Hansard — Tuesday, April 1, 2008 a.m.

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

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY


CONTENTS

	Routine Proceedings
		Page


Introduction and First Reading of Bills		10693
	Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act (Bill 16)
	Hon. R. Neufeld

Point of Privilege		10693
	C. Wyse

Committee of the Whole House		10693
	Budget Measures Implementation Act, 2008 (Bill 2) (continued)
	J. Horgan
	Hon. C. Taylor
	B. Ralston
	Hon. B. Penner

Proceedings in the Douglas Fir Room

Committee of Supply		10706
	Estimates: Ministry of Transportation (continued)
	M. Karagianis
	Hon. K. Falcon
	S. Fraser
	C. Trevena
	C. Wyse

Hon. R. Neufeld presented a message from His Honour the Lieutenant-Governor: a bill intituled Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act.

Hon. R. Neufeld: I move the Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act be introduced and read for a first time now.

Hon. R. Neufeld: Mr. Speaker, I am pleased to present the Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act. The province is committed to taking action on climate change by reducing greenhouse gas emissions. We have made a commitment to reduce the carbon emissions intensity of transportation fuels by at least 10 percent by the year 2020. We have made a commitment to have renewable fuels blended in our diesel fuels and our gasoline to a 5 percent average by 2010, and we have made a commitment to adopt a low-carbon fuels requirement similar to the state of California.

This legislation delivers on those commitments by establishing a new regulatory framework that will reduce greenhouse gas emissions from transportation fuels in our province. The proposed legislation will reduce greenhouse gas emissions from transportation fuels in two ways.

First, the renewable fuel requirement stipulates that fuel suppliers must supply a prescribed percentage of renewable fuels. The required amount will be set in regulation and will fulfil the B.C. energy plan commitment.

Second, the low-carbon fuel requirement will empower the province to set regulations for specific carbon intensity targets that will reduce the amount of carbon emitted per unit of energy in transportation fuels.

This legislation will support British Columbia's commitments to climate action, reduce the environmental impact of transportation fuels and contribute to a sustainable low-carbon economy.

Hon. Speaker, I move that the bill be placed on the orders of the day for second reading at the next sitting of the House after today.

Bill 16, Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act, introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

C. Wyse: I rise to speak to my point of privilege raised in this House on Thursday, March 13, 2008. I reserved my right at the first opportunity to do so.

The following outlines the factual basis for my points of privilege — that the House should find that the Minister of Small Business and Revenue misled the House and that he be directed by the House to apologize and correct the record.

During Committee of Supply for the Ministry of Small Business and Revenue on Tuesday, March 11, 2008, I informed the minister that staffing numbers in the B.C. Assessment Williams Lake office had gone from nine to five FTEs. The response: "There are no staff reductions at the Williams Lake B.C. Assessment office."

In addition, I questioned the minister on service provided by the Williams Lake office: is the farm category being transferred to the Kamloops office, effective March 15? The response: "I have been advised that farm specialization has been handled out of Kamloops for some two years now."

On March 13, 2008, I was sent a document from my constituency office in Williams Lake that supported my contention and contradicted the minister's answers in estimates. I am submitting this document, along with the Hansard record, with my motion.

Therefore, I have raised my matters of privilege reserved at the earliest possible opportunity in that the Minister of Small Business knowingly misled the House on March 11, 2008, by denying staff reductions at the Williams Lake B.C. Assessment office and by advising that farm specialization has been handled out of Kamloops for some two years. I am also submitting the required accompanying motion.

Hon. R. Thorpe: I call in this chamber committee stage debate of Bill 2, Budget Measures Implementation Act, 2008; and in Committee A, Committee of Supply, for the information of members, continued estimates debate on the Ministry of Transportation.

The House in Committee of the Whole (Section B) on Bill 2; S. Hammell in the chair.

J. Horgan: It's a pleasure to participate in the debate on Bill 2, particularly with respect to section 33.

As I read the section, section 33 is repealing section 25 of the Hydro and Power Authority Act. I'm wondering if the minister could give a rationale for repealing that section.

Hon. C. Taylor: The reason is that since 1964, there have been 13 times that the debt cap was changed. Because we are now moving into a situation where we are confident that B.C. Hydro will be doing major rebuilds and builds, we felt that the proper way to approach it was just by removing the debt cap.

J. Horgan: Will this not have an impact on the cost of borrowing for the Crown corporation?

J. Horgan: With respect to deemed equity, as I understand it, a special direction to Hydro in January — No. 28, I believe — increased the deemed equity from 20 percent to 30 percent. Is there any correlation between that special direction and the amendments in this bill?

J. Horgan: So is the minister saying that there will be no increased cost of borrowing to B.C. Hydro as a result of this amendment?

Hon. C. Taylor: Only in that they will be borrowing more, which is our assumption, because of the rebuilds that will go on. In terms of the cost of borrowing, we borrow on their behalf.

J. Horgan: So there will be no increase in the cost of borrowing that larger quantum to meet the requirements of maintenance operations as a result of this amendment.

Hon. C. Taylor: There's no change in price because of this, but there will be, we are assuming, a change in quantity.

J. Horgan: Does the minister believe that this increase in the amount to meet the requirements will have a negative impact on Hydro's projects and potentially put it at a disadvantage to private projects?

J. Horgan: Does this amendment have any impact on the dividend and return to the treasury from the Crown?

Hon. C. Taylor: The removal of the debt cap will not affect the dividend that's payable to the government.

J. Horgan: So B.C. Hydro will be borrowing more to meet its requirements, whether it be on maintenance or any potential new projects that are approved by cabinet. As I understand the energy plan, Hydro can only proceed with new generation projects if it has approval from cabinet.

The cost of borrowing has not increased. The amount of borrowing has increased to meet a larger quantum as time goes by. Inflation is factored in. But as I read the budget documents, the expectation over the three-year plan is that the dividend from Hydro to the Crown would be constant or increase.

I'm wondering: if B.C. Hydro is taking on more debt and it's meeting its requirements to the growing demand for electricity, how is it that we're going to be borrowing more money, expending more money, to pay back that debt and still meet the obligation to the Crown?

Hon. C. Taylor: As is the pattern, B.C. Hydro will present their business plan, including whatever their borrowing is, to BCUC when they discuss what rates will be charged. Those decisions, the business case, have to have BCUC approval.

J. Horgan: But BCUC doesn't set the dividend. Treasury Board does. Or Treasury Board requests from Hydro their financials to demonstrate that they can provide a dividend to the Crown.

Does this amendment have any impact on that calculation, and will the steady dividend over the next three years have an impact on ratepayers?

Hon. C. Taylor: The removal of the debt cap is not related to this question, but when B.C. Hydro does present to BCUC, they do present a return on equity — part of their business case as well.

J. Horgan: Well, in my experience with the dividend, it fluctuates based on what the ROE was to the Crown. As I read the budget documents, I saw a constant request for cash from the Crown to Treasury Board for social purposes, and that's all to the good.

But as I read this amendment, you're saying to B.C. Hydro: "Go and incur more debt on behalf of your ratepayers, but be sure that while you're doing that, you're meeting our needs, which is a steady flow of income." In the past that dividend was based on the profitability of the corporation and its debt load.

I'm wondering: if you're now increasing the ability to incur debt and still requesting the same amount of money, how is it that the company is going to be able to keep rates low for taxpayers?

Hon. C. Taylor: As disclosed in the budget documents on page 192, there are rate increases that are assumed in the numbers that the member opposite has been citing.

J. Horgan: My concern is that these rate increases are designed to maintain the dividend rather than to provide electricity at the lowest cost possible to ratepayers. I'm wondering if the minister could explain why we've forecasted rate increases over the next three years

We've allowed the corporation to borrow more money, but we're insisting that they continue to pay the same level of rent back to the Crown. That's putting aside increases in water rentals, which I'm sure I'll have to canvass elsewhere. In this instance, I see an opportunity for the Crown to keep taking money from B.C. Hydro without them being able to run their business in the best interests of ratepayers rather than running their business in the interests of the Treasury Board.

Hon. C. Taylor: The dividend is not in this document — what we anticipate that B.C. Hydro will be paying. Perhaps the member opposite is referring to the net income line.

Hon. C. Taylor: The net income, while it's obviously related to what dividend can be paid, is not directly the number that would be paid to government.

J. Horgan: Well, maybe I'll just ask for a bit of a lesson from the minister and her staff, capable as they are, on how we then determine what the dividend will be. Maybe I'm missing something.

Hon. C. Taylor: There are many factors that come into play. BCUC makes a decision looking at the business case as presented. What we've tried to do in the budget is show from the numbers in the business case, which B.C. Hydro has presented, what those rate increases would be and what the net income would look like.

But we'd be very happy to pull in the experts from B.C. Hydro for any kind of briefing that perhaps we all can partake in to see what that exact formula is and how you move from the net income to the amount for the dividend.

J. Horgan: Well, I remember from my time hanging out with B.C. Hydro that low-water years meant less money to the Crown, and it meant less return on equity as well.

As we look at increased borrowing to meet maintenance needs and any other potential expansions that are approved — and we're looking at the budget documents that say we're going to have a flat net revenue over time — do we factor in high-water years and low-water years when we're coming up with that calculation? Does that have an impact on the dividend?

Hon. C. Taylor: The second line in that chart shows reservoir water inflows at about 100 percent, so that's the way we've budgeted it. But the member is absolutely correct that you do have years where it's lower or it's higher, which then would have an effect on those numbers that we're projecting going forward.

Again, the feedback that I've been getting on B.C. Hydro of late and the government's role in assisting that corporation in managing the affairs of electricity users is a concern that rates are increasing beyond the rate of inflation. Special directions to the commission with respect to water rentals are going to have another effect, which is certainly not the subject of our debate here today.

These added costs to the corporation, according to the Utilities Commission — whether it be purchasing costs of new energy supply — are leading to higher rates. Although the minister did say earlier on, on this section, that she felt that higher borrowing would not lead to an increase in rates, I'm wondering if she could just say that one more time before I sit down and let this section go by so that ratepayers will have some comfort that what we're talking about today is not going to mean more money out of their pocket.

Hon. C. Taylor: I didn't say that. I did say that the price for borrowing would not change and that the quantum for borrowing would change. That would be part of the business case that B.C. Hydro will present to BCUC when they determine rates.

J. Horgan: And here I thought I was done. I should have paid more attention to the minister's earlier responses. So the request to remove the cap — did that come from B.C. Hydro, or was that a decision of cabinet?

Hon. C. Taylor: This really came out of Treasury Board because of the pattern that we'd had where you have a borrowing cap, but 13 times since '64 — every time there was a request for new expansion or dollars for the heritage facilities — the cap kept being changed. That's gone on for a lot of years. It was the pattern.

We didn't think that made sense, to keep changing the debt cap, and we also recognize that government has made a strategic decision to not only rebuild a lot of the heritage facilities but also look towards a future where B.C. can be self-sustaining in clean energy. So recognizing that there would be more of a build coming and rather than changing the debt cap year after year, we felt it would be best to remove the debt cap.

J. Horgan: So the debt cap hasn't changed since 1984, but there's an ongoing request — a nagging desire — by B.C. Hydro to spend more money to incur more debt. Rather than prudently manage that insatiable desire by the senior managers at B.C. Hydro to fritter away ratepayers' hard-earned dollars, we're going to

just open the floodgates and let them have it. Is that what the minister is suggesting?

