Hansard -- Tuesday, April 27, 2004 a.m. -- Vol. 24, No. 5 (HTML)


CONTENTS

	Routine Proceedings
		Page

Committee of the Whole House		10501
	Mineral Tenure Amendment Act, 2004 (Bill 29)

Report and Third Reading of Bills		10501
	Mineral Tenure Amendment Act, 2004 (Bill 29)

Committee of the Whole House		10501
	Coal Act (Bill 28)

Report and Third Reading of Bills		10501
	Coal Act (Bill 28)

Second Reading of Bills		10501
	Nanaimo and South West Water Supply Act (Bill 31)
	M. Hunter
	Hon. M. Coell

Committee of Supply		10503
	Estimates: Ministry of Advanced Education
	Hon. S. Bond
	J. Kwan

Proceedings in the Douglas Fir Room

Committee of Supply		10513
	Estimates: Ministry of Transportation (continued)
	Hon. K. Falcon
	J. MacPhail

Hon. R. Neufeld: Mr. Speaker, I call committee on Bill 29. I call, in Committee A, estimates for the Ministry of Transportation.

The House in Committee of the Whole (Section B) on Bill 29; J. Weisbeck in the chair.

Hon. R. Neufeld: I move that the committee rise and report the bill complete without amendment.

Bill 29, Mineral Tenure Amendment Act, 2004, reported complete without amendment, read a third time and passed.

The House in Committee of the Whole (Section B) on Bill 28; J. Weisbeck in the chair.

Hon. P. Bell: I move the committee rise and report the bill complete without amendment.

Bill 28, Coal Act, reported complete without amendment, read a third time and passed.

M. Hunter: It's a pleasure for me to stand this morning and speak in support of Bill 31. As you can imagine from its title, this is an act of significant import in my community.

The greater Nanaimo water district has been in place since 1950 as an organization that has developed and managed the water supply in the city of Nanaimo, in the village of Extension and in communities that prior to amalgamation of Nanaimo in the 1970s were independent villages and communities in their own right. The history of the Nanaimo water district and its supply goes back a lot further than that. As we take this important step in the development of the water system in my community, I just want to note for the record a few things that I think are of interest, certainly to me and to people in my community.

If you go back to the very beginnings of my community — in fact, as long ago as 1874 — there was no water system reported in place in the city of Nanaimo. Residents at that time had to wend their way on a path down a steep hill to cross a tidal inlet to get water from a spring which is located where the western end of the present Bastion Street Bridge is located. It wasn't until 1879 that a Mr. J.W. Stirtan laid a line of wooden pipes from the spring that was reserved for public use on Wesley Street just above the spring by the Vancouver Coal Co. In my community the history of the water supply and the coal industry which built Nanaimo are intimately linked. It was that development of a line of wooden pipes in 1879 — from small beginnings grow great things — that was the start of Nanaimo's waterworks, the beginning of today's present systems that have been run jointly by the greater Nanaimo water district and the city of Nanaimo for a number of years.

This is an important historic occasion today, as we speak to this bill and the changes that it would make in the future development of our water system in the city of Nanaimo. What the bill does is transfer authority at

the request of the city and with the agreement of the village of Extension so that the city of Nanaimo will, in future, manage and be responsible for the water system throughout the greater Nanaimo area. As I said, the history goes a long way back. It is intimately involved with the coal industry.

Just to bring it into more modern times, the original dam on the Nanaimo River was built in 1930. It was the South Fork Dam. It is still in place today. It encloses about two billion litres of water. Its cost in 1930 was $151,543. That was the second major facility. The first one was the No. 1 Reservoir built in 1911. Its cost was $28,500.

There have been many investments made over a long period of time by the various authorities that eventually got amalgamated in 1950 into the greater Nanaimo water district and that today, as we move through this bill, will be translated into a new responsibility for the city of Nanaimo, which is obviously growing and has matured significantly since the water supply system was first put into place.

It is important, Mr. Speaker, that we recognize today what we're doing. I think that this bill offers great opportunities for my community. It offers opportunities to the city of Nanaimo to actually utilize the facilities that it has on the Nanaimo River to a greater extent than has been available to date. The city of Nanaimo, through exercising its authority under this bill and through the Community Charter, will be able to add to the assets of the city. There is already talk about providing some hydroelectric generating capacity at the dams and on the river itself. I think one of the most important things here is that the city of Nanaimo has committed itself in discussions that have been going on around this initiative to deal fairly with communities that are not part of the water system at the present time.

In my community, in my constituency, of particular importance is making sure that as the Snuneymuxw first nation develops its capacity — as it is doing — to get involved with business and provide services to its own members, the supply of water from the Nanaimo River is a matter that the city of Nanaimo and the Snuneymuxw first nation will be discussing in a positive way.

I am extremely pleased that the communication has started with the city. It has been going on for a while with the greater Nanaimo water district, but that commitment of my city to deal fairly with all the citizens in the area about how the great water assets we have in Nanaimo are going to distributed and managed is extremely important.

We do have very important and valuable assets in our water resources. We are extremely fortunate in the mid-Island and Nanaimo to have abundant water supplies. The catchment basin and the Nanaimo River are very well situated to provide for our present and future needs for a long period of time to come — with the appropriate investments in further storage facilities, which the city is already talking about.

I am extremely pleased that this government and this minister have taken the initiative to respond positively to the request of my city and my community to put forward this bill, to transfer authority to modernize and bring into the twenty-first century the management of water — domestic water — in Nanaimo. I am very pleased to be able to stand here and support this bill today.

Mr. Speaker: The Minister of Community, Aboriginal and Women's Services closes debate.

Hon. M. Coell: I would first like to thank the member for Nanaimo for his strong support for this bill and for working with us to bring it forward today. The legislation, as the member suggested, is at the request of the city of Nanaimo. I'd also like to thank the mayor and council of Nanaimo for their support in the development of this bill. It really reflects our ongoing commitment to local government autonomy and authority.

The Nanaimo and South West Water Supply Act converts the greater Nanaimo water district to the city of Nanaimo water supply service. As the member said, early in the 1950s the greater Nanaimo water district served the city of Nanaimo and a number of neighbouring rural communities on a shared service basis. As we all know, in the past 50 years Nanaimo has seen many, many changes. We now have a regional district system throughout the province also, whereby rural and municipal communities may share in providing basic public benefits such as water supply and distribution.

Also, the Nanaimo area has grown significantly over those past few decades. Several rural communities have joined the city of Nanaimo, and the population served by the water system has doubled over the last 30 years — mostly within the city of Nanaimo. Today the membership of the greater Nanaimo water district is just two communities — the much larger city of Nanaimo and a much smaller southwest Extension waterworks district. As such, the city is the largest consumer of the water system and has the majority representation on the board. Today's legislation sees a formal transfer of operation assets and liabilities to the city. Citizens will not notice a change, as the Nanaimo and South West Water Supply Act will not affect the day-to-day operation of the bulk water supply service in the area.

Nanaimo will also establish a water supply advisory committee, including a representative from the southwest Extension waterworks district, the smaller community on the current water board. In discussion with the trustees of the southwest Extension waterworks district, they cited satisfaction with the city's potential role as the bulk water provider. As well, I have spoken to the chair of the regional district and also to the neighbouring first nations. Neither has expressed significant concerns about this change. In fact, the legislation may enhance future water supply arrangements between neighbouring communities and

the city of Nanaimo. The potential for mutually beneficial water provision agreements is also reinforced under the Community Charter, where the city has more comprehensive and flexible powers than the water boards are typically granted.

The Nanaimo and South West Water Supply Act formally converts the greater Nanaimo water district to the city of Nanaimo water supply service. It is a reflection of our commitment to local autonomy and authority. I ask all members to lend their support to this important piece of legislation.

Hon. M. Coell: I move that Bill 31 be placed on the orders of the day for consideration at the next sitting of the House after today.

Bill 31, Nanaimo and South West Water Supply Act, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

Hon. M. de Jong: I call Committee of Supply in this House, and for the information of members, we will be considering the estimates of the Ministry of Advanced Education.

Hon. S. Bond: Hon. Chair, it is with great pleasure that I rise today to present the 2004-05 spending estimates for the Ministry of Advanced Education.

Before we begin, I would very much like to introduce my staff that are with me here today. I also want to acknowledge the incredibly hard work and dedication of the fabulous staff at the Ministry of Advanced Education and also of our post-secondary partners. With me today is my deputy minister, Philip Steenkamp; Assistant Deputy Minister Tom Vincent, responsible for the student and strategic services division; and Arlene Paton, the director of the public institutions branch.

A little over a century ago British Columbia took a small but important step to meet the needs of a modest yet growing population of students who felt their education should extend beyond the threshold of high school graduation. Recognizing the need for professional teacher education, officials opened the Provincial Normal School, the province's first public post-secondary education institution. Prior to its establishment, no form of teacher education existed despite the pressing need for teachers in the growing number of schools.

Within a decade the province's first public university, the University of British Columbia, was established and housed in temporary headquarters near Vancouver General Hospital. Eventually the University of British Columbia would move to its present location in Point Grey, and the provincial normal schools would be integrated into UBC's teacher-training program.

These were important moments in the life of this province, but none was as significant as the moment in 1962 when British Columbians were presented with the Macdonald report on higher learning. That report made two major recommendations: to decentralize post-secondary education by establishing two-year and four-year institutions in various parts of the province and to establish local two-year colleges that would provide a broader, more diverse range of programs than existed at the time.

These recommendations underscored two key principles that would drive the post-secondary education system in British Columbia for decades to come: first, that increased opportunities in post-secondary education are key to a strong and diverse labour market and by extension to a robust economy; and second, that those opportunities should be available to all, no matter what part of the province they live in.

Today approximately 300,000 students are enrolled in four universities, one specialized special purpose university, 11 community colleges, five university colleges and five institutes. These numbers will be changing over the next year and a half, and so in fact will the models, as we have recently introduced a number of new innovations in the post-secondary system. The Macdonald report is a clear example of how vision can produce results.

In 2004 we are blessed with an effective and well-integrated post-secondary education system that delivers a broad range of high-quality programs that respond to a variety of social and economic needs. We also have one of the most effective transfer systems in all of Canada, which means that our students can move easily between colleges, university colleges and university. I think we would all agree that British Columbia has a system that they should be extremely proud of. Clearly, our post-secondary education system represents a solid basis from which to articulate our own vision for the future and to respond to new challenges.

To meet the new challenges, the Ministry of Advanced Education has developed a long-term comprehensive vision for post-secondary education that features a seat expansion at twice the rate of growth of the 18-to-29-year-old age group by 2010. As a result of the Premier's commitment to add 25,000 new student spaces to post-secondary education by 2010, this government is making a significant contribution to the future of the province. Even better, we're ensuring that

all institutions and all regions will benefit. With the development of the University of British Columbia–Okanagan and the new Okanagan College, a total of 5,500 new FTE, or full-time-equivalent, spaces will be created over the next six years.

By 2010 government will invest $100 million in capital funding for the campuses plus $52 million in added operating funds. These new institutions are expected to contribute $500 million a year into the region through growth in students and staff as well as spinoffs from research, creating more than 2,000 new jobs.

In the Thompson-Cariboo region a new special purpose university will combine the strengths of the University College of the Cariboo and British Columbia Open University and Open College. The result is 800 new full-time-equivalent student spaces and a balance of university, college, trades and distance education options that will better serve the region and the province. By the time the 2010 Olympics are underway, the new university will have enrolled the equivalent of approximately 9,000 full-time students. The long-term economic impact for the region is expected to be up to $100 million.

