[ Page 1389 ]

The House resumed at 6:39 p.m.

[M. Farnworth in the chair.]

Hon. M. Sihota: I call, in Committee A, the estimates of the Ministry of Employment and Investment, the Ministry of Small Business, Tourism and Culture, and sundry other ministries. And in this House, I call Committee of Supply, Ministry of Forests.

On vote 36: minister's office, $432,868 (continued).

M. de Jong: I wonder if I can alert the minister to the plight of a company, Silvacom (North America) Industries Inc. We were discussing earlier in the day Forest Renewal B.C. This is one of those companies that has made an application and has attempted to avail itself of that particular source of assistance and funding.

I should tell the minister just briefly that this is a company, headquartered in the Abbotsford-Langley area, which has developed some world-renowned technology, I'm advised, in hydraulic-drive skidder equipment. It's a particular harvesting tool that leads, as I understand it, to a much more environmentally friendly method of retrieving wood fibre.

Just by way of chronology, I'm told that the application was made to Forest Renewal B.C. in January of this year. Approximately a month later -- actually, on January 19 -- Forest Renewal B.C. wrote to indicate that the application had been received and had passed the initial screening process, and that was communicated to the principals of the company. The matter then was referred to the Science Council of B. C., and on April 15, notification was received that the Science Council required additional information and wasn't in a position to approve the particular application.

One of the questions I'll ask the minister is to explain in a general sense how Forest Renewal operates and the exchange relationship that exists between Forest Renewal B.C. and the Science Council of British Columbia. Beyond that, I want to alert him to the fact that this was a company employing in excess of 30 people in the Abbotsford area, and they're now down to five.

I should also say to the minister -- and I know he will look into this in greater detail, but he will discover -- that some of the urgency surrounding this particular application relates to the fact that there was an international partnership at work here with, I believe, a Malaysian Crown corporation that has since privatized and decided that it would not be involving itself in these sorts of operations. So the source of funding that the company had been counting on for developing and marketing this technology dried up.

I note there is correspondence from the British Columbia Trade Development Corporation, fully endorsing the particular project. As I understand it, it's a research and development application, which may well explain why it made its way to the Science Council of British Columbia. The B.C. Trade Development Corporation acknowledged that, assuming this were to proceed, there was a genuine potential for in excess of 200 people being employed in fairly short order. The technology -- and I'm no engineer -- is apparently very sound and has passed that scrutiny. Maybe the minister could address in general terms the relationship between the Science Council of British Columbia and the plight of this company, Silvacom Industries.

[6:45]

Hon. D. Zirnhelt: That is a good question; it does focus on the dilemma we're facing. The Science Council undertakes for Forest Renewal to evaluate projects, and they go through a peer review process. They have an advisory structure. So while it may pass the initial screening of FRBC, it really can be kiboshed -- I think your word was -- at the Science Council level. I do have a note on it. Thanks for the warning. I was able to get some information and give you a fuller answer, and I think you'll come to understand what happened there.

As to where it stands right now, the rejection by the review committee gave several reasons: the technical details and methodology needed some strengthening, the impacts and benefit of the study were unclear, and the proposed research was not cost-effective. Now I understand that Silvacom, when advised of that, chose not to appeal the decision, but they have an option to submit again when a new call for proposals comes out. But where it stands right now is that following a meeting between Forest Renewal executives and Silvacom, the indication was given to them by FRBC that FRBC may be in a better position to assist the company later this year, after the board of directors of FRBC considers implementing an innovation development fund. So it is this question of commercializing known technologies, where the Science Council looks more at operationalizing the technology as opposed to commercializing -- that's my understanding of it.

There still is a gap in programs there. But currently the company is working with the Ministry of Employment and Investment and B.C. Trade in an effort to find venture capital to replace that which they no longer have, as you said, from the Malaysian company, to develop this harvesting equipment. But I can just be encouraging; I can't explain all the intricacies of the reasons that have been given. Surely we must encourage people to innovate and develop, and there are going to be jobs in it, as you have indicated. If these kinds of technologies take off, it will probably be beneficial to the resource base as well as to employment.

M. de Jong: It sounds to me from what the minister is saying that the company really has two options at this stage. I'm not sure if there is a limitation period that applies to any sort of an appeal, but the minister seems to be indicating that, as the minister responsible for Forest Renewal B.C. at least, he would be receptive to a resubmission that perhaps takes account of some of the concerns that are laid out in the April 15 letter from the Science Council of British Columbia, and to the extent that perhaps the company, the ministry -- the various ministries, actually, that are involved -- and the agencies that are involved can work together to alleviate those concerns, this matter may not yet be dead.

Hon. D. Zirnhelt: I certainly wanted to be positive about encouraging the company, without saying that we can guarantee that their project will be funded. I take it from what information has been provided to me by FRBC that there's every hope, if they can't find some venture capital in the short term, that FRBC certainly would be receptive, and they're hoping there will be a program into which this would fit more appropriately.

G. Wilson: Just before the break, hon. Chair, I was asking the minister questions with respect to FRBC dollars and pri-

[ Page 1390 ]

orities in terms of local employment. The minister made a comment that I want to explore in a little bit more detail in terms of this government's commitment with respect to money. The minister commented that FRBC was not currently mandated and/or that there was no policy to deal specifically with planning issues on a local basis. I need to explore that a little bit. A lot of the application that took place in the first and second years seems to have been, in large measure, dollars placed with respect to restoration of watersheds and often stream management, stream restoration -- those sorts of things.

In my own riding, Powell River-Sunshine Coast, the Chapman Creek-Gray Creek watershed, FRBC dollars were applied in some numbers, and we expect that those numbers are going to be continued through the Chapman Creek-Gray Creek project, which is now being administered, at least in part, with involvement of local government. Now, local government looks at that region as its principal watershed, and it's in the long-term interests of all of the residents there, whether they're involved in forestry or not, that that watershed, above all, be protected and maintained and managed adequately. FRBC dollars are necessary to restore that watershed to a level where it can sustain, long-term, potable water. The consequence to that creek of past forest activity has been fairly significant.

Not only is local hire an issue that might be given some priority, but there are also issues that relate to local government, predominantly in regional districts -- because I would think they're the ones that would be most predominantly affected -- where local government can in fact direct in partnership with government, through FRBC funds, these kinds of long-term restoration and management programs that would significantly improve watersheds and whether or not priority can be given to that. If the minister is prepared to suggest that's so, what sort of dollars are committed to that kind of project? And if not, would he be prepared to entertain that?

Hon. D. Zirnhelt: In my response earlier, I said that the board was looking at trying to find a way to have a better program for local partners to apply. When I addressed the issue of planning, I said that to the extent that there were plans available, the dollars can flow and do the work. If there is a plan in place -- a resource management plan of some kind, like a watershed management plan -- that will help to secure the dollars. If the plan is in place, then the dollars can follow the plan. I was just indicating that we hadn't required that there be extensive regional or local plans of a holistic nature covering all phases of work, but I think that might come, because Forest Renewal is out there in the regions talking about priorities. If potable water was a need in that particular region or subregion, and it could be linked back to previous logging practices, then, of course, restoring that to the point where there's comfort with the level of potability is the kind of thing we want to fine-tune in the year to come. It's my understanding that FRBC is looking at exactly that kind of question now and examining it as a matter of policy.

G. Wilson: I have a couple of follow-ups to that, because this is critical not only to Powell River-Sunshine Coast but to at least half a dozen other communities I'm aware of now. It comes back to the issue that was raised earlier on with respect to the priority given to these dollars and whether there's flexibility to move these dollars around or whether they should be dedicated specifically to certain kinds of forest jobs.

It's my understanding that there is certainly a debate right now -- let me use that word, because "dispute" is perhaps too strong a word -- as to who really owns the dollars. I made a comment just before the break that there is a perception, at least among some people, that the major forest companies own this money -- that this is their money, which I take exception to because these are dollars that are raised from the public forest. Therefore, if we need to look toward community-based watershed management as a priority for these dollars, and if we can start to direct that through management plans that affect local government or are driven by local non-profit groups or whoever may be wanting to get in and to do that restoration work, it's important that we don't necessarily yield to the interests within the forest companies that say this isn't the highest and most critical use of this money with respect to forest revenues -- if the minister understands what I'm saying. It's important for us to not necessarily tie forest revenue return specifically to application on dollars.

I take the point -- and members in my party take the issue -- that the government should have flexibility with respect to how they commit this money. This is, after all, the public's money. The money belongs to the people of British Columbia, and how the government chooses to apply it should be in the interests of the majority of British Columbians -- keeping in mind that we do want to secure forest jobs.

Let me be very specific in my question. There is, right now, disagreement between the major forest companies that are looking at FRBC dollars applied in the lower Sunshine Coast, in the area between Egmont and Langdale, as to whether or not we should do long-term management on Chapman and Gray creeks or if we should divert some of the dollars that have been talked about -- I hope they are still committed, although I understand they're in the freeze like everything else. Those dollars should be committed long-term to that project and not diverted into something that the major forest company might see as providing them a particularly good return through its application, because the need for the community is so much greater.

I don't know how that's factored into the decisions taken by FRBC staff or in the applications -- how it's maintained. There is a growing dispute with the major forest companies, which are saying: "Look, there are other groups that are getting too influential in the decisions that are being taken, and we want to make sure that those priorities are rigidly applied to forest sector jobs" -- which I think would be a big mistake, frankly, because that's the public's money; I don't care if it was raised off stumpage revenues from giving tenure to the forest sector. That's one thing. I'd be curious to know if the minister is like-minded or not on that question.

Hon. D. Zirnhelt: There's no question that the money belongs to the people of British Columbia; it's economic rent for resources that are publicly owned. But part of the agreement was, of course, that we use the funds to renew the forest in all its aspects.

With respect to watershed restoration, the funding that has been dedicated and put in the business plan is in the neighbourhood of 25 to 30 percent; that's dedicated to watershed restoration. Again, within that, priorities should deal with water for communities. My advice would be that if the region or community hasn't elaborated a plan for priorities in that area, then that could be done -- set a long-term plan for the region and for the local communities that make up that region.

If there is resistance to spending more money on that kind of thing, then we need only remind people who oppose it 

[ Page 1391 ]

that watershed restoration was a major part of forest renewal. Restoring the environment generally was an important part of this, because it was accepted that some of the forest extraction practices did degrade the environment in some areas. You've given an example, and that's the kind of project that should be able to look to long-term funding. If there's something missing, it is that we don't have a plan for all the specific regions now, and that was my comment. It's application-driven, and we should, in my view, more towards a more planning-driven program.

G. Wilson: This is my last question on this, then, and I appreciate the opportunity to get into this debate. I heard the minister say that these kinds of projects -- the Chapman Creek-Gray Creek project for one -- should be given priority. I didn't hear him say it will be given priority.

We're all looking for confirmation for funding on this. I don't know if the minister is able to shed any light on whether or not we have those dollars committed for this next year, because it was originally looked at in three-year financing. If we can get that commitment, that would be good. But in the absence of that, could the minister assure us that with respect to these project funds, every effort will be made to make sure that the control and decision on the priority for its application -- that is, how that money is applied -- will be given to those who are directly involved in the restoration project and not administered by the major forest companies, which may seek to control those dollars for enhancing their own . . . ?

So there are two questions there. Can you tell us that we've got the bucks? That would be good news. If you can, that's wonderful. If not, can you at least assure us that the project team that is currently working on that will continue to have priority over its application of FRBC dollars coming in on the Chapman Creek-Gray Creek project?

Hon. D. Zirnhelt: I can't give the member the assurance that that project will get funding. I just can't stand here and do that. The board itself will make the decision. What we are doing, though, is looking at mechanisms to give communities more control over the dollars that flow into those communities. That's being examined by FRBC, and as I said, if there's consensus in the community that this is a high priority, then it stands an excellent chance of being funded. Clearly, until we've restored watersheds, the job isn't finished and the promise isn't fulfilled.

[7:00]

J. Wilson: I have a few things I want to tidy up here. Last evening I asked for some percentages for the last three years on No. 3 and greater wood, and to this point I haven't received them. They are fairly critical to my debate here. I was hoping that the minister could provide those in the next little while.

Hon. D. Zirnhelt: Just before dinner I placed it on your desk -- I should have, anyway. I placed one piece of paper on your desk, and I believe that was the one. Or was that the one on range? Oh, it's the one on range.

I have those figures here. We'll just try to dig them up for you and send them over.

J. Wilson: I'd like to get back into the world of numbers here. It is my understanding that a fund has been set up by FRBC to guarantee loans to businesses which are trying to establish and do work under the FRBC program.

Hon. D. Zirnhelt: Yes, there is a loan guarantee program that's administered through the credit union system. That's how the delivery is going to take place, so it's not duplicating an administrative arm there. It's a pot of money that's set there. I think the maximum is $250,000, and that's to promote the smaller value-added businesses that need some kind of security in order to obtain their loans.

J. Wilson: Which ministry would this be coming through to establish it? Is it a separate entity on its own or is it handled by a ministry?

Hon. D. Zirnhelt: As I understand it, it's a contract between FRBC and the B.C. Central Credit Union. They undertake to administer that program. No ministry is directly involved, although there are consultations with Small Business, Tourism and Culture, which handles the local economic development stuff. Clearly the people in the Ministry of Forests will offer advice where necessary on program administration.

J. Wilson: Can the minister give me the dollar figure of this fund that has been established?

Hon. D. Zirnhelt: We don't have it in the particular books we have here, but we'll get it for you.

J. Wilson: Would the minister be able to provide me with the 1996-97 allotment of moneys that have been budgeted to the Ministry of Employment and Investment from the FRBC fund?

Hon. D. Zirnhelt: I'm not aware of any money to Employment and Investment from FRBC, but I'd be happy to check that out for you.

J. Wilson: Which ministry is the funding supplied from FRBC to retrain displaced forest workers, etc., channelled through?

Hon. D. Zirnhelt: The funding to retrain forest workers goes out in a number of ways. Some goes directly to applicants, which might be forest companies that want to do some retraining. There is money in an arrangement between what was then Skills, Training and Labour, now the new Education, Skills and Training, and Labour. They are actually helping to develop criteria in workforce development. I expect that the applicants will include colleges, but primarily the partners of Forest Renewal, which are the companies that employ the workers. It is mostly channelled directly to them.

J. Wilson: Can the minister give me a total figure on the 1996-97 funding that is going to be allotted to these training programs? It would have to be a total figure, all combined.

Hon. D. Zirnhelt: We'll defer that question; we are attempting to get some detailed information for you. We'll have it in a few minutes.

J. Wilson: In addition to that, is any part of this retraining funding handled through the Ministry of Forests?

Hon. D. Zirnhelt: I'd just like to explain to the Legislature that in getting prepared for estimates, we expected that the details of FRBC could be discussed at the standing com-

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mittee when the business plan is referred. That's where we expect to get into a detailed debate. But we are happy to try to accommodate members' questions now.

Your question was about delivery of workforce dollars -- retraining dollars -- through the Ministry of Forests. To our knowledge, we aren't delivering that.

J. Wilson: If the minister could get me the total figure on the retraining, it would be very much appreciated.

These are not details in this program; these are basic figures right off the top, I would surmise. If I wanted to get into detail, I could get into specific contracts, and there are hundreds of them. But this is the overview on it all. What is the funding projected for 1996-97 that will be allotted to the Ministry of Environment, Lands and Parks?

Hon. D. Zirnhelt: As we understand it, the contract for Environment, Lands and Parks is $101 million, but we don't expect that they will deliver all of that this year. We expect them to enter into contracts for that amount, and they have, but we don't expect that the contracts will all run the full amount this year. That's the difference we were getting at: the amount contracted and the amount that is expected to be delivered in this fiscal year. There's a difference.

J. Wilson: On the amount contracted, is that not the amount set aside in the budget for the present fiscal year?

Hon. D. Zirnhelt: Yes, the amount is what Forest Renewal will allow Environment to contract up to; it's the contracted amount. They can make commitments for that amount of money, and it can be over a multi-year period. This year they will allow Environment, Lands and Parks to enter into contracts for $101 million.

J. Wilson: This money is contracted, so if the Ministry of Environment, Lands and Parks is permitted to use this amount of money this year, even though they are not expected to use it, that money has to be in place if they so require.

Hon. D. Zirnhelt: If it happened that project proponents wanted to draw down everything, they could. But we don't expect they will, and therefore we're not budgeting for the full amount. That's the amount they will allow to be contracted, and because it is multi-year, we're trying to get the money. If they did draw down the full amount, we would be happy, because they would probably get closer to their targets, but it's not expected that they will it draw down. In any given year, they could be expected to draw down up to 60 percent of what is committed for the multi-year period.

J. Wilson: Does the same thing apply to the Ministry of Forests? Do you not expect to use this $199 million?

[7:15]

Hon. D. Zirnhelt: We don't expect to be able to. We're going to make best efforts to expend that amount of money. It's an ambitious target, but we don't expect to reach it. We would like it if we could, but we don't expect to reach it.

J. Wilson: The figure that the minister gave to me that has been allotted for this year's projects was $275 million. Is that what is budgeted, or do you not expect to reach that target?

Hon. D. Zirnhelt: Forest Renewal is attempting to expend $275 million. They have given authority to the ministries to enter into contracts for somewhat more than that, fully knowing that it is difficult to spend the money -- that all the things, that all the approvals have to be in place. So they're giving lots of room. There is no shortage of dollars with FRBC right now, but they're giving ministries enough room to try to get the contracts out. So if you have any viable projects on which money can be wisely spent, then they can come in. To bring surety to the applicants, they are contracting up to that amount. But they don't expect to deliver all of it.

J. Wilson: Then I assume that you do have a financial plan in place and that any money which could be used will be in place, and should things fall apart within the Forest Renewal organization, that money will still be there and can still be used either this year or next year. We have to prepare a budget. Every organization has to budget. You have to budget. Your departments put in their budget. That amount of money that you allot to them has to be in place, whether they spend it or not. I assume the financial structure within FRBC would be the same as within government.

Hon. D. Zirnhelt: No, it's quite a different matter. Within government ministries, what you don't spend at the end of the year, you lose. You can't carry it forward. FRBC can carry forward funding. So if they undertake to enter a delivery contract with the ministry, they can carry that money forward and it could be spent in the next year. It's quite a different mechanism.

J. Wilson: Whether you lose it or whether you spend it next year, it still basically serves the same purpose.

I had a couple of other questions on FRBC. I'll get off this one for now. In the Ministry of Forests, how many of your employees are funded by FRBC? I realize that they are FTEs and they are paid by the Ministry of Forests, but what is the exact number funded by this program?

Hon. D. Zirnhelt: When they're fully staffed up in those positions, those FTEs are fully staffed at 386.

J. Wilson: Does the minister expect an increase in the number of programs that will be funded directly by the ministry, or will there be a decrease? Are there any projections or predictions here?

Hon. D. Zirnhelt: We have no plan to change the programs that are reflected in this budget. In future years government might want to reduce spending, so we might have to look at the programs we have and in fact reduce the number of programs. But we have no plans right now. This budget doesn't reflect an intent to decrease the funding in years to come.

I'd like to reply to a previous question that the member for Cariboo North had: how much money is being spent this year, how much is targeted to be spent on the workforce, which is comprised of two programs? The forest worker employment training program expects to spend $3 million, and the value-added training program expects to spend $2.574 million -- for a total of $5.574 million. That's the targeted expenditure for training under FRBC this year.

J. Wilson: I have another area. I will leave FRBC for a moment. The figures which you have just supplied to me I find interesting, in that we had an increase last year of 0.4 million cubic metres of wood that went down to a No. 3 stratum. Converted into dollars over the previous year, that is 

[ Page 1393 ]

a considerable decrease in revenues from the forest industry. Can the minister explain to me why he has this large increase in the change in the stratum?

Hon. D. Zirnhelt: I think the decline in volume just has to do with the stands in which people are operating. You have to reflect on the fact that at that time pulpwood was a high price, and they could have been harvesting in pulpwood stands. I imagine that when the price is up, they go into those stands in a higher way. But it doesn't necessarily mean a reduction in revenues. It depends on what that volume offsets. There may be low stumpage in another band of wood that has been displaced by this No. 3 grade.

J. Wilson: I guess I could construe this as a question. With the implementation of the code, we've seen a very large increase in the number of employees and the actual cost to run the Ministry of Forests. Taken over the last five years, the budget keeps growing and growing. Today we have a lot of unhappy workers out there on the land base. These people have not got the security they need, and the reason they don't have the security is that today the available cutting permits and roadbuilding permits are becoming harder and harder to put in place, and they're not available when they are needed. Logging crews are being shuttled from one area to another. They cannot rely on a workplace within a certain area for a certain period of time. They could be there a week or two, or a month, and then they're relocated to somewhere else within the district. Why is the level of service and the availability of cutting permits deteriorating rather noticeably when we have such an increase in the expenditures within the Forest Service?

Hon. D. Zirnhelt: More is being asked of the ministry employees. The Forest Practices Code has some onerous responsibilities. They are asked to do more to check out cutting permits. We have maintained the flow of cutting permits, so that's a major achievement, given that there's more work to be done. When you talk about the growth of the ministry, it's in the context that a major cut was made in the early eighties, to the detriment of forest management, I think. We are starting from a very, very small base, and it's questionable whether we've got enough people out there taking care of the forest now.

You talk about logging crews moving from one area to the other. As the member knows, they are taking more and more wood. They are getting bigger and bigger, so they consume more wood. As they consume more wood, it's not reasonable to expect them to operate on a diminishing land base. They've cut all the easy areas, and now, to a large extent, they are getting into the harder areas where they have to log in different ways. Logging equipment is becoming more specialized, so they might have to move to work with that specialty. But I would like to take you back a few years when loggers had to quit when it was too cold or the snow was too deep or it was too wet. It was always a bit of a.... It wasn't a year-round employment; you sought that.

It is more difficult under the Forest Practices Code, but there is no way we are going to harvest in a sensitive way and still maintain full employment, no matter what the weather or the season is. It's a combination of factors, but I have to remind you that the wood is getting in; the wood yards are full. They aren't buying private wood; you know that now. So there is no shortage of wood being brought in.

J. Wilson: The minister has made the comment that there is no shortage of wood. When I look around at the yards of the mills in the interior, I would say that it is the biggest shortage of wood I've ever seen for this time of year. Several of the operators have said that the reasons they are not buying wood this year is the fact that we are faced with a rather unsteady market at the moment, and we are on a quota system which has not yet been sorted out. Would the minister care to expand on that?

Hon. D. Zirnhelt: Without the agreement that's been made, which establishes a quota for Canada, there would be a 20 percent tax put on timber leaving the country, and there would probably be less employment, less wood being harvested and more uncertainty. I think as much certainty as can be expected has been achieved by the agreement between Canada and the U.S. Without it, it was a very uncertain future.

[7:30]

As to the logs that are being harvested, there has been lots of rain in some parts. They will be scrambling, when the weather turns better and freezes up, to get the amount in, but the companies have, over the years, taken in their cut. I did say that there seem to be fewer but larger logging contractors, and they have special needs to operate with the kind of equipment they have.

J. Wilson: An interesting prediction is that the tariffs, which are put on after we reach a certain level, are going to impact the industry, and we can expect a reduction in the volume of wood harvested because of them. Has the ministry done any research into this area to see what the impact will be?

