1998/99 Legislative Session: 3rd Session, 36th Parliament
HANSARD

The following electronic version is for informational purposes only.
The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, JUNE 15, 1999

Volume 16, Number 2

[ Page 13609 ]

The House met at 10:04 a.m.

Prayers.

Orders of the Day

[1005]

PENSION BENEFITS STANDARDS AMENDMENT ACT, 1999
(continued)

On the amendment to section 48 (continued).

K. Krueger: For people who are just tuning in to the debate this morning, we're debating Bill 58, amendments to the Pension Benefits Standards Act. We're on section 48, which is the most odious section of the bill and the one that attacks pensioners' rights after they're already pensioned off and allows cabinet -- through order-in-council -- to suspend their pensions if they're caught working.

My colleague from Vancouver-Quilchena has proposed an amendment in order to protect pensioners from what we have referred to as retroactivity. That is, if pensioners have already elected to take their pension and have now built their lives around the belief that they are secure in having that pension income for the rest of their natural lives -- as Canadians have always been entitled to believe. . . . If this government does ram through this odious section -- section 48 -- we wish to protect those pensioners from having their lives turned upside down. The government has a history, as the Forests minister has put it, of doing anything it wants. The minister puts it a little more poetically when he says, as he's fond of saying, that the opposition may have its say, but the government will have its way. But we're issuing a warning to NDP MLAs that they are being called to account by their constituents on this question.

[1010]

So her husband took his meagre pension, and shortly thereafter she found she had cancer. They went through terrible times, but because of his ability to go back to work and supplement his pension income a little bit, they got by. They got their Visa bills paid off, and she said that if they hadn't had that ability, she doesn't know what they would have done. Her husband isn't presently working, but like many other pensioners around this province who are being attacked by this legislation, he's extremely nervous about his future, knowing what this government's intentions appear to be.

We're trying to protect people like him with this amendment. I caution NDP MLAs: if you do not support our amendment and protect these people, you'll never know what hit you. As the tradespeople say, when the election's over, you won't know whether you've been punched, bored or countersunk, because your career in politics will be over. This government is attacking pensions and pensioners who have built their lives on the basis of believing in the security and reliability of their pensions.

The minister, not accepting the term "retroactivity," has referred to what this amendment seeks as grandfathering and has said that he is opposed to grandfathering. That's a fairly apt term, because many of these pensioners are grandfathers. It's very, very difficult for them, at this stage in their lives, to change all their financial plans and somehow bring about some measure of security when confronted by a government that wants to attack their pensions. They do not deserve this treatment; it is wrong. Every NDP MLA on that side of the House had better support this amendment. Even if they choose to vote with their government as a bloc as usual to support section 48, they had better support this amendment. Otherwise, they are hurting the very people that used to believe in them.

The member for North Vancouver-Lonsdale has some questions in this regard. I will turn the floor over to her.

Hon. D. Lovick: I simply want to clarify for the record one point that the member made. He is absolutely wrong when he says that cabinet is the one that makes this decision. The legislation, rather, empowers the trustees of a plan to decide -- in consultation with the members and in consultation, indeed, with the superintendent of pensions -- whether members who return to the same trade in the same industry and who take an early retirement pension -- a pension subsidized by people still contributing to the plan -- might be suspended for the amount of time that they work in the same trade, the same industry. Their pension is, of course, guaranteed to them the moment they quit doing that work, and then they have exactly the same rights as any other pensioner has. So just to clarify it for the record, that's what we're talking about in the legislation. We're not talking about cabinet making a decision to suspend people. That's simply not true.

K. Whittred: In perusing the Blues and in looking at the debate, I find interesting the words that have been used throughout this debate. In fact, reading the minister's reply to a letter to the editor published today in the Times Colonist, two concepts emerge over and over that I have a little bit of difficulty getting my head around. One of those is the concept of a subsidized pension, and the second is the concept of early retirement.

In speaking to this amendment, I would like to have the minister help me, I guess, in getting my head around those particular concepts. It is clear that the minister is basing his entire case on these two things: that it is necessary for the

[ Page 13610 ]

[1015]

So the first concept here that I would like to canvass with the minister is this idea of early retirement. Over and over again in the Blues and in the debate, I see talk about normal retirement age being 60 or 65, and that certainly is the accepted norm in society. However, it is commonplace, I believe, in pension plans that what is classified as a full pension is based on years of experience and age. Usually there is some sort of magic formula; there is a number that must be achieved.

Therefore, to me, the concept of early retirement simply doesn't exist. One either goes to the full length of the agreement and would receive what is a maximum pension -- that is, the maximum amount one could receive under the plan -- or the individual could elect to leave work at an earlier stage, in which case they will get less money. But that is the agreement that they're working under. Therefore the whole concept of early retirement, to me, has no meaning. I wonder if the minister would explain that to me within the context of this legislation.

Hon. D. Lovick: I just refer the member to the definition in section 1(j). The reference there is to early retirement pension. An early retirement pension is defined as "a pension that. . .is received before pensionable age. . . ." Now, the member may say that the concept of early retirement has no meaning for her, for reasons that she offers. But it has for everybody else.

Most workplaces where there is any kind of pension arrangement. . . . For example, I believe that the member is probably receiving a teacher's pension. I don't know if she took early retirement, but she certainly will qualify, as she should. Part of the arrangement that a teacher makes with that particular public sector pension plan is to negotiate with the trustees under the retirement package. That's common practice in pensions.

Indeed, it's become the trend, frankly, in pensions in this country today, and all to the good. I think more and more people are saying that you shouldn't work until the maximum allowable age of 65 or whatever it normally is. Rather, most people are saying that if they possibly can, they'd rather get out of the workplace, the workforce, earlier. So early retirement is given -- done everywhere.

What it means in terms of the particular pension plans we're talking about here is that the normal retirement age is usually referred to in the pension plan itself. For example, in one like the sheet metal one -- which, as the member knows well, has been the basis of some of the controversy surrounding this particular measure -- the normal retirement age was agreed to by the pension trustees some years ago as age 60. Therefore anything that occurs before age 60 would be considered to be early retirement. I hope I've answered the member's question.

[1020]

Hon. D. Lovick: It depends entirely on the terms of the individual plan, and I want to note for the member that I used the example of the teachers' pension only to validate that concept of early retirement. Trying to compare that public sector, broad-based plan with the kind of plans we're talking about here -- the multi-employer pension plans dealing more particularly with the construction trades, with the building trades. . . . The comparison, quite frankly, doesn't work. As I say, the only answer to the member's question is to be found in the nature of the individual plans and what they have to say on that subject.

K. Whittred: Perusing this a little bit further and moving on to the word "subsidized," again I have trouble getting my head around the definition here. I mean, I know that there's a definition of "subsidized" in this and that this "early retirement pension" means "a pension that. . .has an actuarial present value which is greater than the minimum actuarial present value of a pension as required by section 38(8)." Does the minister say in this case that any person who would opt to take a pension. . . ?

Let us take the example of a worker who perhaps works for ten years in the sheet metal industry and then leaves the industry and goes on to some other career. That money, the ten years of pension that they have invested in that plan, will remain there over a period of time. Then let us suppose that at age 55, for whatever reasons, the person decides to take that pension. That money has been sitting in this plan, earning money for the plan, and yet at this time, I believe, by this definition, this is called a subsidized benefit. Am I correct in that?

Hon. D. Lovick: The answer is that the pension is subsidized only if the plan is topped up beyond what the member is normally entitled to receive, based strictly on the payments he or she has paid in. Where the problem occurs here, and why this is understandably confusing, is that. . . . Again, let me use the example of the sheet metal one because it was the one, as you know, that led to the court case, which in turn led to the amendments presented here. What the sheet metal union did, consciously and deliberately, was first of all change the normal retirement age from 65 to 60 to encourage people to take an early retirement. They also made it very clear that they were encouraging their members to take early retirement so that they could bring new people into the industry. That was indeed their stated intention. That was their hope in trying to keep the industry viable and to make sure that people could take apprentices, because as the member knows, the building trades workforce has become -- alas -- middle-aged and beyond. It hasn't been rejuvenating at the rate that

[ Page 13611 ]

[1025]

K. Whittred: I was intrigued by the minister's use of the words "legal and technical entitlement," because a pension is a contract. Most pensions are very complex, and the rules are pretty much laid down. There is no room for negotiation; there is no room for individual changes. They're based on a contract that exists, and people rely on that contract -- which is, of course, the reason for my colleague's amendment here. I'm wondering if the minister can expand on what he meant when he talked about this hypothetical worker we're talking about, who is going to get more than he is legally entitled to.

Hon. D. Lovick: I hasten to point out that I am not offering a brand-new legal concept or terminology, and if I have in any way led the member to believe that, my apologies. What I'm referring to is the normal entitlement based on the years of service and age. That's what I refer to -- all right? When we talk about "subsidized beyond it," we're talking about topping it up beyond the amount which would be the normal entitlement based on years of service and age.

K. Whittred: All right. Do I understand the minister correctly, then -- with this hypothetical worker that we're talking about, who has invested ten years in this pension plan and decides at age 55 that he's going collect it -- that the plan is in fact going to top up in addition to what is in the agreement?

Hon. D. Lovick: The answer is yes.

K. Whittred: By what regulation or by what plan would. . . ? I mean, this makes absolutely no sense to me -- that a plan would in fact pay someone more than they're entitled to. If that is the case, why would any plan do that?

Hon. D. Lovick: I thought I had explained that, Mr. Chairman. It's an incentive to people to take early retirement so they can make it possible for new people to enter the trades, enter the profession. I don't want to belabour the point, but again, as I thought I had explained, the reality of the skilled trades in this province is that they have become inhabited largely by people who are middle-aged. It's hard to find too many skilled tradespeople today under the age of 30, and there's a concern being expressed by the trades -- quite legitimately -- that we're losing those skills. Indeed, I think my colleagues across the way and I have had these discussions about one of the purposes of ITAC, the Industry Training and Apprenticeship Commission, which is to try to find ways to encourage people to enter those trades. One of the ways it was perceived that they could do that is by providing an incentive to people to take early retirement and therefore make it possible for more people to enter the trades. That's the answer.

[1030]

Hon. D. Lovick: I want to explain to the member what I think is the fundamental point of difference -- confusion, frankly. We're not communicating well, and I take some responsibility for that.

It is not the case that people are being absolutely surprised by this -- that the rules are changing in midstream. People know these rules. This is the nature of these plans.

