2010 Legislative Session: Second Session, 39th Parliament
HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

official report of

Debates of the Legislative Assembly

(hansard)

Tuesday, May 18, 2010

Afternoon Sitting

Volume 18, Number 2

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TUESDAY, MAY 18, 2010

The House met at 1:33 p.m.

[Mr. Speaker in the chair.]

Routine Business

Introductions by Members

G. Hogg: I'm pleased to introduce and to welcome two fine British Columbians, Mr. Glen Ross and Mr. Joe Bobdanich, and their esteemed Italian guests, Dr. Sabino Basso and Dr. Joe Cerino of the Fedele and Figli SRL. They're makers of one of the world's finest olive oils, and they are here to explore business opportunities in British Columbia.

Mr. Speaker, they had lunch hosted by you. Also attending were the Minister of Healthy Living and Sport and the Minister of Transportation and Infrastructure. I'm pleased to report to you that everyone was extremely well-behaved during the luncheon. I especially congratulate the Minister of Transportation and Infrastructure who, I understand, in the past has been somewhat recalcitrant, but I can report that her behaviour today was quite exemplary.

I would ask the House to please make them all feel most welcome, including our own members.

R. Chouhan: I have two sets of introductions. It gives me great pleasure to introduce Antonia Beck, the executive director of South Burnaby Neighbourhood House. Antonia is a leader in our community. She has done a wonderful job helping people.

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She has some family members with her today. Her cousins from Italy are with her as well. I hope I'm pronouncing correctly Antonella De Vattimo, Georgio Pontarrollo and Marica Pontarrollo. I'll send the correct names to Hansard later on.

My second set of introductions. We have twelve members of the occupational health and safety committee of the B.C. Federation of Labour. It gives me great pleasure to introduce them: Jim Sayre, Larry Stoffman, Dusty Kelly, Sheila Moir, David Clarabut, Steve Milne, Pam Taylor, Ron Corbeil, Bob Ages, Dan Burrows, Jim Laliberte, Drew Garcia. Please join me to welcome them all.

S. Cadieux: I had the pleasure of joining the member for Surrey–White Rock for lunch this afternoon along with two of my constituents, Jerry and Karen Philipchuk from Surrey-Panorama, and their friends Sharon and Siri Jayatunge — which I apologize if I got wrong, because I didn't hear it pronounced — who are residents here in Victoria. We had a lovely lunch. Jerry and Karen purchased lunch with the former minister, current Gordie Hogg — sorry, I'm not allowed to say that.

Anyways, a lovely fundraiser for PACS Community Services, now Sources, and I would like to thank them very much for their support of the community organization.

H. Bloy: Today I would like to welcome to the Legislative Assembly the Second Street Community School, and up here we have the future that is going to lead British Columbia. I had the privilege of meeting them along with many of their parents and their teacher, Carlene Montgomery, earlier today. Would the House please make them all welcome.

Hon. S. Thomson: I'd like to have the House make welcome in the precinct today Roland Baumann, the president of the B.C. Cattlemen's Association from Vanderhoof; Judy Guichon, the vice-president from Merritt; and Kevin Boon, the general manager of the Cattlemen's Association from Kamloops. They had lunch with the member for Kamloops–North Thompson and the co-chair of the Ranching Task Force. We're having further discussions with them in terms of the Ranching Task Force later this afternoon.

I'd like both sides of the House to make them welcome today.

L. Reid: In the gallery today I have a lovely guest, Bree Macdonald. She works in the field of video relay, which is the interpretation of phone calls between those who are hearing-impaired or deaf and the hearing population. She has worked as a classroom assistant. She continues to be an interpreter for the deaf. I would ask the House to please make her welcome.

D. Hayer: We had an excellent event this afternoon to celebrate Asian Heritage Month. There were many performers from different backgrounds. My colleague is going to introduce some of the guests.

I will introduce guests from Shan-e Punjab Dance, Performing Arts and Heritage School. They include Navjit Bhangu, Melody Sidhu, Harkirn Bhela, Madison Bains, Janessa Sundher, Amy Sundher, Nicole Randhawa, Raveena Moor, Serena Rai, Angela Bamra and Jasleen Dhatt.

Two other performers, who were also working as OMNI TV reporters, were Amritpal Sekhon and Harman Dhillon, along with the many other guests that we had — including, from Vancouver Chinatown BIA Society, John Bal and Har Singh, who was a previous ADM here and who arranged for some of the performers to come here.

They performed one of the best performances in dance I have seen in Chinese music and Indian music and Punjab dance. They provided music that went back thousands of years up to current music.
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Would the House please make them very welcome for the excellent job they did today.

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R. Lee: We had a very successful celebration of Asian Heritage Month in the House today.

I would like to introduce some of the guests who came over to celebrate with us. Jason Chen of Canada Association of Heyuan Economic and Cultural Communication; John Lo, president of Hainan Business Association of Canada; and, of course, Don Montgomery, executive director of Vancouver Asian Heritage Month Society.

We also have performers from the Canadian Pluralistic Cultural Exchange Association. The group is called Allure Dance Studio, led by Jack Li. The performers are Jean Ding, Mara Zhang, Helen Zou and Haisie Li. So would the House please join me to welcome them.

Also, I would like to mention two grade 9 students from Reynolds Secondary School. They displayed their project. The project is called "Chinese Immigration to Canada," by two grade 9 students, Alysha Haas and also Colleen Ten Have.

Thank you to those performers and the guests who attended today's event. Would the House please make them welcome.

Statements
(Standing Order 25B)

LIVING WAGE POLICY

D. Black: Last month the city council in my community of New Westminster made history by becoming the first municipal government in Canada to enact a living wage policy. The council unanimously passed a resolution that commits the city to establishing a living wage policy that is tied to an hourly rate, which will be set each year. The policy will apply to both full- and part-time employees, regardless of the value of the contract or the number of employees. It will apply to employees who perform work on city premises or properties.

A living wage has been defined as enough to keep a family of two working adults and two children above the poverty line. For New Westminster, that works out to $16.74 an hour. This is more than twice the amount of B.C.'s minimum wage of $8 an hour, now the lowest in Canada.

While the living wage policy has been successfully spreading throughout the United States, here in Canada the issue is just beginning to make itself felt. I congratulate the members of New Westminster city council and the citizens in my community who worked together to bring about this historic victory for working families. This is another first for western Canada's first city.

B.C. ASSOCIATION
OF HEALTH-Care AUXILIARIES

N. Letnick: Today I rise to speak about and recognize the positive contributions made by the British Columbia Association of Health-Care Auxiliaries. Their goal is to provide better health care to every British Columbian through volunteering their time and helping raise funds that are channelled back into B.C.'s health authorities to provide continued care for patients.

Funds are raised through a variety of different means, such as hospital gift shops, coffee bars, thrift shops, raffles, catering, bake sales, fashion shows and book sales. These funds help health authorities purchase equipment that might not otherwise be provided for by hospitals and care facilities. In the year 2009 alone the auxiliaries in B.C. donated over $9 million to health care facilities to which they are attached, and since their creation, the B.C. Association of Health-Care Auxiliaries have raised an astonishing $169 million.

Locally in my area over the past few years the government has partnered with local regional district hospital boards to announce and invest over $1 billion in expansion to local hospitals. These much-needed and appreciated enhancements to medical service for people living in the Interior are made easier with the fundraising and volunteer efforts of our local hospital auxiliaries.

In addition to dollars, another important donation that cannot be overlooked is the donation of one's time. The total number of hours donated by 86 B.C. auxiliaries has reached over 1.3 million hours. So I would like to take this opportunity to thank the B.C. Association of Health-Care Auxiliaries and its members who so generously offer time, care and support to the citizens of every riding in every corner of British Columbia.

NORTH FRASER
THERAPEUTIC RIDING ASSOCIATION

M. Sather: Today I rise in the House to make special mention of a group whose programs have been of great service to my constituents and to many individuals across the Lower Mainland.

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The North Fraser Therapeutic Riding Association offers a selection of therapeutic riding courses in the Lower Mainland for individuals with mental and physical disabilities.

The organization has operated in Maple Ridge for 30 years, and throughout that time the services they provide have benefited many, allowing them to develop balance, coordination and strength while assisting their social integration and helping their confidence and self-esteem.

The program's ability to help participants reach their full potential is demonstrated by the example of
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Jennifer McKenzie, an equestrian Paralympian who figured prominently in the Paralympic ceremony in Maple Ridge–Pitt Meadows.

Many others have been helped by the therapeutic riding association. For example, Jack Hajum, a child who is visually impaired and has been diagnosed with high-functioning autism. According to his father, Dean, Jack has benefited from greater balance, gross and fine motor skills, increased strength and overall improved enjoyment of life. His schoolmates and everyone who learns he rides a horse find it fascinating and impressive that he's doing something that many people only dream of.

From developing Paralympians to helping others feel great about themselves by overcoming their challenges, the North Fraser Therapeutic Riding Association has demonstrated a tremendous capacity to improve the lives of participants.

Despite the great work that the riding association has done, their future is in doubt. Recent changes to gaming funding have resulted in the loss of $40,000 to the association, which puts their programs at risk.

I remain hopeful that the North Fraser Therapeutic Riding Association will survive the challenges they face, because the services they provide are a lifeline to their clients, and it would be a shame to see them lost.

COMMUNITY FUNDRAISING
IN KAMLOOPS

T. Lake: Members of this House are well aware that as Canada's tournament capital, the city of Kamloops is very competitive. This good-natured competitiveness applies not only to sports but to fundraising challenges.

One of the best-known of these is the annual SPCA City Challenge, which has become one of the largest fundraisers for the organization that speaks for those who cannot speak for themselves. In past years we've challenged the cities of Kelowna and Prince George, and in all but one instance that I can recall, Kamloops has come out on top. The Little Apple did squeak out a win in my last year as mayor of the 'loops, but we are still awaiting an auditor's report on that result.

This year B.C.'s northern gateway is challenging Kamloops throughout the month of May, and the latest figures show Kamloops ahead at $16,000, compared to $7,200 for PG, but I understand my colleagues from Prince George have yet to write a cheque, so I know that gap will soon close. The Kamloops SPCA kicked off the drive with a barbecue and silent auction. A car wash, garage sale and open house will follow in the coming weeks.

The SPCA City Challenge comes on the heels of another very successful community fundraising event held earlier this month, when 2,200 runners and walkers took part in the 13th annual Boogie the Bridge, which raised over $100,000 for the ASK Wellness organization.

Joe Berry and her dedicated team continually encourage Kamloopsians to keep moving to improve their physical and mental well-being and at the same time support very deserving local community groups. For the size of our city, the Boogie the Bridge is comparable to the Vancouver Sun Run. Since 1998 when only 60 people took up the challenge, over 2,200 people raced this year.

I would like to congratulate organizers of these two community events and the thousands of people in the Kamloops region who support them.

STUDENT ACTION ON PESTICIDES

D. Thorne: I think politicians should take note. Parkland Elementary School students, which happens to be the alma mater of my own children, are calling for action to see cosmetic pesticides banned in Coquitlam and across B.C. and Canada.

Lori Sherle's grade 4 class is determined to teach civic, provincial and federal governments about eco-friendly options to pesticide pollution. They've rolled up their sleeves and created all-natural slug bait and weed killer, all with donated recycled materials.

All 30 students — including Anthony, Kylee, Shelby and Melanie — have been learning about the environment while they work on changing government policies on pesticides.

This is what the students have been saying — and in our own local newspapers: "We don't want animals to die. If birds eat dead insects on the grass, they will die too, because pesticides are in the bugs. The chain keeps going, and the food chain gets affected, so we are going to try to create change in our whole country."

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That wasn't enough for this proactive group. They wanted to sow the seeds of change far and wide, with their hopes of growing greener governments. They invited a city councillor, an MLA and an MP to visit their classroom and presented each of us with a gardening gift: a box of organic slug bait and weedkiller made from grandma's secret recipes.

Included in my box are a personalized letter and a green pesticide kit for each of the following: the Premier, the Leader of the Opposition, the Environment Minister and the Environment critic, and I will deliver them personally tomorrow. I would have brought them, but I knew I wasn't allowed to have props, Mr. Speaker.

I think they deserve a really big hand, grade 4 Parkland School. Mr. Speaker, out of the mouths of babes.

CULTURAL AND HERITAGE SITES
AND EVENTS IN RICHMOND

R. Howard: Earlier this month the city of Richmond opened its doors to the public for a special event called
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Doors Open Richmond. Over 40 cultural and heritage sites within the city offered people a chance to visit venues for free — venues such as the Richmond Cultural Centre, the art gallery, Minoru Chapel, Pathway Aboriginal Centre and the John Lecky boathouse and many others participated.

It is often very surprising when you discover all the great things that exist within your own community, and in this era of staycations, it is important to keep people interested in what's happening in their own city. We can't always go on an exotic vacation. We can, however, stay at home and discover something great within our own city. The work done by the city to bring out residents for this event was well-planned, and the weekend was a great success drawing over 16,000 visits.

Our community embodies the spirit of our citizens and reflects their good nature and hospitality. I was able to attend a number of attractions myself and was reminded of our proud past and encouraged about our future.

The Richmond Delta Heritage Fair took place this weekend, and it was great to see the younger generation come out and how aware it is that history exists in their community. It's even more interesting to learn and listen to them about what they think about our future.

We've had a very special year in Richmond so far, and it is great to see the pride of the people in our city. We are looking forward to a wonderful summer, and I'm certain we'll bring many people together and continue to build on the great hospitality of Richmond as we keep our doors open to all.

Let us please congratulate the hard-working staff and the legions of volunteers such as Ron Hyde, Clara Chow, Seema Aaron who give generously of their time and help make open doors such a success.

Oral Questions

INFECTION CONTROL AT
NANAIMO REGIONAL GENERAL HOSPITAL

A. Dix: Nanaimo Regional General Hospital has lived through a virtual epidemic of infection outbreaks over the past two years, including two in the last six weeks involving C. difficile and norovirus. Research has demonstrated a link between the contracting out of housekeeping services and the rise of hospital infection rates.

This has certainly been the experience here in British Columbia and in Nanaimo in particular. Cleaning is a vital element of infection control, and only this government fails to grasp this reality.

The Vancouver Island Health Authority has put out a proposal call for housekeeping services. Right now, I think it's coming due in June. Will the minister take advantage of this period to return, to repatriate, housekeeping services in-house at Nanaimo Regional General Hospital?

Hon. K. Falcon: Actually, the member is just totally wrong to make a false connection that the member ought to know is wrong if he's done even the most briefest of research.

The fact of the matter is the norovirus is actually acquired in the community and was brought to the hospital. That would be the first level of information the member should do.

Then the member talks about C. difficile. C. difficile is present in virtually every hospital around the world. If the member had done his homework, he would know, whether it was the New England Journal of Medicine, Archives of Internal Medicine, Annals of Internal Medicine, all of them are saying that this is an ongoing challenge for hospitals around the world because of the increased use of antibiotics which makes new strains more difficult to deal with.

For the member to try and suggest this is about housecleaning is just dead wrong.

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Mr. Speaker: The member has a supplemental.

A. Dix: Well, British Columbia continues to distinguish itself as being the only jurisdiction in the world that denies the link between a clean hospital and infection control — the only jurisdiction in the world.

It is nonsense, the minister's position. He wants to talk about evidence. He knows that outbreaks of norovirus have doubled over the last few years. He knows that between 2006 and 2009, C. difficile outbreaks have doubled in the Vancouver Island Health Authority and that there's been a virtual…. There was an 11-month — the minister might not be aware of it; it happened before he was Health Minister, perhaps — outbreak of C. difficile last year.

It's the minister that is denying the evidence. The minister knows, or he should know, that best practices, such as surface sampling, are only used in the audit process in Vancouver Island once an outbreak has been confirmed.

Will the minister set aside…? I know it's hard for him. I know he wants to deny that a clean hospital has a link to infection control, but he is alone in this. Will he take advantage of the opportunity today and bring that housekeeping back in-house?

Interjections.

Mr. Speaker: Members.

Hon. K. Falcon: This is a fascinating line of questions from the NDP. Now, just put aside for a minute the fact that the Hospital Employees Union funds virtually all
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their election campaigns. Just put that aside for a moment. We are the first government…. In the 1990s they did not do any independent cleanliness audits ever. We are the first government that actually do independent cleanliness audits, and I think it might be interesting….

Interjections.

Hon. K. Falcon: Well, that seems to have excited a nerve. I'm not sure why.

If they look at the independent cleaning audits that were undertaken last year, they will find something interesting. Of the 19 facilities that did not meet the 85 percent benchmark, 12 of those were in-house. Seven were contracted out.

I imagine, if we follow that philosophy, we ought to get rid of all the in-house housekeeping and do it all contracted out, based on the evidence of the external auditing that's been done.

The fact of the matter is this. All hospitals deal with the challenge of C. difficile. It's in all the medical journals. It's there. I'd be happy to refer the member to the evidence, and the fact is our housekeeping staff do an exceptional job every day of the week.

Mr. Speaker: The member has a further supplemental.

Interjections.

Mr. Speaker: Members.

Continue, Member.

INFECTION CONTROL AND CLEANING
IN HOSPITALS

A. Dix: The minister can't help himself. He wants to support hospital workers, but then he starts his response to the question by attacking them. He just can't help himself.

The fact of the matter is….

Interjection.

A. Dix: Well, the Minister of Aboriginal Relations is talking now.

Interjections.

Mr. Speaker: Member, just take your seat for a second.

Continue, Member.

A. Dix: I mean, it is of course true, as the Vancouver Island Health Authority has said, that overcrowded hospitals also lead to the spread of infection. It's also true that the Vancouver Island Health Authority has acknowledged that that hospital in Nanaimo is overcrowded.

How do we deal with this? The evidence shows that it takes well-trained health care teams to do this. The evidence shows that you abandon schemes such as privatization. The evidence shows that you have assessments based on more than whether a hospital room appears clean.

Interjections.

A. Dix: Oh, they don't want to hear this, but they're going to hear it.

Will the minister start following best practices in infection control, repatriate services and adopt microbiological standards in infection prevention?

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Hon. K. Falcon: Well, let's be clear about this. What the Health critic is doing is blaming C. difficile and outbreaks of norovirus that are coming from the community to the hospital…. He's blaming it on the very cleaners in the hospital. But let's also be clear about another thing. What he is saying is…. Actually, no, he's only blaming those that are not part of the union that supports the NDP, so let's be clear about the kind of health care workers that the NDP critic is prepared to support.

The fact of the matter is…. Look at what the independent cleanliness audits actually said last year. As I pointed out to the members opposite, this is another inconvenient NDP fact. Of the 19 facilities that did not meet the higher standard we put in place…. There was no standard under the NDP. Of the 19 facilities that didn't hit the 85 percent standard we put in place, 12 of them were in-house cleaning. Seven were contracted out.

I guess if we follow what that member is suggesting, then actually we should get rid of those in-house cleaning operations because they're failing to meet the benchmark that government has set. I'd be surprised to hear the member say that, but I'm looking forward to hearing that in the follow-up question.

D. Routley: The minister denies that cleanliness affects the outbreak of disease in hospitals. It's clear that standards have decreased throughout the province. He's proven that by the facts that he has given. He's also content to rely on visual checks to check the standards of cleanliness at the Nanaimo Regional Hospital. Surfaces are only tested after there's an outbreak.

It has been repeatedly recommended that to prevent outbreaks, microbiological tests become part of the routine tests for hospital cleanliness. Will the minister immediately overhaul how hospital cleanliness is monitored and reported?
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Hon. K. Falcon: Well, it's a fascinating position from the member opposite, given that they had absolutely no monitoring in the 1990s. There was no independent auditing done of cleanliness standards. We actually brought in outside, independent monitoring of cleanliness standards.