Government will also create 8,000 new full-time-equivalent spaces over the next six years in the South Surrey–Fraser Valley, the fastest-growing region in British Columbia. The brand-new SFU Surrey campus alone will see 2,500 additional student spaces.

In the year ahead my ministry's $1.9 billion budget will support a total of 164,065 student spaces, including 6,149 industry training spaces, an increase of 3,217 seats — or 2 percent — over last year and double the rate of growth of the 18-to-29-year-old age group. To support these seats, government has restored post-secondary institution funding levels to 2003-04 levels and provided an increase of over $15 million to institutional operating grants.

Over the next three years government is investing an additional $105 million to support 11,811 new spaces. The remaining 13,189 spaces of our commitment of 25,000 spaces will roll out from 2007 to 2009 and 2010.

Our commitment to 25,000 new seats by 2010 is one of the most important developments in the post-secondary education system in the past 40 years, but where and how we make this crucial investment in post-secondary education is as important as the numbers. Growing demand for access to post-secondary education programs has been accompanied by a demand for a broader range of programs. Equally important, demographic shifts and changing labour market requirements have led to a shortage of skilled labour in a number of areas — notably in computer science, computer and electrical engineering, medicine and other health sciences. We have certainly made a good first step on that front, and $95 million in capital funding and $150 million in operating funding will add 3,410 new student spaces to double the opportunities for computer science and electrical and computer engineering students by 2006-07. This year alone we will create 1,608 student spaces to meet our new-era commitments to nursing, allied health professionals, medicine, computer science, computer and electrical engineering, social work and on-line learning seats.

We've also made good progress in revamping our industry training model to meet industry needs, helping institutions trim wait-lists and forging closer links between high schools and the working trades. For the coming year, my ministry has committed $77.3 million for industry training and provided the Industry Training Authority clear direction on our goals for the future of industry training in British Columbia.

Last year we introduced new guidelines that will allow students to earn nearly three times as much money without reducing their loan eligibility. As a result, an estimated 12,000 post-secondary students in B.C. will be eligible for $4 million more in B.C. student loans. In this budget we are reallocating funding from the B.C. grant program to help increase the ministry's direct grants to post-secondary institutions. This has already helped public institutions avoid dramatic tuition increases this year and increased the number of seats and access for students. Over the past two years we have been enhancing our debt management package, including the interest relief and debt reduction in repayment programs to assist students who experience difficulty in repayment.

Of course, my ministry continues to support research. The Leading Edge Endowment Fund, established in 2002, has engaged in a process of selecting new leadership chairs and regional innovation chairs at public post-secondary institutions throughout the province. The British Columbia knowledge development fund continues to fund research-intensive infrastructure projects that permit our researchers to excel in attracting federal funding for important projects. These programs are designed to create exciting new social and economic development opportunities for British Columbia, using the expertise and knowledge of B.C.'s world-class researchers.

While we are expanding the post-secondary system by 25,000 spaces and focusing on skills shortages and economic growth opportunities, we do not forget that we must also foster an efficient and effective post-secondary system that is accessible to all British Columbians. We continue to maximize the effectiveness of our post-secondary education system by supporting transfer, articulation and laddering of courses and programs. Institutions work with the British Columbia Council on Admissions and Transfer to create as seamless a system as possible for students.

As I mentioned earlier, British Columbia has long been acknowledged as having the most effective transfer system in all of Canada. More importantly, our reputation is what this does for students themselves. Today an academic student living and studying at North Island College in Courtenay has the ability to transfer seamlessly to Malaspina University College to complete his or her degree or to the University of Victoria or another public degree-granting institution in

British Columbia. The unparalleled level of mobility between institutions is a distinctive feature of British Columbia's post-secondary system and one that we will continue to enhance and to foster.

We are also helping students make the most of their post-secondary education by creating an effective and collaborative on-line learning system through BCcampus. This year we will fund 230 new on-line full-time-equivalents across most public post-secondary institutions, bringing the total funded number under BCcampus to 850. We continue working with institutions and aboriginal groups to increase educational choices for aboriginal youth.

Since 2001 my ministry has funded approximately 85 aboriginal special projects totalling about $4.5 million. Our institutions work with other underrepresented groups — such as people with disabilities, students whose first language is not English and those who have not completed high school — to help them obtain the skills and training they need to succeed in a highly competitive global marketplace.

Increasingly, well-qualified individuals from other jurisdictions are also finding their rightful place within British Columbia's post-secondary education environment. We continue to work with the Ministry of Community, Aboriginal and Women's Services and BCIT's International Credential Evaluation Service to make it possible for more individuals educated outside Canada to receive appropriate domestic recognition for their education.

Literacy programs remain of vital importance to my ministry. By doubling our annual contribution to the federal-provincial adult literacy cost-shared program, we will enable more British Columbians to gain access to more and better programs and resources. These in turn will give them the opportunity to enhance their reading, writing and numeracy skills.

We stand at an important moment in the history of post-secondary education in this province. For the first time in a generation we have an opportunity to support a well articulated, compelling vision for post-secondary education and training, increasing opportunities for all British Columbians seeking post-secondary education and training, targeting our investment to meet critical skills shortages and making connections to facilitate entry into and movement within the post-secondary system. This government is making the strategic investment in post-secondary education to benefit British Columbians throughout the province for decades to come. Thank you, hon. Chair, and I will be happy to entertain questions.

J. Kwan: I, too, would like to share a bit of background in terms of the opposition's analysis of how the government is doing in the area of advanced education. As we know, the throne speech introduced a new comprehensive strategy for advanced education. It also stated that a new major initiative to foster literacy for all British Columbians would begin, and it promised 25,000 new student spaces by 2010.

Now, 25,000 new spaces to B.C.'s colleges, universities and institutes by 2010 are what the government had promised. The Advanced Education budget will increase by $105 million by the year 2007. Therefore, if you do the math, the throne speech announcement is worth approximately a dismal $4,200 per space.

In the 2002-03 budget year the government provided $7,238 per space at colleges and universities across British Columbia. What we see, then, is that you can expect funding to decrease over the coming fiscal year, and this is in accordance with the government's own service plans from last year. The $4,200 allocated to meet the throne speech promise, in my view, is completely inadequate. If the 25,000 spaces were to be funded at current levels, the government would have to promise $181 million in its budget. As a result, the government is stiffing B.C. colleges and universities out of $76 million, and this does not even account for inflation.

In the government's attempt to find good news anywhere, the Liberals, of course, have made an empty promise. Their 25,000-space promise would force some $76 million worth of burden onto the students of British Columbia where tuition fees are already increasing at a skyrocketing rate. The government wants all students with a 75 percent average to get access to university, but by the time 2010 rolls around, tuition will be out of reach for the majority of British Columbia students. The government's promise of access is really, in that context, completely hollow. Students will receive less in 2010 than they receive now. The numbers speak for themselves if you just do the math.

This is the information that we have been able to garner to date to do the analysis on the government's performance in the area of advanced education, based on the throne speech and the budget information and the government's service plan. Let's get some answers from the minister to try and dissect this information a little bit further.

The government has still not posted the institutional budgets for post-secondary education institutions on its website. Usually, by this time, the government would have already done that, but it appears not to be on the website. Why have these letters not been posted, and when can we expect them?

Hon. S. Bond: The member opposite is correct. Those numbers are typically posted on our website. We anticipate being able to put them on the website within the next couple of weeks. We obviously are working our way around the province as we work with institutions to deal with the 25,000 seats — a very aggressive plan. Institutions have received their individual letters. I anticipate being able to post them on the website within probably the next several weeks.

J. Kwan: Was the delay because of complications in trying to work out the figures? If the institutions have received them already, then it should be public information. Why is there still another few weeks' delay? Why not post them now?

Hon. S. Bond: We are in the process of making that information public around the province as we work with institutions. The numbers are in the final process in terms of institutions deciding where those seats are going to be divided. The institutions needed their budget numbers in particular as they began to look at the process they had in terms of faculty and classes and things like that. Again, we are working our way throughout the province. We will be making those public on the website as soon as we're able to do that.

Now, can the minister tell me what would be an accurate estimate of how much it costs to fund a single space at a university?

Hon. S. Bond: Obviously, the seats are different in what they cost the system. The seat for a medical professional is obviously much more expensive than it is for an undergraduate seat. In fact, we look at a balance in terms of the amount that we pay. We tend to pay on an average across the system, because those professional courses are on the much higher end of what it costs to put a seat in an institution.

Hon. S. Bond: It is a complicated matter. It's not as simple as: "This is what it costs for a seat, and the average applies to the entire system." As you add students, and you add them incrementally, obviously some of the infrastructure is in place. For example, if we're adding two students to a class, or ten students, the cost of the seat is lower because we already have faculty and things in place. It's also different in different institutions, so it is very complex. But the average in terms of the number that we work with in 2003-04 would be $8,390.

J. Kwan: That's how much it costs to fund, on average, a single space at a university. Does that also apply to colleges and other institutions?

Hon. S. Bond: We actually use a system average, so that would be across the entire system.

J. Kwan: Across the system the cost is about $8,300 — almost $8,400, actually — or $8,390. Now, according to the budget information, the 25,000 new spaces by 2010, based on a $105 million increase from the Ministry of Advanced Education by 2010…. That averages out to about $4,200 per space. On that basis, if you do the calculation, the institutions across British Columbia are receiving a shortfall of $4,190 per space for them to be funded adequately. So these new spaces that the Premier and the government and the minister like to talk about and say what a great job they're doing…. In reality, for the institutions, the funding is short significantly — short by almost half of what is required to actually fund these spaces.

According to the Confederation of University Faculty Associations of B.C., the 2004 budget requires B.C. universities and colleges to add 11,811 spaces by 2006 but is only providing funding from the government of 26 percent — at the current average funding level — to do so. That equates to telling universities and colleges to create 5,197 new student spaces without any funding at all. So maybe the minister can tell me: how many of the 25,000 new spaces will be fully funded, partially funded or simply not funded at all?

Hon. S. Bond: It is far too simplistic to say that the seats are going to cost…. You simply can't take the number, divide it into the number and say that is what we're paying. Seats cost a different amount of money. In other words, undergraduate seats can be much, much less expensive than even the $4,000 that the member is quoting. Other seats cost more than that. This amount of money that we're giving to institutions is incremental to their base funding. So, in fact, we expect to see economies of scale. We expect to see classes adding students. In fact, when I look at the number, the average dollars that will be sent to institutions in '04-05, '05-06 and '06-07 are virtually the same as we move the seats forward. There is not a drop in terms of FTE dollars that are being sent to institutions. This is incremental funding added to their core. It is a package of dollars, and seat expectations are built out of the dollars that are sent to institutions.

J. Kwan: No, the minister just admitted that on average, taking into consideration graduates and undergraduates and the different curriculum, institutions, universities, colleges…. Taking all those factors into consideration, to fund a single space across institutions on average would cost $8,390. The minister herself just gave that figure, so on that basis, if you use….

Yes, it is simple math, and we're not calculating it to the T in terms of how much each space costs. But if you look at the institutional averages that he minister has just provided…. I know the Confederation of University Faculty Associations of British Columbia uses that kind of information, as well, to arrive at the numbers they have put out. It actually shows that the funding from the government, based on the budget numbers the government has provided and the targets they have tried to say they would achieve by 2010 — and that is the 25,000 new spaces by 2010 — works out to be, on this funding from the government for students, about $4,200 per space.