Let me give the member an example, and what I say here about carpenters is exactly the same for sheet metal workers and, I think, most of the other building trades, if not all. Every member of the carpenters' plan -- to use that one as an example -- is informed about the early retirement conditions by a variety of means. Each member is required to sign early retirement documents, which have written into the agreement a reference to the policies of early retirement -- i.e., an ability to suspend benefits. The same is true, by the way -- I was told by my colleague from Mission-Kent -- and applies to the retail clerks' pension. They have exactly the same kind of thing. Nobody's surprised. They know that these are the rules. Regular membership meetings are held throughout the province, which explain the rules and the purpose of early retirement. Each local takes the time to explain to the applicant the conditions and requirements of early retirement. The trustees go to great length to explain the provisions of early retirement to their members. The carpenters report to me that they feel that no member could state that they didn't know what the rules of the game were. Those rules are well known. As I say, I know that's true in sheet metal, and I believe it's true for most of the building trades.

I would also just point out this. Prior to 1993, when we got the Pension Benefits Standards Act, as the member knows, everybody knew that suspension was the norm. That was just something that was done. If people went to work in the same trades, the same industry, doing the same job for non-

[ Page 13612 ]

Before that, everybody knew what the rules were, and everybody is certainly becoming aware of what the rules are, because of this legislation. It's not a case of changing the rules in the middle of the game and a whole bunch of people suddenly saying: "Oh, I had no idea that suspension would indeed occur." Rather, suspension was the assumption that people made, because that was the norm. Until the court case, that was the norm.

K. Whittred: Continuing with that line about the rules and the ability of workers to plan their futures, I would like to ask a few questions of the minister regarding other workers in our province. Several times in the course of this debate reference has been made to other pension plans, and therefore I'm going to use another pension plan just as a model here, in terms of a reference. The one that I've chosen to use is the Pension (College) Act.

[1035]

That person can repay the fund and be reinstated. So if a person has retired, and a year later they change their mind and say, "I'm going to go back to work as a college professor," they can have that choice. They can repay the fund and be reinstated in the plan. And of course, the pension ceases, as it would. That would make sense. They have a second choice. They can begin making payments again, in which case the pension would also cease, but they again would be reinstated into the plan, and the accrued moneys and time would be added to their pension service. Or third, they could continue to receive a pension. There is absolutely nothing to prevent me, for example, from returning to my employment as a teacher.

Obviously my question to the minister is: why do these choices -- and I believe that they are legitimate choices, choices that have been tested in the courts -- apply to college professors, municipal workers, teachers and, in fact, many other workers but not to sheet metal workers?

Hon. D. Lovick: The member's example refers to people who go back to work within the plan. They're still, in effect, part of the plan and contributing to it.

What we're talking about in this instance is people who go back to work outside the plan. That's the difference, essentially -- let alone the difference between the public and the private sector. It is essentially that they go back to work outside the plan; that's the point.

K. Whittred: Well, let's take a further example. Let's suppose that a college professor goes to work as a tutor. That professor is doing precisely the same work and would continue to receive a pension. So my question is the same: why are tradespeople -- sheet metal workers and plumbers and so on -- being treated differently in terms of their economic choices? That's what this gets down to. It's about economic choices and the ability of people to plan their lives, and I think it's a very legitimate question. Why do certain workers have the right to return to work -- whether it's inside or outside the plan -- and to continue to receive pensions for doing the same work?

Hon. D. Lovick: The individual who goes back -- like a college instructor, let's say; I was one -- to be a tutor is not doing exactly the same kind of work. That's not the case. One can argue that the knowledge base and some of the skills one has are being invoked and used; that's true. But it's not the same as going and teaching in the classroom of the institution. So let's get that straight, first of all.

What we're talking about in the nature of this arrangement, essentially, is the fact of people going to work in competition with the plan. That is the central point about the construction pension plans -- namely, the concern is that individuals will go to work in competition with the plan and that that will have a deleterious effect on the plan.

Otherwise, individuals have every right to go back to work. A carpenter, for example, can obviously go out and do residential construction, because that's not going to be covered by the companies that are paying into the plan. One can do that; one can work at one's trade. And so it is with the other trades. It's only in those companies that are doing the work covered by the plan. That's the issue. It's not a complicated issue.

[1040]

K. Whittred: The minister has made the point about the viability of the plan -- that this legislation is necessary to protect the integrity of the plan and therefore the economic future of workers coming into the plan. My question to the minister is: how is the viability of this plan threatened any more than the viability of the plan about which the minister may be familiar? Let us suppose that the minister -- or one of his colleagues or anyone who has been a college professor -- goes back and works on contract for a public college. This is common practice. That person is working at the college and is not paying into the plan. Why, then, is that plan's viability not threatened when this particular plan is?

Hon. D. Lovick: I wish the member had been involved in the early debate, because this is what we talked about in

[ Page 13613 ]

The concept is multi-employer plans. The difference between that and the kind of plan that the member is talking about -- a public sector plan, like the college instructors' or the teachers' or others of that kind. . . . I can't say it any more plainly than I think I have already. Namely, what happens is: if people go back to work in the same trade and in the same industry, for those who are not contributing to the plan -- in other words, employers who aren't signatory to a contract with workers whereby they make a payment to the pension plan. . . .

Remember that the pension plan exists only because certain companies are union companies -- all right? They have a contract with the building trades. Nobody else pays into the plan. It is only the trade-unionized companies that pay into the plan. Clearly, if a large number of people are going and working in a non-union operation that doesn't pay into the plan and competing, with that non-union company, then the unionized company is obviously going to be threatened with what they would regard -- and I think with some legitimacy -- as unfair competition. What they have, in effect, is a subsidized workforce, and therefore the non-union company can beat down the wages, if you like, because they don't have to pay as much to people who are being subsidized.

What that means, ultimately, is that the unionized companies will not get the contracts. If they don't get the contract, obviously they will not be paying into the pension plan any longer. The trustees of those pension plans are saying: "Wait a minute. If we continue to allow people who are the beneficiaries of the plan -- which we fought for and got for people -- to go out and make it possible to destroy the plan, then we are breaking our trust with and our obligation to those members who have fought for and contributed to the plan." That's the issue. Obviously the colleges and teachers and public servants aren't affected in any way. The multi-employer pension plans and the industries they represent are unique and distinctly different from the kinds of things that the member has been talking about.

[1045]

K. Whittred: I hear the minister's comments. I believe that that issue has been canvassed, and I think that on this side of the House, we still see this as an infringement upon the economic decision-making ability of individuals.

There's just one final thing that I would like to canvass while I have the floor, and that is. . . . The minister has repeatedly made the point that the trustees of this plan need this power to suspend pensions for workers who return to work, in order to maintain the viability of the plan and to ensure the economic well-being of the younger members. I would like to suggest another reason, if I may be permitted just one moment of digression. One of the most common complaints that I receive in my role as Human Resources critic is about the economic hardships that are facing many people in their middle years -- that is, people in their fifties. I see in the minister's comments in the paper today that the minister says that this early retirement package is necessary to help tide over older workers who find themselves out of jobs but are too young to be eligible for the pension they've earned.

My question to the minister is: is the government in fact using this as a means of covering for the lack of employment and as a means of encouraging -- in fact forcing -- older workers to take these pension benefits, which is ultimately going to affect their economic future for the remainder of their lives because they will be taking a lesser amount and, according to the terms of this agreement, will not be allowed to earn anything? Therefore what this legislation does is say to that worker, who may be 50, 55 or 59 years old: "You are destined to live in this economic package for the rest of your life, because we're not going to let you go back to work, or we're going to take your pension away." So what you're doing is taking away that person's ability to make any economic decisions. I'm not so sure that I don't see this as part of a trend, if you like, on the part of the government to search for almost any economic solution that will get people out of the workforce because of the decreasing job market.

Hon. D. Lovick: I think there was a question in there, and the answer is no.

K. Krueger: In his response to my opening comment this morning, the minister yet again said that this legislation provides for the trustees of pension plans to decide who this attack is going to be levied on. He didn't say that last part, but that's what it is: an attack. But he said it's up to the trustees to decide.

[1050]

The minister handed us this Mickey Mouse page of suggested regulations yesterday. According to the minutes of the Pension Benefits Standards Advisory Council, that council has been working on this issue of the suspension of benefits since at least September 1997. The September 10, 1997, minutes state at the end of item 3: "The council would like to see the suspension of benefits removed from the Labour Statutes Amendments Act, 1997 -- the failed Bill 44 -- to a PBSA package." Well, here's the package; we've got the PBSA package in front of us. So the council's been working on this since September 10, 1997, and earlier obviously. The minister's been working on it that long.

[ Page 13614 ]

We're going to allow the vote to occur on our amendment. But I want to point out to the members opposite -- as I already did, but in case they weren't listening -- that it's the minister that has referred to our request not to attack, with this legislation, pensioners who are already retired. . . . The minister has referred to that as a request for a grandfathering clause; that's his term. And we're talking in many cases about grandfathers. So if the NDP MLAs do not support our amendment, if they vote against that amendment, they are voting against grandfathers. They are voting against pensioners. It's an attack on pensioners, and they should be very clear about that. I implore the minister to be fair, to pull back from his position on this amendment at least and not allow the retroactivity provisions, not allow people's lives to be turned upside down.

It's another matter -- also unfair, in our view -- if he applies these rules to people who take pensions in the future. That's another matter, and we dispute that as well. But this should not be applied to people who in good faith took pension benefits arrangements -- which they paid into, which they're entitled to -- and now face the prospect of having their world turned upside down.

[1055]

YEAS -- 32
Whittred	C. Clarke	Campbell
Farrell-Collins	de Jong	Plant
Abbott	L. Reid	Neufeld
Coell	Chong	Sanders
Jarvis	Anderson	Nettleton
Penner	Weisgerber	Weisbeck
Nebbeling	Hogg	Hawkins
Stephens	Hansen	Krueger
Thorpe	Symons	van Dongen
Barisoff	Dalton	J. Reid
McKinnon		J. Wilson
NAYS -- 35
Evans	Zirnhelt	McGregor
Kwan	G. Wilson	Hammell
Boone	Streifel	Pullinger
Lali	Orcherton	Stevenson
Calendino	Walsh	Randall
Gillespie	Robertson	Cashore
Conroy	Miller	Dosanjh
MacPhail	Sihota	Lovick
Ramsey	Farnworth	Waddell
Smallwood	Sawicki	Bowbrick
Kasper	Doyle	Giesbrecht
Goodacre		Janssen

S. Orcherton: I seek leave to make an introduction.

Leave granted.

[1100]

On section 48.

G. Campbell: One of the issues -- I think the minister will agree with this -- is that Canada has built its position with regard to workers' rights, with regard to protecting people's rights, on a principle of competitiveness. People in this country are opposed to restraint of trade, and I think that sometimes people think of that restraint as being a restraint on businesses. Indeed, one of the challenges that we face with section 48 of this bill is that it is effectively a restraint on a worker's ability to be competitive, a worker's ability to have freedom of choice and a worker's ability to have mobility. I would ask the minister if they have reviewed this in view of a number of court rulings which actually prohibit an unfair restraint of trade on workers.

Hon. D. Lovick: The answer is yes.