As I just pointed out to the members opposite, surprisingly enough, of the 19 facilities that failed to meet the 85 percent benchmark, which is a very high standard we set in British Columbia, 12 of them were in-house cleaning facilities. That is the group that supports the NDP financially. I hope the NDP isn't suggesting that we now should contract out those services, too, because they fail to meet the standard. Is that what I'm hearing from the member?

You know, the fact of the matter is that we have brought in consistent independent auditing so we have a continual improvement process in place. It is wrong for those members to attack health care workers in the field that are dealing with the issues of norovirus outbreaks in the community brought to the hospital. They're doing a great job under very difficult circumstances.

Mr. Speaker: The member has a supplemental.

D. Routley: The minister is dismissing the concerns of the residents of Nanaimo. Mr. Speaker, 88-year-old Ernie Little went into that hospital on March 17. He's struggling with serious health issues. He's a veteran of the liberation of Holland. His family is afraid he'll never leave that hospital alive. Routine is what closures have become in that hospital. Lockdown has become a routine event recently because of these outbreaks. It's clear that hospital cleanliness is key to controlling outbreaks of infectious disease.

This minister is in denial. The people of Nanaimo know the truth. They know that this minister won't reverse his disastrous contracting-out policies that have led to this in Nanaimo. Why doesn't he do the right thing and speak up for patients like Ernie Little in Nanaimo and make the changes that will keep those patients safe?

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Hon. K. Falcon: The more appropriate question is: why doesn't the member do his homework so he would discover that, actually, these cases came from the community and were brought to the hospital? The hospital is dealing with the fact that the norovirus and C. difficile cases came from the community into the hospital. That is an inconvenient fact, but it is a fact.

Interjections.

Mr. Speaker: Minister, just take your seat.

Continue, Minister.

Hon. K. Falcon: The other thing the member might want to look into is the fact that we actually set up a patient safety quality office headed by Dr. Doug Cochrane. Dr. Doug Cochrane has actually been taking best practices and ensuring that best practices and cleaning standards are applied right across the system, right across British Columbia. That never existed, again, under ten years of the NDP, nor did the independent auditing.

The fact is that it is really wrong and irresponsible for them to try and blame health care workers for viruses that were brought from the community to the hospital. They are actually doing an exceptional job in dealing with outbreaks from the community brought to the hospital.

KASLO PRIMARY HEALTH CARE CLINIC

M. Mungall: For years, Kaslo primary health centre has been the model of community care. Rather than supporting this strong interdisciplinary team, the B.C. Liberal government's local health authorities are waging what the local doctors and nurses describe as a war of attrition against the clinic.

The Minister of Health says primary care is key to a quality health care system and to containing costs. Will he, on those grounds, instruct his health authority to stop dismantling this model clinic that north Kootenay Lake communities rely on?

Hon. K. Falcon: As I've said many times in this House, the fact of the matter is that even with a 15 percent increase in health care funding over the next three years, it does not mean that we continue to do everything exactly as the status quo. I know it's hard for the NDP to believe that even with 15 percent increases, there are still demands on the health care system. But there are.

So the real question is: should we be asking the health authorities to try and do more in delivering those services as efficiently and effectively as they can? Yes, we believe we actually owe it to the public and the taxpayer to do those when an environment of 15 percent health care increases is still a challenge.

Now, the NDP position is: "Do not change anything. We must not ever look at different ways of doing things. We must always do them exactly the same and just pour more money into the system." That is not our approach. That is the approach of the NDP, and we won't be following that approach.

Mr. Speaker: The member has a supplemental.

M. Mungall: I know that Kaslo is just a dot on the map for the minister, but let me tell you this issue is very important to people who live in that community. Things do change in the health care system. Actually,
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the changes that were first implemented to create the primary health care centre happened in 2002 under this government, and now they're pulling back.

Public health nursing is being cut from full-time to part-time, home care nursing is being slashed in half, and primary care nursing is also being reduced to a half-time position. "Primary care is an ounce of prevention," says the minister, but actions — these cuts — speak louder than words.

Will this minister back up what he says with action and protect this clinic's ability to deliver primary care in the Kootenays?

Hon. K. Falcon: I'm a little surprised at the nature of the question. If it's so important to the member, I'm surprised the member hasn't contacted me, hasn't stopped by the office and has sent nothing over to suggest that this is an issue.

Interjections.

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Mr. Speaker: Members.

Continue, Minister.

Hon. K. Falcon: It is a bit of a surprise. Generally speaking, if you have a real concern about an issue in an area like Kaslo, you would present that to the minister's office. I've certainly had other members of the opposition that have problems bring them forward, and we try and deal with it.

You know, I pride myself on trying to make sure I am up to speed on every aspect of a $15 billion portfolio. But it would be helpful if the member would send some information over, identify the issue she's concerned about, and we'd of course be happy to try and help the member deal with that issue.

LOAN PROGRAM AND SALES TAX
EXEMPTION FOR LEAKY-CONDO REPAIRS

S. Simpson: In 2008 McClanaghan and Associates conducted an assessment of the Homeowner Protection Office leaky-condo program. They determined that over 72,000 condominiums in B.C. were leaky and that as of 2012 between 14,000 and 24,000 would still need to be repaired.

We know the government cancelled the loan program in July 2009, leaving these homeowners with no meaningful government support. But now we know that by implementing the HST and cancelling the PST rebate on repairs, effective June 30, the government is removing the only other support available to them. This assessed PST rebate averaged $688 in 2009.

My question to the minister is: why have the B.C. Liberals now completely turned their back on the thousands of people who need to repair their homes?

Hon. R. Coleman: It was last July that we actually announced we would be doing…. Both the homeowner protection loan program would sunset, and also at the same time, the PST program would sunset.

Nothing to do with the HST, Member. It's got to do with the fact that we looked at the program. We did our analysis. We knew that we were well over what was predicted it was going to be, well over $700 million in homeowner repairs.

We knew that during the given time period, looking at the time period where new building envelopes were put into place in British Columbia…. The time period that people should have identified their issues and been within the construction loan program had long gone past the date that everybody predicted, including the previous government.

So we decided to move on with that, and it had nothing to do with the HST, Member. It's a fact of the matter that the PST program is sunsetting the same as the HPO program was, which we debated last fall. We've answered in other question periods. We've done it twice in estimates, and the member is well aware of it. We're not about to change the position.

Mr. Speaker: The member has a supplemental.

S. Simpson: It was bad policy. The minister was wrong last fall, and he's still wrong today.

The PST disappears when the HST comes into force. When it disappears, there is no more PST to rebate, and the minister knows that. As of September 2007, 32,000 homes were repaired. They received about $21 million in PST rebates. That's gone now. We estimate that the people who are still waiting to repair their homes are going to lose somewhere between $10 million and $17 million because this government is implementing the HST and cancelling this rebate.

These are people who have no choice but to repair their homes. These repairs often cost in the range of $70,000-plus to do, and now what little support they had left from this government is gone because of the policies of this government around the HST. How can this government justify killing this modest bit of support for the thousands of people who face leaky condos and instead giving them the HST that they hate?

Hon. R. Coleman: Anybody that has their application processed or in by 4:30 on June 30 will still get their PST rate on leaky condos.

The irony of it is this. This is the opposition that wanted to keep the PST and charge everybody in B.C. 19 percent in provincial sales tax and harmonized sales tax, because they're opposed to it.

Interjections.
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Hon. R. Coleman: There they go, the great….

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Interjections.

Hon. R. Coleman: I just heard you want to keep the PST and have the HST on July 1. That's what I heard. I saw you all vote against getting rid of the 7 percent sales tax, and now you're whining about the fact that we're reducing taxation to British Columbians.

I know one thing. You, your own government, said it was a ten-year program. It went 12. You said $250 million. It went to $750 million. It helped the people with leaky condos. We changed the code so we could deal with building envelope failure. We've made the adjustments to the building code in British Columbia, and because you want to keep the PST and have a 19 percent tax, you go and explain that to your constituents, hon. Member.

SCHOOL JAZZ BAND PROGRAM
ON SUNSHINE COAST

N. Simons: Right now the Elphinstone Jazz Band is flying over the Prairies on their way to Ottawa to perform in a music festival that showcases some of Canada's best and most dedicated young music students. However, because of budget shortfalls caused by this government, the school district is cancelling their jazz program next year. Will the minister take this opportunity to explain to students in Gibsons why the school district can't afford to run this highly prized band program?

Hon. M. MacDiarmid: Thank you for the question, to the member opposite. As the member is well aware, our government has placed a priority on education at a time when governments around North America are struggling to meet budgets because of the economic downturn. We've increased education funding — this year, an additional $112 million for education — and we've done this at a time of great economic challenge.

REGISTRY OF ASBESTOS EXPOSURE RISKS

R. Chouhan: Asbestos is linked to lung diseases, including cancer, and has killed untold thousands of Canadian workers. Workers are far too often exposed to asbestos in building renovations and demolitions. Without knowing where the asbestos is hiding, these workers have no chance to take proper precautions.

My question is to the Minister of Labour. Will the Minister of Labour commit today to create a registry of locations, facilities and buildings where asbestos is present so workers aren't walking blindly into dangerous situations?

Hon. M. Coell: I met with the B.C. Fed this morning. They discussed that issue with me. I've taken it under advisement and will give it consideration.

CORRECTIONAL FACILITIES
IN OKANAGAN AREA

M. Farnworth: Two years ago and six Solicitors General ago, the government cancelled a press conference to announce a new corrections facility in the Central Okanagan, a corrections facility that was to help deal with the increasing problems and challenges that corrections officers face in this province where they've seen increasing violence and the ratio in facilities of prisoners to corrections officers has increased significantly. In the case of Kamloops, the ratio is now 40 prisoners to one corrections officer.

Can the Solicitor General tell us when the Central Okanagan can expect to see a new corrections facility?

Hon. M. de Jong: I reject the member's assertion. You're not allowed to count me twice. [Laughter.]

Interjections.

Mr. Speaker: Continue, Attorney.

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Hon. M. de Jong: Mr. Speaker, the issue is a serious one and relates to not just the housing of prisoners but the fact that we are taking other steps, both on the investigative side and on the prosecutorial side, to aggressively pursue those who commit the most serious of crimes. The demand on the system is increasing.

That's why we were anxious and have proceeded with the new facility that is under construction in Surrey, which will provide an outlet for the increased capacity that we need. We are, of course, continuing to explore and move ahead with the provision of additional facilities elsewhere in the province.

OFFSHORE OIL DRILLING ON B.C. COAST

R. Fleming: In the weeks following the catastrophic Gulf oil spill at BP's offshore drilling site, all of the governors and all of the senators of every Pacific Northwest state who share our coastline have called for a permanent ban on offshore exploration and drilling.

The Premier is in China this week. When he was there last in 2006, he told a business audience that the B.C. Liberals would open up our coast to drilling within a few years.

My question is to the Minister of Environment. What is the Premier telling oil and gas firms on this trade visit when he's in China? Is he saying: "Come to British Columbia, the best place on earth to open up drilling in the world"?
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Hon. B. Lekstrom: I think it's fair to say that everyone is still gravely concerned with what's going on in the Gulf, and we're all, I think, very hopeful that the remedy can be sought and the cleanup can begin. Our message has not changed, nor has the reality that there's a moratorium off the coast of British Columbia.

The federal government, I know, is watching closely what's taking place in the Gulf as well. We have no intention, unless something can be done…. Whether you're on land or on the water, if it can't be done environmentally sound and scientifically safe, it won't happen in British Columbia.

Mr. Speaker: The member has a supplemental.

R. Fleming: The minister just finished by giving assurances that were given to the people of Louisiana, ones that can't be given with this industry. The public in British Columbia overwhelmingly reject the environmental risk that this Premier and the B.C. Liberals lobby Ottawa to take. British Columbians support continuing the moratorium that every government of every political stripe in B.C.'s history has maintained.

Will the Minister of Environment stand in this House today and promise British Columbians that this government will cease lobbying the federal government to lift the moratorium on coastal oil drilling off the coast of B.C.?

Hon. B. Lekstrom: I can't be much clearer than what I said earlier. We said, for the people that want to listen…. It's interesting. "We should look at the offshore ten or 20 years from now when supplies are absolutely critical" — the Energy critic from the NDP. Interesting. "The moratorium ought to be lifted" — former NDP Premier Dan Miller. It's interesting.

What we have said is that when we look at resource extraction in this province — whether it be the issue we're talking about here today, whether it be offshore, whether it be onshore natural gas drilling, whether it be the extraction of our forests — whatever takes place in this province will only be done if it can be done properly in a sound scientific manner, one that respects the environment. If that can't happen, Member, it won't happen in British Columbia.

[End of question period.]

Orders of the Day

Hon. M. de Jong: In Committee A…

Interjections.

Mr. Speaker: Members.

Hon. M. de Jong: …I call Committee of Supply — for the information of members, the estimates of the Ministry of Finance — and, in this chamber, second reading debate on Bill 21.

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Second Reading of Bills

Bill 21 — Forestry Service
Providers Protection Act

Hon. P. Bell: I move that Bill 21 be read a second time now.

The Forestry Service Providers Protection Act repeals the antiquated Woodworker Lien Act and brings lien legislation for logging contractors into the 21st century. This piece of legislation establishes two individual levels of protection for forest workers or for forest service providers.

The first element is a lien that takes place as long as the primary licensee remains solvent, and it operates much in the same way that normal lien legislation would operate. In fact, it is replicated from other lien legislation. If a company or licensee becomes insolvent, then you move from the regular lien legislation into a form of insurance or a trust that allows or ensures that the contractor will be paid for their services.

[L. Reid in the chair.]

This has been a very complex issue involving deep consultation with logging service providers as well as licensees, and we spent a significant amount of time over the last year and a half developing this legislation.

This legislation came as a result of various insolvencies starting out, perhaps, with Skeena Cellulose and then moving forward to the more recent Pope and Talbot insolvency. We need to ensure that our logging contractors can be provided with a reasonable level of security and finance their businesses in an orderly way.

The challenge comes in ensuring that we're not negatively impacting licensees' availability of credit by displacing the order that various credit providers are involved in, in an insolvency situation, secured versus unsecured creditors. We think we've found a good balance between the lien legislation with contractors or with licensees who are not in protection and then moving to a trust or an insurance model after that point in time.

As I said, Bill 21 has two key parts. The first operates in the identical way to normal liens, allows a contractor to utilize the services of a sheriff should a licensee not fulfil their payment obligations to the contractor, and then the insolvency model that we've talked about.

This is, by the nature of the legislation, as I said, very complex and I'm sure will involve a significant amount of
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time during the committee stage of this bill where I think we'll be able to probe all of the individual elements.

As I said, from the perspective of someone who worked as a logger in the 1990s, I certainly understand the need to be able to have a secure business and to ensure that you're paid for the services you provide. That was not the case prior to this legislation coming forward. There has been a gap that was identified by the truck loggers as well as some of the interior logging associations. We're pleased with this piece of legislation, to be able to fill that hole and ensure that they are paid.

As I said, we went through a significant amount of consultation. This has the support of all the logging associations, including the Truck Loggers Association, the Central Interior Logging Association, the Interior Logging Association and the North West Loggers Association, as well as the support of the Council of Forest Industries and the Coast Forest Products Association along with the Interior Lumber Manufacturers Association.

I will look forward to the debate in the committee stage of this bill, and I'm sure that members will have comments at second reading stage as well.

N. Macdonald: Always a pleasure to stand. Bill 21 is, as the minister has alluded to, a fairly complex bill and one that obviously begs a lot of questions in terms of how it's going to work.

I think one of the ironies with Bill 21 is that the need certainly was far greater when the changes to the Woodworker Lien Act were first proposed years ago. Since late 2007 some longstanding contracting companies have disappeared. I think many will have heard of companies such as Adama Enterprises, LeRoy Trucking, Hayes Forest Services, Madill Equipment and Munns.

Some of these had been in operation for over 90 years and were caught up in, I think, one of the most unprecedented collapses of the forest industry. Well, it was certainly the most unprecedented collapse of a forest industry that we've seen in British Columbia.

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Many contractors close to where I live were also caught up in the collapse of Pope and Talbot, where work had been done. Logs were there, but others had priority over those contractors. So it's certainly an issue that many people feel very deeply concerned about.

In talking to contractors about this legislation…. I'll just highlight for the minister some of the things that we'll be exploring as we go through the detail, because the key to this will be in the detail and how it's actually going to work for people on the ground.

We are hearing some concerns from contractors about the lien provisions. Obviously, they are not particularly willing to speak publicly, but there are complications that they say will make this bill largely ineffective in terms of the lien protection. I think the minister has alluded to the complication for trying to deal with this issue. There are multiple interests dealing with this issue, and very clearly, the major licensees obviously had concerns about changes to the lien provisions.

I think, also, you will have workers groups that will have concerns about changes to the lien provisions, and I presume that when the minister was consulting with groups, he would have consulted with the major licensees. He's alluded to the very many organizations that presumably there was full consultation with, and I presume that he would have included, as well, groups like the Steelworkers, who have used the existing legislation in the past to deal with some of their issues.

Those concerns, I think, go a long way to explaining why this bill has taken so long to come to the House. It is over a year and a half since the promise was made, and the promise was made at a time when there was tremendous need. So we are going to be exploring, in third reading, very specifically how the lien provisions are going to work, and then from there we'll make a judgment as to whether the minister has found the right balance in terms of looking after the various concerns that are out there and the various parties and interests that want this legislation to work effectively.

This is what some of the contractors have said. If they complain about the lien provisions, it makes it more complicated as they participate in discussions about how the forestry service providers compensation fund is going to work.

Again, one of the concerns you have with a piece of legislation like this is that there is a fund, there is perhaps a hint of what the fund may look like, but it is very difficult, in looking at the legislation or from the minister's comments, to really get a clear sense of how this fund is going to work. Because it's a piece of legislation that really leaves it for a later time to come up with those provisions, it's clear that there's still a great deal of work to be done in actually putting together the framework for that fund.

Having said that, the expectation that I would have and that the public would have is that in bringing in the piece of legislation, the minister must be very close to coming up with the key framework for how the fund would work. There would be, of course, questions that we would have during the third reading debate where, for the public's information, we have an opportunity to ask the minister with staff specific questions, and we're really not restrained in terms of the amount of time.

It is often the most productive period of the law-making process, where we get, hopefully, clear answers on what is being proposed with what the minister has quite correctly characterized as a complex and challenging piece of legislation to put together.

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With this fund all, really, in regulation, there is a problem with that. We will have questions about the authority that regulates the fund. That invites questions.
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We will have them. There is the source of the funds. We will, of course, want to know in detail what the government is proposing in terms of providing money to fill this fund.

I think there's also another issue that we will need to address, and we will find the sections to do that. The minister and I attended, as I'm sure the ministers will normally attend, the meeting of silviculture contractors. He will have heard the same concerns that I have from the contractor community. They will quite correctly ask how this piece of legislation addresses the concerns that they have.

These silviculture contractors, of course, are those that run nurseries. They do the technical preparatory work for cutblocks and for silviculture work. They are the ones who go out and replant our forests. They do the spacing and thinning. That's a community that has likewise identified concerns about being left in a bankruptcy with no capacity to get money that is owed to them.

I think it's worthwhile. I mean, this is an attempt to deal with what we know takes place when there is the collapse of a business. There is a whole ripple effect, because of course, the business is a series of contractual obligations that you have. So when a business goes down, as Pope and Talbot did…. There are multitudes of businesses that have operated successfully but will find themselves exposed in a way that certainly seems unfair and definitely is not in the public interest to allow to happen.

We're going to be looking and just trying to understand whether within the legislation there are provisions for silviculture contractors. If there aren't, then we will be asking the minister to explain what the rationale for not including them is. We'll also be talking about perhaps some future ideas that the minister or the government has to deal with that particular issue.