If you use those general numbers, the $8,390 and $4,200, then each space at the post-secondary institutions is underfunded by $4,190. So the number I have worked out, which the opposition caucus has worked out, is strikingly similar to the information that the Confederation of University Faculty Associations of British Columbia has provided. That is, on the basis of the 2004 budget, universities and colleges in British Columbia, who are being asked to increase spaces by 11,811 by 2006…. Based on the government's funding

formula, they're only getting 56 percent of the current average funding level to do so. That does mean that 5,197 new student spaces will not receive any funding at all.

That's what it works out to be. If the minister would like to dispute these numbers, I would ask her to provide specifically the cost of funding the spaces at the different universities, colleges and institutions across British Columbia in terms of what that cost is — and to work out the math accordingly so British Columbians can have this information and judge for themselves whether or not this Liberal government is doing a good job in addressing post-secondary education issues and in providing the spaces. Or are they actually doing it inadequately and underfunding it significantly, as experts in the field have identified is exactly what is happening?

Hon. S. Bond: Just to reiterate, in 2004-05 we will be sending, once again, average dollars per FTE of over $8,300 — virtually similar to what we're sending this year. In fact, we will continue. What that means is that as the number of students increases, the average amount of money we send to institutions will remain at the same levels, and we will be funding increasing numbers of FTEs at the same average rate that we are currently.

J. Kwan: It doesn't change the fact that the minister's information, based on the throne speech, the budget speech and the number that has been put out there and based on the costs to fund each space…. It costs institutions…. It doesn't change the fact that the government is underfunding these spaces, no matter how the minister wants to dress it up. Unless there are more dollars into the system, it doesn't change the fact — unless the minister would like to say on record that the Confederation of University Faculty Associations of British Columbia's numbers are wrong; unless the minister would like to say: "No, we're not providing only 56 percent of the current average funding level for the universities, colleges and institutes to create 11,811 spaces."

If that information is wrong, I would ask the minister to get up and put it on record, say which piece of that information is wrong. If that information is correct, then what we do know, based on the current funding formula that the government has announced, is that universities and colleges are being asked to create 11,811 spaces with funding for only 56 percent of those seats. That means 5,197 of those spaces will not receive any funding at all. I'll give the minister another chance to dispute these numbers. If the Confederation of University Faculty Associations is wrong on that information, please correct it on the record.

Hon. S. Bond: I'm simply going to reiterate the obvious. Operating grants from 2003-04, 2005-06 will continue to increase. Student FTEs will continue to increase, and the average number of dollars that we will be sending to institutions remains in excess of $8,000 per student.

J. Kwan: Based on the 2002-03 budget numbers, the government is providing $7,238 per space at the colleges and universities across British Columbia. Then funding is expected to decrease over the coming fiscal year, according to the government's own service plans. If you look at the government's own service plans, you can actually calculate what those numbers are and how much they're funding. As I said, the Confederation of University Faculty Associations of British Columbia have received this information. On that basis, they have made the calculations, and they find there is a significant shortfall. Almost 50 percent of the new spaces would not be funded if you used the $8,390 per-space cost to fund these spaces.

The minister can keep on saying the same thing. It doesn't change the fact that universities, colleges and institutions across British Columbia, with the government's demand on the new spaces foisted on them without the adequate funding in place…. What that means is that there's a shift in the burden of cost onto the universities, and then where that shift goes is to the students. Some $76 million of shift would be onto the institutions. I predict the majority of that will be shifted onto students by way of increased tuition fees.

The minister is not disputing the Confederation of University Faculty Associations of British Columbia's numbers. She would not correct it on record, saying: "No, they're wrong on that." Then one can only assume that those numbers are indeed valid.

Maybe the minister can answer this question. How will those spaces — the 25,000 spaces — be divided amongst universities, university colleges, colleges and institutes across British Columbia?

Hon. S. Bond: We've got it broken down by region, so that is a bit of a challenge, but what we can do is get you those numbers at a later date. The breakdown is approximately 50 percent to universities and 50 percent to institutes, colleges and university colleges. So between the five major universities, approximately 50 percent — so obviously 12,500 — and then the other half would go to institutes, colleges and university colleges.

J. Kwan: Yes, I would appreciate the breakdown on the spaces of how many would go where across British Columbia. If I could receive that from the minister, I would appreciate it.

Now, how many of the 25,000 spaces does the government believe will be created by the private sector?

Hon. S. Bond: I actually can now give the member opposite the breakdown. Thank you for your patience with us. None of the 25,000 seats are anticipated at all in the private sector, and any seat growth there would

be incremental to this. Colleges will receive 21.4 percent of the seats; institutes will receive 3.6 percent; university colleges, 25.4 percent; and for universities — sorry, I was slightly over on this — it was 49.6 percent. Again, none of the 25,000 seats will be reflected in the private sector.

J. Kwan: Does the minister have the information within each of the categories — colleges, college institutes, universities, etc.? How many seats are allocated to what universities and what colleges and institutions?

Hon. S. Bond: We're in the process of actually making those numbers public, so not all of them are in their final details yet. As we work with institutions, as they decide which campuses and which parts of the…. We don't have final details about where every one of the 25,000 seats goes. We have some estimates, but we will be finalizing those around the province very shortly.

J. Kwan: When that information becomes finalized, if the minister can provide that information to the opposition, I would appreciate that. In addition to that, presumably there is also a breakdown by year of how many seats would be achieved. Maybe the minister has that information already in terms of what those targets are and by which year the seats would be created within these various categories of post-secondary institutions.

Hon. S. Bond: I can certainly give you the estimates at this point and would certainly give you the finals when they are made, but I can give you the rough growth over the next number of years. In '04-05 it would be 3,217; 4,200 in '05-06; 4,394 in '06-07; '07-08 would be 4,394 again; 4,394 in '08-09; and 4,400. And we added one, so 4,401 in 2009-10. According to my math, that should be 25,000, but there could be some give-and-take as we look across the years.

J. Kwan: So that's the breakdown for '04-05 to 2010. In the '04-05 year, which is this fiscal year, we're looking at 3,217 seats.

Students right now need a minimum of 81 percent in terms of their grade-point average to get into B.C. universities, compared to 73 percent in 1997, and I'm just using universities as one example. In the 2002 year some 3,302 students who had good enough marks were denied first-year admission because there weren't enough spaces. Given that that is the lay of the land right now, what is the ministry doing right now to increase student spaces — given that some students with 80 percent as their grade-point average are still being turned away from universities?

Hon. S. Bond: We certainly do share the concern about rising GPAs. Actually, it was the Premier who said that if you work hard and get a B, you should get into an institution in the province. So a couple of things.

First of all, students have several routes, and certainly in my community many students choose community college to begin with, transferring into a university at third year. We still have those options. With the 25,000 seats, with the work that we have done, we will be able to accommodate those students with a much lower GPA. And I say much lower; they're still absolutely excellent students.

The challenge is that the system can't take the kind of capacity increase instantly that it would need to accommodate that this year or next year, so it's a phased-in approach. That's why the 25,000 seats over time. We are beginning with the 3,200-plus seats this year. As we've looked at the numbers, we have worked with institutions to ensure that what we will be able to do over time is, in essence, drive down the GPA requirements. In fact, the system simply doesn't have the capacity to do that instantly, so we're starting a phased-in approach that will make that possible over the next number of years.

Hon. S. Bond: It is a combination of things, and one of them certainly is physical capacity. Institutions are running at…. They're filling classes, there has been huge demand, and our institutions have been very innovative, so it is a number of things. It is capacity; it is faculty. As you know, we're seeing faculty retire.

I do need to point out, because it is significant, that the increases we are looking at up to the year 2009-10 are actually double the anticipated growth in the age group of 18-to-29-year-olds. We're not simply saying: "Let's just grow the system to the size that the cohort will grow." In fact, we're doubling those numbers. It is aggressive, it is very complicated, and there are a number of factors as we try to add those seats to the system as quickly as we can.

J. Kwan: There are still remaining issues insofar as, first, students now who are in need of getting into post-secondary education are being denied access because there are not sufficient spaces. People with GPA averages as high as 80 percent are getting denied, and that is a real concern, I think, for the government to consider as an issue.

Second to that, by the time 2010 rolls around, and based on the math I used to calculate the cost and the impacts for students, I am very worried that when students can get into the spaces the government says will be created by 2010, the costs for post-secondary education will be too expensive for many of those students. Because the government, quite frankly, is not funding post-secondary education spaces at the level where it needs to be, institutions and colleges and universities would have to off-load those costs somewhere along

the line — some $76 million worth of shortfall for these spaces, according to our calculations.

That would mean that students would have to take on that burden, so there's an added burden here for students in terms of that. That is one of the key questions that I know, and we'll get into the tuition fee issue later on in the estimates. It would be an issue of affordability, which is a real concern for students and for families across the province.

In the midst of that — and I will get into that debate with the minister as well — is that the government, of course, is cutting the student grants program. The government calls it a shift in priorities. In reality on the ground, for students it's a cut in the program. These are outstanding issues that the government has not yet addressed, and they continue to be major, major concerns for students in the community.

Now, in the throne speech the government stated: "In the days ahead your government will outline a comprehensive new strategy to increase access to advanced education." Could the minister please explain how the government is planning to create this comprehensive strategy? What is this comprehensive strategy?

Hon. S. Bond: We're just trying to decide how, in a minute or two, I can describe what our strategic plan is and what our investment is.

Well, it begins with increasing opportunity. Access is absolutely the linchpin of that. The key portion of that is adding 25,000 seats to the system in every region of the province. We believe that if students have the opportunity to have a post-secondary opportunity closer to where they live, they're likely to stay there. That's incredibly important to us, especially in rural and northern communities. We want to first of all increase opportunity.

Secondly, we are targeting our investment. We are encouraging our system to address key program areas that need immediate attention, things like medical and health care training and especially looking at the skills shortages areas. We're increasing opportunity. We're targeting investment.

The third key component of our strategy, if you would, is continuing to strengthen programs and strategies that meet the needs of all of our students. It's really important that we find ways for groups to connect, particularly underrepresented groups in our system. We have initiatives we're working on that include on-line learning and literacy. I'm particularly concerned about the participation of first nations students in post-secondary education, and we're working on a number of issues there.

Also really important to our vision for a system that's integrated is the ability to transfer, to ladder and to create pathways for students both to enter and to exit the system. We're calling it a strategic investment plan, the beginning of the funding being the $105 million. But remember, there are budget years after that where we intend to add additional dollars. In essence, we think we need to look at strategic investment. The beginning of that is a 25,000-seat doubling of the growth of the 18-to-29-year-old cohort. That's the linchpin of our plan.

J. Kwan: We have established the seats and how they would be funded — actually, how they'd be underfunded. We've established that issue. Now, in terms of the target for key programs, it would be, of course, up to institutions to decide how and in what curriculum they would put their spaces. The institutions will be taking care of that.

On the last issue in this comprehensive strategy that the minister's talking about — the strengthening of the programs through on-line literacy, first nations and transfers — let me just explore this area a little bit. On the strengthening of the programs, the funding that the government has allocated in the area of advanced education…. In these key areas that the minister talked about, how many of the funds within the Ministry of Advanced Education are targeted towards these areas to strengthen these programs?