G. Campbell: Is the minister aware of Maguire v. Northland Drug Co., in which the court found that, prima facie, all covenants in restraint of trade are illegal and therefore unenforceable? Can he explain how this is not a restraint of trade on a worker who has decided on his or her own to go out and carry on with a trade that they have been trained in, that they have talents in and that they should be able to move forward with as they see fit?

Hon. D. Lovick: I'm not going to comment on that particular case. Suffice it to say that our advice is that we are on solid ground for doing this.

G. Campbell: Well, of course, with this government's record in terms of their legal opinions, one has to ask further questions with regard to this. The courts have found on a number of occasions that indeed it is not fair to unduly restrain an employee from carrying out and making use of their skills and talents. That is exactly and precisely what this piece of legislation does, and it's exactly and precisely what this particular clause in this legislation does. So when the comments have been so straightforward and direct with regard to this, can the minister tell me what references he has to suggest that in fact this is okay and that it's not an unfair restraint of trade that takes away people's most important tool -- their talents, abilities and skills -- and says: "We will give that off to some trustee to say, 'You can't do something; you can't do this; you can't do that,' and we'll make the choice for you"?

Hon. D. Lovick: I would point out that first of all, I disagree that this is an undue restraint. I know, historically, what the restraint-of-trade legislation was. The member may not know, but he might be interested to know that trade unions were originally treated as a criminal conspiracy in

[ Page 13615 ]

[1105]

I would also emphasize the fact that what this legislation talks about doing is restricting the individual from particular employment in a particular place, working for particular employers -- those areas that are covered directly by the plan. That's the concept. Otherwise, the individual still has the right to go back to work. Again, all of those reasons, then, would lead me to the conclusion that we frankly don't need to be overly concerned about a legal challenge that this might in fact be perceived to be in restraint of trade.

G. Campbell: Well, I frankly don't think that's a very good analogy, because if an individual decides to enter an agreement, they make a specific individual agreement that says that this is how I will restrict myself. It's their free choice. This is in fact taking away workers' choices, and it does discourage their personal freedom. It does discourage them specifically from having the freedom of economic and employment opportunity. There's no question about that. It discourages the use of their skills and their talents. It penalizes them for doing it. It is a penalty when you say to someone: "If you do this, you will be punished financially." Workers understand that; I'm sure the minister understands that. I would suggest that the courts have been pretty clear that that is not something that is appropriate. That is not something that meets the test of individuals being able to use their talents.

Again, when you look at section 48 and this clause, particularly with regard to suspension of benefits, that is indeed. . . . Well, the minister will admit that that is a penalty on the individual worker. Surely he'd accept that.

Hon. D. Lovick: I'm not sure I would. Rather, I think we're talking about a contractual arrangement. People do, remember, sign early retirement documents as part of a plan. They're well aware of what the conditions are for early retirement. Remember, too, that the kind of early retirement we're talking about -- what we referred to earlier as subsidized early retirement -- is indeed perceived to be a reward to people for taking the early retirement. They do so knowing the conditions of taking that early retirement and getting that benefit. So it isn't the case that they're being punished or otherwise discriminated against. Rather, what happens is that their freedom to go and do whatever they want is circumscribed, to be sure. But I think that's as far as one can go in terms of saying what that negative impact might be.

G. Campbell: Well, I think the minister has already accepted the fact that there are at least 1,600 workers who are going to lose their opportunity to make those choices. The deal is going to be changed. The pension they had is going to be changed by this legislation. Surely he recognizes this is a change in the conditions that their pensions had.

Hon. D. Lovick: There will be a change. There's no question. That is indeed what the amendment talks about, and that's no surprise. I have, however, some difficulty with the member's reference to 1,600 people. I don't know where that figure comes from. I don't believe I've ever heard it or seen it.

G. Campbell: My understanding is that there are 1,600 members of the building trades today who have collected early retirement. The minister can confirm that. Say it's 26, say it's ten, you're still changing the agreement for those 26, those ten, those 1,600 or those 2,000 -- whatever the number is. The agreement has been changed. The minister agrees with that?

[1110]

I'd also just point out that members on the other side have already read into the record their concern about people wanting to take early retirement, largely because they're getting too old to do the tools, as is said in the trade. Obviously, if that's the case, then those same individuals are highly unlikely to go back and do the same work that they did before. It's only if they did the same work as before, for those jobs or those trades covered by the plan, that they would run any risk at all of having their benefits suspended. So again, it's a significantly smaller number, I think, than the member wants to read into the record.

G. Campbell: It may be a significantly smaller number; I don't know what the number is. The fact is that if it's any number, we are changing the agreement. We are saying to someone: "The agreement that you had, that you entered into, has now been changed. We're doing it retroactively. Too bad for you." Number one, that is wrong. Number two, it seems to me that we are saying to people who are working, who are involved in these 33 separate funds and in various walks of life that indeed they are not going to be able to use their talents, their skills, their abilities. They will not have the economic freedom that they deserve in this country. They will not have the choice they deserve. They will not have the mobility they deserve. In fact, their rights are being taken away by a group of trustees and a government that is enabling them to do that with this legislation.

I believe that the minister should look very hard at the court cases, because I believe this is a restraint on workers'

[ Page 13616 ]

G. Plant: I want to pursue a couple of aspects of that issue for a moment or two. When we talk about the principles of the law around restraint of trade, we're talking in the first instance about a body of law that the courts have developed to deal with the relations between, in some cases, an employer and an employee when a private agreement is reached in which the employee agrees, for example, not to compete with the employer after the employment ends. The minister said in the course of his response to the Leader of the Opposition's questions a few minutes ago that non-competition clauses are commonplace. His particular example was the context of the sale of a business.

But the fact is that the courts, looking at covenants not to compete, look at them with this very principle in mind. In fact, the starting point for the court's analysis of a covenant not to compete is the presumption that such a covenant is a covenant in restraint of trade and therefore violates the public policy which the courts should uphold. That is, a covenant not to compete is, in effect, presumed to be invalid and unenforceable unless the parties -- and it's usually the recipient of the benefits under the covenant -- can demonstrate that it is reasonable in the particular context. That may be an argument about the geographic territory that the clause applies to, and it may be an argument about how long the promise not to compete lasts. It may be that those arguments will prevail at the end of the day -- that the court will say that the clause in the agreement is enforceable even though it is a clause in restraint of trade.

[1115]

Here the issue is not whether the provisions of this statute will be challenged on the basis of common-law principles around restraint of trade, because it seems to me, at least at first blush, that it is always open to the government to override the common law. In fact, if I may say, this government has a particularly lengthy track record in doing that in a variety of ways in a variety of contexts. So the government can come into the House and say: "We want to pass a bill which overrides this basic protection -- this basic idea of mobility and freedom to practice and pursue one's livelihood." But I think we're entitled to stand up and say: "Well, wait a minute. That's against a very time-honoured public policy." That's the issue that I think the minister needs to grapple with.

Basically, is he going to stand up and say: "I understand that the law abhors provisions which restrain trade, provisions which restrain competitiveness." But presumably he would say that in this case the public policy objectives underlying this legislation, from his perspective, override those other principles. In the contest between, on the one hand, free competitiveness, free trade, free mobility, free workforce mobility and, on the other hand, what he sees as the threat to the integrity of multi-employer pension plans, he thinks that the threat prevails over those other principles. My guess is that that's the minister perspective, but he'll. . . .

Hon. D. Lovick: I appreciate the member's articulation of the case, and I think his conclusion is probably correct. What he attributes to me is, I think, fair. That's fair comment.

I want to make two points. Notwithstanding that I am struggling a little bit with the fact that it seems to me that we're back in second reading debate, the two points I want to make are these. Number one -- and I read this into the record the other day -- is that we're guided in part by the decision that was made by the Supreme Court regarding the sheet metal workers' local. The judgment made very clear that the trustees have a fiduciary obligation -- they have a duty -- to consider whether the suspension is in the best interests of all the members of the plan, including the individuals who are being suspended. I think that is the important principle that stands behind this.

Here's the second point. I would point out that suspending benefits is not a decision taken lightly. Indeed, the judgment is that the only grounds for suspending benefits are the ones that we are talking about here -- namely, the integrity and the survival of the pension plan. That's the basic argument. That's been divisioned.

While I'm on my feet -- because I haven't quoted it into the record yet -- I want to offer a more legalistic, professional rendition of the case that I have tried to articulate on various occasions about why we do this. I think this is the quintessential argument. I'm going to quote Mr. Allan Brown and the letter he wrote to the superintendent of pensions. Mr. Brown is a prominent Vancouver actuary; he's a partner in an international actuarial firm. He's the president of the Canadian Pensions and Benefits Institute, which I gather is one of the largest pension industry associations in Canada. Mr. Brown, interestingly, is also the adviser to the sheet metal workers pension plan. So there's obviously the connection with the trade union plan as well. Those are his credentials.

[1120]

"By prohibiting the suspension of benefits, the Act" -- the old one -- "is seriously undermining the existence of negotiated-cost multi-employer pension plans and hence the level of pension coverage in those industries where such plans are prevalent. In particular, the legislation has an adverse effect on a plan's funded position since it results in an increased incidence of early retirement and a reduction in the number of contributory hours. In combination, these factors have a serious detrimental effect over time."

G. Plant: It's helpful to have that statement on the record. I'm sure that maybe my colleagues will engage the minister on the way it relates specifically to section 48, which we have before us.

[ Page 13617 ]

There is an additional source of principles that are conceivably at play here. That is the Charter. As the minister well knows, the Charter of Rights and Freedoms guarantees mobility to all citizens of Canada, and in particular section 6(2) of the Charter guarantees every citizen and every permanent resident of Canada the right to pursue the gaining of livelihood in any province. The courts have had to grapple with the meaning of that promise. The promise is itself subject to qualifications that appear in the Charter that are directly intended to give the government the legislative ability to enact laws or practices in certain circumstances. So the Charter itself, in relation to the issue of mobility, strikes a balance.

It does always seem to me, though, at least relevant and pertinent to make sure that we in the House are not being asked to pass legislation where the government has not given adequate consideration to Charter issues. I certainly think it's important that the government look at Charter issues when it's considering legislation which potentially infringes Charter rights.

I think that there is at least the basis for the beginning of an argument that the mobility right guarantee in the Charter is put at issue here by section 48, because section 48 does contemplate, ultimately, a form of restraint on the ability of people to earn a livelihood -- admittedly, in the specific context of someone who has taken early retirement, pension and so on. But the minister knows that the ingenuity of those who think about the Charter is virtually limitless, and the courts have had lots of arguments presented to them over the last 16 or 17 years that we've had the Charter, and many of those arguments have succeeded. Has the government considered the application of the Charter to section 48 of this bill? Is the government satisfied that there are no Charter issues engaged by it or, if there are, that the government will successfully withstand a Charter challenge?