We're also going to have questions about how the changes are going to affect steelworkers and other unionized workers who have expressed concern that the existing Woodworker Lien Act has been useful as a tool to protect some workers rights. We'll be questioning the minister and looking for an explanation on whether that concern is something that has been addressed with this legislation or is something that the minister has not considered in terms of what he's brought forward in this legislation.

The act comes to address — as I just come to the end of my comments here — the unparalleled collapse of our forest industry. Since the B.C. Liberals took over in 2001, we've lost 30,000 jobs and 71 mills. That has been a very difficult period for a tremendous number of rural communities. The contractors are just one group that has been impacted.

I think that for those of us that come from rural communities, that know individuals who have been caught in one of these bankruptcies, there's certainly a hope that it will address their issues. But as I say, there are many other friends and neighbours that we have…. We are going to be testing this legislation to make sure that it addresses those concerns as well.

With that, we will really be able most effectively to judge the quality of the bill in the third reading, and I think that we will get to that fairly quickly, I would assume in the next day or two. That's a process I look forward to.

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I know my colleague has comments, and then I think after that, unless there are members from the government side that have comments, we'll be fairly quickly moving on to third reading and a few other forestry bills.

With that, I thank you for the opportunity to speak.

B. Routley: I definitely have some very serious concerns about what's going on here as this government lurches from one change to another in amending the Forest Act, cobbling together all these bits and pieces from almost out of thin air.

[Mr. Speaker in the chair.]

This act even seems to go against what the Premier of the province suggested was going to happen as recently as 2009, when the Premier spoke at the TLA.

"We think it's important when people do work that they actually have an opportunity to be paid for it. This is something that we've also talked about significantly over the past, so I can tell you that the minister will be introducing legislation" — and here are the key words that I want to focus on — "to strengthen the Woodworker Lien Act to make sure that contractors have the right to freeze logs they've harvested in the event they are not paid for the services that they have already rendered and have been rendered by the contractor to the licensee."

Now, here's the problem with that. The Woodworker Lien Act was established way back in the 1900s. There was a lot of piecework that happened back in those days. Individual workers were paid for the pieces of work that they did, and the workers were able to put a lien against the work that they'd done.

For example, if the faller had done the falling and wasn't paid for the work, there was the ability under the Woodworker Lien Act to put a lien on that timber in order to make sure he was paid and, if necessary, go to the courts and deal with it in that way.

While we're talking about what the Premier commented on to the truck loggers, he was suggesting that it was going to be strengthening the Woodworker Lien Act. What this act actually does…. It starts off in the explanatory notes saying that it repeals the Woodworker Lien Act.

I need to add that in the past this act has been relied on successfully by a number of workers. While it's admirable that the government is concerned about contractors…. I, too, saw a number of contractors getting shafted by various licensees over a period of time.
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I think it is important that there be some provisions to help them. But I would add: what about the workers, the thousands of workers?

I saw the workers myself that worked for Munns and Leroy and Hayes. I actually represented those workers that worked for those contractors at that time when they were going bankrupt, and they got shafted out of their wages and their benefits. They got shafted. At the end of the day they didn't get their wages. They didn't get their vacation pay. They didn't get all of their benefits. They didn't get their pension plan paid for.

They left liability all over the place to all kinds of small businesses, including pension plans. So I find it absolutely unacceptable that this would cut out the very people that were originally intended to be protected under the Woodworker Lien Act, and that was woodworkers — not just contractors, all of the woodworkers. It is unacceptable that we're cutting the very people that do all of the work.

Sure, there's a handful of contractors, like Ted Leroy himself. He was around for a long time. It is brutal what happened to a guy like that at the end of the day, but you know, he fell on a sword of his own making.

You have a contractor that goes to work, and he buys all of this equipment based on a promise from a major, like TimberWest, that they're going to get to log all this timber. I happen to know that over 300,000 or 400,000 cubic metres of wood in the Johnstone Strait…. Imagine this. A contractor's gone and leased the equipment, maybe even bought a bunch of equipment, and at the end of the day, they just get a phone call: "We don't need the wood. Don't go and log at all in the Johnstone Strait."

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Imagine yourself, hon. Speaker, or any of the other members here, if you were a contractor, and you had gone out on the promise of all this timber to go out and cut, and you had gone out and leased all of this equipment or bought equipment based on some hocus-pocus deal that they got, that said that they were going to be given this timber.

Yeah, everything works out fine as long as the market is good, but as soon as the market collapsed, they're just abandoned by the side of the road like yesterday's news by a lot of these big companies, who just say: "Oh well. Those are the breaks." They're sitting there, stuck with all this capital equipment. That's what's happened.

In the context of this act, people need to understand why we're dealing with this act. We had all kinds of truck loggers come forward and say: "We're getting shafted." And they are, but there are a whole bunch of other things behind this.

There are the workers who do the falling and the bucking. They work on the yarding and loading — all of the truck drivers. Why shouldn't they be left in the rearview mirror? Why would we have an act that just takes care of a handful of contractors? Well, good for them. We're taking care of contractors, but what about the suppliers?

If you're some guy that's got a bit of wire rope and you're making cable for a contractor, how do you think those people are going to feel? Some small business in Port Alberni or Ucluelet or somewhere making wire rope so they can supply the big contractors, and at the end of the day they get shafted. I've seen it with my own eyes. I've gone through the list of contractor after contractor that's been supplied by all of these small businesses, in communities all over British Columbia.

This bill is contemplating making a public fund. That's what I'm concerned about. Again, I haven't heard the details, but boy, if what I'm hearing is at all true — that we're thinking about using public dollars to hand off to a handful of contractors and that we're going to leave everybody else behind — boy, there is something wrong with that. We're taking the wrong medicine. It's the wrong act.

Again, was there consultation? I don't believe so. I talked to some folks, and they told me that they hadn't heard a thing about all of this, and they certainly didn't know that they were going to be cut out of the piece. Has the minister looked at all of the previous cases, the case law behind this? I'd be real interested in that, because there are all kinds of situations where people have put a lien.

I'm aware of a case where some workers put a lien against a boom and said: "We did the work. We felled it. We hauled it. We got it in the water, and now somebody wants to take that wood. Some big company wants to go and run it through their mill without paying up." That money has to flow back to the workers.

Now, if there were some words in here that gave comfort that the contractors are actually going to pay all of the workers who I've seen left out in the cold time and time again…. Again, you know what I'm concerned about? This is another one of these things that could end up with unintended consequences. We could end up with a handful of contractors.

Again, you think about Leroy. That's the one that loaded up the equipment and ended up on some whale-scratching beach, dumping all of that equipment in the ocean, and there's some big lawsuit against them.

I don't know whether the money from this would go to pay off some of the lawsuits, exactly how that would work. If that was public money, how do you think the public would feel today if you played the tape back, if we had this legislation and some kind of pot full of money out of the public purse was going to go to some contractor in circumstances like that? Boy, I'll tell you, I think there would be a lot of egg on some people's faces about that one.

So this needs to be thought through carefully. I know we're going to have the opportunity to go through the
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questions on this, and we'll be asking: what about the workers, the suppliers, all of the community businesses?

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You look at Donald Hayes. I want to mention that one. Donald was around for a long time on the coast of British Columbia. In fact, I know this was a company that…. They were on the front page of a magazine, one of the best-run companies on the coast of British Columbia.

You know what happened? We got into helicopter logging, and helicopter logging was…. They were making out like bandits. They were getting paid really well for what they were doing. They went from one helicopter, those great big Sikorsky helicopters, and pretty soon they were buying another one. Then they got another one. They even got…. Right there, just outside of Duncan, we were working on jet engines for helicopters. It was something to see. You'd have to go down there.

I'll tell you, when this act that they're talking about applying to help pay for some of that…. What it was, was grandiose ideas. Somehow we were going to do helicopter logging forever, and they got to five helicopters or six. At the end of the day, when the markets downturned, here they are stuck with all of this iron and no work for it to do, and the bills have got to be paid. The bank is not interested in your excuses about why you've got all this iron and nothing to do with it.

So at the end of the day, they were forced into bankruptcy. It is sad. It was certainly heartbreaking for me at the time to see not only those companies that had been around for a long time on the coast, but all the workers that worked for them. That's what I'm talking about.

You know, it's great that the government on the other side there have bleeding hearts for the contractors and the TLA. They get really nice. They like to go down there and get a standing ovation once in a while from somebody for saying all these good things like we heard the Premier say about improving the Woodworker Lien Act, but apparently that's not what we're doing. We're going to tear it up and throw it out. To heck with the workers and their families, and to heck with the suppliers and the communities and the small businesses that are attached. That's just plain sad. It's unacceptable.

This act needs some really serious amendments to it, in my opinion. It needs a great deal of work, and I hope the government will listen and go back…. Even if they went back to the Premier's own words that said: "Let's take the Woodworker Lien Act and improve on it." You know, I'm all over that. Like, I'm really interested in talking about how we improve the Woodworker Lien Act. But if we're going to tear it up and destroy the rights of workers and their families and the suppliers and the communities, that is a really serious problem, and it is not on.

I'll have more to say about this, but as you can see, I get really excited. I went through all those bankruptcies, and it wasn't a pleasant thing. So there's a reason for me to get upset. I care about those workers and the community, and they've got to be taken care of.

E. Foster: I rise today to speak to the Forestry Service Providers Protection Act. I can assure the member that the people on this side of the House are extremely concerned about the workers. That's what this is all about.

I worked in the forest industry all my life. I've been a logging contractor. I've been an employee of contractors.

Speaking to the four different associations that represent the logging industry throughout the province of British Columbia, and that's where the consultation was done…. The industry people, the licensees, the representatives of the Truck Loggers Association, the Interior Logging Association have worked very hard with the ministry on this initiative. It's a two-part protection system, if you will. There's the lien act portion of it, and then for companies that become insolvent, there is, if you will, the insurance-type fund that will protect the contractors.

[L. Reid in the chair.]

To be concerned about the workers…. If the contractors don't get paid, the workers don't get paid. So this providers protection act does exactly that. If a company becomes insolvent or if a company chooses not to pay their contractors, those contractors can't pay their employees. I know that in my area some of the larger contractors would have hundreds of thousands of dollars on the books at any given time, and this will protect them.

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This will enable them to borrow money to extend their line of credit so that they can pay their suppliers and they can pay their employees. The member opposite was concerned about the employees. This will protect those employees, will make the money available for the contractors, their employers, to pay.

The other thing that I see as a benefit here…. As a small contractor, I shipped wood to the major licensees, and I also many times had the opportunity to ship to some of the smaller operations. Quite often they were specialty-type mills, and they were able to pay a little more for their logs. But in uncertain times you maybe weren't quite so optimistic about selling to some of these smaller fellows, so you didn't. With this act, especially the small logging contractors will be able to do business with some of the smaller manufacturing operations with the confidence that they're going to get paid.

I'm not going to take up any more time on this. As the member for Columbia River–Revelstoke suggested, the meat and potatoes, if you will, of this will be at the committee stage, and I know the minister is anxious to answer a lot of the questions that some of the members
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opposite have and to clarify, certainly for the public and people in the forest industry, how this is going to be of great benefit to contractors and employees alike.

I certainly support this. As a person who has made their living in the forest industry for the last 40 years or so, I applaud this. It's an opportunity for us to protect both the contractors and their employees into the future.

Deputy Speaker: Seeing no other speakers, the minister closes debate.

Hon. P. Bell: I appreciate the opportunity to close debate. Listening to the member for Cowichan Valley, what total and utter nonsense. I am tempted to call division on second reading to see how the member will vote, because I'm relatively certain that the member will vote in favour, yet none of his comments would indicate to me in any way, shape or form that he is supporting this bill. So it will be interesting to actually see how the member opposite chooses to vote.

[Mr. Speaker in the chair.]

This act is something that has been very complex and very challenging. We are confident that we have the broad support in the harvesting sector. It is targeted specifically at that sector. Certainly, I'm looking forward to the comments in the committee stage of this debate.

With that, I move second reading.

Motion approved.

Hon. P. Bell: I move the bill be referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

Bill 21, Forestry Service Providers Protection Act, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

Hon. B. Penner: I call committee stage debate on Bill 7, Forests and Range Statutes Amendment Act, 2010.

Committee of the Whole House

BIll 7 — forests and range statutes
amendment act, 2010

The House in Committee of the Whole (Section B) on Bill 7; L. Reid in the chair.

The committee met at 3 p.m.

On section 1.

N. Macdonald: Section 1 deals with changes to language. For instance, section 1(a) says, "by adding 'that' before 'portions' and by striking out 'attributable'…" and so on. Just for the public's information, these changes, while minor and often dealing with just one word or two, can have a dramatic effect.

I'll just quickly give an example of a change in an education bill where "and" was changed to "or," and it meant an incredible difference to how special needs were dealt with. When we're looking at these bills, even though it's just a change of one or two words, the impact can be really profound or it can be just a minor change. Part of what we will be doing here is just trying to understand — dramatic or a minor change?

Maybe the first question would be with section 1. It's essentially changing the definition of "allowable annual cut" by changing the wording from "timber and terrain" to "timber or terrain." Maybe the first question to the minister is an explanation of the need for the section. What is the problem it's intended to address?

Hon. P. Bell: The amendment to this section is intended to allow us to better define areas that we wish to partition, specifically around pine stands, and our ability to manage the long-term sustainable harvest, in the central interior portion of the province in particular, as a result of the potential impacts of the mountain pine beetle.

N. Macdonald: Part of the concern will be, of course, that the projections for many of these areas are that there's going to be a massive reduction in the amount of wood that's available for major licensees and others in the area. On the change to the language, the context for this is the concern that by changing the language, you might address a problem in the short term, but you might create a situation where in the long term you're not looking after the best interests of the forest.

The new language obviously allows greater flexibility in what is counted by, presumably, the chief forester. The question is: why would you want to do that? Why do you want that increased flexibility? What is the minister or the government looking for in creating greater flexibility?

Hon. P. Bell: This is really a housekeeping amendment. It does create additional flexibility to allow the chief forester to partition cuts in a way that ensures that the objective of the partition is met — as an example, partitioning specific pine stands and allocating a portion of the cut in any given TSA to those pine stands, but being able to do it in a way that might involve terrain parameters or specific species parameters. It is a tool that will create additional flexibility, but it's largely a housekeeping amendment in nature.
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N. Macdonald: I think it's pertinent to this section. The minister is talking about pine beetle areas. Has the ministry used partitioning on the coast or in other areas, or is this something that would first be in place in the pine beetle areas?

Hon. P. Bell: Partitioning has been used both on the coast and in the Interior. The coastal example was specific to the annual allowable cut partition around cedar, to ensure that licensees were harvesting the full profile and not just the cedar component of stands.

Section 1 approved.

On section 2.

N. Macdonald: Section 2, then, is a change in terms that allows the cabinet to prescribe, by regulation, the maximum term of the innovative forest practices agreements. Now, these are not new, the innovative forest practices agreements, but they're not all that common.

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Maybe the minister can explain how many of these innovative forest practices agreements there are that are up and running, and give a rationale at the same time of the need for removing the 15-year cap.

Hon. P. Bell: There are seven IFPAs altogether around the province. Originally the term of the innovative forest practices agreement was 15 years, and that was actually placed in legislation. If we did not amend the legislation, the innovative forest practices agreements would expire at the conclusion of their 15-year term. That was a sunset clause that was put into the legislation about 15 years ago.

The innovative forest practices agreements have largely been believed to be a success. We've seen good reasons to continue to support those. There were a couple of options. One of those options would have been to put a new sunset date in place for the innovative forest practices agreements. You could have done one or all seven or a combination of those.

It was deemed that it made more sense to actually do that by regulation instead of doing it by legislation, but I think, generally speaking, the IFPAs have been a success. It was a good innovation, and we intend to see those continue on. That's why this amendment is in this piece in this act.

N. Macdonald: Thanks for the answer. Maybe just a bit more expansion. The minister said that there was consideration of setting another term and that it was felt it was better to go to an unlimited time instead of by regulation. But maybe just expand on that. What were some of the considerations, and what was the persuasive argument that led to the minister concluding that using regulation rather than a set period of time was the best way to go?

Hon. P. Bell: I just need to correct the record. I said there were seven IFPAs. There are actually eight IFPAs around the province: Williams Lake; 100 Mile House, which is a single IFPA; Kamloops; Fraser; Arrow; Merritt; Prince George; Morice and the Lakes, which is a single one in the Okanagan. Those are the eight locations of the IFPAs.

Again, the IFPAs largely have proven to be a success. We want to make sure that each of the individual TSAs in which those IFPAs are located — that we tailor the IFPA to meet the needs of that specific timber supply area. Some may look for a longer extension period; others may look for a shorter extension period, depending on the nature of the IFPA.

Rather than amending it by legislation and then having to re-amend it at some future day by legislation, I believed it made more sense to do this strictly by regulation and giving us the flexibility to do this.

This is not a significant amendment by the nature of it. IFPAs are a good tool and not something, in my view, that needs to be embedded in legislation. It can easily be handled in a regulatory measure.

N. Macdonald: Now, these terms are highly technical, especially to a layman. Just so that I understand the IFPAs, because as the minister said, they're not terribly common. How do they relate to the assessment of the annual allowable cuts? Are there different criteria that the chief forester would use in terms of looking at innovative forest practice agreements, in terms of: does it have any impact at all in establishing what a cut will be in a certain area?

[1510]

Hon. P. Bell: One of the points of difference between an IFPA and an area that is not being managed under an IFPA is that in an innovative forest practices agreement the AAC determination is done by the regional manager, not the chief forester — so another statutory decision–maker. It is done differently in that circumstance.

The companies, or licensees, that operate within the innovative forest practices agreement area work together to establish a forestry plan. That's then approved by the regional manager and implemented and delivered by the individual licensees in the area.

The goal of many of these plans is to try and find ways to more effectively manage the land base and achieve higher levels of annual allowable cut, but those determinations are made by the regional manager. That is a point of difference, because in a non-IFPA area it is the chief forester, not the regional manager, that determines the cut level.

I'll just remind the member opposite that, of course, this legislation all goes back about 15 years.

Section 2 approved.
[ 5486 ]

On section 3.

N. Macdonald: There's quite a bit in section 3, as well, that I just want to understand. Maybe the most effective way of dealing with section 3, as well, is to simply provide the rationale for section 3 and for the minister to characterize it as either a minor change…. This obviously seems like a far bigger change that's been suggested here. Maybe, to begin with, the minister can characterize what is intended with this section and also give his impressions of the scope of the change.

Hon. P. Bell: This particular section of the bill is intended to protect the midterm timber supply, in particular with regards to the mountain pine beetle areas. As we all know, there are still significant volumes of dead pine that are available to us, and we want to ensure that we protect the green stands for as long as possible so that there is incremental resource through the midterm, which I consider to be 15 to 70 years in terms of timber availability. It just gives us incremental tools to direct the harvest into, particularly, dead pine stands.

N. Macdonald: The minister invites the question of what specifically is being done to protect that green fibre. How does that specifically work?

Hon. P. Bell: This particular tool would give the chief forester the ability to set an upper limit on the harvest of any green stands within a mountain pine beetle area. There would be a maximum green volume that could be harvested and then the partition volume, as well, of the dead pine stands. It sets an upper limit for the TSA, for the licensees, on green trees to be harvested in that area.

N. Macdonald: I guess part of what I want to understand is: how does this relate to timber supply reviews that are currently underway?

[1515]

Hon. P. Bell: I am tempted to say that this doesn't directly relate to the timber supply reviews that are currently underway, but that's not entirely accurate, because without this tool, the chief forester would have to make certain assumptions about the amount of green timber that would be harvested over the next ten to 20 years. That would then reduce the amount of timber that was available in the midterm timber supply and not allow him to secure the midterm supply of green stands.