Hon. S. Bond: I would like to provide a couple of examples — three of them, if I could, because the system is all woven together. This is incremental funding. In the case of literacy, we have an initiative there where we have doubled the funding from $700,000 to $1.4 million, as we look at adult literacy initiatives. The special projects funding for aboriginal special project funding — we are working very closely with the first nations community to work on those projects — has gone from $1.3 million to $1.5 million. Again, this is not an FTE cost.

A really exciting initiative which we think…. The member opposite shares our concern about access. We are working on the BCcampus situation. We've created a $1.5 million development fund, and that's to create on-line courses. Some of the work that's being done is phenomenal there, as institutions are looking at a collaborative approach to creating excellent curriculum to put on line. That's a $1.5 million development fund. Those are examples of what we're doing under the umbrella of what we call making connections.

J. Kwan: Let me just break down some questions in each of these areas. First of all, on the on-line piece, the $1.5 million that the minister talked about is to develop courses, the minister advises. Now, of the 25,000 spaces, how many of those would actually be on-line spaces?

Hon. S. Bond: We're planning to fund 230 of the new FTEs across the six years — 230 every year in terms of on-line learning opportunities. Currently, at the end of this year BCcampus will be up to 850 students.

J. Kwan: That's about 1,380 spaces over six years of the 25,000 spaces that would actually be on line. In

terms of actual physical spaces to be created across the province for institutions, colleges and universities, we're looking at about 22,620 spaces. That's what I've worked out. That's the actual physical spaces we can expect given that 1,380 of those would be on-line spaces.

Right now the minister says there are 850 on-line spaces up and running under the BCcampus. The $1.5 million investment to develop on-line courses — when does the minister expect that those courses would be fully developed, and in what areas are these courses being developed?

Hon. S. Bond: I do want to give the member opposite some more information, because I should have answered it this way. This is the second year we have done the $1.5 million, so in essence we've done $3 million in developmental program creation. It's called the on-line program development fund, and it's for the creation of on-line courses and programs. It was a competitive process, so institutions sent in proposals. There were lots of fantastic proposals.

In the first round a total of 24 proposals were approved through a competitive application process. The approved projects created 59 on-line courses, two virtual labs and many learning objects and learning tools. Some of the proposals address things like basic education. We're delighted about that. There are trades initiatives, health, government and public administration, arts and sciences, science and technology. We anticipate that those programs will be finished and on line by the end of '04-05, and we are currently adding a further $1.5 million. We're doing a second call for proposals this spring, and that may have taken place already. It is the second round. The results of the first round should be up and running by '04-05.

J. Kwan: What kind of support do students who are taking on-line courses get from the institutions?

L. Mayencourt: Mr. Chair and members, it is my pleasure to introduce a person that is visiting our chamber. Her name is Julie Anne Morcroft. She is the godmother of a very dedicated staff person here in the Legislature, Erin Darling. She is joined by Matthew Heinz, her cousin from White Rock. Would the House please make them feel welcome.

Hon. S. Bond: Well, first of all, we have a number of goals. One of the things I wanted to point out, because the member opposite asked me about math around the number of seats that would be on line over the next six years…. I think one of the things that is important to note is that access, as I'm sure the member would agree, is different and the needs are different for different students around the province. I know that where I live, on line is an important component for many people who live in rural and northern British Columbia, so our goals in terms of the support that students receive…. I just want to be really clear that we're working on all of these pieces; many of them are in place now in terms of support. An on-line student now can still take advantage of an institution that's close enough to them. If they're able to, they can use library facilities and actually do some face-to-face as well.

Let me just very quickly give you a sense of what we want to support students with through the initiative of BCcampus. First of all, they would be able to access information on all the distance education courses available through every public post-secondary institution, so a student can go to one site and find out every course that's available to them in the B.C. public system. Actually, British Columbia has been a bit behind in that. Some of the other provinces have a fabulous system, and so we're working collaboratively with them as well.

We want them to have access to student support services tasks on line, including applying for admission, selecting and registering for courses on line, and tracking a personal academic history, as well as an extended 24-hour, seven-day-a-week help desk for on-line students. The ability to transfer courses easily from one institution to another is absolutely critical. If we're going to allow and encourage choice, students have to be able to get credit and transfer that from one institution to another. We want to enhance individual choice by giving learners access to broad ranges of programs, courses, schedules and delivery formats. Also, for some students it may be that they would choose to complete their entire program of study on line and receive their credentials on line. So that's ultimately our goal.

One of the added benefits we'd like to see is access for students to actually talk to each other, to network and to share and provide peer support. Those are the goals of BCcampus. It's a phased-in approach, and our team is working very hard to see all of those supports put in place as quickly as possible.

J. Kwan: In terms of library facilities, access to courses and that kind of information, I would venture to say whether you are an on-line student or not, you are able to access that information. In any event, one could go to a library of a university or college or institution…. Anyone can actually go, and if you are a student within the system, you would be able to borrow the books as long as you are a student. You would have a student card to be able to do that. So that really is not specifically targeted, I would say, towards on-line students. That's just available for all students as long as you can access a facility near you. I just want to set that aside for a moment.

The issue that I really want to get at, though, would be the 24-hour, seven-day-a-week help line desk in terms of what that entails, and then, second, the access in terms of peer support. I'm wondering whether or not the on-line students would be able to access TA assistance, for example, and if so, how they would be able to do that. Do they actually have an opportunity to connect with someone to talk about the courses — the issues that may arise from the course or problem-solving or whatever the case may be? That's the area I would like to explore with the minister, first of all.

Hon. S. Bond: To clarify, the help desk is up and running. It's a 24-hour service, and that is for technical support. There is a difference there, and that's a valid point. There is a difference in the tech support.

Each institution is still the host of a particular course. Let's take an example. The University of British Columbia offers a course, and they would have faculty associated with that on-line course. Students would actually have a faculty person teaching the course, just using the medium of technology to deliver the course around the province. They would have access to their professor, to their faculty person.

One of the groups of people that specialize in this type of teaching is, obviously, Royal Roads University. They use an incredible combination of on-site for a period of time, and the rest of the course is taught by cohort groups all around the world. We think we have some excellent examples, but there is a component that involves either faculty or professor.

J. Kwan: Is there an opportunity for students to get direct one-on-one access to a faculty member or to a tutorial assistant? I presume that in this instance, TAs don't exist or are not necessary with on-line students.

Hon. S. Bond: It depends on the course, and certainly there are those opportunities. I have some personal knowledge in the sense that my daughter took an on-line course in part of her university program. In fact, she loved it. She took regular courses as well, but she took an on-line course. The instructor would meet them on line. She was able to connect with her instructor, and there was also an e-mail connection, so she was actually very well supported in the particular course she took.

It is course-specific, institution-specific and very much up to the faculty person how they make those arrangements. These are high-quality programs. One of the reasons we're doing the development fund is to ensure that level of quality, and institutions are doing a really good job of connecting students to staff as part of the process.

J. Kwan: On the issue around access and peer support, the minister said that work is being developed in that area. Could she expand on this target?

Hon. S. Bond: I was wondering if the member could repeat that for me, please.

J. Kwan: The minister said BCcampus is working on a number of targets, included in which is the notion of peer support, better access for students to connect and network, and so on and so forth. I'm wondering, on this target, if the minister could provide more information with respect to that — on whether or not students now have an opportunity to connect with other students and whether or not that networking opportunity, peer support opportunity, is being expanded on. Where are things at right now?

Hon. S. Bond: In different institutions right now, the ability for students to interact with their peers does exist, but it is not universal. I think the best way to describe BCcampus is as a coordinating agency. It's a small agency which, in essence, is working with the entire system.

What we're trying to do is look at best practice — where does this work really well? — because it works in pockets and in different institutions. What we want to do is take the very best of that and give the entire system some common tools that would be available through BCcampus. In essence, we want to make a system like that universally available.

The other point that's important is that it also has to be technically available, and it's not at the moment. There are some connecting difficulties there. We also believe we can save costs for institutions, students and faculty by bringing it in one place, so it's a work in progress. Some institutions do it very well. Our job as BCcampus is to bring those tools together and provide a universal approach so that peers can actually connect with each other all around the province. That's the goal.

J. Kwan: The 850 spaces that the minister talked about for on-line students — is that 850 students, or is that 850 spaces available for students?

Hon. S. Bond: Actually, the 850 is full-time-equivalents, so in essence, it could be one student taking one course or one student taking a full course load of five. It is an FTE, not a head count.

Hon. S. Bond: In fact, we don't know how many students have actually taken the opportunity to take on-line courses. I do need to point out that the 850 seats are the seats we have funded through BCcampus. As I've suggested, it could be one student taking one course or two students taking three or five.

We know that there is incredible on-line activity going on, because we also have students taking courses through B.C. Open University. So there are literally thousands of students taking on-line opportunities, and the 850 number that I gave you was simply the funded FTEs through BCcampus.

J. Kwan: The 850 on-line spaces that are funded — are they fully utilized right now, the whole 850 spaces?

Hon. S. Bond: According to our interim FTE reports, not only are they utilized, but they're actually oversubscribed.

J. Kwan: Is the minister advising us that there's a wait-list for on-line students to try to get on-line space?

Hon. S. Bond: We're not aware of significant wait-lists. One of the great things about on-line learning…. It's not for everyone, but certainly many students are taking advantage of it often — as my daughter did — to supplement a particular series of courses. We do have the flexibility to add additional students into programs. The other thing institutions can do — because we're focusing right now on BCcampus — is that they can also take general growth numbers and obviously seats, and put some of that growth into on-line capacity as well.

There is a lot of demand. We have a lot of flexibility to meet the needs of students who choose on-line learning as their particular preference in their learning mode. At this point, we're not aware of significant wait-lists, but we'll certainly check with BCcampus to see if there are situations like that.

J. Kwan: There are 850 spaces being funded for on-line learning. Maybe the minister gave me this information already, but I don't seem to have it. No, I don't have it written down on any of my notes. Maybe the minister can provide me with the information. How much is the budget for on-line learning for these 850 seats?

Hon. S. Bond: Similar to how we fund and look at the average, which we reviewed earlier with the member opposite. It's a similar kind of thing — different costs, depending upon program mix and how those courses work.

One of the common misconceptions is that on line means cheaper. What on-line learning does help us avoid are capital costs in particular, because we don't need to look at as much physical space to actually accommodate that. More importantly for me, it gives students choice, which they may not have in other circumstances. So when we look at both the technology costs and staffing costs, the average number at this point — looking at the program mix — is about $6,000.

Hon. S. Bond: Similar to the number that we discussed earlier…. So in the post-secondary education system, the average would be $8,390 in '03-04. The same FTE average cost for on-line seats would be $6,000 per FTE.

The tuition fee which on-line students pay — what is the student tuition for the courses they pay for in comparison to regular courses, so we can compare apples to apples?

Hon. S. Bond: Okay. I just want to make sure we get this clear because, again, the $6,000 average FTE cost we're paying here is very much based on the program mix. Many of these courses are, for example, arts programs. We're certainly not talking about a medical degree on line. We have to be clear that this is a program mix, which brings the cost of these 850 seats down to about $6,000 on average. Additionally, tuition is treated exactly the same way it is in institutions. The dollars are determined. Tuition costs are determined institution by institution, and typically they are not different, whether you take an on-line course or an in-person course.

J. Kwan: Well, that is interesting. I would have expected, though, that on-line courses should cost less for the students because, quite frankly, the support for the students is less. Yes, it is different, but it is also less, and the cost to deliver the course…. Well, maybe I should ask this question: what is the cost, on average, to deliver the course? The government funds it at $6,000 per space. What is the average cost to deliver on-line courses from the institutions?

