications that are required by statute, we wouldn't see a 1,000 percent increase in one year.

I'd like to ask the minister some questions regarding people who have taken early retirement. Given that we've had some discussion now over the last year about the shortfall in staffing in the ministry, given that the minister has indicated that that was one of the motivations for boards, and given that the minister has repeatedly essentially agreed that that's a problem and the auditor-general has identified it as a serious problem, we've now had, as the minister says, 20 people take early retirement. Could the minister tell us what positions those persons occupied and whether they've been refilled.

HON. MR. DAVIS: Those who took early retirement were mainly senior staff. Some two-thirds of the positions have been subsequently filled by others.

[8:30]

MR. BARLEE: Evidently the number of inspectors has been cut from 60 to 51, which is approximately a 16 percent decrease; yet in the last ten years there's been a very definite increase in the number of placer mining leases. The placer mining leases were required to pay $50 per year annual rental fee. In addition to that, there is required $250 worth of assessment work. About 90 percent, according to my field notes, of the placer miners do not do their assessment work, and if they don't do their assessment work, they're required to pay $250 in lieu of same. So the only people who can check whether this assessment work is done, indeed, are the inspectors who are in the field. Has the minister made provision to increase the number of inspectors, considering the increasing number of placer claims in the province?

HON. MR. DAVIS: I'm told that the inspectors don't do the assessment work. The geologists and titles people do.

MR. BARLEE: Could the minister give me the figures on those individuals — whether or not that staff has been cut?

HON. MR. DAVIS: I'm advised that over the last three years there has been no cut in the numbers of people employed as geologists or in the mineral titles branch.

MR. BARLEE: Mr. Chairman, I think in the last three years and certainly in the last decade the number of claims has skyrocketed. So holding the status quo is simply not good enough.

HON. MR. STRACHAN: Could I also advise the second member for Boundary-Similkameen that there has been, if I'm not mistaken, a $300,000 increase in the Environment and Parks vote for that type of inspection as well.

MR. GUNO: I want to just follow up on the concerns that have been expressed by my colleagues about the staffing problems and also the auditor-general's concerns about that particular issue. This relates to the petroleum resource division.

There's no doubt that the oil and gas industry in British Columbia is a very important one. We have something like 150 small companies operating in British Columbia in addition to the large companies such as Esso, Texaco, PetroCanada and Dome, and last year the industry's production value was something like $1 billion per year. But the importance of this industry is not reflected in the auditor-general's report on the division's mandate and performance. In fact, it states that the division is not effectively addressing its full mandate.

Two factors contribute to this, according to the auditor general’s report. The first one is that the division's workload grew while staff levels were being reduced. Secondly, the management's reaction to staff reduction was to forgo managing and take over much of the division's technical workload itself. Also, it identified that it also had difficulty in making productive use of the private contractors. As I understand it, in response to the auditor-general's report in October 1987, the petroleum resources division was merged with the energy resources division. This eliminated the duplication of its efforts and streamlined the management responsibility.

The auditor-general's report emphasizes that priority must now be given to the management process. What efforts have been made or are being taken by the ministry to address

[ Page 5443 ]

the past management difficulties experienced in the petroleum resources division?

HON. MR. DAVIS: As I've said previously, in an attempt to reduce the workload and make the operations of the ministry more efficient, we've simplified the tax system, the administrative procedures, the statistical computations and so on. I find it hard to believe that the workload recently was higher than it was in 1980 and 1981, when the oil and gas industry was much more active in British Columbia than it is now.

On the other hand, I'm glad the auditor-general reports that we've been able — in his view anyway — to undertake a larger workload with a somewhat smaller workforce. That's called productivity improvement.

I would also like to comment that the auditor-general's staff comes into a ministry, talks to the members of the ministry staff and asks them what the problems are and where they think things may be improved. The auditor-general substantially reports the opinions of staff and often recommends changes which are already in train. Most of the changes that the auditor-general recommended, in a report printed months after he made the recommendations, were in process when he wrote the report and had been implemented by the time his report was published. The auditor-general's people perform a very useful function, but that doesn't say that we haven't corrected most of the problems and wouldn't have corrected most of the problems if the auditor-general's people had never visited the ministry.

MR. CLARK: Just to deal with staffing a little more, would the minister confirm that the project analysis branch has been abolished?

HON. MR. DAVIS: Yes, it's been folded into the policy group, and some additional staff and resources have been allocated to the policy group.

MR. CLARK: What's going on here? I'm at a loss to figure out what's happening, because we're seeing a gutting of the civil service across the board in this government. As I understand it, the senior person at the director level, who was in charge of policy analysis, has now left the ministry, and so have several staff in that branch. I gather you've beefed up a different branch that dealt with policy development.

The policy analysis branch used to review proposals for development and use, or removal, of B.C. energy resource certificates, I understand. Is that work now being done by, presumably, an already stretched policy development branch?

HON. MR. DAVIS: Substantially the same people are doing the same jobs, but they're under a single division called policy development — not under two separate divisions. As I say, there were more people and more money involved in this operation than before.

MR. CLARK: Well, there were 12 people in the policy branch and eight people in the project branch, as I understand it. I don't have the details. Could the minister tell me how many were in the policy development branch?

HON. MR. DAVIS: The numbers which I've been given by the assistant deputy minister tell me that the same number of people are now employed in one division, whereas they were in two separate divisions before.

MR. CLARK: So the only job you eliminated was the director. Is that correct?

HON. MR. DAVIS: The only job that was eliminated was the director, yes. The numbers are the same in total.

MR. CLARK: Who is now responsible for the overall coordination of energy development proposals in the province?

HON. MR. DAVIS: The director of policy development is now Mr. John Allan.

MR. CLARK: Mr. Peter Ostergaard — didn't he used to be the head of that? What is his position?

HON. MR. DAVIS: Mr. Peter Ostergaard is one of the policy division employees. He reports directly to Mr. John Allan.

MR. CLARK: We will move on to some more substantive issues. I think we have canvassed the staffing problem enough tonight.

It is apparent to me — and I think to the minister — that staffing is inadequate and that moving to contract services to try to hide the fact that there aren't the available resources is really not acceptable. To try and pawn it off to the industry because you can't get approval through Treasury Board really isn't acceptable either, given that the inherent conflict of interest between the industry and the public, or the Crown as owner of the resource.... It is absolutely clear to me that if shifting around priorities in terms of consultants and advertising and the like into front-line people dealing with the day to-day operations of the ministry is required, and increased staffing.... I say that not because I want to see a larger bureaucracy, but simply because this is an industry that, as the minister points out, generates a lot of revenue for the Crown and deserves to have some financing to police it and to adequately protect the public interest.

As you said, 20 people have left through early retirement. Senior staff in all the ministries are leaving the public service. It is not easy to replace that. It is human capital being dissipated by this government across the board. In the Energy ministry, as much as any, we are seeing an already stretched department lose some of its key staffing and not have it replaced. Contracting out services to try to deal with geological mapping and stuff really isn't an acceptable way to go. I think it begs the question.... Of course, this is the minister responsible for privatization. We'll get into that in a little bit, but it doesn't bode well for the public service of British Columbia.

I want to ask a couple of questions now on the Vancouver Island pipeline. First of all, maybe the minister can give us an update on where that's at, given that, as I see it, the original press release said that fieldwork would start on July 1, 1988. I don't know whether that's still operational.

HON. MR. DAVIS: We have asked the federal government for an outright grant of $200 million, and we are momentarily awaiting a reply. Until we have a reply in the affirmative, we don't have a pipeline; but as hon. members

[ Page 5444 ]

know, the federal government, under several guises, has put roughly $1,500 million into pipeline extensions in the province of Quebec and other moneys of comparable orders of magnitude into some other provinces. We believe it is our turn, partly because commitments were made some years ago to extend natural gas service to Vancouver Island and partly because British Columbia has never received moneys of any substantial order of magnitude for any energy project at any time.

We think that in delivering gas to the Sunshine Coast and Vancouver Island, the price to consumers and industry in both of those areas should be similar to the price levels in Vancouver. To achieve that, there has to be a substantial subsidy from government, and we think the federal government should put up a large share of the subsidy. Hopefully we will know in a few weeks' time — at the outside, in a month or so — whether this particular pipeline is a go or not. It is a less expensive line than some of the earlier projects. The lower cost is due in part to the fact that steel is lower-priced today. Pipeline-building companies are not busy and would welcome the business. Nevertheless, the route, which involves the Sunshine Coast as well as Vancouver Island, means that more gas will be sold from year one, and the economics of the project as well as the lower capital cost mean that it is economically more likely to be feasible than earlier proposals.

In any case, the ministry did look at half a dozen different proposals after it had asked for an expression of interest from the industry. It chose the proposal which sees the line running up the Sunshine Coast, across from Powell River to Comox, then north-south on Vancouver Island. The estimate of its capital cost, including the crossing, was $250 million, considerably less than the $400 million or $500 million figure given in earlier years, whereby the other proponents — although I must say that two of the ideas put forward involved a pipeline north from the Olympic Peninsula, which might have been cheaper but would have involved an international route — would not have served the Sunshine Coast nor perhaps the northern end of Vancouver Island.

[8:45]

MR. CLARK: I'm tempted to say that the delay in the Meech Lake debate in here may have something to do with negotiating this kind of money for Meech, as we call it here — $200 million for the pipeline and Moresby and a few other things, I'm sure, being negotiated as we speak.

Interjection.

MR. CLARK: The minister says: "That's leadership." It's something, anyway. This is a new founding father of Canada: money for Meech.

I have a few questions about this, because the minister says $200 million, and I assume that's a bargaining or a negotiating position which may come down. Certainly if I were the federal government, it would come down, but given it's election year.... Maybe we need a federal by-election here in British Columbia, and we'll get the pipeline.

In order for the pipeline to be economical, we need all the pulp mills on Vancouver Island to go on it. Could the minister indicate what the status is of negotiations or discussions with the pulp mills of Vancouver Island to convert to natural gas?

HON. MR. DAVIS: The forest products industry has agreed that if there's a pipeline supplying natural gas passing their fence, they'll take natural gas. I think they'd take natural gas for several reasons: they much prefer clean natural gas to heavy residual oil, which is banned in California and shipped north to find a market on the west coast of Canada. Their only proviso is that the price of gas be competitive with residual oil. If they pay that twice and take the volumes which they've told us they would use, then the industrial side will support the pipeline adequately.

The principal advantage of the mills taking gas is that they take a large volume of gas from day one, so there's an immediate income available to the pipeline from those seven large mills; whereas residential, commercial and other loads will take some years to develop. Even if the prices are attractive, people will convert relatively slowly to natural gas in homes and stores and so on. I must say that if natural gas is available at anything like Vancouver prices, it would be half the cost of oil or all-electric space heating. So there's a considerable incentive to switch to natural gas provided in the pricing system.

MR. CLARK: I've had some discussions myself with the companies involved. They indicated to me that they weren't interested in converting to natural gas, that they'd obviously need to retool. I wonder if the government is considering — because I understand the industry has asked for it — some subsidy to convert to natural gas. Or may there be some environmental regulations which might compel them to move to natural gas from oil?

HON. MR. DAVIS: The message I get from the industry people is that they don't want to be subsidized. They certainly don't want to appear to be subsidized because of trading relations and problems associated with government subsidies, particularly if they are exporting to the United States. I think that the environmental regulations — the rules which apply to interior mills and are practical because they have natural gas — could well be another factor in the decisions on the pipeline. Once gas was available at the mills, then the more rigid provincial regulations could logically be applied. About subsidies for conversion, I think the industry itself would say they don't want any subsidy that might be an amount that came off the price they paid for gas. In an all-up sense, the gas price was competitive with the residual oil price, but I don't see the province funding conversions in pulp mills.

MR. CLARK: That's certainly heartening, although a subsidy is a subsidy. Presumably a subsidy for the pipeline might be countervailable; I certainly think it's arguable. As you know, $200 million is not a small sum of money.

I wonder if the minister could comment on this. Some people in the industry have told me that there is great concern about moving to 10-inch diameter pipe from 13-inch diameter pipe, given that presumably — and maybe the minister could comment on this — it simply can't take the volume of a 13-inch pipe. One would think, intuitively, that would be the case. So if all the industry on the Island converts, particularly the seven pulp mills, will it be possible to carry the full load of residential consumers, or will there need to be some further adjustment in the future? In other words, is a 10-inch pipe capable of handling all of the projected capacity that might take place with full conversion to natural gas, and pulp mills, given the fact that the minister has stated, and I certainly agree, that if we're going to provide this and get the

[ Page 5445 ]

subsidy and get the link for free, then the people on the Island are going to get the same prices for natural gas as people in the lower mainland? Therefore there will be, presumably, although slowly, a significant move, at least in the medium term if not the short term, to convert to natural gas. And I want the minister to confirm now that the pipeline is fully capable of taking the entire load on the Island that's being contemplated.

HON. MR. DAVIS: Yes, the pipeline project has been sized to look after the projected markets — industrial, residential and commercial — through the first decade, if I can put it that way. It is relatively small-diameter pipe — thick wall, very high pressure — as opposed to the thin-wall, much bigger pipes which are low-pressure systems. But in any case, the sizing of the pipeline, the scale of the markets and the ability of the pipeline physically as well as economically to meet these loads at the right prices will be reviewed by the Utilities Commission in a public hearing; and if changes are desirable, they'll be recommended by the Utilities Commission.

MR. CLARK: Presumably the pulp mills have to convert, and, of course, many people might argue that we're at the peak of a boom in the pulp mill sector and there's every likelihood that we'll see some — as it is a cyclical industry.... If, for example, the Canfor pulp expansion in Port Mellon doesn't proceed, or the like, or we see some not continuing.... They're producing above the maximum, over 100 percent, theoretically anyway, of their capacity, and we're seeing this expansion. Would it impact on the viability of the pipeline if, for example, the Port Mellon expansion didn't proceed?

HON. MR. DAVIS: Yes, I think a recession would have some impact. When the studies were done a year ago, the Canfor expansion was not seen as firm or definite, yet it's a plus, if you like, to the economics of the line. We'd like to be sure that Canfor is engineering now for gas and doesn't spend a lot of money on pollution abatement and so on, relative to heavy residual oil, which is unnecessary.

We also have some hope of one or several petrochemical industries locating around Squamish coming on line. But they will bonus the line; they will improve its economics. They are not included in the basic numbers on which the essential viability of the pipeline rests.

MR. CLARK: With the projections on the pipeline, we also see reports.... Actually, I think today's Globe and Mail had a discussion of the bubble bursting in natural gas and the price rising. Is the pipeline predicated on some increase above the current costs for natural gas? Presumably the price will rise in the lower mainland as well as elsewhere, and that should affect the economics of the pipeline.

HON. MR. DAVIS: Yes, that's certainly relevant. We probably have a window in time where a number of things are coming together. We have a low field price at the moment. The pipeline company says that they have presently lined up all the gas they would need at very low prices. If we were into this two and three years from now, we might well find a much higher field price; but they believe they can contract for the first decade or so of gas at really attractive prices. Also, Westcoast Transmission's main pipeline is not fully loaded.

Indeed, in the summertime it's only about 40 percent loaded, and Westcoast can offer reduced — or call it incentive — rates. These have to be approved by the National Energy Board. But that excess carrying capacity Westcoast has today could disappear in a few years' time. So, hopefully, this project will come together soon rather than waiting a few years, when field prices may be much higher and Westcoast is fully loaded and so on — and hopefully while residual oil prices are low today. They're going to be much higher in future, and then the price the mills would then pay for this gas would be higher.

MR. CLARK: We'll move on and discuss briefly some of the stuff we talked about in Bill 46 — the power export agency. Once again I have some concerns, which I'm registering with the minister, that policy pronouncements, particularly significant ones, aren't made here. While I don't expect to be the first to know, I would appreciate not being the last to know, either.

It seems to me that the power export agency.... Like the discussion we had earlier with respect to the boards, we really haven't seen anything on paper on this proposal. I have gleaned the information basically by listening to the minister reading press reports and listening to him in the House here today. Surely this is a significant policy pronouncement. I assume that a great deal of thought and discussion has taken place within the ministry, although, as I said earlier, I don't think there's anybody left in the ministry — or not enough people left — to deal with these significant matters. Presumably this kind of work would spawn some discussion paper within the ministry.

Perhaps it might be worth making that privy to people — not just me — for debate and discussion before the government embarks upon such a significant shift in terms of moving into long-term power exports. Of course, it is moving in the diametrically opposite direction to deregulation, in favour of a Crown monopoly for export, which is kind of an interesting irony with this administration. It's not the irony that I support, but certainly the export corporation is a good idea.

I would like to discuss very briefly some of my concerns. The minister did say, in dealing with average and marginal cost pricing for power exports.... I want to follow up on some of the things that I recall the minister saying today. If the power export corporation, which is, at least in the interim period, a subsidiary of B.C. Hydro, is the sole buyer of power from private facilities and then, of course, the sole seller — I guess, akin to B.C. Petroleum Corporation — it raises a question regarding a blended price with the average cost in our total system today, which would reduce the price dramatically and pretend to show a profit.

The minister said he is hoping to keep domestic production separate, particularly including the current facilities and the production for export. That's something I certainly would strongly support, so that the facilities built for export are stand-alone in terms of being economic. I quite frankly think it's unlikely they would be stand-alone and economic, at least for several years anyway. I don't think it's likely that a thermal plant in the Kootenays, particularly using waste coal without any subsidy, is going to be competitive with the Pacific Northwest or California, given the prices that thermal plants are coming in at, certainly in the United States. Maybe we can get into that in a minute.

Maybe the minister could give me some idea as to how he sees this being organized, separating the domestic production

[ Page 5446 ]

of the current facilities — the dams, etc. — that are low-cost power for domestic consumers and hiving off new projects like the Alcan and Kemano completion project and thermal plants simply to be exported. Would he see, for example, some kind of blended price, with the export projects the price to be negotiated for sale to the United States, or would each project have to have a committed contract in the United States and be viable with respect to each individual contract?

HON. MR. DAVIS: The hon. member is talking about long-term exports. In simplistic terms, each of those export stand-alone projects must be identifiable and separate from the ongoing power generation, distribution and retail business of the province. They have to be viable standing on their own. The single-desk agency at the border initially is made up of several people who currently manage B.C. Hydro's short-term spot sales. They are knowledgeable about utilities to the south — their costs, their prices and so on. In the fullness of time, this single-market export agency — it's really a marketing agency — would be stand-alone from Hydro as well.