So although there's perhaps not a direct relationship between this particular amendment and the timber supply reviews, there is an indirect one in the sense that the chief forester, knowing that he or she has access to this tool, is allowed a broader range of decisions in protecting the midterm timber supply.

N. Macdonald: Hopefully, this is connected. So this is a tool for the forester. Now, the minister actually makes the allocation. What is the relationship between this and allocation? Is there a relationship? How does the minister see this impacting decisions he'll have to make?

Hon. P. Bell: I just want to make sure that the member isn't confused between two terms, in terms of annual allowable cut and allocation. The chief forester establishes the annual allowable cut. The minister actually allocates the annual allowable cut for any given TSA.

Once the chief forester sets a partition amount of green timber, then it would be up to the Minister of Forests to decide how that timber is metered out. Now, in some situations one might choose to meter out the green timber in a different way than on a straight-line basis relative to what the existing licence volume is. That would largely be dependent on the nature of the mill that was being supplied.

The member for Cariboo North has plywood plants in his region and would know that you're really unable to make veneer out of dead pine stands when it's checked significantly. So a plywood plant might require a higher level of green timber to be provided to it. So the Minister of Forests would presumably consider those sorts of factors in his or her allocation decision.

B. Simpson: The minister is correct. We are trying to understand the complexity in the relationship between the determination of an annual allowable cut and the partitioning of an annual allowable cut with a specific objective in mind. In this case in the mountain pine beetle area the specific objective is potentially protecting green stands in order to protect the midterm timber supply.

Then as that determination is made, the minister will get a recommendation from the chief forester, I assume, in a timber supply review that the cut should be set at this level. But there are some presumptions in the cut that these types of partitions are going to be put into place.

The minister then is going to have to make some allocation decisions on the basis of that. The minister has referenced my riding. In my riding it's more complicated than just a plywood plant because the operating areas of the licensees are very different from each other, depending on whether you're on the east side or the west side of the Fraser River. The minister is aware of that.

If you've got licences in traditional kinds of operating areas and operating interests east of the Fraser, you're more into those green stands than if you are on the west side of the Fraser. As the minister must well know, Canfor and Tolko have traditionally and historically operated west, and West Fraser has traditionally operated east, as much as that flips their own names around, but that's what happens.

[1520]
[ 5487 ]

We want to get into the minister's role in determining some of the work that's going to be done on determining partitions and various other things. When you get into the allocation, what's the relationship between the chief forester saying that okay, in the Quesnel timber supply area or the Prince George timber supply area, here's what he or she believes is the annual allowable cut; here are the constraints in order to achieve that on partitions…? Now the minister has to go and give allocations.

Will that also inform the minister's allocation so that people are equally getting access to green timber or whatever is available there? Does the minister then have to juggle what is available green timber versus being pushed into, say, 70 percent dead pine? That's really the question we're getting at.

Hon. P. Bell: That was a more complex question than I thought it was. The answer to the question is that the operating areas hold no basis in law. In fact, if an annual allowable cut partition established for a given licensee put them in a place where they were unable to operate in their existing or traditional operating area, we would be working within that timber supply area to make sure that they were working in an area that could reflect their cut partitions and allocations.

B. Simpson: Again, this is where it does get complicated. This has significant implications within the mountain pine beetle area in particular, but it could eventually make its way to the coast because of the issue around second growth and the commercial viability of second growth. I know there was some discussion about using some partitions there.

[1525]

What this bill does…. Again, we're in section 3 of the amendment but in section 75.02 of the act, which is being inserted as a result of this bill. You've got, again, some of the language around the minister making determinations by order, which I presume is order-in-council. I'm seeing a no there. So maybe we can get a clarification on what…. By ministerial order. But the minister is actually making determinations on existing operating areas, including tree farm licences, in order to achieve objectives established by the chief forester.

One is in a very constrained timber supply area. The minister may not have the luxury of being able to go to another operating area. Again, I think Quesnel's a very good example of that, where there's a clear delineation east-west of the Fraser. To suggest that Canfor or Tolko just get operating areas east of the Fraser may not go over well in there, where that's traditionally been West Fraser's area.

The minister contends that those operating areas hold no rights under law. But is it possible that they hold rights by practice, in that the government compensated these companies for the 20-percent clawback based on traditional licences and operating areas? If I understand this bill correctly, what it does is it gives the minister rights to issue ministerial orders, reducing cut levels in areas that could be seen as a clawback, especially in a TFL. Maybe I'll stop there. Is that what this is doing?

Let's take the TFL as an example, where that is a clear right — lines on the map and area-based tenure, the whole works — a certain volume allocated for cut based on a sustainable level determined by the chief forester.

Now, because of partitioning and whatnot, as we understand this, that cut may come down, and the minister may actually have to issue a ministerial order to reduce the cut in certain stands or timber types or whatever, and may not be able to push the company into achieving its full volume in the other stands. Is that a correct understanding of what's possible here?

Hon. P. Bell: TFL AAC determinations are done independently from the remainder of the TSA. There is no interconnection between a timber supply area annual allowable cut and a TFL annual allowable cut. That said, if there is a partition done in a TFL, it strictly is impacting the single licensee that is operating in that TFL, and it would be a division between two timber types, in this case dead pine and green timber. So it is completely separate and distinct from anything that goes on in the remainder of a TSA.

B. Simpson: I appreciate the minister's clarification there, but I understand that. This bill talks about…. Section 75.02(3). So yes, it's a separate process to do the TFL annual allowable cut determination, but it says specifically in here that "if the chief forester specifies an annual allowable cut partition for a tree farm licence area, the minister, by order, may, if he or she considers it necessary to ensure the attribution specified in the partition is carried out, specify a limit on the harvested volume" for the various timber types.

What the minister was saying before, and I guess that's what I'm trying to get at…. In some of these tree farm licences and in some of the timber supply areas, it may not simply be that you can push with a partition into an area that is commercially viable to get the volume that's given under licence, in the case of TSAs, or under a tree farm licence, in the case of a TFL. So if you can't achieve the total volume that either historically has been the case or that by licence has been the case, would it be possible that these licensees can come back to the Crown and claim compensation?

Hon. P. Bell: In fact, there are provisions that will not allow for compensation, so the answer to the question is no.

[1530]
[ 5488 ]

B. Simpson: We canvassed this in estimates debate about the problems. The minister indicated he understands that in particular the Quesnel timber supply area is a problem and, we know, getting up into the lakes along the Highway 16 area and up in the Prince George area.

Are there licensees that, if we use partition, may end up not being able to achieve volume as the result of partitioning and keeping the green volume on hold, if you will, in order to protect midterm timber supply, pushing people into 70 percent dead pine, 60 percent dead pine, whatever the case may be? Could it be possible that we end up, as a result of using partition, making it economically not viable for some licensees to achieve their volume that they want to keep their mills running?

Hon. P. Bell: The AAC determination would determine the amount of timber that could be harvested in any given TSA, and that AAC determination would be partitioned into different types of timber — in this case, what we're referring to as dead pine versus green stands of spruce, balsam, perhaps some residual pine and some fir. So you have two separate portions of AAC.

[C. Trevena in the chair.]

However, the licensees that operate in that area…. If there was a reduction in allowable cut, it would have an equal impact on each licensee. I think perhaps what the member is asking is: in the short term is there any risk by this amendment to individual licensees? I think the answer to that is no.

Over the long term, is there a risk? I think we already know there is a risk, specifically in the Quesnel TSA and others that the member has mentioned, and that's exactly why this piece of legislation is here. It's to try and protect the interests in the midterm timber supply and keep as much of the green stands as possible available for those licensees to continue to function in that midterm.

N. Macdonald: Still on section 3. Section 3 has changed to 75.02. Part of that change is the introduction of the idea of cruising rather than scaling. I guess first, in terms of scaling, has the minister considered or studied job loss related to scaling? Has there been any consideration of scaling jobs being lost?

Hon. P. Bell: The member asks if there's potential for job loss on the scaling side of the business. I suppose, technically, the answer to that question would be yes. This does, however, I think, provide greater access to very low-quality timber, bioenergy type material, that if there's significant incremental cost added to it, would be unlikely to be harvested. So is there real loss or not? I suspect the answer to that is: "No, there isn't."

It is a different way of selling timber, though, by selling it on a cruise-based versus a scale-based system. That does require a more intensive level of cruising as well. The member for Cowichan Valley, I think it is, had asked about that the other day in his second reading speech. In fact, we would, of course, have a very high standard for cruising in order to ensure that the timber is being appropriately charged for.

This is a shift. We think it's a positive shift, and it will ensure that we will be able to recover a greater portion of the dead pine beetle stands than we might have otherwise recovered.

N. Macdonald: Presumably, the impact on scalers' jobs…. Was there specifically a study of that, or is the minister…? The minister sounds like he's presuming. Was that actually studied — as to: would scaling jobs be lost?

Hon. P. Bell: No, there was no study done of that.

[1535]

N. Macdonald: Scaling is the traditional way that the Crown makes sure the true value of wood is represented in what is charged to companies. While cruising is a fairly common practice, it is new as a way of deciding how much revenue presumably should come from licensees.

The question is…. The minister has indicated that there's a comfort level that the cruising will be accurate, but could the minister please go through and describe the work that's being done to ensure that cruising is an accurate way of the government getting value for the product there.

Hon. P. Bell: I should start out by saying that we don't anticipate any change in revenue to the Crown as a result of this shift, in terms of the dollar value for any of the stands.

The studies that we have done, though, reveal that in scale-based systems of charging for timber, there's a 15 percent error rate. In cruise-based systems charging for that same timber, that's reduced to a 12 percent error rate. Also, recently we've amended the cruising manual to ensure that appropriate practices are in place to fully value timber.

I can share with the member opposite that, as someone who has some experience in log harvesting, once a tree is de-limbed and sitting in a log deck, oftentimes they look the same, regardless of whether they were dead or alive when they were harvested, whereas when the tree is still standing and you're walking through the forest, it's pretty easy to tell what the quality of that tree is. It sometimes is easier to tell with the tree standing than with it on the ground.

N. Macdonald: Just to understand, the minister is saying that cruising is more accurate than scaling. Is that what the minister is saying?
[ 5489 ]

Hon. P. Bell: The standard that we have for the sampling error is, in fact, 3 percent lower, yes.

N. Macdonald: Presumably that research is public information. Is the minister saying that those studies that show that cruising is more accurate than scaling is public information?

Hon. P. Bell: I may not have made myself clear in my first response, so I'll just try and reiterate, if I can. The standard that is set for cruising is a 12 percent error rate, and the standard that is set for scaling is a 15 percent error rate. That is the standard that's set. Are there studies that have been done over the years? I guess. But that is the standard that has to be achieved for either cruising or scaling.

[1540]

The other response — we haven't kind of gotten to this, but I think it really gets to the theme of the member opposite's question — is that these stands are largely very low-value stands. They're stands that have been dead for five, ten, 15 years and would only receive an upset stumpage rate of 25 cents a cubic metre. So this technique or tool, although it is something that we'd like to see expanded over time, would only be used in these very low-value stands at this point in time.

N. Macdonald: Just to be very clear, the minister is not saying…. He's talking about errors, acceptable errors — right? — 12 percent, 15 percent. But to be very clear, the minister is not saying that cruising is more accurate than scaling. The minister is not saying that — or is he? Just to clarify, is cruising more accurate than scaling?

Hon. P. Bell: Their scaling systems are more accurate than cruising systems, but the error rate is, as I have articulated a couple of times…. Again, just to remind the member, we are talking about stands that are very low-value stands, and we're trying to do what we can to incent the utilization of those stands.

N. Macdonald: Just to be clear, then, cruising is less accurate than scaling, but the minister is saying that I need to remember, the public needs to remember, that these are low-value areas. Therefore, the less accurate system can be justified in that way because presumably, if cruising was more accurate, it would be used provincewide — right? Just so that I have that clear, the question then is: who will be responsible for the cruising?

Hon. P. Bell: The model is similar to what goes on under a scale-based system. In other words, the licensee is responsible for scaling the timber. The ministry then goes and checks scales, specific sample loads, to ensure compliance with the level or the scale that is determined.

The same occurs with cruise-based sales. The licensee does the cruise, and then the ministry checks the cruise. The standard, by policy that we have…. Suspecting that I know what the next question from the member opposite will be: how often do we check those? The policy in cruise-based sales is that 100 percent of permits are checked.

N. Macdonald: Okay, so just to understand this, the minister talks about permits. But let's just talk about individual cruises. Does that mean that 100 percent of the cruises are checked by the ministry? If not 100 percent, then what percentage of cruises are checked by the ministry?

[1545]

Hon. P. Bell: Again, going back to the model that we currently operate under, a scale-based system, sample loads vary depending on a specific stratum of timber and how many loads are coming into that stratum, but typically, in a larger stratum, the sample frequency is one in a hundred loads.

In the cruise-based system, all the same principles will apply in terms of each individual permit being checked. Now, it is possible that one permit could be broken down into a couple of cruises as opposed to a single cruise, so there's a little bit of area there, perhaps, to explore. But the principle is the same in terms of maintaining a high level or standard of checking for accuracy in the cruises as it would be in a scale-based system.

N. Macdonald: I mean, it would not be uncommon for a permit to require many cruises. Just to come back to a really specific answer, is the intention to have government personnel, ministry staff, to check cruises on each of the cruises that the licensee would do? Is that the intention?

Hon. P. Bell: Yes.

N. Macdonald: So each cruise will have a check cruise. Maybe the minister could just explain how the check cruise works. Presumably, the cruise would be an extensive look at the volumes that are there, and the check cruise, presumably, would not be a repeat of the whole cruise but would look at one section and just see if that one section is accurate. Is that what the check cruise would entail?

Hon. P. Bell: Again, handy, I suppose, to have a Forests Minister who used to work in the industry and can read cruises and used to go and actually check cruises the odd time to make sure I was getting what I thought I would be buying.

As the member opposite will likely know, there's a series of cruise lines in any given permit area, and then
[ 5490 ]
there are plots along that cruise line. Each one of those plots is articulated in the cruise document and, specifically, what's in each of those cruise plots.

There are really three things that are checked by government staff. The first one is that they will arbitrarily select some plots within that stand and look and check and make sure that the plot was done properly and that what was actually identified as being there is there. The second is that the boundaries of the cruise will, again, be checked by the government staffer. The third is the stratification, the timber type, the height of the timber.

Does it line up with the overall cruise information? Those would be the three elements that are checked by government staff.

N. Macdonald: Presumably, there's a unique skill set in terms of doing cruises. With the scaling system, the logs will be brought to a central area to be scaled, and government staff would go to that one place to do the scaling. Presumably, what this will entail is ministry staff travelling to various remote locations to do that work.

[1550]

Since for every cruise that's going to be done, the check cruise will also take place, the question is: given the reductions in compliance and enforcement workers, given the restrictions that have been applied in terms of using vehicles, does the minister see a complication for his staff in trying to meet the requirements that this will place upon a reduced staff?

The other thing that I would mention in considering that is…. When you meet with compliance and enforcement staff, they will talk about what the minister has talked about in estimates, which is that somehow compliance and enforcement staff are also going to be expected to do other work with mining inspections, with conservation officer work. It does beg the question: is the staff in place to effectively monitor the cruising that the minister is talking about?

Hon. P. Bell: The staff that do the check cruising will be, actually, revenue branch staff, not compliance and enforcement staff, so it's a different pool of staff. I'm not sure where the member opposite is getting his information on vehicle use, but there's no restriction on vehicle use within the ministry for staff in their day-to-day work. Any restrictions around travel pertain to the sorts of travel that would be for other purposes, not the day-to-day work that takes place by the staff.

N. Macdonald: So with scaling, it's a fairly definitive process — right? The ministry would come in and check to see that the scaling is being done accurately. With cruising, there perhaps is a wider range of possibilities that there would be a disagreement in terms of the conclusion that's reached in a cruise.

The question I have for the minister is: if there is a check cruise and it disagrees with the cruising information that the licensee has provided, what is the process that goes on to decide what the outcome should be? There clearly has to be a process. What is it?

Hon. P. Bell: I mentioned earlier to the member opposite the 12 percent error rate standard within the cruise. If the cruise is outside of that standard, then the cruise is rejected, and the stand would have to be recruised.

N. Macdonald: Who would do the recruising?

Hon. P. Bell: It's the licensee that would recruise, and we would recheck that new cruise.

N. Macdonald: Just to go back to some of the minister's earlier answers to my questions. The 12 percent that the minister talked about, in terms of the cruise, is not really talking about the accuracy of cruising. That is just the envelope. After 12 percent disagreement, that kicks off a rejection of the work that the company has done.

Just to clarify that, is that my understanding? It really doesn't say…. The 12 percent that the minister used around cruising and the 15 percent for scaling had nothing to do with the accuracy of the two systems. It's simply that that's the envelope allowed — a 12 percent disagreement.

[1555]

Beyond that it kicks into an appeal process or a requirement that the government indicates to the licensee that they have to go and recruise. Then, presumably, there would again be another check of the work of the licensee. Is that all accurate?

Hon. P. Bell: I think the answer to the question is yes. In addition, there are other reasons why a cruise may be rejected. If there were specific other errors found that were deemed to be significant, even if it were to fall within the 12 percent error rate, the cruise could be rejected as well.

N. Macdonald: Could the minister give examples of other instances where a cruise would be rejected?

Hon. P. Bell: There are a number. I can provide the member with three very quickly: if there were any trees missed in a plot — in other words, not recorded as part of an individual cruise plot; if the area calculation for the permit was incorrect; or if there were incorrect species calculated within a cruise plot. Those would be three examples.

N. Macdonald: Just under the section that talks about "Increase or waiver of harvested volume limit in order,"
[ 5491 ]
which is 75.03(1). "On request of the holder of a licence to which an order made under section 75.02 applies, the minister may increase or waive the harvested volume limit specified for that licence if the minister is satisfied…." Just an explanation, why would that be given to the minister? In what circumstances does the minister foresee needing to use this ability?

Hon. P. Bell: There are two specific examples. And I need to correct a previous statement that I made that is incorrect as well.

The two examples where a minister may choose to utilize this tool would be where there's a First Nations agreement in place that would not allow for the partitioning to be done in a way that still meets the First Nations agreement. Another example might be an additional forest health issue where it's not just mountain pine beetle, but maybe there's a fir beetle issue, as well, that complicates the situation.

Previously, I'd indicated that I believed that the minister had the ability to award portions of a partition for a special manufacturing requirement like a plywood plant. I was incorrect in saying that. That is not one of the abilities that a minister would have — to allocate portions of a cut that is partitioned.

[1600]

N. Macdonald: Okay, maybe to come back to 75.02, just to clearly understand. The intention with this is to take wood that has been compromised by disease, and it is intended, in part, to deal with the challenges that the government has found so far in terms of moving fibre to biofuel. Is that centrally the intention of 75.02 and of what's going on here?

Hon. P. Bell: There are really two elements to this piece. We've explored both of them at different times over the last half-hour or so.

One is to be able to better utilize the very low-quality material that's been left behind. The member has described that quite accurately. One of those pieces is bioenergy, but there may be other uses for the low-quality material that's left behind.

The other is the partition piece, which protects the midterm timber supply and allows us to try and keep a stable industry going forward. So there are the two elements to this piece, and they both work together to achieve those objectives.

N. Macdonald: Maybe again for context too. What sort of volume are we talking about? I realize that it will be a ballpark, but what sort of volume are we actually talking about in terms of this sort of a licence being applied?

Hon. P. Bell: The member opposite asks a question that is very hard to answer, because it's unclear to me whether the member is asking what the volume of material is that might be partitioned kind of provincewide or whether in any specific timber supply area. That varies significantly.

Quesnel, of course, has been the hardest-hit timber supply area, with about 70 percent pine. There are many other TSAs that have very low percentages of pine, and then there are TSAs that are in between those two places.