Hon. D. Zirnhelt: Well, that's one possibility, but nobody can predict the future. If for some reason the commodities aren't exported, then there's the possibility that they can be turned into value-added products which go to a different market -- probably an Asian one -- so not all is lost. On any given day, if you talk to somebody who is not in an optimistic mood, he can be pretty negative about the future. But I dare say that there are a lot of people wanting to get their hands on timber in order to put it into a product that they can sell.

J. Wilson: I would like to go back to Bill 7, which we passed here a week or two ago. One part of it had to do with salvage operations. As I viewed it, the intent of the bill was to allow salvage operations to proceed on the land base. At the same time, it required people with an area-based tenure to do salvage work rather than leave it, and if they didn't do it, then someone else could be given the opportunity to go in and harvest the wood that was going to be lost. Is that the primary and only focus in that part of Bill 7?

Hon. D. Zirnhelt: Yes. The simple intent of the bill was to allow or require that a licensee do the salvage, and in the absence of them doing so, the wood could be made available to somebody else and taken off the licensee's quota.

J. Wilson: In an area-based tenure, then, the wood that is salvaged is part of the cut. If it's in a small business area, then what would apply?

Hon. D. Zirnhelt: If I understand the question, the member asked what would happen if it was in a small business area. Well, if it was part of a small business sale, then whoever had the small business sale would be billed for the waste, and it would be offered again. It would already be charged, then, against the small business program. That's what happens 

[ Page 1394 ]

now. What the bill does, if the wood is in an area of the major licensee's responsibility, and they waste it is allow it to be charged against the big business program -- rather than charge it, as is the case now, against the small business program.

J. Wilson: We are not in a block that has been put up for bid or sale. This salvage will probably be strips of blowdown on the perimeters of a block that has been removed. It may be within a volume-based area that is utilized by a major, or it may be in an area where there is no major licensee operating. It could be strictly small business. Now, you have a volume of wood that's extracted under each program, regardless of whether it's by a licensee or the small business program. Will the salvaged wood that is removed come off the allowable cut in that area?

Hon. D. Zirnhelt: If the timber is in an area of responsibility of the major licensee, it will be taken off their quota; if it's in an area of small business, then it will be taken off the small business quota. It could come off the Forest Service reserve that is controlled by the district and regional manager.

J. Wilson: I assume, in that case, that the same thing would apply to a woodlot. If you have some blowdown or some bugwood in there, or something like that, will it come off your cut for that year or off your five-year cut?

Hon. D. Zirnhelt: It seems to me to be highly unlikely on a woodlot, which is a small area. The woodlot licensee is going to try to get their volume off it, and if there is some salvage volume, they would be directed there. I don't imagine that their development plan would be permitted if it didn't address the salvage area, because the purpose of the area-based licence is to take care of all management in the area. But yes, it is possible that if that licensee refused to harvest that wood, it could be put up for bid and charged against that licence.

J. Wilson: The rules seem to vary somewhat, depending on the type of operation you're in at present, and, under this new act, I'm wondering whether the ground rules are going to change at all or whether it is just the enforcement of the harvest that is being changed. In some cases, where we have a leave strip that is starting to be lost, and it's in a volume-based area of one of the majors or in an area-based tenure, then when you reach a certain percentage of that wood having blown over, they will come in and clearcut a strip to clean it up. Generally speaking, the stumpage on that strip will be 25 cents a metre, even though there is considerable green wood in it still standing, but the easiest way to approach it is to clearcut it and remove it all. Will there be any change in the way that the stumpage is set on these things?

Hon. D. Zirnhelt: This bill doesn't change anything there. The wood that's dead-and-down should be charged at the salvage rate; any green wood should be appraised according to the manual. But if it happened to be a long way from town, it might not go for a whole lot more than that. But it should be appraised as green wood. What could happen under this new legislation is that rather than a company coming in and taking a whole a strip to make it economically feasible under their standards, they may be willing to forgo that amount of wood and allow a salvager to take just the dead-and-down. I can see that happening now, because the mechanism is there, and we can charge the dead-and-down against the licensee's quota. I think the bill might help.

J. Wilson: Does the minister see this approach becoming policy out there, or it just an idea at this time?

Hon. D. Zirnhelt: Given that it's the law, it is now a policy that it can be sold to salvage and be charged. I expect the effect of that policy will be to encourage salvage in those stands. That's what we expect will happen under this legislation.

J. Wilson: I'd like to look at a woodlot situation now and find out what we can expect from this new legislation. In the past, any wood that you took out that was salvage wood was usually applied against your cut. In many cases the stumpage was at the discretion of the district manager. Now, in some cases, the stumpage that was applied to the salvage wood was the same as the stumpage that applied to the good wood that you harvested. Under this new legislation, will the stumpage that is charged against salvage wood on a woodlot be levied at the rate of salvage wood, which generally is 25 cents a metre at this time? Will it be applied to the cut? Say you have a cut -- a five-year cut -- and then in six months you get some blowdown in there. What are you going to do then? Are you going to leave it for four years before you can harvest it and put it against your cut? Will it be extra on your cut when you are in a woodlot situation?

Hon. D. Zirnhelt: It depends on the situation, I guess, and how desperate the need to get the wood out, but there may need to be a revision to the management plan. They may agree that he can cut another year and take that wood out, and then not cut any more for another few years. I would expect that the best thing for the forest and the management of the woodlot would be to get out the salvage. So they may advance the cut in order to deal with that, but that will have a falldown effect later in the management of the woodlot.

J. Wilson: The idea of salvaging the wood before it's lost is what we all want, and I think that's what we all work for. The only problem is that you sometimes end up with wood that is No. 3 wood; it's not good-quality wood, and it may just go for chips. The stumpage that's applied to it at present could be in that $40 to $50 range, if it's on a woodlot. When this happens, that wood is not harvested at the moment; it's left there because it's not feasible.

[7:45]

Hon. D. Zirnhelt: Having had a little experience with that situation, it sounds to me like the advice would be to make sure that that person asks for a scale -- maybe a piece scale -- or to select out the loads to make sure that they are scaled separately, rather than going to a stratum, which would end up being billed at a higher stumpage rate. If you know of a situation where that has happened, and we can document the case, we can find out the explanations for why certain things happen. If you're suggesting here that somebody could come in and salvage it at a salvage rate, I see no reason why the ministry wouldn't assess the salvage for the woodlot owner in the same way that they would assess salvage for the....

Interjections.

Hon. D. Zirnhelt: There are some distractions over here that I'd like to delegate to my deputies. I know that they're trying to take a serious matter and make a joke out of it, but 

[ Page 1395 ]

I know that the member for Cariboo North is as interested in this topic as I am and that we're both determined to get to the bottom of this problem.

I would say that there's got to be a mechanism. If they'd sell it to somebody else and take the quota at salvage rates, take it off the quota of the woodlot owner, they should be able to assess for the woodlot owner at salvage rates.

J. Wilson: That's a commonsense approach. It doesn't always happen, and I can give him some documentation that can show otherwise. That was the point of my questioning.

The other thing I was interested in on this salvage wood.... I assume that the ministry is going to consider issuing permits to individuals who can go out and do some salvage operations to improve the health of the forest and create a little bit of income for themselves. Is this correct?

Hon. D. Zirnhelt: Yes. They wouldn't technically be sales; they'd be timber sale licences. Yes, the purpose is to create employment from something that might otherwise be lost. I don't know that you'd go so far as to say that salvaging always improves the health of the forest. I think you might make that case. But certainly it's to use product that otherwise might be wasted.

J. Wilson: It's a debatable point. As to whether it's good for the health of the forest, I guess if you're dealing with bugwood, it could be. If we let it go, we could have a tremendous loss out there. That is the way I look at it.

On these operations where you're issuing cutting licences on the salvage areas, what will the stumpage on those areas be assessed at?

Hon. D. Zirnhelt: Having talked to my officials a bit about that, we think that what might be happening here is that something like a woodlot may have an assessment made for all of the wood on it. When it was cruised, there was a certain amount of dead-and-down, a certain amount of salvage and a certain amount of damaged timber. There was one rate that was applied equally across the whole thing. So that might be what's happening.

What we would advise, since this involves a lot of detail, is that if you'd like to bring the details, we'd sit down with the officials in that program, go over it and try to determine what happened. You may be finding some flaw in the system, and I alluded to that. But it may be just a question of averaging the stumpage over all types of trees coming off the woodlots. That may well be what's happening.

J. Wilson: We were playing with the mike here, so I think you missed my last question. It's on the stumpage which will be assessed on sales for salvage by independents. How will the stumpage rate be assessed on those?

Hon. D. Zirnhelt: The assessment would probably be this. There would be the minimum stumpage for poor-quality wood. If the better-quality wood is blown down but green, for example, it would be assessed for its value less its logging costs. If there's a higher logging cost, it's because a real jackpot is in there. Otherwise, if there's green wood on the sale and some green wood would have to be salvaged, if that's the best thing for that site, then that might be appraised at a different rate. But there will be an appraisal done on a site-specific basis.

J. Wilson: I think we've beaten that one to death.

I had a couple of questions on innovative forest practice in another part of the bill. I believe the minister made the statement that in order to increase the harvest from these areas.... Now, they're not an area-based tenure; they are a volume-based tenure. Is this correct?

Hon. D. Zirnhelt: Yes, that's correct.

J. Wilson: In a volume-based tenure, it was my understanding that in order to increase productivity in these areas, the licensee would be investing money of their own out there on the land base.

Hon. D. Zirnhelt: Yes. It's expected that the licensee may make an investment of their own, but they might apply to FRBC for dollars as well.

J. Wilson: So, then, there is no direct requirement of the licensee to invest their own money in this venture. It could all be taken out of FRBC. Is this correct?

Hon. D. Zirnhelt: Yes, it could all be FRBC dollars.

[G. Brewin in the chair.]

J. Wilson: We were also told here that these pilot projects would be limited to one per region, I believe. The other thing I would like to know is: have they had boundaries laid out on them yet?

Hon. D. Zirnhelt: We didn't say one per region. There happen to be six regions and six pilots, but there could be more than one in a region. The boundaries have not been laid out for any of them yet.

J. Wilson: I assume that these will be new and that they will not take over existing volume-based tenures.

Hon. D. Zirnhelt: Yes, they will be part of existing volume-based tenures.

J. Wilson: They will be, or they will be part of them? Will there be changes? Will they be increased or decreased, or will they come in at the volume that presently exists within that tenure?

Hon. D. Zirnhelt: The plan would be that a licensee enters into an agreement with the Minister of Forests to apply certain treatments to a certain area within the timber supply area in which their volume-based tenure is. So there's no question there will be an area to the management, and there will be contractual arrangements to apply treatment to those areas.

J. Wilson: Could the minister detail to me where these new tenures stand at present? Are they simply at the stage where they're being talked about? Has anything been drawn up yet as to an agreement on any of them? Are they simply something we're thinking about at the moment, or are they something that exists in actuality?

Hon. D. Zirnhelt: There are two agreements where we have letters of intent; with a third one we have indicated that 

[ Page 1396 ]

we are prepared to move forward with a letter of intent. We have draft agreements for all three of them; those agreements have no areas mapped out yet to which the agreements apply.

T. Nebbeling: I would like to change the subject a little. I think the other side won't mind that right now.

I would like to start asking some questions about the softwood lumber supply. This afternoon when the subject was mentioned by my colleague from Surrey-White Rock, the minister made a plea that consisted of asking for assistance from this side of the House in dealing with our Liberal sisters and brothers in Ottawa to find a level of cooperation so we can do something that will be to the benefit of British Columbia. Somehow the feeling created by the minister's statement was that there was little or no cooperation given by the Liberal side in Ottawa when discussing these issues that are still outstanding pertaining to the softwood lumber supply.

[8:00]

Being a very accommodating individual, as maybe the minister expected, I did make a call to Ottawa. It was quite interesting to hear some of the background on what has happened there, and here as well, pertaining to the softwood lumber supply. The first thing I would like to ask the minister is: has he actually had any conversations with the federal Minister of International Trade?

Hon. D. Zirnhelt: No, I haven't.

T. Nebbeling: The reason I'm asking this is that the minister made the statement -- and maybe he was informed by his officials -- that indeed things were not as they should be. But looking at the background, I learned that the federal government was only pulled into the discussions with the Americans a year ago, and I believe the debate on softwood lumber has been going on for a number of years.

In order to get some background information, I would like to ask the minister to give me a rundown on what has happened in the last, say, four years, in which period I believe certain agreements were reached and then were broken -- if I can have the information. Why were they broken? Who negotiated during these years? That would help me get a bit of a grasp of both sides, because I heard something in Ottawa that I don't think I heard today in the House.

Hon. D. Zirnhelt: Just to clarify, there was no fault of the federal Liberal government given. I was just explaining to the member that with only six Liberal MPs here and the federal government being faced with 40 or more in Ontario, Ontario's interests would be at the forefront. I was saying that as a provincial government, at this point we're letting the federal government work it out. We're not trying to rock the boat. There's no need for me to talk to my federal counterpart. I'm taking guidance from the B.C. industry lead. I stand ready to escalate, if necessary, the political pressure.

At this point, we're positive. We think things are going well. We hope B.C. will gets its share of the quota. I was just saying that we need to stand together as British Columbians to make sure that, if need be, we're here for British Columbia first. I was just alerting the member to the fact that there are counterpressures amongst the federal Liberals, where they have many more seats in Ontario that they may wish to protect. That's the dynamic I was trying to explain to you. As for the version of the events you might have heard from them, I'd be happy to hear more about that.

Basically, there was a memorandum of understanding in 1986 with the Americans. Under that agreement, British Columbia increased its stumpage 15 percent, because Americans were alleging that we weren't charging market value for the stumpage. Under that, there was a right to give notice. The government previous to the Harcourt government, the last Socred government, gave notice; B.C. initiated the action. Canada gave notice to the U.S., and as a result of that termination of the memorandum of understanding, there were countervail actions that were initiated virtually immediately.

When we became government in 1991, we then fought a series of countervail actions by the United States. They threatened and took actions. There were a number of panels in the intervening years. No sooner would we win a panel than we would be faced with a change in the American domestic law, which then kicked in another countervail-type action. We're back in a situation now where they have a determination that the free trade agreement doesn't give us the protection we thought we had. As a result, we're forced to cut a deal with the Americans. The deal has been made. Now all that remains is that British Columbia gets its share, and then within British Columbia we find an equitable distribution among the types of producers. I hope that background is helpful.

T. Nebbeling: Give me some more material to ask a question, to clarify this. When this whole process started in '86, was that negotiation to set this 15 percent done by Canada as a whole or by British Columbia? Let's put it this way: was the 15 percent increase in the stumpage fee that was agreed on in 1986 done by a B.C. team or by a Canadian team?

Hon. D. Zirnhelt: In 1986 it was a Canada-U.S. negotiation. There were some independent actions by the then B.C. government that helped break the logjam they were in, so to speak, but I'm a little vague on those details. I'd be happy to provide the member with an assessment, if he likes, but I don't think it's germane to the situation we're in now.

T. Nebbeling: I'll just try to get a vague idea what our role as British Columbia has been, first, and the role of Canada. At the time in '86 -- maybe you can recall this or you have the information -- there was some independent B.C. activity going on. Who was doing that? Were we, as a team from British Columbia, going to the States and trying to negotiate something different from what the Canadians were negotiating? Or was this done in cooperation with the federal government?

Hon. D. Zirnhelt: Just to clarify the record, in '91, when we became government, there already were noises and threats of countervail actions, so it was well underway. It was debated in this Legislature in the late eighties -- in '89-90.

British Columbia's role has been to support the Canadian action and to put forward the British Columbia story on our stumpage system and our timber management system. We did that and funded that because it was in our own interest. But we always supported the Canadian side, because, indirectly, they were at times targeting each province's stumpage system and market system. Each province had to put forward information as part of the Canadian case.

T. Nebbeling: I want to make it clear that I'm not questioning the expenditure. To achieve the goals that had to be achieved, the money had to be spent. That's not the issue. What is an issue is that I get the feeling that, from time to time, we as British Columbians went out on our own to make a deal with the Americans, and it did not necessarily benefit the overall Canadian strategy, or was not part of the overall strategy.

[ Page 1397 ]

Whenever the British Columbia government felt a need, since 1991, to again take initiatives to go after changes in the countervail, go after changes in the agreement, was there any discussion going on with the other provinces that were affected by the softwood lumber agreement?

Hon. D. Zirnhelt: There are regular stakeholder meetings in Canada, so British Columbia is always working with the other provinces. This government, though -- neither the Harcourt government nor the Clark government -- has never gone out on its own to strike a deal on the side. It was the Socred government before us that actually made the deal in 1986, which was seen as a side deal. That's history. We've been trying to work very closely with Canada, because it's an international trade matter. It is the jurisdiction of the federal government. We argue, of course, that because forestry is a provincial jurisdiction within the federation, they have to respond to the provinces. So the federal government is called upon to listen to the provincial governments.

T. Nebbeling: If we can go back to 1994-95, when did the federal government start its last round of negotiations on behalf of the four provinces?

Hon. D. Zirnhelt: January '95.

T. Nebbeling: When was this deal completed?

Hon. D. Zirnhelt: Approximately April '96.

T. Nebbeling: What happened in 1994? Did nobody talk to the Americans about certain conditions of the agreement? We know that the federal government didn't. Did the provincial government have any discussions going on with the Americans at that time?

[8:15]

Hon. D. Zirnhelt: In that time period we were, in effect, in court before a panel. It was a NAFTA panel, so we weren't having discussions. No one was having discussions. Only when the tribunal concluded did we open up discussions.

T. Nebbeling: That tribunal concluded, then, in 1995, and at that time you started, together with the federal government, to work toward the last deal?

Hon. D. Zirnhelt: The panel concluded at the end of '94, so discussions began in January '95.

T. Nebbeling: Who had discussions with the panel? Was it the provincial government? Was it industry people? Somebody must have spoken to.... When this panel discussion was going on -- whatever they were discussing -- who spoke and dealt with that panel?

Hon. D. Zirnhelt: The discussions before the panel were paralegal discussions undertaken by the lawyers for the federal government. They were backed up by other advisers, but at all times the discussions were led by the federal government.

T. Nebbeling: So the $1.9 million spent in 1994 was a contribution towards the federal discussions that were held in the States, in Washington, with what I suppose was a NAFTA panel working on behalf of British Columbia. So the federal government was working on behalf of British Columbia in that time frame.

Hon. D. Zirnhelt: Well, at the time all provinces had their own counsel contributing toward the federal effort. I'm not sure where the member is going with this. He seems to imply that the federal government may have some problem with the role that the province played. The role that the province played in this recent round.... Together with industry, we invented the notion of a quota system, so we made a major contribution toward solving a national problem.

T. Nebbeling: Where I'm going, Mr. Minister, is that the information given me from Ottawa is that B.C. was on its own in 1994 trying to make a deal that failed. Then in early '95, B.C. came to the federal government and started to work together with the other three partners on behalf of the other three provinces. So, early in 1995 -- this is what I was told; I'm trying to get to the bottom of this, if this indeed was the case -- B.C. was doing negotiations on its own. That's what I was informed, and I would like to hear that that is either true or not.

Hon. D. Zirnhelt: I'm sitting beside the B.C. government's chief negotiator, and the answer is that it's absolutely untrue. We'd really like to know your sources and straighten that out.

The Chair: I'd also like to have you tie that to the estimates that are the topic of these discussions. Tie it a little more closely.

T. Nebbeling: The thing is that this $1.9 million was spent and there was no explanation for it, because we were not negotiating. The lawyer in Washington was paid $1.9 million by this government, so I'm trying to find out why that money was spent. Now we hear that they did represent us in dealing with the softwood lumber deal under the NAFTA panel. So I think this ties in with the estimates.

I will have a discussion with the minister outside the chamber on what I have been informed.

Hon. D. Zirnhelt: Hon. Chair, I think the member is owed an explanation. I just didn't know what the question was.

Even though we won a number of panels -- I believe we won three -- and even though we won in the international tribunal, such as it was, the Americans would still threaten. So we always had to be on the defensive. This problem has always been with us, and we're trying to cope with it. It's not unusual that we would be trying to find out what's going on in Ottawa. We would need to know what they were doing to change their domestic law. They had a full-time lobby -- a big lobby -- from the Coalition for Fair Lumber Imports. They were always at their federal government, so it was incumbent upon us to make sure we had the maximum amount of intelligence. I daresay that the activities of British Columbia were at all times known to the federal government, and there was no sidestepping done here. It has not always been a major issue for the federal government, as big as it is for us. It's life and death for the economy of British Columbia, so we had to be there with our eyes and ears and to know what was going on. That's probably what the member's source was referring to. But there was no dealing going on at that time.

T. Nebbeling: At least we got to 1995, and there is a deal made. I felt it was important to ask those questions, because of earlier statements.

[ Page 1398 ]

Now we have a deal signed, and I would like to hear from the minister what exactly is happening with the quotas, the numbers. How are they divided up between the provinces? What is the assurance that these quotas are available to us?

Hon. D. Zirnhelt: The division of the quota between provinces is a responsibility of the federal government. They're doing some research now to determine historical patterns. It hasn't been decided yet. We are continuing to press, as we see necessary, to ensure that British Columbia gets its share of that quota, and we're working together with the industry to achieve that.

T. Nebbeling: What is the total amount of lumber that goes over the border? What percentage of that lumber in the past has traditionally come from British Columbia?

Hon. D. Zirnhelt: The volume is approximately 15 million to 16 million board feet. Of that, 55 percent is British Columbia's contribution to the total.

T. Nebbeling: So about nine million board feet?

Hon. D. Zirnhelt: Yes. It's closer to ten million, I'm told now, so it's closer to two-thirds -- 60 percent.

T. Nebbeling: Who is the other big supplier from within the four provinces that tap in to this quota?

Hon. D. Zirnhelt: Quebec.

T. Nebbeling: Can the minister or the deputy explain how the deputy minister is actually involved in negotiating these quotas and these parts of the quotas? There seems to be an imbalance in how these quotas are divided at this point. I think it's great that we get 66 percent of the total, but that must create some bad blood in the other provinces. How does the minister deal with that particular problem, and how do we entrench our share?

Hon. D. Zirnhelt: The member has just put his finger on the major outstanding issue, and that is the quota between the provinces. The federal government has the responsibility to do that. For his information, the Ontario government takes the position that there should be no provincial quota -- that it should be allocated by company, which then would allow a company operating across the country to vary its amount. British Columbia takes the position that there should be a provincial quota and that within the provincial quota the distribution between companies would be a matter for the province and its stakeholders to decide.

T. Nebbeling: So it's really a war between the provinces, rather than between the federal government and the province of British Columbia, as was seen a little bit earlier -- the interference was with the federal government. I now get the feeling that it's more provincially driven to fight for the share that we have today.

Hon. D. Zirnhelt: This brings us full circle to where we were. The concern I have as a provincial Minister of Forests is that if the federal government leans towards Ontario -- where there are, I'm told, 99 Liberal members now -- the federal Liberal power may influence the federal government to the disadvantage of B.C. That's what I was saying; this is the concern we have. It is the constitutional responsibility of the federal government, we argue, because of our jurisdiction in forestry, that they should listen to our advice. Hopefully, if they get one story from all the provinces, it will be easy. But if there's competition between the provinces, then we say it's important that British Columbia's view be held. That's why I entreated you and your colleagues to assist, if you can, in ensuring that British Columbia gets its fair share.