Hon. C. Taylor: What the minister is suggesting is that the government has set a policy where we are going to move toward a future for B.C. where we are self-sustaining in clean energy. That means not only the revitalization of a lot of the current facilities, but it will mean some new builds.

J. Horgan: As I understand the B.C. energy plan — and I've been paying a lot of attention to it over the past little while — B.C. Hydro is not in a position to generate its own new sources of supply. In fact, it is dependent on the private sector to do that.

Certainly, I appreciate that 40-year-old facilities require new turbines now and again, There are opportunities for upgrades at places like Revelstoke and Mica, and that's going to be a capital cost.

But my recollection, again, was that B.C. Hydro was constantly knocking at the door, and were it not for the good work of your staff at Treasury Board and the staff of the previous ministers at Treasury Board, the debt would have gone through the roof. So wouldn't we want to, as prudent managers, keep one eye on the purse so that ratepayers are not adversely affected by B.C. Hydro excesses?

Hon. C. Taylor: Nothing has changed in terms of the process. Treasury Board still reviews the capital plans of Hydro. The capital plans of Hydro are part of the BCUC application that is reviewed thoroughly when they are deciding rates.

J. Horgan: Does Treasury Board participate in those plans? Do they have access to those plans, and do they comment on those plans?

There's a requirement now to refurbish some of our older heritage assets. There's a possibility of Site C proceeding many years out. Rather than completely repealing section 25, why not do what has been done in the past and prudently allow Hydro to raise a little bit more money for the projects they need rather than leaving it open-ended?

Hon. C. Taylor: We are comfortable with the review process by Treasury Board through the capital planning process and also through the BCUC process.

J. Horgan: Again, I'm not sure if that answered my question. If you've got, as you do, a figure in the Hydro and Power Authority Act, section 25, the "Borrowing limitation," why not just amend that figure and ensure that the pencils are sharper at Hydro — I'm not even getting a smile from staff; I thought I might on that one — and have a little bit more control over that borrowing rather than just leave it to chance potentially?

Hon. C. Taylor: Certainly, we could have continued the pattern of the past, which was to keep changing the borrowing cap when you know that you're going to exceed it. We felt that there were good processes in place — the review by Treasury Board, the review by BCUC — to ensure that the capital spending would be properly reviewed and overseen.

J. Horgan: From 1984 to present there has been Treasury Board oversight. There has been BCUC oversight. Why not just continue on as we have done? It's served the province well. It's kept that taxpayer-supported debt, or that ratepayer-supported debt, in balance.

It's provided low-cost power to British Columbians, and it's ensured that there are checks and balances in place not just at the commission, not just at Treasury Board but in legislation. Why not maintain that last level of protection from overspending?

Hon. C. Taylor: We believe, as a government, that we are moving into a time when there will be extra spending by Hydro to meet the priorities of government. The minister who is responsible for B.C. Hydro, I think, would be the first to say that he believes that B.C. Hydro has fallen behind in terms of the revitalization of some of its heritage projects. We really do believe that B.C. Hydro is going to step up the borrowing that it does in order to meet its commitments.

We could go back to the pattern where between '64 and '84, 13 times — every time they needed to borrow money — they just changed the debt cap. We didn't believe that was better oversight. We think the processes that are available through Treasury Board and also through BCUC ensure that B.C. Hydro's capital plan is well reviewed.

J. Horgan: Well, '64 to '84 was the growth period in history for the corporation and for the province. That costs were escalating at that time shouldn't come as a surprise. If we're going to be duplicating that growth at Hydro, then I welcome that if those are going to be publicly owned and publicly controlled assets.

I do want to ask if the Transmission Corporation is affected in any way by this amendment.

Hon. C. Taylor: This specific legislation is about the borrowing debt cap for B.C. Hydro.

J. Horgan: I appreciate that between 1964 and 1984 they wouldn't have come for increases, because they didn't exist. Are we then relying on the Treasury Board

process and the Utilities Commission to manage and keep growth of that debt under control?

Then if there is no cap in place for the Transmission Corporation, which again has aging infrastructure, one issue that causes me some concern — and I'm anxious to hear the minister's response — is with respect to the electrification of Highway 37, which is a project that's primarily of interest to mining interests in the northwest of British Columbia.

It's an initiative that potentially could lead to high-paying jobs for people in the northwest, and I would support that. But the negotiations, the discussion around putting a 276-kilovolt line from Terrace north to Atlin is a commercial arrangement being brokered by the Minister of Energy and the minister of mines that could potentially see the Transmission Corporation incur significant debt to put in place a transmission line that would ultimately just benefit the private sector.

Is that a concern of the minister? Would that be something that would go through the capital branch before it was approved?

B. Ralston: The purpose of this section appears to change a definition to conform with the federal act as a result of the creation of section 8(1). Is that correct?

B. Ralston: Can the minister confirm that this section provides for the indexing of the low-income climate action tax credit?

B. Ralston: I understand that the deduction will be indexed to the consumer price index, and that will be dealt with by way of regulation. Is that correct?

Hon. C. Taylor: This will be automatic. We won't have to do regulations. It will be automatically indexed to inflation.

B. Ralston: This section reduces the dividend tax credit for the 2009 tax year and subsequent tax years. Can the minister explain the rationale for the policy change?

Hon. C. Taylor: The policy behind this is to harmonize so that whether the income comes either as wages or as dividend, they will be comparable.

B. Ralston: I'm sorry. There was some background noise here. I didn't hear part of the minister's answer. I wonder if she could repeat it.

Hon. C. Taylor: The policy idea is to harmonize the taxation policy so that whether the income comes as dividend or in other forms, they are harmonized.

B. Ralston: "Harmonized" is one of those supremely ambiguous words, which sometimes has some loaded political rhetoric associated with it. Does that mean that the intention of this section is to harmonize this tax credit as income with other income so that the rate will be the same? Is that what is intended?

B. Ralston: This section creates the enabling legislation for the low-income climate action tax credit, so-called. In subsection (1)(b) there is a reference to — and I'll read it — "who was resident in British Columbia on the first day of the specified month and the preceding specified month." Can the minister explain that this is related to eligibility to receive the grant? Can the minister explain what the specified month is and what is the intention of this particular section of the legislation?

Hon. C. Taylor: The specified month is the beginning of each quarter, since this will be paid on a quarterly basis.

B. Ralston: That would determine continuing eligibility to receive the grant. Is that correct?

B. Ralston: This section sets out the definition for the climate action dividend. Under section 13.01, the proposed definition of eligible individual means "a person who on January 1, 2008…." So in order to be an eligible individual to receive the grant, you have to have been resident in the province on that date. If you subsequently left, you remain eligible to receive the grant?

Hon. C. Taylor: Yes. The intent is to make sure that we capture any of the children that were born in December, for instance. So as of January 1, they would be eligible.

B. Ralston: So I suppose that Matt Cooke, who was on the Vancouver Canucks and was traded to the Washington Capitals, after January will still be eligible for his $100. I'm sure he'll be happy to hear that.

Under "eligible individual," paragraph (b) describes: "…the parent of the qualified dependant who primarily fulfils the responsibility for the care and upbringing of the qualified dependant…."

"Qualified dependant" means — and it's referred to later in the section…. So the intention is that "qualified dependants" — that is, children, I think, someone who has not achieved the age of 18 years — and their parents…. In other words, everyone in a family will be eligible to receive this payment. Is that correct?

B. Ralston: Under paragraph (d) in the definition of eligible individual — I'm not quite sure why the section is drawn in this way — it says: "…if a qualified dependant resides with the dependant's female parent, the parent who primarily fulfils the responsibility for the care and upbringing of the qualified dependant is presumed to be the female parent…." I'm not quite sure what mischief that section is seeking to avoid, but perhaps the minister could explain just what that means.

Hon. C. Taylor: We are following the federal payment rules, so this is picked up just to match that.

B. Ralston: By the federal payment rules, does the minister mean the federal child tax credit?

B. Ralston: This section reduces the general corporate income tax rate from 12 percent to 11 percent effective at a rate to be set by regulation, as I understand it. Can the minister explain the policy rationale for the reducing of the general corporate tax rate and why this particular reduction — from 12 percent to 11 percent — was chosen rather than 12 percent to 10 percent, for example? Can the minister also confirm when she expects this will come into force?

Hon. C. Taylor: When government, as a policy, decided to bring in a carbon tax, we looked at various models of how that might be accomplished. We decided that the best form, first of all, would be to bring in the carbon tax at a low level but to promise revenue neutrality for all of the dollars that came in. Rather than government keeping on its books the dollars gained from a carbon tax, we are making the commitment to return it to the community in business tax cuts and personal tax cuts. This is the first step in terms of what that model looks like.

We did analyze various options. There is $1.8 billion that we are forecasting will come in over the next three years from the carbon tax to government. We are returning that to the people and businesses of B.C. by cutting personal income tax and by cutting the corporate income tax, which is what this section refers to, from 12 percent over a three-year track to 11 percent initially — we expect it to be at 10 percent — and the small business tax, which I'm sure we will talk about, from 4.5 percent tracking down to 2.5 percent.

This is a policy issue. This is government saying that we do not intend to keep on our books the revenue that comes in from carbon tax, but we want to return to the people and businesses of B.C. the dollars in the form of tax cuts. The first step is the corporate income tax cut from 12 percent to 11 percent. The change is effective July 1, 2008.

B. Ralston: The minister speaks of the application of the carbon tax. Would the minister agree that the reduction of the corporate income tax from 12 percent to 11 percent bears no relationship to what amount of carbon tax any corporation may pay — whether they pay a slight amount or if they're in a more carbon-intensive business, which requires that the impact of the carbon tax will be greater on that business? There's no relationship between the amount of carbon tax they're going to pay and this reduction of general corporate income tax.

Hon. C. Taylor: I'm happy to spend some time talking about the model that we ended up with, because we did consider various options and how the tax cuts would take place. If we look at how we estimate the carbon tax will be collected, we assume that approximately two-thirds of the dollars will be collected from businesses. However, the model we have chosen in returning tax cuts to the community in fact reverses it so that two-thirds of the benefit and tax cuts go to individuals and only one-third to business.

We believe that this is the way we can make sure those who are on low income are adequately protected, because we put in extra dollars for a tax credit for low income. We also know that some businesses do pass on any increase in cost to consumers. For both reasons we believe that the model we have chosen, which over-emphasizes tax cuts for individuals, is a good model.

B. Ralston: The minister speaks broadly of revenue neutrality, but I'm speaking about the impact of the carbon tax on the individual firm. That's the question that the minister did not address in her last response.

Would the minister agree that the impact of the carbon tax is variable, depending on the business in which the firm is in; that the effect of the carbon tax upon the bottom line of an individual company may be very different; and that it bears no relationship to the general reduction in corporate tax from 12 percent to 11 percent that's being proposed in this section?

Hon. C. Taylor: Of course, there is great variability in businesses and in individual lives in terms of how much carbon fuel one does use. Therefore, there is great variation.

Our model in taking the corporate tax rates down in a three-year track to matching the lowest in all of Canada, we believe, will be a great benefit for businesses. We believe that it will be a selling point in trying to encourage businesses to come to British Columbia, to invest in British Columbia, to expand in British Columbia. But for sure, there is great variability with the type of business and the choices that businesses have made in terms of what fuels they will use.

B. Ralston: The minister refers to choices that businesses have made. I suppose if you're in the trucking business and you're running a trucking company, you don't have much choice — in the short term, in any event — about the fuel you have to buy in order to run your business.