I'm not sure whether I can accurately answer the member's question. But again, the intent of this piece in particular is to ensure that we can recover as much of the dead pine material as possible by making it easier to get at those stands, reducing costs in the processing of those stands and also protecting the midterm timber supply so that our licensees have the opportunity to look into the future and make capital investments in a way that will keep those jobs and those opportunities in the communities where they exist today.

N. Macdonald: The minister, just because of the expertise that the minister has available to him, will probably…. It might be right in here, but we are talking about areas that the minister has characterized as low-value, and I believe there is a percentage of pine beetle–affected wood that sort of defines the type of forest that we're talking about.

[1605]

With those parameters and with no expectation that I will throw it back in the face if the minister is off by a certain percentage, just as we go forward — like I say, very ballpark — what's the scope of what we're talking about here? I think the largest area is, obviously, around the Quesnel and Prince George area. But can you give a ballpark figure as to the extent of the area that we're looking at with this?

Hon. P. Bell: The original estimate of the impact of the mountain pine beetle was 1.1 billion cubic metres of pine stands across the province, but that number is really a moving target. We're finding in the Kootenays right now that the expansion of the infestation has reduced dramatically. In the Peace we've had some good success. Conversely, in the Quesnel–Prince George area there's not a lot of pine left alive. So it's a very difficult moving target, and that 1.1 billion doesn't reflect the amount of pine that's been harvested over the last four, five, six years.

I think what the member is trying to get at is: how broad an application of this tool will there be? And I think it's fair to say that in the pine-dominated areas of Quesnel, Burns Lake, Houston, Prince George, Vanderhoof, Fort St. James we expect that this will be used very widely.

N. Macdonald: Just given the scope…. I'll come back to where I started. The scaling, presumably, is a fairly accurate
[ 5492 ]
process. The flexibility that the ministry accepts is around 15 percent error before the ministry kicks in with a process of trying to get the licensee to be more accurate.

How would the minister characterize, in percentage terms, the accuracy of cruising? Is it 95 percent accurate? Is it 85 percent accurate? We are talking about large volumes, even though they are of lower value, as the minister has said. Here again, something that…. I accept that it would be a fairly ballpark figure, but can the minister put a percentage in terms of the accuracy of cruising?

[1610]

Hon. P. Bell: I can never resist the opportunity to refer back to the member's previous career as a social studies teacher and my interest in mathematics at the University of British Columbia. Between the two of us, we have a large portion of the educational forum covered off, so I hate to do a statistical lesson for the member opposite, but I will, just because I can.

When there's an error rate — whatever error rate; 5 percent or 10 percent or whatever it happens to be — it's on both sides of the line. In other words, you could have a 10 percent error rate where a stand is overcruised by 10 percent and an error rate where a stand is undercruised by 10 percent. The more input that you put into the statistical box, the higher degree of accuracy you receive.

The total revenue risk to the province is minimal, keeping in mind that these stands are very low-value stands already. The tool is only used in stands that are low-value stands and probably at upset stumpage rates of 25 cents. But the economic activity that will accrue as a result of the different model of recovery and encouraging full-stand utilization will generate incremental value.

The revenue risk, while there is perhaps a small one, balances out by the increased use of the tool, as you have statistical evidence demonstrating that you have errors on both sides of the average line.

N. Macdonald: Thank you for the lesson. Just to be clear, then, the 12 percent is not an arbitrary number that the ministry has decided upon. It's based on the statistical evidence that cruises will be either 12 percent more or 12 percent less. Maybe it's time for another lesson. So it's not an arbitrary number.

This is based on study of cruising, where essentially the minister is saying there is fluctuation of 12 percent one way or another. But other than that, the accuracy of cruising would not normally fall outside of those parameters, and that's based on study.

Hon. P. Bell: The 12 percent number was deemed to be an appropriate number, given the level of revenue risk associated with these stands being very low-quality stands.

N. Macdonald: Well, what is the level of revenue risk? What is the number?

Hon. P. Bell: I used to have a six-axle logging truck, and a six-axle logging truck would haul about 40 cubic metres of timber on average.

Interjection.

Hon. P. Bell: The member opposite wants a little extra time to write this down, because it's a math question, not a socials question.

[1615]

The stumpage on that truck would be $10 on that truckload of logs. If there was an error rate of 15 percent, it would be $1.50.

N. Macdonald: The minister was taking me back to grade 6 with my math anxiety. I thought you were going to test me on the answer.

Okay, so the volumes are huge there for $1.50, but nevertheless, it's considered a minuscule amount.

Let's go to 75.03. The minister talked about considerations, such as First Nations. What is the process in terms of engaging First Nations on the request from the holder of the licence to increase or waive the harvested volume limit? Is there a process that we're talking about related to 75.03?

Hon. P. Bell: We're venturing dangerously into the study of social studies, so the member opposite may have to correct me on this one.

There may be a licence agreement with a First Nation that requires a specific type of timber or quality of timber to be provided to that First Nation, and that may fall outside of the partition values for a specific timber supply area. If in the allocation of that timber….

The way the timber is allocated may be done in a non-proportional rate to that specific First Nations licence versus other licences, or the minister would have that authority to make that decision. That would be an example of where that could be used.

N. Macdonald: We'll go to consolidation, subdivision or replacement of licences. It's 75.04. If the minister could characterize the intent of this part of section 3 and what the minister attempts to do with this provision.

Hon. P. Bell: This particular tool allows the intent of a minister's order on a group of licences or a timber supply area to continue in the event that those licences are subdivided or reapportioned in some way. It just extends the order through and doesn't allow a licensee to avoid the partition by way of subdividing a portion of their licence.

N. Macdonald: Looking at 75.06, it says: "On request of the holder of a licence to which an order made under section 75.02 applies, the minister may grant relief from
[ 5493 ]
a penalty imposed…." I just would like the minister to explain the criteria. What circumstances does the minister perceive as appropriate times to grant relief from the penalty?

[1620]

Hon. P. Bell: This is a final relief valve for a licensee who might overharvest a portion of their partition, and if they've gone through all the regular processes and have not been successful in acquiring relief from a penalty that has been recommended, the final decision would rest with the minister if the minister chose to establish a regulation under which that relief could be provided.

N. Macdonald: Okay, so just to understand, what sort of penalties are we talking about? Can the minister give examples of the extremes of penalties?

Hon. P. Bell: This is the partition overcut penalty, which is typically double the stumpage rate for a specific stand.

N. Macdonald: Can the minister give an example of a case? Obviously, this is something that the minister anticipates as being a problem. Can the minister give, like I say, a better sense of dollar figures that were being considered here?

Hon. P. Bell: This isn't a provision that we would necessarily see any minister utilizing on a regular basis. It is available as a final relief valve in the event that a ministerial decision is necessary.

The member opposite asked what kind of money could be involved, I think, in a decision of this nature. I recall at one point in time stumpage rates up as high as $65 or $70 a cubic metre. I suppose cedar might have even been higher than that. I wasn't logging on the coast. I was logging in the Interior. So if there was a large overcut in a circumstance like that, I suppose the penalty could be fairly large. It's not something that we anticipate either having to use or wanting to use, but we do think it's appropriate to have that relief valve in there.

N. Macdonald: The obvious question for a minister is that it moves from what would normally be a fairly administrative function into one possibly in the political realm. Possibly, this is just language that would be normal — that the minister represents a process or the ministry — but what specifically is the process that would go on that would lead to the minister granting relief?

Hon. P. Bell: The licensee would go through all the normal appeal mechanisms that are currently in place. If the licensee is declined the appeal at all of those various opportunities, then the licensee must request relief from the minister. Then the minister would have to actually approve, by regulation, relief, which would require an order-in-council to be approved. So that would be the final mechanism, and it wouldn't be a ministerial decision. It would be a minister's recommendation to cabinet and a cabinet decision.

N. Macdonald: Just to understand, is this something that licensees or others in the forest industry have asked for?

[1625]

Hon. P. Bell: No, we thought it was appropriate to have it in place in this piece of legislation.

N. Macdonald: Does the minister not see that some could perceive the possibility of a conflict of interest if, ultimately, this is left to the minister's discretion? I mean, there are many circumstances where it could certainly create the impression that there is a political aspect to this, when I think the public would perceive it more appropriately to be an administrative process. What are the minister's views on that?

Hon. P. Bell: There are tools, which have been available to all governments over the decades, called remission orders, which follow a similar pattern to this. It just allows the Forests Minister to bring it forward rather than having it go through Finance.

N. Macdonald: Just maybe one final question. Clearly, it went through Finance for a reason, since it was perhaps a check on the Forests Minister. So there was a process in place. Clearly, with this, the minister thinks that it was broken in some way. Maybe just a fuller explanation of why there was the need to simplify a process that absolves licensees or those in the industry from penalty.

Hon. P. Bell: This specific section allows for tailor-made initiatives specific to forestry, as opposed to generic ones, but the approval process is identical. It would require the support of cabinet in order for the penalty to be reversed.

N. Macdonald: Just to understand. For somebody who has had a penalty imposed on them, it's as simple as having a representative of the company or the owner of the company come to the minister, see the minister maybe in the constituency office or see the minister here in the offices, and simply ask to have the relief granted. That's the process, and then the minister would take that proposal to cabinet as a whole. Is that the process that's being laid out here?

Hon. P. Bell: Unlike some remission orders, in which it is a requirement for the minister responsible to take
[ 5494 ]
those remission orders forward if it is requested of the minister, this would not require a Minister of Forests to take forward a request unless the Minister of Forests believed that it was appropriate.

N. Macdonald: Okay. So the minister on his own would decide whether it was appropriate or not. Just to understand how formal the process is, could this be something as simple as a meeting at a constituency office of the minister or a meeting, presumably, anywhere? That's as formal as the process gets? It means a meeting.

Could it be as simple as an e-mail to the minister or a phone call? Just to give a sense of how formal the process is in terms of the appeal to the minister to get rid of what the minister describes as perhaps a fairly substantial penalty.

Hon. P. Bell: The member opposite, under 75.06(2)(b) and (c), will note that the form of the request needs to be in writing, signed by the individual requesting the relief and specifying the reasons for the request. That would be the form that is required, so it couldn't be done by telephone, by a meeting. Perhaps by an e-mail. I'm not sure if that's possible or not, but I think it would have to be a written, signed request.

[1630]

Well, I suppose, technically, the member describes a possibility. In fact, what would happen is that it would be referred to ministry staff, who would do the research and the work and come forward with a recommendation to the minister. The minister would then make a decision based on the recommendation, and if the decision was to move it forward to cabinet, a regulation would be drafted by staff, taken forward to cabinet, discussed and determined at that level.

N. Macdonald: To go to 75.07, here the minister again is given significant abilities to make regulation. Again, why did the minister feel there was a need to go to the Lieutenant-Governor-in-Council, which I presume is orders-in-council? Is there not concern that there's a degree of secrecy in terms of allocation with these powers? If the minister disagrees with that, maybe just a fuller explanation of exactly what is intended in terms of this part of section 3.

Hon. P. Bell: I would actually argue that this particular section specifies the types of regulations that can be made, as opposed to a general regulation-making section. The member will recall that in the zero net deforestation bill there was a section that gave complete powers to make regulation over whatever sorts of issues needed to be regulated. The member, I believe Hansard would show, supported that section of the bill. This actually limits the regulation-making powers specifically to the items that are identified in this particular section of the bill.

N. Macdonald: Just looking at this, then, you have regulation-making powers that the minister describes as being limited, but still, to me, they look fairly broad. I mean, you're talking about "base-level allowable annual cut." You're talking about prescribed conditions for exempted licence, specifying volume and criteria for harvested volumes, prescribing criteria for increasing or waiving harvested volume limits, prescribing criteria for relief from penalty.

That's quite a broad area. Does the minister not confirm that there's going to be an issue of a lack of transparency in those? Or can the minister assure the public that there is a mechanism that would allow the public to follow what regulations the minister would make using this section?

Hon. P. Bell: Regulations are housed in the public domain, and it is clear and transparent what those regulations are.

Section 3 approved.

On section 4.

N. Macdonald: Section 4 is a very small section. I believe it may cover ground that we've already covered in terms of being, essentially, consequential to division 3, but maybe the minister can just quickly run through the purpose of section 4, just in case I've misunderstood it. Essentially, I think we're dealing with things that we've already covered in section 3, but maybe the minister can expand if there's something new in section 4.

Hon. P. Bell: I think the member opposite has accurately described this section. Section 75.1 of the act contains definitions for the purpose of the cut control provisions of the Forest Act. The definitions of "volume of timber harvested" and "timber volumes" determine the volume of timber that's attributed to a licence for cut control purposes.

[1635]

The proposed amendments to the definition "timber volumes" provide a means to measure timber volumes under the cruise-based cutting authorities that we've talked about extensively earlier. This is consistent with the definition of timber volumes in the new division 3.01 of the act.

N. Macdonald: And this may just be a language thing, but in section 4, let's see…. Actually, no. Let's move on to section 5, then.

Sections 4 to 6 inclusive approved.
[ 5495 ]

On section 7.

N. Macdonald: On section 7, again, can the minister explain the need for the changes here and what this section is intended to do?

Hon. P. Bell: I'm not sure…. Section 7 includes several amendments. The first amendment takes from 94(1)(a), simply moves decisions from being statutory decisions to delegated decisions. But it could be that the member is referring to items under 94(5), (6) and (7). If he could just clarify what his question pertains to, I'd be happy to respond to it.

N. Macdonald: We'll just take a bit of time with it. Let's break it down, then. Section 7, section 94 is amended. There are changes with (a). Maybe just take one section at a time.

So if you could just explain subsection (a) there. It talks about "striking out 'A person' and substituting 'Subject to section 94.1, a person.'" If the minister could just describe the nuance there.

Hon. P. Bell: Section 94 is the section of the Forest Act that requires timber to be scaled, and we've added a new section to 94 that allows for the scaling of special timber forest products. That's what this initial comment refers to.

N. Macdonald: Just to define special timber products…. I forget the exact term that the minister used — special forest timber products? If I've mixed that up, I apologize, but if the minister could specifically explain what that is.

Hon. P. Bell: These products are defined in the appraisal manual. Some of the products that would be included in this mix would be things like firewood, hog fuel chips, cedar shake and shingle blocks, post and rail material — those sorts of items. They're all defined in the appraisal manual.

[1640]

N. Macdonald: In section 7, just in terms of the description part, it talks about expanding "the exemption power to include persons." Maybe the minister could explain what that refers to and what exactly that means.

Hon. P. Bell: Previously the minister had the ability to exempt specific timber. If we wanted to test a new product or a new opportunity, or if we felt that the revenue risk level was so low in a specific site, we could choose to exempt a person from having to scale that timber as well.

N. Macdonald: Again, there's an explanation that I don't completely understand, that the minister could explain for me. It says: "to harmonize the language of the condition-granting power with section 95(4) of the act". If the minister could explain what that means.

Hon. P. Bell: Section (5) gives the minister the ability to exempt timber or a person from subsection (1), and section (6) allows that same minister to apply conditions to that exemption in order to effectively risk-manage the exemption. So it is a function of, first of all, allowing to exempt and then, second of all, applying restrictions to that exemption as deemed appropriate.

N. Macdonald: Back in section 3 the minister was given the ability to forgive fines that the company may have. Now here we see in section 7 that the minister is given powers that used to reside with the regional manager, the district manager or forest officer, and they're given the ability to again grant exemptions.

There seems to be a trend of centralizing power with the political part of the Ministry of Forests, which is the minister. Just an explanation from the minister about why that would be appropriate in this case.

Hon. P. Bell: A couple of answers to this. First of all, philosophically, it is a function of whether one believes in statutory decision-making authority or delegated decision-making authority. Generally speaking, I support the model of delegated decision-making authority. I think that's why we get elected — to make decisions. When people go to the polls, they entrust us with that authority for a period of time and re-evaluate our performance at the end of, typically, a four-year cycle.

It is simply a function of moving to a delegated model rather than a statutory model. But also, these decisions can be fairly significant in nature, and rather than having them delegated down to a lower level of staff, we think that it's appropriate to have the ability to make that decision at a senior executive level or delegated to whatever level the minister deems appropriate.

N. Macdonald: Just to be clear, this is…. My history is from 2005 on. We did spend quite a bit of time with the Ministry of Forests moving in exactly the opposite direction. It seemed to me that we had a number of bills where, philosophically, for the minister of the day — I don't think that it was this minister, obviously — that was the direction. The argument was made that decisions on a whole host of areas would be best made at that local level.

[1645]

Is the minister saying that this is a major philosophical change for the ministry?

Hon. P. Bell: Just in discussions with staff here, they indicate that this has been a general direction of this government. I can't speak specifically to previous pieces of
[ 5496 ]
legislation that came forward, but generally speaking, we've been moving towards the delegated decision-making model, especially in the last perhaps four or five years — perhaps not in some of the early years, but more recently.

N. Macdonald: So the minister feels strongly that the regional manager, the district manager or the forest officer should not be making certain decisions. Can the minister give examples of where the decisions that the minister would make would be fundamentally different than the regional manager, the district manager or the forest officer?

Hon. P. Bell: I think the member is incorrect in his assessment. The vast majority of these decisions will continue to be delegated. It is different delegating the decision than having the decision statutorily removed from the elected officials, but I expect that the vast majority of these decisions will continue to be made by the people who've been making them over the last number of years.

N. Macdonald: Just because it's a trend that continues…. As we look at future sections, there are a number of these same changes, where decision-making that used to sit at a local area has been taken on by the minister. The minister is saying that the minister would still have the ability to delegate to lower levels but that there are circumstances where the minister, very clearly with section 7, wants central control.

Could the minister characterize what the circumstances are where the minister would want the ability to make decisions that he would not trust the regional manager, the district manager or the forest officer to make?

Hon. P. Bell: This specific section is a new section, and it contemplates new decisions being made in terms of exempting an individual or timber from scaling and then applying conditions to that.

It may be appropriate in the initial years to have that decision made perhaps at an ADM level, a deputy level or a regional executive director level and in future years to have that decision made at a district manager or a forest officer level. Each of the decisions will be different in nature, but this is a newer section, and we want to make sure that we get those decisions right, especially in the early years.

N. Macdonald: The danger with it, and the criticism, is that the minister has talked about ministerial responsibility and the fact that he was elected to make decisions, but I think that the public expects the minister to be responsible for a professional civil service. It doesn't necessarily mean that they're completely comfortable with the minister making decisions that very often may be seen as perhaps tainted with the appearance of political interference.

Just the question…. On many of these issues there are going to be complications for a minister to deal with, complications that wouldn't exist if there was decision-making within the civil service — right? The question is: how does the minister, with this and subsequent — in many, many sections — changes that put decision-making at the ministerial level, ensure that there's not a perception of or real political interference in decisions that are being made?

Hon. P. Bell: Again, I'll repeat my previous answer. The vast majority of these decisions, I expect, will continue to be made by individuals in the public service.

[1650]

I find it a bit ironic that the member opposite is standing up, on one hand suggesting that on decisions there could be political interference and that we should have decisions delegated, yet virtually every day in question period in this House, members of the opposition stand up and accuse ministers of not doing their due diligence on files and making decisions inappropriately. So I don't think you can actually have it both ways.

I fundamentally believe in the principle of delegated decision-making. The decisions will be made by staff at an appropriate level, which will largely be the exact same individuals that those decisions have always been made by. I think that is the appropriate model that we operate under.

I think when the public elects us, they elect us believing that we are responsible individuals and that we'll be making decisions in their best interest.

N. Macdonald: I mean, very clearly the minister has responsibility for what the people within his area of responsibility are making. That's the ministerial responsibility we're talking about.

The minister talks about certain exceptional circumstances where the minister would want to step in and make that decision himself. Again, it does point to perhaps inconsistent decision-making that may lead to a perception of political interference in decisions. Let's be frank. These are decisions that can affect the viability of a business or not, and we are talking about often massive amounts of money — maybe not in section 7 but in other sections that we're looking at.