[9:00]

Each project would have to go through the Utilities Commission, would have to be scrutinized on its own merits. The export corporation at the border is the one that identifies the market and then calls for tenders. The waste coal plant in the Kootenays is to be privately financed. This has now been agreed by Hydro's economists and accountants. It can deliver energy at the border at a lower price than publicly financed Site C. That is as it may be. It's a relatively small development compared to some of our big Hydro projects, but it happens to be close to the border. If — and this is a big if — there is a private utility or a group of utilities in the northwest prepared to pay a good price, that project will fly. If they're not prepared to pay a price considerably in excess of the cost of delivering the power to the border, then there's no project; there can be no public subsidy.

This is still all a matter of some conjecture, although, as some hon. members know, Hydro is now marketing substantial amounts of Alberta coal-based power in the U.S. northwest, and the price is interesting. It's a price comparable to the price which we would need in order to finance a coal-fired plant in the Kootenays. I think the main concern about a coal fired plant in the Kootenays is not so much whether the resource is available — there's lots of waste coal — or whether the cost of production is less than the price Americans would pay; there is also an environmental concern. That must be covered and all costs of environmental protection included in the costs of production.

To recap, we haven't yet established a market in the U.S.; when we do, it has to be of sufficient volume and price to make it interesting for different groups to express an interest in supplying that market. We've had different companies wishing to get engineering and other contracts pressing the government for some time to give them exclusive rights to develop this or that. There's no way that can happen. There has to be a call for expressions of interest and then, finally, a selection process, and a decision made in the full public view that the particular project, the first to go ahead and hopefully the second and third, can not only stand on its own but can generate a profit for the marketing agency.

MR. CLARK: So the minister is saying categorically that there will be no blending of hydroelectric electricity with, say, a thermal plant in the Kootenays for export to the United States. It won't be supplemented by our existing power facilities.

HON. MR. DAVIS: Mr. Chairman, to put it in the simplest terms, there can be no subsidy. There can be no confusion as to what costs British Columbians bear — what rates they pay — and the costs borne by the American importer. The American importer must meet all the costs and provide a margin over and above costs, or there's no incentive for the project to proceed.

One of several reasons why Hydro is being initially involved is the concern that purchasing utilities to the south have. They've heard of B.C. Hydro. They know Hydro is a substantial operating concern with a track record, and they want to be sure there's some kind of backup. But the price of that backup can in no way be borne by British Columbians.

MR. CLARK: Well, you've disconcerted me a little bit — and I won't take too much time — because the nuances of the language there are a little different than what I was saying. I don't want to belabour it, but I want to reiterate a little bit of what I said. If we assume that a thermal plant in the Kootenays is significantly more expensive than our average cost, and that there will not be a blending of our existing average cost power with the new thermal plant in order to provide a composite price, or a lower price, then what would be the marginal cost for the thermal plant as a stand-alone proposition? It would be rather easy for government to say that we're making a profit, when in fact there would be a subsidy, using the existing system, the existing grid, to blend in with the thermal facility.

That is what concerns me. If the minister is saying that there will not be a blended average price that we'll be selling at in the United States, but that the fully recoverable marginal cost of each new unit will be the cost upon which we base our export prices, then I wouldn't be nearly so concerned. I may have other concerns, but I wouldn't be nearly as concerned as I would about what would be an implicit subsidy to the exports, using our existing grid. So if the minister could just clarify that for me, then we can move on.

HON. MR. DAVIS: Mr. Chairman, I've said several times that there can be, there will be, no blending. But can I put it in other language? I don't believe, for economic reasons, let alone political reasons, that B.C. Hydro should in any way be involved in long-term exports to another jurisdiction. B.C. Hydro, among other things, is subsidized as a result of the government's guarantee of its debt, etc. This tends in some importing areas to be a detriment. The American can coal lobby is saying that all Canadian power is heavily subsidized, etc., etc.; that alone makes the trade of some concern. But in the public mind I don't think there could ever be any real unravelling of accounts. If Hydro was in the long term export business itself and was also responsible for looking after the bulk of the needs of British Columbians, I think customers of B.C. Hydro would always be concerned and very difficult to convince as to whether they were or were not subsidizing the exports.

That's another reason for involving the private sector, having the private sector people shoulder all the costs and be at risk, and be advancing stand-alone projects. Assuming that they meet environmental and other criteria, assuming there's a profit to be made not only by themselves but by the

[ Page 5447 ]

marketing desk at the border, then they would be building and operating for several decades a stand-alone project.

MR. CLARK: I think we're in agreement then.

HON. MR. DAVIS: To comment further, Manitoba, for example, has committed itself to several long-term export contracts, and there is a blending in Manitoba.

I think it became a serious problem there for several reasons. One of the reasons was that it was thought, wisely at the time, that it tied the export price to the price of crude oil worldwide, and you know what's happened to the price of crude oil worldwide. As a result, the consumers of power in Manitoba suspect that they're subsidizing exports, and I don't think we want to get into those difficulties.

MR. CLARK: Is it the minister's intention with the new power export agency to staff it or to spin off hydro from the B.C. Hydro corporation? Will we see staffing reductions at B.C. Hydro with the creation of this new agency? In other words, are you going to take a piece of the marketing division of B.C. Hydro and spin that off and form a separate corporation? How do you see that working, given what you said?

HON. MR. DAVIS: I think that in the very short run, because Hydro has in a few people all the expertise there is in the province on inter-utility transfers across the border, those people will be available to this agency. In the longer run they are needed for short-term occasional sales to the U.S. in any case, as part of the personnel of an ongoing operating utility which has a major obligation to British Columbians, and this agency would be manned otherwise.

I don't see it as having a large staff. It's really a sales group, and it might have four or five people who knew the utility picture to the south, a lot of the utility politics and the regional politics in the U. S. and so on, and who were able in the end to come up with some contracts both as to price and quantity which would then make it worthwhile for us to call tenders up here. That's yet to happen, and it may be some time off.

DEPUTY SPEAKER: The Minister of Labour and Consumer Services requests leave to make an introduction.

Leave granted.

HON. L. HANSON: We have tonight with us in the gallery three students from the Monterey Elementary School: Christopher Taylor, Robin Taylor and Scott Bland. They are here for the first time in the Legislature tonight to listen to the debate. Would the House please make them welcome.

MR. CLARK: Just a couple of questions and then we can move on. Will interruptible electricity from the B.C. Hydro system that we normally sell in the spot market be tunnelled through the new power export agency as well?

HON. MR. DAVIS: No, I would think that sales of energy from surplus capacity from an existing utility would be managed by the utility itself.

MR. CLARK: Could the minister tell me the status of the Columbia River negotiations? I have been told that there has actually has been some renegotiation taking place with respect to the Columbia River agreement.

HON. MR. DAVIS: It may be several years before the precise amount of the downstream benefits has been agreed on by both the Americans and the Canadians. The downstream benefit entitlement is the property of the province, not of B.C. Hydro; but B.C. Hydro is administering, certainly carrying out, the current negotiations with the exception of an appointee by the government of Canada on the joint engineering board.

The downstream benefits were three in number: there was flood control, irrigation benefits and power benefits. Canada agreed to build three dams and control the spring runoff in return for a recognition of the benefits. When the Columbia River Treaty was negotiated, at least in its broad outline, it contained no provision whatsoever for the financing of the dams. I was a critic of that aspect of the treaty's development. We didn't need additional power at the time because the government of British Columbia was busy developing the Peace.

So in the last analysis, the downstream benefits were sold: the flood control for a sum certain at the time, the irrigation benefits similarly; but the power benefits were sold at a price which was then roughly double the price being paid for energy in the Pacific Northwest, and for 30 years. A lump-sum payment was made. The stream of payments over 30 years was present-valued and a number produced then, and the B.C. government received some $250 million, which it put in the bank.

[9:15]

[Mr. Rabbitt in the chair.]

But at the end of 30 years — which comes up in the late 1990s — every second generator on the big dams down on the Columbia, including the Grand Coulee, The Dalles, Bonneville and so on, is ours; at least, it's ours in terms of its production. That additional energy from those particular generators is of the order of capacity and volume of a Site C. That energy under the treaty must be delivered at the border at no cost to British Columbia.

So in the late 1990s we have a resource which is unique. It's a Site C at no cost, and it's probably the best asset that B.C. Hydro and the province have for the future. Negotiations toward finalizing that delivery or sale of energy are continuing but won't be concluded for several years.

MR. CLARK: Has the minister confirmed that there are negotiations taking place now with respect to ironing out the outstanding issues in order for an agreement to be reached by the late 1990s? Is that's what's happening?

HON. MR. DAVIS: The only detail to be hammered out is the quantity of the energy. The obligation to deliver and so on is there; it's spelled in the treaty. But the Americans are claiming, for example, that the water that's pumped out of the river for irrigation and doesn't go back in should be deducted from the quantification of power and so on. The Canadians are saying that generally, around the world, 90 percent of the water does flow back into the river. So the debate is really about numbers, about matters of that character. At some point there'll be an agreement, and we'll know whether we'll have a Site C plus 10 percent or minus 5 percent.

MR. CLARK: I guess what's news to me — and maybe it shouldn't be — is that this negotiation has begun already. It's an eight-year negotiation process or something? How long

[ Page 5448 ]

has the negotiation been taking place with the Americans. and is it resolved through the International Joint Commission?

HON. MR. DAVIS: There's been a difference of opinion between the Canadians and the Americans ever since the treaty was signed. At one point the downstream benefits were supposed to disappear. They would have disappeared if the Americans had built a lot of thermal plants.

You call it "negotiation"; these deliberations are ongoing. There's a Canada-U.S. joint engineering board looking at the matter; it's been in existence since the mid-1960s, and it'll continue. There may be a resolution before the IJC or some other body, at the end.

MR. CLARK: One last area I just want to briefly canvass before we move on to some other sections of the ministry is with respect to Hydro sales to the U.S. and the interim policy. As I understand, there has been a sort of model agreement with BPA to export through their intertie a small amount of electricity in order to see how it works, so to speak. I want to know how that's proceeding, particularly in light of the free trade agreement and discussions around that, and secondly, around the discussions surrounding the new interties that have been announced with Washington Public Power Supply System — WPPSS — down to the United States. I want to know the status of those arrangements. Is the WPPSS connection really a negotiating strategy with respect to BPA, or is it a real thing that the regulatory procedure has begun? What's B.C. Hydro's and the government's role with respect to that other intertie?

HON. MR. DAVIS: The problem of selling into the United States is complex, largely political and institutional. Bonneville Power Administration is like a giant B.C. Hydro, except it's federal and is regarded by most people who live in Washington and Oregon as their utility. They don't want their surplus water to go to California, and they don't really want their surplus water power to go to California. So you have a will in the northwest which is opposed to power movements across their territory, particularly power movements which would benefit California. When a foreigner comes along — British Columbians — and wants to exploit across the northwest into California, they regard it much as British Columbians would regard Alaskan power crossing B.C. when B.C., might have some surpluses itself to sell in the United States.

I believe the real opportunity lies in some fairly modest sales to several of the private utilities in the northwest. Puget Sound in the Puget Sound area wants to build an intertie north to White Rock, and Washington Water Power wants to build an intertie north to Trail. If they obtain presidential permits, they will buy power from us. If they have surpluses, they will sell it to California. But I doubt very much if we are going to leapfrog right across the American utilities, the American political scene and the internal politics and make direct sales in California, at least in the early years.

Incidentally, the free trade agreement really doesn't change much. It admonishes B.C. Hydro and Bonneville to get along together, but it doesn't change things very much.

MR. CLARK: What approvals would need to take place in British Columbia before construction of the intertie on the B.C. side with either the WWP proposal or the Puget Sound proposal?

HON. MR. DAVIS: B.C. Hydro would have to have approval from the Utilities Commission to build a very modest connection at Trail and similarly at the international boundary line south of Vancouver. Most of the facilities are in place. The major investments are on the U.S. side, and before those utilities obtain presidential permits, there is nothing they can do, and there is no point in our investing in any additional transmission facilities.

MS. EDWARDS: Before we go past the Columbia River Treaty, I want to make my chronic pitch. The minister may well know that I have been trying to educate several other ministers in the House as to the Columbia River Treaty, and the aspect of the recreational resource of the waters that exist in the reservoirs in Canada, and the minimal but important, I think, commitment that I want B.C. Hydro to make about the recreational resource value of the water there.

The minister is very familiar with the treaty. He knows that — I say this more for the record than anything else — the Columbia River Treaty was written mainly for power generation and that, beyond that, there is a component for flood control. There are a few other things mentioned, such as stock water and irrigation, but the whole business of the recreational use of water is not written into the treaty, although that was the major benefit that was advertised and used to sell the whole giving-up of bottom land and so on that we all did for the reservoirs of the Columbia River Treaty.

I have also spoken to the minister, and I think he is relatively sympathetic to the problems that occurred this summer, which look as though they may not be as bad as they had initially threatened to be. However, there is a situation where the two authorities, the two entities - the U.S. entity and the Canadian entity - do in fact have a certain amount of power under the Columbia River Treaty. They may or may not agree on the amount, but it is generated as downstream benefits. Then there are some other benefits that have been generated because of improvements since the time of the treaty being signed that weren't necessarily included in the terms of the treaty. There were other improvements made, and there is some power available. When the two entities treat, if you like, on a regular basis as to what they are going to do with the power they can generate this year and for up to five years, there is a certain amount of elasticity in the amount of sales they can make, even if they are short-term sales of perhaps six months.

I have been at a series of meetings with residents of the Canadian side who are interested in the reservoirs in Canada and residents of the United States who are interested in several reservoirs down there — both the Libby reservoir, which we share, and the one behind the Hungry Horse Dam. In both cases, what the residents are saying to the governments and to the entities that do the dealing on this dam is that they were sold the benefits of this dam so that the power can go somewhere else. In both cases it is certainly a net export at least, and we were told that we would have this great recreational resource. Now comes the summer, when there is a great threat of a drought, and although the treaty deals with the probability of flood, it does not deal well with the probability of drought. Nobody cares about the recreational resource.

So I am asking the minister if, given the circumstances that seem to be shaping up this year and that could well have shaped up had the precipitation in May and June not been so generous, he would be willing to commit to directing B.C.

[ Page 5449 ]

Hydro to consider the recreational use of the water in the reservoirs as an important consideration when they are making the arrangements about how much power to sell, to see that where they can.... I recognize that there is a very small amount of water that could be used in this way, but there is certainly room within the predictions for them to see that a dry year is coming and that they are taking a chance if, for example, they give a six-month sale, which they didn't really need to give.

Would the minister make a commitment that under circumstances where a drought seems to be threatening, the recreational use of the water would be a consideration?

MR. CHAIRMAN: Before the minister replies, the second member for Kamloops requests leave to make an introduction.

Leave granted.

MR. S.D. SMITH: Joining us in the gallery this evening, no doubt energized by the debate that's gone on so far, are the president of the BCGEU, Mr. John Shields, and Sheila Fruman. Would the House please make them welcome.

HON. MR. DAVIS: Yes, I'll make a commitment to look into the recreational aspects of reservoir management. I know that the hon. Minister of Environment (Hon. Mr. Strachan), who's responsible for water licences, water flows and so on in the province, is very much involved. I know also that the water regime is substantially committed by the treaty. I know also that B.C. Hydro on its own really can't do very much. It's a power entity, and its job is to maximize its power output, not to help other activities in the province.

Generally speaking, I think the province has a vital interest in recreational aspects of river management, in particular on the Libby reservoir. It's a difficult topic, given the commitments made by Canada in the treaty. Times change; times have changes dramatically. The old CCF, and then the NDP, were very much enamoured of the McNaughton plan. The McNaughton plan would essentially have built a dam at the border and flooded the mountain trench from end to end, and created a massive reservoir in Canada, with the long-term intention of diverting the flood waters from the reservoir through from Revelstoke into the Thompson system, the Shuswap Lakes and down the Fraser. Eventually there would have been a series of dams on the Fraser which would receive those stored waters in the mountain trench. The McNaughton plan would have devastated the mountain trench from the border through to Golden, right around to the present McNaughton dam at Mica Creek.

I remember well a provincial by-election when Tommy Douglas flew out to Calgary and drove into Golden to help support the NDP cause. At the end of his speech, one of the people in the audience jumped up and said: "Tommy, do you realize you'd be under 200 feet of water if the McNaughton plan went through?" Those were different days. The belief then was that you maximized power; the concern was power. Even a decade later environmental concerns were beginning to surface. Today it's inconceivable that anyone would advance a plan to use the mountain trench from the international boundary up around the Big Bend as a reservoir purely for power production in British Columbia. That was the mindset of those days. The Libby Dam and reservoir were modest compared to what might have happened under the McNaughton plan.

[9:30]

Today we all recognize environmental and recreational values, and I'll certainly make that commitment. I think we should take another look and see whether there's any room at all where we can optimize recreational values as opposed to power values in the Libby reservoir.

MS. EDWARDS: I'd just like to say that this member of the NDP was never enamoured of the McNaughton plan from the time that I discovered what it was. We would have only been 50 feet under water, but I guess the fact that I use feet indicates how long ago it was, because I don't even know what that is in metres unless I figure it out.

I very much appreciate what you're saying, and I recognize that the Minister of Environment has something to do with this. As I said, he has agreed that he thinks the recreational use of the reservoir water is important. I bring it to you because you are the head of the Canadian entity that can do it. It was a different mindset at the time, but by the same token, in order to sell the production of power there were many promises about recreational value, and it came out.... I appreciate that the minister will look at that. If we can even get a commitment on that minimal bit — to look at the recreational value — I think it's important.

I also want to deal with another issue. I want to ask the minister, because I'm sure he must know by now.... It was several weeks ago that the announcement came out that the federal government had decided to commit $27 million through the western diversification initiative, I believe, to further the initiatives of the western Canadian task force on selling coal to Ontario. When that information came out it took me at least a week to discover what the base for that announcement was, and that was about all I could find out. I'm asking the minister: could you enlighten us now as to what exactly that proposal is? What is B.C.'s part in it? When will all this money start flowing into the demonstration projects, in which British Columbia will be a sharer? Is there any continuing provincial presence here?