Would the minister agree that there is no recognition of the unequal impact of the carbon tax upon business across the province and, in particular, that this general reduction in corporate tax does not address that?

Hon. C. Taylor: I'm happy to have a discussion that doesn't in fact relate specifically to these sections — about the general carbon tax and what we're trying to do and the billion dollars of incentives we're putting into businesses and technology and research around the province to help businesses make adjustments. I'm also happy to talk about the carbon tax and why we're starting it at a very low rate to give time, whether it's to truckers or to various businesses or individual families, to make adjustments. I'm happy to talk about the fact that we will be cutting taxes to a rate for both personal and large and small business that, at a three-year track, will take us down to matching many of the lowest rates in Canada.

You know, it's not a discussion that specifically relates to this section, but if you would like me to do so, I will start to talk about everything we're doing for truckers and other businesses to help them with these changes.

B. Ralston: I appreciate the minister may want to divert the discussion in that way. I'm just asking the minister to agree or not with a specific proposition that the impact of the carbon tax upon a specific business bears no relation to the reduction of the general income tax from 12 percent to 11 percent. It may reduce the amount of tax paid by a business, but the combination of the implementation of the carbon tax and this reduction may in the end result in an increased tax burden on individual companies in the province.

Hon. C. Taylor: As I've already said, there is great variability. We recognize as a government that there are different patterns of doing business, different requirements for using fuel. That applies to families as well. Of course there is great variability, and the income tax cuts and the corporate tax cuts will not match in every single case.

What we have promised as a government is revenue neutrality in terms of the carbon tax, but that does not mean revenue neutrality for each and every business, because there is great variability.

B. Ralston: Can the minister advise: in the Treasury Board modelling, what is the immediate cost of this reduction to the treasury?

Hon. C. Taylor: Page 100 of the budget book lists the actual costs. For this particular measure, in '08-09 the cost is $75 million; for '09-10 it's $128 million.

B. Ralston: The next group of sections deals with the film and television tax credit. This amendment proposes to amend the definition, or adds the following definition of a distant location. Can the minister explain the policy reason for adding this definition?

Hon. C. Taylor: As part of our review of the film tax credits, when we were looking at whether they should be continued, and if so, what model and pattern, our staff did a lot of consultation with the film industry. The regional film commission recommended that this extra region be recognized.

We also believe from a policy point of view of this government that it's important to encourage film production around the province. It's a billion dollar industry for us now. It's been a very good industry, but we want it to be very good for all parts of the province. However, we recognize for film production, whether it's from Los Angeles or wherever, that to encourage them to move their production to Fort St. John has extra costs.

So this distant regional tax credit is designed to specifically encourage many of these productions to move out of the lower mainland and explore the rest of the province.

B. Ralston: Just so that there's some clarity, the "prescribed area of British Columbia that is outside of the designated Vancouver area," I understand that the boundary is a line in suburban Metro Vancouver…. Does the distant location then become all of the rest of British Columbia, or is there an intention to create specific areas? What's the ambit of this proposed section? Are

there going to be a number of distant location designated areas, or is it simply the rest of the province?

Hon. C. Taylor: Again, the specific definition is included in the budget document, but Vancouver is regarded as one region. The nearby region is the next description, and that extends from the designated Vancouver area, north up to and including Whistler, east to include Hope, and includes the capital regional district.

The distant region, therefore, will be the area of the province beyond this nearby region. So we end up with three categories of tax credit. Vancouver would have the lowest tax credit. More is included in the nearby region, which includes Victoria and many of those suburban areas. Then the distant is the richest tax credit, and that is to encourage productions to really consider some parts of the province that they would not normally take productions to.

B. Ralston: As I understand it, and perhaps imperfectly, the regional tax credit for productions filmed outside the designated Vancouver area is 12.5 percent. Is the minister able to advise what the proposed credit is for distant locations?

Hon. C. Taylor: The rate would be 12.5 for the nearby region, 18.5 for the distant and 6 percent goes up to 12.

B. Ralston: One of the features of the film tax credit is its recognition of qualified labour costs. I understand that in some American jurisdictions that credit for qualified labour costs is available only to those production companies who use unionized labour. Was that possibility…?

First of all, could the minister confirm that, as part of the consultation? Secondly, was that considered as a basis for a credit for qualified labour costs in British Columbia?

Hon. C. Taylor: The question of unionized labour is not part of this section or the bill that we're presenting. It's just based on salaries and wages.

B. Ralston: The minister spoke earlier, though, of a consultation with the economic actors in the film industry. That would include producers and presumably some of the unions involved in providing the highly skilled labour that's recognized, I think, globally as an important part of the film industry here in British Columbia.

Can the minister confirm that that issue did come up in discussions, and was it something that the minister considered in these revisions to the tax credit?

Hon. C. Taylor: One of the pluses that came out of the consultations with the ministry staff and people involved in film was an awareness that there is a good relationship between the labour and the employers.

Most of the consultations concentrated on whether or not the film credits would be continued at all, whether they would be extended, whether there would be a change between domestic and foreign credits. The regional film commission, as I mentioned earlier, was very anxious to have an increased credit for distant locations. Those were the main areas of consultation.

B. Ralston: This section changes the definition of a B.C.-based individual. As I understand it, the person is required to be resident in B.C. every year rather than just the year the principal photography began. Can the minister explain the rationale behind that proposed policy change?

Hon. C. Taylor: This is designed to be helpful to the industry. On occasion, you would have a film production that might go over a couple of years. So if the individual wasn't resident in B.C. right from the beginning, they would not be eligible. This way, it's done on an annual basis. The film industry is very pleased to have this change made to the legislation.

B. Ralston: This section, as I understand it, provides an additional credit of 5 percent for qualified B.C. labour expenditure. Can the minister advise, through her officials: how does this compare with the recent changes in the Ontario tax credit, which is a similar legislative scheme to this one?

B. Ralston: This section, as I understand it, adds an additional 7 percent credit for the production services tax credit. Can the minister explain what the production services tax credit is and why this policy change is recommended in this section?

Hon. C. Taylor: This production services tax credit is for foreign productions, and the increase is to match the rates in Ontario.

B. Ralston: I had understood that those credits were available to both domestic and foreign producers, but there is no Canadian content requirement. Can the minister confirm that?

Hon. C. Taylor: It is correct that if you don't meet the requirements for the basic tax credit, then you would fall into this category.

B. Ralston: I just wanted to confirm with the minister that this extends the distant-location amendments to the production services tax credit scheme. It seems to extend the proposed distant-location tax credit to the production services tax credit program as well. Is that correct?

B. Ralston: We discussed this earlier, but I just wanted to confirm that this authorizes the cabinet to designate the distant location and that the intention is as the minister described it. It will not be included in the legislation, but there will be the three areas: the Vancouver area; the suburban area; and the single distant location, which will be the rest of the province.

B. Ralston: These amendments deal with the International Financial Activity Act. There are some definitions that are changed, repealing a definition of "active business" and substituting a "qualifying business." I'm not clear why this is necessary. Is this to conform with federal law, or is there some other reason?

Hon. C. Taylor: This is our attempt to broaden beyond what the federal description would be to encourage other businesses to locate here, and this came out of consultations that ministry had conducted on this issue.

B. Ralston: The proposed amendment would substitute "qualifying business" as defined in the regulations. So the regulations are something that would be passed by cabinet, assuming this legislation passes, as I'm sure it most likely will. Can the minister give a sense of the ambit that's proposed for the regulations that this section refers to?

Hon. C. Taylor: Yes, I would have to say that it's the intention at this point. But through regulation, it's intended that the definition of "qualifying business" would include a substantial B.C. presence test and that the business must incur a minimum of $300,000 in wages and employ at least $10 million in capital in British Columbia. Alternatively, the definition of "qualifying business" will include an active business of a corporation as well.

B. Ralston: As I understand the international financial activity centre, the present act gives the centre the ability or qualifying businesses the ability to apply to have certain employees designated and then be relieved of the obligation of paying any provincial income tax if they're designated personnel.

Is it intended that in order to meet the qualification that's proposed here in the prospective regulations, those employees who would be employed by the business but designated as employees under the act and not required to pay any provincial income tax would still meet the definition for qualifying as part of the international financial activity centre?

I suppose the policy question is that if one of the qualifications is to have employees, presumably there has to be some benefit to the province. If they're not paying income tax, they may be of some benefit to the province but obviously less benefit directly to the treasury. So that would be my concern in this proposed regulation that the minister has offered.

Hon. C. Taylor: The definition of specialist is very narrow. It's my understanding that there are only three in British Columbia at this point, but it's not tied to this particular definition.

B. Ralston: There's a change in the definition of "international financial business." It appears to follow the previous change, the definition from "active business" to "qualifying business," and I just wanted to confirm that. Is that correct?

Hon. C. Taylor: I move the amendment to section 64 standing in my name in the Orders of the Day.

Hon. C. Taylor: Perhaps while the member opposite is looking at the specific amendment, I could at least give an overview or description. This amendment removes a restriction on the types of businesses that can undertake the trading and money market investments, because this has been accomplished already in section 61 of the

bill, which provides a revised definition of "international financial business."

B. Ralston: This changes or adds to the meaning of income to an international financial business. Can the minister explain the policy basis or the policy rationale for this proposed section?

B. Ralston: Just on this section and broadly on the previous sections, can the minister advise what the estimated cost of these revisions will be to the treasury?

B. Ralston: This next set of amendments deals with changes to the Motor Fuel Tax Act. Section 70 proposes some changes and repeals some definitions — "family farm," "family farm truck," "family farm truck emblem" and "farmer" — and substitutes a single definition of "farm," which is "land classified as a farm under the Assessment Act."

The minister will be aware of some recent controversy, I think, in the Saanich area and part of the peninsula here in the lower Island, where land previously assessed as farmland was partially reclassified as residential land and as a result had to pay higher taxes.

I understand that the Minister of Small Business and Revenue is undertaking some review of that definition. Is this definition in concert with the review that the Minister of Small Business and Revenue has proposed to undertake or not?

Hon. C. Taylor: No, this in fact doesn't have anything to do with the review that that minister is taking on. This is because there are some even very small family farms that they incorporate, for whatever reason. Under the previous definition, if you incorporated, then you didn't qualify as a family farm. This just says that whether or not you incorporate, if you're a farm, you're a family farm — so be it.

B. Ralston: As part of the routine consultation that likely took place in this event, were the B.C. Agriculture Council and the typical participants in the agricultural industries of the province consulted on this definition?

B. Ralston: There are some changes in the definition of "locomotive fuel." Can the minister explain what the rationale is for that change in the definition of locomotive fuel?

Hon. C. Taylor: This is to capture those vehicles that can run on rails as well as on the highway, to ensure that they only qualify for the locomotive fuel when they're actually on the tracks. When they're on highway, then, they would revert to paying the full price.

B. Ralston: I'm advised that the clear fuel rate for diesel is 15 cents and the locomotive fuel tax rate is three cents. Is that the difference that the minister is referring to?

B. Ralston: This section proposes to increase the Victoria regional transit service tax on gasoline and diesel from 2.5 cents a litre to 3.5 cents a litre. I have some information from the B.C. Transit annual report that that will increase the regional transit authority's revenue from approximately $3 million to $3.5 million a year. Is that accurate?

B. Ralston: The Victoria regional transit area — can the minister confirm that that's within what are called the capital regional district boundaries?