[1125]

G. Plant: The test of that proposition will be time, no doubt. If the challenge is made, we will all be interested in seeing what the result is.

I do want to pursue one final point, though, while I temporarily have the floor. I am continually interested in one part of the debate about what this provision actually does: that is, the part of the debate where we on this side of the House talk about what section 48 does in terms of empowering cabinet to make rules, and what the minister on that side of the House talks about in terms of trustees being given the power to suspend benefits.

One example of that continuing debate is the comments made by my colleague the Labour critic at the opening of debate this morning, followed by the minister's "clarification" in which he took time to stand up and say that one aspect of the opposition Labour critic's comments was wrong because it won't be cabinet that has the power to suspend benefits; it'll be the trustees of a plan that will have that power. We could argue all day about what we think this means. We could all assert our position about what we think this means, but I don't even begin to see a foundation for the government's argument.

The statute is as clear as clear can be. Section 74(2) of the Pension Benefits Standards Act says: "Without limiting subsection (1)" -- which has nothing to do with this -- "the Lieutenant Governor in Council may make regulations as follows. . . ." Stopping there, it is cabinet that will have the power to make regulations. There are a variety of headings of subject matter which are listed. In the existing section, it starts with paragraph (a) and goes all the way down to paragraph (p). What we have in the middle of section 48 of this bill is a repeal of one of those paragraphs -- paragraph (g) -- and its replacement with the provisions that are set out in the bill. Those provisions do not in fact contemplate that the trustees will have regulation-making authority; it will be the Lieutenant-Governor-in-Council that will make the regulations. The provisions of the bill before us say that cabinet may make regulations respecting the benefits and membership of a former member who has begun to receive a pension under a plan, and so on. The cabinet will have the ability to make rules about the suspension of benefits.

As I read that, that is statutory authority for the cabinet to make a rule, for example, that would -- prescriptively, automatically and without any need for any action by the trustees -- suspend the benefits of someone who, as a former member receiving an early retirement pension under a multi-employer plan, starts to work in a trade or industry covered by that plan with a non-participating employer. In other words, it's open to cabinet to stand up and make the rules themselves. As I understand it, what the government is intending here is that cabinet will make regulations that will essentially confer those powers on the trustees of a plan.

But this is the issue we debated last night. That is the difference between what the minister intends to do and what the section allows him to do. What the section allows him to do -- and allows cabinet to do -- is to make the rules themselves, not to delegate the power to the trustees. I mean, it seems to me that -- contrary to the minister's statement in the editorial that appears in the Times Colonist this morning, in the following words, "The amendment does not give cabinet any power over pensioners taking early retirement" -- the amendment does exactly that. It does in fact give cabinet power over pensioners taking early retirement. Whether the government chooses to make rules under this power that are consistent with that is a matter of the government's intention. But the amendment gives the government the power to do that. I just don't even begin to see the basis for the minister's position on that issue.

[ Page 13618 ]

[1130]

It is absolutely true that the Lieutenant-Governor-in-Council has that regulation-making authority. Nobody else has that regulation-making authority. That's just a point of law and standard practice, for starters. What I have been saying is that the trustees will be charged with this responsibility to make recommendations regarding suspension and so forth.

Let me see if I can explain to the member where in the legislation I see the evidence for drawing that conclusion and the reason for arguing as I have. If you look under section 48 at the new section 74(2)(g) and the number of features the member was beginning to list, what I think is worth noting is this. Take, for example, clause (g)(i): ". . .the benefits and membership of a former member who has begun to receive a pension under a plan and restarts work or service in an employment covered by that plan." I think that last phrase is the operative one, just as in the next paragraph: ". . .with an employer who is not a participant in that plan. . . ."

The reference point, then, for all of those regulatory authorities is back to the plan. The plan, by definition, is the creature of -- drafted by, put in place by -- the trustees. In other words, the member's quite right: the lawmaking authority is cabinet's authority -- no question. But it's rather circumscribed, I think, by the points I'm making here -- namely, by the references to the plan. The plan, as I say, belongs to the trustees. Cabinet isn't going to look at the individual plan; that's what the trustees do.

Similarly, the other argument I would offer to the member that may help to explain why I continue to talk about trustees rather than cabinet doing this. . . . I would refer the member to the existing regulations for the Pension Benefits Standards Act and more particularly the section that is most germane here -- i.e., "Pension on recommencing employment," section 22. The opening phrase there is the key one: "A pension plan may provide. . . ." All of the regulations that we anticipate and indeed the ones I referred to yesterday -- all of those regulations -- are going to be couched in precisely that framework. In other words, here's what a pension plan may do.

Now, it's true that Lieutenant-Governor-in-Council provides that authority, but it's a deferred authority to the pension plan to do those things -- i.e., the trustees. I hope I've explained that.

[1135]

I don't quarrel with the minister's reading from the existing regulations. For the purposes of my argument, I don't even need to quarrel with the sincerity of the minister's intention to follow the existing format of the regulations. But I'm not, in fact, asked to give lawmaking authority in terms of the regulations; I'm asked, as a legislator, to respond to the language of the statute. And it's in this statute where I think the minister's argument fails. In fact, I think its failure is subject to the first part of his argument about reading into the words covered by that plan -- which I'll deal with. The failure is virtually admitted when the minister stands up and says: "Yes, cabinet will have the power, but we anticipate that cabinet will exercise its power in a certain way."

The issue that we're talking about is: who has the power? If the cabinet has the power in these broad terms, then it may be that cabinet won't make the rules that the minister wants cabinet to make. I guess that is the age-old dilemma. I remember the first time I was struck by it in my short time here, in 1996 -- the first time I heard a cabinet minister stand up and say: "Well, this is what we intend to do." I was looking at the statute and asking myself the question: "Well, if that's what you intend to do, why don't you just draft this statute in a way that is consistent with your intention, instead of drafting a statute which is broad, open-ended and allows cabinet to make all sorts of rules and then giving us the cold comfort of an assurance that cabinet will exercise those powers in a way that is reasonable?"

They say: "Just trust us; this is what we intend to do. Give us this enormous range of power, and we'll act responsibly." As a legislator, I don't think that's acceptable. I don't read into the words covered by that plan as much as the minister does. I actually think it would be open to the Lieutenant-Governor-in-Council to make a rule almost in the language that appears in (g)(ii), for example -- a regulation that says that the benefits of a former member of a pension plan who has begun to receive an early retirement pension and so on and so on will be and shall be suspended until such time as. . .etc.

It would be open to cabinet, as I see it, under these words, to make that rule. That is the gist -- the heart and soul -- of our argument, and our concern is with the scope of the power that cabinet is taking for itself.

Again, I come back to the problem with the minister's statements. When the minister says in an editorial published in a newspaper today, "The amendment does not give cabinet any powers over pensioners taking early retirement," that misstates the amendment. The amendment does exactly that.

Let me just give an example of what the amendment might say if the minister's view were correct. It might say in (g)(ii), before the words "the suspension," that cabinet would have the power to make regulations authorizing the trustees of a plan to make rules regarding the suspension of benefits. But it doesn't say that.

That's the gist of my concern. I just don't get how the minister can say that cabinet doesn't have the power, when it seems to me that the statute expressly does give cabinet that very power. Whether cabinet chooses to exercise it in the way the minister says he intends to have it happen is an interesting question, but it does not give me any comfort one way or the other.

Hon. D. Lovick: Again, I thank the member for his comments. I would just point out that yes, it is true that cabinet does have that power. That's the nature of elected government and cabinet government, it's true. I'm sorry that what I have said thus far doesn't give the member comfort, but we may disagree to disagree.

I want to just make a point, though -- a couple of points. Number one, just to draw his attention to the existing regulations out of the Pension Benefits Standards Act. . . . This is under "Power to make regulations" in the existing act; it's a

[ Page 13619 ]

[1140]

E. Gillespie: I ask leave to make an introduction.

Leave granted.

E. Gillespie: I'd like to introduce a grade 5 class from Miracle Beach Elementary School in the Comox Valley. They're here with their teacher, Mrs. Windecker, and a number of parents. They are down in Victoria for the day and are full of very interesting questions about the life and work of Members of the Legislative Assembly. I ask my colleagues to join me in welcoming them.

G. Plant: Well, I don't think the minister will be surprised if I say that I'm not as comforted by his assurances as he would like me to be. The problem is. . . . I have to say that as I was listening to the minister a moment ago, I was thinking that if by some inexplicable series of circumstances we were on the other side of the House defending a bill which granted regulation-making powers with the same kind of defence that the minister is offering, the minister would actually be one of the first people on the opposition benches, given his background, to make the very point that I'm making, which is that there is a difference between what the law allows and what the government chooses to do when it has the power to make regulations.

The regulations that the minister reads do go some distance towards confirming his construction of how the process will work, but the fact is that those regulations could be eliminated tomorrow, as I understand it, with virtually nothing more than a stroke of a pen. The minister and the cabinet would have the power to make new regulations. That regulation-making power would only be circumscribed by the language of the statute. And it is that -- the language in the statute -- which gives us the concern.

This may be one of those occasions where the processes that the minister talks about, in terms of publicity and disclosure and the circulation of drafts, will help act as some kind of a check on the tendency of cabinet to exercise its power in a way that is virtually unaccountable. Time will tell. The challenge we have as legislators is whether or not we should give cabinet that much power.

[1145]

C. Hansen: I want to follow up on some of the points that we were discussing last night. It occurs to me that a lot of the discussion that we've been having about this particular section of Bill 58 centres around the viability of these 16 pension plans. I'd like to ask the minister to explain to the House what the government's responsibility is when it comes to ensuring that pension plans are viable.

Hon. D. Lovick: Government's obligation is to set the test that pension plans must meet and then to monitor and ensure that they do so. Those are its obligations.

C. Hansen: If you have a pension plan that wants to introduce an early retirement component to it, for whatever the reason is, does the provincial government have to approve any amendments to the plan that would allow for the structuring of an early retirement option?

Hon. D. Lovick: Approvals are given, but only within the context of the act, and whatever is proposed must comply with the provisions of the legislation.

C. Hansen: So basically these 16 plans that have introduced early retirement provisions in them have done so with the concurrence of the provincial government. I'm just wondering to what extent the provincial government has to agree to the provisions that are offered in an early retirement plan. To what extent does the provincial government have to determine whether or not that then makes the plan a subsidized plan or whether in fact it's their actuarial determination that will allow the early retirement option to be fully funded within the existing provisions of the plan?

Hon. D. Lovick: My life would be made much easier, and I think it would be of benefit to everybody, if the member would break his questions into particular ones rather than trying to slip in two or three at once, because one is so totally different from the other. So if I don't get it absolutely right, I apologize.