HON. MR. DAVIS: The $27 million fund is to be administered by western diversification. It's really a federal fund. The provinces are expected to put up, if not matching moneys, similar amounts of money in areas where they believe their industry might benefit from substantial shipments of thermal coal from the west to Ontario. It's not clear so far how much of the $27 million might go to Ontario to help Ontario prepare for western coal, which is lower in sulphur, rather than burn high-sulphur but cheaper American coal. So some part of that moneys may be spent in Ontario with Ontario Hydro.

The province has written to the coal-mining companies in the province and asked them for expressions of interest in improvements in productivity, improvements in beneficiation of coal, improvements in transportation economics and so on, and we're awaiting confirmation from our own companies as to areas where research and development dollars could be beneficial to that eastward movement of B.C. coal.

We have several concerns. By far the largest cost that could be reduced is the transportation cost. If Ontario was prepared to take the coal there still has to be assistance in respect to the rail haul charges. That's one area of concern. Other concerns are, of course, that Alberta has lots of thermal coal, more readily mined, in the foothills, and Alberta is interested in this trade. And there are the lignite coals from

[ Page 5450 ]

Saskatchewan. So British Columbia coal-mines aren't the only mining operations which may benefit from that developing trade.

In any case, we've contacted the industry. We've told them the kinds of money-sharing programs that may be available. Hopefully we'll receive replies from the mining companies as to what might be done with government assistance to improve the competitive position of B.C. coal in thermal plants in Ontario.

MS. EDWARDS: How close will the work have to be to the initial report of the Mazankowski task force? In other words, there were a number of initiatives that were identified for B.C. and a number that were identified for Alberta, Saskatchewan, Ontario and so on.

I ask this partly because you mentioned the transportation problem, and it's still named as the major problem for the selling of B.C. low-sulphur coal to Ontario for its thermal plants. That being the case, it's interesting to note that most of the initiatives dealing with demonstration projects and research and development into transportation by rail to Ontario were assigned — offered, whatever, volunteered — by Alberta. So I'm not sure, now that you talk about transportation proposals, whether it has to do with rail transportation or whether in fact you're talking about the one direction where British Columbia was looking into transportation costs; that was evidently to ship coal via Panama, which is not going to do southeastern British Columbia coal, at any rate, very much good.

I wonder if you could be a little more specific about what directions the research and development in British Columbia might go? And will they be tied to that initial report?

HON. MR. DAVIS: The principal areas of B.C. interest, at least the preliminary indications we have, are: improvements in productivity at the mine, improving the coal quality so that what is shipped is perhaps lesser volume but equally effective at the end of the line — beneficiation, in other words — and cost reductions at source. Otherwise those are the principal areas of interest that B.C. has indicated.

There's a possibility that Vancouver Island coal might move via the Panama to eastern Canada, but that's not being investigated as a specific research project costing any amount of money. I think that's merely a matter of rates, which change from time to time in any case. To my knowledge, no money is being earmarked specifically out of that fund for Vancouver Island coal that conceivably could go to central Canada via the Panama.

MS. EDWARDS: I've said this before, but I found it quite interesting to investigate Vancouver Island coal, which is mined in an extremely minimal volume right now. It would of course require a great expansion of the development. What you're telling me then is that it's simply a case of checking the numbers and seeing what's there. I assume it still would be directly related only to Vancouver Island coal and not to southeast coal.

HON. MR. DAVIS: Specifically, of the $27 million R and D money, none — or virtually none — is allocated to examining the economics of shipping Vancouver Island coal by collier via the Panama to eastern Canada.

Vote 28 approved.

Vote 29: ministry operations, $26,909,039 — approved.

Vote 30: British Columbia Utilities Commission, $10 — approved.

Vote 31: Fort Nelson Indian band mineral revenue sharing agreement, $800,000 — approved.

Vote 32: mineral development and exploration incentives, $2,527,000 — approved.

On vote 33: government personnel services, $9,508,597.

MR. CLARK: We want to spend a bit of time on this, because it clearly deals with privatization and with the minister responsible for privatization. I want to start with some discussion about the budget in government personnel services. We've seen the budget increase from $6.8 million to $9.5 million — an over 40 percent increase. Maybe we can start by asking the minister to identify what it is that requires a 40 percent increase in budget for this ministry.

HON. MR. DAVIS: Mr. Plecas, my deputy minister who is present here, says it isn't totally privatization. There's also some systems support in that figure.

MR. CLARK: That isn't the answer. We want to know what the $3 million increase in budget is for. We want some accounting to the Legislature on what you're spending this huge increase for. This is a minister who said, about an hour or two ago, that he was understaffed; he didn't have any people; they were letting millions of dollars in natural gas revenue go because he doesn't have a staff that can keep track of the royalties paid. This is a minister who said we're going to start petroleum corporation boards and let the private sector do it because we don't have any government civil service. This is a minister who said we're going to increase the contracting-out budget dramatically to try to deal with chronic underfunding by his government. Then we get to this little branch of his ministry and we see a 40 percent increase in budget. We want to know what it is that requires a 40 percent increase in budget with this vote.

HON. MR. DAVIS: One million of that increased amount represents the estimated costs of implementing the government's several privatization initiatives. Two million dollars is for corporate leave and personnel management information systems; this is partially offset by decreases for other completed system projects. That's a total of $3 million. Privatization is $1 million, asset acquisitions are $2 million.

[9:45]

MR. CLARK: The minister said "corporate leave," and then he said "asset acquisition." Could the minister explain that $2 million for corporate leave in some detail before we get to the other million dollars?

HON. MR. DAVIS: In this case, management systems are deemed to be assets, so management systems acquisitions might be a more appropriate title for the funding of personnel management systems, etc.

MR. CLARK: I'm not quite clear what that means. Does that cover seconding of senior civil servants from other

[ Page 5451 ]

ministries? What precisely are you spending an extra $2 million on in this vote that wasn't there last year?

HON. MR. DAVIS: It's for systems software development and the acquisition of the necessary hardware.

MR. CLARK: Could the minister explain what vote or what number that increase is so that I can determine it? It's under the supplementary estimates, page 46.

HON. MR. DAVIS: Under votes 25 and 68: $1 million under 25 and $2 million under 68.

MR. CLARK: So those are under columns. The big increase, you are saying, is for data and word processing systems. Maybe the minister could explain the purpose of that. Is that another Wang contract?

Interjections.

MR. CHAIRMAN: Have patience, members; you will all get your chance.

HON. MR. DAVIS: Previously in government, we've never had even approximations of the costs of benefits, and those costs are now being established in some detail. It's simply a better system of accounting for numbers of employees, their salaries, their other wage costs, their fringe benefits and so on. The total bill is in excess of a billion dollars, and it would seem to be reasonable to spend some of that order of magnitude to have a better information system to better manage those matters.

MR. CLARK: The minister said that they are going to spend $2 million designing a better system to keep track of the number of employees. Is that essentially what it is — to keep track?

HON. MR. DAVIS: I think we've known the numbers of employees, but we certainly haven't known in any detail the costs of the various benefits and other expenditures related to the government's total payroll.

MR. CLARK: Is this a system designed to cost out all the benefits, to assist in, say, contracting out services to see what the precise costs are, to see whether the private sector can compete?

HON. MR. DAVIS: This information will give us better information on wage and related costs and, I am also advised, in order to assist in contract negotiations.

MR. CLARK: How much of the $2 million is for software? Is all of it for software, as opposed to hardware?

HON. MR. DAVIS: I am told that the majority of the $2 million is acquisition of hardware; the remaining sum is for acquisition of software support.

MR. CLARK: Why would you need more hardware than you already have in your existing system? Presumably this is simply an accounting function to cost in all the various non-cost items and put a price tag on it for the purpose of facilitating contract negotiation and, more importantly with this government, contracting out.

HON. MR. DAVIS: This accounting function has been centralized. Previously it was carried out largely manually by individual ministries and totalled up.

MR. CLARK: Since this has been centralized in your ministry, it seems interesting that the minister responsible for privatization has centralized the government personnel services and these kinds of cost functions, unless it's associated with privatization. If it was not associated with privatization, it would be with the Provincial Secretary. Is that not correct?

HON. MR. DAVIS: No, essentially it is providing better information and more up-to-date information in this area — certainly more accurate information for a variety of purposes.

MR. BLENCOE: What kind of information?

HON. MR. DAVIS: The costs of salaries, wages and fringe benefits are all broken down in detail.

MR. LOVICK: Surely that's not new.

HON. MR. DAVIS: The process certainly is new. The requirements have existed for some years.

MR. CLARK: Again, we see the priorities of the government. As I said before, we have seen that there has been significant reduction in your ministry in terms of full-time equivalents — 30 percent reduction in your civil service. We see horrible problems in your ministry that the auditor general pointed out. We see 20 people taking early retirement, most of whom aren't replaced. We see government scraping for dollars and spending $2 million on a software package to assist in negotiation and contracting out. I don't think it is a particularly useful way of spending the government's money. I assume it is probably to do with....

HON. MR. DAVIS: Each year from now on, we will have the breakdown in detail accurately of more than $1 billion in categorized salaries, wages, short-term illness costs, long-term disability costs, special leaves, holidays and so on — considerable detail as to the actual cost aspects of personnel management in the provincial government of British Columbia.

MR. CLARK: Will that information be available to the public and the members of the Legislature? Will it be tabled in the House if we ask?

HON. MR. DAVIS: I believe so; definitely, yes.

MR. CLARK: I want to deal now with the other dramatic increase in this branch, and that deals with the $1 million for privatization initiatives. Could the minister give us a breakdown of what that money is being spent on? For example, Info Line — is that covered by the $1 million?

Incidentally, it is interesting.... Maybe the minister can comment, seeing as he is the minister of privatization. I must say I was offended to see two pages on contract negotiations which has nothing to do with privatization — at least according to the government — in Info Line. Under the old Labour Code.... I haven't checked, but my feeling is that it is probably contrary to previous labour codes in terms of the employer communicating directly with their

[ Page 5452 ]

employees about aspects of negotiation. It seems to me a kind of perversion of what Info Line was supposed to be, when we are seeing it now used as propaganda for the government with their own employees. Maybe we could have a comment from the minister regarding whether the Info Line is covered by this $1 million.

HON. MR. DAVIS: Of the $1 million budget, some $775,000 has been committed to date, and I'll list the various consultants and others who have been involved in supplying information and advice as to privatization. Substantially it is consultants negotiating in respect to the privatization in half a dozen ministries, firms like Peat Marwick, Price Waterhouse, Stevenson Kellogg, Touche Ross and so on.

Also there's an item, administration services, $175,000. I assume that's contracted with a variety of companies as well. These are all moneys spent under the heading of privatization through contracts with private sector companies involved in the privatization process.

MR. LOVICK: A first question, just to clarify things. I recall vividly that the minister, in discussing the estimates, said about selling off the four divisions of B.C. Hydro that the total amount spent on advertising was some $1 million, and you made much of the fact that it was $1 million spent in that activity versus a $700 million asset. Is that the case, $1 million, just to clarify it?

HON. MR. DAVIS: No, I think the total money spent to date relative to Hydro — and I would think advertising is a very small amount or percentage — is of the order of $600,000. When all is said and done, perhaps when this fiscal year is up, the Hydro budget might be of the order of $1 million or $1.1 million. The moneys spent to date are of the order of $600,000, and the estimate through to the end of the current fiscal year — that's May 31, 1988 — is of the order of $1,353,700: Baker Lovick, $45,100; Pemberton Securities, $150,000 advisory fee; Touche Ross, $193,000, and so on.

MR. LOVICK: I recall the figure of $1 million, and I'm certainly not about to quibble about that, but my question is: wasn't that the amount of money for privatization of B.C. Hydro alone? The question then is: does that sum of money figure into the $1 million you have just enunciated for us as the cost of privatization in total?

HON. MR. DAVIS: The expenses of privatization of B.C. Hydro will, in the first instance, be paid by B.C. Hydro. The other figures I was talking about are privatization other than, in the case of B.C. Hydro, expenses of this ministry. B.C. Hydro's four divisions so far have expenditures of the order of $600,000. The ultimate number may be $1.1 million or of that order.

MR. LOVICK: So what we're saying in effect is that if we look at the total privatization, the promotion, the marketing the advertising, etc., we're already estimating it at about million. Is that the case?

HON. MR. DAVIS: The simple answer is yes, but the advertising component of all of that might be $100,000. It isn't a large percentage.

MR. LOVICK: I'll want to come back to that in a bit, Mr. Minister, and I'm sure my colleagues do too, but if I can, first I'd like to refer to that $2 million sum that you spoke of a while ago. I'm wondering if you could tell us what your ministry envisages using that data base for. We're spending $2 million mostly on hardware to acquire certain bits of information, very important stuff. What I want to know, however, is what we are going to use that for. Could you give us some illustrations or examples?

[10:00]

HON. MR. DAVIS: The annual cost of — I'll call it the government's payroll —  is of the order of over $1 billion. This $2 million sum is to provide basic information for essentially the negotiation of new wage settlements, new fringe and other benefit settlements and so on. A good part of that $2 million, I'm told, is hardware, but nevertheless the $2 million has to be judged in the context of $1 billion plus. It's a small fraction of 1 percent, in other words, for an information system which has in the past been provided on an inadequate basis.

MR. LOVICK: The basic information, if I read you correctly, is that something like, for example, sick days and the total amount of time it costs the government we can now derive from the system and can put that down at the bargaining table and say to the people opposite: "This is what it's cost us on average for the last five years; therefore we're going to reckon that into whatever we're putting on the table. Is that a possible use, or am I engaging in wild speculation?

HON. MR. DAVIS: It's certainly one of the uses. I think it's important, however, that the government know what the cost is of health care or lack of health care, etc. There are a number of other purposes to which it can be put. I know that one of the uses to which that information is put is to make available factual data during the bargaining sessions with employees.

MR. LOVICK: I'm sure you can understand our concerns. Apparently what has happened is that now the ministry, for apparently the first time, has this system that enables them to derive and come up with that kind of information, but only, coincidentally, on the eve of privatization. One obviously has to pose the question: do we only do this preparatory to selling? Surely a responsible sale, a responsible management of that operation, would be one in which we knew those things before so we could talk about the advisability of privatizing in the first place.

Doesn't that follow? Isn't that logical? Or am I being unfair and unkind in my question?

HON. MR. DAVIS: I'm told that the system isn't in place yet. They started to develop it after the last round of negotiations some 20-plus months ago. Hopefully the data in all its glory will be available in six months' or 12 months' time, but I don't think the hon. member can therefore link it directly with privatization. It may be in some degree coincidental. We will have privatized the four divisions of hydro long before this data is all available.

MR. SIHOTA: That doesn't make that much sense. What the second member for Nanaimo said makes a lot of sense. It seems to me that you would want that information before you decided to engage in privatization. It seems to me, from what the minister is saying, that the minister doesn't have in his

[ Page 5453 ]

hand the information as to the costs of some of these benefits, let alone the cost of employees. Does it not make more sense for the government to put this program in and defer its privatization initiatives for another 12 months until they have this program in place? If not, why not?

HON. MR. DAVIS: I think the hon. member is confusing personnel management for the government as a whole, an ongoing function — ongoing certainly as far as improvements are concerned — with privatization, where substantially the moneys have been spent acquiring the services of consulting firms who have looked at specific opportunities and advised for and against privatization, advised as to how the process of privatization might be improved and as to how the return from the actual privatization might be enhanced. So they are quite separate. Privatization is not inevitably linked with the cost of personnel services for the government, which is an ongoing matter.

MR. SIHOTA: Fine. The minister said a few minutes ago that he'd be quite prepared to table information that flowed from this new hardware and software system that we've got. I take it that we've paid for these consulting studies. Is the government prepared to table those studies, given the fact that we've paid for them with taxpayers dollars, so that we all know what all of these consultants have to say about the government's privatization initiatives?

HON. MR. DAVIS: I think the government would be prepared to table some of these studies where they can be neatly published. I might read out some of them. Arthur Andersen and Co. provides consulting assistance in negotiating highway maintenance contracts and contract areas.

MR. CLARK: How much was that?

HON. MR. DAVIS: That one was $60,000. Clarkson Gordon provides business consultation to privatization groups on a variety of projects — nurseries, highways maintenance, Langford sign shop, etc.; that was $68,000.

These aren't like some of the earlier studies which actually looked at, say, a division of Hydro and assessed whether or not there might be a market for that activity and so on. These tend to be more operational, ongoing advice in a number of areas. But to the extent that they can be neatly packaged up as studies with conclusions and so on, certainly I'll endeavour to have them produced.

MR. CLARK: I would like the minister to continue that list if he could. He mentioned Peat Marwick, Stevenson Kellogg, Touche Ross. Maybe he could read us a complete list of the companies, how much they were paid and the subject matter they discussed.

HON. MR. DAVIS: Deloitte Haskins Sells — provide consultation to up to ten valid employee groups relating to development of a business proposal, $50,000; Dunwoody — provide consultation to up to ten valid employee groups relating to the development of a business proposal, $3,400; Peat Marwick — provide consulting assistance in negotiating highway maintenance contract area, $60,000.

AN HON. MEMBER: Can you give us the dates?

HON. MR. DAVIS: I don't have the dates here.

Price Waterhouse — provide business consultation to privatization groups on a variety of projects, e.g. Environmental Lab, dairy lab, Queen's Printer Publications, etc., $67,500.

Interjection.

HON. MR. DAVIS: Well, that's several: Environmental Lab, dairy lab, Queen's Printer Publications, etc.

Price Waterhouse — provide up to ten training sessions to groups of employees related to operating businesses.... I think it's probably simpler for me to photostat this material and make it available to the members opposite rather than reading it out at length.

MR. CLARK: It would be appreciated if the minister would table that document.

The minister said that Deloitte Haskins advised ten valid employee groups. Could he name which ten employee groups?

HON. MR. DAVIS: Perhaps if I could take that as notice, I'll get the numbers as soon as I can.

MR. CLARK: I want to ask a similar question, and I don't mind if the minister takes it as notice. I think Dunwoody advised ten valid employee groups, and the fee for service was $33,400. I'd like to know which employee groups were advised and how much was allocated to each advice procedure.

HON. MR. DAVIS: I'll take that as notice with a commitment to return the information.

MR. CLARK: The minister has indicated that he will make those studies available. While he takes that on notice as well, could he provide that information as soon as possible?