T. Nebbeling: Maybe the minister can help me with some of it, because it is important how these shares are falling. It is 66 percent; what was it in 1995, 1994, 1993, 1992, and 1991? Have we, over the years, taken more and more and more away from these other provinces, or has it always been about that percentage?

Hon. D. Zirnhelt: I don't have the figures here, but our share has eroded moderately over the last few years, since there has been some second-growth timber come on in some of the other provinces. Of course, this is the danger: that they'll ramp up their exports and then try to show a bigger historical share. That's the danger for British Columbia, and that's why we're most keen to go back and make sure that we maintain the historical share that British Columbia has had under a quota system.

T. Nebbeling: The minister said "eroded" in the last two years? Those are years that the control of the government was in the hands of the party that you are affiliated with. Why would you have a problem today with a party standing up for the rights of Ontario when your party didn't stand up with your NDP colleagues in Ontario during the three years when you saw these erosions happening?

Hon. D. Zirnhelt: Hon. Chair, I would ask the member's indulgence -- ask the question again. I'm sure he's quite capable of asking it in exactly the same way.

T. Nebbeling: The minister made the point that the share that British Columbia has today could be under attack because there is a Liberal government in Ottawa today. He just told the House that during the last three years, when there was an NDP government, they actually lost their share. I don't think he should put blame on the Liberal government today, when the NDP government obviously succeeded in Ottawa in doing what he doesn't want the Liberals to do -- that is, maybe getting a difference balance in place.

Hon. D. Zirnhelt: I didn't follow everything there. It's not that British Columbia's total amount reduced; it's that it has been increased in other provinces, because they've had quite a bit more timber come on stream. We're saying that if you use only the last year or so, British Columbia's position would have eroded. But I can assure the member that British Columbia has been exporting everything it can, and that has been what has driven some of the countervail actions. In fact, the argument has been made that we have been flooding that market. That's what they say. We don't accept that; we accept that we can export, and they should receive what we have.

It's not a matter that we can't find a comfortable position here, except to say that we expect a British Columbia-first policy when it comes to the development of the quota system. So I simply request that this is something that, like on other issues, British Columbians stand together on, to put the interests of British Columbia first.

[ Page 1399 ]

[8:30]

T. Nebbeling: Obviously I do not disagree with the minister at all. I keep saying that during the time that there was an NDP government, British Columbia lost a percentage of its share. That is the point I was trying to make, because the minister is saying that he fears they will lose more share because there is a Liberal government now.

The share of British Columbia -- the close to ten million board feet: does that all go straight out of British Columbia, or does it go to other provinces that ship it out? Can you give me some idea?

Hon. D. Zirnhelt: I just want to let the member know that the quantity of British Columbia's exports over this period has risen in the recent years.

In answer, yes. Some of our lumber goes to other provinces before it's exported.

I just want to caution the member that the discussion is of a very sensitive nature right now, and if British Columbia and Canada don't find a way to consolidate their position, we might be collectively weakened. I'm limited, really, in how much I would like to put on the record in a casual debate about this. I would be very pleased to brief the member fully on the technical aspects -- I'm more than happy to do that any time for any member of your caucus. It's just that we find that every word has the potential to be distorted. I have to be very cautious about what I put on the record, because it will be seen as an official position of the province, when we're really having a more general debate about the subject.

T. Nebbeling: In the interests of the well-being of British Columbians and of the industry, I will certainly respect what the minister has just said.

Hon. J. Cashore: Hon. Chair, I'm very pleased to rise in my place during these estimates and provide my colleague with an opportunity to take a very, very brief break and attend to some matters. He'll be back very, very soon.

I just thought that, during the moment I have here, I would like to reflect on the last five or six years -- actually, going back to the administration prior to the Harcourt government and recognizing the steps that have been taken leading to the protected-areas strategy: Parks and Wilderness for the '90s, starting before that, and the role of the Ministries of Forests and Environment in that process.

Coming from the area of Coquitlam, one of the results of that process -- I'm very proud of the Ministry of Forests for the way in which it was handled -- was the eventual designation of the Pinecone-Burke area as a protected area. One of the hallmarks of that was the way in which a great deal of respect was shown not only for environmentalists but also for workers in the forest industry, and the sensitive way in which their concerns were approached, recognizing that we were having to deal with some very difficult issues while addressing the kind of turnaround we saw during that administration. That is something I think we can be very proud of.

It's helpful when we're able to acknowledge, on both sides of the House, that there are values and issues that we want to see achieved, so that we can truly have a sustainable resource while continuing to enjoy the kinds of natural amenities that are in such a pristine area, which is now being protected.

With that, I would like to say that I think that's about the extent of the part that I'll take in these estimates on this occasion.

T. Nebbeling: I really appreciate the little interruption on behalf of the minister. The last time I was asked to keep talking for a little while.

The point I was trying to make to the minister when he hastily had to leave was that.... First of all, I will respect very much what you said as far as the concerns you have that you can't speak....

Interjections.

T. Nebbeling: I thought there was some kind of decorum in this House.

Anyhow, Mr. Minister, the point I was trying to make before you walked out of the room, and the point I tried to make when somebody else came in front of you, is that I will respect your need for sensitivity. I will not pursue questions as far as the relationship with the other provinces and the numbers are concerned, for that reason.

But I should also say that I think it is very important at this time to design.... I wasn't going to mention it, really. I have asked verbally for a lot of information in writing. Four weeks ago I was given a 15-minute briefing. It was only 15 minutes, because there was no documentation whatsoever there. I've been to other briefings where folders, reports and information were brought to the meeting and handed out to me, and then I had other stuff I was getting. All I received were four sheets of paper, with some very summary information. Most requests finished with "More information to be collected -- will follow later," but it never followed later.

Interjections.

T. Nebbeling: I can't believe this.

My asking more questions during this whole process over the last two days is really because there has been no information given to me or to my colleague from Cariboo North. One of the reasons he has been asking a lot of questions, which maybe should have been done in a briefing, is that element, as well. Your ministry has been very unaccommodating. I regret to say that, but I have to say it now, because you have asked me not to ask certain questions dealing with the countervail.

I still have some questions that have to do with the lumber deal, but they are more on a local issue. One is: where does the timber that goes over the border come from traditionally? Is it coastal timber? Is it interior timber?

Hon. D. Zirnhelt: It's mostly interior timber.

T. Nebbeling: The reason I am asking this is that I was told that it was mostly interior timber, and I'm getting complaints from mills in the interior that they cannot get their timber within the quota of the period they are in. As a consequence, they have to look at either sitting on the timber or shipping it over the border and paying the countervail of $50 or whatever is applicable to that timber. How is it locally controlled to make sure that every area gets its fair share? Are you working on a provincial quota so that all areas and all industry participants, big and small, can indeed be part of this whole timber supply?

Hon. D. Zirnhelt: First we need the interprovincial quota, and then we need to sort it out within the province. Just so you know, it's Jake Kerr of Lignum Ltd. who heads the 

[ Page 1400 ]

negotiation on behalf of British Columbia. He operates solely in the interior and is most sensitive to the interior operations. But, of course, everybody will be vying for a larger share of the provincial quota right now, as well, so we have to do the same thing the federal government is doing -- that is, establish a fair quota base. We have information. There are various debates going on about what role timber brokers play in it. That sort of thing has to be worked into the internal B.C. arrangement. We are trying to advance those discussions and to be ready for a determination once the interprovincial quota has been decided.

T. Nebbeling: One of the problems that I think is developing on a provincial basis -- and I was trying to hint at that already -- is that the smaller mills, which traditionally have been using wholesalers, fear that wholesalers will not be given a quota and that for that reason, they will not be able to use their traditional source. Obviously they do not produce enough volume to become independent shippers to the States. It would make it very difficult for the ministry to control that as well.

Hon. D. Zirnhelt: If I can explain to the member, we're working with the wholesalers right now. We know the wholesalers represent some of the smaller producers who don't have a large enough amount. But what we fully intend to do is have transferrable quotas, so that the small producer who takes the quota will then be able to transfer it to the wholesaler and have it registered that way. That's a pretty crude explanation, but we are making every effort to make sure that the smaller producers do get a share of the export quota.

W. Hurd: I just have a couple of issues I want to canvass with the minister tonight. I wonder if the minister could provide us with an update on the work that went into the lumber credit system in the industry. I'm aware that there was a lot of work done to refine a proposal to allow the trading of lumber to the remanufacturing sector in exchange for standing timber, I think. I haven't heard how the process evolved and what resolution has been reached. The last information I had was that we were still in an experimental stage with this initiative and that it had been deferred. I wonder if the minister could just take a minute to advise us where the entire issue of the lumber credit system stands in the province.

Hon. D. Zirnhelt: It was a six-month experiment. The data have been collected; a report is being drafted. At the last forest sector strategy meeting, there was a verbal report given to members to update them on the results. The government will receive the report, and when we receive it, we will consider the alternatives that have been recommended.

W. Hurd: I wonder if the minister could amplify on the six-month experiment. What was done? Was it a computer model, where the data were introduced to determine whether the system was workable? Was it actually a pilot series of licences, in which a major licensee was able to trade lumber actively to determine whether partnerships between the reman sector and the major licensees could be forged? I wonder if the minister could just tell us the nature of the six-month experiment and what information the ministry expects to glean out of it. Or was it under the auspices of the forest sector strategy group?

[8:45]

Hon. D. Zirnhelt: Targets were set for the coast and the interior, and what's happening right now is that we are registering the results of the targets to see what the achievement was. What happened was that the major licensees registered, and we kept track of how much they transferred to the remanufacturers, the value-added sector. Having tracked that, we now have the data, and we're assessing that data to see what they achieved, according to the targets.

W. Hurd: Can the minister, then, expand on the way the data was collected? Was it provided by the licensees? Was it the subject of any sort of internal audit? One of the challenges identified with a lumber credit system was the difficulty in tracking the transactions. It's challenge enough to deal with the standing timber in the province and where it moves.

I wonder if the minister could advise the committee what systems were in place to verify the trades. I wonder also if he or the ministry has had any chance to review the data and could provide the committee with some sort of assessment about what has happened with the program. I'm assuming the six-month experiment is over and the data is being tabulated. I wonder if any preliminary assessment has been made by the ministry of the success of the program as it was proposed.

Hon. D. Zirnhelt: No, there has been no auditing. We had industry report the information, and we take it as correct. If there was any question about the figures, we can go back and check. The preliminary results that we have.... Again, they're preliminary, and I hope you keep that in mind. The targets were 4 percent for the coast and 5 percent for the interior. That's what we believe the targets were; the note we have doesn't tell us.

The preliminary results were quite favourable: the interior reached a target of 10 percent, and the coast reached a target of 16 percent. That's a weighted average of the percent of harvest supplied. Those are the preliminary results, so they're quite favourable.

W. Hurd: I guess the most obvious question is whether the model was based on an incentive system or a penalty system. The concern with the original proposal was that it was going to be based again on a penalty provision, where certain targets for the movement of raw material to the reman sector would be set, and if licensees didn't meet that target, they might lose some cut as a result. Was the model based on a system of licensees potentially losing cut, or was it based on an incentive system, whereby if the major licensee did meet the target for providing reman material, there were additional harvest levels allocated? I'm just trying to straighten out whether we're dealing with a penalty system or an incentive system with respect to the lumber credit system.

Hon. D. Zirnhelt: It was a neither a penalty nor an incentive; it was strictly voluntary.

W. Hurd: Thank you. That clarifies it.

There are two other issues I want to discuss with the minister. One is the status of the forest jobs commissioner in the province. I'm certainly aware that Mr. Cochrane was appointed to oversee the impacts of the Vancouver Island land use plan, and I believe there were also forest jobs commissioners appointed in the Kootenays and the Cariboo. I'm not too sure about the Cariboo. I wonder if the minister could first advise us whether his ministry receives an annual report of 

[ Page 1401 ]

how many job losses were identified by the forest jobs commissioners, and what steps they might have taken, independent of FRBC, to catalogue the impact of the land use plans -- the job losses. Perhaps you could tell us what they might be.

Hon. D. Zirnhelt: The only commissioner who is technically a forest jobs commissioner is the one on Vancouver Island, and he reports directly to the Minister of Forests. The other two report to the Minister of Employment and Investment. They are extensions of the job protection commissioner, in effect, so they report that way. They are called resource jobs commissioners, so it's somewhat broader.

In the case of Mr. Cochrane, he has submitted an annual report, and he does report on the number of clients he has dealt with. I'd be happy to make a copy of his report available; I don't have it here. It was released before I was the minister. We're happy to report that he does report annually to us. I actually don't have the information on the others, but I do know that in the Cariboo they have a responsibility for economic development beyond the job loss, because the negotiations that took place around the land use plan were really for no net job loss. So we expect that he would have to be proactive. But he's there in case he's needed.

W. Hurd: That certainly invites a discussion about the definition of job loss, and I know we dealt with this to some extent in the debate over the amendments to Forest Renewal B.C. The minister will be aware of some criticism of the methodology applied by Mr. Cochrane to the job loss issue and of what, in essence, constituted a job loss. I'm aware that in the mind of the forest jobs commissioner, an extended period of layoff from the industry was not necessarily considered a job loss. Since the definition is crucial in terms of his role and also, one would assume, ultimately for assistance from Forest Renewal B.C., I wonder if the minister can tell us whether that controversy -- that initial disagreement -- has been clarified, in terms of the definition of a job loss and what kind of clients Mr. Cochrane might accept as being people who have officially lost employment in the forest industry.

Hon. D. Zirnhelt: There is no resolution to that. But we are making progress towards that and intend to resolve the issue of the definition of a displaced forest worker as we define that through the consultations under Bill 12.

W. Hurd: What I hear the minister saying is that Mr. Cochrane has not been operating with a specified methodology in terms of identifying job losses. I don't have the benefit of the report, of course, which the minister has pledged to provide to us. Is the minister satisfied that the forest jobs commissioner has been applying fairly and evenly some formula that does not potentially disadvantage those who are on a definite layoff? Or is the matter of what constitutes a job loss still in the hands of the commissioner, to make a judgment call?

Hon. D. Zirnhelt: Mr. Cochrane did start out with a fairly narrow definition of what constituted job loss, but in recent times he has expanded the definition to include people who were involved in protracted layoffs or reduced workyears. He has been actively developing programs that would channel those people to Forest Renewal B.C. So he's actually setting up, in effect, SWAT teams to go in and work with people where numbers of people are experiencing a reduced workweek or a reduced workyear.

W. Hurd: I'm familiar with the fact that part of the problem in this particular issue emanated from the Clayoquot Sound issue and the fact that there was a target harvest level for that region, based on the recommendations of the scientific panel and others. I wonder if the minister can tell us whether the target harvest level identified in that particular plan was met last year or whether he expects it to be met this year. Because, obviously, the long-term AAC in that area, which was originally set at 900,000 cubic metres.... The information I have is that it's down in the 150,000-cubic-metre range. Is that an accurate reflection of where we are? And is that below or above the target that the ministry set when it negotiated and bought into this particular plan for Clayoquot Sound?

Hon. D. Zirnhelt: We believe the contribution to the AAC that Clayoquot Sound made was in the neighbourhood of 600,000. But there is no AAC for Clayoquot itself; there are two TFLs in the area. While what we believe was contributed by Clayoquot Sound -- that 600,000.... That hasn't been achieved in recent memory. It's been years since anything like that has been achieved. It was not achieved last year, it wasn't achieved the year before or the year before that, and it's not expected to achieve anywhere near that this year.

W. Hurd: I must confess that I had no idea the harvest level for Clayoquot Sound was anywhere near 600,000 cubic metres. It was my understanding that it was targeted to be far less than that, as a result of implementation of the scientific panel recommendations -- the innovative logging practices that were to be applied to the sound. I don't believe that figure is actually correct, if I have read the plan correctly.

In any case, I wonder if the minister could tell us what level of harvest in the Clayoquot Sound region is expected this year, in terms of implementing the panel's recommendations and meeting the higher standard of forestry which has been imposed on that particular ecological area.

Hon. D. Zirnhelt: I heard the member use the figure 900,000, which in his first comment he believed was the figure. That's why I raised the issue of 600,000; it wasn't what he had said.

We expect that the AAC, or the cut from that area, will be in the neighbourhood of 200,000 cubic metres. It's at that level because until we prove the methods of the scientific panel, some of the undeveloped watersheds will be out of reach for logging. That was the agreement under the scientific panel, so it is further depressed than we thought. The scientific panel, of course, laid out what they thought was a reasonable area in which to cut and prove logging practices, so until we've finished the experiment there, it will have to stay down around that number.

[9:00]

W. Hurd: In terms of the sensitive-area designations on Vancouver Island, I am aware of the concern expressed by some licensees about the pace of cutblock approvals or cutting permits for those particular sensitive areas. In fact, I'm certainly aware that the deputy minister was dispatched on one occasion into one of the areas to find out what was happening with a cutting permit. I know that concern has been expressed about those sensitive areas that were designated by the Vancouver Island land use plan.

I wonder if the minister can tell us whether there are any targets or goals in mind for approval of cutting permits in these sensitive areas on Vancouver Island, or whether it's still a curve of moving up to what was expected. I know the concern has been expressed that the pace of the cutting per-

[ Page 1402 ]

mits has been slow at best. In fact, I'm not aware of too many that have actually gone ahead. I wonder if the minister can just tell us whether there is expected to be any improvement in that issue during the coming year.

Hon. D. Zirnhelt: I don't have figures here, but the access to harvesting in the sensitive areas is picking up. We undertook in the low-intensity areas, the sensitive areas, to have an impact of no more than a 10 percent reduction of cut. So it is picking up; that's the information I have.

W. Hurd: Can the minister tell us whether the pace of cutting-permit approval in the sensitive areas has impacted the ministry's calculation for the Vancouver Island AAC as a whole? I think one of the downward pressures on the annual allowable harvest has been the fact that it has been exceedingly difficult on the part of licensees to get approvals in these areas. The level of development work and the approval process has been particularly onerous. I wonder whether the ministry, in assessing the overall level of harvest, is assuming a certain level of activity in the sensitive areas or low-intensity zones that may not in fact be happening yet. Or is the cutting in those low-intensity or sensitive areas completely accounted for in the overall harvest levels for Vancouver Island?

Hon. D. Zirnhelt: Every attempt is being made to meet the AAC quota of the licensees. There may be isolated cases where there is an inordinate amount of low-intensity area in the operating area of a particular quota holder or licensee, and those people may be affected. But there aren't very many of them, from what I understand. The AAC is not affected yet. There would have to be a redetermination by the chief forester. But we are achieving harvest levels.

I think a problem is that the goal of having two years of cutting permits out ahead isn't being achieved. That's a goal we haven't reached for some time in the province, since the beginning of land use disputes. They are between 70 percent and 90 percent of a year out ahead. It remains a struggle to get them out in some of these sensitive areas. I'd be surprised.... The nature of sensitive management is that it's going to take an awful lot more planning to do it right.

W. Hurd: I have two other lines of questioning. One is related to the woodlot program. I'm aware that the ministry announced an expansion of the woodlot program in the province. As I mentioned earlier, it's been a while since I've had the portfolio, and the figures escape me; I don't think I even have the information in my possession anymore. I wonder if the minister can tell us whether the goals that were set when the ministry announced this expansion of the woodlot program have been met. Secondly, can he advise us whether the ministry has been able to provide any assistance to woodlot owners who, I'm aware, are facing a major increase in costs, in view of the implementation of the Forest Practices Code and other processes of government?

There are two questions there. First, has the government succeeded in its goals for expanding the program, and to what extent? Secondly, is there any assistance from the ministry or any recognition of the dramatic increase in costs these small operators are facing without the manufacturing component, of course, to offset the developmental costs that they face?

Hon. D. Zirnhelt: There are three things. The woodlot program did set a doubled target within three and a half years, as well as topping up existing woodlots. In other words, legislation was changed to increase the size; you will remember that. But the increases are continuing. There is an increased number of woodlots every year; there are approvals every month. But we are behind in achieving that goal. I can't give you the exact figures right here, but it was a very ambitious goal. I don't think we're going to make it in the three and a half years.

There is training being provided for woodlot owners so that they can become proficient in aspects of the code and therefore keep their costs down. The woodlot owners have been invited to provide appraisal cost data so that the small operator's cost gets reflected in the appraising manual. It's my understanding that that information hadn't been forthcoming. We certainly invited it; we want it to come. I think it's in their interests to provide it. So if they provide that data, then the appraisal manual can reflect the small operator's cost.

W. Hurd: I would just ask the minister whether there's an analysis underway of the cost to the ministry of the woodlot program, in terms of administration and support. Would it be fair to say that perhaps one of the reasons why the doubling has not been achieved or the ministry might be behind is the costs that the Ministry of Forests incurs in administering the program? Is that in any way a concern, or is it just the fact that the applications themselves have not come forward to the extent the ministry had hoped?

Hon. D. Zirnhelt: It took quite a while to get the money to hire the staff and then to train them to get the woodlots laid out on the ground. Each year it gets tougher and tougher to lay out special blocks for woodlots. I think if you look back and reflect on the agenda that we provided for the Ministry of Forests, it's not a really significant increase in resources. But we expected them not only to develop but now to implement the code, get involved in land use planning, and get involved in backing up the treaty tables and in a higher level of consultation with first nations about their uses -- all in the interests of stability and access for industry to these traditional lands. So we have laid all of that workload on the ministry, including responding to Forest Renewal. We have given them a load of work to do that could -- pardon the expression -- choke a horse.

W. Hurd: Obviously the ministry was confident that it could reach a doubling of the target at one point. I guess what I hear the minister saying is that perhaps the horse bit off more than it could chew, or something; I don't know.

I wonder if I could close my remarks by returning to an issue I raised earlier in estimates: the research report submitted to the Ministry of Forests by Mr. Pendleton, who is a PhD with the University of Washington. I did manage to find my copy of the report, which, according to the author, was submitted to the ministry in April of 1995. The minister advised me that he hadn't read the report when I approached him on it, I think, yesterday in estimates. Since the report was submitted to the ministry, I wonder if the minister or his staff could tell us what, if any, action has been taken on some of the observations made in the report about scaling, enforcement or compliance. Did the ministry determine that the contents of the report were groundless, or did they review the recommendations and take any action on what Mr. Pendleton had determined, based on his research?

Hon. D. Zirnhelt: I want to assure the member that after he mentioned it last night, I didn't rush out, get a copy and put myself to sleep so I'd be prepared for today. But what I offered yesterday I offer again: we will provide you with our analysis of the report.

[ Page 1403 ]

The ministry was skeptical of a number of the findings. The use it was put together for, and the fact that it gets into the public domain, makes us maybe a little bit more careful about how we treat researchers coming in. We will make the information available to you, and perhaps you'll have other comments then.

W. Hurd: I know we could go on indefinitely on this report, but I will certainly accept the minister's assurance that his ministry will comment on it -- albeit some time after its presentation to the ministry.

One issue in the report, though, that does shine through, is the concern expressed over the check-scaling that goes on. I think the concern expressed by the author was that the whole purpose of a check-scale is that it be random, unannounced, and that it really is the underpinning of the entire scaling and stumpage appraisal system in the province. I just wonder if the minister could tell us, as a result of the particular incident described by this researcher -- which he contends was the result of him travelling in the field with Forests ministry staff -- whether the ministry has reviewed its policies on check-scaling and whether this in fact increased the number of random checks that go on. I think the author expressed the real concern that the licensees knew when the check-scales were coming and might have taken some pre-emptive action to prevent the ministry from getting the data that it needs to cross-reference the scale, the dryland sort, and then realize an appraisal system with fair stumpage returns to the province.