First, let me make the point that in most cases, the plans and the basic provisions governing those plans existed before there was pension benefits standards legislation. What the plans were was in fact registered to comply with the legislation as drafted, but many of those provisions had been in place, obviously, because they antedated the legislation itself. I think I'm just going to answer that for now and let the member have another crack at the other question, to make sure I've got it right before I answer.

[1150]

[ Page 13620 ]

Hon. D. Lovick: The trustees, I am advised, must go to the superintendent of pensions and demonstrate that they can indeed afford the provisions they are promising to their members.

C. Hansen: So if you have an issue today where you've got a plan -- let's say, other than the 16 building trades plans that are before us -- that has an early retirement option that is set up to be a subsidized provision, or, because of the changing circumstances of the plan, they realize that they are in fact subsidizing this early retirement option that was put forward. . . . I gather that those plans would then have two choices: they could restructure their plan so that it is actuarially sound -- I hope that's the right word -- or they could come to the Minister of Labour and beg for legislation to change so that they can actually start deleting people from the benefits of the plan. Are those the two options that plan trustees might face in that circumstance?

Hon. D. Lovick: The member was, I believe, absent from the House when I gave what I referred to as the quintessential argument for making the changes. The quintessential argument, I think it's safe to say -- I don't mean to put words in this individual's mouth -- is looking for the longer-term viability of the plan. It's not about whether it works today, because it demonstrably works today -- and, indeed, the legislation ensures that it does work today. So it's not a matter of saying: "Oh, you've got a problem tomorrow, and therefore something has to be done to fix it." It's rather the expert advice that we were given, the recommendation made to the pension council. I quoted it into the record before, and I'm going to do it again, because the member wasn't here at the time.

Mr. Allan Brown, in a letter to the superintendent. . . . He is a prominent Vancouver actuary, a partner in an international actuarial firm and president of the Canadian Pensions and Benefits Institute. He provides the argument for saying that we must do what we are doing. The argument he offers is that if we were to prohibit the suspension of benefits we would be "seriously undermining the existence of negotiated-cost multi-employer pension plans and hence the level of pension coverage in those industries where such plans are prevalent." Mr. Brown states: "In particular, the legislation" -- if it didn't prohibit suspension of benefits, which it didn't before, as you'll recall -- "has an adverse effect on a plan's funded position since it results in an increased incidence of early retirement and a reduction in the number of contributory hours. In combination, these factors have a serious detrimental effect over time." That was the case presented to the council. The council said: "Yes, we understand your point. We accept your point, and therefore we are recommending that this particular amendment should be brought forward." And we as government are accepting that recommendation and doing what we do.

Mr. Chairman, I see that the committee is here. Accordingly, unless there is outrageous objection from across the way, I will move the committee rise, report progress and ask leave to sit again.

[1155]

The House resumed; the Speaker in the chair.

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

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

Hon. S. Hammell moved adjournment of the House.

Motion approved.

The House adjourned at 11:56 a.m.

PROCEEDINGS IN THE DOUGLAS FIR ROOM

The committee met at 10:13 a.m.

ESTIMATES: MINISTRY OF EMPLOYMENT AND INVESTMENT AND
MINISTRY RESPONSIBLE FOR HOUSING
(continued)

S. Hawkins: We're continuing with the business plan for a little while this morning. We are on page 5, under "Strategic Priorities." I wonder if the minister can just tell us if the priorities are listed in order of priority in the business plan.

Hon. M. Farnworth: No.

S. Hawkins: If the minister had to organize them in an order of priority, can he tell us where he. . . ? There are five boxes -- can he tell me in which order he would place them?

Hon. M. Farnworth: I guess it would be (1), (3), (2) and (4).

S. Hawkins: Yes, there are four boxes -- I see that one was continued on the other page.

Starting with No. 1, the minister mentioned on a previous day that it was hard to track jobs. Under examples, under the first priority "to promote strategic economic development," point No. 3 does say: "Track major projects." Can the minister give me examples of. . . ? I know that this is still a draft plan.

[ Page 13621 ]

[1015]

Interjection.

Hon. M. Farnworth: That's right. That's how we would do that.

S. Hawkins: So these major projects would be only the ones that the government has some interest or investment in?

Hon. M. Farnworth: Yes. I mean, we're interested in all the projects that are taking place in the province, but we can track ones where we have money in, for example, a lot easier than ones where we don't.

S. Hawkins: In the priorities section, under the first priority, the last point says: "Reduce impediments for potential investors." Can the minister just elaborate on that? Does he mean reducing red tape? Does he mean working with the small business task force on red tape? Or is it something else?

Hon. M. Farnworth: It would be all of those things. It could be working with immigrants, for example. It could be assisting in the identification of key staff. It's a whole host of issues.

I. Chong: In conjunction with these priorities, the example given is "Managing the Build B.C. special account." I understand that that account has been reduced substantially. I was just curious as to why it would be deemed part of the priorities in the example given. It certainly falls within the ministry's mandate and responsibilities, but it seemed odd that it had decreased substantially -- that it would be considered a priority.

Hon. M. Farnworth: We're still implementing the projects that have been approved, so that's why there's still considerable interest attached to it.

I. Chong: Can the minister advise what projects are ongoing, how many there are and the dollar value that is associated with them? If he has a list, perhaps it may be easier if he wants to provide us with that list.

Hon. M. Farnworth: I can get the list of the projects for you.

I. Chong: The minister indicated that point No. 3 was sort of a second high priority. This has to do with increasing benefits to British Columbia from trade. I notice that managing 150 incoming missions each year, including 50 from China alone, was one of the examples. What I'm assuming is that for the 1999-2000 year, we're looking at 150 incoming missions. Can the minister advise what the 1998-99 incoming missions amount was and whether there is a value attached to those incoming missions in terms of contracts signed or jobs generated, if possible -- a performance success rate?

Hon. M. Farnworth: Last year there was a total of 165 missions from 36 different countries. So a lot of what we do is try and separate the wheat from the chaff, to find out who should be meeting with whom to make sure that they're meeting with the right people. Then they go out and do the work in terms of businesses and contract development and those sorts of things. So that's the focus there.

[1020]

Hon. M. Farnworth: There were 68 from China last year. I would point out that this is an actual for last fiscal year. Sometimes we don't find out that missions are coming until a few weeks before they arrive here. We appreciate it when we know well in advance. In this case, 150 have indicated to us that they are coming this year. That's good, because then we can do the preparatory work that needs to be done. But sometimes they do come on short notice. For example, the Italian trade minister is coming, and that's done on relatively short notice. We prefer to be informed well in advance; that helps. As I said, there are 68 from China and 17 from Japan, so Asia-Pacific is well represented.

I. Chong: In my first question to the minister, I did ask whether he had a way of tracking the dollars generated in terms of the signing of any contracts -- whether he had those figures available for 1998-99. I know we can't project for 1999-2000, but just as a measure of how successful these are, could the minister give us an idea?

Hon. M. Farnworth: It's an imperfect science right now. If there is an event, for example, we have a better idea in terms of how we can judge these things. For example, within the aerospace industry, we're having the Aerospace North America Show in Vancouver in August. That will be an opportunity where there are a significant number of delegations and companies coming through. We will be able to get a much more accurate reading, for example, in that sector at that time.

I. Chong: I certainly can appreciate that it is an imperfect science, and I hope that over the course of the next year we can develop some statistics. Certainly, if we're continuing to have these missions in the hundreds every year, the amount that we increase or decrease needs to be determined by the measure of the success of previous years.

I'd also like to ask the minister whether he can advise as to the amount that was allocated in '98-99 for those 165

[ Page 13622 ]

Hon. M. Farnworth: It would be less than $1 million, but we can get you a more appropriate figure in the future. It's within the budget that we have in terms of international trade and dealing with incoming missions. It probably amounts to somewhere just under $1 million.

B. Penner: Just one question arising from the minister's answer, where he mentioned an aerospace show that's planned for August. Is that the aerospace show that coincides with the Abbotsford Air Show?

[1025]

B. Penner: Does the ministry have any plans to have a presence at this year's Abbotsford Air Show? I'll give you some background.

Two years ago was the last time there was an Abbotsford Air Show, and there was a major aerospace industry trade show that took place at the same time. There were booths set up by various countries, including the former Czechoslovakia and various other European countries. I think there were 12 U.S. states represented, most of the provinces of Canada were represented, and Australia and New Zealand were represented. But there was no visible presence on behalf of the province of British Columbia, and this was an event that was occurring right in our back yard, where we had thousands of guests from around the world coming through to spend a couple of days.

I thought we missed a real opportunity two years ago by not having a visible presence at that aerospace trade show, and I wonder if the ministry has any plans to show the B.C. flag and have a proud, visible presence at this year's Abbotsford Air Show.

Hon. M. Farnworth: A couple of points: (1) Aerospace International will have a presence at the Abbotsford Air Show; and (2) B.C. participates through the Aerospace Industries Association, so we will have a presence at the air show as well.

R. Thorpe: In the last couple of days there's been some press coverage with respect to a major Chinese shipping company coming to British Columbia in a big way. Can the minister advise the role that E&I played in securing that for British Columbia?

Hon. M. Farnworth: The Vancouver Port Corporation is involved with that, not this ministry.

R. Thorpe: Is the minister then saying, hon. Chair, that the Employment and Investment ministry and his government had no involvement in bringing those people to British Columbia? Would that be correct or incorrect?

Hon. M. Farnworth: The Ministry of Employment and Investment lobbied Costco to stop in Vancouver to pick up the automotive supplies for the automotive industry as they come out here to transport them to Shanghai and southern China.

R. Thorpe: There have been a number of press reports, and in some areas of the world this organization is reputed to have been involved in some questionable activities. Was any due diligence done as part of that lobbying process to ensure that illegal activities would not be a part of this stopping in Vancouver?

Hon. M. Farnworth: No, we just lobbied to get the ships to stop in Vancouver. We did that in partnership with the federal government.

R. Thorpe: Has there been any coordination between your ministry and the Attorney General, who apparently is expressing some concerns about the reputed allegations of this organization?

[1030]

S. Hawkins: I'm just interested, then. . . . We'll just move further down the plan to page 6, under "Workplan/Activities." There are some ambitious activities there, but I'm interested in the second-to-last point: "Promote development of the aluminum industry." I know that in the past we've seen a lot of press releases and announcements from the Premier about three new aluminum smelters coming to the province. I'm wondering if the minister can tell us where we are with that.

Hon. M. Farnworth: We are still aggressively pursuing the aluminum smelter industry. In fact, there are a couple of companies coming here to British Columbia this summer -- one from the United States and one from Europe. We are also working with a number of companies right now on issues around aluminum production, but we are still aggressively pursuing that.

S. Hawkins: Can the minister perhaps address the issue of incentives that these companies are being given, or plans for incentives for these companies, to come here? Are there any commitments?