HON. MR. DAVIS: Yes. Mr. Chairman, I might qualify the numbers I've given. They're the budget for the current year. Not all of this money has been expended as yet, but I have prepared a breakdown of the budget item by item, as requested.

MR. CLARK: So the fee for this kind of advice to business is budgeted for in the order of $775,000; that's what that breaks down to when you add it up. Of course, you haven't listed them all, but that's correct, is it?

HON. MR. DAVIS: Yes. The photostats of the papers I have before me will itemize the total of $775,000 by company and by amount. As to the budget date, termination in most instances, I see, is March 31, 1989.

MR. SIHOTA: The minister, when he was originally dealing with this $1 million budget and talked about $775,000 for consultants with respect to information and advice to the government on privatization, said that it dealt with the privatization of half a dozen ministries. Can the minister tell us which ministries were involved?

HON. MR. DAVIS: I'd have to go through this list. This is, again, prospective. It's for the current fiscal year, through to March 31, 1989. I notice the Ministry of Transportation

[ Page 5454 ]

and Highways; Environment; Energy, Mines and Petroleum Resources. They're mentioned in this. Forests and Lands. Those are the ones mentioned on these sheets. I'd be speculating if I named other ministries, but undoubtedly there are a few.

MR. LOVICK: Most of the moneys that have been expended under that $1 million total sum appear to have been given for consulting fees from outsiders, people we have retained specifically to perform various services and studies. I am wondering if whether in that privatization budget have been factored in some other costs: namely, the costs of secondments and transfers within government; namely, people who were hitherto working in another ministry but became part of the privatization task force. Has that kind of calculation accounting been done as well?

HON. MR. DAVIS: No. Secondments are not included in these numbers. I should add, however, that these different sums of money have not been paid exclusively for particular studies. In fact, the great bulk of the money — the closer I look at this, the more it becomes clear to me — is spent for the training of employees who will be involved in the new operation. It's in large part the training of individuals, but, of course, individual reports on specific aspects of privatization are also covered in these amounts.

[10:15]

MR. LOVICK: May I fairly conclude from that that we do not at this time really know what it costs for the privatization initiative? In other words, there are a number of costs that have apparently not yet been accounted for.

HON. MR. DAVIS: Those costs are not in the particular budget which I am quoting from, but they will be identified and they will be properly accounted for.

MR. LOVICK: I certainly don't mean for a moment to let my remarks be construed to be a challenge to that last argument; indeed, I am pleased to hear it. I am wondering if you can tell me how that's going to happen. How is it that we are going to account for all those things that we have not thus far, apparently, been able to account for?

HON. MR. DAVIS: I've been shown a list of the staff which have been seconded for discrete periods of time from different ministries, and I am sure we are able to cost that secondment. The number of people involved is 20. They tended to be relatively senior people in the different ministries, but they have been seconded for a period of time in order to ensure that ministry advice is available from the senior level.

MR. LOVICK: May I ask the minister whether we can also get a copy of that list as well as an approximate cost attached and assigned to each of those names? Is that possible?

HON. MR. DAVIS: I think so, but I will have to take it under advisement. Certainly we will have the costs. We'd have to develop them from the sheets we have here, but I am sure they can be made available — certainly the order of magnitude.

MR. LOVICK: I just wanted to emphasize, if I might for a moment — because our questions thus far have been rather rapid-fire and very direct — why it is we pose those questions. The primary reason is because thus far we have not, to our satisfaction, received answers telling us what the true costs of privatization are. Moreover, we are convinced, and the minister has certainly heard me say this on more than one occasion, that the economic arguments that have been adduced on the face of it don't really provide sufficient evidence to justify this kind of transformation, this kind of very large initiative.

[Mr. Weisgerber in the chair.]

Clearly, one logical conclusion as a result of that is that we on this side become concerned that the privatization initiative might really amount, among other things, to simply a rewarding of one's friends. I'm not suggesting any kind of criminality, but what I am talking about is the marvellous opportunity for small business — and big business, too, when I listen to some of those firms that have been listed here.

What we're talking about thus far seems, in fact, to be a marvellous bit of business, of activity for various blue-chip firms throughout the province which suddenly have rather fat and lucrative contracts coming their way. We wonder if that might be one of the primary justifications for the privatization initiative. Ere the minister leap to the conclusion that I am engaging in any kind of inflammatory talk, let me just remind him that it is precisely that agenda that is enunciated by the Madsen Piries of this world.

That's what you do — you get on side precisely those individuals. The minister, I am sure, knows as well as I that one of the largest costs of privatization in Great Britain was the transferring of assets.

One famous example will serve to make the point. In the transfer of British Telephone, for instance, the total amount of money paid for marketing and commissions in that transfer alone was apparently some 190 million pounds. I would venture to say that is a misuse of public funds and is not good dollars or a good investment for taxpayers.

Our questions then to you, Mr. Minister, are based on just those assumptions. We are wondering whether the real value and real beneficiaries of this exercise are not "the public," but rather a smaller subset of the public, namely the transferers, the advertisers and others of that ilk. That's why we pose the questions. That's why I can say with some certainty that we on this side are asking you to give us names and costs so we know precisely what it has indeed cost the people of the province.

I hope that will clarify a little, Mr. Minister, and certainly I hope we can indeed expect to get those specific answers.

Let me add to that that I am a little dubious, however, about receiving that information, because I have had some 12 specific written questions on the order paper about the costs of privatization that have now been sitting there for about three months. As well, some months ago this selfsame minister in charge of privatization took a question I raised about other costs of privatization on notice, and — surprise, surprise — I have not yet heard a word. I hope, then, that the answers will be forthcoming and we will in fact have our suspicions allayed.

HON. MR. DAVIS: For privatization to make any sense at all, the beneficiaries have to be the users of the services — the customers of mainland gas, those of us who use the highway services and so on. I will be making available to

[ Page 5455 ]

members opposite a list of contracts, largely for training and other advice, totalling some $2 million, or perhaps $2.5 million if we include the people who are seconded from ministries; but $2.5 million has to be judged in the context of roughly $1 billion of privatization — a thousand million. Two and a half compared to a thousand million is small. Certainly it would be a very small commission if that's all we were talking about.

Yes, I would be glad to supply these details, but I doubt very much whether this kind of itemization is going to impress anyone in terms of costs if the improvements and operations of the privatized establishment divisions are significant at all. A 5 percent, 10 percent or a 20 percent improvement means hundreds of millions of dollars. These costs are of the order of $1 million or $2 million.

MR. CLARK: We know that these costs are only a fraction of the true costs, and maybe we can get into some of that as well. But first maybe I could ask the minister if we could have a copy of that now in terms of either having it photocopied or sent over to us. It just may help speed things up. Could delay it too.

MR. SIHOTA: I'm really looking for the government House Leader on this. I know you can't table documents during committee — I think I learned that somewhere else along the line — but it would really help this side of the House in terms of our asking questions if we had the information. The minister has it. It's being done? Sorry, I thought it wasn't being done.

MR. CLARK: Unfortunately, Mr. Chairman, the minister wasn't listening to the Whip. I want to ask....

HON. MR. STRACHAN: What do you mean, the minister wasn't listening to the Whip? What really happened is that that member wasn't listening to you.

MR. CLARK: This is what happens, Mr. Chairman, at twenty after ten, I guess.

I want to ask the minister whether it is his branch or his division that publishes Info Line and whether that is in fact the case.

HON. MR. DAVIS: The answer is yes.

MR. CLARK: Could the minister indicate what the costs are for Info Line and where that is in the budget?

HON. MR. DAVIS: I think the number is $310,000.

MR. CLARK: So that $310,000....

HON. MR. DAVIS: It includes a series of publications, but the total is $310,000. Executive Link is one of them.

MR. CLARK: Could the minister indicate what publications have been paid for out of that money? I'd like to know the full listing of the publications.

HON. MR. DAVIS: The principal one is called Postings. That's the posting of all job opportunities. Info Line and Executive Link; those are three.

MR. CLARK: So that's Info Line and Executive Link. Is that the total cost of producing that in-house, or is that simply the cost of the paper and the publication? Does that include staffing as well?

HON. MR. DAVIS: This deals with materials and printing, but not with the salaries of the two seconded staff who prepare the material.

MR. CLARK: I apologize, especially given the late hour. I don't want to reiterate what the second member for Nanaimo (Mr. Lovick) said. But with respect to seconded staff that aren't included in this budget, did the minister give some undertaking to table the list of who was seconded, and what their salaries are?

HON. MR. DAVIS: Mr. Chairman, I'll endeavour to answer these specific questions the hon. member asks. If he phrases them, I'll get the answer, if not tonight, certainly in the next few days.

MR. CLARK: I'll ask the question then. Will the minister provide for me the names of the employees who are seconded to his ministry or to government personnel services for the purposes of privatization and their salaries, and where they're from?

HON. MR. DAVIS: Mr. Chairman, the answer is yes.

MR. CLARK: So out of those 20 people, there are two involved in these three publications.

HON. MR. DAVIS: Mr. Chairman, Postings is done by the GPSD regular staff; the two other people involved in the preparation of Info Line and Executive Link are part-time only on that job. They have other activities, but we'll make an allocation of their time. Those two people are not on the list of 20 that I will also be supplying.

[10:30]

MR. CLARK: Maybe the minister could explain why those two people aren't on the list of 20, and how many there are.

HON. MR. DAVIS: Correction: they are on the list.

MR. CLARK:. Okay. Are there other contract employees working now for the ministry with respect to privatization, or in this branch, who aren't of the 20 and aren't part of the regular staff and are not included in the consulting budget that we talked about earlier? Are they contract employees currently?

HON. MR. DAVIS: If there are any additional staff or any support services in addition to those already indicated, we'll provide the information.

MR. CLARK: I appreciate that, and I appreciate, I might add, the forthrightness with which the minister is responding tonight. That's the first time we've had this kind of detailed breakdown.

I want to ask some other questions about costs. As I understand it, when a group — say the nursery employees in Terrace or wherever that is — were putting through an employee bid, they were flown down to Victoria to engage in a school, essentially, regarding privatization. Maybe the

[ Page 5456 ]

minister could give me some idea of how many employees were run through those kinds of schools, and also whether that's covered by this consulting budget or other budgets.

Let me start simpler. Let's take the nursery employees. I know — and the minister can confirm this, if he will — that there were several employees from different nurseries flown in to undertake a school to help them prepare, to understand the business ways of those kinds of things. Could the minister first of all confirm that? Secondly, could he tell me what the costs are associated with that kind of program? Was the school run by those consultants, and is that part of the consulting service? Were there other costs involved in that? Was the cost of the flights down for those employees paid for by the ministry they were working for — in other words, the Ministry of Forests and Lands — or is that included under your ministry, in terms of ancillary costs associated with privatization?

HON. MR. DAVIS: The consultants who acted in an advisory capacity, prepared the lectures, the instruction, information, whatever.... Those costs are covered in the listing I've already submitted to the hon. member. The other costs are covered in part by the relevant ministries. There are some transportation and other expenditures, but we'll endeavour to get those numbers specifically as related to the particular privatizations that have taken place.

MR. CLARK: I appreciate that, although there haven't been that many privatizations as yet. I assume there are a lot of costs associated with the program which maybe were aborted or didn't take place. Could the minister give me some handle or understanding as to how many employees in the aggregate have been through this kind of school or program in Victoria?

HON. MR. DAVIS: Between 100 and 200, I'm informed.

MR. CLARK: That's called plus or minus 100 percent, but that's okay. I appreciate that quick and dirty sort of answer. I don't want to burden his staff too much, but perhaps the minister could give me a precise answer in the next few days. The minister is nodding his head, so I'll take that as confirmation.

We haven't, of course, scratched the surface here with respect to privatization. If we have 20 employees that are seconded specifically to work on privatization and they make $30,000 each, which is clearly low, we're looking at $600,000. But if it's more like $40,000 each, then we're looking at $800,000. Let's say about $800,000....

HON. MR. DAVIS: Two months, three months, half a year?

MR. CLARK: That's a good question. The minister raised a valid question. Clearly, those employees have been working on it now. We've been almost two years into the mandate. If they haven't been working on it for a year, they certainly will have been by the time this is through, especially given the difficulty the government's having with implementing this kind of project.

I suspect that the 20 employees.... Maybe the minister could undertake to deal with that. We asked for a list of the seconded employees. Perhaps he could tell me whether that's a list of employees today, or whether in fact it's a sort of rotating group of employees. I'd like to know whether there were ten employees last year and those employees have left and there are ten more, or whether there are 20 to date.

HON. MR. DAVIS: In addition to the list of 20 names and their positions in the different ministries, we'll supply an approximation of the times which they are expected to spend on privatization. Some are for a matter of weeks, some are for much longer. It varies between projects. One can't multiply their numbers up by some rough approximation of an annual salary, etc., because on the average they are in for a matter of a month or two, not for six months or a year.

MR. CLARK: I appreciate that, but perhaps down the road I could deal with it in FTEs, to use the jargon, to try and work it out, because it is interesting that we're seeing — as I say, this just scratches the surface — $310,000 in publications, $750,000 in consulting services, 100 to 200 people flown in, $500,000 with respect to seconded employees, $2 million for a new software package to assist in privatization. So we're getting up closer to $5 million or $6 million. Even though the minister says that this is a small part with respect to privatization, it's getting a little larger. I suspect that if we dealt with not just the direct costs but all the hidden costs associated with privatization, the number would be significantly higher. Perhaps when we get the details from the minister, we can do some approximations ourselves.

I just want to quickly turn back to the $2 million which was the first thing we talked about, because I understand that the minister said that this was a new software package to give us a better breakdown of costs associated with that, but I also understand that since 1982 all ministries have had to submit extremely detailed compensation stabilization reports. I'm wondering whether this is really a software package that puts that into the computer for quicker analysis or whether this is new information that wasn't in existence and isn't contained in the compensation stabilization reports.

HON. MR. DAVIS: Some of the information is common. I'm told that the CSP information was always prepared for the government as a whole. By computerization and so on, it's possible to break it down by different units, not only by ministry but by divisions, sections, agencies and so on. It makes that information available more rapidly and available for operational, management and other purposes. There will be some of the same information, but more timely and more useful.

MR. CLARK: So it allows the government to disaggregate the results on the basis of programs or departments.

The other thing I wanted to ask was along the same lines, because you also indicated that some of the $2 million was for corporate leave provisions. I understand that the government has an existing leave management system. Is this something new? Because we are dealing with an incremental cost associated with this program.

HON. MR. DAVIS: I'm told that some branches of government — for example, the liquor distribution branch — have a very sophisticated system with all the information available in great detail. Some other agencies of government have little or none. There's also an attempt being made to standardize and produce the information on a uniform basis across government ministries and agencies.

[ Page 5457 ]

MR. CLARK: Now that we've dealt with some of the detailed stuff, I would like to deal, in brief at least, with at least one policy question on privatization. As the minister responsible, this appears to be the appropriate budget item to discuss it under. I want to raise it particularly because we have the Deputy Minister of Energy, and the Minister of Energy also being the minister for privatization and the minister for contract negotiation — which is convenient, although we don't want to jeopardize anything that may be going on there — and also because we have before us Bill 45, which I hope we'll get to shortly, maybe in a hour or so. In Bill 45 the government deals explicitly with the Verrin decision and essentially overrides the Verrin decision.

We'll get to this, and I won't go through the debate we'll have in a few hours, but there's something rather offensive to me in sections 22 to 25 of that bill, which really override sections of the collective agreement, the Verrin decision, and limit the rights of the employees to stay in the public service if the service is sold. What it does is to effectively treat employees as property to be transferred with the privatized enterprise.

I know my friend from Esquimalt-Port Renfrew will want to deal with this question in some detail, but I simply want to ask one broad point: given that the minister and this ministry have chosen to deal with the Verrin decision in Bill 45 with respect to Hydro, is it the government's intention to try to do the same thing with respect to the public service and privatization?

HON. MR. DAVIS: The short answer is that the government has no plans to do that sort of thing, certainly at this time and perhaps ever.

MR. CLARK: It begs the question then: why would you put this kind of language in the legislation dealing with Hydro and then say you don't want the same kind of language to deal with the public sector? Clearly that's setting up one standard for those in B.C. Hydro's employ and one for those in the public sector. How does the minister justify or reconcile those two positions?

HON. MR. DAVIS: I don't see the need to privatize government functions which are of a continuing nature. It would only apply to some entity or group that was moved out into the private sector.

But let me continue. In the legislation, as it is incorporated in the Hydro and Power Authority Privatization Act, the pattern followed is set by the Metro Transit Operating Company Act; the British Columbia Transit Amendment Act, 1985; and the Assessment Authority of British Columbia Act, 1974. In other words, legislation which was passed by an NDP government is basically what we are following in respect to the treatment of employees of B.C. Hydro who may be privatized, say, in respect to the gas operations in the lower mainland.

[10:45]

MR. CLARK: That's not correct. The minister should know that the Assessment Authority was.... There was an act that deals with similar language, but what does the NDP government's legislation dealing with the Assessment Authority do? The legislation guaranteed that wages, seniority, pensions and all other benefits would be maintained. The legislation also specified that the Labour Code applied to those employees, and that the right of employees to retain the job in the public sector was guaranteed. This legislation specifically abridges rights proven to exist under the Labour Code under the Verrin decision.

The minister's reference to the Assessment Authority legislation is clearly quite different from the legislation contemplated here. We will get into that in a few hours when we deal with this section of the bill.

HON. MR. STRACHAN: The member has recognized that we are dealing on estimates right now. If we're going to discuss bills, we will discuss them when the bill comes up. Is that correct?

MR. SIHOTA: I trust the government House Leader will agree that there is an overlap in terms of the bill that's before us and what is being debated here in terms of the government's privatization initiatives. I think that is fairly put. I'm not using that as a springboard to get into Bill 45. I will try to avoid it, but we are dealing with the same issue. The Hydro example is before us, and it may not be a bad example to refer to from time to time.

I do want to find out from the minister.... The minister says it is not their intention. What is the government's intention then with respect to the Verrin decision? Is it simply to wait for the court of appeal to make its determination and to take it from there, or does the government have other plans?

HON. MR. DAVIS: I'm not a lawyer. I'm not trained in the law, so I'm not going to venture into speculating as to the legal aspects of this matter. Certainly we are all awaiting the outcome of the appeal of the Verrin decision, and I think we'll all wait until it is handed down.