Hon. D. Zirnhelt: This is one area where we feel fairly confident that our position, as opposed to the position in the report, is the correct one. We frequently do check-scaling, and we're confident that we're doing it frequently enough, accurately enough, and with a methodology that yields results that will tell us whether we're on.

I'm inclined to comment that members opposite are continually putting forth the position that the system is onerous for the licensees and that the stumpage costs of production are high and so on. I think the implication of the Pendleton report, if he said we were underestimating, would again be to drive costs up for industry. Of course, it has to be accurate and it has to be fair, but any assumption that we're undercollecting, I think, could be disturbing to anybody in the business, because it would be a cost-driver. We're satisfied that the check-scaling we do is effective and it results in us feeling that our scaling is accurate.

[9:15]

W. Hurd: I guess because there's so much meat in the report, I'll just look forward to the ministry's assessment of it. I would commend it to the minister, because I think it's somewhat unfortunate -- and I'm sure the minister concurs -- that at the time the report did make its way to the public, we were involved in the sensitive negotiations on the softwood lumber agreement.

The author of this report issues a portrayal of a system that hemorrhages fibre on a regular basis and that fails to adequately scale the material that is harvested, and that therefore could be construed to represent a major benefit to licensees and to the industry at large. In closing, I urge the minister to refute the findings of Mr. Pendleton and to challenge the assumptions that he makes, just because he is an American researcher who may have a wider audience in the United States than the report, perhaps, achieved in British Columbia.

Hon. D. Zirnhelt: I'd like to acknowledge that at the time the report came up, it certainly wasn't helpful. But we weren't called upon to respond at the time, and therefore we didn't. There is a rebuttal to it and you'll have it.

T. Nebbeling: I'd like to talk briefly about the protected-areas strategy, because the previous Minister of Environment is in the room. For three minutes, he spoke very compassionately on this subject while the minister was out of the room.

I would like to state up front to the minister that what I'm going to say is not because I do not believe in the protected-areas strategy. I think it is a very good initiative, and I've spoken well of it on many occasions. When I criticized some of the other programs during the estimates debate, the minister turned around every time and said: "Well, obviously you do not believe in the cause." I do believe in the protected-areas strategy. I do believe in setting aside certain land masses for future generations to enjoy, as well. I do believe in bio-diversity, so do not doubt my loyalty to the concept.

I do have a tremendous number of problems with the implementation and the consequences of what I believe are not necessarily the right decisions, which you, as a minister, will be asked to endorse in the very near future. I have watched the committee that has dealt with this issue for what I believe a much longer period than was intended. I have spoken to some committee members at their urging, and, quite frankly, I think the recommendations that are coming your way -- what I know of the recommendations -- contain elements that I do not think are right. It is regrettable that we did not have a meeting prior to the estimates to discuss some of these things, because you may have been able to clarify some of it. Just to get everybody in line, I would like to ask the minister to explain the membership and how it was selected.

Hon. D. Zirnhelt: The protected-areas strategy is an initiative of the land use coordination office. The ministry supports it, but it wasn't something that we led. LUCO doesn't appear in our estimates, so I don't have all the information. I have some information on the lower mainland protected areas. Let me see if I can tell you about the regional planning committee that was set up to do that. It's the regional protected-areas committee, RPAC. It was set up with representatives from a broad range of stakeholders, and the list includes conservation, environmental, recreation, tourism, forestry, mining and community groups. There are also two government representatives, one from land use coordination and one from the lower mainland interagency management committee, IAMC.

T. Nebbeling: The reason I feel some questions to the minister are in order is the consequences of the recommendations, which will go to another body. They will certainly have a significant impact on the annual allowable cut in the three TSAs that fall within the protected-areas strategy. There will be impact on the AAC, so maybe I'm going to focus on that one. Has the minister been involved in -- has he been informed by any member of the organization responsible for making the decision -- what is going to happen once the recommendations have been approved, as far as the allowable cut is concerned, for the Soo TSA, the Sunshine Coast TSA and the Fraser TSA?

Hon. D. Zirnhelt: I've been briefed in general terms on what has happened at the RPAC, but there is no report. We have asked for a report, and we've given them a deadline for 

[ Page 1404 ]

submitting a report, so that we can have a look at it. When I receive it we'll go through and evaluate it. My understanding is that there has been considerable debate at the committee about mitigation strategies, and they think they can reach a consensus.

T. Nebbeling: I come back to something the minister said earlier, and that is that whatever happens in the working forest, be it in the TSA or a tree farm licence, you will not support anything that does not deal with the timber target and the job target. How can the protected-areas strategy be implemented if it will have a considerable impact on the timber target? As a consequence of that, jobs will be lost in these three areas. Are you going to have the opportunity not only to have input but also to make sure that these two objectives that you say you used to determine what an AAC can be in a certain area...? Will that also be used when it comes to making decisions on the protected-areas strategy?

Hon. D. Zirnhelt: The AAC will only be affected when there's a redetermination by the chief forester. It's only in the last year that he's made determinations for the Soo, the Sunshine Coast and the Fraser. So there won't be another determination for another five years, unless the chief forester decides to kick in a new review of the timber supply.

When the report comes forward, we expect to find in it some assessment of the job impact as well as any other impact -- perhaps on the spotted owl, on the supply of parkland or on biodiversity. I expect that they will have considered the various options and come forth with an option that the parties around the table agree on. As I say, there's adequate representation of licensees and workers, the communities are there as observers, and I trust they are trying to find a solution that is a win-win. But I don't think no-change is what they are going to come forward with. They are going to come forward with their recommendation to increase the amount of protected area in the lower mainland. I appreciate the member's support for the concept, and I do recognize that he's asking that we consider the job impact. I trust that committee did that as well.

T. Nebbeling: I shouldn't have used the AAC as my concern; it is the timber supply area that will see a reduction. As a consequence, there will be less timber coming out of the forest. Of course, as far as the Fraser is concerned, we had the announcement by your office a week or so ago that there was an overestimation in previous estimates, so there will be a reduction there, as well. My fear -- not just my own fear, but the fear of the communities in these timber supply areas -- is that there will clearly be tremendous job losses. As a matter of fact, recently the district manager for the Soo TSA didn't make an official announcement but did warn that there could be another 10 to 15 percent reduction in timber supply exclusively for the Soo coming forward. You can figure out for yourself what that is going to do to the communities of Pemberton and Squamish.

Once again, it is not a committee that reports to you, but you obviously must have an impact. How can you make sure -- and maybe you can explain the system -- that indeed you have input so that jobs will not be risked without consideration for the elements that we talked about earlier?

Hon. D. Zirnhelt: The acceptance of a report from this advisory committee on protected areas will go to cabinet, and I'll be one of the ministers reporting out to cabinet. I will have plenty of opportunity to have input into the decision.

T. Nebbeling: That is what I am really concerned about. Because if the report is as I fear it is, and it will get to that level that it comes to cabinet, then I think the damage will have been done already. I think it needs ministerial interference prior to that level, because of the serious consequences.

The serious consequences are really extrapolated by the fact that the focus, in particular in the Soo TSA, has been not necessarily on creating parks that are accessible. It is not necessarily only driven by the need for biodiversity, but clearly by putting as much old forest as possible into that park status. Percentage-wise, it is so high compared to the other two TSAs that the impact will be considerable in the Squamish and Pemberton area. These kinds of things have to be looked at prior to its coming to cabinet. Because the cabinet level, I believe, it is too late for that.

I would also like to tell the minister at this point that within the package of proposed areas in order to come to the 12 or 13 percent -- what it ultimately will come up to -- a large number of areas that were accessible, were representative of biodiversity, and did give people an opportunity to get into them.... Most of those areas were ignored or not considered, for whatever reasons, by that committee. What they have chosen to go with are lands that are often inaccessible, far away from areas where we traditionally put people to recreate, or that are impenetrable because they are almost like wilderness. That park concept, I think, has been violated, not because the land mass that has been chosen had to be in that package of protected areas, but more because it had timber value that they wanted to take away from the timber supply. That is, I think, what's really happening.

I hope that the minister can give me in the very near future a breakdown of exactly what those areas are and deal with it that way. I think there's injustice done in the whole implementation of this protected-areas strategy group. I am very unhappy with it, and I wanted the minister to know this.

[9:30]

Hon. D. Zirnhelt: I'm happy to have had the position put forward by the member. I hear what he says. I will take the concerns he expressed into account when the decision is made.

I'd like to say that when you establish a committee, and when the committee comes to consensus and the stakeholders are there, then you've got to be very careful not to upset what has been a very carefully negotiated deal. So if they do have consensus, it will be difficult but not impossible. That's why we have said we don't accept, up front, all the recommendations. We say that we bear the responsibility for making the best decision, as we see it. We have the responsibility; the buck stops with the government. We're not going to tell them ahead of time that we're going to agree. They have raised concerns that they want a guarantee that the government will accept everything, and we can't give that guarantee. We don't know what's in the report. All we hear is bits and pieces of it. I can assure you that I'll take a full briefing on it and consider all the impacts and all the implications of the recommendations.

T. Nebbeling: If it is possible for me to get a briefing, as well, once you have more detail, so that I'm up to date on exactly what's happening, it would be appreciated. I obviously have to leave that up to you.

The other item that I see as a threat, again to the communities not in tree farm licences, although there is actually a tree farm component as well, but in timber supply areas -- the Sooke timber supply area and the Fraser -- is the spotted owl 

[ Page 1405 ]

issue. I believe that is an issue that your ministry does deal with. This has been going on for three or four years. It started with a sighting or the sound of a spotted owl in the Chilliwack area in the Fraser timber supply area. Since that time, I think there has been a lot of panic created by many persons stating that they had either seen or heard an owl. I've always had a real problem with it.

I'd like to ask the minister today why every time somebody claims to have heard or seen a spotted owl, immediately that area where that sighting took place or where the owl was heard is declared a SOCA. You know that meant that 3,200 hectares of forest was set aside. Part of the claim, of course, is that the owl can only thrive in old-growth forests. Therefore very often these sites are part of timber supply areas. Right now there's a tremendous amount of these SOCAs all over the place, areas that are very often not available to the licence holders or to the old timber market. Can the minister tell me what motivated the Ministry of Forests, together with the Ministry of Environment, I believe, to take that route and take away so much timber?

Hon. D. Zirnhelt: I think we've been trying to find a way to conserve the spotted owl. It's an indicator species of old growth. It's a temporary measure to try to conserve the owl while we are working out a more permanent solution. It's an interim measure and, of course, makes sense. If one of your objectives is to try to preserve a species, and you find a place where the species exists, you conserve it. We're trying to learn from the experience we've had. We've tried to come up with a solution. We haven't arrived at a solution yet that's a long-term solution.

T. Nebbeling: There were many reports prepared and recommendations made in the past. I've got some here, as a matter of fact. Not much was done with them. There was always a follow-up to be done. I know there is another draft right now to be presented to the ministry in the very near future, with some very drastic recommendations. Can the minister tell me if he is aware of the draft? Has he looked at it? Again, is the fear in the communities that the timber supply area will be seriously eroded a real fear?

Hon. D. Zirnhelt: I don't know which report -- there have probably been several reports made -- the member refers to. I'm aware that there's work going on between the ministries, trying to achieve timber objectives as well as conservation objectives with the spotted owl. I expect there will be a report to cabinet in due course, and cabinet will have to reconcile any opinions or options that we are presented with.

T. Nebbeling: I have not spoken tonight about a couple of issues that.... I believe each and every one has the ability to erode the community's stability, throughout the Sea to Sky corridor, throughout the Fraser Valley and the Sunshine Coast. There is one thing that all these issues have in common, and that is the lack of public consultation.

The spotted owl. I know, Mr. Minister, that you're not responsible for the protected-areas strategy, but let me read part of a letter written to the previous Minister of Forests, Mr. Streifel. This is on the spotted owl and in a sense says exactly what the people in the communities that are going to be affected by the decisions made within the ministry feel about the process: "We were led to believe the management plan that has been created would come back to the community advisory group." This advisory group was created three years ago when there was a major demonstration in Squamish, when 1,500 loggers and people who depend on the forest industry got together and said that you cannot impose on us the tremendous impact it will have if you go with the recommendations that were coming forward at that time. Since the time we have had this advisory group.... This advisory group was committed to receive, before any decision was made, a copy of the plan created by the management team.

A letter from Tom Gunton, dated March 4, 1996, stated: "The draft management plan was completed in October, 1995...." That's the plan I've got here, and it is currently under review by himself and Gerry Armstrong. Before I go any further, Mr. Armstrong is here. Could the minister ask Mr. Armstrong if he is indeed in the process of reviewing that report?

Hon. D. Zirnhelt: Yes, the reports have been reviewed, and they were sent back to do more work.

T. Nebbeling: At least now we know that there was a report, but two minutes ago I was told that you didn't know what report I was talking about. That was the report.

"After further evaluation from the prospective staff" -- I'm talking about Mr. Gunton and Mr. Armstrong -- "they will make recommendations to the ministers." Mr. Gunton stated that: "The ministers will determine whether the community advisory group will be given further opportunity for comments prior to a final decision being made." The community advisory group had not seen the draft management plan and therefore has had no opportunity whatsoever to make any comments on it.

If the final decision is made without their evaluation, the planned public process will have been bypassed. This is totally unacceptable to us, our membership and the communities that will be very much affected by this plan. It is the bypassing that I have been focusing on through the whole estimates, every time. We talked about initiatives of the provincial government -- they do affect people. This is a group that has been at the forefront of trying to be a partner in finding solutions for the spotted owl through the protected-areas strategy, and they have been bypassed. That's why there is fear and anger.

Hon. D. Zirnhelt: In the time I've been minister, it hasn't been brought to my attention. You brought it to my attention. All I can say is that I'll look into the public review process. If there had been some commitment to do that.... We think it's a process managed by the Ministry of Environment. I can't answer for them, nor can my officials. I'll look into it and see what I can do about managing to make sure that we live up to commitments we made.

T. Nebbeling: As I said, I appreciate those words. I hope no decisions will be made before that particular element has been dealt with and the communities feel that they have a say in how their destiny is being created.

Vote 36 approved.

Vote 37: ministry operations, $443,601,135 -- approved.

Vote 38: fire suppression, $63,205,913 -- approved.

Vote 62: environmental boards and Forest Appeals Commission, $2,217,000 -- approved.

[ Page 1406 ]

Vote 63: Forest Practices Board, $4,292,000 -- approved.

Hon. J. MacPhail: Hon. Chair, I move that the committee rise, report resolutions and ask leave to sit again.

Motion approved.

The House resumed; the Speaker in the chair.

Committee of Supply B, having reported resolutions, was granted leave to sit again.

Committee of Supply A, having reported progress, was granted leave to sit again.

Hon. J. MacPhail: It has been a good and productive week. It's going to be an interesting weekend, and safety is going to be of the utmost concern on people's long weekends. Please, everybody, be careful this weekend. Be safe. Have a good, relaxing weekend. I move the House adjourn until 2 p.m. Tuesday, and I wish everybody a safe and healthy weekend.

Hon. J. MacPhail moved adjournment of the House.

Motion approved.

The House adjourned at 9:51 p.m.

The House in Committee of Supply A; W. Hartley in the chair.

The committee met at 6:59 p.m.

On vote 22: minister's office, $374,615 (continued).

D. Jarvis: Just before dinner, when we were discussing power and power rates throughout this province, the availability of power and independent power producers, I was rather surprised that the minister said that one of the main concerns of B.C. Hydro was to have low rates but efficiency. When you look at some of the 42 proposals that were put forward and then down to the shortlist of ten, there were producers in there that were going to produce gas for around 3 cents. That was pretty low. When he talked about the efficiency that the minister keeps saying B.C. Hydro is more interested in, I'm wondering if he would still consider that Burrard Thermal is an efficient way of producing electricity in this province. Burrard Thermal, as you know -- after $800 million was spent on it -- will never get above a 60 to 70 percent efficiency rate. You have independent power companies out there that are prepared to produce up to 2,000 or 3,000 megawatts for us. I would consider them a lot better.

At the same time, we're looking at a change in the power situation in this province. The power situation in this province is changing because the rest of North America is changing. Within the next two and a half years, we'll see the price of gas come tumbling down even more. With free trade, we're going to see places like Portland punching power into this province, and rates are going to drop dramatically.

My question is: what does Hydro say about this? Are you getting prepared for this? Are you preparing to get into the market, or are you going to hold it as a monopoly, the way it has been done for the last ten to 15 years.

Hon. D. Miller: I was talking about some of the complexities of social costing relative to IPPs and the need to be very careful in terms of designing a policy for IPPs. We currently have 28 IPPs in the province.

An Hon. Member: How much?

Hon. D. Miller: I'm not certain how much power is being generated there. But we approved two prior to the election, and we have five in process.

I didn't want to indicate that we're not interested in IPPs at all; in fact, we are interested. We've got a process and are moving forward on IPPs. I just tried to indicate the fact that about 5 percent of today's supply is in those 28 and that it is a balance. Many of those IPPs want to sell power back into the grid on long-term contracts at rates that are higher than what Hydro can produce the power for itself. I just tried to outline, not in any negative way, that those are some of the challenges with respect to having more IPPs come on.

D. Jarvis: Is it a fact that Hydro was aware that the price of power will drop drastically in the next two to three years, and that is why they're not prepared to enter into these higher prices of the independent power producers?

Hon. D. Miller: Yes, we're aware that prices have come down. I know there is a difference of opinion. The member for Peace River South, I think, tabled an opinion last night that despite the trend in North America, that may not last. But the energy markets are changing. There is excess energy, and Hydro has to be mindful of that and be competitive. Yes, we are having additional IPPs come on, and hopefully, there will be more.

D. Jarvis: We're all aware of how the member for Peace River South predicts things and of how far he has gone with his predictions. Power is going down.

How is B.C. Hydro preparing itself to compete in this pending market that's going to mean drastic changes to our future power...? You know, in places right across Canada.... The minister was comparing us and saying that we have a very low rate. Well, our rate is not low; Manitoba is way below us. Even Ontario, which carries atomic energy, is now changing their situation, and they're becoming aware of a very competitive market. I'm not an expert in this; you're the experts. I want to know if you're prepared for what's coming down the line.

Hon. D. Miller: I did deal earlier with a comparative table, on a monthly average, for 1,000 kilowatt-hours of consumption. It indicated that B.C. Hydro was at $61.16, relative to Seattle; Calgary; Saint John, New Brunswick; St. John's, Newfoundland; Bellingham; Regina; Halifax; Toronto; and Los Angeles, which are all higher, some marginally and some dramatically. Some were lower, including Montreal at $57.71 and Winnipeg at $55.96. I'm advised that Winnipeg's rates are

[ Page 1407 ]

 based on the depreciated book value of dams built in the 1920s and before. Their output, by the way, is limited, and industrial and commercial customers have been dropped because they can't meet that demand.

That's not the situation here in British Columbia. We've been working to ensure that Hydro is efficient. Our operating costs have decreased about 5 percent. We've made good steps to have access to the Pacific Northwest markets, the U.S. markets. We're looking at wholesale wheeling. The organization really is mindful of these kinds of competitive challenges in this new environment and, I think, is taking steps to be competitive in light of that.

D. Jarvis: Just one last comment to the minister. As I said earlier, we're looking at a situation in this jurisdiction in which we're going to be affected drastically by the prices we're dropping, and it's from gas -- the price of gas is dropping. Power is going to be wheeled in from the United States to British Columbia, and we're going to have a completely different market before the turn of the century. I'll turn it over to my colleague.

G. Campbell: Over the dinner hour, hon. Chair, I received a couple of pieces of correspondence, as I'm sure the minister has -- because it came out of the minister's office -- with regard to the issue of Mr. Laxton and SEPCOL, his involvement and some of the comments that were made. They raise a number of questions for me with regard to the discussions we've had earlier.

Just to review the dates to start with: on February 21 the entire arrangement was made public by the opposition; on the 22nd the Premier said that he had acted to fire Mr. Laxton from his position in connection with B.C. Hydro; on the 23rd he appointed Brian Smith as the chair and pointed out that Mr. Smith had been given the direction to investigate fully what was taking place and to try and restore some public confidence in what was taking place at B.C. Hydro, and how that was working in terms of some of the issues that had been brought forward with regard to Mr. Laxton's involvement, etc.

We found about a week later -- roughly a week later, maybe ten days later -- that Mr. Laxton had indeed misled the public with regard to his personal involvement, his personal investments and the personal investments of his family. After saying on 21st and the 22nd that he had no involvement whatsoever, we discovered that he had hundreds of thousands of dollars of involvement, as did his family. We heard that his son-in-law Mr. Coglon, I believe his name was, who had in fact phoned up BCTV at one point to protest that he had been mentioned in their story and claimed he had no connection, also had a connection to what was taking place.

It was in that light that the inquiry was commenced, and the interim report of April 23 was prepared. From just briefly going through the interim report of April 23 again tonight, it's clear that that was the date it was issued, not the date it was written. The letter that I have in my hand is dated May 7. It's a letter from Mr. Laxton to Mr. Smith, and the concern that I have to begin with is that clearly Mr. Smith was aware of Mr. Laxton's involvement, and clearly, from the letter, there was an effort to keep that as quiet as possible.

So I'd like to start by asking the minister with regard to this: was the minister at any time aware of this before last night? Was Mr. Smith, again, doing this on his own hook, or was he in fact keeping the minister informed of how they were dealing with the issue with regard to BCHIL, SEPCOL, etc.?

Hon. D. Miller: I've answered the question, Mr. Chairman. It's on the record. I indicated that I became aware when the question was asked last night.

G. Campbell: The concern I have is that it really brings into question the whole issue of the interim report and what was exposed to the public -- what was told to the public and what was not. This letter from Mr. Laxton is dated May 7, and the first sentence says, "As you know, I visited Pakistan last week." Last week must have been the end of April. If the chair knew that, he obviously knew at the time that he was writing the report. In spite of that, he says that virtually nothing was known about SEPCOL at that time. He goes on to say: "...since it was agreed I should remain in the position until the public offering in Karachi is no longer a concern...." Again, in the so-called inquiry report or public report or interim report, there is no mention of that whatsoever. It's pointed out here that Ali -- who I assume is the Ali Mahmood we mentioned earlier today -- had demanded that the chairman, who in this case happened to be Mr. Laxton, attend in Pakistan and that he have a meeting with him. It turns out that the meetings took place in Mr. Mahmood's bedroom, which is an interesting venue.

The comment that's made at the end of the first paragraph of this letter is: "I made no public appearances." My question is to the minister. If the minister doesn't know the answer to this, I would suggest that it's something that we should ascertain from the chair of B.C. Hydro. Why would it be necessary for someone involved in a public initiative, appointed by B.C. Hydro to represent them publicly, to remain -- I hate to use this word in view of the fact that this took place in a bedroom -- undercover throughout this exercise and to comment that he had made no public appearance? If the minister doesn't know the answer to that, will he undertake to get the answer from Mr. Smith and Mr. Laxton and provide it to this committee on Tuesday?