B. Ralston: Section 78 proposes the first of a series of amendments to the Park Act. This appears to expand the purpose for which the minister may accept gifts and bequests. Can the minister explain — I think the policy rationale is obvious — the expanded ambit of this proposed amendment?

Hon. B. Penner: I'll endeavour to answer this question in response to the member's inquiry. In essence, this section merely allows us to accept bequests for a broader range of protected areas so that it's consistent with the definition of a protected area.

B. Ralston: This section repeals some regulations that give power to set fees, collect fees and prescribe uses and services that fees are charged for.

I'm grateful to the minister responsible for entering the debate. That ordinarily doesn't happen, and it avoids the usual reference to ask the question in estimates. I'm grateful to the minister for being here to answer those questions.

Can the minister explain what the proposed new regulations will accomplish and why the present ones are being repealed?

Hon. B. Penner: In fact, this section is intended to make the process less cumbersome. Rather than having to go to an order-in-council, these decisions can be made by the minister.

B. Ralston: At what point would they then become public as an announcement by the ministry? In the same way, or is there some public input? Sometimes there is public interest, as the minister will be aware, in park fees, whether they're camping fees or fees for firewood. That's something that the minister will be aware has been the subject of some public debate and, indeed, public criticism.

I'm wondering if there's any opportunity for, or expectation that, the public who have views on these sorts of things will be considered when new regulations for park fees are set.

Hon. B. Penner: I would expect that the process wouldn't be materially different than how it's done today, except for the process for bringing it into legal effect. In addition, if I can look ahead briefly to section 82(5), I believe…. It directs that the minister must make a list of fees and fee ranges available annually to the public and whenever a fee changes. So we would be required to make it public, whatever the fee change is.

B. Ralston: This section adds a section to the Park Act, which is entitled "Selling merchandise and advertising space." It's a new section that would allow the minister to create protected area-related products to sell advertising space and to establish fees. Can the minister explain to those who may be concerned about this introduction of selling merchandise and advertising space in parks and conservancy areas, the rationale for the policy, what he expects will be the effect of this amendment, and what would be the revenue impact for the treasury?

There is a reference in subsection (2) to establishing prices for different classes of services, including advertising space. So I suppose the concern would be: why is this being undertaken? Is it being undertaken to gain revenue, or is it simply meant to inform the public and collect an offsetting fee to recover costs of doing that kind of endeavour? Just what is the rationale?

Hon. B. Penner: I think there's an opportunity for B.C. Parks to generate additional revenue to go to providing an enhanced level of services for the public. We've seen this in some other jurisdictions that have pursued this, and they've done so with some success, particularly with the B.C. 150th anniversary but also with the B.C. Parks 100th anniversary that's coming up very soon.

I think that there's an opportunity for B.C. Parks to capitalize on that — for example, selling products that might have a B.C. Parks logo on it and have partners sell them for us. You could maybe speculate about certain well-known suppliers in the Vancouver area, whether it's Taiga, Mountain Equipment Co-op or some similar commercial venture. We could perhaps license the use of the B.C. Parks logo and generate a revenue stream back to B.C. Parks to be used for parks purposes through that endeavour.

In addition — quite proud of this — last year we came out with regional maps and brochures for the B.C. Parks system for the first time in about 15 years. But we have to pay for this all on our own out of B.C. Parks's revenue. If, for example, someone were to be able to underwrite the cost of this and in return put a small logo — their company logo — at the bottom of the brochure on the inside, that would defray costs for taxpayers while still maintaining a level of service for the public in terms of getting information they haven't otherwise been able to get over the last 15 years, except for last year.

I've said all along in the development of this policy that B.C. Parks will continue to hold the editorial pen, as it were. We will not accept corporate logos or advertising that we deem to be unacceptable or lacking in taste. We will maintain that level of control.

B. Ralston: The minister referred to other jurisdictions. In order to get a sense of the minister's thinking on this topic, can he explain or reference the other jurisdictions that he spoke of.

Hon. B. Penner: There are a number of jurisdictions across Canada, I'm told, that have looked to the private sector to help raise additional dollars for their parks services, including Ontario and Alberta. Further, in my meetings with World Wildlife Federation officials or representatives, they inform me that various jurisdictions in Australia have been able to generate additional dollars for their parks system in this way. It's something that I think will prove beneficial in the long run.

B. Ralston: I'm not asking the minister to disclose specific suppliers. He mentioned some hypothetically, but I'm interested….

In bringing this legislation forward, has the ministry developed a business case? Presumably, if legislative amendments are being sought here to enable this activity to take place, there is some sense of a business case in order to justify the amendment. So can the minister advise: was there a business case study conducted? And what is the range of prospective revenue, appreciating that not all the details are available at this point?

Hon. B. Penner: We've done some of that work. For example, in the case of Ontario, I'm told that they're able to generate about $2 million to $3 million annually through partnerships or looking for additional revenues from the private sector in this way. We're not expecting to have that same amount of revenue, certainly not in the near term. But we think that we do have the opportunity, perhaps, to generate over the next couple of years in the hundreds of thousands of dollars in additional revenue for B.C. Parks.

I mentioned just a moment ago — and I know I'm not supposed to hold this up and use it as a prop, so I won't — that the new B.C. Parks map and brochure that we introduced last year for six different regions, again, came out of our direct operating budget. Then, once the money was spent and that print run was complete, those brochures were gone. They were not kept in continuous production.

So one of the things that the Minister of Finance has heard about from me a number of times is that if we could have this kind of legislative change we could perhaps charge a loonie for a B.C. Parks brochure and have that stream of revenue go to keeping this park map or brochure available throughout the busy season in the summer right into the fall.

My own experience last summer in visiting various tourist information kiosks around the province, where I was specifically looking for this on the shelves, was that, without exception, I was told by the staff operating those different tourism information facilities that these brochures were a hit and it was hard to keep them on the shelves. They went through them at a record rate, and then their supply or sources were depleted by the end of August.

This proposed amendment will give us some additional flexibility to keep generating revenue to keep these kinds of very helpful and useful documents in supply. I think it's good for tourism overall. I think it's good for families. If you go through one of the brochures, it highlights, in each one, tips for families in different regions, things that you can do with your children — short hikes, fishing expeditions, those types of things.

I think it has real benefit for the tourism industry and benefit for individuals and their families. But more importantly, I think it's of benefit for B.C. Parks by just getting the message out about the great services and opportunities we offer.

B. Ralston: The reference in subsection (1)(c) is to advertising space, and it says "in those products." I take it from that wording that the advertising space that's envisaged here is advertising space for the specific type of products that the minister spoke of, and it's not generic advertising of other commercial products. One can well imagine the range of products that we are all subject to in our daily lives in various locations and various mediums.

So it's specifically confined to advertising of the products that the minister referred to and that are intended to be sold through B.C. Parks. Is that correct?

In terms of publications or those types of things, we would consider whether or not we want that particular product, whether it's the brochure or the Go Camping guide or if we produce something similar to that ourselves…. We would decide whether we want to link ourselves to a possible partner.

There may well be cases where we decide that's not the most appropriate partner to have linked to or associated with B.C. Parks, so we'll have to develop that as we go forward. But you can probably imagine the types of people who would want to associate with a B.C. Parks product — people who would sell canoes or other outdoor gear, fishing gear, camping gear and the like.

I understood the wording of this section to be that it would be advertising confined to the sale of products, like the maps the minister referred to, but not an opening — and I suppose this would be the public concern — to a broad range of advertising about camping products or different kinds of fuels for campfires. There's a wide range, and one can imagine that there might be some public concern about opening up B.C. Parks to that kind of wide range of advertising. I understood this section to limit the possibility of advertising to only those products that are for sale, like the map that the minister spoke of.

If that's not the narrow definition, and I don't understand correctly, I'd appreciate having that clarified.

Hon. B. Penner: There was considerable debate on this side of the House about what the question was. I'll take a stab at it here.

I believe what the member is asking is: what kind of screen will we apply to the type of advertising that we would accept? We're working on policy in that regard. It's likely to be similar to the screen that's applied to ethical funds and that type of thing, where there's a restriction on certain types of advertising that would not be deemed appropriate or acceptable. It may have its own unique flavour when it comes to B.C. Parks and may go further than that, but that's still under development.

B. Ralston: Well, let me have another stab at this. In subsection (1)(a) there's a reference to maps, information materials, service or promotional or educational products. Subsection (b) says "sell products…to a person for resale…" and "sell or otherwise dispose of advertising space in those products."

I'm assuming that the term "products" refers to the same products that are referred to in (b) and the same

products that are referred to in (a). That would limit the advertising that could be done. For example, you go to a park. You might want to consume some beverages or buy foodstuffs, but we won't be confronted with advertisements from Safeway or Overwaitea advertising hot dogs and beverages for consumption in the parks. I'm assuming that the purpose of this very fairly narrowly written definition is to confine that reference to those products which are referred to in (1)(a).

Hon. B. Penner: Yes. Subsection 29.1(c) refers to subsection 29.1(1)(a), so that would be the limiting factor.

B. Ralston: These series of proposed changes to the Ports Property Tax Act and extend a tax cap on property tax for designated businesses in municipalities with port facilities…. The minister will be aware, and I expect her officials are certainly aware, of the ongoing debate that has been brought forward, I think, most recently by the mayor of Port Moody. It is the view of many affected municipalities that the cap has the effect of unfairly reducing municipal tax revenue from port facilities. I'm wondering what response the minister has to that.

I'm advised that Port Moody — the only city, I believe, that will see an increase in revenue as a result of these changes…. Well, maybe the Port of Prince Rupert. But most of the lower mainland municipalities are of the view that they're being obliged to provide a tax break without compensation.

Hon. C. Taylor: Yes, the ministry did extensive consultations on this. We had promised to do a review because the initial policy went to 2009, and we wanted to have municipalities and port businesses have the opportunity to talk about it — if it was working and what changes should be brought in. So I really do want to commend staff, because they kept coming back with the list of everyone they talked to and did a remarkable job.

I would say that if you ask municipalities whether they want any cap at all, they would say: "No. Ideally, we wouldn't want any cap." If you said to the port businesses: "What do you think about the cap?" They'd say: "We would want the cap there forever." The middle ground where we landed was that we would continue the cap. We would increase the compensation from municipalities and tie it to inflation but limit it to ten years.

So it's a middle ground that listened to a lot of the issues. As a government, I have to say that we do believe in the policy. We believe in helping our ports be competitive. We think it's an important part of our economy.

B. Ralston: I believe it's not in this section but in one of the subsequent sections, but I will address it generally at this point.

From what I understand, the beginning of the consumer price index increases, in the view of the municipalities, doesn't compensate for what has taken place over the last several years. Can the minister explain why this starting point was chosen and not something that would, in the view of the municipalities, more fairly compensate them for the lost revenue that they're experiencing?

Hon. C. Taylor: The date was chosen because that's the end of the current policy and agreement. On a go-forward basis is where the changes get made.

B. Ralston: As I understand it, the discussion did include…. Certainly, the position of the affected municipalities was that they were of the view that there was an opportunity to make that calculation retroactive for the three previous years of the policy — notwithstanding the minister's comments.

I gather, obviously, that the minister has decided not to accept that. Can the minister explain why that is that case?

Hon. C. Taylor: Yes, we heard lots of ideas and proposals. We felt that where we landed with this policy was one that listened to both sides on some of the issues that were involved.

One other thing that I should mention. This came directly from a couple of the mayors who felt that if they could negotiate with the port businesses a better situation and one that both sides agreed to, would we allow them to do it? So we've included that as well.