Hon. M. Farnworth: No commitments have been made around any incentives. Right now it's a question of looking at issues around power and things around sites, in terms of the size of sites that they require to do a particular project. Different aluminum companies have different sizes of facilities that they're looking at. Some are now favouring what you'd call a jumbo smelter, if you like -- the half-a-million-tonne facility -- whereas others are into smaller facilities -- let's say 250,000-300,000 tonnes -- so they require different sites. It's those types of issues that we're addressing at the present time.

R. Thorpe: With respect to aluminum, can the minister confirm the rumour that as part of attracting these possible aluminum smelters to British Columbia, the government is committed to waiving the corporate capital tax if they desire to invest in British Columbia? Can you confirm that?

Hon. M. Farnworth: No.

[ Page 13623 ]

Hon. M. Farnworth: There's already a four-year holiday on the capital tax for new investment. Different companies come, and they have wish lists of all kinds of things. But as I said, there are no incentives being offered right now, nor are any under discussion.

S. Hawkins: With respect to the smelters again, can the minister tell me what sites in the province are being looked at by the companies that are interested?

Hon. M. Farnworth: We have a list of about 35 sites that are being looked at. If the member wishes, I will share that information with you.

I. Chong: Looking at the workplan activities again, I notice that there is mention of the Infrastructure Works program. I know that the ministry issued a press release last week regarding the Infrastructure Works program and the request to have that continue. At this point I'm not sure where it will be located in the line item in the 1999-2000 budget year, as to the amount that has been allocated for the Infrastructure Works program -- if in fact there has been an allocation in the current budget year. If so, could the minister advise?

[1035]

I. Chong: Thank you for providing that clarification. I would just like to also ask. . . . In the workplan activities, I notice in the second section it says: "To improve the lives of disadvantaged people." You make mention of a number of things, in particular the Bladerunners program, which I'd like to pursue at a later time. But within that first bullet contained in that section, there are comments made as to increasing opportunities such as the Trade and Convention Centre and SkyTrain expansions in Vancouver.

But the third example I'm particularly interested in is: "the construction of the new arena in Victoria." By way of background, I understand that there was never any intention to have any provincial involvement with this planned arena here in Victoria. So I'm curious as to why this would appear in the Ministry of Employment and Investment's workplan, when it has been stated time and time again: no provincial involvement. I know that the minister might be thinking that it has to do with financial. . . . But as we understood it, no provincial involvement means no provincial involvement. Could the minister give me some clarification on that?

Hon. M. Farnworth: It has nothing to do with the funding of the new arena. I will repeat what I have said on numerous occasions. Brian Mulroney stands a better chance of becoming Prime Minister than this government does of putting money into that arena -- okay?

B. Penner: Joe Clark came back.

Hon. M. Farnworth: I think the rising of Mulroney from the dead is a much harder trick.

Anyway, on the issue of the Bladerunners program, the fact of the matter is that it still would not prevent. . . . For example, if private sector funding came forward for the arena, and a private sector deal started to build it, Bladerunners could not be a part of a project where you could get the Bladerunners program involved. It doesn't require provincial funding participation for that to happen.

I. Chong: I do recognize that there was never a commitment for provincial funding or dollars to be expended; that was quite clear. I believe I mentioned to the minister that I understood that. But when within your business plan you're wanting to continue to develop the Bladerunners program, and you've tied it into the construction of the new arena, then surely the ministry has, I guess, a workplan as to how this involvement would occur.

I'm curious as to whether the ministry has suggested that, should the private sector succeed in having the arena finally built, the ministry would -- through whatever means -- suggest that the Bladerunners program be a part of it. I'm curious as to how this ministry can work in conjunction with the private sector in that manner, when there's no other obligation on the private sector to participate.

Hon. M. Farnworth: It's just an example; that's all it is. It could have just as easily have been a new trade and convention centre here in Victoria. It could be any private sector private capital project that Bladerunners gets involved in. GM Place is an example.

I. Chong: I thank the minister for that clarification. I just want to be certain that there was no underlying assumption on the part of the government that they would be able to influence the private sector to necessarily accept or adopt whatever program, or that the ability for construction to occur would be somehow hindered by this government as a result of not participating in a program. That's what I was just trying to ensure and get clarification on. That's what I believe I'm hearing from the minister, and if that's what he's saying, then that's fine.

Hon. M. Farnworth: There's no requirement for anyone to participate in a program, but good corporate citizens recognize that sectors of the community do need help. There's a program -- Bladerunners -- which has been very successful. Orca Bay recognized that and has worked very closely with them on the program, and it's been quite successful. As I said earlier, this an example; that's all it is.

S. Hawkins: I'm just working down to the last point under "Work Plan/Activities." "To improve administrative efficiency/effectiveness" is the title. Can the minister address the second bullet under there: "Attempt to improve employment equity implementation"? What are the ministry's plans around that?

Hon. M. Farnworth: We have an employment equity plan. If the member wishes. we will give you the plan.

[1040]

[ Page 13624 ]

Hon. M. Farnworth: There are targets, and we'll give you the plan.

R. Thorpe: I'm just wondering if the minister could, in that same area, talk to us a little bit about the details of communication plans. What is happening in that area? Why is that a highlighted bullet?

Hon. M. Farnworth: We want the various groups that deal with the ministry to know about activities within the ministry. We want first-time exporters, for example, to know about the work that we do. We want businesses to know about programs such as Bladerunners, for example. We want to make sure that our activities and the programs we deliver reach their target audiences and that those people we're trying to reach receive the necessary information.

R. Thorpe: How many FTEs do we have in the area of communications within the ministry?

Hon. M. Farnworth: Twenty-two. That also supports Energy and Mines as well.

R. Thorpe: What would be the total salary costs identified for those 22 FTEs?

Hon. M. Farnworth: Probably somewhere around $1 million to $1.2 million.

R. Thorpe: Why does E&I handle communications or. . . ? I'm assuming that I understood the minister correctly. Do you handle the communications for Energy and Mines? And why?

Hon. M. Farnworth: In part, because the two ministries are closely related. When they were split, rather than duplicating the same work in one ministry as in the other, it was felt that by keeping the communications shop together, we could serve both ministries, especially since a lot of Energy and Mines can be around marketing, and that's within the purview of Employment and Investment. So the shop is able to serve both ministries.

R. Thorpe: These 22 FTEs, excluding their salaries and benefits. . . . How many dollars are spent on advertising and advertising vehicles?

Hon. M. Farnworth: It's about $500,000.

R. Thorpe: I don't have my detailed blue book here, but I thought I saw, under advertising, about $2.4 million under STOB. . . . I can't remember what it was. Is that the correct number?

[1045]

R. Thorpe: I don't understand something here. Maybe you can walk me through it. We have 22 FTEs, costing -- ballpark -- $1 million, administering half a million dollars' worth of advertising. Is that what we're talking about here? Or have I misunderstood the minister? Would the minister like to clarify that?

Hon. M. Farnworth: The member seems to think that it's just advertising. It's all the issues around communications. It would include events. For example, the Aerospace North America Show would be involved in that. It includes all the press releases. It includes some of B.C. Housing, for example. It includes all those -- the wider spectrum of the work within the ministry. For example, it would include the regional newsletters, sectoral communications, conferences, events and displays, research -- things like that.

R. Thorpe: Again, what I would appreciate receiving, if I could. . . . We've talked about 22 FTEs; we've talked about half a million dollars. STOB 40 says $2.397 million. So somewhere in between, there are numbers. If we could maybe get the list of the 22 FTEs and then some of the stuff they work on, that would facilitate this.

Hon. M. Farnworth: We'll get that information for the member.

R. Neufeld: Just a couple of quick questions about the communications for Energy and Mines. The minister said it revolves around marketing. I'm also aware, through Energy and Mines estimates, that your ministry puts out the monthly bulletin on the land lease sales and bonus payments, which actually doesn't correspond with the budget manual, because there's some glitch -- as the Minister of Energy and Mines told me -- in what happens between the two ministries. I would appreciate it if there is some way the minister would undertake that we can get that information coming out, one relative to the other. If this ministry is going to do the communications and those types of things, then obviously it should balance with what Energy and Mines does. At the present time, it doesn't; in fact, it's quite a bit out of whack. If the minister could commit to that. . . .

I'd also like to have some time and opportunity, rather than doing it here, to meet with whoever is responsible to go through with me how much your ministry spends on communications for the Ministry of Energy and Mines and exactly what they do to expend that money -- rather than going through that process here.

Hon. M. Farnworth: Yes, we can do that.

R. Thorpe: In the business plan summary -- perhaps you covered this the other day, when I had other business to attend to -- it talks about regional economic development. How much of the communications and, I guess, support in the broadest sense is for regional development?

[1050]

Interjection.

[ Page 13625 ]

R. Thorpe: Well, I guess I'm a little troubled by that. One of your guiding principles says: "Promote activity in all regions of the province." If that's one of your guiding principles up here and your workplan is down here somewhere, how do you make the connection to your guiding principles to ensure that your day-to-day, month-to-month and year-to-year workplan is supporting the guiding principle of promoting activity in all regions of the province? How does that happen?

Hon. M. Farnworth: Well, for a start, we have this "Investment Climate," which outlines in detail the opportunities right around the province. We do look at things on a regional basis. We spend a considerable amount of time, for example, on regional summits around the province, which we discussed earlier with the critic. So there is a great deal of work within the ministry on the regional areas around the province, and it's very much involved in the workplan and the business plan.

R. Thorpe: For these purposes -- and I'm sorry if this question was asked earlier -- how many regions of the province are there, and how do you identify them?

Hon. M. Farnworth: Let's see -- how many regions would you like? You can define a region by school district, by regional district, by watershed, by highways district. You can define a region by any number of ways of looking at it. But I think that most people would probably expect that you've got regions. . . . For example, the Peace country would be considered a region. Within the Peace country, there's a subregion called North Peace and a subregion called South Peace. Then we've got Vancouver Island; that's another region. You've probably got North Island, and you've got South Island, and you've got Central Island. Then you might have the coast. You've got the North Coast, and you've got the South Coast, and you've got northwestern British Columbia. Then you've got the Cariboo, the central interior and the Chilcotin. It depends on who you're talking to, because different people identify themselves by the region that they live in.

Then you've got the Kootenays, and within the Kootenays, you've got the East Kootenays and the West Kootenays. There are a lot of regions in the province, but I think most people in this province and within this ministry recognize that there are regions. The regions in the province are important, and we work on a regional basis. That's why we've been holding regional summits.

R. Thorpe: I don't know whether it was the minister's breakfast or if he's got a toothache or what happens to be the. . . .

Interjection.

R. Thorpe: Well, the minister may think it's a stupid question. But do you know what? There are some regions in British Columbia that don't think it's a stupid question, but you know what? There are some regions of British Columbia that don't think it's a stupid question. We're here to perhaps represent some of those people that the minister has characterized that way, but I wouldn't characterize it that way.