Hon. D. Miller: Throughout the debate in estimates, both last night and this morning, I think we have insisted correctly that Mr. Laxton remained on SEPCOL only at the request of the Pakistanis. I have stated endlessly that he was not representing B.C. Hydro in any kind of reporting relationship or in any kind of economic relationship. We weren't paying his bills, and he wasn't representing us. I assume, not having been the author of the letter, that that sentence simply confirms that Mr. Laxton understood that and was not in any way attempting to do what we expressly did not want him to do.

G. Campbell: Again to the minister, the question I'm asking here is with regard to why it would seem necessary to keep Mr. Laxton out of the public view. We know that in this report, virtually nothing is mentioned with regard to this. We know now from a letter dated May 7 that obviously the timing was that the so-called independent chair with regard to this review knew at the time that Mr. Laxton was B.C. Hydro's representative on the board. He knew at the time that he was either going to go or had been in Pakistan. And part of his direction must have been to keep undercover or non-public -- to make sure that no one saw -- or he wouldn't have reported back to the chair of B.C. Hydro that he made no public appearances. The question is: why would it be necessary that no public appearances would be made? If there was nothing to hide, why would someone feel it was necessary to say: "By the way, no one noticed; I made sure I wasn't in any public kind of activity"?

[7:15]

[ Page 1408 ]

Hon. D. Miller: I hesitate to translate or interpret other people's letters, but I did put an interpretation on it. The letter goes on in the second page to indicate, "I could not speak on behalf of IPC," which seems consistent with what I have been saying all along. The letter goes on to essentially confirm what I've also been saying all along -- that the Pakistanis wanted Mr. Laxton to stay in place for reasons of stability. In fact, the language is: "I understand Ali's need for stability and continuity." It goes on to say that when that is completed, he would like to get out of it. I think the letter is entirely consistent with what I have been saying as the minister, once Mr. Smith had advised me about those proceedings.

G. Campbell: The concern I have, hon. Chair, is that this at least undercuts what we've been told over the last couple of days with regard to Mr. Laxton's involvement and how necessary it was for him to be involved. Remember, this letter is dated May 7, not July 31. The issue is here, if you want to go to page two of this letter, where it says: "One obvious concern is that if a disaster does occur, some parties may find excuses to blame me for it." Mr. Laxton should not have been involved. We were told he was not involved from February 22 on.

Mr. Laxton has absolutely nothing to offer either investors in Pakistan or people who want to build power projects with regard to this. He has none of the credibility of B.C. Hydro, none of the credibility of their staff and none of the professional expertise which they provide. All he could provide was the slick development of some deal that would hide investors and keep the British Columbia public out of the know.

Again, I would say to the minister that we've heard for the last two days that this was because stability had to be created in Pakistan. The letter is very clear: "People in Pakistan were very relaxed about the situation. Ali" -- this is obviously Ali Mahmood, whom we can't seem to get hold of in terms of having him interviewed on what the position was of SEPCOL or himself as a partner -- "is relaxed about the state of the public offering. There are no quotes and no bad publicity in Pakistan. In fact, the publicity in British Columbia has had virtually no effect in Pakistan." To end this off, we're told very explicitly that Mr. Laxton now feels that he can get off this board. This is May 7. This is a project that has caused grave concern to the government and to the people of British Columbia, yet nothing took place from May 7 until August 1 to remove Mr. Laxton from his position. My question to the minister is: why wouldn't Mr. Laxton have been removed immediately when he said he wanted off? Why wasn't he removed immediately when the Premier said he was off?

Hon. D. Miller: Again, the letter, and the subsequent letter from Mr. Smith to Mr. Laxton, entirely bears out what I've been saying. Just going through the points, we dealt with the issue that Mr. Laxton has not made any public appearances. I think that's consistent with the fact that he was not there representing B.C. Hydro. I can understand, perhaps -- it's almost a bit painful -- the sentence that says: "If something goes wrong, I'm going to take the blame for it." I think Mr. Laxton has been under a great deal of stress throughout this period.

With respect to the issue of publicity in Pakistan, it's important to note that the letter from Mr. Laxton does indicate that while there had been no bad publicity here, or had had virtually no effect.... There had been some effect, but Mr. Mahmood had been able to counter that publicity by employing the good offices of Prime Minister Bhutto of Pakistan. The government of Pakistan strongly supports the development of these projects, for obvious reasons. It is a country that is trying to modernize and expand its economy. Mr. Laxton says in his letter that he couldn't speak on behalf of IPC; that's true. Mr. Laxton said that he would like to get out as soon as the purpose for which he was left there has been completed.

Mr. Smith, in his letter of response to Mr. Laxton, really confirms under point 2 what I've been saying: the whole purpose of Mr. Laxton being retained was in regard to the issue of the stock being listed on the exchange. He confirms in the final point in the letter, with certainty, that now that the issue of the stock has been dealt with, "I want confirmation of your resignation." So the letters together absolutely confirm the position that I've outlined and the reason Mr. Laxton did stay on the SEPCOL board.

G. Campbell: I'd like to carry on with the letter from Mr. Laxton to Mr. Smith. Last night the committee was informed that there would be no other projects which we were involved in or pursuing. Mr. Laxton, again, points out that he is evidently concerned that an alarming position has developed, which is that SEL alone had an interest in two new deals -- Malakand and Swat River -- because BCHIL had failed to comply with the contractual obligations respecting them. Last night we were told that they were not involved in any additional deals. Does that mean that Mr. Laxton's alarm is totally out of place, we're not going to pursue them, we have no interest in pursuing them, and they should know that we're not going to be involved either through B.C. Hydro or BCHIL or any of its subsidiaries?

Hon. D. Miller: Mr. Chairman, the whole business of going into offshore projects.... There has been activity. In fact, BCHIL is engaged in activity in other parts of the world as well. As I recall, the next project that might have moved forward was the Malakand project. What I said -- and I said that here very clearly last night; in fact we had a debate about it -- is that because of the events that took place here in British Columbia, that was an issue that needed to be debated, and that we needed to form a conclusion about whether we should continue to move forward with these projects. We have not done that yet. I think the imperative for Hydro and the government is to bring stability to this project to ensure that it is successful. We have taken steps that the opposition clearly doesn't like by allowing Mr. Laxton to be left on the board of SEPCOL until the share offering was completed. But everything in these two letters absolutely confirms what we have been doing, however much the opposition may disagree with it.

We've not made a decision. The opinion, as I interpret this letter, is that Mr. Mahmood has offered some opinion with respect to BCHIL's failures -- failures or not -- with respect to moving into the other projects. We haven't said no; we haven't said yes. But I've said generally that we need to examine that entire issue.

It's interesting. We received calls in the office this morning from other parts of the world, because they've been dealing with BCHIL, and they're in a position in other parts of the world of wanting to engage with B.C. Hydro and to move forward on power projects. Of course, I guess word gets out fairly quickly about these kinds of debates, and they're asking themselves whether or not Hydro is still in that game. At this point I can only say that these have been troubling events. We're trying to bring stability to the issue as quickly as we possibly can. We want this project to succeed. I think the very best thing that could ever happen with respect to our ability to move forward into other projects around the world is if this project does succeed.

[ Page 1409 ]

Now, in terms of that question, perhaps the fact that Mr. Laxton -- at the request of the Pakistani people -- was allowed to remain on SEPCOL for the purposes of trying to make sure this succeeded can be criticized. But in terms of the business issues important to British Columbia -- Hydro's reputation and our ability to have the option of moving forward -- I think it is very, very important.

I tried in a very sincere and straightforward way to deal with all of those questions -- and I think I have. I understand the opposition not liking, presumably for moral reasons, the fact that we did what we did. But the hard facts are -- as I said and was pleased to see repeated in the media -- that sometimes these hard decisions have to be made. It's not a perfect world in which you make them. We made -- and I've confirmed that I think Hydro made -- entirely the right move with respect to wanting to ensure that this project succeeded. These letters absolutely confirm the position, or the strategy we accepted to allow that to happen. So I'll sit down and see if there are other questions.

G. Campbell: Obviously, confirmation is in the eye of the beholder, because I think they confirm an entirely different story. What they confirm to me is that the public was kept in the dark, purposefully, not just by the minister, but by the chair of B.C. Hydro. I think it's ongoing in terms of the information not being provided, either to this committee or to the public. And I think that's wrong. It's as plain and simple as that. It's wrong. It's wrong to continue covering up.

I can tell you that B.C. Hydro's reputation is not enhanced either by this debate or by the debate that took place in February. Anyone who thinks it is enhanced, is wrong. It certainly isn't enhanced in British Columbia.

What we understand from the observations of B.C. Hydro's ambassador abroad -- Mr. Laxton -- is that there was no impact in Pakistan. I have to be honest. I question whether or not there has been this massive, sudden, international impact of the debate we've had here today. But let me simply say this: when I read that Mr. Laxton has asked to be relieved of his duties, I fundamentally disagree with him being left as a representative of B.C. Hydro and British Columbia with regard to SEPCOL -- as a chair, or as a member of the board of directors. I totally disagree with that. There's no question in my mind that that was wrong, and I'm sure there's no question in the mind of anyone in this room about the opinion of the opposition with regard to that.

I don't think it was a tough decision. I think it was a bad decision. It was a decision that shouldn't have been made. It was a decision that shouldn't have been made if British Columbia and B.C. Hydro were going to regain the credibility they formerly had.

Secondly, we've been told that this used to be an urgent matter with this government. It's so urgent that the chair of B.C. Hydro, for some unknown reason, decides to respond to a letter two months after it's been written -- two months after it's been written from 1285 West Pender Street in Vancouver. It's got to go four or five blocks to get to the offices of the B.C. Hydro chair on a matter which is of urgent public importance. The B.C. Hydro chair decides he's going to respond on July 15. That just happens to be when estimates are coming up; I understand that. It seems to me that he should have been responding on May 8. On July 15 we hear from the chair of B.C. Hydro that the offering was completed on May 21. Still nothing happened, and still no action -- until this House sat. We also hear that the chair of B.C. Hydro understands that there has been no impact in Pakistan with regard to the activities and the debate that has been taking place here. We also learn that Mr. Mahmood, who has not been available, somehow or other can be contacted in order for Mr. Laxton to get another trip back to Pakistan and talk things over in his bedroom -- but he's not available in terms of the so-called independent interim report. Yet we managed to get him here on June 3 and 4 -- conveniently just after an election, conveniently just in time for people, hopefully, to have forgotten about the whole thing. He says, quite clearly, that BCHIL and IPC would allow the Malakand project to go forward.

What we're hearing from the minister and what we're hearing from the chairman of the board of B.C. Hydro are two different things. The problem for us is that there is only one person we can ask questions of. There's only one person who seems to be or may be accountable -- and who we have an opportunity to keep accountable -- for B.C. Hydro, and that's the minister responsible. And the minister responsible keeps saying: "Well, I don't know what's going on." The issue here is that we have the chair of B.C. Hydro saying: "Good. Maybe we can resolve these issues and get on with the Malakand project." But we hear the minister saying: "We're not doing any of those things." Last night the minister told us quite clearly that we're not intending to go forward with those things. The question is: are we going forward or not? All I need is a yes or a no. I'll ask a short question after I get a short answer.

Hon. D. Miller: Not so long ago, the Leader of the Opposition and I had what I think was a fairly useful exchange, and we ended on a note whereby both of us confirmed that the reputations of British Columbia and B.C. Hydro are important. We confirmed that there may be merit in moving forward on some of these things and bringing this issue to rest. I thought that was quite a useful conversation, and I appreciated it. Now I'm faced with what appears to be the exact opposite. Based on a desire to interpret letters and further exploit this issue for political gain, once again we get into the back-and-forth, the misinterpretation.... Quite frankly, this is taking words out of context. Throughout this debate, I've consistently said that these are questions we have to determine. I've said that we have to bring some stability to this project, that the very best stability is in making sure that it's successful in order to leave our options open in respect to other projects around the world -- but I've also said that we haven't made a decision on that question. Check the Blues; it's on the record. No matter how much the Leader of the Opposition tries to mischaracterize my words, they are on the record.

I very much fear that the opposition is in that enviable position -- enviable to some, I presume -- of wanting to have their cake and eat it too: of wanting to be the critic without the responsibility. We understand, from what they've said over the last couple of days, that they don't like it. They have not put forward one constructive criticism or idea. They don't like the fact that we left Mr. Laxton there because we thought it was important -- notwithstanding the solid evidence that is there that we thought it was important to do so in order for this to be a success. They just don't like it. The opposition sent out signals that the government should expropriate private shares. Now, there's a wonderful signal to the private sector. I'm sure that's greeted with enthusiasm around the world in terms of leaving our options open to pursue projects that might be of benefit here in British Columbia. That's a wonderful message to send.

[7:30]

The letters are very clear and straightforward. They confirm what I've said over and over and over again: we're trying 

[ Page 1410 ]

to bring stability; we want this project to succeed; we took certain actions to do that; now we think we've got it right. Then there's Mr. Smith saying: "Now that that's done, let's get your resignation."

[J. Doyle in the chair.]

G. Campbell: Given the minister's comments, I just have one question. We both say that this is an important matter. We both say that B.C. Hydro is an important institution. Given that we both say that, is the minister satisfied with the response to Mr. Laxton's letter of May 7, more than two months later? In view of what the Premier said, what the minister said, and what the minister and I have both said today, are you satisfied with it taking more than 60 days to get a response to a letter like the letter from Mr. Laxton to the chair of B.C. Hydro, the person who was supposed to make sure all of this information was public, to make sure that everyone in the province of British Columbia knew what went on so that we could make sure that it didn't happen again? Is the minister happy with a response time of over 60 days to that letter?

Hon. D. Miller: Mr. Chairman, the opposition wants to at one time get on a lofty high moral plane and say: "We don't like it. This was morally irresponsible. You shouldn't allow this to happen." I think they've also said a couple of times: "We think it's important for the project to proceed." They've taken almost every conceivable position you can possibly imagine. What I'm satisfied of is this: in a very professional way, the people responsible in B.C. Hydro took important steps to ensure that this project would succeed. That's important, to bring stability to this matter, to give us the option of looking at this entire question, in terms of either moving forward or perhaps making a decision that we don't want to. And we get this nitpicking; people are unhappy that it took a certain period of time to answer a letter.

There are issues around the closing that I'm not exactly certain of. It seems to me that there are some questions I said I'd get back on, in terms of that final closing. It appears to me that that probably is a linkage between one letter and another. We wanted to be sure that this was going to work. What's the issue? Sixty days. What if it was 59? What if it was 55? What if it was 50? You know, you are zeroing in on single isolated issues completely out of context to the whole debate.

This is a very difficult issue. I acknowledge that. Do you think I'm happy about any of the events that transpired? Obviously not. And not because I'm worried about my own political skin, but because I do worry. I'm a British Columbian. We want this issue to be straightened out.

We can go around the ring here forever, I suppose, and, I think, in a very unhelpful way. I think the opposition has established that they don't like, and disapprove of, what we did. Fair enough. That's your position, and you're welcome to it and entitled to it. My position is we did what we had to do. It was important to do that, and it was prudent in terms of this business. And you don't like that. Fair enough. So we disagree. But that's it, plain and simple, nothing else. That's it. It's all there. It's a simple issue.

And so, Mr. Chairman, I think I've responded. I think I have shown extraordinary patience throughout the afternoon in trying, in a very calm way, to respond to every question that has been asked. And now we come back, and because there's a letter here, I think they feel that there's another opportunity to raise some issues and lay some markers. Fair enough. But there has to be some reasonable point, with respect to the rules of this House, in terms of repetition. I've answered this question, and I don't know, I'll check the record tonight perhaps.... I don't know how many times I've responded to the same questions on this issue. I'm not reluctant for debate, but I'll tell you, I think we've had the debate. But it's up to the opposition.

G. Campbell: It may be simple to the minister because he has most of the information. I can tell you, when I read the letters, hon. Chair, I was surprised at the letters in view of what I'd been told. And I have an obligation to raise questions. The reason that we raise these questions is that we are concerned, not just about the reputation of B.C. Hydro, but about what people feel about what government is doing in this province. I believe that's important for all of us.

I'm not questioning the minister's commitment to British Columbia. He's got a great commitment to British Columbia. Everyone recognizes that. Everyone that runs for office has that. The fact of the matter is, these letters raise questions for me. They raise questions for me because I was naïve enough to believe that there was an independent report that was being done. I was naïve enough to believe that we would get all the information, and what I'm finding out is we're not getting all the information.

We may get more from the minister, and I thank him for whatever little information he's going to give us. But I can tell you we don't have all the information, and when you read these letters the feeling that you get when you're on the outside looking in is that there's information that has been withheld from the public, from the opposition, and from people who care about the future of British Columbia and B.C. Hydro. I hoped that I would never have to say this about this report. I hoped that this report would be the kind of report that everyone in British Columbia could read -- the government and the opposition alike -- and say: "Good, we know what's going on; we can prevent that from happening."

You don't feel that. You don't feel it, having read the report, because of the shoddy way that it was put together. We have people that publicly lied, and not testifying under oath. We have huge gaps in the report. We now understand from these letters that the chair of B.C. Hydro knew that Mr. Laxton was involved, continued to be involved and continued to go to Pakistan; in spite of that fact, there is no reference to it in this report.

There is no question that people that do not have the information are going to raise questions. I can guarantee you we'll continue to raise questions -- not because we question the minister's commitment to B.C. Hydro and British Columbia, but because we want to get to the bottom of this. We want the facts here, so we can make sure that no government and no party is able to do this again in the future.

Hon. D. Miller: Let's try to get some definition to the issue at hand. I think the opposition has again had the luxury of simply using the name Laxton and saying that, because of what happened here in British Columbia, Hydro's willingness to allow Mr. Laxton to remain on SEPCOL for the purposes of this project -- and I won't go through that whole thing again -- was somehow linked into events that took place here in British Columbia, that somehow there's a nefarious link that casts a cloud over all these dealings, when in fact the terms of reference for Mr. Smith and the review team clearly were focused on the allegations made by the Liberals.

Let me read the scope of the engagement: "...the process followed in establishing the Cayman Islands structure, estab-

[ Page 1411 ]

lishing IPC and conducting the IPC share offering" -- dealt with in the report; "...whether the conduct of the participants was in accordance with sound public policy and good business practice" -- dealt with in the report; "...what guidelines and checks existed within B.C. Hydro and the provincial government to protect the public interest in relation to the Raiwind project" -- dealt with in the report; "...whether there were any system or governance failures either inside of..." -- dealt with in the report.

If the opposition thinks they've got the luxury of simply using the Laxton name in an obscure way to question every other thing that ever happens, they are wrong. We have an obligation -- and it's a responsibility that the opposition does not have, and quite frankly has not shown any inclination to carry out -- to make sure that this project succeeds. It's important. It's important for B.C. Hydro's reputation; it's important just in terms of the basic obligations of any business to be prudent with respect to their shareholders; it's important for those people who bought shares, regardless of how those shares were offered and who bought them and what the fight is right now about getting those shares back. It's important. It's an obligation of business to do what's prudent to protect those shareholders. To do anything other would be a dereliction of duty.

We've done what we thought and Hydro has done what they thought was necessary to carry out their duty. And it appears, from all of the evidence so far, that they have been successful, that they chose the right course. So this luxury of getting up and giving these diatribe-type speeches, that are quite frankly devoid of content, that put the speaker on some kind of high moral plane, and as long as they mention the name Laxton every once in a while, that seems to justify anything they say, is getting a bit tiresome.

So it's there. The letter is now confirmed -- exactly what I have been saying. If the opposition wishes to continue, I guess they have the right to continue, but I'll tell you, they've missed the mark.

G. Farrell-Collins: I think if one were sitting back watching this or listening to it from a bit of a distance, one would find that the only diatribes and the only repetition are coming from the minister. The diatribes are such that every time one asks a question which he is uncomfortable with, or a question that in any way insinuates that perhaps B.C. Hydro or the minister or the government have been less than competent in their handling of this issue, the ego gets bruised, and the minister rises and gets his hackles up and enters into a protracted repetition of what he's been saying now for three days, which doesn't actually answer any more of the questions but just repeats the position that the minister has.

I think perhaps part of the problem that we have here is that it's difficult for the opposition to take the minister's analysis of how this project developed, and how it went on, and how B.C. Hydro -- in recent time anyway, under the new chair -- have handled it, when the minister.... I'm not trying to insult the minister in any way. I'm just saying that he doesn't have all the information at his fingertips. So if I felt the minister was briefed and had his staff and they had the information and they were up to speed and he could fire the answers back right away, I'd have a much stronger feeling that it was being dealt with in a way that showed that they now grasped the seriousness of what's happened here, grasped the seriousness....

Hon. D. Miller: And what is it?

G. Farrell-Collins: I'll get to it, Mr. Minister. You've had your turn, and I'll have mine.

I'd have that stronger feeling if they had shown that they grasped the seriousness of what's taken place here, and really had realized that it was important; that the reputation of B.C. Hydro was at stake -- not just for this one issue but long-term -- and that the minister was ready to deal with it, and had placed it as a priority on his agenda. He's been the minister responsible for B.C. Hydro since the end of February, I guess it was -- some time in February. Since that time, he has yet to find out that Mr. Laxton -- according to the minister, anyways -- was still involved in the project. That doesn't give me a lot of confidence that he's got his finger on the pulse of B.C. Hydro. He didn't understand what the arrangements were for reporting and monitoring Mr. Laxton. He has been unable in the 24 hours since yesterday to obtain information that was requested yesterday.

So without getting into a personal tone that we heard from the minister, it's difficult for the opposition to have confidence that we're really getting the straight goods, or that the minister understands how serious the opposition feels this issue is. So when he gets up and he rants and raves like his ego's been bruised, it doesn't further the debate, as he says, but these questions have to be asked. And I know, because I've read Hansard from years ago -- way back when the minister was in opposition -- that he would be at least as tenacious in asking questions as the opposition has been on this issue. So the indignation that comes from the minister just doesn't do much. It sort of hits about here and bounces off onto the floor. I guess it feels good to vent, and the minister can get up there and blow off his frustration, but we always come back to the facts and try to get the facts.

One of the facts that exists -- and the Leader of the Opposition raised it, and I think it's a legitimate question.... The report from Mr. Smith came out on April 23, and in that there's absolutely no mention at all that Mr. Laxton has been retained to continue to work for B.C. Hydro through SEPCOL, to make sure this project is a success. Yet we have on May 7 a letter that shows the two of them are in correspondence, and have been talking to each other. Forget the contents of it and analyzing the contents for a minute -- although that certainly raises some very interesting questions -- the fact is that Mr. Smith was well aware of the continued relationship of Mr. Laxton with B.C. Hydro. Yet there's no reference in the report at all that that relationship continues. I'm surprised. I would have thought that was something that would have been brought forward, given the clear statements by the minister.

Second of all, with regard to the report, knowing Mr. Laxton's penchant for not telling the truth, I found it amazing that the testimony of Mr. Laxton in this report was not taken under oath. You'd think you'd want to pin the guy down. I mean, he's a lawyer, and he at least understands the difference between just lying to the news media and lying under oath. I would have thought that Mr. Smith would have wanted to get that testimony under oath. When I see those kinds of things develop, when I see the lack of supervision of Mr. Laxton, when I see the role he's continued to play and the role that Mr. Smith has played as the chair of B.C. Hydro, I have to question in a very serious manner whether or not Mr. Smith has been doing his job. I delved into that earlier on this evening with regard....