MR. SIHOTA: I don't want to get into the pros and cons of the legality of the decision and whether it's a right or a wrong decision. The minister knows that I've already spoken for half an hour on that aspect of the decision. However, there is a principle here. There is a matter before the courts. The courts have not made a determination with respect to the issue that's before them. We have the government, by way of legislation, circumventing any interference by the courts with respect to that. We're wondering whether or not the government intends to utilize a similar mechanism in the future to deal with the Verrin report. Am I to take it that the minister is saying that they will abide by the Verrin decision and not introduce legislation to deal with the Verrin matter?

HON. MR. DAVIS: That's future government policy. We'll certainly abide by the law but again, I think we're in an area where I couldn't responsibly answer the hon. member, especially if I was endeavouring to outline what may happen in the future.

MR. SIHOTA: I'm going to ask the minister again in the sense that he's the minister in charge of privatization. The privatization initiative, as I understand it from what the Premier has explained, had basically — I said this earlier on, and I'll say it very quickly again tonight — two pillars to it. One was that the sale of these assets would bring in cash to the government coffers, and the government would do with it what it chose. Whether it would go into the privatization initiative fund, the budget stabilization fund or whatever, the government would secure the cash. The other pillar was that

[ Page 5458 ]

it would reduce the size of the public sector. The Verrin decision takes away that pillar by saying that you have to provide these people with a choice, hence they have the opportunity to remain in the public sector. It seems to me then that one of the basic foundation blocks of the government's privatization initiatives has collapsed.

Let me just pause there and ask the minister if he agrees with that analysis, before I go further.

HON. MR. DAVIS: I don't agree with the two-pillar analogy the hon. member draws. One, as I recall, was to make money, and the other was to reduce the size of the public service. I don't think either of those are substantial objectives. I think the main objective of privatization is to provide the same or better services at less cost to the taxpayers of the province.

MR. SIHOTA: It seems to me that the government tends to achieve that by reducing the size of the public service. In terms of saving money and quality of service, we look forward to the reports that we will have tabled here later on and see what they say about that aspect of it.

There are implications that flow from the Verrin decision. To take the Highways example, Highways workers were given the choice to remain with the government and chose to do so, and Highways work is privatized. There is a cost factor. I wonder if the minister can indicate to us....

HON. MR. STRACHAN: On a point of order, I really hate to interrupt the member for Esquimalt-Port Renfrew, who's really on a good line of questioning, but there are two problems with his line of questioning. Number one: we're dealing with sub judice, because we have a case before the Court of Appeal. Is that correct?

MR. SIHOTA: True.

HON. MR. STRACHAN: Okay, we're dealing with sub judice. Secondly, we're dealing with seeking legal opinion, which you can't do. Even if the minister were a lawyer, he can't give you a legal opinion. That's not allowed in the rules of debate in estimates. We'll give you a citation if you wish. You have two flaws in your argument: sub judice, and you're asking a member of this House for a legal opinion. You can't do either. Could you get back to the vote?

MR. SIHOTA: I'll deal with the matter, but let me tell the government House Leader this: the government House Leader is telling me that the matter is before the courts, and as a consequence one can't raise it. It's his government that has brought forward legislation — albeit we're not on it right now — when all these matters are before the courts. Don't tell me about affronts of the court, when the government brings forward this type of legislation.

The second point....

HON. MR. STRACHAN: On a point of order. If I'm not mistaken, we're discussing a vote. That's what I see on your table, Mr. Chairman, so why would the member be concerned about legislation? We're in the minister's estimates.

MR. SIHOTA: Thank you. Now that the minister is....

MR. CHAIRMAN: Hon. member, the question is vote 33, be it resolved that a sum not exceeding $9,508,597 be granted to Her Majesty to defray the expenses of the Ministry of Energy, Mines and Petroleum Resources, government personnel services. That is what we are discussing, hon. member. Please continue.

MR. SIHOTA: Look, Mr. Chairman, we're dealing with how the government deals with this budget on privatization. It's a $3 million budget, and we're entitled to ask some questions as a consequence of the web that government has tangled for itself by getting into this crazy initiative in the first place. If it hadn't got into this crazy initiative, it wouldn't have this court case to deal with.

I'm going to ask the minister the question I was about to ask him before the other member tried to come to his support, rather weakly at that. The question to the minister is this: has the government considered what the cost implications are of the Verrin decision? In other words, the law before you stands, and it says that Verrin is the case of the time. What are the cost implications to government of that? Have you calculated out what the cost implications of that decision are?

HON. MR. DAVIS: The hon. member is asking me for an estimate of the cost implications of the Verrin decision? I just don't have any estimates along those lines.

MR. SIHOTA: We'll try this again; perhaps I didn't phrase the question as well as I would at 11 o'clock in the morning.

Interjections.

MR. SIHOTA: If members want to have a little fun, they can go ahead.

The point is that the government clearly knows that there are cost implications flowing from that decision. I don't care what it cost the government to take the matter to court, but there are some implications that flow to government in terms of a predicted number of people that will now opt to stay within the public sector. Obviously that cost implication from the Verrin decision has to....

Interjection.

MR. SIHOTA: Maybe I will lecture the government House Leader for a moment on the matter of the law. The law right now is the Verrin decision. If you don't like it, you take it to the Court of Appeal. There is no Court of Appeal decision, so you stick and you ask questions to the law. Now I'm asking questions as it relates to law, which the minister says that they will abide by. There are some consequences that flow from that, Mr. Chairman. I want to know what the government has done with respect to those projected costs, now that I explained what those costs are all about.

HON. MR. DAVIS: The Verrin decision is under appeal. Until the full legal process of appeals is complete, I don't think there's any point in attempting to cost what the final result is.

MR. LOVICK: As a layperson not trained in the law, perhaps I can put this question in another way. Our contention is that considerable money is now being spent proceeding with the privatization initiative as if the Verrin decision never happened. The question is whether this government is being

[ Page 5459 ]

responsible about spending that considerable amount of money, proceeding apace, despite the fact that what it does may be ruled invalid if the Verrin decision is upheld. That, I think, is the kind of question that certainly I would pose.

HON. MR. DAVIS: One court found one way, and another court has found another way. The same matter is now under appeal. I think we're simply wasting time. Until we have a final resolution of this matter in the courts, I doubt very much whether there is any point in attempting to estimate cost.

MR. LOVICK: The minister's answer surprises us all because we are aware of only one decision that has come down, and if the minister knows others or has friends in the Supreme Court, perhaps he would divulge those to us now.

Interjections.

MR. LOVICK: What's the other case?

MR. CLARK: Does the minister want to clarify that remark? He's really only dealing with one case, presumably.

HON. MR. DAVIS: I'm seeking a legal opinion.

MR. CLARK: He's seeking a legal opinion from his deputy minister, which might take him a while.

[11:00]

[Mr. Rabbitt in the chair]

Interjections.

MR. CLARK: I don't propose to belabour this point too much longer.

MR. MOWAT: But you will.

MR. CLARK: We will if we keep getting heckled. The cabinet shuffle is in a couple of days, and if you heckle more you might get in if there's a vacancy.

MR. CHAIRMAN: Could we direct the question to the minister, please.

MR. CLARK: To the second member for Vancouver Little Mountain (Mr. Mowat), there can't be two cabinet ministers from the same constituency, but he'll have his opportunity in a few days.

The reason I won't belabour the point is because the minister has confirmed now in the House that even though he seeks to override the Verrin decision in Bill 45 for the Hydro employees, he has given us a commitment here that he has no intention of seeking such an override with respect to other privatized areas, particularly Highways and some of the other major initiatives undertaken.

Given that the minister has given that confirmation, I won't belabour the point now. I will ask some specific questions along the line my two colleagues have proposed. It may be in fact as the minister claims, that there are no studies being undertaken with respect to the costs of the implications of the Verrin decision. I really do find that rather difficult to believe, notwithstanding that the government does things without doing very much analysis — and I certainly don't hesitate to say that. Perhaps the minister could deal with whether or not even in a specific sector — let's take Highways — the government has done any analysis or studies, maybe with this big consulting budget he has, to look at the potential cost implications of the Verrin decision with respect to that major privatization initiative.

HON. MR. DAVIS: I don't believe any such studies have been undertaken.

MR. GABELMANN: I wonder if the minister could confirm that no major privatization arrangements have been completed or signed since the Verrin decision.

HON. MR. DAVIS: Mr. Chairman, there have been a number of relatively small privatizations to date, none of which I would class as major. We are on the eve, however, with Lower Mainland Gas, of carrying out a privatization which is major in character.

MR. GABELMANN: Lower Mainland Gas privatization is being accomplished through Bill 45. My question relates to privatization initiatives that may be underway and may be ready to be proceeded with. Will they be proceeded with in advance of a Superior Court decision?

HON. MR. DAVIS: Mr. Chairman, I understand it's business as usual. If they're ready, they'll proceed.

MR. SIHOTA: If I heard that correctly and it's business as usual and the government intends to proceed.... Did I hear that correctly in terms of its privatization program, notwithstanding Verrin? You can just nod, and I'll put it on the record. If that's correct, I just wonder what kind of respect that is for the process of the law. Here we have a decision that, it seems to me, says to the government that it had better slow down and move cautiously on its privatization initiative, pending the appeal, of course; yet this government chooses to say that it's business as usual. In the same breath the minister says the government has no further intention of introducing any legislation to deal with the Verrin decision, no matter what the outcome. I wonder if he could then clarify — because those are confusing signals — exactly why the government is proceeding in effective contempt of the process.

HON. MR. DAVIS: Mr. Chairman, my understanding is that the law does not say that the employee has to stay in the job or on the job, and so far we haven't had any employees who've wanted to stay. They've left or gone over to the privatized operation of their own volition, with no protest whatsoever.

MR. LOVICK: Isn't that the case, however, only because the operations that have been privatized have been very discrete ones, and those employees who wanted work elsewhere could readily still obtain it within government because government, the employer, was where those places were located; whereas, if we're talking about a larger scale such as highways maintenance, we could be facing a tremendous crisis for government because there is no employer handy, thank you very much, and therefore you won't be able to accommodate those employees? Is that not the case?

HON. MR. DAVIS: Mr. Chairman, we haven't encountered those circumstances yet, and we don't really expect to.

[ Page 5460 ]

MR. LOVICK: Well, as my colleague from Vancouver East said earlier — and I'll echo it — I don't want to belabour the point, but.... The obvious question is: what are you going to do if that arises? What are you going to do if the employees in the Prince George and Terrace districts say, "Sorry, we don't want to play this game," and there is no longer a Highways operation for them to be employed in? What do you do then, and at what cost?

HON. MR. DAVIS: It's a hypothetical question, of course, and there'd be hypothetical costs attached to it. I don't think I should endeavour to answer on either ground.

MR. SIHOTA: The point is this: it has an effect on your cost. You may come to the conclusion that it might be cheaper to privatize. However, if a number of employees decide to stay within the public sector, it may not be cheaper. Therefore it seems to me that you ought now to have in your possession, given what the law is today, some contingency plan — if I can put it that way — to deal with that. How do you deal with that aspect of it as a government when you're dealing with your privatization initiative?

HON. MR. DAVIS: Mr. Chairman, we'll develop the contingency plan if the need arises. As of now I'm not in a position to articulate any such plan.

MR. SIHOTA: Will the minister give us his assurance that he will advise the House of whatever plan he comes up with, so that we know what the plan is once it's in place?

HON. MR. DAVIS: By all means, Mr. Chairman.

Vote 33 approved on division.

The House resumed; Mr. Pelton in the chair.

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

HON. MR. STRACHAN: Mr. Speaker, before calling the next piece of business, there was a question raised earlier this evening about practice recommendation 1, and the Chairman reporting a report on division. Upon perusing the rules, it appears clear to the government that "in any voice vote a member may ask the Chair to announce to the, House or Committee that the motion in question was 'carried (or defeated) on division."' Therefore, sir, I would submit that that term would apply in a report to the Speaker.

Do you have a different opinion?

MR. CHAIRMAN: Yes, the Chair does have a different opinion.

HON. MR. STRACHAN: Fine. I'll hold mine in abeyance until we can arrive at the correct decision.

MR. GABELMANN: Mr. Chairman, on that point of order, one of the points the opposition House Leader made when he raised this as a point of order earlier today was that the way in which the "on division" is reported results in there being no record in Hansard of the fact that a division took place. It is in Votes and Proceedings, surrounded by commas, but no reference is made in Hansard in any way to the fact that the House divided. If the House divides on a called division, the names of the members are recorded as to how they voted. The point of order related to the fact that there is no record in the formal recordings of this or any debate that a division actually did take place.

HON. MR. STRACHAN: I think, Mr. Speaker, that in this preponderance of brilliance I'll back up and punt, and we'll probably have a look at this again tomorrow.

I call committee on Bill 45.

HYDRO AND POWER AUTHORITY
PRIVATIZATION ACT

The House in committee on Bill 45; Mr. Rabbitt in the chair.

Section 1 approved.

HON. MR. DAVIS: Mr. Chairman, I move the amendment standing under my name on the order paper [see appendix], which says, "Electrical division not for sale," and elaborates: "Nothing in this act authorizes the sale of the authority's electrical division."

On section 1.1.

MR. CLARK: I guess my remarks on second reading spawned this amendment to some extent, and I won't reiterate to great lengths my remarks in second reading. But I will say that as the minister knows, my concern as we go through the bill — at least the first part of it — is that it is a generic bill, and the generic sections deal with the spinning off of any assets of B.C. Hydro into a private company. It was my assertion that that meant that segments of the electrical division or indeed the entire division could be sold. This amendment says: "Nothing in this act authorizes the sale of the authority's electrical division." In a moment, I will be moving an amendment to that amendment, which I believe will be in order. Perhaps I'll move that now, and then speak on it.

I move the following amendment to the amendment to section 1.1: that the words "nor any part thereof" be added. The amended section would then read: "Electrical division not for sale. Nothing in this act authorizes the sale of the Authority's electrical division nor any part thereof."

[11:15]

MR. CHAIRMAN: The amendment is acceptable to the Chair.

On the subamendment.

MR. CLARK: I'd like to discuss briefly my amendment, if that's in order, and I believe it is. The minister, I hope, is conferring on this. It clearly is a very simple amendment which attempts to deal with — again to clarify — the government's intention with respect to privatization. I very strongly hope that the government chooses to accept this very minor amendment, and it should be minor if the government's intentions are as they attest.

As I suggested in my remarks both in second reading and after the introduction of the government's amendment, or after the tabling of the government's amendment, it seems to

[ Page 5461 ]

me that there is a loophole with respect to the selling off of components of the electrical division. The minister has repeatedly indicated that dams and such aren't for sale, and I appreciate his understanding, but once again I just want to ensure the act says what the minister says it says.

I'm not trying to be cute or anything about this. It seems to me simply that there is a loophole in the way the original amendment is worded, because it could be construed as all encompassing, that the sale of the Authority's electrical division would in fact be the whole division, and that it would still allow for the sale of components of the electrical division. The government has indicated that's not their intention; therefore I want simply to clarify that point here with this minor amendment. I hope, and quite frankly rather expect, that the government will accept this amendment in good faith given the minister's repeatedly stated intention that no section of the electrical division is for sale.

I want to continue talking, not to belabour the point but to enable the minister and his advisers to confer on this what I perceive to be, as I say, minor amendment. It is a minor amendment only if one accepts the notion that the government is not intending to sell any part of B.C. Hydro. That's certainly been the minister's contention.

I would go on to say that when we were having some discussion regarding a Thorne Ernst and Whinney report on privatization of B.C. Hydro, which suggested in fact that the Kootenay canal project, the fifth or sixth largest generating facility of B.C. Hydro, could be sold for something in the order of $1 billion — I know that was the suggestion from the privatization group, the suggestion from the consultants — the minister indicated that he's not going to accept that suggestion from Thorne Ernst and Whinney, although he accepts virtually all of the other ones.

It is my contention that the original legislation as proposed would have enabled the government to sell off the electrical division piece by piece, and that the amendment as it stands on the order paper under the minister's name would still allow the sell-off of at least a component of the electrical division. What we could have the minister saying is: "Well, we're not selling the electrical division, but only one dam or only one part thereof."

What I simply wanted to do by this amendment.... I should make it clear that I don't propose to move this amendment simply to buy into the other aspects of the bill, because I don't support the privatization of any of the components of B.C. Hydro. I certainly have yet to be persuaded that they make sense. Nevertheless, I really brought this amendment forward, these four words, to sharpen the focus of the government, to really strengthen the bill so as to do what the government has indicated it will do, which is not to sell any part of the electrical division of B.C. Hydro; and in particular not to sell any dams or generating facilities even though the government's privatization study, the Thorne Ernst and Whinney study, did indicate that a part of that division could be sold profitably to West Kootenay Power and Light, the suggested buyer.

I'll defer to the second member for Nanaimo (Mr. Lovick), who can talk a little more on this discussion while the minister and his colleagues discuss this matter. I want to reiterate just briefly that this is an amendment which could be called in other areas a friendly amendment. If in fact the government has no intention of selling the electrical division, as they purport and have said, it simply clarifies the intent of the bill, in keeping with the minister's comments.

HON. MR. DAVIS: I agree with the spirit of the amendment to my amendment. The government wants to make it clear that neither this legislation nor indeed any other legislation in this session or any foreseeable legislation of this government will involve the privatization of the electrical operations of the B.C. Hydro and Power Authority. I think I could accept the amendment or any part thereof. The hon. member realizes that the electrical division is not elsewhere defined in this act, so I'm not quite sure what I'm agreeing to; but if "or any part thereof" makes him feel better or causes the opposition to accept the rest of the bill with equanimity, I will agree to the amendment.

Subamendment approved.

Section 1.1 as amended approved.

On section 2.

MR. CLARK: Having got that passed, I don't want the minister to think that we'll sail through the rest of the bill, because I still have a number of concerns. I want to begin my remarks on section 2 by thanking the minister for accepting an amendment from the opposition. As we know, it's highly unusual, especially in British Columbia. It means that 94 percent of the assets of B.C. Hydro are, I think, protected to some extent. We might get into a debate as to the R and D division and a few other things, and how they're divided, but....