Again, how does the minister avoid the perception that part of the decision-making will be political when it really should be administrative?

Hon. P. Bell: I believe I've already answered that question. The member opposite and I have a philosophical difference. I believe it is appropriate for a minister to delegate decision-making authority.

Section 7 approved.
[ 5497 ]

On section 8.

N. Macdonald: Section 8, again, is a fairly short one. It replaces references to officials with references to the minister. Can the minister again expand on exactly what the purpose of section 8 is?

Hon. P. Bell: As we are amending various acts — the member opposite has already identified that this is a common theme — and we're in specific sections of an act, we take the opportunity to amend it in a way that reflects the delegated decision-making philosophy that certainly I have as minister responsible for this portfolio.

N. Macdonald: Can the minister explain exactly what the authority is that is coming to the minister here? Be specific in terms of outlining what exactly is being changed and what authority the minister now has resting with his office directly.

Hon. P. Bell: I'm certainly happy to walk the member through. I think he can read this section as easily as I can. It simply moves from a statutory decision-making authority to a delegated decision-making authority in each of the three sections identified here. If the member opposite would like me to read them, I'm happy to do that.

N. Macdonald: Just to be clear, in section 8 it changes sections 94, 97 and 100. Just to be clear, this is giving the minister the ability to waive the recheck of scale calculations where they would normally be required if volumes differ between original and check scales more than a certain percentage. Is that what the minister now has the ability to do, whereas before it was statutorily given to a bureaucrat?

Hon. P. Bell: Again, it changes the nature of the decision from a statutory decision to a delegated decision and gives the minister the authority to delegate that decision to whatever level the minister deems appropriate.

N. Macdonald: So we're changing sections 94, 97 and 100. In just one of these, previously there would be a bureaucrat. Somebody who has served and sits at a non-political level would make a decision on whether it was appropriate or not to waive the recheck of scale calculations, where normally they would be required if volumes differ between original and checked scales more than a certain percentage.

[1655]

So it seems a fairly straightforward administrative task. The minister with this section 8 is putting into his office the ability to make that decision on something that seems pretty straightforward. Yet why would the minister want the ability to do that?

Hon. P. Bell: Again, this is just fundamentally a philosophy of delegating decisions as opposed to removing them statutorily. Again, I believe it is appropriate for the decision to be delegated from the minister. I would expect that these decisions by and large will be made by the same individuals who've made them statutorily. This has been an ongoing shift, and we're simply in this section because it was convenient at the time that we are amending the remainder of the bill to move it to a delegated model.

N. Macdonald: With section 97 you have the ability to decide on second scale checks, so the minister now has the ability within his office to make a decision on whether there should be second scale checks. What the minister is saying is that normally it would be where it appropriately would be — at a lower level — but on certain exceptions the minister will make that decision.

Isn't that the weakness in the minister's office? Many of these decisions, like on whether to recheck scale calculations, on second scale checks or on appointing scaling examiners…. All these things should normally sit within a bureaucracy that is not political. Why would you raise it to the minister's level? This is not an area where they would have expertise, but it is an area where there are potentially financial implications to the decision the bureaucracy makes.

Now with this section and with all these other sections, the minister has put the politically elected minister in a position where they could be making decisions on these things. It seems a pattern with this bill but a problematic pattern, I would argue.

Hon. P. Bell: Again, this just comes down to a philosophical difference between the member opposite and me. I believe that the public elects us to make decisions, that they entrust us with that authority and that they re-evaluate us every four years. I believe it is appropriate for decisions to be delegated, and that is the constant theme as we move through this bill — moving away from statutory decision-making to delegated decision-making. I expect that by and large, these decisions will continue to be made by the individuals who have been making them all the way along.

N. Macdonald: Presumably, with all of these powers there has in the past been an appeal process. Is there an appeal process for a minister's decision?

Hon. P. Bell: If there is an appeal process from any given section in the act, then that appeal process would apply to the minister's decision as well.

Section 8 approved.
[ 5498 ]

On section 9.

N. Macdonald: Again, this is dealing with the scaling of special forest products. Again, it's a fairly extensive change. Can the minister explain the changes and the rationale for the changes taking place in section 9?

Hon. P. Bell: This is a section we referred to earlier, which creates a new scaling procedure for special forest products and is intended to encourage fuller utilization of the resource.

N. Macdonald: Okay, so you're dealing with waste assessment, and you're also dealing with special forest products which may be scaled instead of timber. Can the minister just connect that? That's in subsection (1) and subsection (2). What's the connection between "special forest product" and "waste assessment"?

[1700]

Hon. P. Bell: These two sections working together allow for a product to be scaled, utilizing special scaling practices, after waste assessments have been completed on a given site.

N. Macdonald: I just need to understand here. In subsection (2) it talks about timber being felled, and then presumably it is changed into a special forest product that will then be scaled instead of the timber. Can the minister just take me through that, as to what exactly is being talked about here? I mean, presumably it's more than firewood. What are we actually talking about here? Can the minister give me scenarios so that I can understand this section?

Hon. P. Bell: Well, the product described here could be firewood. It could also be shake and shingle, post and rail and other types of materials that I identified earlier that are identified in the scaling manual. But 94.1(2) simply takes the wording from the old 94(3) and moves it over to this place.

N. Macdonald: The minister gave a partial list. Would this include biomass? Does it include chips? Maybe a more comprehensive list. I realize that maybe the minister can't name everything, but a more comprehensive list of what exactly we're talking about here.

Hon. P. Bell: I think the Hansard record will show the products I identified earlier include chips, hog fuel, post and rail material, cedar shake and shingle as well as firewood. If the member is looking for a more complete list, it is located in the scaling manuals.

N. Macdonald: Okay, so in (3)(c) it says that if all of the following apply, "the person is authorized to do so by the minister." Can the minister give just an explanation of in what sorts of circumstances the minister would authorize the person to do what is laid out in subsection (a) and subsection (b)?

Hon. P. Bell: Again, the term "minister" simply creates the delegated authority.

What the point of difference is in this particular section, and it's an important section, is that currently — again, going back to my logging days — if you're going to transport timber, you have to transport that timber to a designated scale site. This particular section for special forest products allows you to transport that timber to another site other than a designated scale site. So it creates that flexibility with regards to special forest products.

Please keep in mind, again, that this is after timber has been harvested and the waste assessed on a given site. This is after all those things have occurred. It allows you to go in and remove that timber to a non-scale site and have the authority to measure and scale that residual timber in a different way through a delegated model.

[1705]

N. Macdonald: Just to understand, is it going to be normal practice, or is it normal practice, to scale the product rather than timber? Is that what's going on?

Hon. P. Bell: Currently this practice is not allowed. This allows for timber to be scaled off-site in a different way than the normal scaling methods — again, keeping in mind that this is after the site has been harvested and the waste assessed. So again, the risk is deemed to be very low. But it allows for things….

The members opposite, I'm sure, had contact with individuals in their constituency offices who are interested in utilizing some of the residual material that is left behind after a site has been harvested. Often that has been very difficult. This creates some of that flexibility that is necessary to do that.

N. Macdonald: Part of what would be useful is just for the minister to explain how the money works, like how the scaling leads to revenue. How does the ministry trace all of this? What's going on here?

Hon. P. Bell: A good example of this would be a chipping plant where the material, the residual harvest, comes off of a harvest site and is hauled to a chipping plant where it is then chipped, and the chips are then hauled to a pulp mill where the wood is actually scaled and billed out at that point.

[L. Reid in the chair.]

It allows for a product to be manufactured somewhere in between where the material comes from and where it
[ 5499 ]
ends up, the end destination. So the actual charge — I think the member asked where it is paid for — would be at the eventual receiver of that wood chip, but it could be chipped somewhere through the process at an alternate plant, which is not currently allowed.

N. Macdonald: I guess I don't follow how that could be tracked. How does the ministry keep track of that product? It is going from one place. It is being changed. We don't…. You know, logs are marked, so you have systems. But what system does the ministry have to ensure that the product that arrives is…? You know, how do you track it all? It just seems incredibly difficult to put that into place.

Hon. P. Bell: Last year we amended the regulations to allow for the marking of products that wouldn't normally fit in a normal timber-mark situation where you hammer-mark the end of the log and paint the sides of the log. So there were alternate methods provided for, and that was done last year.

There are, as well as the marking processes, load slips that are required to be kept in all the trucks. I recall those load slips fondly from my trucking days, which identify where the wood came from, where it goes to and where it ends up in, the end destination. All truckers are required to maintain those load slips and books and to return them to the Ministry of Forests for full documentation at the conclusion of the time at which they're hauling those stands or harvesting those areas.

N. Macdonald: Well, I still don't follow. It just seems like quite a complex thing.

[1710]

Presumably, on the site, somebody is moving into a place that has been harvested in the past and where there is a product. They are going to change the form of that product. Let's say that they change them into chips or move them to another site and change them into chips, where presumably there are a whole number of other products that are coming in and being chipped, and then it is taken to another location.

Is the minister saying that that can be tracked and that the Crown can accurately get the revenue it deserves for that product?

Hon. P. Bell: The staff do advise me that they believe we're going to be able to follow the products along appropriately. Also, this is intended to encourage greater utilization of stands. So it is intended for when there is limited revenue risk — again, keeping in mind that this wood has already been paid for once through the original harvesting and waste assessments.

This would be incremental revenue to the Crown, and more often than not, this would be very low-quality fibre that's being recovered. The goal is to make it easier, from a regulatory perspective, to recover additional quality from these stands, and the revenue risk is very low in the event that something did go awry.

N. Macdonald: The minister has said that there is a way of following this. But could you just specifically lay out the way that one would follow this?

The other thing that the minister has said sort of implies that you can't really follow it, because you're also saying that it's low-grade and, therefore, this is all incremental and that we should look upon it as found money. But clearly, whenever you're charging people for a product that is a Crown resource, you want to be as careful as possible to properly account for the value of that product. It's not found money. It's something that people should properly pay for.

Can the minister specifically explain how the Crown is going to keep track and accurately measure the product that licensees are buying when they purchase this licence?

Hon. P. Bell: The load slips, which the trucks are required to carry, all do that, and if they're not carrying those load slips, then they are in contravention of the appropriate pieces of legislation.

N. Macdonald: So the load slips are going to move to a central area, where presumably there are many loads that are going to come there. The minister has explained a system that takes you to a certain place. It gets you to that marshalling area, but it doesn't get you to where you're actually going to be paying the value of the fibre, which is presumably at the plant.

Can the minister take us through the next step? How do you keep track of that fibre to the place where it's actually being paid for?

Hon. P. Bell: Again, the load slips track all that. The fibre goes from the landing, potentially, to a chipping plant, if that's where it ends up. The chipping plant then does its thing and reloads those chips into chip trucks, which have load slips as well. So by comparing all the load slips from the beginning to the end of the process, you can track the fibre throughout the cycle.

N. Macdonald: Is the minister saying that staff are going to check all of the road slips, that this is the process that the minister is going to have staff look after? All road slips are going to come to a Ministry of Forests staff, and they're going to compare what went into a chip plant to what leaves to the next section. Is that what the minister is suggesting? And what is the cost of that sort of a system?

Hon. P. Bell: They're actually called load slips, not road slips. The load slips will be checked periodically.
[ 5500 ]
It gives the tool. Just the same as a car travelling down the highway, the RCMP periodically check to make sure that you're not speeding, and if you are, occasionally you might get away with speeding, but that doesn't mean you should do it. So there are processes in place.

[1715]

But again, the revenue risk is very low. We're talking about a product that's likely not currently being recovered. The members opposite often comment on the need to recover a higher percentage of the fibre, and I very much agree with them. This simply provides a tool that allows us to do that in an efficient way.

N. Macdonald: Just to put this into context. The way that it used to work before the B.C. Liberals came to power is you essentially first had one pass — right? — so that all of the product was brought out and then was sorted. There was an ability, in a cost-effective way…. The minister has recognized that the most cost-effective way to do this is with one pass.

There was a system in place that the B.C. Liberals changed, and since that time they have created a massive waste issue that they're attempting to deal with in this way. Now, the minister has described a system of tracking this product that seems to be very, very loose. The minister talks about, on occasion, checking load slips, but this is in the context of reductions in ministerial staff, especially with compliance and enforcement.

I guess that the question is: why does the minister think that this is the most effective way when, clearly, there are other opportunities to do, for instance, one pass? Might that not be a more reasonable way to go forward in this, rather than this very convoluted system that the minister is setting up with this legislation?

Hon. P. Bell: The member is absolutely wrong. In fact, cut-to-length was initiated in the 1990s, when I was harvesting. I think it was one of the reasons why we have the volume of waste that we have today — because of that change that took place. That happened not under our watch.

The waste that we all are passionate about and want to see recovered is something that we are all in agreement on, and this helps us achieve that. But to be clear, cut-to-length was not instituted under our watch. That's what led, in my view, to the larger level of residual materials that are being left behind in our forests.

It should also be mentioned that what the member just refers to as single-pass harvest is what we were talking about earlier on in this bill, which is facilitated through cruise-based selling, and that does really encourage the full utilization. There are sections in this bill earlier on that allow that to transpire.

N. Macdonald: I think what the public would recognize is that the substantive change was to take-or-pay and that that's where you saw the real increase in volumes of merchantable wood left in the forest. The minister is also making the assertion that the new cruising tenure is going to somehow increase utilization. I mean, there are products that companies will want, and they'll remove them with the scaling system just as they will with the cruising system.

The fact is that the minister has recognized that with giving multiple licences — right? — because the presumption is that stuff is going to be left. This is an attempt to get people to come in and to pick up the pieces that they want and pay for them. I think the minister and I agree that that's a direction that we need to go.

I guess just coming back one more time…. Does it not make sense to set up a system that fully utilizes and forces the licensees to do one pass, to bring the product out to a central place and then allow higher utilization, rather than what I would conclude is a pretty convoluted way of trying to track products that go to chipping and then somehow end up being paid for?

I think that it would be very difficult…. The minister has to recognize that it's going to be very difficult to get the full value for the product that's delivered. Even if it is incremental, there is still an obligation to set up a system that's going to be accurate and fair. If it's not accurate, it's not fair.

[1720]

Hon. P. Bell: I am not certain that I can respond accurately to the member's question, but only to say that this provides another tool in the tool box to achieve an objective that both he and, I know, the member for Cowichan Valley and I all share, which is fuller utilization of the resource.

Section 9 approved.

On section 10.

N. Macdonald: We're going to get to a series of sections — section 10, section 11, section 12, section 13, section 14. It's essentially…. The minister has described it as a philosophical discussion. I don't think there's any particular benefit in terms of revisiting that discussion.

But if you don't mind, for each of these sections we'll just go one at a time. If the minister could put on the record just what exactly is intended with that particular section. It may be that it's simply a repeat of what the minister has said for section 9, but just in case that's not the case, we'll take it one section at a time. Like I say, there's no point in really revisiting the discussion we've already had in terms of the centralizing of decision-making.

We'll begin with section 10. The question: could the minister explain the need for this change? If it is exactly the same as section 9, you can simply repeat that quickly, and then we'll move on to section 11.
[ 5501 ]

Hon. P. Bell: Again, the member opposite points out that the function of these amendments is to change from statutory decision–making to delegated decision–making. So 95(2) is to do with scale site authorizations, 95(3)(b) again has to do with scale site authorization, and sub (4) again has to do with scale site authorization. So section 10, section 95, refers to scale site designations and the authority to delegate the decisions around those.

Section 10 approved.

On section 11.

N. Macdonald: For section 11, if we can just follow the same process. As I said, there's no need to revisit the discussions we've already had on changing the power to the minister, but if there's anything particular about section 11, if the minister could put it on the record, that would be appreciated.

Hon. P. Bell: Nothing special. It's to do with second scale and second check scale requirements and moving from a statutory decision to a delegated decision.

Section 11 approved.

On section 12.

N. Macdonald: If the minister could have the same process with section 12, please.

Hon. P. Bell: Again, moving from statutory to delegated decisions around scale site authorizations, the second scale or second check scale, and also the suspension and cancellation.

Section 12 approved.

On section 13.

N. Macdonald: Again, the same request here for section 13.

Hon. P. Bell: Richard Grieve, who joins me here today, points out that it's kind of interesting, because we're actually amending sections here that refer to the chief forester having responsibility for scaling timber, which hasn't been the case for quite some time. The other authorities have that within government.

[1725]

Again, this points to the advantages of going to a delegated-decision model as opposed to a statutory-decision model. These are delegated decisions with regards to scaling, re-examination, and suspension and cancellation, and are all routine.

Section 13 approved.

On section 14.

N. Macdonald: With section 14, if the minister could just give an explanation, if there's anything different than the debate we've already had on this.

Hon. P. Bell: Again, moving from statutory to delegated decisions, and this is with regards to a scale return.

Section 14 approved.

On section 15.

N. Macdonald: On section 15, then, it is again a change to the Forest Act and relates to calculating stumpage payable. Can the minister explain the need for section 15 and what the intent of this amendment is?

Hon. P. Bell: This is actually a fairly important part of this particular bill and comes as a result of a court decision.

Typically, stumpage rates can be changed under a redetermination if there's a change of circumstance on a specific site. As an example, a licensee may identify the need to put in a culvert going into a site and calculate that as part of their stumpage costs and, in fact, discover that it's necessary to put in a bridge.

Even though the stumpage was originally calculated based on a culvert being put in and discovering that incremental cost was borne as a result of putting a bridge in, he can apply for a change in circumstance. That change in circumstance would then result in a recalculation of stumpage.

The same holds true if one of our staff people goes out and reviews the site. The licensee had put in their stumpage criteria that they were going to put six inches of gravel on a road. We went out and inspected the site and discovered that maybe that hadn't been done at all or that there had only been an inch of gravel put on the road, yet they had been provided a stumpage offset for six inches of gravel. This allows again for redetermination of that rate and then the appropriate stumpage to be paid.

The court struck down that provision — although it was a longstanding provision — in the court case because of the word "when." So it is amended here to ensure that the spirit of this section of the act complies with the case law of the day. I am advised that it does.

The other piece of this that's important is this particular section of the bill allows for a licensee to start harvesting prior to the time that they receive their stumpage rate, if they so choose. So a permit can be issued, and they can go out and start harvesting on a site prior to a rate being issued.

[1730]
[ 5502 ]

Under the case law referenced, as a result of the court decision, that would have been struck down, and stumpage rates would have to be issued prior to a licensee going out and starting to harvest. So it corrects the discrepancy caused as a result of the court case.

Section 15 approved.

On section 16.

N. Macdonald: Section 16, again, seems a fairly substantive change. Can the minister explain the changes that are here in section 16 and the rationale for the changes? The change in subsection (a), the reason for striking out "forest region" — maybe start there.

Hon. P. Bell: In my previous explanation under section 15, I actually described the purpose of both 15 and 16. Both sections combined result in the description that I provided in my previous answer.

N. Macdonald: Just to be clear, what is the case that the minister refers to? Is that something the minister has on hand? What is the case?

Hon. P. Bell: The case was the July 30, 2009, decision in B.C. Supreme Court with Canadian Forest Products versus the province of British Columbia.

Section 16 approved.

On section 17.

N. Macdonald: Just an explanation of section 17 — the reason for the changes and what the minister attempts to do with the change.

Hon. P. Bell: This is a housekeeping amendment. It's just a function of the addition of section 94.1 to the Forest Act, which we earlier discussed.

Section 17 approved.

On section 18.

N. Macdonald: Here, again, this deals with the Greenhouse Gas Reduction (Emissions Standards) Statutes Amendment Act, 2008. It repeals amendments that presumably were never…. Well, it says they were not in force as of yet.