An Hon. Member: You asked for his resignation, didn't you?

G. Farrell-Collins: Yes. Is that new? Were you telling me that, or what?

An Hon. Member: Just asking.

[ Page 1412 ]

The Chair: I would ask members to speak through the Chair, please.

G. Farrell-Collins: Thank you, Mr. Chair. I appreciate the intervention.

One has to question Mr. Smith's ability to do his job, and more importantly, one has to question the validity of this report -- whether or not it's been a really independent report. I don't think that.... Put the report aside for a minute. I don't think Mr. Smith has done the job he should have done in managing the affairs of B.C. Hydro and certainly in managing this issue.

Second of all, I don't know how Mr. Smith can continue to investigate the activities of Mr. Laxton when, from the contents of these letters, it becomes very clear that Mr. Laxton, at least as far as the letters are concerned.... On the second and last paragraphs -- two paragraphs, I suppose -- it says: "Finally, on a personal note, I would like to be relieved of all responsibilities in connection with Raiwind as soon as possible. I understand Ali's need for stability and continuity during the public offering stage, but when that is satisfactorily completed, I would like to be released." If one is to take all of this as factual and read it the way the minister wants us to read it, it becomes clear, given those comments, that Mr. Smith is beholden to Mr. Laxton; he feels he needs Mr. Laxton's presence there to make this thing a success.

Now, Mr. Smith has a question. He has to decide whether it's more important to have Mr. Laxton on board and get the project to be a success or to investigate the activities of Mr. Laxton and chastise him. Mr. Smith is now beholden to Mr. Laxton in order to fulfil part of his mandate, and the other part of his mandate is that he is supposed to go after Mr. Laxton and investigate him. I don't think that's a position that was smart for Mr. Smith to put himself in.

If that's the argument the minister is making, that Mr. Laxton was doing us all a favour by continuing on with SEPCOL.... Certainly, that's the way it appears from Mr. Laxton's correspondence. I think that's a legitimate question for people to raise and a legitimate concern from the opposition's point of view as we look at this from the outside. We don't have as much information as the minister, but I'm beginning to think it's pretty close to as much information as the minister has on this. I think those are legitimate questions to be raised.

There is a concern when one reads the letter, the paragraph just above, where reference is made.... Again, it is out of context. It's a letter.... It's hard to tell what all the background is, when a comment is made in here about an interest in the Malakand and Swat River deals: "BCHIL has failed to comply with its contractual obligations respecting them." What I'm inferring from this letter is that BCHIL had contractual obligations, along with SEL, in other projects. The minister told us last night that there were no projects ongoing. So, to ask the question: are there contractual obligations in existence with BCHIL in which IPC or any of the other shareholders, through the Marshall Islands or wherever, that would have to do with Mr. Laxton...? Are there contractual obligations in existence with regard to those projects that would in any way link Mr. Laxton or any of the private shareholders?

Hon. D. Miller: Starting from the beginning, yes, it occasionally does feel good to get up and, as you say, rant. I do that from time to time, and I know the member does it from time to time. It's not a question of who cast the first stone. We saw the display last night when the member referred to people as liars and then, notwithstanding, just pointed to the clock and said: "Well, it's 10 o'clock. I'll think I'll just leave now. I don't care what the rules are." I'm prepared to concede that we can both get hot about this.

But it's amazing, it's absolutely astounding. The member says, first of all, that he doesn't know much and he has to interpret the letter, but then he interprets it in an absolutely bold and declarative way: "This means this." "This is what it means," he said. I don't have university training, but I know how to read. You just take the words as they come on the page. It's not hard; it's not difficult. We have one letter from Mr. Laxton saying: "A little report here.... Yes, there's some trouble. But Prime Minister Bhutto stepped in and filled the role to make sure that this was going to.... And I'm here filling the role to make sure this offering is good, and it looks as if things are working out. But I have to get out of it now." And we've got Mr. Smith responding to him, saying: "Yes, that's right. We want you out of it now." It absolutely confirms everything I've said.

Then there is this strange kind of drifting into questioning Mr. Smith. Look, if the members opposite want to question Mr. Smith, be my guest. What they're saying is that they have no confidence in Mr. Smith. Somehow they're saying that he didn't write the truth, or he didn't.... And there is this last bizarre interpretation that because we were asked by the Pakistanis to leave Mr. Laxton there for the purposes of the share offering, somehow that could be twisted around.... It's the most bizarre attempt at trying to be logical that I've ever heard in my life: that that somehow results in Mr. Smith having some debt with Mr. Laxton because it's something we wanted to do. We didn't want to do it; the Pakistanis wanted to do it. We said: "Okay, fair enough. For the purpose of the share offering, that's fine. We're prepared to let that go." And now it's done.

How the member can twist and distort that into a debt somehow, or that Mr. Smith is beholden to Mr. Laxton, is the strangest twist of logic I've ever encountered. I go back to the report. I have confidence in Mr. Smith. Mr. Smith is a distinguished British Columbian; he's a member of the bar, a QC and a former Attorney General. Before people start to question the man's integrity and whether or not he would produce a report that was somehow deliberately deficient of information, they might ask themselves if they shouldn't have something to go on. Or is it that easy for you to simply stand up in this House...? Is it that easy? It shows so little disregard for people that we could just stand up and without really much evidence, just with some sort of narrow suspicion based on twisted logic, say that Mr. Smith somehow didn't do the right thing. That bothers me.

If you're going to lay a charge against somebody, make sure you know what you're talking about. But you go on a little fishing expedition, you have your suspicions, you kind of pick things up here and there, and you stand up in this House and question the integrity of somebody who has served the public of this province in an outstanding way over many years. I just find that somewhat distasteful.

Do you also question the integrity of Mr. Chris Considine, the lawyer who acted with Mr. Smith? He's a member of the Liberal Party. We know he had delegate status at the Liberal convention. Do you question Mr. Considine? Mention him. Stand up. Talk about the others. Talk about Mr. Considine. I'd like to hear it. Do you think they will? I ask my colleagues: do you think any one of them will stand up and say that 

[ Page 1413 ]

Mr. Considine was less than forthright, that he somehow conspired to deceive the public and produce a report that was less than forthright? Come on. I challenge any member opposite to stand up and say that.

Interjection.

Hon. D. Miller: Really. Do you want to challenge Mr. Neil de Gelder of Ladner Downs? Does anybody here feel comfortable to stand on their feet right now? I'll sit down. Tell me that you'll say that Mr. de Gelder is somehow less than forthright, that he didn't do his job well. Come on.

Silence, Mr. Chair. There is silence.

Mr. Jeffrey Harder from BDO Dunwoody, chartered accountants.... Does anybody want to say that he somehow didn't do...?

Interjections.

Hon. D. Miller: Never mind that.

Mr. Chair, you can call him to order, too. What I see is a bunch of people, sitting on their hands, who for some perceived political gain will say almost anything. But lo and behold, when you put the questions to them, where are they?

G. Farrell-Collins: Only one person can stand at a time.

Hon. D. Miller: So let's hear it. I'd like the member's opinion of the other people who helped Mr. Smith with this report. I think what's going on in here is somewhat distasteful.

The Chair: I'd like to ask all hon. members in this House to be courteous to one another. Remarks are being made that are offensive in this chamber we're sitting in.

G. Farrell-Collins: I guess we've had another little outburst by this minister.

One can challenge the quality of work without challenging the integrity of the individual who has done it.

I. Waddell: You called for Smith's resignation.

G. Farrell-Collins: I called for Smith's resignation, and....

I. Waddell: That's pretty serious.

G. Farrell-Collins: Look, if the member for Vancouver-Fraserview or wherever he's from would care to ever engage in debate in this House in any meaningful fashion, I'd suggest he should just get up on his feet, and we'd all be glad to hear how much he can enlighten us. If not, why doesn't he just to what he does so well and just sit there. One can question somebody's productivity or the quality of the work or the job someone has done without questioning their integrity. I question how well Mr. Smith has done his job.

Hon. D. Miller: Question the others. Question them.

G. Farrell-Collins: I do question them.

Hon. D. Miller: Say it right now, here. Read them out.

G. Farrell-Collins: I do question the quality of that report. I question it because if those people, despite their legal background and their talents, accept the word of Mr. Laxton after he blatantly lied to the people of British Columbia on provincewide television, and if they accept his testimony without putting him under oath, I suggest that they were derelict in doing their duties in making sure that Mr. Laxton gave truthful testimony.

The Leader of the Opposition reminds me that the testimony of Richard Coglon, another gentleman of immense reputation and honesty, was accepted without it being under oath. Hon. Chair, I question the work they did, every one of them, if they were involved in taking testimony from those gentlemen. They were derelict in their duty, and Mr. Smith was derelict in his duty. If, as I accept, the minister's comments that he didn't know are truthful, and that he was never informed about what was going on and had no idea until he stood up in this House that Mr. Laxton had continued on, then I say that Mr. Smith was very derelict in his duty. For Mr. Laxton to continue as he has in that capacity and for that not to be known to the minister is a huge dereliction of his duty.

I suggest that the same test Mr. Smith himself applied to the former chair and the former minister, with regard to competency as far as not knowing and not asking, applies to Mr. Smith and this minister. If one applies the penalty for what they did to this minister and this chair, then this minister should be Premier and Mr. Smith should be fired. That's why I said what I said to the member for Vancouver-Fraserview. If he didn't quite get it he can read Hansard, and it'll....

I. Waddell: Pretty serious, pretty serious.... You guys have fired more people than have ever worked at B.C. Hydro.

G. Farrell-Collins: If that member of the New Democratic Party had paid more attention to what his own party was doing in a whole series of things, his party wouldn't have got themselves into as much trouble as they did. He is a long-time member, and his party has done some pretty nefarious things in this province. I would suggest that instead of sitting here catcalling and heckling, he should go back and do a bit of work.

The Chair: Through the Chair, please, hon. members.

G. Farrell-Collins: Hon. Chair, it is a serious matter. The minister stands up in a sanctimonious way and chastises the opposition for raising this issue. Well, hon. Chair, when he gets so dismissive, disregards the questioning and throws his whatever all over the opposition about the fact that we're asking questions or the way that we're doing it, I would remind him of estimates a little over a year ago in this House. The member for North Vancouver-Seymour asked the then minister, who sat in the same chair, a question about what was going on in the Cayman Islands. The minister stood up and rattled on, and a few months later -- six, eight, ten months later -- he said, gee, he didn't take it seriously because it was just a question. And what sort of trouble did he get himself into?

[8:00]

When this minister stands up and ignores the questions, casts aspersions on them and dismisses them in the way he has been doing and then goes on a little rant, I would caution him that there is another member of this House who he may want to talk to for some advice about ignoring the questions raised by the opposition. Not every question we raise is necessarily the most brilliant or probing or necessarily based on the soundest of information, but we have a duty to ask those

[ Page 1414 ]

 questions. If the minister wants to do his duty and keep himself out of trouble, he has the duty to respond to them. Hon. Chair, I would say that if it wasn't for the diligence of the opposition in following it up -- not the diligence of the previous minister; not the diligence of the chair of B.C. Hydro, heaven forbid, at the time; not the diligence of the staff that sat on either side of him at the time or behind him at the time; not the diligence of the people in the Crown corporation of B.C. Hydro.... It was the diligence of the opposition that uncovered this and brought it to the attention of the minister and stopped it from happening. So I would suggest that the minister be a little more -- perhaps patient -- a little more humble in his responses to the questions that are being asked. I don't think that's too much to ask.

I have a series of other questions for the minister. My understanding is that on October 20, 1995, Bruce Duncan of the Crown corporations secretariat wrote a memo to Adrian Dix, recommending that the project proceed, despite its contravention of cabinet spending guidelines. Did the former Minister of Employment and Investment ever have a chance to see that document?

Hon. D. Miller: I've been attempting through discussions with staff to canvass that issue. Quite frankly, I'm not certain, with respect to the current estimates, whether that is a legitimate question in the context. I'm not aware personally of the issue. I wasn't the minister at the time. You're asking me to go back and confirm in this forum whether a memo that was written was seen by another minister who occupied this office. With respect to the rules -- again I'll take your advice, hon. Chair -- I'm not certain that's within the realm of these estimates.

The Chair: The member continues. Whether you have another question or not, we'll see.

G. Farrell-Collins: Oh, yeah, I think I've got a few.

Yesterday -- last evening -- the minister responded to a request from the opposition for the board minutes that surround this issue. The minister said he would attempt to get them for us today. Can the minister tell us whether he's been able to obtain those board minutes?

Hon. D. Miller: I think the member is in error. I don't think I made any commitment to release board minutes. In fact, I think it's fairly clear that the special prosecutor has asked that no information be released while this investigation, this inquiry, continues. We've said quite publicly that we're going to respect that.

G. Farrell-Collins: I'll check the Hansard. Perhaps I'm mistaken, but I will check the Hansard and see what was said. I believe it was in response to a question about who attended the board meetings where the offering memorandum was approved, and then the amendment -- whether or not Adrian Dix and David Schreck and others had attended those meetings -- and the minister said he would attempt to get that information for us. I don't know what's changed overnight, but I will certainly go back and check the Hansard and try to find out exactly what was asked and what was offered. The Hansard will speak for itself.

I also asked last evening whether or not B.C. Hydro had been able to determine who owned the shares in Wedmore Investments, a British Virgin Islands company that I believe held its shares in Jersey. Can the minister tell us if they've been able to identify who owns those shares?

Hon. D. Miller: My officials advise me in the negative.

G. Farrell-Collins: To be clear, that means we don't know who owns the shares of Wedmore Investments. Has Mr. Smith been able to identify that information at all, or is it that we just don't know who owns those shares?

Hon. D. Miller: I'm simply not able to answer the question.

G. Farrell-Collins: I wonder -- and I don't know if anyone else asked this question after I left last evening: has the review panel or Mr. Smith and his team had an opportunity to interview Ali Mahmood since February 22 in any way at all, either by phone or in person?

Hon. D. Miller: The interview is being run by Mr. Smith, not by me, and I think it's appropriate that the question go to Mr. Smith.

G. Farrell-Collins: In the past when we've done estimates -- not necessarily Hydro, but other estimates -- the chair of the board or the chief executive officer have been available to brief the minister in a real-time fashion, to offer the answers to questions. I had hoped that Mr. Smith would be here to answer some of those questions. I guess that's not going to take place. Can the minister confirm that?

Hon. D. Miller: Well, in the past the opposition has complained bitterly about it -- in fact, said categorically that Mr. Smith is unable to do both jobs, both be chair and then conduct the review. Mr. Smith is conducting the review, and he's doing it quite independently from me as the minister. These estimates are not the place for any questions relative to the review. Rather, they should be asked of Mr. Smith.

G. Farrell-Collins: I guess the minister just makes my point, and the point the opposition has been making all along, that he can't do both. Therefore he's not doing both and that's why he's not here tonight.

The minister, I suppose, should be careful what his argument is. Either he can do both -- do the review, head B.C. Hydro and then be available for questioning -- or he can't do both and he's heading the review and he's not here to answer questions or advise the minister with regard to B.C. Hydro. That's the minister's call.

Can the minister tell us what role the Crown corporations secretariat played in reviewing the Raiwind project through its various stages? Have they played any part at all, or was this done strictly out of B.C. Hydro with really no involvement of the Crown corporations secretariat?

Hon. D. Miller: The secretariat exists to provide advice to the minister on all the Crowns.

G. Farrell-Collins: I'll ask the question again. What role did the Crown corporations secretariat play in approving BCHIL-Raiwind projects?

Hon. D. Miller: I'm the minister responsible for B.C. Hydro now. I was not the minister in the past. There is an investigation into various aspects being conducted by Mr. Smith, and we should try to deal with questions relevant to Hydro.

G. Farrell-Collins: I understand that the minister is responsible for B.C. Hydro and is also responsible for the 

[ Page 1415 ]

Crown corporations secretariat. I can't imagine how a question about the Crown corporations secretariat and B.C. Hydro could possibly be beyond the purview of the minister, who is responsible for both. I'll work on that question in the intervening period, and I hope the minister can get the information for us that's been requested, as he's agreed to do, by Tuesday.

We are prepared, if the minister would like, to proceed with B.C. Ferries at this point, and we can get some work done there. I understand that Mr. Rhodes and his people are in the building and are available to do so, and we can come back to this matter on Tuesday when there's more information available.

Hon. D. Miller: As I said earlier, I've been fairly patient, and I have attempted to be cooperative to deal with legitimate questions. There's been a lot of heat and not so much light with respect to the issues we've been canvassing all day and last night.

There is a natural sequence that the opposition indicated they wanted to pursue with respect to the estimates. My view is that we have spent most of the time dealing with one issue. It seems to me, in terms of the business of this House, that we would want to move on -- in other words, reach a completion stage. That has been the pattern up to now, as we've dealt with various issues like trade, and science and technology -- I did have a list at one time -- and I thought that was the order we were going to proceed in. But I don't control the agenda.

It would be preferable if we concluded a stage and moved on, certainly in terms of my officials. This is a large ministry; we have a lot yet to go through. We're trying our best to schedule people. There have been people sitting around waiting for many, many hours, and I see no reason why we can't complete the Hydro estimate issues at the present time. I think we've thoroughly canvassed every aspect of this issue -- in fact, inordinately so. I see no reason why we can't agree that there has been completion and move on, and try to complete other issues in a timely way.

G. Farrell-Collins: There are several reasons why we can't. First of all, the information that's been asked of the minister hasn't been forthcoming. The minister has come without access to a whole series of information in response to questions that have been asked. One expects the minister to come here and be briefed and prepared and to have the information available. The minister has also given assurances that he'll get information to the opposition, and at that time we'll be able to ask those questions.

The agreement between the opposition and the government is an attempt to facilitate.... It's not an agreement, it's a notice from the opposition of the agenda, the proposed plan of debate for estimates. It's done for the convenience of the government and for the convenience, as the minister said, of the high-priced staff that are here, and it's done for that purpose. In addition, before we began this evening, I advised the minister that we would be asking questions on Hydro for a period of time, until such time as we were ready to go on with B.C. Ferries, and that we would be coming back on Tuesday to pursue the matters that the minister will at that point in time have information on.

[8:15]

It's not up to the minister to decide what order the estimates go in. It's one of the very few privileges the opposition has, which is to ask the questions of the minister as the questions come along. We too have tried to be accommodating and to be respectful of the time and energy that the senior people put in, and when they're available and when they're not. We've done that for the convenience of the minister, who does head a huge ministry, with responsibility for the Crowns, Municipal Affairs and a whole series of things. But it is still, and always will be, the prerogative of the opposition to ask the questions when they have the minister to account. It's the one time in the year when we have the ability to do so. We'll continue to do so, and any agreements or offerings from the opposition are for the convenience of the government, not for the dictate of the government.

Hon. D. Miller: Mr. Chair, it's not a matter of convenience. Convenience matters nothing to me. It's a question of what is realistic and what people indicated they wanted to do. We did get a list from the opposition. My critic, who's now talking to the Opposition House Leader, provided a list. He said this is the sequence they want to go through -- and now they want to change that.

We have staff here who were here all last night and were here all today. They're all on standby, here from Vancouver, and there's incredible cost attached to that. It's not just a matter of convenience, Mr. Chairman; it's a question, really, of people wanting to conduct the business of this House in, I think, a prudent and realistic way. That's really all I was seeking. I care not.... As far as I'm concerned, I'm here, I'm a politician, that's what they pay me for, and, quite frankly, I like it. But I would assume that there is some sense of responsibility with respect to these estimates and some agreement that we would go through them in a sequential way. Now I hear that, really, regardless of the cost, the consequences or the impact, it doesn't matter.

But I don't control these events. I'm here as the minister to try to respond to questions that are asked, and I'll do my best. I can tell you I'm quite prepared to do that, but it doesn't seem the wisest decision I ever heard of to want to interrupt this, move on to something else and come back to it. It seems to me it's not very helpful at all.

G. Farrell-Collins: The minister should be cautious taking advice from the member for Vancouver-Fraserview, because in the past it's proven not to be of great value. It's common practice in this House....

I. Waddell: You've run out of questions.

G. Farrell-Collins: You want to see my binder? You come over and you can ask them all yourself, Ian. I mean, just keep your mouth shut -- or whatever.

Interjections.

The Chair: Hon. members! Hon. members, I'd ask you to please take your seats....

Interjections.

The Chair: Hon. members, hon. members.... Order! Hon. members, I would ask hon. members to remember we're here doing the people's business -- all of us -- and to respect the people's business, which we are trying to do.

G. Farrell-Collins: Thank you, hon. Chair. I won't repeat all of what I said earlier, because I stand by what I've said: it's common practice in this House to adjust the plan of attack, as we say, in estimates by agreement. It is also.... The minister 

[ Page 1416 ]

may have forgotten, but he and I discussed this before we started tonight, and I did let him know that we had a series of questions on Hydro that we'd be asking. We are still awaiting the response and the information that he has promised to us. He has given us his word. He was made aware that after a period of time -- not quite this long, actually -- we would be proceeding to Ferries. The minister agreed with that, and I notice that he went out and let his staff know we'd be doing that. So this is no surprise to the minister.

Once again, taking the advice of the member for Vancouver-Fraserview has turned out to be not a wise decision. We will proceed with Hydro estimates on Tuesday.

Hon. D. Miller: Mr. Chairman, just for the record, we're dealing with the costs, the extra costs, imposed by either the opposition's inability to continue and conclude this Hydro portion of the estimates or their belief that somehow wisdom is going to strike over the weekend and they'll do a better job next week. It is costing four extra helijet round trips, the hotel, per diem.... It's probably a total of about $2,500 of the taxpayers' money because of the games that they want to play. But that's something that, I guess, they're responsible for, so let's get on with it.

The Chair: Before the member continues, I'd like to say that I'd like to see members remember we're here to discuss vote 22. I'd hope the House could come to terms with themselves to get on with that vote. That's why we're here this evening.

G. Farrell-Collins: Thank you, hon. Chair. I would just like to put on the record for the minister's edification and that of posterity that the reason we need to resume these estimates for B.C. Hydro on Tuesday is that the minister wasn't able to answer the questions he was asked last night or today, and he has promised to get back to us. The cost of that is due to the inability of the minister to have the proper staff here for him, or to be properly briefed for his estimates.

The Chair: Okay, we'll recess for five minutes.

The committee recessed from 8:23 p.m. to 8:30 p.m.

[J. Doyle in the chair.]

D. Symons: During the wait to move on to B.C. Ferries, I managed to jot down a few thoughts I had, which I'd like to use as opening remarks, and then we'll move into our interrogation, so to speak. I think we'll have a change in tenor on this in the next while.

B.C. Ferries have been serving the coastal communities of B.C. for about 35 years -- in fact, I'm not sure if this isn't their thirty-fifth anniversary -- and the corporation played an important part in the economic and social growth of many communities. More than half the vessels are over 30 years old and need major refits or repairs, and the government keeps telling us that when they bring in their ten-year capital plan.... The question has been whether new vessels should be larger, with more capacity for passengers and vehicles. I believe that question has been answered by the introduction of the superferries: bigger, more comfortable and very passenger-friendly but more expensive to run and, for much of the year, uneconomical. They also place an awful load on the terminals and access roads when they unload.