My question is: in your workplan, what are the regions that you have identified, and do you have a workplan for each one of those regions?

Hon. M. Farnworth: We work sectorally, and the regional summits attempt to define the regions of the province.

R. Thorpe: It appears we're not going to get definitive answers here today, so I just wonder if I could have an undertaking -- if he could provide the detail of the workplans for the various regions. I'd appreciate that very much.

[1055]

B. Penner: In the minister's workplan, under the heading. . . .

Interjections.

The Chair: The member will take his seat. Division bells have rung, and we will recess until after the division has been called.

The committee recessed from 10:56 a.m. to 11:04 a.m.

[E. Walsh in the chair.]

Hon. M. Farnworth: Japanese and Mandarin.

B. Penner: I wonder if the minister could tell us how many of these latest publications have been printed and prepared. I note that inside the booklet it indicates that it's a review of the year 1998. I wonder when they were last printed and in what quantity.

[1105]

B. Penner: Is there a plan to update this on an annual basis and publish new ones every year?

Hon. M. Farnworth: It's usually every 18 months to two years; it's a function of the stats.

B. Penner: So I take it that the minister will get us an answer as to when it was last published and printed, and the quantity that was printed.

Hon. M. Farnworth: This one was within the last few months, but certainly we will get for the member the information he asks for.

[ Page 13626 ]

Hon. M. Farnworth: We'll get it as quickly as we can. We aim to please.

S. Hawkins: Just a follow-up. Because the member for Okanagan-Penticton was asking about the communication plan, we might as well just deal with it here. The minister read from a briefing note that they did give us on their budget for communications. It does talk about regional newsletters and provincial mailers. There's a budget for $300,000 for regional newsletters and $250,000 for provincial mailers. Can the minister tell us what the difference is between regional newsletters and provincial mailers and where these are going to be targeted -- how many regions and the targeted regions?

Hon. M. Farnworth: The provincial mailers are dealing with economic information on a provincewide basis, whereas the regional ones deal with regional information. For example, the summits and then the follow-up from the summits will be communicated in that way as well.

S. Hawkins: Thank you. I won't prolong this.

I wonder if I can get a commitment from the minister to give me an example of the ones they've sent. And perhaps when they're coming out, he could just forward one to my office as well.

Under each of those categories -- regional newsletters and provincial mailers -- how many are they planning to send? What is the number? Provincial mailers -- is that a one-time mailing of three million? What does that budget include?

Hon. M. Farnworth: We will get that information for the member, and we will put you on the mailing list.

R. Thorpe: Are those projects run out of the ministry, or are they run from another part of government?

Hon. M. Farnworth: That three million is administered by CPCS.

R. Thorpe: I'm just wondering if the minister could explain the day-to-day working relationship between the communications division in E&I and Cupcakes.

Hon. M. Farnworth: I guess the best way to describe it is that we communicate and coordinate with them weekly.

R. Thorpe: When push comes to shove, who makes the decisions: staff in your ministry or Cupcakes?

[1110]

S. Hawkins: I think that's as much as we'll deal with on the business plan. We do understand it's a draft. I appreciate the minister's staff sharing it with us. We hope to get the final business plan when it's finished. Perhaps next year we can canvass the areas that we didn't, with respect to the performance measures -- about which targets were set, whether they were met, what actions were required. We'll get into that kind of detail next year.

At this time, the member for Shuswap would like to pose some questions regarding the Skeena Cellulose investment.

R. Thorpe: I just have one more question; sorry to the member.

We are looking forward to the binder on performance measurements, as was undertaken yesterday. I'm just wondering if we could get the detail on STOB 20. Perhaps you don't have it with you. Under "Corporate Services" there is $3 million-plus for professional services. Could we get a copy of the detail of that budget from the minister? I guess I'd like to expand that. Could we also get the detail for the ministry on the different components under STOB 20, at the appropriate time?

Hon. M. Farnworth: Yes, we will.

G. Abbott: I have a number of questions on Skeena Cellulose Inc. Does the minister have all the staff that's required to undertake this process -- no problem?

Hon. M. Farnworth: Yes, we do.

G. Abbott: There are a couple of documents that I would like to request at the outset. Perhaps you can get them for us, if indeed they exist. The first would be from Skeena Cellulose, or 552513 B.C. Ltd. Is there a consolidated balance sheet as of March 31, 1999?

Hon. M. Farnworth: We have an audited one for December 31, 1998. We have a consolidated one for April 30, 1999.

G. Abbott: So we do have an audited financial statement for 1998. Would it be possible for the minister to provide that to me today?

Hon. M. Farnworth: Yes, we can do that.

G. Abbott: Does the minister also have at this time a summary of first-quarter results for the corporation?

Hon. M. Farnworth: We can give you the gross profit results from January to April.

G. Abbott: I guess these first requests revolve around the timely release of information from SCI. I suppose it's understandable, to a point, that SCI has been reporting differently than other integrated forest products companies in British Columbia, given that they went through a dramatic restructuring over a year ago now.

Is the plan to get SCI on a regular reporting schedule, as others are? For example, I don't know whether the audited financial statement for '98 has been made available publicly. To this date, I don't think it has. I think we've been attempting to get it -- unsuccessfully to this point. Is there a plan for a more timely release of information of that sort?

Hon. M. Farnworth: We can get you the '98 financial statements that are audited. Within a month we will have the

[ Page 13627 ]

[1115]

The last point -- not the last point, but the last point just at the outset here -- is an easy one, and that is: being an occasional amateur historian, I like to be sure that the record is all correct. So I do want to point out that the minister said in this room on June 10, 1999. . . . I'll quote the minister. He's referring to the Forests critic at the time: "I don't mean it in terms of criticizing him for. . . . But in terms of when he was up in Skeena himself, 'If we were in government,' he said, 'we would have had to do the same thing.' "

Now, I suspect that the reference has something to do with the acquisition of majority ownership of SCI, although I wasn't in the chamber at the time and don't know. I've scratched my memory very deeply and can't for the life of me recall making any such statement. Perhaps the minister can either tell me where he might have heard such a thing. . . . I suspect he may have actually confused me with another individual, although I don't know. Certainly I don't recall ever saying anything of that sort. Perhaps the minister can ask his MA or whatever to find the documentation or simply withdraw it, if that's his wish.

Hon. M. Farnworth: I will be happy to dig up the appropriate quote for the member. In the meantime -- while we're on the topic, I guess -- in terms of the new glasnost, Skeena's still in what would be referred to as perestroika.

S. Hawkins: Soviet-style management.

Hon. M. Farnworth: No, no, no. That's called restructuring; that's Russian for restructuring. Anyway, we can get the financial statements that the member has talked about.

S. Hawkins: Are you withdrawing?

Hon. M. Farnworth: No, there isn't. . . . I said. . . . He asked me to find the comment. . .

The Chair: Through the Chair, members.

Hon. M. Farnworth: . . .and I said we will get the comment. I may have been paraphrasing, and if, at the appropriate time, I. . . . You know, I'm not above saying: "Hey, I paraphrased wrongly." But there was, I think. . . . We may have been talking about an event on CBC or something like that, but I will dig up the appropriate quote.

G. Abbott: I do look forward to that. I know that one of the worst things is to be accused of being a revisionist historian in the chamber. I know the minister wouldn't want that, so he has one to two hours for his political staff to find an appropriate quote that will embarrass the heck out of me. I'll look forward to that or to the minister's withdrawal at the end of that period. Great.

Okay, on to more serious matters. We did have, I think, a good and quite thorough discussion of Skeena Cellulose last year, and I want to do the same this year. I want to start, I think, where I did last year: around the broad aims and objectives which the government is looking for in terms of its current ownership of Skeena Cellulose. I asked the minister last year whether it was the government's intention to, in the long term, retain ownership of SCI. Much to my satisfaction, the minister indicated that no, they would welcome the purchase of SCI by a private sector concern. He indicated further that the Toronto Dominion Bank and the government have both agreed to hire Goepel McDermid to act as their investment bankers in respect to the sale of shares in SCI. Can the minister -- again, to put this into the broad context -- advise us whether the government's objectives around SCI remain the same -- whether Goepel McDermid remains seized of the task of selling the government's shares of that company?

[1120]

G. Abbott: I'm assuming from that that Goepel McDermid remains. . . . The minister is signalling yes. Very good.

In terms of private sector interest, again, we had a considerable discussion around that issue last year. The minister confirmed that there had been some private sector interest. There is a marvellous exchange between us about the level of that interest, which culminated in this comment by the minister: "It's more than one and less than seven. It is really hard to say who's really, really serious, and who's mid-serious, and who's saying: 'Yeah, if the situation is right, maybe we might do it' -- not really serious. But there's a limited number of forest companies and resource companies, it's definitely below ten." To which I responded: "It's definitively somewhere between one and ten, I guess. . . ."

Could the minister bring us up to date in terms of private sector interest in SCI? There was, I think, an article in the business page of the Sun a couple of days ago which indicated that there was new interest in SCI. Perhaps the minister could tell us what's happening there.

Hon. M. Farnworth: I would say that history repeats itself, and those comments apply equally this year -- with the added footnote that I would say there are two companies that have gone just beyond preliminary. There are more detailed discussions taking place with two companies. But basically the comments of last year would still apply.

G. Abbott: When the minister suggests that two companies have gone a little further than anyone had when we talked last year, I presume that they have eclipsed the serious range -- or at least are in the serious range. What would suggest that those two companies have gone a little further in terms of discussion. How does that play out?

Hon. M. Farnworth: We've signed confidentiality agreements and exchanged financial information.

G. Abbott: Does it remain a precondition of the government that the sale of SCI would be for all of the assets? I'm presuming that the government is committed to the notion that it will be sold only in one piece, including all the assets.

[ Page 13628 ]

G. Abbott: Not to put too fine a point on it, but would the sale of the government's shares in SCI have a precondition that the potential purchaser must operate all portions of the operation?

Hon. M. Farnworth: Our goal is to keep Skeena Cellulose whole -- the sum of all the parts -- and to make it a world-class facility. That's, in part, why the capital expenditure is in place. The interest that we've had to date has been for the whole, as opposed to the parts. That's in keeping with our goals.

[1125]

I just want to nail down the point about whether the government, before it sells its shares in Skeena Cellulose, is looking for any additional commitments around the operation of the pulp mill. Or is that just a given here?

Hon. M. Farnworth: In a nutshell, we are not interested in splitting it up. That's not our objective. As I said -- I'll just repeat my answer -- the companies that have come to talk to us aren't interested in splitting it up either.

G. Abbott: Again, the reason I'm asking this, hon. Chair, is a couple of relatively recent developments in the B.C. forest industry. M&B is spinning off Pacifica Papers, for example, as a successful spinoff venture. Then the other example which leaps to mind is Canfor's write-off of Howe Sound Pulp and Paper. There were assets there of $400 million, or thereabouts, last year. That is a possibility that would loom with respect to SCI as well. The question is whether the government would forcefully bind, through some contract mechanism or another, any potential purchaser to operating all phases of the current SCI.