We have designed the policy that we think protects port competitiveness and compensates municipalities, but we have given them the freedom so that if they can negotiate a deal that both sides believe is a good one for their municipality, we will honour that.

B. Ralston: Noting the hour, I move that the committee rise, report progress and ask leave to sit again.

Committee of the Whole (Section B), having reported progress, was granted leave to sit again.

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

M. Karagianis: Minister, this morning I would like to actually move into a slightly different topic. We've been talking about some of the major projects, most of them outside of the Lower Mainland, so more of the rural projects. I would like to move into some discussions here that would also allow some of my colleagues to ask questions. Many of them are rural related.

I wanted to know the current status on maintenance contracts around the province. It's my expectation and belief that there is a report that would give us current status and update on all contracts currently underway with the ministry across the province — who's carrying out those contracts and what the current status is. Is that available to me?

Hon. K. Falcon: Just before…. I thought I would introduce staff who are joining me here again for the benefit of members opposite and perhaps those in our viewing audience. I'm joined by my assistant deputy minister, Sheila Taylor; Kathie Miller; Mike Proudfoot; chief operating officer, Peter Milburn; assistant deputy minister of partnerships, Frank Blasetti; and my Deputy Minister, John Dyble. I welcome them and thank them, obviously, for being here today.

With respect to the maintenance contracts, all of the areas that have maintenance providers are all currently under contract. We have no major concerns with any of the particular contracts, all of which, as I say, are under contract. I'm not entirely clear what report the member opposite was referring to. Maybe she could clarify that for my benefit.

M. Karagianis: I was expecting that there might be some kind of report out on the maintenance contracts, the current status on any of those, perhaps some kind of registry about complaints and resolution of those complaints from communities across the province.

I know we talked a little bit yesterday about the implications of some of the new public-private partnerships on those maintenance contracts as well. Obviously, some of those will kick in.

The Kicking Horse Canyon. I believe the minister has talked about the fact that that concessionaire is going to be taking over maintenance and all operations of that specific project at some point.

So I'm just looking to get a picture of where the current maintenance contracts are around the province; what the current status of them is; what, if any, complaints have been registered; and the resolutions to those. I would expect that there must be some kind of registry that tells us all of that, and I'd just like to know how to find that information out.

Hon. K. Falcon: In terms of the maintenance contractors, do you want me to sort of give a listing of who they are and their areas? I wasn't quite clear what you would prefer. I've got a listing of all the maintenance contractors and the areas that they're responsible for, their service areas. Like is that helpful?

Hon. K. Falcon: Okay, I'll do that, and then I'll answer your question about the issue of how complaints are dealt with.

So the maintenance contractors for…. And I'll whiz through this. If you want me to pause or slow down or stop, or if I didn't say it clearly, then just go ahead and interject.

South Island is Mainroad South Island Contracting Ltd. Central Island is Emcon Services. North Island is Emcon Services. Howe Sound is Mainroad Howe Sound Contracting. Sunshine Coast is Capilano Highway Services Co. Lower Mainland is Mainroad Contracting. Fraser Valley is Emil Anderson Maintenance Co. South Okanagan is Argo Road Maintenance Inc. Kootenay-Boundary is Emcon Services. Central Kootenay is Yellowhead Road and Bridge Ltd. East Kootenay is Mainroad Contracting.

Selkirk is HMC Services. Okanagan-Shuswap is Argo Road Maintenance. Nicola area is VSA Highway Maintenance Ltd. Thompson is Argo Road Maintenance Inc. South Cariboo is Interior Roads Ltd. Central Cariboo is Interior Roads Ltd. North Cariboo is HMC Services Inc. Fort George is Yellowhead Road and Bridge Ltd. Robson is Lakes District Maintenance Ltd. South Peace is Caribou Road Services Ltd. North Peace is Yellowhead Road and Bridge Ltd. Nechako is Yellowhead Road and Bridge Ltd. Lakes is Lakes District Maintenance Ltd. Bulkley-Nass is Billabong Road and Bridge. Skeena is 141187 Ventures Ltd. North Coast is O'Brien Road and Bridge Maintenance Ltd., and Stikine is Lakes District Maintenance Ltd.

Now, with respect to how complaints are handled, each of the maintenance contractors is required to keep tallies of any complaints they've received and how they've dealt with those complaints. As part of the quality assurance program within the ministry, we audit their reports to make sure they are not only keeping that tally list but how they are responding to them. That will form part of the annual service review that we do on the maintenance contractors.

That annual service review includes other things too, as the member will probably know, including

stakeholder feedback. So we'll talk to the municipalities, police services, school districts, trucking associations, etc., to also get feedback from them in terms of how the respective maintenance contractors are dealing with issues in their area. All of that will form part of the ratings that the maintenance contractors will receive for the services they're providing.

M. Karagianis: With regard to the complaints process and the audit process here, how does that affect bonus payments or performance payments?

Hon. K. Falcon: What happens in terms of the maintenance contractors is that there is an assessment system. There's a summer assessment on how well they did during the summer months, and then there's a winter assessment on how well they did in the winter months. It's based on written performance criteria that they're responsible for adhering to and, of course, on the audit process that we go through.

There are assessments of their performance that are undertaken by our local Ministry of Transportation staff. That's one level. There are also assessments undertaken by our regional staff. That is another level of assessment. Finally, there are the stakeholder assessments. The stakeholders, which I mentioned earlier, being things like local municipalities, trucking associations, school districts, police, etc.

There is a weighting that is allocated to each of those. The local assessment portion, our local MOT staff, who would be working most closely with the maintenance contractors…. Fifty percent of the weighting is predicated on local assessment. The regional assessment represents 30 percent weighting, and 20 percent weighting is provided through the stakeholder assessment process. All of that makes up the rating that ultimately is done annually for each of the maintenance contractors.

M. Karagianis: Does that rating then affect their bonus payments percentagewise? Perhaps if they have failed 50 percent or 25 percent, does that then affect the bonus payment system?

Hon. K. Falcon: The short answer is yes. It absolutely affects the performance payments that they may or may not receive, dependent upon the kind of service that they've provided. It comes out through their annual performance reviews, which are undertaken in both the summer and the winter — the assessments.

They are entitled to earn…. There's a step-up process, so depending on how well they do on each of the levels of assessment…. That will also depend on what level of performance bonus that they could anticipate receiving. The maximum that they're able to receive is 2 percent of the contract value.

That can be a considerable sum of money for these maintenance contractors, so there is a strong inclination for them to meet the performance requirements of the contract. Otherwise, they will be dealing with hefty financial…. Really, what they are is penalties, because if they don't get those performance payments, then that is a significant financial cost and, we believe, a significant disincentive to ensure that they do not provide a level of service below what is, certainly, outlined and what we expect as part of their contract.

M. Karagianis: In the case of these bonuses, does the minister have a reporting-out, basically — say, over the last five years — on who has received bonuses, who has not and who has received only partial bonuses, therefore providing kind of a snapshot of performance of these companies across the province?

M. Karagianis: Is that available to the public or to the critic? How would I get my hands on that kind of report?

Hon. K. Falcon: Typically, when we get requests for information on performance of individual contractors, that's usually what happens. Someone is upset in an area, and they want to know what the situation is. Did they get a bonus? Did they not get a bonus? We provide that information. But I'm happy to provide the information on all of them for the member if the member wishes. It's a fairly detailed list, but we can get that to the critic.

Let me just ask, theoretically at this point: have any of these contracts been cancelled due to poor performance? At what point does the ministry determine that the contractor has not met the obligations? Is it one year, two years, three years?

What's the threshold to say: "You've not met your contractual obligations here, and we're now going to look for a new maintenance contractor"?

Hon. K. Falcon: The answer is that, historically, yes, we have had to cancel maintenance contractors in the ministry. We haven't, according to staff, in the last seven years, but historically that has happened in the past when maintenance contractors have not performed and they continued to have non-performing. They had their contracts pulled. So that's something that very much can happen.

The steps that go into something like that happening…. There are a number of steps that would take place. The first is that if there is a pattern of them not meeting their standards that are set out in the maintenance contract, they would get a warning and non-conformance report from our quality system we have in place. That would basically be letting them know — and this is a written notice — that they are non-conforming in whatever aspect of their maintenance contract they are not meeting the terms.

If there is continuing to be non-performance even after the written notice being provided and it's not

remedied, we will issue a notice to comply to their bonding company. This is a very serious situation for a maintenance contractor. Once their bonding company is notified, of course, being financially responsible for the performance of the maintenance contractor as part of the bond, they are going to take a very vigilant interest in the fact that there's a problem. What will likely happen is that they will move in and try and figure out what's going on and deal with that.

If there's still a problem, we will start making payment deductions for work that is not being done. So if we identify areas, whether it's snow removal or mowing or whatever the case may be, where the work is not being done, we start making deductions for payments. So that will start to financially penalize them on issues where work is not being done.

The fourth step is that we have the ability to issue what's known as single-event default, which means that they've defaulted in a particular area and they're not going to receive any payment. They're issued a notice of single-event default — or it could be total default, where the entire contract is now considered to be in default.

In the event that that happens, the bonding company then has an option of taking over the contract. We would then enter into negotiations. The bonding company has the choice to either pay us out the value of the bond — then we would re-tender the contract and have the work done by someone else — or, through the negotiation process, may decide that they will continue to operate and fund whatever costs are necessary to keep up the service commitments required under the bond.

So those are the steps that take place to ensure that there is accountability and that the performance is being done as outlined by the maintenance contract.

M. Karagianis: In the case now — we discussed this at length yesterday — of the change…. There's going to be a change in status for some of these maintenance contractors when the public-private partnership concessionaires take over. Kicking Horse Canyon and that entire corridor is one; there will obviously be numerous others.

What is the process that you follow of notifying the current maintenance companies that they will no longer be responsible now for the specific areas being taken over by the new concessionaire?

Hon. K. Falcon: All of the maintenance contracts have an article in the contract that allows for the provision of removal of some section of maintenance contract services that they are required to provide. There's an adjustment that is made, obviously, to the payment made to the maintenance contractor to reflect the fact that they'll no longer be responsible for a certain area.

The Sea to Sky was actually one of the largest situations. In that case, there was lots of notice. In fact, it was built into the maintenance contractor's contract — the provision that when it went to a tendering process, part of the tendering process would include maintenance. Most of these contractors are well aware a long time in advance of the fact that this process will take place. There's usually a very long construction period involved in these projects prior to the maintenance being assumed by the new contractor under the concession agreement. So there is sort of a long period of advance notice to the existing maintenance contractors.

M. Karagianis: My last question, before I allow one of my colleagues to get up and ask a few questions about his particular constituency, is with regard to climate change policies.

We're currently undergoing a significant sort of paradigm shift here around climate change initiatives, both within government and from without. What climate change policies or initiatives are being required now of any of the maintenance contractors?

Hon. K. Falcon: The maintenance contractor community has been very proactive working with the ministry on how they can contribute towards dealing with issues of greenhouse gas. There's obviously a very important self-interest there, too, and a good one — that there's a benefit of reducing greenhouse gases in that you also reduce your costs. So there is a real financial incentive for many of the maintenance contractors.

They've struck a committee that is looking at all the different aspects of how they operate their businesses and coming up with best practices in terms of reducing greenhouse gases and saving costs for the maintenance contractors. Some examples that I've touched on in the past would be…. The anti-idling measures is one. Another one is storing their vehicles overnight within their buildings as opposed to leaving them outside. Traditionally, they would leave them outside and then come out in the morning and leave them running as they slowly warmed up. That would often have the cars idling for ten minutes or more.