I want to deal with the mechanics of Bill 45, because it is clearly a rather complex piece of legislation. The minister said it was like unscrambling an omelette, and I must say that I have some sympathy for that description of what it would be like to sell B.C. Hydro. One might argue that all of this effort, all of this work, all of these convoluted clauses, all of the kind of discussions going on and all of the money really make one question whether or not the effort is worthwhile. But I'll leave the politics of that to the government.

Section 2, which deals with intermediary companies, clearly says that any assets other than the electrical division can be spun off into an intermediary company. I want to ask a broad question as to why the government would choose what is essentially a convoluted way to privatize as opposed to spelling out the assets in the business opportunities plan, which the minister has already pointed out spells out the assets of the four divisions for sale. Why would we need essentially generic legislation spinning out into an intermediary company any assets described by the minister — although that's limited — rather than simply designating the four divisions that are for sale, listing the assets and putting them up for sale. I don't quite understand, and maybe the minister.... I know this broaches some of the other sections of the bill, but I don't quite understand why they chose this method.

In closing, I might say also that it's my understanding that this kind of privatization bill does not exist anywhere else that there's been privatization. This is a novel and unique approach to privatizing B. C. Hydro, and therefore maybe the minister could explain to me why we need this kind of approach.

HON. MR. DAVIS: We may or may not take advantage of the opportunity to create an intermediary company. There may be a direct sale or there may be an intermediary company

[ Page 5462 ]

established which has the structure of a private company — all of the administrative capacity, the financial abilities and so on of a private company, without being privately owned. My understanding is that in a number of cases in the United Kingdom a private liability company was created. Hence the term that one often sees in the business page now: "So-and-so PLC." It was an intermediary company created by the British government which had all of the properties in place, all of the capabilities, all of the structure of a private company — except that it had one shareholder, the government, as opposed to another private shareholder. What was then offered for sale was something which in all respects except ownership was a private company.

The gas division, for example, does not have in its structure a financial officer, a legal officer or a number of the capabilities which B.C. Hydro in total has. Those offices have to be created, or would be created in an intermediary company, properties allocated properly from big Hydro to the small gas division and so on. So there was an identifiable company with books being kept on a private sector basis — a much more identifiable, more readily understood entity for the private sector to make bids on. That's the reason for an intermediary company. But as I say, a sale may occur directly without creating an intermediary company en route.

MR. CLARK: I don't want to sound paranoid, but let me tell you, and you can correct me if this is wrong. It seems to me that one other reason for an intermediary company — and I understand the logic of the minister — might be to deal with the debt problem, and there may be tax implications for the private company depending on the debt that's transferred or not transferred to the intermediary company. For example, the government could decide to spin off the assets into an intermediary company and retain the debt at B.C. Hydro — use the proceeds from the sale of the intermediary company to pay down the debt or do anything else.

Of course, this highlights one of the problems I have with this bill: that it tries to cover every possible permutation of privatization but doesn't provide any answers as to what in fact is happening. It provides every possible scenario both for the sale and then for the disposition of the proceeds. I don't think that's good legislation. I don't think it helps elucidate to the public or certainly to the opposition where the government is going. Anyway, leave it at that.

[11:30]

It seems to me that the debt associated with the companies that are spun off into the intermediary company may have tax implications and maybe tax benefits to a person purchasing the private company. Is that unfair?

HON. MR. DAVIS: I think it's fair to say that throughout this bill, the drafting allowed for as many possibilities as possible. The scenario that the hon. member traces out is one possibility. The debt opposite B.C. Hydro gas, for instance, or Hydro Rail and so on, is dealt with elsewhere or later in the legislation. But it's conceivable that an intermediary company could be sold off in stages — for instance, the debt retired by one issue and on and on. It is the government's intention, though, to retire the debt opposite each of these entities, distinctly.

In the United Kingdom, various approaches were used. One of the more successful approaches, as I recall it — successful politically — was created for the private intermediary company, private in structure at least, and then a share issue was made to employees, say, at a preferred price or a price deemed to be below market. Then another share was issued to British citizens at something less than market, it was advertised at less than market, and when all was said and done, the shares appreciated. It was a successful operation from the point of view....

MR. CLARK: Like BCRIC.

HON. MR. DAVIS: No, no. It was unique but successful in the sense that not only did a large number of Britishers become shareholders, but the shares appreciated in their hands as a result of the sequence of financing. I believe our shortlisted companies will buy the company outright, and the province will retire the debt opposite those divisions directly from the proceeds of the sale. That is my expectation.

However, the member is quite right: this bill was drafted to cover all possibilities, and certainly it has been drafted and is before the House before negotiations are far advanced with the short list. In the case of the mainland gas, there are five companies, each of which, we hope, will continue to improve its offer. Their offers are different one from another, and we want to take advantage of the best deal all around.

MR. CLARK: I've asked this question about 15 times in the House, and it's the first time the minister has said to me that it's the government's intention to retire the debt associated with those divisions. Therefore he's saying, I assume, that the proceeds will not go into the privatization benefits fund, but a large portion of the proceeds will in fact go to make B.C. Hydro whole. Or to use another option which I read in the bill — we'll get to this clause later on — they could take all the proceeds and put them in the privatization benefits fund, but the government, through some other mechanism, either general revenue or otherwise, will have to pay to B.C. Hydro the equivalent money to cover the debt reduction. Is the minister making a new announcement here today?

HON. MR. DAVIS: I'm not making any new announcement. I'm saying, however, that to the extent that there is debt opposite any one of these four divisions, that debt, which is a liability on the books of B.C. Hydro, will be retired. The proceeds of the sale, hopefully, are in excess of the amount of the debt, and therefore there will be a net amount. Hydro's board of directors is arguing that that as well should go to Hydro. There may be other opinions, but the only amount that is up for debate is the net amount over and above the outstanding debt opposite the relevant division.

MR. CLARK: I could get into some debate on this, but that's in a different section. The minister started off by saying that one of the most successful privatizations in a political sense was essentially spinning off an intermediary company, as this clause suggests, and then floating shares. I certainly would argue that in fact it's an undervaluation of the public's assets and therefore is essentially a subsidy to the shareholders. One could argue that the shareholders are widely distributed, and that's more of an advantage. Nevertheless, we're the shareholders and owners of the resource now, and we deserve full value for our assets. I would hope the government would not embark upon a similar privatization initiative as the minister has described.

It is rather odd that the minister would start off in this section talking about the British privatization as a success but

[ Page 5463 ]

then go on to say that it's not the government's intention to actually do that. It's the government's intention, really, at this point to try to deal with the short list of bidders and not to proceed upon the approach that Mrs. Thatcher took in the British experience. Am I misreading what the minister said? Or is it fair enough to say that?

HON. MR. DAVIS: Mr. Chairman, I tried to make clear my understanding that the government will make a point of having Hydro retire all debt opposite each of these divisions when the sale of that division occurs. As to the method of privatization — sale of shares and so on — I think the hon. member will see that all these alternatives are possible. I'm not going to stand here and say that the government has decided not to follow what might loosely be described as the British precedent. That's still a possibility. I'm not saying it will be followed, but the legislation allows for that possibility. I was merely trying to describe the intermediary company and how it could be used in the privatization process.

MR. CLARK: Will the debt go to the intermediary company with it for the purposes of privatization? Or will the debt stay with the Hydro division, the assets spun off and the proceeds from the assets go to Hydro?

HON. MR. DAVIS: The discussion so far with the corporations that have indicated an interest have proceeded along the lines that they raise their own debt.

In other words, let's say the book value of B.C. Hydro Gas is $420 million; let's say that the purchase price, nominally, is $700 million; the $700 million will have to be financed partly by debt and partly by sale of equity. The company buying that gas division raises the whole $700 million; part of the sale of debt is paper, and partly through the sale of shares. Hydro receives all the proceeds and is in a position, obviously, to retire the debt opposite the division in question. The destination of the remainder — the difference between $420 million and $700 million — will be a matter of policy. The government will have to decide whether to leave it in Hydro — and eventually if Hydro pays dividends, it comes out — or to take it directly into government.

MR. CLARK: What you're saying is that there'll be new debt associated with the new company, but the old debt stays at Hydro, which is paid off by the proceeds from the sale. I appreciate that that option is only one option available.

HON. MR. DAVIS: I think, Mr. Chairman, there's an important point here. Hydro's debt has been guaranteed by the province, and I don't think this government would consider transferring government-guaranteed debt to a private corporation.

MR. CLARK: I appreciate that answer, although I thought in an earlier discussion on this topic the minister did indicate that was one possibility. I appreciate the clarification that that's not likely and is not the government's policy.

There is, of course, and I don't want to.... Well, the series EJ bonds; maybe we could deal with that just very briefly. It seems to me on reading section 6 of the EJ bonds in conjunction with this section, it is now the case that when the government gives its unconditional guarantee.... Well, let me put it this way: does the intermediary company approach — in other words, leaving the debt with the Hydro division — deal with getting around that potential restricted covenant and the potential time-bomb, so to speak, pointed out by the Thorne Ernst and Whinney report, among others?

HON. MR. DAVIS: The privatization committee responsible for B.C. Hydro doesn't see the EJ series as an impediment to the privatization of any of these four divisions.

MR. CLARK: Will the minister confirm that he has different legal opinions, one saying in fact that it does impact and one saying that it doesn't?

HON. MR. DAVIS: I gather, without exception, that the legal opinion which we have received — and they're from a number of sources — says that we can privatize up to $1.5 billion worth of B.C. Hydro facilities — and I'm not suggesting impacting on the electrical division — without complications in respect to any particular bond issue in the past.

MR. CLARK: That's comforting. I assume the lawyers have resolved this question which has been going on for some time and come up with a number. Now, of course, I suppose it depends on who's paying the lawyers to some extent, but perhaps there might be another opinion from some of the bond holders. I don't propose to defend the institutional bond holders against the privatization initiatives, so I won't. But I wondered whether the intermediary companies, seeing that we are on section 2, was a method to get around that. I gather what the minister is saving is: no, that's not the case. In fact, if the number is larger than.... The minister may have looked at EJ bonds. I tried to; it's very complex. It appeared to me to be a number significantly less than that, but it was very complicated and I certainly defer to the legal opinions of the minister.

I think we'll leave 2.

Section 2 approved.

On section 3.

MR. CLARK: I would just ask the minister to clarify this. I assume this is obviously companion to section 2, which authorized cabinet to make transfers to the intermediary company, including assets and obligations. The minister has stated that it's not the intention of government to transfer government-guaranteed obligations, although once again this does specifically say that that's certainly possible.

Perhaps we won't belabour this. Maybe the minister could just give me a brief rundown.

HON. MR. DAVIS: Mr. Chairman, this is, as the hon. member says, a companion, a corollary, to section 2. It allows cabinet to transfer Hydro assets and liabilities to the private sector or to an intermediary, if the sale of the gas division is not directly to the private sector, and it specifically avoids bond default.

MR. CLARK: Why would it specifically avoid bond default, given what we've just discussed?

[11:45]

HON. MR. DAVIS: I'm advised that section 3 really is only there to give comfort to certain bond holders of an issue

[ Page 5464 ]

released in the early 1920s. It's a bit of history which had to be reasonably — should be — covered off with somewhat different words than section 2.

MR. CLARK: It seems to me that's what I said in the previous clause, and the minister said that wasn't the case. It seems to me that it's there to deal with any potential problems associated with some bonds. The government is saying on the one hand that there is no problem with defaulting, but on the other hand it has put in a clause that specifically deals with that.

If there is a transfer of debt to the intermediary company, the government would still be obligated or liable for that debt. In other words, the government guarantee still prevails to the private company if that were done. Is that correct?

HON. MR. DAVIS: In the unlikely event that some part or all of the bonded indebtedness was transferred as is to the private company, certainly the government guarantees would go with them. There would be no welching on the original terms of the bond or bond guarantees, but as I said previously, I doubt very much whether that will be the course of events.

MR. LOVICK: I have a question under section 3, Mr. Minister. I must say at the outset that I'm out of my normal environment when it comes to this bill, and perhaps what I want to ask about may come under section 7 under right-of way. It concerns specifically section 3(l)(a) about obligations and liabilities and the transfer thereof.

My understanding is that part of the Hydro gas line currently goes directly under the main street of the municipality of Coquitlam, and that there is some history and record of concern that's been expressed, namely about a potential safety hazard there, and whether in fact that pipeline is getting to be a number of years of age, and whether its safety can be guaranteed for a very long time. Just what is the impact of the transfer as spelled out in sections 2 and 3 of liability and obligation, in the event that there are problems with that particular stretch of line? Am I on the right section, Mr. Minister, and can you answer that for me?

HON. MR. DAVIS: All safety statutes and obligations move to the intermediary company and to the ultimate private owner of the equity, and all liabilities to which B.C. Hydro is currently exposed are transferred with those safety obligations. Any responsibility, in other words, with regard to that line due to its age or poor construction is inherited by the purchaser.

MR. LOVICK: I then might make reference to the Pipeline Act, pipeline regulations, B.C. reg 451/59, section 8, pipeline and highway crossings, where it stipulates very clearly that: "Where specified by the public authority concerned, the carrier pipe under any highway shall be encased in a steel casing, pipe or conduit of sufficient strength to withstand all stresses and strains resulting from its location." It's straightforward. If it were the case — and this has been alleged; with what validity I do not know — that the existing line in the municipality of Coquitlam were not properly encased, who then would assume the liability for, under this regulation, having to take it up, repair it and bring it up to standard?

HON. MR. DAVIS: The utility, Mr. Chairman. Today, B.C. Hydro and Power Authority; this time next year, the purchaser — the corporation responsible for the operations of that utility. I might add that enforcement is one of the duties of the B.C. Utilities Commission overseeing the operations of a utility of that nature.

MR. LOVICK: Is it not the case, however, that the B.C. Utilities Commission's role has been effectively taken over by the Lieutenant-Governor-in-Council? Is that not the case as spelled out otherwise in the act?

HON. MR. DAVIS: First, the Utilities Commission exerts all its powers during the three-year interval with the exception of rates. The Gas Utility Act and Gas Safety Act will be fully enforced by the Utilities Commission and otherwise. I might add that B.C. Hydro in law is not subject to that legislation but has behaved as if it was. It has followed and enforced standards higher than those generally outlined in the legislation. That legislation is fully effective in respect to a private corporation in the utility business.

MR. LOVICK: I apologize, Mr. Minister, if I'm on the wrong part, but I note that the pipeline regulation I quoted some few minutes ago was consolidated effective October 31, 1987, which is rather late, it strikes me. I understand from some conversations with people that there have been two or three different chunks of legislation governing the standard to which pipelines must be built. There is, as a result, some possibility for different standards of pipe, depending on what time they were put into the ground.

For pre-1968 there was one set of regulations, from '68, apparently, to 1987 there was another set, and in post-'87 we have this new standard. If that's the case, it would seem to me the question about safety suddenly takes on some extra significance, and I'm wondering if I'm correct in that assumption and if that has been taken into account and is under consideration in this rather significant transfer to a private company.

HON. MR. DAVIS: Perhaps I am repeating myself, but Hydro has observed the national and provincial standards with respect to pipelines and, indeed, has exceeded those standards in nearly all or all instances. The quality of the installations which will be bought by the private utility is good. I agree that over time standards are modified and tightened up and where old installations no longer meet the standards, replacement has to take place. That would certainly apply in full force to any private utility operating those facilities.

Sections 3 to 5 inclusive approved.

On section 6.

MR. CLARK: This is obviously a comfort clause, but I just wonder why. It seems to me there were comfort clauses in each of the sections we dealt with, so why would we have a broad one in this separate section of the bill when we just dealt with that question in the previous sections?

HON. MR. DAVIS: My only comment is that it's an abundance of caution. We want to ensure that all bond holders are fully protected. Hopefully this clause is unnecessary, but it's there to cover any and all possibilities.

Section 6 approved.

[ Page 5465 ]

On section 7.

MR. CLARK: Perhaps I could have the minister deal with this, because he has given some undertaking that the government would not be transferring rights-of-way, certainly with respect to rail. This clause of the bill clearly allows, at least in my reading of it, the rights-of-way currently held by Hydro to be transferred to the intermediary company and the new buyer. Is that an incorrect reading of this section?

HON. MR. DAVIS: My understanding is that the rights of-way stay in Hydro's name. In instances where a gas line eventually privatized is in the same right-of-way, the gas company will pay a lease rental or some other charge, but the right-of-way stays with — I will call it — residual big Hydro, and only in a few instances where the right-of-way is exclusively used for gas transmission would there be any transfer of rights-of-way as such.

MR. CLARK: Maybe the minister could explain where that is in the bill, or where it is in this section, because that's not how I read this section.

HON. MR. DAVIS: I think essentially it's the intention of the government that these rights-of-way continue to be shared as they are presently, but the land, if I can put it in a simplistic fashion, will rest with residual Hydro. An accommodation will be made, by way of either rental or lease fee and so on, for the gas company to make use of the right-of-way.

MR. CLARK: I appreciate the minister making a governmental commitment that the rights-of-way won't be transferred, certainly in respect of shared rights-of-way. But that's not what the section does, as I can see. This section in fact allows for the transference of rights-of-way from Hydro to the intermediary company and then the new buyer. Is that a correct interpretation? If the minister wants to make a commitment here in terms of government policy but they're not going to do that except in cases where gas has the exclusive rights-of-way, then I certainly appreciate that. Perhaps the minister could give those two things: first, am I reading this correctly; and secondly, is that the government commitment?

HON. MR. DAVIS: I'm instructed that this section does not in any way allow the sale of the land, the right-of-way. It permits a function to occur on the right-of-way but doesn't permit the sale of the land as such.

MR. CLARK: I'm not trying to belabour this, but it says: "a transfer under either section of an interest" of the authority or of an intermediary company in a statutory right of way.... It seems to me that it does in fact enable a transfer to an intermediary company or a private company of an interest in a right-of-way. The minister has given me government policy that they're not going to do that, and I appreciate that; but I'd like to know where that is in this section of the bill — or if it is.

[12:00]

HON. MR. DAVIS: The notes I have under the heading "Rationale" are that this is related to the land title issue in section 5. The gas division couldn't be sold as a going concern without rights-of-way. The alternative to legislation is to have several lawyers spend many months researching these matters, then reaching agreements with persons who may be affected.