Hon. S. Bond: I think one of the things that, certainly in the reading we've done and the experience we have, we have found out is that offering on-line programs is, in terms of cost — and I can't give you the average cost of offering a program in particular — relatively the same, because you still have a faculty person. In this case, we have technical support. Simply because the person isn't in the classroom…. We still have significant costs similar to those of a typical program.

Again, I want to go back to the program mix and the $6,000 average. For many of these courses in the 850 FTEs we have funded, the mix would allow us to have that lower funding allotment, but in essence we're finding that on-line instruction is not necessarily any cheaper than it is in terms of a face-to-face. We still have how many students can participate in that program. So there are a number of factors involved in that. In fact, it is not, in essence, a cheap way of providing an educational opportunity. It is, though, an excellent way of providing choice for students.

J. Kwan: I would certainly concur insofar as this, in terms of choice. Particularly for students who are in rural communities, access to a physical structure to receive the education may well be difficult, so on-line correspondence and those kinds of things can make a big difference. That's an important component for consideration, and I would agree with that.

On the question around…. I would be very interested for the minister to try and find out how much it costs on average to deliver an on-line course per stu-

dent. If the funding for the on-line course for institutions is less from the government — which is $6,000 versus $8,390 for a regular course, on average — then there is a question to be asked — if the cost to deliver the course is not significantly different from a regular course, then whether or not that funding is adequate. It raises that question. If to deliver the course is actually less costly than that of a regular course, then the question is the tuition question that comes to mind — whether students should be paying the same amount or not.

I've never taken on-line courses before. Now I'm dating myself. When I went to university, there was no such thing. Having said that, I did take correspondence courses from time to time, and it is less support than being in a physical structure. Let's be clear about that. And I would suspect that it's the same thing for on-line students as well. There are a number of factors that come into play in terms of all of those kinds of dynamics, but it is less support. Having experienced both regular class structures versus correspondence, the delivery is different, and the access for support is also different.

If the minister could commit to provide that information in terms of how much it costs to deliver, on average, an on-line course for institutions, I would appreciate it.

Hon. S. Bond: I'm certainly happy to. We were just discussing that. We can find some examples. It has been one of the things we've looked at in studies — that the cost of delivery is actually not that different.

I do want to go back to the 850 FTEs and the $6,000 average, because I don't want to leave an incorrect impression. If we took the same mix of courses that we funded here and that these 850 FTEs are based on and we did the same thing face to face, the average cost would probably still be the same in the face-to-face delivery. It would be $6,000 probably, because we're not including, in that average, medical school programs — all of those things that are far more costly. The average would be very similar to what it would be in terms of face-to-face because of the program mix, but certainly I'm happy to provide the information to the member opposite in terms of differentials in costing between face-to-face and on-line.

J. Kwan: I will have more questions for the minister in this area and also in other areas.

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

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

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

Hon. K. Falcon: Mr. Chair, in response to some questions raised by the Leader of the Opposition yesterday in estimates, I have some answers for the member regarding specific dates, etc., which I would like to read out for her information. What I'll do is try to go at a pace that the member can sort of keep track of these dates.

September 15, 2003, when round 2 proposals were received…. I spoke a bit of this yesterday, member of the opposition, but I just thought I'd go over this again. October 8 was the specific date that data was inadvertently provided to CN — the discussion we had the other day. As I mentioned yesterday, we had provided aggregate data to all of the bidders. What was inadvertently provided earlier than should have been provided was the greater detail on some of the freight data traffic.

On October 10, two days later — we said 72 hours, but it appears to be a shorter term — CN's general counsel provided an undertaking that CN had destroyed all of the confidential information that was inadvertently provided.

The member opposite raised questions regarding CP's withdrawal from the process. On November 13 a letter from CIBC World Markets went out to all proponents, stating that the province was undertaking detailed discussions with a lead proponent with a view to conclusion of the process. It also indicated that there would be some detailed information, obviously, being provided to that lead proponent now that they were the lead proponent.

Four days later, on November 17, is when CPR withdrew from the process. So subsequent to them being made aware that there was a lead proponent — which, clearly, they recognized wasn't themselves — they announced that they were withdrawing from the process.

Then, with respect to the meetings between…. We had a discussion with respect to Mr. Trumpy and the RCMP. The member was looking for some details on dates. As we discussed yesterday, the first meeting with the RCMP was on March 1, 2003. There were, as I mentioned yesterday, phone calls between Mr. Trumpy and the RCMP. The second meeting was on March 8 with the RCMP.

The final thing that I would point out is that with respect to the Charles River Associates final report…. I did read into the record yesterday comments that were made regarding the fairness of the process. I'll read a paragraph under the conclusions regarding process fairness on page 30 of the final report. I'll read this into the record, because I do think it is relevant and certainly germane to the discussions we had yesterday. I'll just quote directly:

J. MacPhail: Was that report done before or after the Roberts Bank deal collapsed?

Hon. K. Falcon: That was before. As the member well knows, the Roberts Bank spur line is a totally separate transaction.

J. MacPhail: I'd just say that I'm sure Charles River Associates has a useful place somewhere in the world. I think that report added nothing to the confidence that British Columbians have in the B.C. Rail fiasco that's going on.

I have a couple of questions. One hasn't been brought up yet. In my preparation for B.C. Ferries questions, I've been looking for the most recent annual report from B.C. Ferries. The most recent one I can find is '02-03. Does the minister have access to any more current information than that? We're in estimates of '04-05. I'm just wondering: what is the most current either service plan or annual report that I can obtain for B.C. Ferries?

Hon. K. Falcon: I would suggest that for that information, the member would best contact B.C. Ferries.

Hon. K. Falcon: As the member knows, B.C. Ferries is an independent authority which no longer comes under the direct purview of the province, and so they're not required to file service plans in the province. I imagine they will post annual reports, probably on their website.

J. MacPhail: I just thought that maybe, given the fact that this government is giving B.C. Ferries $125 million of tax money, we could have an annual report from B.C. Ferries. We'll be asking a lot of questions about B.C. Ferries as it relates to the B.C. Rail lease. There's a huge corresponding language between what the B.C. Ferries contract is and the B.C. Rail contract.

So, sorry. I think these are important questions, and I'm completely surprised that the most recent information we can get is '02-03.

There were news reports this morning. I wasn't aware of this, but I've been contacted by someone who claims to be in the know about the $900,000 figure the minister gave about the costs to the taxpayer for the failed Roberts Bank–B.C. Rail deal. I was told that actually those costs are closer to, perhaps even exceeding, $1 million. That person is in the know — claims to be in the know.

I assume the minister is going to say that he had the most recent information on the $900,000. Could he actually break down the $900,000 in terms of what those costs were?

Hon. K. Falcon: Well, as I mentioned to the member, right from the beginning I've been very clear that there are going to be costs involved in cancelling a process like this. I indicated at the time that I imagined it was going to be in the hundreds of thousands of dollars. I indicated yesterday that I felt the total cost was going to be approximately $900,000 but we were still in the process of gathering and putting together that information. Again, there's absolutely no attempt at subterfuge at all. In fact, when all those figures are pulled together, we'll release it in full. But I would disagree with the member. I don't believe at all that it will exceed $1 million. I've said it will be approximately $900,000.

J. MacPhail: Oh, I don't know. It's pretty early for the minister to get defensive. I'm just telling him what happened between last night and today.

Hon. K. Falcon: I said to the member yesterday that there are significant costs associated with the investment banking work, the legal work, the accounting work that was undertaken. Much of that information, fortunately, is information that is useful to the province. We'll be able to avail ourselves of it in the future, but that's primarily…. The member, I presume, at some point in her term in government was probably involved in some sort of business transaction and recognizes that there are significant legal, accounting and investment banking fees associated with it.

J. MacPhail: Yes, but I was intrigued by the minister's claim that got reported that this would be useful information for the future. I don't recall any investment banking fees that are a good lesson for the future. I was just trying to get some backup for the member's word about what the nature of these costs was — and what aspect of the cost that he claimed yesterday would be a useful investment for future transactions.

I'll just finish, Mr. Chair. It's way too early to get so anxious. The minister quite clearly said it was $900,000.

J. MacPhail: That was an approximation, but it's an approximation based on the bills that have come in so far. Could the minister tell us what those bills are, how he knows that they're useful for the future — because he must have made that statement on the basis of some knowledge — and what other bills are anticipated?

Hon. K. Falcon: As I said to the member the other day, I'd be happy, once we get all those figures, to release them to the member so that she can understand the breakdown exactly. I don't have that information — the breakdown that is involved in the transaction costs associated with the cancellation of the spur line deal. We will make sure that that is made available to the member.

Hon. K. Falcon: I apologize for the delay, member. As the member may be aware, B.C. Rail operates on a calendar year-end, as opposed to the government, which operates on a March 31 year-end, so the expenses will show up in government's '03-04 year and in B.C. Rail's '04 year.

J. MacPhail: When the public accounts are released for '03-04, the information that the minister has promised me will be included in the public accounts? How detailed will that information be?

Hon. K. Falcon: There won't be detailed breakdowns, because it's B.C. Rail expenses in the public accounts, but I can assure the member that we will be releasing the full details and the breakdown certainly in the coming weeks.

When the minister said yesterday that some of these expenditures would be useful, he sort of indicated that the expenditures would be useful in that they could apply to future work of the government. In other words, it wasn't a complete waste, is what he was kind of indicating. This person said it's news to him/her. Just what kind of expenditures was the minister lauding as being a useful investment for future work amongst the approximately $900,000? Just a couple of examples.

Hon. K. Falcon: That would include legal work to establish the port subsidiary, the work that went into identifying the land and confirming ownership. It would also include the data room, which of course was all the information that was collected that will be useful.

J. MacPhail: Well, I guess that's useful, then, if the government's going to sell the rail line again — and only then. It's very specific to that one deal. It doesn't transfer. That kind of investment, or that expenditure — it's not an investment — of what the government claims is $900,000….

Mr. Chair, I'll do something nice for the minister if these expenditures aren't at $1 million. I'll do something really nice for the minister. That's how confident I am that this number will exceed $900,000.

But anyway, these "expenditures" that the minister says are useful elsewhere are only useful elsewhere, we now find out, if the government proceeds with the sale of the rail link to Roberts Bank. The minister was quite confident yesterday that these expenditures would not be wasted, so what are his plans for selling that rail link?

Hon. K. Falcon: The member keeps referring to the term "sale," and I know she does that for political reasons. She knows it's not a sale. We were looking for an operating partner at the time that we made the decision to terminate the port subdivision process. I've been clear and on the record that that is something I absolutely intend to revisit, because I actually think it's for the good of the province. We'll revisit it at such a time as everything is cleared up and we have all the information associated with why we made the decision to terminate the port subdivision.

J. MacPhail: What's the time line for that? Do we have to wait for the courts to deal with the police raids and charges that may arise from that? What's the time line? Let's be clear. This government is in their last year of their mandate.

Hon. K. Falcon: The short answer is yes, I would wait until all that information is cleared up. I think it's important — good public policy — to ensure that it is.

J. MacPhail: Then I would expect the great justification the minister made yesterday that that $900,000 is a good investment to future activity is just bluster. I predict that the sale of that rail line — and it is a sale…. The sale of that 37-kilometre rail link to Roberts Bank will not occur before the next election. I just predict that with great certainty. So $900,000 has been flushed down the toilet with the very compromised, failed bid of the Roberts Bank spur line.