They are also doing things as straightforward yet effective as, for example, taking their aggregate piles, which they use for their paving and asphalt components, and covering them with tarps, as opposed to leaving them in the open the way they used to. They would get wet, and then they would have to take the aggregate and put it in these special drums that would dry the aggregate. By using tarps, they can obviously avoid the whole drying process, which is a financial savings and a significant reduction in greenhouse gases.

Those are the kinds of things that the maintenance contractors are working with the ministry on. The good thing about this kind of thing is….. What they can do is identify best practices that all of them can then utilize for the benefit of all the maintenance contractors.

So this will be an ongoing process. We intend to work with the maintenance community in not just trying to find the best ideas here in B.C. but also adopting whatever the best practices are in other jurisdictions that are also dealing with the challenge of rising fuel costs.

M. Karagianis: Are there any costs associated with any of these? I know that one of the members was asking

questions yesterday about climate change action budgets. Does the ministry have a budget specifically around climate change initiatives, costs that may be accrued through the MOT as a result of climate change policies? Do we have that budget, and what is that?

Hon. K. Falcon: In addition to the efforts that we will undertake working with the different industry sectors on finding ways to use best practices to reduce greenhouse gas emissions and help them save money, some of which I reviewed with the member just a moment ago, the member will see it in the Budget and Fiscal Plan. On page 27 you will see a section there called "Additional Transportation Initiatives" that outlines $33 million over four years that this ministry will be investing to do things like electrifying the ports, for example, as one way of reducing greenhouse gases.

It will include truck electrification stops. Where the trucks will typically park their vehicles, often you will see them idling. They need the power to run their generators. We want to electrify these truck stops to provide them the option of plug-in, which will reduce idling, etc. There are a number of initiatives under that program that we will be moving forward on. As I say, we've allocated $33 million over four years towards those items.

S. Fraser: I've raised this several times in previous estimates. It's regarding the alternate route proposals for Port Alberni. There have been several. We've raised this a few times around the bottleneck that we see with Highway 4 going to Port Alberni from the Qualicum Beach area.

I know the minister has not been willing to entertain the cost associated with an alternative route. However, there has been some subsequent work done, considerable work done by the Alberni-Clayoquot regional district on this.

I know the minister is probably aware that there was an alternative route proposal worked on by Charlie Haggard, who has since passed away. There has been a committee formed through the regional district to address the possibility of an alternate route. Charlie actually did a huge amount of work on finding an appropriate route that could go through Horne Lake area that might be feasible and might be economically feasible.

Now, I know that the minister had referred to the cost of this as being cost-prohibitive, but since then what has happened is that a cost-benefit analysis has been done on the benefits of an alternative route. It's actually showing that it would be cost-beneficial to have this alternative route, that there is merit, in the sense of a benefit there.

I'm just wondering if the minister is aware of any of this work. Would he be willing to maybe meet with the regional district, the committee involved, to look at this as a possibility?

Hon. K. Falcon: I am aware that the Alberni-Clayoquot regional district has undertaken a study to look into some of the options the member mentioned. I think they were doing a version that had a slightly shorter alternative route that they were proposing. They have provided a report — I believe, just last month — to our ministry, which we're still in the process of reviewing. We will take a look at that. But I think that the challenge….

We did a study on the recommendation of the RTAC. The regional transportation advisory committee for the Island had recommended that we look at the Horne Lake bypass option. We undertook a fairly significant study, which formed the basis of the $40 million to $50 million cost that we anticipated that alternative would provide.

Essentially, what it concluded was that the kind of traffic volumes wouldn't justify that kind of a major investment and that what we ought to do is keep focusing on providing improvements to Highway 4 that will provide more passing-lane opportunities, more improvements to some of the areas that will improve safety.

We have invested, since 2001, almost $14½ million on improvements to Highway 4. So I think we've tried to go a long way towards dealing with some of those issues. I realize that there still is some support for an alternative, though I have to say on the record that I still remain a little bit skeptical in terms of the cost benefit.

I will say to the member that staff will review that report, and if the member wishes…. I don't know whether I'll be able to meet directly with him, but I'll certainly arrange for staff to meet with the regional district to go over the results of the review at such time as the staff has completed the review.

S. Fraser: I just want to address one issue that the minister raised: the improvements to the road, Highway 4. I think most of those improvements are beyond Port Alberni. They're between Port Alberni and the west coast — Tofino and Ucluelet. We're dealing with a pretty finite unit in the Highway 4 section between Qualicum and Port Alberni. There's not really any room between Cathedral Grove and Cameron Lake to expand or widen or create more passing lanes. So I think we're pretty much maxed out on any improvements we can do there, except maybe for maintenance.

There's another issue that has happened in the last year, since I last raised this. The Alberni industrial review has come forward. That's being looked at now by, certainly, the Minister of Forests, who initiated that review — with a lot of pressure brought to the minister from the community, from community groups and community members.

The industrial review also refers to this independent study done and paid for and commissioned by the government. It also refers to an alternative route as being an important part of an economic revitalization plan for the region. I just hope the minister will take that into context — and that his staff will, when they meet.

I'm happy to hear that they're willing to look at this. The community is doing a lot of the work on this too, so it could be a good partnership. I'm happy to hear that the minister has an open mind on this.

I'm going to jump right on to the next section now: Highway 4 beyond Port Alberni. The minister has already touched on the improvements that have been happening there. I travel that road a lot, of course, and I have noticed the improvements — the widening, the passing lanes. But there are, as the minister and his staff know, substantial challenges in the bottlenecks that exist, that are still there.

What we're getting is people moving a lot quicker now on these sections that have been improved or widened — a lot quicker to get to these bottlenecks. We're seeing a lot of people. They're cramming in a lot faster at the bottlenecks that are happening — above Kennedy Lake, for instance. These sections of road — I understand they're the most challenging pieces of the highway.

Does the minister have any plans for how we are going to address those bottlenecks? People are moving faster to the bottlenecks. As you know, in the summer there are a lot of mobile homes or RVs — they call them rolling roadblocks — and trucks and everything else and a lot of tourists travelling there. They're all getting to the bottlenecks quicker, and that's actually creating a problem on its own. So are we looking at alleviating those last bottlenecks?

Hon. K. Falcon: The member does correctly point out some of the challenges on Highway 4 and, frankly, in some other areas of the province, particularly where you've got seasonal fluctuations in traffic volume, where you might have low traffic volume for significant portions of the year. Then, of course, you get the summer traffic and the RVs, which drive a lot of the rest of the travelling public a little bit crazy.

That's one of the reasons why we're trying to provide those passing-lane opportunities — to give people that option of passing safely through some of that slower-moving traffic and getting on to where they need to go. What was happening prior to this, as the member would well know, is that people were still passing, but they were doing it in a very unsafe manner and putting themselves and others at risk.

Our goal for that area is twofold. First, we recognize that — the member is right — this is very challenging terrain. There are big geotechnical issues, and there are often very, very expensive costs associated with trying to do road improvements. What I can tell the member is that we are continuing to look at that road closely. We will be making further investments on Highway 4, particularly investments that will have a safety return. Safety is always our number one issue. We really want to try and make sure that the road continues to improve in terms of safety.

I very much appreciate the member for Alberni-Qualicum raising this issue. I think exactly what a good MLA should do is continue to make the minister aware of this issue. I want him to know that we are going to continue to make investments. You will see those coming forward. Again, safety is going to be the number one thing, but I don't want to underestimate the challenge there. It is quite significant, and the issues of terrain and the geotechnical challenges are very significant.

S. Fraser: Thanks to the minister for that. We have an area of the highway that is basically, for all effective purposes, cantilevered over the lake. I don't see any way to repair that. I'm certainly not an expert, but I don't see how you can repair that without shutting the whole highway down for an extended period of time. I see the minister is agreeing with that. That's a big challenge.

If I recall, back in the late '90s, when we were trying to bring in the first UNESCO biosphere reserve in the area, which was successful — the Clayoquot biosphere reserve…. That designation…. The government of the day looked at…. We made the deal. We tried to get them to raise the priority of fixing that highway to deal with some of those challenges.

I know that engineering work was done, to some extent, around how to deal with those particular bottlenecks, which are a big problem. I think the thought at the time was that we would have to go up and around the terrain, the challenging topography that the minister is referring to. They would actually have to go up and around the other side because there was no way to deal with it.

Is that still on the books somewhere? Is that a possibility for addressing those?

Hon. K. Falcon: Member, I had a meeting with some representatives — and I apologize for not having all their names at the tip of my tongue — from either Tofino, Ucluelet or both, I can't remember, and some local first nations reps. We had a meeting in Victoria last year about this issue, and they were very, very good and really helpful. They brought along some great photographs and some video footage, and we went through it together.

That was one of the commitments I made to them, that we were going to look at what investments we could make that at least in the short term could try and improve safety issues that they identified — no question — on some of these roads. Unfortunately, in a province like British Columbia we do have roads like this that are very, very challenging, particularly as traffic volume grows.

We discussed together ways in which we could make some improvements that we thought would have some safety improvements. They seemed quite happy with that. Actually, I remember them specifically touching on the lake issue. I think what they were suggesting — and their biggest nightmare, of course — was that if we did improvements to that section, it would shut down the highway and then they would be, effectively, impacted to a huge degree.

They were talking about a logging road, I think it was. Was it an old logging road on the other side of the lake? There was some discussion about that. How we left that meeting was that what we would do is try and deal with some safety issues we could fix now, because I think one of the dangers….

One of the things I always say to people when I meet with them is: let's first of all try and figure out

real, practical things we can do right now to create some improvements immediately, in the short term. The longer term challenge is a much bigger issue, and we'll have to take a look at that and really do a little bit more work in terms of what that's going to involve.

That's kind of how I left it. I think that sort of addresses what the member is talking about. But the member is absolutely right to just identify what a challenge this section of road is. It is really one of the most challenging areas.

I think of this road and Highway 12 as being a similar kind of challenge in terms of the fix being so huge and so expensive that we really have to think about what improvements we can make today that can particularly create some safety benefits for people immediately and then look to the longer term about what the ultimate long-term answer is going to be for that area.

S. Fraser: Thanks to the minister for that. Being mindful of the time, I'm just going to move on. We could talk about this one a lot. I appreciate the minister's comments.

Just quickly, in the rural areas where there's no incorporated municipality, approving officers are often from the ministry of highways. Just a couple of points on that. I've had complaints that the ministry had neither the policy nor the process in place to address adjacent homeowners, when subdivisions are being built, in the ministry's role as approving officer.

I'm just going to quote here. "However, the Ministry of Transportation has neither policy nor process in place to ensure that these owners are notified of any application from a developer or to ensure that the solicited or unsolicited information provided by an owner enters into the approving officer's consideration of the developer's application."

The owners are feeling that they have valuable information they might be able to provide or that they should be at least apprised of development, yet the approving officer through the ministry isn't doing that. I'm not faulting the approving officer, but there is no policy in place. Is that something that the minister could comment on?

Hon. K. Falcon: The areas that the member refers to, of course, would be covered, I believe he correctly pointed out, by regional districts. Regional districts are the body responsible for issues having to do with zoning and whatever public process will be involved. All the approving officer is doing… The approving officer will refer subdivision submissions to the various agencies — to the regional district, to the health department, if necessary, to the environment ministry, etc. — to get all of the feedback from those groups.