In order to make them more cost-effective, they would have to sail less frequently and carry more people, but then service suffers. In what is now referred to as the shoulder seasons, there used to be an 8 a.m. sailing that I could catch to Victoria on Monday mornings, and that disappeared, except for the summer months, as soon as the superferries were introduced.

Larger is not always better. More frequent service with smaller vessels can alleviate traffic congestion at the terminals and the communities near the terminals. That's one of the reasons that the government has suggested for going the fast-ferry route. The government appears to have recognized this problem and is now moving to fast ferries.

Again, there are trade-offs. While they are smaller than our larger ferries and therefore alleviate the problem just alluded to, they also have problems. They've reduced the time of crossing at the price of fuel consumption and a loss of some comfort. Will the travelling public be willing to pay a premium to arrive on the other shore a few minutes earlier? Or is the ferry trip a bit of a break from the rush of the world for many of the passengers? I believe the minister may find that the answer to that question is no. I believe there is a difference between paying a premium to have assured loading to avoid an extended wait at the terminal and paying a premium to shorten the actual sailing time. We will probably have to wait to find out who is right on that particular topic.

Another issue is passenger-only ferries. It is much better economically and for the environment to move people instead of cars. But until public transit is much better between the terminals and urban centres, there won't be too much public support for a passenger-only service. I would like to move from those opening remarks -- unless the minister cares to respond in some way -- into the questions.

I wonder if we might move into the problems or philosophy in funding of the ferries. I believe there is a philosophy now, enunciated by the CEO of B.C. Ferries two or three times in the last year and a half or so, of a move to make the system more self-supporting, and the government has accommodated that move by reducing the government subsidies.

In 1994-95, I believe, the subsidy was $13 million, and the federal government put in $29 million, meaning that the ferries were subsidized up to about $33.9 million. In 1995-96, that dropped down to $9 million, with a $21 million federal subsidy, to make it approximately $30 million. And this coming year, in the estimates book, I see a figure of $4.7 million. That's quite a drop. I don't know what the federal subsidy was this year, so that would be my first question. What is the federal subsidy for 1996-97?

Hon. D. Miller: It's true that we have been reducing the subsidy that is paid by the Crown, and that has been a challenge for B.C. Ferries, one that I think they responded to quite well. But there are still ongoing challenges with respect to trying to make the corporation achieve a slightly better revenue performance. The figures for last year indicated a modest revenue shortfall, and those are issues that I will be pursuing with the corporation.

D. Symons: My question to the minister was whether he could tell me the figure which the federal government is putting into coastal ferry service in British Columbia.

Hon. D. Miller: Approximately $21.5 million.

D. Symons: It seems, at least for last year and this year, the federal figure is fairly constant, whereas the B.C. subsidy portion is going down.

[ Page 1417 ]

At this rate, I assume it's intended to have a zero subsidy in 1997-98. Would that be future policy, or could the minister indicate that at the rate things are going, you intend to move it down again by the figure you moved it down this year?

Hon. D. Miller: I have not made any decision with respect to next year's budget; we're still in this fiscal year. I think I've talked generally and publicly about the fiscal challenges that the Ferry Corporation faces, and that's one of the things I want to work with the corporation on.

D. Symons: I wonder if the minister or his staff could tell me how much of a fare increase would be needed to produce $4.5 million more in revenues -- which is roughly the subsidy you're having this year. If you were to replace the subsidy with a fare increase, what increase would you need across the board to do that?

Hon. D. Miller: If we were to rely exclusively on a fare increase, it would be, roughly, just under 2 percent.

D. Symons: In calculating that 2 percent figure, does that take into account any possible reduction in ridership due to higher fares?

Hon. D. Miller: The question wasn't really based on a sort of detailed analysis of elasticity of demand -- I think that's the term. It really was a straight question: how much would we need on a straight percentage basis to come up with that revenue?

D. Symons: I'm wondering if the minister might be able to tell me, then: if you decrease government subsidies and therefore force B.C. Ferries into a position where they are going to have to find revenues to make up that shortfall on the revenue side by fare increases -- which seems to be the main way they can do that -- does that not translate into a tax increase? The government is taking money it previously took from general revenue and using it as a subsidy to B.C. Ferries. If you stop doing that and turn it over to the B.C. Ferries passengers to make up that shortfall from the subsidies, is that not a tax increase, in a sense?

Hon. D. Miller: No, I don't believe it would be. Again, I've publicly stated that while the corporation has really said to me, "We'd like to look at the potential for a fare increase," I've said to them that I'm not prepared to move forward on that at the present time. I should also point out that there are a variety of revenue sources that the corporation does take in. For example, catering revenue is a fairly significant amount of revenue. It increased 13.6 percent from '94-95 to '95-96. That's a pretty healthy increase -- in about the $9 million range. So you can see the variety in an operation like this. There are a variety of areas where revenue comes in.

D. Symons: I did notice the catering being one of the big increases in Ferries revenues there, but I do think there may be a maximum you can achieve in ferry food, as well, as a source of revenue.

I heard that the new rate is going to be a dollar more per passenger, a dollar more per vehicle, and that it's planned to bring it in this fall. I wonder if the minister might confirm or deny that that's the case.

Hon. D. Miller: The member knows full well that the question is completely out of order. I can advise that he's in error, but the question is completely out of order.

D. Symons: I thought I might slip that by. We'll find out, I guess. Time will tell on that one as well.

The federal government contributes to the maintaining of coastal ferries. Is the west coast ferry agreement still in effect? Or how has it been modified, if it has been changed?

Hon. D. Miller: Yes, it is. That agreement arose back in the seventies as a result of a decision by the federal government to withdraw subsidies from the then Northland Navigation. Subsequent negotiations with the province and the federal government resulted in a subsidy that is subject to the Vancouver CPI index. That has risen, I think, from about $4 million at inception to $20-plus million today. That is an agreement with the federal government.

D. Symons: As I read the agreement here, it says the terms of the agreement give the province the responsibility for providing coastal service as well as deciding which services will receive financial assistance. So I'm wondering if the federal government contribution of $21.5 million goes into the general ferry pot and it just is one of the operating incomes for the ferry, or is it dedicated to certain ferry services?

Hon. D. Miller: In the general fund.

D. Symons: Thank you. I note here in a newspaper article, in the Island Tides of February 9, 1995, that there's a quote from the CEO of B.C. Ferries, saying: "We're eating our equity. Debt service costs, currently $35 million, exceed the government subsidy of $33 million" -- and I think it's now only $4.7 million -- "$19 million of which is grants from the federal government. The government subsidy is $20 million less than it was four years ago. B.C. Ferries starting paying debt costs in 1992. Prior to that time, capital costs on all new construction were paid by government." I'm just wondering, if you're adding these things on to B.C. Ferries, how they're going to manage with the capital costs that were previously paid for by either the federal or the provincial government. We're on a spending program on ferries of $800 million now. That's all going to be added in and paid for by the farebox. I'm wondering how we're going to do this.

Hon. D. Miller: I think I've tried to indicate that there are challenges facing B.C. Ferries. The annual report and the summary of that, which came out some weeks ago, did indicate that the loss on an operating basis was in the $4 million range. But if you factor in depreciation, we're looking at about $40 million, and that's really what the chairman was referring to in his remarks. That is really the challenge for the corporation. I don't accept the simple notion that we go out and look at increasing fares in order to achieve the kind of revenue that is required. I think, like any large corporation, we have to challenge it, and it's ready to be challenged, quite frankly. The president and I have had some very good discussions about that. While we've not gotten into any in-depth work at this point, we will. I think we have to look at the operation, its efficiency and everything about it -- as any business of this size would do in today's modern economy -- meet those challenges and continue with that capital plan.

D. Symons: In the statement of revenue, expenses and deficit for the year ended March 31, 1996, I find that the net finance expense represents really the largest change from '94-95 to '95-96, and it's a change upwards. That particular expense seems to be the largest change there, and if the government is going on a capital building program, as it's 

[ Page 1418 ]

doing with fast ferries, upgrading of terminals and so forth, that figure and that change can only increase even more. The minister seems to be telling me that by selling more food or increasing the cost of food, and changes like that, we're going to manage to make up that difference.

Hon. D. Miller: I don't think it's any single thing that will allow the corporation to meet these challenges. What I'm saying is that a corporation of this size -- a $371 million corporation, one of the largest ferry fleets in the world -- has to look at every aspect of its operation in order to be able to continue to move forward. It's not without precedent. It's the fact that we've changed the way things are reported. In the past those debt costs were carried by government. That cost was, if you like, hidden. The ferry fleet that was put into operation in the sixties was built in a very short period of time at huge capital cost. I don't know if it's similar to the amount in today's terms, but it was a huge capital cost. That's really paid off, so as part of our capital planning in this province we are looking at the corporation. There is a need to update those vessels. They are getting old. Efficiencies obviously can be gained through some of those changes. In other words, by spending capital, you can realize efficiencies and better revenues, so we're looking at all aspects of the corporation in order to meet these challenges.

[8:45]

D. Symons: I note that over the years 1990 to 1995 we've had six fare hikes, including the one that we're doing in the peak and shoulder seasons. This year, in spite of all of that, the Ferry Corporation had a $40 million deficit. At that rate, I wonder how we end up justifying the fact that you are reducing the subsidy while this seems to be going on. Ferry fares have gone up and the costs have gone up faster, or the deficit has gone up faster. Does the Ferry Corporation run a debt now, besides an operating deficit, as well as capital costs? How much has that particular deficit on the operating side accumulated over the years?

Hon. D. Miller: Quite simply, a couple of things have happened. One is that we've reduced the operating subsidy paid by the taxpayers, the Crown. Secondly, we've imposed the capital debt-servicing costs on the corporation, and I think they have responded really quite well. This is not something we did last year. It's been ongoing, and you can see the result of that. Prior to the corporation having that responsibility, there were no depreciation costs.

It is a different ball game, and the corporation, I should say, is responding very, very well. It continues to be a marvellous operation providing outstanding service. I did a radio program this morning, and as usual, when you get on the radio and start talking about ferries, you kind of expect some heated calls. But I was quite pleased. The calls were constructive. People phoned in -- there weren't that many -- with ideas in terms of how they thought the corporation could respond. In fact, that's one of the ways we're interacting with the public in a much better way. I know that up in the North Coast, I was very extensively involved in the stakeholding process there that saw the introduction of a new route based in Port Hardy and serving midcoast communities. It's is proving to be, from all the accounts I've heard.... I've just heard some very glowing reports from a wide variety of individuals about that new service. It has also provided new economic opportunities in the midcoast region.

The corporation is really being quite creative and will continue to be creative as we work together to meet and overcome the challenges of a modern, large corporation providing the kind of service it does.

D. Symons: I am not differing with the minister at all on the quality of the ferry service. It is renowned as a world-class ferry service. I am concerned about some of the issues relating to it, maybe things we can investigate as we go on. I am going to ask a question that relates, in a sense, to fast ferries, which I am going to do as a separate topic later on. I've tried to put these together in certain categories, and that will come up later.

I notice that if we take the years I've referred to -- or going back even further than that, starting in the beginning of 1990 -- the ferry rates have gone up by almost double the consumer price index in that period of time. The previous holder of your position who was responsible for B.C. Ferries, now the Premier, commented a year ago when he was introducing the fast ferries that, indeed, the costs of fast ferries would be covered by the fare increase, which would only keep up with the consumer price index, and an increase in traffic, and basically it should take care of the costs. We found by doubling it over the last six years -- double, that is, the consumer price index -- we still are running a deficit, a reasonably large deficit on the operating side -- let alone the side that involves construction.

Hon. D. Miller: Getting to the issue of fares, I think it really goes to the question: do fares at a certain point dissuade people from using the operation? The corporation is currently doing a survey with respect to that, and that's the elasticity issue I referred to.

I did look at a table that compared fares on our ferry routes relative to similar routes in other parts of the world. I've said this since.... It's always cold comfort. It's nice to tell people that you've got a bargain, but I guess if you are taking the money out of your back pocket, quite often you are not prepared to accept that. I think it is useful, occasionally, to provide some context for the issue of fares. We also have mixed traffic patterns. We've got domestic users who rely on it. You hear those arguments. In my part of the province, residents of the Queen Charlotte Islands, for example, use that ferry as a good means of transportation to the mainland. A place like Klemtu, which is a small aboriginal village on the midcoast, has not had any ferry service whatsoever up until now. They are absolutely delighted. They've built a dock on their own; they've got plans. They've been very ambitious and aggressive with respect to accommodating tourists who come in on the new Chilliwack.

It's really in the eye of the beholder, I suppose, to some degree. I said this on the radio this morning. I had my grandson for a couple of weeks, and last weekend my wife and I went to Mayne Island. I had never been there before, but I was struck by the fact that for an occasional visitor, the round-trip passenger fare was $4.50. I hope nobody from Mayne Island reads this and gets offended, but I did think, as a one-time user, that that was pretty much of a bargain to go to a very pleasant place. I had a thoroughly good time over there. But people who live there might say that's too high. You know what I mean? You have to have some sense of balance and a sense of context when you consider these questions.

D. Symons: I've done most of the Gulf Islands, so I guess I'm ahead of the minister on that. Certainly going between the islands is quite reasonable; I'm not quite sure what it was from Sidney.

[ Page 1419 ]

However, dealing again with fares and the fact that you are having B.C. Ferry Corporation move more toward a corporate model in the sense of a bottom line, in doing so there are certain restrictions that the government places on the operation of B.C. Ferries, which inhibit them from basically going to a corporate model. I'm referring to the fact that the B.C. government has, over the years, added free senior days and subsidies, and they've covered certain social programs such as medical passes, free passes for students going to school and that sort of thing. I wonder if, when the government does remove its subsidies, it will pick up the costs of those basically social programs that the government imposes on B.C. Ferries.

[W. Hartley in the chair.]

Hon. D. Miller: I want to be clear that I've not, at least in my own mind, arrived at any absolute determinations about, for example, ferries being a commercial Crown -- in other words, simply operating in the marketplace. I don't think we should ever forget the social obligations, the social arguments, whether it's simply that this is the only way you can get from point A to point B, and in other parts of the province there's a highway and the taxpayers obviously spend money there.... The total value of those subsidies, you might call them, is about $6 million or $7 million.

Again, I go back to the people in the more remote parts of British Columbia. I was saying, again referring to that radio program, that the round-trip fare for people who live in my hometown of Prince Rupert to get to Vancouver is over $800. I'm sure most British Columbians don't realize that if they never travel, but that's an astoundingly high cost to fly from a community that's not that far away.

I see the member for Peace River South is here, and I think we've had some discussion about that. So you look at the issue, and that member has been quite outspoken, as I have been in the past, on the problem that people in the north have in accessing medical services. We did introduce a program with the private sector. Some of the airlines have cooperated fairly well, so that when people have to fly from Fort St. John to Vancouver to receive medical attention that's not available in their home community, there are some discount fares. We've committed B.C. Ferries. You have to set that example, I think, if you want to go to the private sector and say: "Well, you participate." Then you have to be prepared to do that with corporations that you have some control over.

That's not a huge cost -- about $1 million -- but it's certainly important to families that may have to seek medical help that's not available in their home communities. So it's worthwhile. Whether the member is making the argument that the government might assume that cost, instead of imposing it on B.C. Ferries.... But I'm not convinced that we need to go.... We may look at some issues around commercialization, but that work really hasn't been done.

D. Symons: I am reassured in hearing that at least the government isn't planning on doing away with those social ones. My concern was who's paying for it, in that sense? If the corporation is moving toward a corporate model, which seemed to be the case from the words of the CEO in the past, then those questions, I think, are going to have to be addressed.

I'm wondering if you might tell me how fares are set. Is it by the distance travelled or by the cost of operating a given route? In what way have you set the fares for the various routes?

Hon. D. Miller: The rates are really a reflection of history. In other words, looking at how B.C. Ferries came to be and the various components that came together under B.C. Ferries, they all had different rates. I don't know how far back you'd have to go to figure out how they were set, but it's been fairly ad hoc. The Ferry Corporation is trying to find some consistency over a period of time.

Mr. Chairman, if I could just do a little pitch for my constituency and the B.C. Ferry Corporation.... I'm delighted that Mr. Rhodes has given me the travel section of the July 28 issue of the Seattle Times. There's another outstanding story of the new service on the midcoast, and it's entitled "The Little Ferry That Could." It has a picture of one of the communities in my constituency, Bella Bella, and that's obviously good news. It goes to 700,000 readers, and so that means more people are going to look at this and say: "I'd like to go." Perhaps that will be one of the things that generates some additional revenue.

D. Symons: On my question a moment ago, from Powell River to Comox is a considerably shorter distance than from Tsawwassen to Vancouver Island. Yet I think those runs charge the same fares to get from the mainland to Vancouver, regardless of how far it is across the straits. So that was prompting my question. I suppose the member for Powell River-Sunshine Coast would want the fare there halved because it's about two-thirds the distance, I guess. I wasn't necessarily suggesting that. But I was just wondering if there was some connection between distances and the routes, or whether it's on the costs. Can you give me some idea? I know that particular route loses money compared to the southern route, which is a moneymaker. Can you give me an idea of just what the difference is? It's certainly a shorter route, but it seems to cost more per passenger.

Hon. D. Miller: Well, it's really economies of scale. I know the member's been to Prince Rupert; I think he took the ferry, if I'm not mistaken. When I fly home tomorrow morning, I'll land on an island and then I'll have to get on a little ferry and a bus to go across to Prince Rupert. That fare is $11, and it's not very far -- probably a couple of kilometres, but I couldn't throw a rock. That's the cost for the city; in fact, that's heavily subsidized even at that fare. So there's probably an immense variety of reasons why fares have arrived at where they are today.

D. Symons: I believe the minister made some comments about the possibility of a bridge going across to the island there, so that might solve your $11 problem. It's $11 each way; that's a $22 saving if you build a bridge to go across to the island. How many million was the bridge -- $35 million? I forget what the figure was. Anyway, is there a move toward making the fares cover the costs of providing specific route services?

Hon. D. Miller: Not in any absolute terms. In other words, I don't think you could isolate specific routes and say that they've got to be full cost recovery, because it would be prohibitive. You talk about elasticity of demand, so people would, I guess, in some cases, continue to take seaplanes or whatever is their mode of travel. So, no, there is internal cross-subsidization.

[9:00]

But we have to really look at all of them. You know, we did the stakeholder approach on the midcoast. It was a bit of a challenge, but eventually what was produced was endorsed 

[ Page 1420 ]

by everybody. During that process, the issue of fares was addressed by the stakeholders' committee. Now, that's kind of a good system, because what you have are people not only involved in the development of the service but also with a full realization of costs and everything else, who don't kick about.... They, in fact, really come to the conclusion with the corporation what fare structure is appropriate. That's a good way of doing it. I'm not naïve. I don't think that you can always get everybody to buy in, particularly when you get heavily populated areas. How do you get to those stakeholders...? It's much easier in a small community where there are fewer people and people tend to know each other and word gets around a lot quicker. It's much more challenging, I think, in larger communities or spread-out, diverse communities. But it's not a bad approach and is one that we're trying.

D. Symons: I'm going to have some of the stakeholders' meetings and so forth coming up later in discussions.

Just one more comment here. The government budgets close to $500 million per year for maintenance and rehabilitation of our highway system. It's about $300 million on maintenance, and $139 million this year is going toward rehabilitation. That doesn't really count capital costs in there at all. So this could be called a subsidy to the highway system -- in a sense, the money that's going in year by year to keep it operating. Could the per-kilometre rate of subsidies provided to highways be applied to a subsidy providing ferry service as a continuation of the highway system? Has the government considered that?

Hon. D. Miller: Yes, I think, in theory, although I don't know what the costs are, so I'm not saying that that would be the basis. But again, going back to and looking at the go-north strategy and the potential for increased service, particularly in areas where there is no service or limited service, the strategy was quite clear in defining an implicit subsidy that had to be followed by any community requesting a new service.

Now, you go back to the origins I talked about -- B.C. Ferries taking in a bunch of services, some of which were free, some of which were low-priced, etc.... It's not necessarily an equivalent argument with highways. I appreciate the argument, but it isn't. People years ago, for example, may have decided to move to a certain island, with the full knowledge that either there was no service or there was a private sector service. Yet today, and as populations have expanded over time, people tend to say: "Well, no, this is like a highway." They are not quite comparable arguments.

J. Weisgerber: I'd like to ask a few questions with respect to fuel efficiency, fuel operating systems, etc. I've been approached and had a series of discussions with a group of people representing something called ETA Pilot, and they apparently put a system into the Queen of Alberni a couple of years ago. I think ferry staff would certainly be familiar with it. My understanding is that the system maximizes engine r.p.m. and propeller pitch in order to maximize fuel. And the figures that I've seen are very impressive: $350,000 a year savings on the Queen of Alberni, a projection of $2 million a year savings in fuel. That seems low, but the numbers that I've seen are several million dollars in annual fuel savings if this system were adopted fleet-wide.

Maybe the minister could give me an update as to where the corporation is at with respect to ETA Pilot. I understand that some other systems are being tested also. Perhaps the minister could give me an update.

Hon. D. Miller: Mr. Rhodes advised me that, in fact, we are testing two models, one B.C. and one U.S. Essentially, it's the application of technology; it's efficiency. Mr. Rhodes advised me that perhaps it's less useful where there are constant speed changes, because it has to be turned off and on. Perhaps it's more useful where there's a regular coming up to speed, maintaining speed for a period of time and then slowing as you approach the next terminal. But yes, we are testing, and we will make a decision based on our testing as to which is an appropriate model for implementation in the fleet.

J. Weisgerber: The frustration for this particular proponent is that the system has been in place for two years -- in test in the system -- and they find themselves unable to move to the next logical step, or what appears to be the next logical step. Could the minister tell me: do these other systems appear to offer greater savings than the one currently being tested? There obviously is some reluctance on the part of the corporation to go ahead and expand the use. I understand that ETA Pilot actually offered to put systems on all the ferries on a cost recovery basis -- in other words to say: "Look, we won't charge you for the systems. We will simply let you pay us back on the basis of half of the fuel savings." Could the minister tell me if it is the expectation that there is a much better system out there somewhere?

Hon. D. Miller: No, but there is a requirement for the process that all, either government or Crowns, must follow with respect to purchases. Clearly, Ferries is testing to see which one performs.... As for any sort of offer to "put it in and you can pay us over time," that's a way of getting in the door, if you like -- right? They've got the technology, and we're paying for it over time. So there's always a bit of a problem with that approach.

J. Weisgerber: I'm certainly not here shucking for ETA Pilot. It seems to me they would obviously take the cash if you wanted to buy the system from them. The cost recovery method, as I understand, wasn't their first choice, either.

Could the minister tell me...? I understand there was actually a proposal request out that was cancelled and again has caused some consternation for these particular individuals.

Hon. D. Miller: The explanation is that we have not finished the evaluation, and the other one is that a B.C. manufacturer came along and asked us to test, and I think that's important. So that's why the process was not completed. But we're still going through the evaluation.

J. Weisgerber: Recognizing that in addition to reduced fuel consumption, there are issues such as air pollution, wear and tear -- all the things that go along with increased fuel consumption -- can the minister give me and, I suppose, ETA Pilot and anyone else who's interested some sense of the time lines? When do you expect that the Ferry Corporation will issue a full-fledged proposal call? It does seem like a logical step for the corporation to take.