The minister says that on November 13, CIBC World Markets started discussions with the lead proponent, identified the lead proponent and notified someone that they were in discussions with the lead proponent. Was that made public? I discussed at length with the former Minister of Transportation, under Bill 89, exactly when that decision was made, and at no time was this information made public. I'm just curious. When was this information about the November 13 decision to go with the lead proponent made public?

Hon. K. Falcon: In a process like this it's very common that a lead proponent is identified. Those proponents that are not lead proponents are let know that they're still in the process. The process continues because it may be that the government, through the evaluation committee, is unable to come to terms with the lead proponent that is identified at that point.

As a matter of course, all the proponents that are not lead proponents are made aware of the fact that there is a lead proponent. They were made aware of that fact, and as I indicated, CP four days later made the decision to withdraw from the process.

J. MacPhail: My question was: was that information made public — that by November 13, CIBC World Markets had identified a lead proponent? The answer could be yes, and I just missed it.

Hon. K. Falcon: No, it's definitely not made public. This is a very complex transaction in which some amount…. Actually, it's very important for the integrity of the process to ensure that confidentiality is maintained, and it was.

J. MacPhail: Sorry. I'm not making my question clear. I meant that subsequent to the choosing of CN as the buyer of B.C. Rail, did the government reveal that as of November 13, CN had been identified as the lead proponent by CIBC World Markets — subsequent to the announcement of CN? I just don't recall it. It could be on the public record. I'm sorry. This isn't a complex question.

Hon. K. Falcon: I'm not entirely sure of that answer, member. We think it might be in the Charles River report, but we don't believe anything was made public. We'll check in the report and see if we can identify that for the member.

J. MacPhail: The reason why I'm curious is because there were lots of questions in the House about who had the lead around this successful bidder during question period and during the debate around Bill 89. I think there were questions even into December, because we sat in December on a couple of occasions and questions were raised about B.C. Rail.

The reason why I'm curious is because I would like to know, then…. I spent a lot of time, under Bill 89 debate, debating about how the deal proceeded, when it was concluded and what occurred when, based on the information that had been revealed in the Legislature in November.

Perhaps the minister, now that we have this information that as of November 13 CN was identified as the lead proponent…. What happened between November 13 and the November 25 announcement about negotiations? When the minister says the other proponents are still there for negotiations, what occurred? Who was at the table? Just CN? Or was the government continuing to work with the other proponents? Now is the time we can get all of that information.

Hon. K. Falcon: The intent of that letter was to let the proponents know that the evaluation committee had identified a lead proponent that they were going to engage in further negotiations with. What is critical to understand is that the reason why you first of all notify them, and the reason why you wish to maintain them as part of the process, is that should the negotiations with the lead proponent eventually collapse or not reach a successful conclusion, you want to have the ability to go back to the other proponents.

I think the critical thing for the member to keep in mind is that there was never a deal had prior to the day before the announcement was made. That subsequent deal, the partnership that was ultimately reached with CN, did not conclude until the day before the government announced it.

J. MacPhail: I'm asking the minister to fill in the blanks during that period of time. Between November 13, when CIBC World Markets declared CN the lead proponent, and November 25, who did the government negotiate with? Anybody besides CN?

Hon. K. Falcon: CIBC didn't identify who the lead proponent was. What we did was negotiate with the lead proponent, who we now, of course, know is CN. I mean, they're the lead proponent, so that's who you negotiate with.

J. MacPhail: I expect CP and Omnitrax figured out that the lead proponent was CN. Everyone else was figuring out that it was CN — except the government refused to acknowledge that. We now know that CIBC World Markets actually declared CN as the lead proponent on November 13.

When the minister says that the deal wasn't reached until the day before…. I'm asking the minister: from November 13 until November 24, did the government enter into discussions with anybody except the lead proponent?

Hon. K. Falcon: I'm taking some time because I am trying to understand the nature of the question. The government, through the evaluation committee, identified the lead proponent. They work with that lead proponent to continue the negotiations to see whether they can reach a finalized agreement.

Were there any discussions with the others? Well, certainly not discussions of the nature that would be involved with dealing with a lead proponent. There may have been ancillary questions asked and answered. That's a possibility. I can't certainly preclude that. I do think the critical thing to recognize is that you have a lead proponent. You negotiate and try and successfully reach a transaction with the lead proponent. If you're unsuccessful, then you certainly want to have the option, if you can't reach a deal, to then go to the other proponents and see what you can achieve with them.

J. MacPhail: What's the purpose of keeping that CIBC World Markets decision of November 13 secret? The minister and the government were asked questions directly about that in the Legislature during that period of time, and the government denied all of this. What was the purpose of deliberately keeping that secret?

Hon. K. Falcon: I would make two points to that. One is that we didn't have a deal at that time, and you certainly…. I don't know how that government prefers to negotiate agreements, but when you're negotiating a very large, complex transaction, you obviously have to respect that there are certain confidentiality provisions. You don't negotiate it publicly. It would be hopeless to all the parties involved.

The thing that the member needs to know and that it's very critical to understand is that there was no deal until November 24. It was announced the next day, once a deal was finalized.

J. MacPhail: I'll go back and check the record, but in the questions that were asked, we didn't ask about a final deal. We asked about who had the inside track. The minister and, I think, the Premier, or whoever, deliberately withheld that kind of information, and we now know, as of November 13, that CN had the inside track. It was declared to have the inside track. It was declared to be the lead proponent. It wasn't as if negotiations were compromised by that information. I just asked the minister whether his government was in discussions with any of the other proponents during that period of time, and the answer is no.

It's not like CN was put at a disadvantage or the government was put at a disadvantage for revealing that information when asked, because it was those two parties that were in negotiations. That's it, simply. I'll go back and check the record. I expect that the minister will be embarrassed by some of his government's answers during that period of time that we now know November 13 was the declaration that negotiations would be completed with CN and CN only.

What was the nature of negotiations? Well, I'm actually going to ask very specific questions about the final deal and ask the minister when those matters were concluded. This is out of the transaction agreement, Mr. Chair. I think it's the transaction agreement, but if I'm wrong in assuming it's part of the transaction agreement, I hope the minister will take the opportunity to correct me and say the matter is in the revitalization agreement.

Part of the deal that was announced was…. The minister raves on about this every time he gets a question asked about the B.C. Rail deal and what good news the B.C. Rail deal is for the north. He talks about the Prince George Airport improvements, the Prince Rupert port improvements, the northern development initiative and the first nations trust. Where are those matters included — in the transaction agreement or the revitalization agreement?

Hon. K. Falcon: The commitment made by CN to invest $15 million in the track upgrades at the port of Prince Rupert is, we believe, part of the schedules associated with the agreement. The balance of the very positive news the member correctly referred to — and I appreciate that — including the northern development initiative, the first nations trust, the commitment of $17.2 million to the port of Prince Rupert…. Those are all commitments of the province, commitments that will be realized through the proceeds out of the B.C. Rail–CN partnership.

J. MacPhail: Well, isn't that interesting? Is the minister sure that the track upgrade to the port of Prince Rupert is included in the transaction agreement?

Hon. K. Falcon: Yes. As I said to the member, it's in a schedule to the agreement.

J. MacPhail: Just to be clear, the schedule to the agreement is part of the agreement. I'm not quite sure why the minister is distinguishing.

Hon. K. Falcon: Absolutely. Any schedule to an agreement is part of the agreement.

J. MacPhail: Okay, so we'll be looking for that to see what the commitment is, for sure.

Hon. K. Falcon: That level of detail, member, will be released as part of the entire transaction that will be fully released upon completion of the competition bureau review. Again, we expect that to be happening in the coming weeks, and all of that will be available for the member at that time to review.

J. MacPhail: Oh. My gosh. I waited a long time for the minister to say he's not going to give me any answer on that. I'm not quite sure why. I mean, he brags

about it every day. Now when I just ask him about the details of what he's bragging about, he won't tell me.

The minister just said "in the coming weeks." That's good news. That's new news. That's fresh news about the federal competition bureau. Did he get some information from last night that he now knows he can predict within the coming weeks that the federal competition bureau is going to deal with this, make a ruling, on the B.C. Rail deal?

Hon. K. Falcon: Member, we canvassed that quite extensively the other day. I think you're quite aware of that, and I've told you that's a federal process I've no control over in the coming weeks. I'm always an optimistic person. You know that. My hope is that in the coming weeks we will have a decision, but I have no control over that.

J. MacPhail: Well, the minister better get used to the fact that his words are supposed to mean something, especially when they're on the record — they're actually supposed to mean something — and this is the opportunity for the opposition and the public to find out exactly what the words of this government do mean. I would assume "coming weeks" means less than two months. Once you're into two months, that means the coming months.

Anyway, what we do know is that the government refuses to tell us what CN's legal commitment is to upgrade the track. We do know that the Prince George Airport improvements, the Prince Rupert port improvements, the northern development initiative and first nations trust are not part of the CN–B.C. Rail deal at all. They're government commitments, just the same way the government committed not to sell B.C. Rail, just the same way the government committed not to break contracts of working people. I'm sure people in the north will judge the government by their wonderful claim that it's as a result of the B.C. Rail deal these other various matters are happening.

What is the status of the Prince George Airport improvement? When does construction start?

Hon. K. Falcon: Member, if we could just defer that to a later part of the discussion. It's only because my staff member that is responsible for that ministry information isn't here right now. We had anticipated we'd be spending it sort of on the remaining B.C. Rail stuff, but I can get that information to you once she comes by.

J. MacPhail: Thank you. In fact, I'd be more than happy to do this, and it does confirm that it's not part of the B.C. Rail deal.

All right. None of that is in the transaction agreement. We can't get the information about what CN did commit under the transaction agreement. I can hardly wait for that agreement. By the way, how long is the transaction agreement? How long will it take us to read it all, including the schedules? How many pages is it?

Hon. K. Falcon: I'm not sure of the member's speedreading skills, but I can assure you that this will be a real challenge, because it is a lengthy document. We've estimated 1,500 pages. I haven't actually personally counted them, but it is a substantial document — probably 12 inches in width. I mean, it's a very complex transaction. The member will recognize that it entails a lot of pages.

To briefly mention the member's comments she made regarding the commitments…. The northern development initiative and the first nations trust, the Prince Rupert port, etc., are firm commitments. Once we have notification of the completion of the transaction, we will be moving very swiftly to fulfil all of those commitments for the good folks up in the north, who are very excited about seeing those benefits — which won't be accrued until we have completed investment partnership, I might point out — come to other communities.

J. MacPhail: Yes, and even if the deal does go through, the money won't flow until second quarter, third quarter maybe — maybe. I wouldn't expect the northern ridings, the northern communities, to be that thrilled. Of course, as we found out, the Peace region is getting $15 million in total — $15 million. Just let me compare that to the last year of expenditure by the previous government in the Peace region, where $50 million was spent on road upgrades in the Peace. That's $50 million — five-zero — in one year to open up the oil and gas industry.

Okay. Now let's look at the shipping rate reductions that were negotiated. I think we've clarified that the average 7 percent reduction for shippers' rates will apply to interline agreements. What portion of shipping contracts are interline agreements versus intraline agreements? Of course, intraline agreements are those involving shipping wholly contained within the province of B.C., while interline agreements are those that start in B.C. and end outside of B.C.