I think that any concerns that the homeowners would have about making sure they have their input, according to my staff, would best be directed to the regional district, which is the appropriate body for dealing with that kind of information.

S. Fraser: Being mindful of the time, I know that there are others that need to ask questions. I have a few questions on this issue that I'd like clarification on. Would it be all right if I provided that in written form to the minister and his staff and I could await the response there?

I'll go on to my last topic quickly. The B.C. forest safety ombudsman's report has just come out on forest safety on roads, and it has specific recommendations that come with it. Of course, the minister is aware I've raised this issue a number of times. Specifically, the Bamfield road in my constituency is not safe, and I'm having a hard time getting…. It's the Ministry of Forests. It's the Ministry of Transportation. It spans both, so it's confusing.

The specific recommendation I'm going to just touch on right now is from the ombudsman's report. "The province should establish a new public highway designation for resource roads that serve as the primary or secondary access roads for communities" — which, of course, is the Bamfield road and others, like Zeballos road too. "The new designation would have clearly defined standards for construction, maintenance, enforcement and be funded and resourced similarly to the public highway system."

Now, this would be the responsibility of the ministry of highways. Will you consider some of the recommendations, all of the recommendations, in the Forest Safety Council ombudsman's report in the interests of public safety?

Hon. K. Falcon: Our staff is working with the Ministry of Forests with respect to the B.C. forest safety ombudsperson's report. They have primary responsibility for this. We will work with them, and we will provide whatever advice our ministry has with respect to that, but it will be Ministry of Forests that will take the lead on that.

With respect to Bamfield road, the member's right. This is a long-term issue. It's a bit of a challenge because it is a private road owned by a forest company. There has been a long-term historical agreement where we, as the Ministry of Transportation, provide some dollars to help on the maintenance upkeep of that particular road to reflect the fact that there are some folks and some local first nations that use that road, and we're very much alive to that. I believe we provide about $220,000 a year to look after maintenance upkeep on that road.

But as I say, it is a private road. It is a longstanding issue. We will continue to maintain our financial commitment to that road. We will, of course, work with the local first nations to see and try and realize whatever opportunities there are with the local first nations. I know that they've expressed opportunities in the past to do road maintenance themselves, so we'll continue to try and work with them to provide the best possible results for the folks that utilize Bamfield road.

S. Fraser: Thank you to the minister for that. Just a clarification, though. The $220,000 that is given by the

ministry to the forest companies is not for maintenance specifically, the way I read it. It is specifically just to acknowledge the use of the public and allow the use of the public on that road.

There's no maintenance schedule that is enforced by the ministry that I'm aware of. There is no requirement to ensure that the public road is up to public road safety standards. And it's used by…. There are 3,500 students — school kids — that travelled that road last year. That's expected to increase. It's more than just a few locals travelling the road. There are thousands of visitors there every year, too, for magnificent sport fisheries.

So I hope the minister will work well with the Minister of Forests and Range and ensure that the Ombudsman's report's recommendations are taken seriously.

Hon. K. Falcon: The way the $220,000 works is that it actually does go towards improvements to the road. What happens is that the private company which owns the road is responsible for, obviously, maintaining it to their logging standard requirements. What we do is sit down every year with the Ministry of Forests, with the forestry company and with representatives from the community and figure out how the additional dollars can go and what improvements should be made to the road to bring it to a higher standard — albeit not a highway standard but a higher standard for the benefit of those folks.

C. Trevena: I'd just like to follow up on my colleague the member for Alberni-Qualicum on the issue of the crossover between the forestry service roads and the ministry of highway responsibility roads. I've also been dealing on the issue…. I know that a lot of money has now gone into the road in Tahsis, and that is improving, and I'm very grateful for that.

But the road to Zeballos links a number of first nations communities and other communities. It's eroding very rapidly. I know that the Ministry of Forests is looking at this, but I would hope that the Ministry of Transportation, in light of the forest safety ombudsman's report, will also have a look at the ways that his ministry can invest in that road also.

Hon. K. Falcon: This will come as probably no surprise to the members opposite. This has been a longstanding issue. It was an issue when the members were in government. It's an issue when we're in government, where there's always a cry for forestry roads to be put under the Ministry of Transportation and have the Ministry of Transportation operate them. We've maintained the same position that governments have maintained, really, for decades in British Columbia — that that's not where we want to go. The road to Zeballos is a good example of that.

One thing we do, though, is work with the Ministry of Forests. We provide an annual dollar allotment — I haven't got the number on the top of my head — to the Ministry of Forests to assist them in maintaining some of these roads that do service small communities or first nations communities. That is something that we will continue to do.

But we do not intend, as all governments of every stripe have maintained over the past, to try and get into the business of being responsible for all of the forestry roads. We will continue to work closely with the Ministry of Forests — in particular, any advice we can give them in terms of advice on roads, although they're very good at it, I have to say. They've got a ton of experience over in that ministry. We will continue to make a financial contribution to assist them in roads like the road to Zeballos.

C. Wyse: Three questions of the minister — one on each one of the highways in Cariboo South: 20, 24, and 97, just to help the minister.

The first one deals with the seal-coat portion of Highway 20. I know that the minister, from correspondence that we've had on this item, is aware of the lack of markings that exist when you have seal-coating. The suggestion has been made about having indicators put along the side of the road to mark where the actual road exists. There are areas where fog develops out along this section of road.

These are suggestions that have been made through my office from frequent travellers in that part of the area. That suggestion has been conveyed to the highways office located in Williams Lake. I would be looking for the minister's commitment to have that idea investigated and implemented.

Hon. K. Falcon: I appreciate the member bringing that to our attention, certainly to my attention. I know it's been brought to staff's attention. I think it's a good thing, actually, to take a look at the issue of roadside reflectors and try and see if there are areas along there where the addition of roadside reflectors might help deal with that issue. I will follow that up with staff. Anything that can improve safety for folks and that makes some sense, we'll be happy to follow up on.

C. Wyse: I appreciate his commitment. There was no implication that his staff would not have been investigating and working upon this particular item. The community also wanted to show their commitment to try and come up with practical solutions to a problem that has been ongoing.

The second issue is in Highway 24, East Lake Sheridan Road. The minister has responded to me with questions when I did draw the conditions that this approximately two kilometres of road disintegrates into as a result of three gravel pit operations and a cement plant that exist with the travel upon this particular road.

When there is rain or melting snow, the road turns into, basically, a mud bath very quickly. The maintenance that is done upon the road disintegrates, again, relatively quickly, and we end up with one of these situations of capital versus maintenance improvements.

In discussions that we've had on this item this has not been given a priority for paving, as it exists at this

moment in time. I wish to draw personally to his attention that the conflict between a maintenance contract versus where this sits on the priority for capital paving is only going to deteriorate.

I would like him to be aware of that item and his commitment to have that particular issue reviewed for where it sits on the priority for capital improvements.

Hon. K. Falcon: I appreciate the member's question, and I think this is really a good sort of representative example of the challenges you always face in the ministry, that you have obviously…. I think the member recognizes…. But, we don't have unlimited dollars, so what we try to do is make sure we deal with the higher-traffic areas first. That's one of the things we're trying to do in the 100 Mile House area, in areas like Bridge Lake Road, Horse Lake Road, Canim road south. Those are the areas that obviously are receiving higher priority.

But in response to the letter the member wrote me, I think it was, back in February, asking about East Lake Sheridan Road, we did make the commitment, and I believe the maintenance contractor re-gravelled some of the worst sections of that road. We made a commitment that the maintenance contractor this year would re-gravel that route as part of their maintenance program for this upcoming year.

Hopefully, that will bring about some improvements, but I recognize that the gravel truck traffic along that road clearly has an impact on the road. I still think that we're always right when we try to focus dollars on the areas where we have the higher levels of usage to ensure that we're maximizing the benefit of the limited taxpayer dollars that are available.

But I respect the question from the member, and I think that the gravelling that's been done and the future gravelling that will be done will hopefully, at least in some part, try and address the issue for East Lake Sheridan Road.

C. Wyse: Once more, through to the minister, I appreciate his response very much. I appreciate very much the attention that has been given to this particular item.

Recognizing that the conflict that develops when you have industrial use in an area versus the traffic generated by people does not necessarily fit the usual model that exists, I can let the minister know that the residents I have in Cariboo South who live in this general area are going to be keeping me advised. I will, through his staff and himself, let him know how successful this has been.

My third question comes to Highway 97. It's an item that is referred to as nine mile corner. According to Pioneer Service and Towing of Clinton, this particular stretch of the road has been subject to fatalities over the year and near fatalities. This towing company has been in operation with the same people for 30 to 40 years, so they have got a very long record of this particular incident.

Similar to what happened to Mile 6, with straightening out and making improvements, I am here directly to encourage the minister in the capital upgrades that are planned on Highway 97 — that this particular item be included in the capital improvement projects for the year 2008. We even could possibly make this part of the four-laning of the Cariboo connector. It's a relatively short section, a kilometre or whatever, but it would possibly be a start of that aspect. So over to the minister for his commitment to have this construction part be included in 2008.

Hon. K. Falcon: I have to apologize because while you were speaking about nine mile corner, I was wracking my brain to figure out where nine mile corner is. I honestly don't know.

Hon. K. Falcon: The 20 Mile area. Okay, good. The staff is trying to figure that out, too, so I apologize.

Hon. K. Falcon: That's okay. With 43,000 kilometres of highways, I sometimes lose track of….

Hon. K. Falcon: Exactly. I forget where nine mile corner is. There's probably a pothole there too. But, nevertheless, I appreciate that.

One thing I can assure the member of is that in the improvements we're doing on the Cariboo connector and the planning that goes into that, one of the first and most important things we look at is accident history, particularly if there are fatalities. We're very much alive to that issue.

If this is an area that has had an unfortunate history of accidents and fatalities, then I can pretty much guarantee that as part of the Cariboo connector process it will be high in the priority list of areas to be improved. I will try…. In fact, if the member could send me a little e-mail specifically saying where the area is, I'll doubly confirm that for the member.

The one thing I will say to the member — it's a good opportunity to say it — is that a little bit of frustration I've had, and I've expressed publicly too, is that a lot of the work in the Cariboo connector…. We are trying to get federal dollars to share in that work. We want to leverage the provincial investment. If I go and spend money now on projects, none of it is cost-shareable. What we're trying to do is get the federal government into some of these projects.

We've had some success now with the Simon Fraser Bridge up in Prince George and some of the approaches. We've got significant federal dollars there. That was after quite a bit of lobbying work being done. We're pleased with that.

I'm going to be in Ottawa again — I think it's next week — and I'm going to be again lobbying for more dollars for the Cariboo connector. But the quicker we

can get commitments there, the faster we can get a lot of these projects — on which we are already spending a significant amount of money doing the design and engineering work — so that they're shelf-ready and we can move immediately.

I am hopeful and feeling increasingly confident that we will have some of those federal commitments shortly. But I haven't got them all there yet.

I appreciate the member bringing that to my attention. I'm always especially concerned about areas where the member talks about fatalities. I'll bet you the tow truck operator knows that area better than almost anybody. Thanks for bringing that to my attention. If you fire me an e-mail, then I'll make sure we get that on the radar.

M. Karagianis: I would like to discuss now the northern port corridor that's been created from Prince Rupert through to Prince George. I know that there's an expectation that there will be a lot of increased activity along that corridor, and I have had meetings with communities along there that are very concerned about a couple of aspects of the evolution of that corridor as it gets busier.