Can the minister simply describe what exactly beyond that is intended with section 18, or is that the scope of section 18?

Hon. P. Bell: Again, section 26 added division 3.01 to the Forest Act and is in section 4 of this bill, which we've already discussed and debated and passed. Section 28 is amended, section 80 of the Forest Act, and was in section 5 of this bill.

Section 18 approved.

On section 19.

N. Macdonald: With 19 and 20, I think basically it's the same thing that the minister is saying. These are from previous decisions made within the bill. You're just changing language. Is that the case with section 19 — it follows on amendments that have already been passed?

Hon. P. Bell: Again, this is shifting from statutory decision-making to delegated decision-making.

Section 19 approved.

On section 20.

N. Macdonald: Again with section 20, if the minister could provide an explanation for the amendment here.

The Chair: Member for Columbia River–Revelstoke.

My apologies. Minister of Forests and Range.

Hon. P. Bell: The member for Columbia River–Revelstoke has way more hair than I have, Madam Chair, although it is receding slightly. He has two years to catch up to me, I understand. Now we know he's 51.

This is simply a function of the addition of 94.1 again.

[1735]

Section 20 approved.

On section 21.

N. Macdonald: With section 21, now we're moving into amendments to the Wildfire Act. Previously the language prohibited somebody from risking a fire, and now the language also includes prohibition against starting a fire on forest or grasslands, so it's an interesting change. Maybe the minister could just describe exactly the reason for the change. What were the circumstances that led the minister to include this in the amendment act?

Hon. P. Bell: I'm advised that this will make the chances of a successful prosecution easier, although I'm sure the member opposite is thinking what I'm thinking, which is: how could you not start a fire without risking to start a fire? But I suppose some lawyer somewhere in the world who is smarter than both of us put together has figured out that we need this.

Section 21 approved.
[ 5503 ]

On section 22.

N. Macdonald: Again, just from the description, it seems fairly straightforward. But I'll still have the minister put on record exactly the purpose for section 22 — again, a change to the Wildfire Act — and give the minister an opportunity to explain this.

Hon. P. Bell: This is creating a new opportunity for us to recover funds from someone who may have caused a fire. In the past there was no clarity in the act with this regard. So if we have paid someone for services that they have provided in the suppression of a fire and it turns out that that individual caused the fire, then they're required to pay us back the money that we paid them as well as any subsequent fines or fees that would be associated with it — so a fairly straightforward portion.

Section 22 approved.

On section 23.

N. Macdonald: Here the minister includes the defence of due diligence. Surely there's already a legal definition of due diligence that the minister would be referring to. Can the minister just explain the reason for section 23 and maybe deal with the issue of due diligence? Presumably it's a legal term that courts will be very familiar with.

Hon. P. Bell: This harmonizes the Wildfire Act with the Forest and Range Practices Act.

Section 23 approved.

On section 24.

N. Macdonald: There's a lot of harmonizing going on around here. Still a popular term, eh?

Section 24 extends from two years to three years the limitation period. Again, if the minister could explain the rationale for that. Obviously there's something specific this is intended to deal with.

[1740]

Hon. P. Bell: We're finding that fire investigations are becoming increasingly complex, and we felt it was appropriate to have the extension to move to three years to complete those investigations.

Section 24 approved.

On section 25.

N. Macdonald: Again, just an explanation of section 25.

Hon. P. Bell: It's just a renumbering of the act to reflect earlier amendments.

Section 25 approved.

On section 26.

N. Macdonald: Just one question. Section 26 deals with commencements, which are when the various sections take effect. For item 4, which includes sections 15 and 16, the date is August 1, 2005. Could the minister explain the rationale for that date?

Hon. P. Bell: That reflects the date of the court case that we referred to earlier and ensures that all of the amendments to stumpage rates made during that period of time are continued to be in effect.

On balance, it worked out to about an equal number of charges where the stumpage increased and decreased. There wasn't a lot of money exchanging hands either way, but it allowed the stumpage reassessments to continue to be in effect through that period, which was the expectation that the licensees would have had.

N. Macdonald: Just to be clear, this in no way retroactively changes the decision of the court. Instead, the court in its decision basically changed the law, and this is recognition of that fact and goes back retroactively to make it the appropriate law in place back at that time.

If the minister could just explain if that's a proper understanding of what has gone on with that date.

Hon. P. Bell: The member is correct.

Section 26 approved.

Title approved.

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

Motion approved.

The committee rose at 5:43 p.m.

The House resumed; Mr. Speaker in the chair.

Report and
Third Reading of Bills

Bill 7 — FORESTS AND RANGE STATUTES
AMENDMENT ACT, 2010

Bill 7, Forests and Range Statutes Amendment Act, 2010, reported complete without amendment, read a third time and passed.
[ 5504 ]

Hon. G. Abbott: I call committee stage debate on Bill 13, Forests and Range (First Nations Woodland Licence) Statutes Amendment Act, 2010. If we could take a very brief recess, Mr. Speaker, to allow staff to change and proceed — five minutes, perhaps.

Mr. Speaker: Hon. Members, the House will stand recessed until five minutes to six.

The House recessed from 5:44 p.m. to 5:48 p.m.

[Mr. Speaker in the chair.]

Committee of the Whole House

Bill 13 — Forests and Range
(First Nations Woodland Licence)
Statutes Amendment Act, 2010

The House in Committee of the Whole (Section B) on Bill 13; L. Reid in the chair.

The committee met at 5:49 p.m.

On section 1.

B. Simpson: I guess we'll get started on this act tonight. I would like to, on section 1, canvass some general questions about the nature of this tenure.

[1750]

They actually go off of the minister's opening comments about some of the intricacies of actually putting this tenure into place, and I think they best fit under the general sort of definition of what this new tenure is, this First Nations woodland licence area. Under section 1, one of the things that the minister indicated is that this particular licence came out of consultations with First Nations.

Would the minister please put on the record who was consulted, specifically with respect to the form of licence that's being proposed in this bill?

Hon. P. Bell: I think a couple of…. First of all, this entire process started in, I believe it was, November of 2008 in a meeting that I did with a large number of First Nations leaders in Prince George. About a hundred or so, I think, different bands were represented, along with the leadership council at the time.

Then, through the round-table work that was done over an extensive period of time, the visits that were held…. There were First Nations invited to all of the round-table meetings — as well as First Nations members on the round table — that led in this general direction.

I think the member's question was specifically: on this specific form of licence, how many or who were consulted with? I suppose "asked for advice" would be a more appropriate term as opposed to "consultation," because that does reflect specific fiduciary responsibilities. So "advice" is probably a more appropriate term than "consultation."

There was a total of 23 bands that we asked for advice, including: Canim Lake; Huu-ay-aht; Seabird; Nazco; the Tsilhqot'in group of First Nations; Gitxsan; Westbank; Nanwakolas — which is a representative body of, I think, five or six First Nations; Stellat'en; Shishalh; Tk'emlupsemc; Skeetchestn; Cheslatta Carrier; Sechelt; Lheidli T'enneh; Kwadacha; and the coastal First Nations. So that was a different representative group — 23 different bands altogether.

B. Simpson: I take the minister's point that because of the nature of consultation and the legal implications around consultation, I think it is appropriate to call this advice-seeking or simply getting people's feedback on this particular licence.

With respect to the advice on this, at what stage was the advice sought? The minister indicates…. As I understand him correctly, there was a general discussion with, as he's indicated, about a hundred bands that sort of sowed the seeds for maybe moving in this direction.

There was the round table and, of course, an explicit reference in the round table to looking at an area-based tenure for First Nations which, in some respects, this is an answer to. But I know that drafting legislation, as I've found over the couple of years I've been here, is a process where sometimes it's awkward to reveal the exact nature of the legislation and so on.

[1755]

With respect to the First Nations mentioned by the minister, what was the nature of the dialogue? Were they actually seeing a draft bill, or were they speaking about this particular approach in the general case?

Hon. P. Bell: The process involved the development of a concept paper that reflected the spirit of the bill — not completely, as is stated today, but the general overview of the bill and what it might look like — and asked a series of questions, and then that work was done over the past six or so months.

B. Simpson: We will get into some of the specifics of the bill, but as I had mentioned in my comments about the bill in second reading, there are aspects of this bill that we're getting feedback that First Nations don't like about the bill. Was the feedback from First Nations captured? Was it a formal dialogue? Were there letters exchanged? Were there briefs exchanged? If so, is any of that available in the public domain?

Hon. P. Bell: The bulk of the work that we did was verbal. We did receive a couple of written responses, but the bulk of the work that we did was verbal. While I do
[ 5505 ]
have a document that provides an outline of each individual band's responses, I am hesitant to release that to the member opposite without checking with the individual bands and confirming that they would find that acceptable.

I would be prepared, though, to share a summary document that outlines the number and the response, the general response, from each of the bands. Just as an example, I'll provide to the member the type of feedback that's on this particular sheet. The question of overall support for the legislation was asked; 20 of 23 bands responded positively — 87 percent. Of the 87 percent who agreed with the proposed legislation, 52 percent indicated that their support is subject to being provided with additional information.

That would be an example of the sheet that I certainly am prepared to share with the member, but I think it would be appropriate, if the member wants information on each of the surveys from each of the bands, that we would have to go back and check with those bands and make sure they're comfortable with us releasing that.

B. Simpson: I appreciate the minister's offer, but that's not necessary. I'll canvass it with some questions about general feedback. If my math is right, effectively about 10 percent of the existing bands were canvassed in order to achieve the insight that the government wanted to achieve.

What were the criteria the government used to determine which bands were engaged in the advice/feedback mechanism in terms of, you know, hitting the 10 percent mark? One of the complaints we've had, of course, as the minister can well imagine, is that there are a number of bands, 90 percent of them, that weren't consulted, and some of them want to know why they weren't part of that process.

[1800]

Hon. P. Bell: We were, earlier on, commenting about the combined expertise of the member for Columbia River–Revelstoke and myself and our two disciplines in education, those being social studies and mathematics. I would point out to the member opposite that it's 11.33 percent of the First Nations bands in the province that responded.

We used three basic criteria for determining which bands we should talk to. The first was that we looked at regional representation and tried to find a blend of First Nations from across the province. The second was those First Nations that are active in forestry currently — those that have either demonstrated an ongoing level of activity or an interest in engaging. The third criteria was…. We had received specific interest from a number of bands on being early adopters of new tenures, so we included those bands in as well. That would be a summary of how we selected those.

B. Simpson: That's interesting. Was this criteria established in conjunction with the leadership council? I need the minister to help me in the timeline because my understanding, if I've got it right, is that the leadership council still existed as an entity at that time. It wasn't until the fall of '09, as a result of the reconciliation act, that there was some difficulty around the leadership council. Now we've got the All Chiefs Task Force. So I'm assuming the leadership council existed at that time.

Was there a dialogue with the leadership council about establishing the criteria to make the determination to get the 11.33 percent feedback?

Hon. P. Bell: The leadership council did not exist when we started this process, and we did not confer with them for the selection of these bands.

B. Simpson: Sorry — just so I'm clear. Did I not hear the minister say that this started in '08 or '09? It started later than that — okay.

Interjection.

B. Simpson: Fair enough. The minister is indicating that it was about six months or so, but….

Interjection.

The Chair: Minister.

Continue.

B. Simpson: We'll make sure it's on the record, that our dialogue is actually on the record, as per process — recognized by the Chair.

Having said that, the leadership council wasn't there. So one of the questions is: was the forestry council consulted?

Hon. P. Bell: We did offer the opportunity to the First Nations Forestry Council to participate in this. There were a couple of events, I believe, that led them to choose not to participate. One was a letter that I received from the chair of the forestry council advising that the forestry council did not have the authority or the mandate to act as a consultative body on new tenures and recommended that we have those discussions individually with bands.

That was the end process that we ended up with. It was actually consulting with the individual bands, but we did sit down with them in December to talk about it, and then as a result of a couple of letters, we ended up not using them as one of the bodies that we referred to.

B. Simpson: Again, part of the difficulty there…. It would be interesting to see the correspondence. As the minister may be aware, the forestry council and the First
[ 5506 ]
Nations Energy Council are convening an event post the sitting of this House to discuss this very bill — some problems that they have with this bill as well as the energy bill. I'll leave it to the minister, but I will be in dialogue with the forestry council about the minister's comments, and they're now on the public record.

[1805]

With respect to the feedback from First Nations, the minister mentioned in his opening comments the lessons learned from forest range agreements and forest range opportunities, some of the issues around size of tenure, some of the issues around volume and accessing volume, etc.

Was that some of the feedback that came back from First Nations about being careful to make sure (a) that the volume was actually going to be available, (b) that the size that was available to First Nations was appropriate and (c) that the structure of these things was actually going to take the lessons learned from the FRAs and FROs and make sure that it was a successful tenure?

Hon. P. Bell: I think it's fair to say that the answer to all three of those questions would be yes.

B. Simpson: Again, I guess we'll have to canvass some of these sections in the various sections of the bill. In the general case, though, was there feedback about the nature of the revenue exchange for a new tenure — feedback from First Nations about the appropriateness of First Nations paying stumpage, paying rents and paying the normative revenue to the Crown? If so, can the minister kind of generalize the nature of that feedback they got from their representative sampling?

Hon. P. Bell: I think the easiest way to respond to that question is to read from the document that I already suggested I would share with the member opposite — the summary of the advice that we received from First Nations.

One of the questions was: is it appropriate to have stumpage based on market rates? Six of 23 First Nations agreed with that, and 74 percent had concerns with stumpage rates and/or wanted community forest rates applied to their tenure.

"When we asked about a portion of paid stumpage being shared with the First Nation" — in other words, market rate collected but then shared back with the First Nation — "16 of 23 agreed that that made sense, for 70 percent. Seventy percent agreed with stumpage from the new tenure being shared as revenue-sharing. However, 93 percent said that their support is conditional on the amount being shared and/or stumpage rate being at about the community forest rates."

I think those are probably the best two answers to the member's question.

B. Simpson: Because we're not privy to this…. I've said it many times in the House: my preference is to somehow use this Legislature better in the formulation of bills and so on. We've been asking for a forestry committee, and we've got a Standing Committee on Aboriginal Affairs that isn't utilized. A lot of this dialogue could go on using standing committees. With respect to that, one of the things I'm curious about, then, is in the comments about the stumpage and the revenue flow.

[1810]

This is with a group…. Based on the minister's indication of the criteria — the size of the band, their experience with forestry and their specific interest — would it be fair to characterize this as a group that probably can make these commercially viable because they've got experience, they've got history, they've got some size? Where we got into trouble with FRAs and FROs was particularly on the smaller end of the scale where often stumpage became the problem.

I'm not sure that this representative sample that the minister got necessarily is indicative of the broad range of issues that are out there in getting First Nations started on a tenure like this, where paying stumpage upfront and paying some of the fees upfront are a problem. So was there any checking done with other First Nations about this particular issue of revenue collection beyond what the minister has indicated already?

Hon. P. Bell: I read into the record earlier the names of the First Nations across the province who participated in the advisory group. I don't want to pick out individual names of communities that I know have not had success. I'd be happy to share that privately, off line, with the member. I don't think it would be appropriate to put that on the record in the House here. There are several, when I looked very, very quickly, that I know have struggled with FROs and have not been successful with them. But as the member points out, there are others that have in this selection of 23 as well.

So I think there is a good broad selection of bands that have had success and those that have had their struggles with FROs and FRAs.

B. Simpson: Fair enough. I'll take the minister's word for that, although the feedback that I'm getting is the stumpage portion of this — and we'll get into it in more detail — is a sticking point.

In section 1 itself is the definition of a First Nations woodland area. And of course, as these bills tend to be…. The definition of a "'first nations woodland licence area' means the area of land subject to a first nations woodland licence." It's one of those interesting things that have to be in these bills.

As I understand the bill, is it fair to characterize that what will be designated is a licence over top of existing licences in effect — a woodlot licence and a community forest licence in terms of the actual on-the-ground application of practices and regulations and so on?
[ 5507 ]

It seems to be a sense in the bill that the woodlot and the community forest are being used as templates with some of the unique characteristics in here — the botanical characteristics and things like that. There's no question there are additional flavours here, but in terms of the guts of the timber activities, is it fair to say that this First Nations woodland licence will use woodlots and community forests as the kind of templates, depending on the size of licence that's issued?

Hon. P. Bell: I think it's fair to say that there are strong linkages between this tenure and community forest agreements.

B. Simpson: Just so I clarify, because community forest is one aspect, but the bill does delineate woodlot or community forest, and it seems to be determined on the size of the licence that the First Nations get. As the minister well knows, I don't have the numbers all in my head, but there are specific sizes for woodlots in the Interior, woodlots on the coast, and then, of course, community forest has a whole different sizing criteria to it. So is it both woodlot and community forest that the template's operating?

Hon. P. Bell: The numbers that the member was referring to earlier, I think, are 600 hectares in the Interior and 400 on the coast for woodlots.

[1815]

But the main purpose for this was to allow First Nations who currently hold woodlots, of which there are several in the province, to convert those woodlots from woodlots to First Nations woodland licences. The actual model of the tenure is far more closely associated with community forests than it would be woodlot in nature.

B. Simpson: That's a helpful clarification for what's going on, because there are sections of this act that talk about conversion and bringing things over that we have a few questions around.

Just in terms of section 1, then, before we move off it. There is section (c) of this that repeals and replaces the definition of "major licence." The section (c) reads: "by repealing paragraph (a) of the definition of 'major licence' and substituting the following: (a) a timber sale licence that was (i) issued under 23(1)(a)…."

Is this simply just making room for the new licence, or is this something that's happening in this bill independent of the First Nations woodland licence?

Hon. P. Bell: The member's assessment that there's actually something else going on a little bit here…. It was a typo that was being fixed in the act and doesn't directly relate to this, to the woodland licence.

Section 1 approved.

On section 2.

B. Simpson: For those who for some reason pay attention to this, what an act that amends existing legislation does is often make single-word changes and various other things. So it does take us a while here to figure out what's going on sometimes.

On section 2 of the bill, there are again some changes that simply look like they're making room for this new licence. But in section 2(c) it says: "The minister must determine an allowable annual cut for (a) each community forest agreement in accordance with the community forest agreement for that area, and (b) each first nations woodland licence area in accordance with the first nations woodland licence for that area."

This is a flavour where…. It's where my confusion came from with respect to woodlots, community forests, these new woodland licences. Some of the changes that are occurring refer to all of these licences. In this case, it's in reference to determining an annual allowable cut for these licences.

I'm wondering if the minister could just explain what the nature of this portion of this section is.

Hon. P. Bell: Section 8(7) allows the…. First of all, it moves from statutory decision-making to delegated decision-making. Second of all, it adds the woodland licence as a complementary form of licence in addition to the community forest licence. So it adds a section (b) that allows the woodland licence determination to take place.

B. Simpson: Again, the dialogue around delegated authority versus statutory authority has already occurred. I just want to make sure that section (a), community forest agreement areas, is already in the existing legislation and that this is not somehow being added in here as well.

Hon. P. Bell: That's correct.

Sections 2 and 3 approved.

On section 4.

B. Simpson: This is another area that the minister indicated may be problematic in realizing these licences, and that's the whole question of the existing volume, where that volume is relative to traditional territories, etc.

[1820]

First off, and I'm just conscious that we will be wrapping up here shortly, this section states: "The minister may specify that a portion of the allowable annual cut determined for the Crown land in a timber supply area…is available for granting under a form of agreement referred to in section 12." I presume that's the new tenure.
[ 5508 ]

Again, for my clarification, is this part of the allocation process after TSA? It's out of the TSA, and it's adding this licence as part of the minister's ability to apportion the annual allowable cut across the licences in a timber supply area. Is that effectively what this is doing?

Hon. P. Bell: This particular section takes the timber supply that is allocated to a new First Nations woodland licence out of the TSA and moves it into its own cut control section similar to the way a TFL would have a cut control or a community forest would have a cut control or a woodlot would have a cut control.