Hon. K. Falcon: Two points, if I could. The first is that I think the member needs to be careful to be dismissive about $15 million for the Peace. As that member should know, each of the four regions of the north are getting $15 million each, but she conveniently overlooked the fact that there's a $25 million operating endowment which will provide future revenues for northerners to continue to make a positive influence on their lives and on their futures. There's also $50 million for a general trust to support cross-regional initiatives, so there's every opportunity for folks in the Peace, the northwest, the Cariboo-Chilcotin, Lillooet and, of course, Prince George to work together on cross-regional initiatives, using and utilizing that $50 million.

Something that I think is very important…. The other thing I would point out, too — and I'll take the member at her word that she invested that amount of dollars in the road network…. One thing I'm very pleased about, as the member should know, is that we are investing $37 million over two years to improve the

oil and gas roads in the Peace, something that has contributed to one of the greatest economic expansions and developments we've seen in the history of British Columbia. Something I'm excited about and I know the member will be very excited about is getting into all the very exciting things we're doing on highways in the future, so I'll reserve my comments.

Specific to the member's question about what percentage of the B.C. Rail business is interline, it has to be, by nature, a little bit of a guess, but it would be approximately one-third of the business.

J. MacPhail: The 7 percent rate reduction for shippers applies to interline agreements, and interline agreements are approximately one-third of all of the shipping business of B.C. Rail, so two-thirds of the business of B.C. Rail that's being transferred to CN offers no break to the shippers from CN. If you take the average 7 percent reduction that's part of the agreement…. Let me just make clear. Is the 7 percent rate reduction, in whatever form it is, part of the transaction agreement?

Hon. K. Falcon: The answer is yes. The other answer I think it is important for the member to know is that all shippers benefit just by the very fact that they are having a company, CN, that is going to be making the kind of massive investment that will see some appreciable and very measurable efficiency gains that are going to benefit all shippers — in fact, all the communities — in the north.

J. MacPhail: We know CN is laying off people and closing down operations. We do know that. For this government, that seems to be good news for the north — that operations will close down and CN will be investing less money than B.C. Rail would over the next 90 years. That's what the government claims is good news.

We now know that two-thirds of the shippers' contracts have no rate reduction whatsoever. On one-third of the shippers' contracts, the interline agreements, there will be an average rate reduction of 7 percent. Given the entire amount of revenue that CN will receive and that previously was revenue to B.C. Rail for interline and intraline agreements, what does the total rate reduction average out to over the entire shipping contracts?

Hon. K. Falcon: The estimate we received from the shipper advisers would be that the interline shippers would realize about a $7 million savings.

J. MacPhail: Okay. Could the minister please calculate…? So $7 million of savings over what's the total amount of money paid by shippers to B.C. Rail…. I'm just trying to figure out what the 7 percent rate reduction on interline agreements means in terms of an overall rate reduction for the shippers. So $7 million of whatever the total revenue is from interline and intraline agreements is what?

Hon. K. Falcon: I don't have those figures in front of me, but I think the member needs to know this: the interline shippers will be paying 7 percent less than they were paying with B.C. Rail. That's pretty significant. In fact, B.C. Rail was looking to apply for a 4 percent increase. This is actually substantially good news for interline shippers. The member should know the railway is a fairly complex business. Many of the interline shippers are also intraline shippers. They are both. They are substantially benefiting from the interline shipments, which are critical in getting goods to the southern market.

J. MacPhail: It's curious how the minister has all that information at his fingertips but can't answer my simple question. I'm just trying to figure out what the shippers' net benefit is. That's all. It's not that complex. What's the net benefit to shippers, both interline and intraline? Some of those shippers are the same. They have contracts that are both interline and intraline.

Come on; there must be a figure there. The minister knew right off the bat that it was about a $7 million saving to shippers. That $7 million is a savings on what total cost to shippers, interline and intraline? Come on; come on. That number is there.

Maybe I could help the minister here, just to work back. He says a 7 percent reduction equals $7 million, and the interline shipping is about a third of the business, so a 7 percent reduction equalling $7 million must mean the interline shipping is about $100 million in revenue. Seven percent of $100 million is $7 million, and the interline shipping is about a third of the business, so the other two-thirds must be about $200 million. That's about $300 million in total, and $7 million on $300 million is about what — 3 percent?

Hon. K. Falcon: I appreciate that the member was listening to some of my comments, because I was actually trying to establish a number. The challenge that the member needs to realize is that there are all kinds of revenue sources like switching revenue, like car-hire revenue.

I think the member can fascinate herself and fixate herself once this deal is fully released in playing with the numbers any way she likes. The important thing to recognize is that we made a commitment to a 7 percent reduction for interline shippers on the day of the announcement. That is very exciting news, especially given that B.C. Rail was going to be applying for a 4 percent increase. The member can do the math there in terms of the savings that are fully realized. That is of enormous benefit to the north. When the details are fully released, the member can fill her boots in terms of playing with the numbers any way she wishes.

J. MacPhail: Well, how disrespectful to the public. The minister is making all these claims about a great 7 percent rate reduction, and the first opportunity he has

to explain that and is maybe challenged a bit on it, he gets all huffy. He says that he doesn't have the numbers and that somehow it's wrong for people to ask about these claims of this government — as if this government has never exaggerated claims before.

Where was it made public that B.C. Rail was asking for a rate increase? Sorry. Again, I'm very busy. I missed that.

Hon. K. Falcon: It wasn't made public. It was a discussion taking place between B.C. Rail and shippers.

J. MacPhail: Oh, so great. There is speculation about a rate increase that there is no proof of, and the minister now trots that out as justification about why a claim of a 7 percent average rate reduction on one-third of B.C. Rail's business is a great counterpoint.

In the revenue that flowed to B.C. Rail in the year ending December 31, 2003, how much revenue flowed from interline agreements? That information is public. Can the minister just tell me?

J. MacPhail: Is there some reason why the minister doesn't have the number exactly? Is there not a line in the B.C. Rail revenue statement that shows interline agreement revenue and then intraline agreement revenue?

J. MacPhail: Well, I actually told the minister that when he refused to deny it the first time.

Is the figure actually $300 million? What's the exact figure for freight revenue? I'd be shocked if it came in at $300 million, but if it did, I'm willing to accept that.

J. MacPhail: Whew. That took a while to get to, didn't it? I'm not quite sure why. So there's going to be $7 million savings to the shippers on the $300 million that they pay out annually. That's about 3 percent savings — an overall savings not of 7 percent in rate reductions but of about 3 percent.

Is the 7 percent specifically written into the transaction agreement, or is there a range of savings written into the agreement? The reason why I ask that is because the Premier announced that there will be, on average, 7 percent lower for shippers on their interline freight costs.

Hon. K. Falcon: The commitment that the Premier correctly made is that it was a 7 percent, on average, reduction. Some will be higher and some will be lower.

J. MacPhail: Yes, I'm asking for the details of how the average is determined. That's what I'm asking for. What does average mean as opposed to an overall reduction of 7 percent?

Hon. K. Falcon: The rates are based on what interline shippers' revenues were in 2003, so the reduction in shipper revenues to B.C. Rail will average 7 percent less than what they were in 2003. To do the math, we've talked about how the revenues were approximately $100 million in 2000, in their prior fiscal that we just talked about, so the revenues would now be $93 million to B.C. Rail.

J. MacPhail: There was some speculation in the media — I can't remember where — about whether we were talking about a 7 percent rate reduction in U.S. or Canadian dollars. What is the rate reduction? The minister says approximately from $100 million to $93 million. Is that Canadian dollars?

J. MacPhail: The rate reduction is paid in Canadian dollars. What are the rates charged in? Are they charged in Canadian dollars?

Hon. K. Falcon: Under the rate matrix, yes, they are charged in Canadian dollars.

J. MacPhail: So the exchange rate has no bearing whatsoever on this to either party. Am I correct?

Hon. K. Falcon: Shippers will be paying 7 percent less in Canadian dollars than they did before. With respect to currency fluctuations, currency fluctuations can have a positive or negative effect on businesses depending on what type of business they're in and how they structure their transactions.

J. MacPhail: Given the current circumstances of the rate of exchange today versus the rates that existed in 2003, is there advantage to either party that the rate reduction is calculated in Canadian dollars? The circumstances of the last…. I'm sorry; I just need to clarify one thing. When does the rate reduction kick in?

J. MacPhail: So the day the transaction closes, the rates are reduced. I'm pleased with the great speed with which the business of CN will be able to react. There's a lot resting on the federal competition bureau concluding their review of this. I'm surprised the minister is taking such a laissez-faire approach to it.

The day the transaction agreement is approved by the federal competition bureau…. I guess it will be the next day, then, according to what the minister says, that the rate reductions will occur. Given the current circumstances of the exchange rate, where the dollar is hovering between 73.6 and 75 cents — it hasn't broken 75 in the last couple of weeks — is there any advantage to either party that the calculation of the rate reduction is in Canadian dollars?

Hon. K. Falcon: It totally depends on the circumstances of each individual shipper, because it'll depend on what their costs are in U.S. dollars, what percentage of revenues they derive from U.S. dollars in terms of customer sales, etc. It's totally dependent on the individual shippers.

J. MacPhail: I find that a pretty overly simplistic answer. Was there any discussion at all of ensuring that the use of Canadian-to-Canadian rate reductions remained revenue-neutral between the two parties so that there was not an advantage awarded because of the calculations being made from Canadian to Canadian?

Hon. K. Falcon: I'm spending some time on this because the member's asking questions that have enormous complexities attached to them. It's difficult to articulate and answer without disrespecting the fact that the public, including the member, aren't in the railway business, and this can be very complex.

The critical thing for the member to know is that the B.C. shippers get a 7 percent average reduction in Canadian dollars. The importance of the open gateway discussion that we had yesterday, member, is that those shippers then have the option to determine who they wish to use when it comes to shipping the goods south of the Canadian border — whether it be CN lines or CP or whatever other options are available to them.

J. MacPhail: Okay. I'm going to have more questions related to this, but who are the other rail lines that the shippers would have the ability to use?

J. MacPhail: Are their rates set in a different fashion than CN? I'm not quite sure why the minister brought that up in the context of the foreign exchange rate.

Hon. K. Falcon: Yes, they will likely be setting the rates differently. Part of the open gateway commitment is the public posting of rates that will be available to all the shippers.

J. MacPhail: How do the rates differ now, then? I take it that the minister is saying that CN has a monopoly on the transfer for shipping going outside of the province. That monopoly is going to be broken. Or if it's not a monopoly now, how do the rates differ, and what's the benefit to the shippers, now that they'll have access to rail lines to move their goods beyond CN?

I confess, Mr. Chair, that I'm growing more confused around this, but that could just be my fault.

Hon. K. Falcon: The way things work now is rates are generally negotiated with individual shippers by B.C. Rail. Part of the benefits of this deal is that now rates will be publicly posted. One of the things shippers wanted was access to other railways, because they wanted to make sure they maintained their options in terms of who they would ship with, particularly down into the U.S. market. That they will have the ability to do under the open gateway.

J. MacPhail: The shippers now will negotiate two rates on an interline shipment: one rate with CN, and that will be publicly posted, and then another rate either with CN to go across the border or with one of these other three rail lines — and that will be publicly posted as well.

Hon. K. Falcon: Member, you'll appreciate I'm trying to give you an answer that makes sense to people like you and me, and it's not always easy. I'm trying to distill what I'm hearing and put it into layperson's language.