First and foremost is the concern that those communities have for hazardous spills and hazardous derailments and their lack of resources to address that. Can the minister explain to me, in the case of a hazardous material spill, whether it be by truck or by rail, whose responsibility it is to move in, in an emergency capacity and deal with that event?

Hon. K. Falcon: As the member probably knows, the railways are federally regulated, so any derailments, obviously, would be investigated by the Transportation Safety Board. The good news is that there has been, I'm led to understand, a fairly dramatic improvement in the derailments from all the major railways, CN, BN and Canadian Pacific. So that's hopefully a trend that will continue.

Obviously, if there's any environmental impact, the Ministry of Environment would, no doubt, be the ministry that would be responsible for getting on the scene immediately and working with the railway on ameliorating whatever the impacts are. To the best of my knowledge, the Ministry of Environment that would be involved in dealing with the results of any spills.

M. Karagianis: Well, I know that many of the small communities along that route are very concerned. A number of them met with me at UBCM and voiced their concern around the emergency response to any kind of hazardous material event. Even if it's trucks…. We're expecting to see, presumably, an increase in truck traffic back and forth, container traffic from the port to Prince George, where the inland port is — certainly traffic going both ways.

There will continue to be an increased amount of hazardous material moving along that corridor. In the case of a spill, it's great to say it's a federal jurisdiction or the Environment Ministry, but in the case where something happens in a community, they're the first responders.

What kind of resources has the ministry put in place? Have they even put any kind of thought into the resources that those communities should have on hand in order to address immediate emergency response?

Hon. K. Falcon: This ministry doesn't have responsibility for that kind of response. The provincial emergency program, the Ministry of Environment, other provincial agencies would have that responsibility. I will say this: I don't think we should overexaggerate. That's the wrong word to use. I apologize. I don't want to say that the member was overexaggerating.

I just don't think we should blow out of proportion the impacts that the member is talking about. There will be very little increase in truck traffic. Most of it will be moved by rail. There are railways going through virtually every community in the province of British Columbia and have been for over 100 years. This is not anything new — having rail traffic go through communities.

We've got a long tradition of a pretty close working relationship with all of the railways to deal with issues of derailments or spills. Fortunately, they have been relatively minor in nature in terms of the impacts, though there are obviously significant exceptions.

We'll continue to work closely with them, but it would not be this ministry that would be responsible for resourcing issues related to cleanups. That's the provincial emergency program, on the assumption that there's anything significant in terms of the nature of the spill, or the Ministry of Environment dealing with the more lower-level tipping over and cleaning up whatever hazardous material may be emitted from the railcars.

M. Karagianis: I think the minister has categorized correctly that the most likely hazardous material events would occur from rail rather than from truck, although there is going to be, presumably, increased trucking back and forth. There wouldn't be a need for an inland port in Prince George. I've been there and have seen the containers stacking up.

It's not like those opportunities will not be there by road as well as by rail. But in the case of an immediate event, like what happened in the Cheakamus, are those communities expected….? Frankly, this is a question that came to me from mayors of communities, so I'm not even speculating on why they would be asking this question. It's not generated from me in any way; it's from them.

They are concerned about first response in the case of an event in their small communities, and their reliance, then, as I guess the minister is saying, on the Environment Ministry or PEP. All of this takes some time to get in action, to get some kind of crew to show up, even from

PEP, for some of these communities that are quite small, modest little towns along that rail.

Has the ministry considered in any way what the maintenance company's responsibilities would be in that case, or are these communities simply left to wait for a response to come from outside of their area, from Prince George? Are there resources in Prince Rupert? Where's the closest PEP or the closest Ministry of Environment hazmat team that would come in and respond to these communities?

Hon. K. Falcon: I have to say I have met with many of these small communities that the member refers to, and this has not been an item of discussion that they've raised, generally speaking, to be honest with you. They are extraordinarily enthusiastic about the northern corridor and the opportunities for their communities.

It could be that they're not raising this issue with me because they recognize that this isn't a Ministry of Transportation area or jurisdiction. We are not the first responders to situations like this. This is the provincial emergency program. We actually sit on committees as part of PEP.

The member refers to maintenance contractors. In virtually every circumstance, it's unlikely that they would be involved. They may be involved if PEP decides that they want to bring them in to help do a cleanup or what have you, but this is under the jurisdiction of the provincial emergency program.

The issues of first responders to hazardous chemical spills, etc., come under the jurisdiction of the Solicitor General. It would probably be more appropriate for the member to raise those questions with the ministry responsible.

M. Karagianis: I will follow up both with the communities and with the alternative ministries, as the minister has recommended.

I know that the minister made reference to the fact that certainly we've seen fewer derailments. It seemed for a while there that there was a derailment every other week, which I think has got to be very disturbing.

The minister is familiar with the fact that our previous critic called for a review of rail safety here in B.C. What, if any, action has the minister taken on that call? Are there any initiatives whatsoever underway right now with the government?

Hon. K. Falcon: I appreciate the member raising this. As you know, a few years back, when CN had a number of spills in British Columbia, the province of British Columbia and all members of the House were very concerned about the incidence of railway derailments and the impact that that had — in one case, severe impacts — on the environment.

Since that time, we have called…. The member knows that I have raised this at the national Ministers of Transportation meetings. I've raised it directly with the ministers responsible federally. One of the results of that was that a federal safety review was put in place on the railways by the federal minister.

There was an individual, a former Transport Minister, that was appointed to head up that review. His name escapes me. I think it was Doug Young. He was a former federal Minister of Transport. I apologize. I just forget his name, off the top of my head.

Anyhow, he came out with a safety report on the railways. He had a number of recommendations. I know that the railways, according to my staff, responded positively to the recommendations and said that they would work immediately to institute the changes that were being recommended.

I'm not positive, but when I am in Ottawa having a chance to talk with the federal minister and my colleagues, I have no doubt that somehow the issue of rail will come up. At that point, we might get more of an update.

I think the one thing I will say about railway derailments that I always tried to say is, first of all, not to raise unrealistic expectations for the public in terms of pretending that there will ever be a time when there are not derailments. I think it's dishonest to do that. Ever since we've had railways operating in Canada and across North America, there have always been derailments.

I think the real issue is: is the federal government, as the regulator of the railways, doing everything that one would reasonably expect a regulator to do to ensure that they are minimizing the frequency and the nature of these derailments?

I am convinced that the federal government takes this issue seriously. I know the federal minister, Lawrence Cannon, takes this issue seriously. I think the recommendations coming forward from the federal safety review are positive, and it is my hope and my expectation — more than hope — that the federal government will follow up on the recommendations coming out of that review.

The final thing I will say to the member opposite on that point is that we also had input into that review. Our staff also made sure that we made our voices heard in terms of the importance of having safe operating railways in British Columbia, and we made some recommendations towards the panel too.

M. Karagianis: I appreciate that the federal safety review has been effective up to this point, somewhat. We can see that there are, at least, fewer derailments here. But I guess, as B.C. is the lessor of the rail lines to CN within the provincial boundaries here, what punitive measures, if any, would we take, and would the government entertain cancelling that lease if it's seen that CN is not abiding by the kind of safety standards that we would expect of them?

Hon. K. Falcon: Member, I must apologize because I don't have any of the agreement with me. I know it's posted on the Web. I remember that I went over this in very great detail in a previous estimates. In fairness to

the member, obviously, that's actually irrelevant because what I've said in previous estimates really doesn't matter. This is the current estimate. But I went into great detail — and I can get the Hansard to the member over that very issue — on what the responsibilities are.

Essentially, what the agreement says is that CN, as the lessee of the line, in their right to operate on the line must obey all federal and provincial environmental laws. They must be in full compliance with all those laws. There is a whole series of obligations that flow from that and penalties, etc., if they're not obeying all that.

I just don't remember all the details. It was a thousand-page agreement. It's very detailed. It is still, I believe, available on the website, and if the member wishes, I could go back into Hansard. I'm pretty sure that we had a really detailed response on those issues, because I remember going through it in quite a bit of detail a couple of years back.

M. Karagianis: I will follow up on that. I'm sure I can obtain the Hansard on that. I've got a couple of other questions, then, that relate just generally to some of the service plan here.

We've talked a little bit about initiatives. I've asked in several of the questions here about climate change initiatives, the budget and what has been planned. There are a few things here that have been alluded to on page 13 in the service plan.

One talks about the support of the development of the hydrogen highway. Could the minister please update me on where we are at with the development of that particular initiative?

Hon. K. Falcon: The hydrogen highway project, for the benefit of the viewing public — if I may, Member — is a project jointly funded by the federal and provincial government. It's an $89 million investment split equally, virtually 50-50, between the federal and the provincial government. The idea there is to have a fleet of 20 hydrogen fuel–celled buses that will operate during the Olympics in Whistler for 2010. It will act as, really, the first fleet of hydrogen fuel–celled buses anywhere in the world.

We think it will be a wonderful demonstration of the technology, which has largely arisen and given birth here in British Columbia. We have a very thriving fuel cell technology industry. Our hope is that this may be a technology that, through a demonstration project like this, will hopefully catch on and capture the imagination of other industries that are looking for ways to reduce greenhouse gases and look at alternative technologies. So we're very excited about it.

I can tell the member that the first prototype buses are under construction, in development, and we hope to have those buses ready sometime this year. The project remains — this is what I'm very pleased about — both on time and on budget, which is really important. We will have all of those buses, all 20 of them, in place in Whistler by 2010. There will also be a fuelling station that will be in Whistler.

I should say that we are doing this in cooperation with the Ministry of Energy and Mines, and we are, obviously, doing our work through B.C. Transit, which will operate the buses and be responsible for working them into their fleet. It's an exciting project. It's on schedule and on budget.

So the hydrogen highway at this point really amounts to the Whistler project. Is there anything beyond that, and where do we get the hydrogen from? There are several other questions here. I'll put them all in here so that the minister can answer them, and we can be mindful of the time here.

I'd like to know what kind of investment we have made into this, dollarwise. What plans are beyond the Whistler bus project, which I think is a bit of an experiment, and where is the hydrogen coming from? What kind of availability will there be in the future for a real highway initiative beyond the Whistler project for 2010?

Hon. K. Falcon: First of all, to the member's question about fuel. What happened on fuel was that B.C. Transit put out an RFP on the fuel. What they wanted was not just the hydrogen fuel, but they also wanted — as part of the provision of making a decision as to the source of the fuel — the hydrogen fuel to come from the most environmentally sensitive and green source possible. That was awarded to a company in Quebec, so that's where the hydrogen fuel will come from.

In terms of the balance of the member's question…. As I say, Energy and Mines is working with us. We really have just the bus component. Energy and Mines is technically responsible for the entire hydrogen highway, including the fuelling stations that they will have operating in the lower mainland and in Victoria. So the member could make a note. Perhaps she can pass that along to the critic for Energy and Mines and probably get more detail, because they actually have it. I don't.

What I do know is that the goal of the province of British Columbia and the Premier is to have the ability to have a hydrogen highway from California to Whistler, which would be one complete highway that would provide the kind of stations…. I know that when we were in Washington, D.C., meeting with the Governor and her senior cabinet members, that was an item of discussion — to ensure that Washington State was on board for providing hydrogen fuelling stations. They've already got them, I understand, in California. Our goal, as I say, is to have an uninterrupted corridor that will provide another green alternative for that budding technology.

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

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