MR. CLARK: So it does transfer the usage of the rights-of-way. That's what the minister is saying. With respect to Hydro Rail and the Hydro gas division, those rights-of-way are effectively retained by the Crown, but the usage of the rights-of-way is now allowed by the private companies, which obviously makes sense. In fact, the Crown couldn't, if it so desired, charge a rental fee or have such an arrangement with the new private owners for the use of those rights-of-way. The minister has indicated, almost, that they will do that. I don't know if it's $1, or how that works, but there will be some kind of negotiation to that effect, both for Hydro Rail and Hydro Gas.

Sections 7 and 8 approved.

On section 9.

MR. CLARK: I appreciate that B.C. Hydro presumably is in contravention of several municipal bylaws, etc., so this is essentially a grandfather clause. Is that correct?

HON. MR. DAVIS: Yes.

Section 9 approved.

On section 10.

MR. CLARK: It seems to me we have a lot of clauses here that are sort of comfort clauses. Is it fair, again, that we have another section that deals with transfers not amounting to a default on Hydro-guaranteed bonds?

[Mr. Weisgerber in the chair.]

HON. MR. DAVIS: The successor company must, if it's going to serve the public, step into the shoes of the gas division and hit the ground running, if it is to continue to provide service as a public utility. It can't be faced with a party affected by a right-of-way for a gas main, for example, claiming a breach of an existing right-of-way agreement. If the person affected is unhappy that the right-of-way is now used by the successor instead of the gas division, he can sue for damages but he cannot stop the flow of gas.

MR. CLARK: So again this has to do with rights-of-way. Is that what you're saying?

HON. MR. DAVIS: Substantially, if a party feels they're affected unfavourably, they can sue but they can't stop the gas flow, the operations of the company. They can obtain compensation, but not by denying the public gas.

Section 10 approved.

On section 11.

MR. CLARK: I assume that these next sections are only to deal with gas for a reason. In other words, could the minister give us some understanding of why only the main-

[ Page 5466 ]

land gas division appears to be regulated in this manner, as opposed to Hydro Rail and some other ?

HON. MR. DAVIS: The gas operations in greater Vancouver and in the Victoria area are franchise operations, monopolies; whereas Hydro Rail and certainly the research and development activities are more naturally competitive, if you like, and are not monopolies to the extent that the gas operation is.

MR. CLARK: Rail's a monopoly.

HON. MR. DAVIS: Well, it's got truck competition. It has a variety of safeguards in the private sector which are not available to the same extent when you have an exclusive operation like a gas distribution system.

MR. CLARK: Could the minister explain again why we need this other step? We've got an intermediary company spun off. Now if the government decides it can designate one of those intermediary companies as a successor gas operator.... Is it simply because, rather than dealing with each different component, you've tried to deal generically, and therefore this section deals with those intermediary companies that become gas companies?

HON. MR. DAVIS: I know that the gas monopoly is subject to a number of regulatory and other restrictions which are not common, or certainly not as extensive, in the case of the rail and R and D operations.

MR. CLARK: Why does it say "may make regulations "? Is it possible under this clause — it is, it seems to me — for the government to spin the gas division off into an intermediary company but not designate it as a successor gas company?

HON. MR. DAVIS: In an extreme case, Mr. Chairman, the government may create an intermediary company and not proceed beyond that; that's unlikely, but it's a possibility. It may go directly, without going through the intermediary route. In any case, this simply preserves all the options, if you like.

Section 11 approved.

On section 12.

HON. MR. DAVIS: Mr. Chairman, I move the amendment standing in my name on the order paper. [See appendix.]

On the amendment.

MR. CLARK: Could the minister explain the rationale for the amendment?

HON. MR. DAVIS: I gather the amendment is to avoid the possibility of a hearing before the Utilities Commission. If the purchaser does not become a successor or intermediary, this amendment is required to accommodate possible but not anticipated corporate structures of the bidders.

MR. CLARK: Maybe the minister can explain the clause itself — I know it's a bit out of order — and how the amendments fit into it.

HON. MR. DAVIS: At least two of the firms on the short list, Inland Natural Gas and Inter-city Gas, are already utilities in the province, so their action in a takeover could be reviewed because they're already utilities under regulation. This puts them on the same basis as the other three.

MR. CLARK: I understand; that makes perfect sense. Let's just say that if Inland were to buy it and you used this provision, it wouldn't deal with the existing Inland service area in terms of exemptions. Well, it might, by how this clause could be read. It could, in fact, exempt Inland's entire operations from the provisions of the Utilities Commission Act. Or is it the intention that Inland would be required to set up a subsidiary which would take over that company, and then that would be exempt, and that's what it's for?

HON. MR. DAVIS: At least in the first instance, Inland, which is an operating utility in the province, would continue to operate as a regulated utility in the interior and the north and would, through a sister company or whatever, engage in similar activities in the lower mainland and be regulated as an entity there. Any possibility of merger and so on would have to be considered at another stage, would presumably go through hearings of the Utilities Commission, and on and on. One should not read into this a merger of two utility areas or two franchises.

Amendment approved.

Section 12 as amended approved.

On section 13.

MR. CLARK: I just want the minister to explain why certificates of public convenience and necessity do not appear to be required. Is it because the government does not want this reviewed by the Utilities Commission Act, or any sale thereof or transfer? Is that what it is?

HON. MR. DAVIS: I don't think the government is much concerned about regulation of the company by the Utilities Commission after it's genuinely in business. I think it is concerned about possible call of hearings and so on in the midst of the privatization process. In order to make a sale certain, it's better to have a known article, one that's accessible from a financial, operation, rate, etc. point of view. That was the main, and perhaps the only, reason for the freeze in rates: to make it an article certain for sale and not suspend the activities of the Utilities Commission or its jurisdiction. Indeed, I think we will read later on, the minister may — and as far as I'm concerned, he will — be taking advice from the Utilities Commission throughout that period.

MR. CLARK: I certainly appreciate that commitment, and tonight we've seen very forthright commitment on the part of the minister. A problem I have, though — and we'll get to this clause in a very short time — is that advice from the commission is presumably still advice that would be private between the commission and you. The minister may agree with me.... One of my concerns is that this process be subject to some public scrutiny and review, not just in this chamber. The Utilities Commission appears an appropriate forum for such review.

[12:15]

[ Page 5467 ]

Even though I'm completely opposed to it, I can appreciate the difficulty in trying to structure such a sale and to try and give the buyer and everybody the same level playing field, to use the old term — all the rates, etc., to be fixed in time — but at some point they should be subject to review. This sunset clause goes to 1991, and I suspect, given the complex nature of regulatory business, the minister will, as he has indicated here, ask for advice from the Utilities Commission. That advice seems to me to be private. Maybe the minister could deal with that concern I have.

HON. MR. DAVIS: The freeze relates only to rates. Were the company, for example, to want to make some substantial addition to capital plant, it would be my inclination to hand it right over to the commission, the whole public hearings, whatever. The freeze really is in relation to the income side of this operation. Hydro was expecting to hold rates roughly at present levels for at least three years, and we chose simply to freeze this entity and say: "This is what we are endeavouring to sell."

Sections 13 to 16 inclusive approved.

On section 17.

MR. CLARK: This deals, I guess, more precisely with the matter which we were discussing previously — section 17 and section 18. I wonder how it is that the minister will endeavour to do this, especially given the discussion we had earlier this evening about his staff, because this transfers all regulatory responsibility to the Lieutenant-Governor-in-Council and allows it to exercise any and all of the rights, powers, obligations, duties and functions under the Utilities Commission Act. These are wide-sweeping regulatory powers in cabinet. Given the fact that the minister has indicated his inclination to go to public hearings, is he saying that the only thing that really is subject to review...?

Presumably the Utilities Commission, if my memory serves me, will review under normal circumstances any purchase or sale. We had that with respect to the hearings up at WKPL. So presumably you want that to be exempt, because it's a political decision to make a sale. Secondly, the minister is saying that we want the regulatory powers in order to deal with rates and to provide a proven or fixed commodity for people to bid on so they know what they're bidding on. I can understand that rationale. Why, then, is it required that all of the regulatory authority go to the Lieutenant-Governor-in-Council, given those are really the only two considerations I can see?

HON. MR. DAVIS: Much of the expertise the province has in this area rests with the Utilities Commission. The ministry — certainly the minister — would want to have that advice available in many of these areas. The main reason for this clause is that without such wording, cabinet may be forced to hold lengthy regulatory hearings which again could delay the bidding and sale for an indeterminable period.

The concern relates to the sale. Once the sale has been consummated, I think all of the areas — with the possible exception of rates, which remain frozen — will be studied by the Utilities Commission, and the minister would act on essentially the recommendations of the commission.

MR. CLARK: The minister is giving some commitment, albeit somewhat vague, that if the minister is asking the Utilities Commission for advice, that advice will be sought in essentially a public forum. As the minister said, I appreciate the concern about delay of complex regulatory hearings, but they are also the only area where the public gets a chance to scrutinize rates, rate structure and actual rates, etc. Given that this moves all of that into cabinet, and I understand the rationale for that, I certainly have some concern that we won't have full public scrutiny of those matters.

I can think of one thing that may come up. For example, with respect to the long-term contract that B.C. Hydro Gas has with Westcoast Transmission or West Coast Energy now, B.C. Hydro, as I understand it, is locked into fairly high-priced natural gas contracts. Given privatization, does that allow a potential abrogation of those contracts for replacement with lower-priced natural gas, for example, or would they inherit those contracts as well?

HON. MR. DAVIS: We don't intend to be party to any abrogation of any contracts, but B.C. Hydro Gas contracts with Westcoast Transmission I think run out in the next two years. Substantially, Hydro will be negotiating with purchasers in the field and buying, hopefully at depressed prices, for the long term. Those contracts, under an amendment projected for the next bill are to be reviewed explicitly by the commission to ensure that they are arm's length and so on. So that aspect of rate-making would still be with the commission.

MR. CLARK: It wouldn't be Hydro two years from now; presumably it would be the new private company. This is where I certainly agree with the minister that they'll be contracting in about two years for a replacement of those contracts that expire, and hopefully prices will still be depressed at that time and that would allow a rate drop. At this stage of the game, we're going to have the minister with complete regulatory control over the new private natural gas company while they're endeavouring to negotiate presumably new rates or new contract volumes at different prices.

There's bound to be, it seems to me, some implication for the new private utility in terms of either rates that are frozen and their natural gas wholesale price goes down, and also profits to the unregulated — or regulated by cabinet — private company, or those rates will be passed on. It seems to me that the difficulty will be in terms of the minister trying to exercise these powers under the act without any public scrutiny. That's where I have some concern.

HON. MR. DAVIS: I've said that the minister will certainly be seeking the advice of the commission on many of these matters. The public utilities act as amended enables the commission to ensure that purchases of energy by a utility, a monopoly, are at arm's length. In other words, some subsidiary or related company can't make a special sale at a higher price or whatever than what was deemed to be competitive. Whether or not that purchase is permitted by the Lieutenant-Governor-in-Council — the minister — or by him with the advice of the commission, which I believe will be the case, that possible opportunity for profit making outside of the utility will be eliminated.

Sections 17 to 20 inclusive approved.

On section 21.

HON. MR. DAVIS: Mr. Chairman, I move the amendment standing in my name on the order paper. [See appendix.]

[ Page 5468 ]

Amendment approved.

Section 21 as amended approved.

On section 22.

MR. CLARK: Perhaps, Mr. Chairman, we could deal with division four. We can discuss this question. There are four sections and division four is one. If the minister doesn't mind, it's easier.

MR. CHAIRMAN: Yes, that's fine, hon. member.

MR. CLARK: So division four, then, is the Verrin override, so to speak. I have some very serious reservations about this, obviously, as I think the minister knows from our previous discussion. Maybe I'll go into it at some length, but perhaps the minister could explain just briefly why it is that he would bring in this section to essentially override the Supreme Court decision on Verrin. What's the specific rationale, given that the minister has indicated, wearing his other hat as minister responsible for privatization, that he has no intention of doing it in all of the other privatization initiatives?

MR. CHAIRMAN: Hon. members, just before we get started, while we're going to deal with this as a division, we want to make certain that we don't get into second reading debate again on the philosophy of the bill.

HON. MR. DAVIS: My advice is that these sections do not override Verrin. They allow the employees to take with them to the intermediary company, and hence on into a private corporation, all of the salary arrangements they have, the seniority they have, the fringe benefits they have. In other words, they are complete and whole, but working for a new employer.

If, however, they choose not to work for the private employer, they do have an opportunity either to retire with appropriate settlements, or to apply for an opening in the 94 percent big Hydro that is still in business as a government owned utility. So they do have alternatives.

These various sections deal with certain aspects of this employee transfer and retention of rights, wages, benefits and alternative employment back with B.C. Hydro electric division.

MR. CLARK: Mr. Chairman, this clearly does override the Verrin decision. I have a legal opinion here that actually documents that. I'm sure legal counsel....

Interjections.

MR. CLARK: I can't quote at the moment whose opinion it is because....

AN HON. MEMBER: Did you pay for it?

MR. CLARK: No, I didn't pay for it.

The last section says....

AN HON. MEMBER: Then that's what it's worth.

MR. CLARK: Well, no; it's a paid-for legal opinion, but not paid for by me. The last section says that only the person who paid for it should quote it, so I won't quote for it.

But very clearly, Mr. Chairman, section 23(2) does override the Verrin decision because it confers on the Lieutenant-Governor-in-Council the authority to make orders transferring employees from the employment of the authority to that of an intermediary company or other person without their consent. That's the crux of the Verrin decision. It allows the government to transfer, without the employees' consent, employees from the Hydro Authority to a private company. That specifically deals with the Verrin decision.

The effect of the provision is significant because, as I understand it, at the time of the transfer from the Authority to the intermediary company, the employee then ceases to be an employee of the Authority — that's specifically spelled out in the act — and therefore becomes an employee of the intermediary company or other person named to be the employer under this section. So the effect of the provision is to bar an employee identified in the order from invoking the rights that the employees have under article 9 of their collective agreement — which essentially allows bumping, etc. — because the employee ceases to be an employee of the Authority. So when the employee is named to go to the intermediary company, he or she no longer has any rights associated with the collective agreement under the Authority because they have ceased to be an employee of the Authority.

[12:30]

MR. LOVICK: The question is: do they have a legal opinion?

HON. MR. DAVIS: Mr. Chairman, it's my understanding that all of the corporations on the short list have agreed to successorship and all of the terms and conditions under the existing collective agreements.

MR. CLARK: I'm sorry. What it does, Mr. Chairman, is.... I understand it doesn't affect the collective agreement, but at the time of transfer to an intermediary company, the employee is no longer an employee of the Authority, and therefore no longer has any rights under the collective agreement, according to 23(2) of this legislation. Is that correct?

HON. MR. DAVIS: If we were to stop at the intermediary stage, and Hydro can grant successorship, bumping privileges and so on.... But taking the second step on to the private operator, I concede that the bumping.... Well, essentially it's a smaller area to bump in. I suppose that's the nub of it.

Employees can go back into Hydro to a vacancy, if there is a vacancy for which they apply and presumably are selected. But the hon. member is talking about automatic bumping within big Hydro. I think that opportunity is closed.

MR. CLARK: I understand that an employee can go to the Authority if there's a vacancy; the problem is if there's a not a vacancy. Verrin says that you can't sell the employee as part of the assets and say that the employee goes with those assets. What Verrin says is that the employee can stay with the Crown if a company is privatized. This says specifically that the employee can't do that; that in fact he's transferred. My reading — and this legal opinion that I have — is that at the time of transfer of the employee pursuant to 23(2), that has the effect of cancelling residuary rights which the employee would have under article 9 of the collective agree-

[ Page 5469 ]

ment: namely, rights extending beyond the division which may have been transferred. In other words, any rights that an employee may have with respect to the collective agreement with the Hydro Authority as a whole, which includes bumping, presumably, and some other aspects....

Obviously, as soon as you're transferred, because you're named and because these sections deal with naming individuals.... I must say I find that offensive, because it names them as part of the sale essentially; these are the employees that have to be named, and therefore they're sold with the company. At the time of transfer to the intermediary company, they lose all rights under the collective agreement. They currently have rights that exist, as I understand it, under article 9 of the agreement. That's why it's quite clear that division four of this bill clearly overrides the Verrin decision. If the minister has some other legal opinion to counteract that, I would be interested in hearing it. But it's very clear to me that this is a significant weakening of what exists in the public sector under the Verrin decision.

HON. MR. DAVIS: The hon. member continues to reason as if the Verrin decision was the last word, and we don't know what the last word is. We'll have to await the outcome of the appeal. I might add, though, that most of these employees who have been operating on the gas side — who have been working in a different industry from the electric side — will want to stay with the gas operation. Very few, if any, would really want to go over to the electric side and bump people there. Anyway, a matter that's still before the courts and yet to be resolved isn't going to be resolved here this evening.

MR. CLARK: The minister says the employees would like to go with the private company, but you've precluded any....

HON. MR. DAVIS: I didn't say that. You keep saying things I didn't say.

MR. CLARK: You specifically said the employees will go because it's a different industry, and you've precluded any other option for those employees. That's the point we're trying to make. You've said that option does not exist in legislation. The only reason I can see why you would put in the kind of legislation that deals with the employees as pieces of property to be transferred, and that says they do not have any rights and essentially removes any rights they have under the collective agreement.... They're no longer employees as defined in the collective agreement; they're now employees of a different company.

This very clearly abridges the rights that do exist under the Verrin decision. I'm not saying the Verrin decision is the be-all and end-all either, but it is currently the law in British Columbia, pending appeal, and it clearly does provide some protection for privatized employees. You have chosen, under this division of the bill, to specifically override that decision. I can't think of any other reason for this division other than to override the ability of the employees under article 9 to exercise any residuary rights they may have that go beyond the division that's being privatized. It seems very clear to me that that's how this decision will be interpreted, and that's certainly the legal opinion I have.

Does the minister have any legal opinion with respect to this section and how it impacts on the rights that exist in British Columbia prior to the appeal of the Verrin decision?

HON. MR. DAVIS: I'm not equipped presently to express a legal opinion on this or any other issue.

MR. LOVICK: I don't think anybody on this side is asking the minister to express a legal opinion; we are pointing out what clearly appears to be a legal problem. We would suggest it is then incumbent on the minister or his staff to give us the legal opinion that justifies this legislation as currently written, because we see it as in direct and stark conflict with existing statutes.