Hon. D. Miller: It's not exact, and I appreciate that the member wanted some relative sense of it. We think we will complete our evaluation in this calendar year and therefore should be in a position to make some internal decision. I won't give a time line or even suggest when that would go out in a public way.

J. Weisgerber: I want to ask a few questions around the high-speed ferries and catamarans. I don't want to get drawn 

[ Page 1421 ]

in to talking about whether they're a good investment or not a good investment or what the engineering concerns are around them. I think we've all heard from a host of people, some more than others, about the shortcomings of the system.

Having thought about that, I wonder what contingency plans the Ferry Corporation would have in place, after the first one is up and running, should a decision be made that really this isn't the ideal configuration for ferries in British Columbia's waters. Is there a contingency plan? I know there are some very big expenditures planned in terms of terminals, etc., and I'm wondering what kinds of contingencies the corporation has in case they prudently decide they're not going to continue with this particular line of building.

Hon. D. Miller: I don't really want to.... That is hypothetical. I want to say that we have confidence that the strategic decision we made was the right one. The terminals are not a significant factor; the fast ferries will fit existing terminals. There will be some terminal upgrades, but the substantive public costs for terminals have been.... At Duke Point, for example, both the terminal and the access road amount to about $100 million. Those are for the conventional ferries to take that traffic out of Nanaimo and move it onto the Island Highway in a much better way and avoid the horrible problems that are experienced in Nanaimo. Having driven up there on Friday afternoon last week, I can tell you that it's a nightmare. So the terminal issue is not really the issue.

In fact, the capital cost of the ships themselves is much lower than for the conventional ferries, and we think we've got it right. If we started making contingency plans now, we'd be displaying an incredible lack of confidence in the decisions that we made.

J. Weisgerber: I know there are members with much closer relationships with ferries than I who are dying to get in and ask these questions. Let me wind up by asking the minister: is it that you don't have a contingency plan, or just that you don't want to discuss publicly the contingency plan that you have?

Hon. D. Miller: No, I was really saying that if we put a lot of time and effort into saying, "My God, this isn't going to work; let's have a contingency plan," then we really would be demonstrating a lack of faith.

In the short time I've been here, in talking to people in the corporation I think we've made the right decision. I am eagerly awaiting the launching of that first ship to see how it responds and how people respond to it. I think it will be just a magnificent sight to see that vessel crossing the straits, and certainly we'll do it in a much faster time and in a better way in terms of the pulse of traffic as it hits Vancouver Island.

I am also excited, as I know many are, for the opportunity for the shipyards and working people to get the opportunity to learn that new technology and look forward to the days when we can be just as competitive internationally in that field. I think that's great. I love looking forward; I like those challenges, and the idea that we can do things that others have done. Combining the talent, skill and know-how that exists here is just a marvellous thing. I look forward, as I am sure all the members do, to having somebody break that bottle over the bow and seeing it hit the sea.

J. Weisgerber: I join you. I genuinely hope that the system is an enormous success. Can the minister tell me if there will be a period, given the rollbacks and freezes on capital expenditure and the understanding that the fast ferries are caught in that, of opportunity to test this first ferry before the corporation commits itself to the construction of others?

Hon. D. Miller: No, the plan is to have work start concurrently on No. 2 while No. 1 is in progress.

In a humorous way, I'm advised that when the decision was made to build the superferries, there were no contingency plans if somehow it didn't work. I think the member was a member of the cabinet at that time.

J. Weisgerber: In rebuttal, I guess I would say that nobody started building a second one until in fact they had it up and running and had tested it, and then it proved to be such a success....

Hon. D. Miller: It worked.

J. Weisgerber: It worked, and a second one was built.

[9:15]

D. Symons: I remember that in a discussion last night the minister was quite irate that one of the members on our side of the House used a newspaper report as a source of asking a question. So I am going to ask one based on a source like that, as well. I gather that passenger and vehicle traffic was down in May of this year, not by a great amount, but.... Where are the figures here? Fourteen thousand vehicles was down, I think.... Passengers were down by roughly 1.5 percent. I'm wondering if the minister might be able to give me the figures for the traffic in the month of June, and how that would compare to the previous June, a year ago.

Hon. D. Miller: That is a specific request, Mr. Chairman. Would the member be happy with the actuals, '96 versus '95, to date? That's probably as good an indicator to use as any, if that's okay with the member. Running through the volume numbers, the first figure is for '96, the second is for '95 and the third is the change. On the underheight, that's fairly constant at 1.94 million to 1.97 million; so it's 1.7 percent, a modest decline. Overheight is again fairly constant, with a decline of about 8 percent. Commercial is down 3.6 percent, and bus is up 10.4 percent. The total decline is just about 2 percent. It was 1.9 percent for the last year to date, over '95.

D. Symons: Those figures re-emphasize the concern I had that if the ridership is dropping, and if you are going to keep decreasing the subsidy, it is going to increase the need for increases in fares as the only way of meeting the shortfalls in operations for the system as a whole.

The Nanaimo-Tsawwassen run, route 30, loses money. Is that partly the reason behind moving commercial traffic from Horseshoe Bay to Tsawwassen? The Horseshoe Bay-Nanaimo run is quite a good moneymaker. Can you tell me whether the reason you're moving there is because the Mid-Island Express isn't doing that good a job paying for itself?

Hon. D. Miller: It's really volume and trying to separate the traffic. It's the truck traffic and the massive congestion that occurred there. I'm not certain what the experience is on the Tsawwassen-Nanaimo run, but I think it has been a beneficial move with respect to the congestion issues in the Horseshoe Bay area.

D. Symons: From the figures I have here, the Horseshoe Bay-Nanaimo route, route 2, is the best moneymaker, with 

[ Page 1422 ]

about a 20 percent profit on costs. Route 1 used to have about a 10 percent profit on its cost. Has the introduction of superferries on route 1 affected the profit margin?

Hon. D. Miller: The Swartz Bay-Tsawwassen route carries all of its capital costs. Those are new ships; and on the other run, with the older ships, they do not carry those costs.

D. Symons: When you're working out the costs of each route, are you including the capital costs of the ships? That's something that has been added recently, I believe.

Hon. D. Miller: That's right. That is the model, Mr. Chair, but there are other models to spread that cost over the entire fleet. As the member is aware, we're dealing with stakeholder committees, and those are some of the things that are being discussed.

D. Symons: In your $800 million capital plan, I gather the increased revenues through extra business, operation efficiencies and fare increases are all things that the now Premier, the previous minister responsible, was saying they were going to cover. I'm wondering if the business plan and projections for the Victoria Line were incorrect, because we were told by that same person that the Victoria Line was going to be self-sufficient after three years, and we find the government is now selling it off. I'm going to come back to that later this evening or next evening. How can we have any faith that fares will not increase substantially to pay for that capital cost once...? I'm wondering if the minister could share with us the business plan prepared for the fast-ferry fleet.

Hon. D. Miller: I'm happy to discuss that issue. We are working on business plans. I don't have a business plan with me here during these estimates, but when business plans are ready, I think it's quite open...sharing that with the member.

D. Symons: I think a common practice in business, to be prudent, is that you do the business plan before you begin on the project that you're working on. In this case, the minister is telling me that you're now working on a business plan. You've purchased the metal, you're building a shed to build the ferries in, you've let contracts, and now you're going to find out whether it's going to be economical.

Hon. D. Miller: Perhaps the answer wasn't clear enough. There is a business plan, but really, we've been talking about the kinds of changes and challenges that the corporation is faced with and the period of change that we're in. We're constantly looking at those, particularly now, with my having rejected the notion of simply jumping to a fare increase but rather, wanting to have a system-wide review of the operation. Really, in that context, we've got a fair amount of work ahead of us to look at the issues that we have spent some time talking about this evening.

G. Wilson: I appreciate the member for Richmond Centre giving me this opportunity to get in. He suggested that I owe him. I'm not quite sure how much or what that might be, but I'll take my opportunity as it comes.

I guess with respect to these superferries.... I want to preface my questions tonight by saying that my questions are designed to sincerely try to understand how the plan has evolved, how it's continuing, what the costs are and what the relationships are of individuals who I'm going to request the minister tell me about. I'm in no way trying to impugn anybody's reputation, and I'm not trying to suggest there's any nefarious activity here, although if we uncover some, that might be exciting.

Hon. D. Miller: Others have tried in the last couple of days, but....

G. Wilson: That's true. Others have tried. This minister always acquits himself well in debate, I must say.

It's not clear to me that the decision with the fast ferries, which we're now into a budget.... I guess my first question, to clarify what the minister said in response to the leader of the Reform Party, who asked the question: if you build the first one, can we see how it works before you build the second...? The minister said: "No, we're already into the second." My understanding is that we're committed to three, that in order to make this package work economically -- based on the business plan that was presented to the board, that the board had accepted and that the people of British Columbia have to live with -- we are actually committed to three vessels. Otherwise the whole system doesn't work. Unlike the superferries, where two seems to work with some supplementary vessels, in this case we are looking at three. Can the minister clarify that, to begin with? Then I'd like to ask a couple of questions about how we're proceeding with this.

Hon. D. Miller: Yes, it is true that the proposal was and is for three vessels. It's also true that we are doing a review of capital spending. It's also true that, since the original decision was made, other offers have come in -- not that we've gone out and solicited. We think we've got the flexibility to meet the original...to move forward in that way. Obviously, if it's three, it's three.

Just off the cuff, there may be opportunities. We're looking at commercial opportunities to manufacture vessels. For example, it might be conceivable that a market could come along for a vessel. We would have to look at that in terms of our operational integrity and make some decisions. For example, if we were building a third vessel and someone came from offshore and said, "We'd like to buy it; we've been looking for this kind of vessel," and that seemed to be attractive and we could maintain the integrity of the kind of service we've projected, we would be foolish to say: "No, we're not going to look at that." I think there's flexibility and there are options available to the corporation.

G. Wilson: My advice to the minister is: if somebody offshore is looking at this and saying, "We'd like to buy it," sell quickly, now, and let's get back to some more conventional design and get.... I know we get into this debate -- I've had it many times -- as to the merits of this particular system.

I am particularly interested in how this contract came to be. It's interesting, as I review a whole series of invoices and payment schedules and workloads and accounts from B.C. Ferries from 1991 through to 1996.... I don't know how much, in the latitude of this particular set of estimates, we want to go back. A number of people who were formerly in the employment of B.C. Ferries have been retained through this process in a capacity of.... They were in employment, on salary, then left the ferry service and went to work for one or other of the design companies that were initially bidding on the superferries and were successful. Polar Design.... They left Polar Design only to get hired back on contract with respect to the superferries.

Let me just mention some of the people I'm referring to. Once again, I want to emphasize that I'm in no way trying to 

[ Page 1423 ]

impugn a reputation here at all; I'm just trying to understand how this works. T.G. Blyth, for example, a marine consultant, was involved initially through Polar Design Associates. He was at one time hired directly by B.C. Ferries. He retired from the new-construction division, where he was working on January 21, 1994, from the position of senior project manager, as I understand it -- if I'm wrong, I'd like this corrected. He was in a position, primarily, of looking after the superferries. Then his relationship with Polar Design terminated, Polar Design being the successful bidder on that project. That terminated as the superferry project came forward.

Another name that comes forward, which is interesting, is that of a namesake of mine -- although no relation, to my knowledge -- and that's Mr. Jim Wilson. I understand he had work in new construction but, while maintaining an office at B.C. Ferries, was also under contract. I don't know how that works -- if you're there on salary, how you can also be there on contract? Perhaps I'm wrong, and if so, that could be clarified.

The third -- I'll just put out a couple more, and then perhaps we can get into this -- is the relationship of a gentleman by the name of Nigel Gee. I understand he was independent from the process of selection of this fast-ferry design -- because he is a fast-ferry expert. Yet we find, in the invoicing of a gentleman whose name is Francis Lin, that he invoiced the report from Nigel Gee to B.C. Ferries, as early as October 17, 1994, which is before this project had even been given the green light. Furthermore, he was also actively involved in the Incat and Austral designs in preparation for B.C. Ferries in the same year. That was a long time before they were even the successful bidder.

As we start to look at this, we see that there are individuals who were either directly involved with B.C. Ferries, were invoicing.... The invoice records are here, and I'd be happy to share them. In fact, I've had an opportunity to speak with the president of B.C. Ferries, who was prepared to make this information available, but I've yet to receive it. It appears that these individuals were either on salary or directly contracted by B.C. Ferries, working toward the development of the successful design well in advance of what was considered to be a public competition for this design, which is now going to cost the people of British Columbia somewhere upwards of $300-some-odd million. I'd like some clarification as to how that was all put together.

[9:30]

Hon. D. Miller: Mr. Chairman, the executive have just been canvassing some of those names, and their own personal knowledge of their history and where they are, and without being insensitive, I don't have a.... Clearly, the member is presenting a lot of information here, and it's very difficult to respond to all of that, and I'm not quite certain that there's a pattern or a point that the member is trying to make. But, just briefly, just touching on some, Mr. Blyth, for example, was a longtime employee and participated extensively in construction programs, and did retire and as a result of his experience was put on the board of PDA following his retirement. Mr. Wilson was on contract, and is now on full-time. Nigel Gee is on contract. So there's a variety of arrangements here, and I'm not quite certain how to respond. I think that if the member has a picture that he's trying to paint here, and there are names, and he wants us to do some work on that and try to respond, I really am quite happy to do that, but I may not be able to do that off the cuff here this evening.

I am advised that on July 24 the corporation wrote to the member a three-page letter that does deal with some of these issues. I don't know if all of the names that you have cited tonight are in here; I have just received the letter. But certainly this written response was as a result of your meeting with Mr. Rhodes and the questions you posed. The letter is fairly extensive with respect to, presumably, the issues that you raised. I don't know if the member has the.... Well, I apologize. It's dated July 24, but I'm quite happy.... I don't know if we have more than one copy. We can make a copy and get it to the member as quickly as we possibly can.

G. Wilson: I won't use up this committee's valuable time, then. I don't know if that letter actually made it into the mail, or maybe it was caught in a fifth-storey fire...or whatever that floor was.... And I was nowhere near the building, I would point out, at the time of that fire.

Having said that, I guess the picture that I'm trying to get clear is the notion that the decision to go toward these fast ferries -- which is really history, and I don't want to go back and visit that.... We are now locked into an expenditure program for an extended number of years which is extremely expensive. I'll give credit to the reasoning for this: we did not spend a lot of money upgrading and keeping the ferries current, and thereby being negligent in any way such as that, and ending up having to spend more to catch up. I understand that, and I don't want to go back and revisit that question.

But it would appear that the decision taken for this design, and all the documentation that's here.... I don't know the extent to which the minister is familiar with it, but certainly I have a host of documents here that demonstrate that the decision was actually taken in 1992-93, and that the successful design was actually chosen in 1994. It had nothing to do with an open competition. The decision had been taken, and the very same players who were involved in its promotion, in the early design -- and I've got some of the early.... When the minister says that you don't need terminal designs, I've got communications here and documentation from members who were in the Ministry of Employment and Investment writing to Incat asking how they should redesign Horseshoe Bay to fit the very ferry that was eventually given the contract. This happened a year in advance.

So it certainly would appear from all of this documentation that the public has been led into this contract, not because it was the best of designs, or because it was won on open competition, but because a decision was taken internally to make that so. If that's the case, then that clearly is going to impact on the viability of this project in terms of its service to the public, and also, more importantly, in terms of the integrity of the corporation to be able to withstand financial difficulties if in fact the thing goes sour. I would suggest that there are a lot of people worldwide who may be looking at this with some pretty big questions marks.

Hon. D. Miller: Well, the member is right, and I appreciate that he's indicated that he's not wishing to go back and examine everything that happened in the past. I guess, from my point of view, as the minister now responsible -- in fact, those decisions were made prior to my having this responsibility.... Officials in the corporation advise me that, in fact, there was open tendering. Even though the linkages that the member makes in purporting to make a case.... Quite frankly, we don't accept that.

[ Page 1424 ]

I guess my challenge and my responsibility as the minister, now that the decision has been made, is to ensure that it works, and that's what I'll be doing. I don't really know that, from my point of view -- and, again, no disrespect.... I mean, these are facts, and the member is trying to make a point, but.... I don't have any interest in it, but as much as I might, my responsibility now is to take the decision that was made and make sure that the corporation delivers and that it actually works. So that's where I've got to focus my energy.

G. Wilson: Well, fair enough. Let's slightly change focus, and I do, once again, look forward to the letter of response from the president on some of those questions, because questions, obviously, generate questions which generate questions. As I say, I'm really trying to get a handle on understanding this. It seems to me, then, that the capital program that we're embarked on now -- some $800 million as announced by the Premier, which is now being advanced -- would include three ferries and the Duke Point terminal. Plus, I'm told now, it will include the construction of at least two new vessels that are non-fast ferries. One, I know, is slated for Comox-Powell River -- at least I hope it is, if I haven't offended B.C. Ferries to the extent that they won't give it to us now -- but where is the other one?

Hon. D. Miller: Well, really, the list is in very rough form. There are the three fast at $210 million, the northern replacement at $75 million, Duke Point -- both terminal and road -- at $100 million, and $250 million in minor...for, really, the entire system, as those have to be dealt with. That's just shy of $800 million. There may be some additional small lumps in there that are not included, but that's the bulk of the capital plan.

G. Wilson: Well, as I understand it, then, the northern replacement is Port Hardy-Prince Rupert. I didn't hear about a new vessel commissioned for Little River-Powell River, which, I understand, the stakeholders are now being asked to comment on and advise on. Is that, then, not slated to be part of this capital plan, or is that slated with the minor system improvements at $250 million?

Hon. D. Miller: Just to be clear, the northern vessel is the Charlottes-Rupert run, the Queen of Prince Rupert, which had its thirtieth anniversary last year, I believe. The $250 million, indeed, is there for the replacement of the Queen of Sidney.

G. Wilson: If we could focus in, then, on the Queen of Sidney replacement for a moment. I understand there is a stakeholders' process underway, although I don't know that there's been a great deal of discussion with respect to that particular vessel. The concern that we have was alluded to -- quite correctly, I think -- by the member for Richmond Centre, who said that the perception out there is that there are decisions taken by B.C. Ferries to go ahead with this capital construction plan, and then they go and consult with the stakeholders to find out how they feel about things so that the stakeholders can feed it back in to create a "business plan." Now, that would seem to me to be the backwards approach. Certainly, if you were to ask anybody where that vessel ought to be stationed, it would be in Powell River. Clearly, the first sailing and the employment base should be in Powell River. I think everybody would agree with that, with the possible exception of the member from Comox. But I don't think that's ever been really discussed or addressed. Work was done with respect to capital improvements on the dock facilities that would be in the Powell River area. They had suggested that this could be done quite economically, and some additional work could be included to make sure that the people of Texada are not ignored and that the connecting routes are looked at. We can work on that, but I don't hear any of that discussion anymore. So it would be good to know whether this minister is committed to make that happen.

Hon. D. Miller: There was a meeting yesterday, I'm advised. But let me try to deal with a couple of points the member raised.

First of all, having been in this House for some time, I do recall that the former member for that constituency the member now represents at one time almost made it. I think, in fact, there was an announcement by Mr. Long, and if I'm not mistaken, Rita Johnston was the Premier at the time. Unfortunately, they didn't get elected, and I very much suspect -- in fact, I know -- that it was an announcement without substance, an announcement of convenience, quite frankly, because of the politics. I don't know that the argument about where the vessels might be stationed is confined exclusively to the member from Comox and the member from Powell River. In fact, I suspect there's probably an equal division between all the people who live on one side and all the people who live on the other. It's probably a pretty safe assumption, because that's just human nature, I suspect.

But really, in terms of the design and capital planning, I think you have to notionally allocate a certain amount of capital spending for vessel replacement, terminals, etc., without having the absolute design issues fully fleshed out. That's normal planning, and it's certainly the case up north. The people up north have been aware for some time that the QPR replacement is part of our capital planning. We've engaged stakeholders in discussions about what kind of configuration of vessel might be more appropriate than the current vessel; in other words, the service, freight and function requirements -- those kinds of questions -- and it's highly appropriate that you engage the stakeholders in that process. The worst thing you can do is go out and, say, internally design some nice-looking ship, but when it comes to functionality, it's not a good fit.

I don't know if this is still germane up north, but I'll just give you one example of a heck of an issue with respect to dangerous cargo. I think it's gone now as an issue, because we've done something else to resolve it. But one of the things we did was engage stakeholders who said: "Well, in the new vessel have a portion with an open deck." That's just to illustrate the point that by talking to people in the communities who use that service, you can really come up with the best design and most functional vessel possible. So I think we're doing things the way they ought to be done.

[9:45]

G. Wilson: Hon. Chair, given the lateness of the hour, I understand that we're not going to finish tonight. So I would reserve the right to come back and go after some of that information, once I receive the letter from the president.

Let me just finish with one statement and a quick question. Clearly, if it's affecting all the people on one side and all the people on the other side, that's a bit of a problem because we're somewhat outnumbered not only in terms of population but in terms of political representation. It doesn't look too good for us right now in terms of the party affiliation that might be there, if the minister's in fact correct and it's all politics. We hope that's not so. I would say, hon. Chair -- and I will put this in the Hansard record just to show what a gentle-

[ Page 1425 ]

man I am -- that I have a commitment to the president of the B.C. Ferry Corporation that should I find that the stakeholder system is actually working well, I will embrace and support it in a weekly column I write for the Powell River News. Right now I haven't quite got there, but we're working on it.

My quick question then -- and I would yield and reserve the opportunity to come back on some of these questions -- has to do specifically with the route 3 ferry rates, and it was alluded to earlier by the member for Richmond Centre. It simply isn't acceptable for the minister to suggest that the stakeholders get around and all say: "Yes, we understand the economics of it, so therefore the ferry rates are going to be...whatever." If I misunderstood the minister, then so be it.

People who are isolated -- and surely the minister knows this, because he comes from a community that is in a similar position -- are already paying the maximum they can pay, because not only do fare increases affect their ability to travel, more importantly, they affect the cost of movement of a lot of goods and commodities, freight, business opportunities and everything else. In our case, the former member who advocated so effectively, only to lose the election, also holds a monopoly on a barge service into that region and therefore holds the people to one set of prices. These fare increases must reflect the reality of a person's ability to pay, not just the reality of the corporation's need for the income. We are beyond it in some communities, and I think it's time for us to look at differential rates, depending on isolation and dependency, whether or not you have alternative routes. All of those other kinds of considerations have to be measured into the mix of what determines the eventual rate that we put forward -- not simply: what do we have to do to pay the bills to keep the ferry running? I'd like to hear whether or not the minister is prepared to entertain that.

The Chair: Minister, a short answer?

Hon. D. Miller: A short answer, hon. Chair, in view of the hour and other events in the other House.

I want to say two things. The member and I share similar types of constituencies. In fact, I think we probably have the two most similar types, except perhaps the urban areas in the southern end of yours. Between us we have the coastline of British Columbia on the mainland, and we have much in common. I was delighted to see the new mid-coast service on the northern end fill some void with respect to your constituents, and you speak very eloquently for the needs of your constituents, which are the same as mine. That doesn't make the challenge any easier. It doesn't make the solutions any easier, but I think it adds to our understanding as we look at that whole question of fare structures. I want the member to know that party affiliation means nothing to me with respect to the advice that he might offer on any subject.

Having said that, Mr. Chairman, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 9:49 p.m.

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