Essentially, what happens is the shippers know what the CN rates are. They ship their stuff down to Vancouver and then, if they want to, ship with another carrier. If they want to have that option to ship with another carrier; they have that option. They then negotiate a rate with the other carriers that they wish to ship with — the ones I mentioned, the Union railway, the CP and the Burlington Northern.

J. MacPhail: How does the exchange rate affect that? Why did the minister bring that particular piece of information up under the context of the exchange rate and whether anyone gets an advantage from the reduction of CN rates in Canadian dollars to Canadian dollars?

I'm not quite sure why the minister brought that up, saying that there would be an opportunity for shippers to use someone other than CN to ship across the border. I assume we're just talking across the border here to the United States and not to the rest of Canada, because interline agreements go to the rest of Canada as well. I assume we're having this discussion in cross-border rates. I'm just curious: how was that justification for saying, in my probing around, that there was an advantage to either party in having the rate reduction from Canadian dollars to Canadian dollars?

Hon. K. Falcon: What I was trying to get across, perhaps not very well articulated, is that the shippers and their relationship vis-à-vis currency swings totally

depend on what percentage of the revenues and what percentage of their costs are in the U.S. markets and in the Canadian markets. That will depend, on a case-by-case basis, on each of the shippers. That's all I was trying to get across. That is a way I can explain it in a manner in which it can be easily understood, but the bottom line is that it will vary on a case-by-case basis on each shipper.

J. MacPhail: What's the variation in rates now amongst rail lines — the variation of freight rates for interline shipping now, as it stands?

Hon. K. Falcon: It's really destination-specific, so it depends on where they're shipping. The other thing, and one of the beauties of competition, of course, member — and that's why this government believes in competition — is that the shippers are highly competitive with each other, too, so they may offer very special rates to try and swing business over their way at rates that are extremely competitive. It just totally depends on the amount shipped, the destinations and everything else. The railway folks spend their entire lives thinking about that kind of thing and are presumably best able to decide what competitive deals they want to offer different shippers, etc.

J. MacPhail: Yes, but all I'm asking for is a specific. Take same-point destination, same kind of freight rate and just tell me the range of the competition. The minister has just said there are competitive rates. Just give me an example. It's actually not a loaded question. I don't know the answer to this. Take the same destination point, same products — whatever.

Hon. K. Falcon: I hate to disappoint the member, but I actually don't have that kind of information on what other shippers charge for different routes, or even on the same routes, for different shipments. If she wishes to pursue this, I would suggest she talk to some shippers. I'm sure they'd be happy to share with her what the different rates are.

J. MacPhail: Then how can the minister make the claim that this is a more competitive process? I'm just trying to follow up for the details behind the minister's claim. The minister says this is all going to work well because there's greater competition. I'm just asking for an example of the competition, and the minister says he doesn't know.

My gosh! I mean, what exactly did get negotiated here? It's up to me now to prove the minister's claim that there's greater competition with this new system? I guess he just thinks that people are going to take him at his word. Well, I expect they're not.

Hon. K. Falcon: I've already answered that question of the member on interline shipper rates. There will be an average reduction of 7 percent. Some will go up, and some will go down. It depends.

Hon. K. Falcon: All existing contracts will be maintained through the transaction.

J. MacPhail: Is there any protection against a rate rise for intraline shippers in the transaction agreement?

Hon. K. Falcon: As I said to the member, their existing contracts would roll over under the new transaction partnership arrangement. When those agreements expire, they would negotiate the agreements with the rail operator, just as they do now with B.C. Rail.

J. MacPhail: There is absolutely no protection under the transaction agreement for rate increases for fully two-thirds of the freight costs for shippers.

What's the range of length of contracts that will be rolled over from B.C. Rail to CN for intraline shipping?

Hon. K. Falcon: We don't have that information, but we'll try and get that for the member. One thing I do want to point out in the member's previous statement is that there wasn't any rate protection before either, so there's no difference between what there was and what there will be under the partnership arrangement. It's very important to get that on the record.

J. MacPhail: Desperate, I'd say. Desperate. It's this government that's making the big claims about what advantage this sell-off is to shippers. No one else made the claims. In fact, other people thought that B.C. Rail was a pretty good operation. It's this minister who says what a disaster that previous rail operation was and what a good deal this is for shippers. It turns out that maybe the claims made by the minister ain't the big, grandiose claims on behalf of the shippers that the original announcement touted.

Can't anyone tell me what…? Tell me what the average…. How does a contract get established for intraline shipping and B.C. Rail? What's the average length of a contract? Is it 12 months? Is it 12 years? Is it by volume?

Hon. K. Falcon: Frankly, Chair, I don't really know what this has to do with the estimates. If the member is fascinated with the rail business, I suggest she pull a book out of the library and start reading up on it. I would encourage the member to actually discuss the estimates here so we can make some progress.

J. MacPhail: What's the average length of contract for intraline agreements? Just answer the question, through the Chair.

Through you, Mr. Chair, is there some reason why he feels this is an inappropriate question?

Hon. K. Falcon: No, but I've already told the member that I would attempt to get her that information,

J. MacPhail: Those are the specifics. I'm asking how a contract gets negotiated. I want to know what the great….

J. MacPhail: The minister says: "Join the railway business." You know, isn't it interesting that the first time this minister actually has to stop his cheekiness and answer some specific questions, he doesn't want to? He's afraid to answer them. He's not got his big, big, big Liberal caucus clapping their hands when he's making silly statements. He actually has to give some specifics, and he doesn't like it.

Well, his government didn't bother to tell people that the rate reduction they were touting really worked out to about 3 percent, maybe a little bit more than 3 percent, for the shippers generally who shipped both intraline and interline. We're just trying to find out the specifics of this.

Here's why this is important. For shippers who ship both intraline and interline, one-third of their business is interline shipping, and they're getting a 7 percent rate reduction on that. I'm trying to figure out what protection, if any, they have on their costs for intraline shipping. It turns out none except for contract rollover. The minister won't tell me how those contracts are negotiated — pretty salient points to the claims the government has made around the great B.C. Rail deal.

Again, can the minister turn to his experts and tell us how intraline agreements are generally negotiated? Are they on volume, on product, on time?

Hon. K. Falcon: Well, as the member should know, in a competitive marketplace, shippers have alternatives. One of the alternatives, if the rail rates get out of line, is that they can ship by truck. In fact, one of the challenges that B.C. Rail was facing was that, increasingly, shippers were shipping by truck. That's why an efficient railway is actually quite critical.

The member should know that in any negotiations, depending on the kind of business you happen to be in…. If you're in rail, presumably, you're going to be making decisions based on volumes, based on shipping frequency, etc. It's a pretty standard business practice. I'm sure the member would recognize that — maybe not — but it just depends on which industry sector you belong to.

J. MacPhail: Well, isn't that interesting — that shippers can move to intermodal. Who has the largest intermodal business in British Columbia? CN. Isn't that interesting? So we're now going to have a virtual monopoly on rail shipping with CN. The minister says: "Oh, don't worry. They can go intermodal trucking." CN has the largest intermodal business in British Columbia. In fact, when you combine intermodal shipping with rail shipping, CN has a virtual monopoly.

Let's just take a couple of examples then. The minister refuses to give any sort of general information about how these intraline agreements are reached, when they're going to expire, when the rates can go up. So let's just talk about two kinds of product shippers — sulphur and grain shippers. They're largely intraline shippers. How are their contracts affected by when their contracts will expire, and how are their rates affected by this agreement — current and future?

Hon. K. Falcon: First, to the member's point about the CN monopoly. The member should know that's not the case in intermodal. In fact, Burlington Northern and CP both have very aggressive intermodal operations. There are certainly options out there available for shippers.

Hon. K. Falcon: They have reload facilities up and down. I'd be happy to get her the specific locations.

The other thing that I would mention is that the member appears to have some concerns about the interests of shippers. I applaud her for that. Certainly, that was an overriding factor in our government's mind when we negotiated this partnership arrangement.

One of the things that should give the member comfort is that the areas of which she is now canvassing are exactly what the competition bureau looks at. These are exactly the kinds of questions that are very rigorously put forward by the federal competition bureau. That is exactly the kind of information they're looking at. One thing I can assuage the member of is that on the conclusion of this review by the competition bureau, she will be very pleased to know that these issues have been thoroughly flushed out and that all of that information will be available. If the federal competition bureau identifies issues that they wish to have reflected in the agreement or changes made, then that is the right and the purpose of the competition bureau.

J. MacPhail: The knowledge that this minister has of the federal competition review of this process fluctuates hourly. Some moments he knows nothing, and other moments he knows exactly what they're doing and how we should have confidence in them. He has the greatest fluctuation.

BN's — Burlington Northern — and CP's intermodal operations are what portion of trucking service along B.C. Rail's rail shipping line?

Hon. K. Falcon: We don't have that information with us. The B.C. Rail representative who is here will attempt to contact his marketing staff and try to determine that information.

J. MacPhail: Then let's just stop. We won't even talk about the B.C. Rail line because, of course, I'm sure the

answer that will come is: "Oops — sorry. CN intermodal service has that locked up."

What portion is BN and CP intermodal business of the overall trucking business in British Columbia?

J. MacPhail: Yeah. The government tries to make these great claims that there is going to be all sorts of competition, when indeed the shippers who previously relied on B.C. Rail and who now must rely solely on CN will be subject to a virtual monopoly by CN through their large intermodal service and their now complete monopoly on rail shipping.

Mr. Chair, I've got a lot more questions in this area. I'll ask one more in this area, and then I think we'll rise and report progress.

What's the length of term of the 7 percent rate reduction on interline shipping costs?

Hon. K. Falcon: First of all, as the member knows, on day one, assuming that the approvals provided by the competition bureau and then the seven or ten days that are involved in final signing off and everything…. There would be the day-one reduction in tariff rates to interline shippers, averaging 7 percent, as I mentioned. Any future rate changes for interline shippers would be based on changes to what's known as the railway cost adjustment factor, which is an index that measures rail cost inflation.

J. MacPhail: Sorry. The 7 percent rate reduction is a one-time rate reduction based on the first day of the transaction agreement being implemented, and thereafter all rates are up for negotiations? Perhaps the minister could answer now: what's the average length of term of an interline agreement?

Hon. K. Falcon: No, just to correct the member, any increases would be tied to an index called the railway cost adjustment factor, which measures rail cost inflation. That's a very significant thing for the member to understand.

J. MacPhail: Well, I'm sure it is significant. I have no idea what kind of rate increase that would give. What I'm trying to figure out is how long this 7 percent rate reduction that the minister is touting like crazy lasts. The contracts are rolled over and reduced by an average…. The interline contracts, shipping contracts, are rolled over the day the transaction agreement is signed, and the day the transaction agreement comes into force and effect, rates are reduced by an average of 7 percent. Then, the minute those contracts expire, renegotiations can occur for rate increases based on this formula. Is that correct?

Hon. K. Falcon: As I mentioned — we've mentioned many times, of course; the member knows this — there's an average 7 percent reduction for interline shippers. The member was asking me to make a prediction on what happens in the future. That's a challenge, obviously, because who knows what happens in the future. The reason why it is so significant is that any future increases will be done through the railway cost adjustment factor index. That index measures rail cost inflation.

While it's difficult to project into the future — because I'm not a futurist, and that would obviously be engaging in speculation — what I can tell the member is that over the past ten years, had we applied that railway cost adjustment factor index, it would have meant a 2 percent increase over that ten-year period of time.

J. MacPhail: Noting the hour, Mr. Chair, I move that the committee rise, report progress and ask leave to sit again.

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