MR. CLARK: I guess one of the problems I have is that what this legislation does is similar to Bill 19. Article 9, for example, gives the employees some rights under the Hydro Authority that were freely negotiated with B.C. Hydro and with the unions involved. What the government is doing is taking away something by legislation which was freely negotiated between the Hydro Authority and its unions, and I think we have seen that in other actions. It is rather offensive because it is a unilateral declaration by the government which they could have achieved and didn't achieve at the bargaining table. So it is again trying to deal with collective bargaining through legislation.

Pension rights, as I have been told, are jeopardized and so too is severance pay. If those employees go with the new private company, and because they are no longer party to the Authority agreement, they no longer have any rights and obligations associated with the collective agreements negotiated with the Authority.

Does the minister understand the point I am making? I am not getting any indication that he appreciates what I am saying. They have a collective agreement with the Authority; they are members of trade unions who have an agreement with the Authority. What section 23(2) does is say that when those employees are named and transferred to an intermediary company, they cease to be employees. It specifically says that they cease to be employees of the Authority. Therefore the collective agreement with the Authority does not go with them to the intermediary company. Therefore any rights they had beyond their division do not travel with them.

That is what I find offensive. There is nothing in the legislation that we discussed earlier — for example, legislation passed with respect to the Assessment Authority when the NDP was in power — that deals with protecting the seniority rights, the wages, the benefits, the severance pay or the bumping rights. There is nothing on that in this legislation. It simply says that they cease to be members of the Authority; therefore any residuary rights that exist under article 9 or otherwise in the collective agreement don't follow them.

I don't know if the minister appreciates the extent or significance of this clause, because it seems to me to be very significant, and it effectively takes rights away retroactively which were freely negotiated between the Authority and the employees.

The government has indicated that wages will be maintained, and those kinds of benefits will travel with them. Could the minister explain why that is not in the act?

HON. MR. DAVIS: It is my understanding that Hydro has agreed that successorship will obtain, and all of the five short listed companies have agreed that successorship will be honoured. Whether the legislation is explicit on that point or not, in fact the employees will continue to enjoy the income,

[ Page 5470 ]

seniority, fringe benefits, etc. which they have enjoyed with the B.C. Hydro and Power Authority.

MR. CLARK: Maybe the minister could deal briefly with the pension rights provision, and how that impacts on the employees' right to participate in the plan.

HON. MR. DAVIS: The purpose of section 24 is to ensure employees that their pension rights will not be affected because of a transfer under this legislation. All previous legislation transferring employees contained complex provisions relating to the transfer of pensions. These provisions were necessitated by the fact that all previous transfer legislation dealt with transfers from the public sector employer to another public sector employer. This meant that there was an interplay between the public service superannuation act and the pension plans of the employers involved.

The pension plan at B.C. Hydro has recently been amended to provide for privatization options. The existence of these options means that there is no need to duplicate the pension provisions which existed in previous legislation. This section has been included to clarify the status of employees transferred to an intermediary company prior to a final disposition. The options under the Hydro pension plans will be available to those employees.

[12:45]

MR. CLARK: There is no grandfathering in this clause, so you can't continue to pay into the Hydro plan when you are with the new private company, or even with the intermediary company.

HON. MR. DAVIS: You can in the intermediary company; you cannot second-step to the private company.

MR. CLARK: Maybe the minister could explain why they chose not to do that. Madsen Pirie had a line, if I recall: "Never cancel a benefit in privatization." Clearly, most private sector pension plans are significantly less than the B.C. Hydro plan. I wonder why the minister would choose not to allow that option.

HON. MR. DAVIS: We don't have private sector firms in public sector pension plans. I might add that all five short-listed corporations have indicated that they will involve the employees in pension plans identical to those presently in force in Hydro.

MR. CLARK: Section 25 gives employees who wish to stay with B.C. Hydro the right to bid on vacancies, but there doesn't seem to be any priority for those employees with respect to bidding on those vacancies or a commitment to any special measures to accommodate employees who wish to return. I talked earlier about the 1974 Assessment Authority Act that made specific reference to the employees' ability to stay with the Crown if they so desired.

This has a pretty brief statement saying that the authority "may place" employees who are not transferred but affected and "may place" employees who bid on jobs within 12 months of the transfer date. There doesn't seem to be any kind of protection for employees who wish to stay with Hydro as opposed to going to the new private company. Section 25 certainly seems to me to be pretty weak. Perhaps the minister could give us some understanding of whether or not there will be any preference.

HON. MR. DAVIS: Hydro has agreed to recognize seniority in the bidding-back process. Also, inclusion of this section is necessary to override the provisions of collective agreements which would fetter the right of a person not covered by the collective agreement to bid for jobs which become vacant in the bargaining unit covered by the agreement. Employees placed under this provision should not suffer loss of pay or seniority. As I said, Hydro is committed to that.

MR. CLARK: I didn't quite understand what you meant by "override the provisions of collective agreements."

HON. MR. DAVIS: The collective agreements within Hydro provide that only individuals who are employed by Hydro can apply for these positions. This waives that caveat.

Sections 22 to 30 inclusive approved.

On section 31.

HON. MR. DAVIS: I move the amendment standing in my name on the order paper. [See appendix.]

On the amendment.

MR. CLARK: Can the minister explain the purpose of the amendment, please?

[Mr. Rabbitt in the chair.]

HON. MR. DAVIS: Usually the voting shares are common shares, but there may be instances in which other kinds of shares qualify for the voting privilege. This provides for that possibility.

Amendment approved.

On section 31 as amended.

MR. CLARK: I just can't resist, on reflection, noting that the sections "non-resident of Canada" and "non-resident of the province" are lifted verbatim from the BCRIC legislation that we saw several years ago. I think it's a nice irony that the legislation that deals with foreign ownership in these sections we see revisited here, although, of course, much, much weaker in this legislation than in the BCRIC legislation which actually prohibited foreign ownership. This simply says that it might be waived and that there might be some other sections, so we'll deal with that. Of course, that BCRIC one of ten years was lifted, and I'll predict that these will all be lifted down the road, maybe 10 years from now, maybe less than 10 years from now. Probably many of them won't even be exercised as well.

Section 31 as amended approved.

On section 32.

MR. C LARK: This deals with the designation of special companies. Perhaps the minister could deal with.... We now have three things, essentially, created by this legislation: intermediary companies, successor gas companies and special companies, as I understand it. This deals with special

[ Page 5471 ]

companies. Again, we see this tremendous latitude with respect to the minister on all these sections dealing with head offices, the number of members of the directorship, corporate ownership, non-Canadian share ownership, and total shares, all of which, every section, can be waived by the Lieutenant-Governor-in-Council, by the cabinet.

Perhaps the minister could give us some explanation why we need this generic section and every clause that allows the cabinet to waive every single section anyway. If we're going to have restrictions on foreign ownership.... At least the BCRIC legislation had restrictions on foreign ownership. You subsequently came to the Legislature to remove them and we got a chance to debate them. Here we have a series of resolutions which could mean nothing, and I'd like the minister to give us some understanding of why we need this kind of weak legislation,

HON. MR. DAVIS: The additional category here is "special company," and the special company is unique in that if it's declared to be such, the government can ensure a greater measure of control over it than would normally be the case with a company simply incorporated under the laws of the province or of Canada. For instance, the golden share provision would apply to a special company and not to other companies.

MR. CLARK: I think the minister said the key word. He said "if it's declared to be such," and that's what I have a great deal of difficulty with. It seems to me that we could have skipped a step, because I can anticipate the minister saying that we need these provisions, probably not for R and D, because that's a small thing; maybe not for Hydro Rail because that's rather small; but we really need these foreign ownership restrictions with respect to mainland gas.

I suspect — I may be wrong; the minister can clarify this — that the only operation that would be designated a special company under this section and subsequent sections is the Hydro mainland gas division. Given that, and given that the successor gas company presumably would also define only the gas division, why would we need such an elaborate section of this bill to deal with special companies when it's probably the government's anticipation only to name or designate as a special company the mainland gas division?

HON. MR. DAVIS: The gas operations of B.C. Hydro, both on the lower mainland and on Vancouver Island, are monopolies. They're different from the rail and R and D to the extent that they involve a franchise specifically granted by the province for a monopolistic purpose. Still, I think the general language and variety of language in the act is simply to cover off a number of possibilities and we may, for example, want to declare that the B.C. Hydro Rail successor company is a special company.

MR. CLARK: So the minister can give us no indication now as to which of the four divisions would be designated as a special company.

Sections 32 to 35 inclusive approved.

On section 36.

HON. MR. DAVIS: I move the amendment standing in my name on the order paper. [See appendix.]

On the amendment.

MR. CLARK: I simply ask the minister to explain the purpose of the amendment.

HON. MR. DAVIS: The government, given the amendment, will be able to designate a person who holds a certain percentage of the shares of the successor company as a special company. The designation is not to be revoked nor is it to be duplicated.

MR. LOVICK: I have a question that on the face of it may appear to be facetious. Would the minister be good enough to explain to me how it is that he, who is an avowed believer in the primacy of the marketplace and the free operation of those forces, can be party to this clear limitation and infringement on the rights of the marketplace? We're talking about restrictions on ownership and so forth.

Interjection.

MR. LOVICK: Well, the amendment is in the same spirit, is it not?

HON. MR. DAVIS: I think we'd all like the market to work, but the market doesn't work very well in monopolistic situations. In those instances, regulatory and other powers are exercised by government to ensure that the consumers' interests are paramount.

MR. CLARK: I was going to deal with this on the main motion, but we can deal with the amendment. Is the minister saying that there is a monopoly on buying shares? Of course not. There's a free market in the shares. It doesn't have anything to do with whether it's a monopoly or not. We'll deal with that on the main motion.

Amendment approved.

On section 36 as amended.

MR. CLARK: I want to ask the minister why they arrived at the 20 percent.

HON. MR. DAVIS: It was less than 25 percent in the Air Canada legislation.

Section 36 as amended approved.

On section 37.

HON. MR. DAVIS: I move the amendment standing in my name on the order paper. [See appendix.]

Amendment approved.

On section 37 as amended.

MR. CLARK: I'm curious as to how this section limits the ownership to 4 percent for any person or group. Is that correct?

HON. MR. DAVIS: Yes, no person — and person includes corporation — can own more than 4 percent of the

[ Page 5472 ]

voting shares of this special company. I think the hon. member will notice that further down, the government can alter that provision if the public interest dictates. But substantially no individual or corporation can own more than 4 percent of the voting shares.

MR. CLARK: I just wonder how the minister came up with the 4 percent. It strikes me as really rather restrictive, given that we're trying to maximize the public's return on their resources.

HON. MR. DAVIS: I've seen figures like 4 and 5 percent in federal legislation, Canadian legislation, and examples in other countries generally in the order of 4 or 5 percent.

[1:00]

Section 37 as amended approved.

Sections 38 to 40 inclusive approved.

On section 41.

MR. CLARK: I'm not sure whether this is a standard clause. As a layperson it struck me as a bit odd that there would be a clause that simply allows one to declare their non-association, and therefore that's deemed to be sufficient, it appears to me.

HON. MR. DAVIS: I'm informed that a number of these sections deal with circumstances in which an individual — a person or corporation — may own more than 4 percent of the shares, what the penalties, etc., are in that regard. If, however, the person or corporation can prove that it's accidental for a short period, this section relieves against technical breach.

Sections 41 to 44 inclusive approved.

On section 45.

HON. MR. DAVIS: I move the amendment standing under my name on the order paper. [See appendix.]

Amendment approved.

Section 45 as amended approved.

Sections 46 to 49 inclusive approved.

HON. MR. DAVIS: I move the amendment section 49.1 standing under my name on the order paper. [See appendix.]

Section 49.1 approved.

Section 50 approved.

Title approved.

HON. MR. STRACHAN: I move the committee rise and report the bill complete with amendments.

Motion approved on division.

The House resumed; Mr. Pelton in the chair.

Bill 45, Hydro and Power Authority Privatization Act, reported complete with amendments to be considered at the next sitting of the House after today.

HON. MR. STRACHAN: I call committee on Bill 46.

UTILITIES COMMISSION AMENDMENT ACT, 1988

The House in committee on Bill 46; Mr. Rabbitt in the chair.

Sections 1 and 2 approved.

On section 3.

MR. CLARK: I have just a few questions on this bill; it won't take too long.

This section 3 amendment states that the minister may by order exempt people who produce their own power primarily for their own use and sell the excess, and people who produce power and sell not more than one petajoule of that power. It's understandable that some or all of the very small producers who would want to sell power would not be able to meet all the requirements of the Utilities Commission Act, so I understand why that might be waived. One concern I have, though, especially given the government's recent announcement that we will have, and perhaps should have, several years from now dozens, or a significant number, of small power producers in British Columbia.... As the number of producers grows, it doesn't seem advisable or even practical that the minister would have to deal with every request for an exemption from part 3. It also seems that there should be some standard application or standard rules and regulations governing this small-scale power.

I appreciate, as I said, that they can't be as rigorous as the broader ones, but as we get more and more small projects, the aggregate energy might be large enough to be regulated. Therefore it potentially has some problems for the system as a whole.

HON. MR. DAVIS: The large utility, let's assume it's B.C. Hydro, for example, is fully regulated, and any purchase it enters into is scrutinized by the Utilities Commission.

MR. CLARK: Under the act?

HON. MR. DAVIS: Yes.

While the small supplier, or even the large private supplier, may not itself be regulated, the contract is subject to review by the commission. Therefore there is regulation in reverse, if I can put it that way.

MR. CLARK: What section is that?

HON. MR. DAVIS: I think there is a new section that deals with power to scrutinize purchases of regulated utilities. It's a later new section.

Sections 3 and 4 approved.

On section 5.

HON. MR. DAVIS: I move the amendment standing in my name on the order paper. [See appendix.]

[ Page 5473 ]

Amendment approved.

Section 5 as amended approved.

On section 6.

MR. CLARK: I just want the minister, before we quickly go through this, to point out to me the sections that deal with what he is talking about which apply the regulation now to purchases.

HON. MR. DAVIS: I think section 7 deals with that matter.

Section 6 approved.

On section 7.

MR. CLARK: Just so I've got it right. Section 7 deals with electricity contracts, and I believe there is another section that deals with energy supply contracts, and this is all section 7 here. So 85.3 is natural gas, and 85.1 is electricity. The minister is nodding his head. If that is the case, I will strongly support this section of the bill.

Section 7 approved.

On section 8.

HON. MR. DAVIS: I move the amendment standing in my name on the order paper. [See appendix.]

Amendment approved.

Section 8 as amended approved.

Title approved.

HON. MR. STRACHAN: I move the committee rise and report the bill complete with amendments.

Motion approved.

The House resumed; Mr. Pelton in the chair.

Bill 46, Utilities Commission Amendment Act, 1988, reported complete with amendments to be considered at the next sitting of the House after today.

HON. MR. STRACHAN: I thank members for their good indulgence this evening, and I move that we adjourn.

Motion approved.

The House adjourned at 1:11 a.m.

Appendix

AMENDMENTS TO BILLS

45 The Hon. J. Davis to move, in Committee of the Whole on Bill (No. 45) intituled Hydro and Power Authority Privatization Act to amend as follows:

SECTION 1.1, by adding the following section:

Electrical division not for sale

1.1 Nothing in this Act authorizes the sale of the authority's electrical division.

SECTION 12, in the proposed section 12 by adding the following subsection:

(3) The Lieutenant Governor in Council may order that designated provisions of the Utilities Commission Act or of the Gas Utility Act do not apply to a gas utility named in the order in respect of a transaction described in the order that is

(a) an amalgamation, merger or consolidation of the gas utility with a special company, or the winding up of the gas utility into the special company, pursuant to the Company Act, or an acquisition of shares in a special company as a result of an arrangement referred to in section 276(1) of the Company Act,

(b) related to a transaction referred to in paragraph (a),

(c) the subject of an order under section 30(1), or

(d) related to a transaction that is the subject of an order under section 30(1).

SECTION 21, in the proposed section 21

(a) by deleting subsection (1) and substituting the following:

(1) Sections 1 I to 14 and 17 to 19 are repealed on October 1, 1991. , and

(b) in subsection (2) by deleting "sections 11 to 19," and substituting "sections 11

to 14 and 17 to 19,".

SECTION 31, in the proposed section 31 by deleting the definition of "voting share" and substituting the following:

[ Page 5474 ]

"voting share" means a share or a class of shares of a special company that carries the right to vote under all circumstances on a resolution electing directors, or a share or class of shares of a special company that carries the right to vote on such a resolution because of the occurrence of a contingency that has occurred and is continuing.

SECTIONS 36 and 37, in each of the proposed sections 36(3) and 37(3) by deleting everything after paragraph (a) and substituting the following:

(b) holds shares in a company on or pending its amalgamation, merger or consolidation with, or its winding up into a special company, pursuant to the Company Act,

(c) holds shares of a successor gas operator that is or is about to become a special company,

(d) acquires or will acquire shares in a special company as a result of an arrangement referred to in section 276(1) of the Company Act, or

(e) acquires, or has agreed to acquire, all or a part of the shares in a special company from a person who has been designated under paragraph (a), (b), (c) or (d) or under this paragraph,

and the Lieutenant Governor in Council, having made a designation under paragraph (a), (b), (c) or (d) in relation to a special company, may make one further designation in relation to that special company, under paragraph (d), but otherwise shall not make any further designations under any of paragraphs (a) to (d) in relation to that special company.

SECTION 45, in the proposed subsection (1) by deleting "dispose of them to another member" and substituting "dispose of them to another person".

SECTION 49.1, by adding the following after the proposed section 49:

Consequential Amendment

Gas Utility Act

49.1 Section 1 of the Gas Utility Act, R.S.B.C. 1979, c. 150, is amended in the definition of "gas utility" by striking out "a corporation which" and substituting "a person that".

46 The Hon. J. Davis to move, in Committee of the Whole on Bill (No. 46) intituled Utilities Commission Amendment Act, 1988 to amend as follows:

SECTION 5, in the proposed section 84.1 in the definition of "energy supply contract" by adding "transmission facilities or" after "by means of the".

SECTION 8, in the proposed section 140(1. 1)

(a) by deleting "reimbursing the government or the commission for any expense incurred by either of them in" and substituting "recovering the expenses arising, in the fiscal year commencing April 1, 1988 or a subsequent fiscal year, out of", and

(b) in paragraph (b) by deleting "to" and substituting "to".