Hon. M. Farnworth: I understand the comments and the arguments that the member is putting forward, and I'll make the following points. In the case of Skeena, the sum is more valuable than the parts, because you still have to have a supply for the chips, and the mill takes the chips. Otherwise, the cost of transporting those chips to other locations is too expensive. So in the sense of trying to split it up and saying, "We'll just spin off the pulp mill and the lumber division," that really doesn't work.

In terms of the companies that have come to see us, they have been interested in the capital expenditure as well. So the sense that we're getting from the interest of companies in SCI is that they're looking at the operation as a whole. They're looking at cap ex into the mill, which says that they're interested in the operation as a whole, because they recognize, as I said earlier, that the value of the whole is greater than the sum. . . .

G. Abbott: I'm pleased to hear that. Obviously everyone in Prince Rupert and the Skeena area wants to see the pulp mill operating.

Again, looking at market realities, there are pulp mills on Vancouver Island that haul barge loads of logs down from mid-Alaska for their mills. So there is a movement of chips and logs, and so on, from considerable distance for these purposes. But, again, as I understand it, the government's position is that they expect that all phases of it will continue to operate if it's sold. But it would appear, at least, that the government is basing that hope on the marketplace -- that the marketplace will drive that as opposed to the government saying that it must happen.

Hon. M. Farnworth: All indications to date are that it is the marketplace that is driving that. We have had no serious interest from anyone interested in splitting up SCI. It's from people who want to operate it as a whole and recognize its value as a whole.

G. Abbott: I won't pursue that any further. I think I understand what the minister's saying, although I don't think he's being quite as bold as I would have liked him to have been with respect to the point.

Could the minister advise: what are the impediments that would currently restrict or discourage the movement of SCI back to the private sector? What are the impediments that Goepel McDermid or this ministry is running up against in terms of finding prospective buyers and consummating a deal?

[1130]

G. Abbott: The overall situation with respect to pulp in the world. . . . Although it's marginally brighter in recent months, it continues to be the main problem in terms of the sale of Skeena Cellulose. I guess that doesn't surprise me, because it would probably be true for any integrated operation at this point in time. When discussions are going on seriously with these two companies or less seriously with other prospective buyers, they are looking really at pulp futures and trying to judge whether they can make a go of it from that perspective. Is that what they're thinking? Is there anything else that would make a prospective buyer hold back from that purchase?

Hon. M. Farnworth: Those numbers are the main argument, and they're the main decision-making issue that needs to be addressed.

G. Abbott: Has the principal interest in the purchase of SCI come from what I would term other domestic producers -- those companies that currently are operating in a major way in British Columbia and who would purchase the assets to complement their existing operations? Or is it eastern Canadian or foreign purchasers that are primarily interested here?

Hon. M. Farnworth: In the interests of confidentiality, I will frame my answer this way. Pulp is a global interest, and companies tend to be global in nature. So there is global interest in Skeena.

G. Abbott: I can reassure the minister that he didn't violate any confidentiality agreements with that rather cloudy, global answer to the question. I can appreciate that the minis-

[ Page 13629 ]

I can't think of a way to frame another question that might produce a more definitive answer, so I'll move on to a related area. Again, when we debated this in estimates last year, we talked about what the government hoped to achieve in terms of losses, breaking even or making a profit on the sale of SCI. The minister responded last year, indicating that. . . . Well, I'll quote the minister: "The best estimate right now is that if Skeena Cellulose were sold today, we would probably come out between a wash -- break even -- or somewhere around a $20 million loss." Does history remain the same one year later, or do we have an expectation of something else here now?

Hon. M. Farnworth: Our objective remains twofold: one is to ensure that SCI is a world-class facility operating in northwestern British Columbia and contributing to the provincial economy; the other is that we can break even.

G. Abbott: Let's pursue the latter objective first -- the notion of breaking even on the sale. Later on we'll be exploring where we are in terms of the government's commitments around the operating line and the cap ex program and so on. So we won't go directly to that number now. Is the minister saying that it is now a precondition on the sale of the assets of SCI that there will be no $20 million loss or anything of that magnitude and that the government's expectation -- in fact, stronger than expectation -- is that they are preconditioning the sale on breaking even or better?

[1135]

G. Abbott: So it's not a precondition; it is a hope that the government will break even on the sale of it. Have the discussions with the globally operating, globally interested concerns to date indicated that this objective will be achievable?

Hon. M. Farnworth: I would say that the discussions to date have been very much in that vein, with a recognition by prospective global interests that this is our objective.

G. Abbott: We've gone a year now, and we haven't sold the government's interests in SCI, even though it appears that the government was prepared to take -- at least last year -- up to a $20 million loss on the sale. I don't know whether or not the suggestion that we can break even is a reasonable one. Obviously we haven't been involved in the discussion, so it's difficult to know the viability of the objective that is being put forth.

The other objective the minister stated was that they want to see SCI be a world-class facility. Now, I guess that begs the question: does the government want to see it become a world-class facility based on expenditure by the government, in hopes that someday they'll be able to sell the asset at a break-even rate? Or is the aim to find a private sector buyer who will, in their own interests, make it a world-class facility?

Hon. M. Farnworth: Our objective is to see it become a world-class facility, and it is our desire that the private sector invest in the cap ex necessary to make that happen.

G. Abbott: I guess that leads into our next area, which is the cap ex program. Is the minister saying that with the recent reduction in the capital expenditure program from $170 million -- I believe it was -- to $110 million, that will only be one step on the way to the development of a world-class facility?

Hon. M. Farnworth: The view is that if we put $110 million into cap ex, we will be between the first and second quartiles of efficiency as it relates to pulp mills.

G. Abbott: If I can just do a quick translation of that answer, the minister anticipates that $110 million in capital expenditure will get us somewhere between 25 and 50 percent closer to the ultimate world-class efficient operation that we want to see developed. Is that correct?

Hon. M. Farnworth: It would be slightly different. It would put us between 75 and 100 percent, the first quartile being virtually there.

G. Abbott: So the government's expectations, in fact, are that the $110 million is going to pretty much take care of constructing a world-class integrated forest company in Skeena Cellulose?

[1140]

G. Abbott: So the expectation of the minister is that with the $110 million in the capital expenditure program, we can sell this enterprise at, hopefully, a break-even rate to a globally operating firm. The expectation is that upon purchase, there will not be a great deal left in terms of capital expenditures to be done by the private sector buyer.

Hon. M. Farnworth: Our objective, our goal, is to have the capital expenditure undertaken by a private sector firm. The $110 million will move us from where we are now into, as I said, between the first and second quartile. You're not all the way to the top end of the first quartile, but somewhere between 75 and 100 percent. That'll make us one the best mills in the world.

It may very well be realistic for the private sector to decide that they want to go right to the number one position. There are things they could do over and above that. But in terms of what's required to take Skeena and make it a very, very efficient mill by world standards, right up there at the top, the $110 million cap ex program will do that.

G. Abbott: Just to continue questions about the cap ex program, then. . . . My understanding from -- I think it was -- the press release that went out on May 26 is that $11.5 million of the $110 million has been expended to date. Is that correct?

Hon. M. Farnworth: That is correct.

G. Abbott: I believe the press release that was released on that date gave a brief explanation of why the capital expenditure program had been reduced from $170 million to $110 million. As I recall, it was around re-engineering and doing things in a more cost-effective way. Can the minister add some flesh to that?

[ Page 13630 ]

G. Abbott: So it sounds like the original $170 million was on the high side and the CEO, by an intensive review of the different components in the capital expenditure program, was able to identify areas where those could be cut very sharply -- in fact, to the tune of $60 million. Is that correct?

Hon. M. Farnworth: The CEO went in there. He looked at it from his perspective as someone who's experienced in the industry. He went through and reviewed everything. He decided what was necessary, what was required to take Skeena up to that world-class level. He decided there were some things that you could continue to do but that he did not feel were necessary. Along with, as I said, the efficiencies that he was able to find, he was able to find, he was able to reduce that and move us into between the first and second percentile in terms of how a mill should be operating. At the end of the day, there's always more that can be done. However, that's what's deemed necessary to take Skeena to being an extremely efficient mill.

[1145]

Hon. M. Farnworth: That's correct. The primary one is the integration of the A-line and B-line mills, and there are some other smaller ones that we can get a list of for the member.

G. Abbott: Can the minister advise what estimated capital expenditure would be involved in the integration of the A-line and B-line mills?

Hon. M. Farnworth: We can get a detailed figure for the member, but it would probably be around the $35 million range.

G. Abbott: The minister mentioned that there were sundry other smaller capital expenditure projects which had been postponed as well. What's the estimated value of them? Perhaps $25 million?

Hon. M. Farnworth: Probably around $25 million to $30 million. We can get the list for you.

G. Abbott: That's useful. If one takes the $110 million that has been committed and adds the integration of the A-line and B-line mills at $35 million and the balance of $25 million to $30 million, one is in fact up to $170 million or $175 million in terms of the totals. When we talk about the re-engineering, the move from $170 million to $110 million really has been a matter of postponing major parts of the capital expenditure program. Is that not correct?

Hon. M. Farnworth: Some of it, it would be fair to say, is a matter of postponing. But for others it's more a question of having done re-engineering, and so certain things become redundant in the sense that they're not required -- and also in achieving efficiencies. So as I said, those figures are not precise here today, but in terms of which projects or what have you, we can get that information for the member.

G. Abbott: That would be useful. The sense I get is that the hope of the government in reducing the capital expenditure program from $170 million to $110 million and postponing these major cap ex projects totalling some $60 million to $65 million is that those would be things which, after finding a buyer, the buyer would undertake as pulp prices improve. Is that what's in mind here?

Hon. M. Farnworth: I'll just go back to my earlier comments that the $110 million is what's required to take it into the top quarter and make it one of the most efficient mills. It's our hope that the private sector will in fact do that. One of our objectives is that they do that capital expenditure program. To go further would be required in terms of taking it to the very top. That would be dependent upon what a private sector company coming in to take it over feels that it wants to do. It also takes into account that it's not a question of just postponing, but there is a lot re-engineering work that has been done. There have been ways of making efficiencies. The CEO has been in there, and he has done, I think, an extremely capable job on that. A lot of the potential -- going the extra mile, if you like -- involves specialized technology and decisions that would be made by a private sector investor. In general, the buyers that we have been talking to are prepared for and are looking at a cap ex program greater than $110 million.

[1150]

Hon. M. Farnworth: It's $110 million -- that's it. Above that, it's going to be the private sector.

G. Abbott: That was the clear and definitive response that I was searching for.

Noting the hour, hon. Chair, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 11:52 a.m.

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