Is that enough? Do you want to pass this section and then go on?

B. Simpson: No. I think under this section…. If I understand the minister correctly, because there's an area-based tenure, that's one of the reasons why you would switch to making it more like a tree farm licence and apportioning it out of the timber supply area, which is predominantly volume-based licences. Can I just have confirmation that that is what's going on?

Hon. P. Bell: That's correct. All area-based tenures have their own AAC determinations. In a timber supply area, there are no area-based licences at all. It is 100 percent volume-based licences that are in a TSA. This simply removes the woodland licence out of that.

B. Simpson: With that in mind, one of the questions behind this, as the minister may be aware…. It wasn't his file when forest and range agreements, forest and range opportunities were conceived, when the 20 percent clawback was underway.

There was a fundamental question of: how would the government prevent what was called by most people a black hole? The timber that was assigned or the volume that was assigned to eventually make its way to First Nations didn't just disappear off of the market and not be made available. There was the whole question of B.C. Timber Sales and their clawback volume coming back into the marketplace.

A fundamental question in here is: in the various timber supply areas, is the work being done to actually determine how much volume may be in these licences so that apportionment work, that kind of scoping and inventory work, is actually being done in each of the timber supply areas?

Hon. P. Bell: That is correct. That work is being done.

With that, Madam Chair, and noting the time, I ask the committee to rise, report progress and seek leave to sit again.

Motion approved.

The committee rose at 6:24 p.m.

The House resumed; Mr. Speaker in the chair.

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

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

Hon. P. Bell moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until 1:30 tomorrow afternoon.

The House adjourned at 6:25 p.m.

PROCEEDINGS IN THE
DOUGLAS FIR ROOM

Committee of Supply

ESTIMATES: MINISTRY OF FINANCE

The House in Committee of Supply (Section A); H. Bloy in the chair.

The committee met at 2:30 p.m.

On Vote 32: ministry operations, $58,480,000.

The Chair: Good afternoon, everybody, and welcome to the Douglas Fir Room. We're doing the budget estimates on the Ministry of Finance. First, I'd like to remind all people in the gallery that the use of the audio portion of any of their electronic devices is not allowed.

B. Ralston: Can the minister please confirm, then? The usual procedure here is that beyond that particular vote, we will deal with all votes related to the Minister of Finance at the same time. I've given notice to the minister that a colleague intends to ask some questions about the Pacific Carbon Trust, which is the subject of a separate vote.

Hon. C. Hansen: Yes, I'd certainly be prepared to field whatever questions pertain to my ministerial responsibilities under Vote 32.

B. Ralston: If I might begin with a series of questions about the harmonized sales tax. In the comprehensive integrated tax coordination agreement between the government of Canada and the government of British
[ 5509 ]
Columbia, in annex C, paragraph 8 set out a timetable for the payment of what was described as assistance amount — the $1.599 billion.

The first payment, according to the agreement in paragraph 8, was to be within seven days of the tabling of the legislation to wind down the provincial sales tax of the province. The next item was: "On the first business day following the implementation date, $374 million; and on the first business day following the day that is year 1 after the implementation date, a further $475 million."

Indeed, in the September update, that was set out on page 10 in table 1.3 as projected revenue from the federal government. In the budget that was debated and passed in this session — in table 1.3, the subsequent table, page 12 of this document — the allocation of that transition money has changed.

The minister has spoken briefly to it publicly. Most notably, on page 12 the original $750 million that was anticipated to be received was reduced to $250 million, and the $374 million was increased to $769 million, and the $475 million was increased to $580 million.

Now, I believe the minister had said publicly…. He made reference to a negotiation with the federal government. Can the minister confirm that it was indeed a negotiation? And can he explain why that change was made? I have some subsequent questions after his response.

Hon. C. Hansen: I can confirm that. What was set out in the original CITCA agreement was in essence a default position. We acknowledged that there may be a requirement for further negotiations which would lead to amendments to the CITCA agreement, but if there was not mutual agreement around any changes, then the original wording of the CITCA agreement would remain in place.

We did have those negotiations with the federal government. We did arrive at a re-profiling of that $1.6 billion, but the timeline for the payments remained the same.

B. Ralston: Well, the minister describes it as a negotiation. I mean, clearly the initial schedule of payments was also the subject of a negotiation, presumably, rather than dictated by one side or the other.

[1435]

Can the minister explain why the province chose to forgo receiving $750 million just before the end of the fiscal year as opposed to $250 million? Obviously, the province's rate of borrowing, although it's very good in the money markets in New York, as the member from West Vancouver pointed out yesterday in the House — and certainly an argument for public borrowing as opposed to P3 borrowing, but that's more of a parenthetic aside….

Can the minister explain why the government was prepared to incur the extra cost of deferring receiving that revenue?

Hon. C. Hansen: There were discussions between the federal government and the province trying to realize each other's fiscal requirements and imperatives that we were facing during a time that was changing quite rapidly in the world economy. We were able to, by mutual agreement, come up with the change in the dollar amounts.

I can actually share with the member that even after we had finalized what these amounts are that were reflected in this September budget, we actually received a further request from the federal government to change it once again. But because of the fact that we were so close to locking — we had already locked down our budget for the March 2 budget — we were not able to continue further changes that the federal government had requested even at that late date.

B. Ralston: Well, I certainly understand what the minister is saying about a negotiation. Obviously, one wants to be reasonable in negotiations. But how was it to the advantage of the province to forgo this revenue, if only for a brief period of time? This negotiation took place not that much before the subsequent renegotiation. The fiscal situation, if anything, would have slightly improved, I would suggest, as opposed to a negotiation conducted in 2009.

Can the minister explain how it was to British Columbia's advantage to renegotiate this agreement in a way in which, I would suggest, the terms were more favourable to the federal government than the original agreement?

Hon. C. Hansen: This process is very much a collaborative process. We see it as a partnership with the federal government, and we have endeavoured to be respectful of their needs on a vast array of issues involving the implementation of the HST in British Columbia. This is one of those examples, and the financial impact, I think, as the member himself has acknowledged, was very minimal. But we were able to arrive, through mutual agreement, at this re-profiling of the $1.6 billion.

B. Ralston: Has the minister or someone on his staff calculated the financial disadvantage in terms of the interest forgone on the revenue, had it been received earlier? Has anyone in the ministry done that calculation — or in the Treasury Board, among the myriad of officials there?

Hon. C. Hansen: It would be very difficult to single out one precise issue such as this, in the array of other dynamics that were taking place, to quantify that, as the member has suggested. The bottom line is that we were working towards our fiscal plan, the federal government was working towards theirs, and we were able to come to mutual agreement on these changes.
[ 5510 ]

B. Ralston: On what basis were the original amounts selected in the negotiation? Presumably there was some forward planning in the federal Ministry of Finance. Revenue flows were anticipated. They have a three-year plan, a five-year plan, very much like the provincial ministry.

Can the minister then explain, from the perspective of the federal government, what changed so dramatically that they were anxious to renegotiate that on a basis more favourable to themselves than the province?

[1440]

Hon. C. Hansen: The original profiling of the $1.6 billion was actually arrived at, at a very different time in the economic history of Canada and British Columbia. It was reflective of what both governments felt was appropriate, given the fiscal situation that was anticipated at that time.

As we got further through that year, things obviously changed in a pretty dramatic way, and we were able to engage in a renegotiation on this profiling of the $1.6 billion and come to an arrangement that was mutually agreed to.

B. Ralston: Well, perhaps the minister can then refresh my memory as to when the final details of this agreement were negotiated. I believe it was in the fall of 2009, but perhaps he could give, through staff, the precise date on which this agreement was signed off.

Hon. C. Hansen: The initial profiling of the $1.6 billion was finalized in November. The first of the signatures on the CITCA agreement was by the federal minister on November 27.

B. Ralston: The minister's words were — I believe I have them correctly — that it was a very different time in the fiscal history of the country. The budget was delivered on March 2, 2010, so the gap there is December, January, February. Presumably, in order to finalize the numbers for publication, that would have been a decision that was made perhaps as late as the end…. I doubt the end of February, so it's really a matter of months.

It seems to be a bit of an exaggeration to suggest that there was a dramatic shift in the fiscal situation of the country during that period of time, but perhaps the minister could explain what he meant by that.

Hon. C. Hansen: The initial profiling that was reflected in the CITCA agreement in November was simply the default should more appropriate numbers not be arrived at by mutual agreement. So even after the CITCA agreement was signed, we had further discussions, further negotiations with the federal government around that profiling of those dollars. We were able to arrive in those months at a mutual decision to change the profiling of the dollars.

B. Ralston: I understand that point, because the minister has repeated it a few times. But what dramatically changed between the end of November and the finalizing of the budget for March 2?

Hon. C. Hansen: I can tell the member that if he doesn't think the revenue numbers were volatile in 2009, he wasn't living in my shoes. That's for sure. It was a pretty turbulent time for the global economy, and British Columbia certainly was not immune to that. Even as we put the budget together for March 2 of this year, we were still seeing considerable volatility in forecasts for revenue numbers.

As those months converged on the date of finalizing the budget, we were able to determine more certainty. But even in the months since March we have seen continued uncertainty in many of those revenue streams, and that was the environment in which we were operating at the time.

[1445]

I think, going back to the $1.6 billion, that this was an amount…. A cash flow was arrived at by mutual agreement and was intended to meet not just our fiscal objectives but also the fiscal objectives of the federal government. As I indicated earlier in my comments, even after we had arrived at these numbers, the federal government came back to us after we had locked down our budget numbers to ask if we could make yet a further substantial change in those numbers. We had to decline any further negotiations because of the fact that our budget date was so imminent.

B. Ralston: Well, the minister mentions that revenue was volatile, but yet here you had…. The minister describes it as a default position, but nonetheless, it was a negotiated position. You had $750 million locked down. You had it available for the budget before March in that fiscal year. So if there were some concerns about meeting the projections for deficit in that fiscal year, you had $750 million available to deal with it.

So I'm not quite sure. That would seem to be negotiating from a position of certainty to a position of uncertainty, in the way that the minister has described it. I don't understand it.

It seems to me that perhaps another explanation might be in order. Initially it was to help in the budget projections with the budget that was tabled in the fall, and it became clear that that revenue was no longer needed. So as a budget-smoothing device for the following fiscal year, the $500 million was transferred over into the next fiscal year.

Is that not really what the decision involves, rather than this suggestion of some friendly negotiation between himself and his federal counterpart?

Hon. C. Hansen: I will remind the member that as of March 2, when we tabled the spring budget, we at that
[ 5511 ]
time were projecting for this last fiscal year a $2.7 billion deficit. If we had taken transfer of the initial amount, it would not have changed in any way the need for us to be borrowing on the open markets. At the time we were actually doing warehouse borrowing because we could get very favourable rates on our borrowing in anticipation of the future need for cash.

Whether we received those dollars at that time or whether we received them a few weeks later would not have been dramatically different in terms of the bottom-line financial picture of the province of British Columbia.

The Chair: Minister for Surrey-Whalley.

B. Ralston: Not minister yet, thank you.

The Chair: Member.

B. Ralston: Appreciate the upgrade — complimentary.

Well, it's interesting that the minister puts it that way. Perhaps this will be ultimately a question that the Auditor General will decide, but surely the $250 million that is booked to the last fiscal year counts as revenue in that fiscal year. Equally, the $750 million, if this device of negotiating it into the next fiscal year had not been chosen, would have counted as revenue in that year as well.

The minister mentions the deficit. Obviously, having a smaller deficit rather than a larger deficit is, I think, politically considered to be generally more advantageous in certain circumstances, and that was obviously a topic of political debate. So I'm wondering why the minister is suggesting that he was almost indifferent to whether he had an extra half-billion dollars booked to that fiscal year.

Hon. C. Hansen: I was surprised to hear the hon. Chair confusing my colleague opposite as being a minister of the cloth, but I understand that happens occasionally.

There was a lot of collaboration between the province and the federal government last year around issues such as accelerated capital. It was really, I think, a very good partnership that worked to the benefit of British Columbia.

[1450]

This is just one of the many issues that were on the federal-provincial agenda where we were trying to find solutions of mutual benefit and to help each government solve their challenges during very, very difficult economic times.

The other thing is that we believe it is very important for us to meet our fiscal targets. We have been rewarded for that over the last eight years with credit upgrade after credit upgrade from bond-rating agencies to the point that today we now have the highest credit rating that's possible, Alberta being the only other province in Canada that has a triple-A credit rating.

By ensuring that we stick to our fiscal targets, it helps to ensure that that credit rating can be maintained. That in turn reduces our borrowing costs and puts literally hundreds of millions of dollars back into the coffers of British Columbia that otherwise would have had to go out to pay for interest rates on bonds. Those help us fund programs that are important to British Columbians.

B. Ralston: Well, I can see that the minister is not going to come directly to the point that I am making, but perhaps I'll try again in a slightly different way. By the renegotiation that took place, rather than $374 million in this fiscal year, the negotiated figure was $769 million in other revenues according to the budget estimates, page 12, table 1.3.

Obviously, there's a significant difference between those two figures. I'm suggesting to the minister that this tactic was adopted as a budget-smoothing device to enable him to meet his deficit target for this fiscal year. Will he agree with that or not?

Hon. C. Hansen: As I mentioned earlier, the province had been pre-borrowing — probably another way to describe the warehouse borrowing that we do. We certainly were of the expectation that interest rates were going to be rising. Therefore, it was far more advantageous for us, if we had to borrow money, to do it last year so that we would actually have those funds in reserve. That diminished our need for other cash transfers last year.

This year we fully expect borrowing costs are going to be higher. Therefore, to have this cash flow coming in from the federal government at that time was probably the most advantageous approach for us to take.

B. Ralston: Is the minister satisfied that the warehouse borrowing program is working effectively? I think when one looks at the public accounts, there's something in the range of $6 million to $7 million in cash on the financial statements of the province, at least a couple of billion of that through the warehouse borrowing program. Is the minister convinced that the standby facility of several billion in cash is necessary and that incurring that interest cost is in the provincial interest?

[1455]

Hon. C. Hansen: One of reasons why we engaged in warehouse borrowing last year was really because of the tremendous volatility in the markets of the time. The concern that we had was that if the world financial markets continued to be as turbulent or to further deteriorate, it may be very difficult for the province to borrow funds that it absolutely needed.

Therefore, as a defence, we went out and made sure that we preborrowed. We were able to get, actually, very
[ 5512 ]
attractive rates for that at the time. But it also was a way of reducing and minimizing the risks that we otherwise would have been taking. We saw other provinces in Canada and other jurisdictions that were faced with an inability to borrow because of the state of the financial markets at the time.

The warehouse account has been utilized as it was intended, and it is working the way it is intended. I think that most recently, as the member may know, we went out to the markets just a few weeks ago with a $1 billion bond issue. It was at a very favourable rate to British Columbia, actually lower than rates that were being offered by other high-value jurisdictions. We not only were able to secure our $1 billion, but we were offered about $2.5 billion by the markets, and we wound up taking $1.5 billion at a very favourable exchange rate.

In some of the commentary that came out of that, it made British Columbia look pretty good. We were seen as a jurisdiction that hits its financial targets, that was deserving of the triple-A credit rating that we have. Particularly in comparison to other sovereign debt around the world, the British Columbia bonds are very, very, very attractive to investors.

B. Ralston: Can the minister advise: what was the amount of the standby facility, or the money in the warehouse borrowing program, as of the year fiscal, March 31, 2009? And compare that to…. I know that the ministry or the comptroller general may be just finishing the public accounts for last fiscal, but what was that at, at March 31, 2010 — so the year-end comparison over those two years?

As I recall, the standby facility was a total, I think, in the range of $6 billion. I appreciate what the minister may be saying, but it does seem to be an inordinately large amount of standby capital borrowed on a short-term basis.

Hon. C. Hansen: As of March 31, 2009, there was about $2.1 billion in the warehouse account, and as of March 31, 2010, there was zero in the warehouse account at that time.

B. Ralston: Can the minister explain, then, why it was drawn down? Were the goals of the program changed, or was there some other intervention on a policy basis? Can the minister also then advise: what was the interest paid over the last fiscal on that amount? Is it projected that there will be money borrowed in this account in this fiscal year?

Hon. C. Hansen: The use of the warehouse account really reflects the degree of uncertainty and turbulence in the markets. If you go back to March of 2010, that of course was a very turbulent time. It was prudent for us to build up that reserve in the warehouse account.

[1500]

Given that markets in 2010 have stabilized, certainly there is not any fear today that the province of British Columbia would have any difficulty floating bond issues, particularly given our recent success. We have no plans to utilize the warehouse account during the 2010-11 fiscal year.

B. Ralston: The minister mentioned, by way of comparison, other provinces that he said had an inability to borrow. I wasn't aware of that. Could the minister give some examples of that?

Hon. C. Hansen: It's not a case that any jurisdiction in Canada, any province, was not able to borrow. With certain bond issues that some provinces put out, they were not able to raise the capital that they needed, the dollars that they needed, at the interest rates that they were offering. British Columbia, in this latest round, went in with a very low interest rate, and in spite of that, our bond issue was oversubscribed.

[D. Horne in the chair.]

B. Ralston: Well, the minister is wont to make interprovincial comparisons on a regular basis, and I suppose that's fair enough. Just to make that clear, can he advise what provinces marketed bonds that weren't fully subscribed in the way in which he's described?

Hon. C. Hansen: I think that's a question that opposition critics in those respective provinces could ask of their Finance ministers.

B. Ralston: Of course, I'm assuming that there's a factual basis for that, so perhaps we can pursue that in another forum. I want to just make sure that that was not something that was being used as perhaps a rhetorical launching pad for a discussion of British Columbia's financial position.

This is the fiscal year in which the HST will be implemented. The legislation is passed, as the minister knows, yet on April 22 the former Minister of Finance, who sat across in the very chair the minister's sitting in, made some public comments about the HST, which I want to put to the minister for his comment.

I'm quoting from former Finance Minister Carole Taylor, of course: "This particular tax takes the tax off of businesses — it takes $1.8 billion off of businesses — and it puts it on consumers. So that shift is a shift that is ideological as well as factual."

What comment does the minister have on those comments of the former Finance Minister? Obviously, she sat in the same chair as him, received maybe the same briefings from some officials who are the same, can be presumed to understand the finances of the province well and may have even considered this option while
[ 5513 ]
she was Finance Minister. What is his comment to the remarks of the former Finance Minister?

Hon. C. Hansen: In fact, when you look at all of the work that has been done by leading economists, not just across Canada but globally, around value-added taxes, it would be difficult for someone to argue that it is ideological. It is actually about driving healthy and strong economies and ensuring that those economies are as competitive as possible and enabling job creation in those jurisdictions.

B. Ralston: Just to summarize, then, what the minister is saying is that the comment of the former Finance Minister that the shift is ideological is wrong. Is that what he's saying?

Hon. C. Hansen: I think that even if you look in Canada, with various governments of various ideological perspectives, you see support for the concept of the harmonized sales tax and value-added taxes generally.

[1505]

Even in the recent Nova Scotia budget…. There's an NDP government that may not be of the same ideological persuasion as this government is, yet they saw the merits of the harmonized sales tax when they made their decision to increase the rate from 13 percent to 15 percent globally. And I think if you look in Europe, where there's been a history of value-added taxes for many, many years, you see governments of various political ideologies all endorsing the concept of a harmonized sales tax.

If you look, for example, to China today, the People's Republic of China, obviously another very different and diverse ideological approach to government, they have in place today on virtually all goods and services a value-added tax of 17 percent. On some products, a very small range, they have a lower value-added tax of 13 percent. But again, I think when you start looking globally at value-added taxes and their merits, it is based on good economics, not ideology.

B. Ralston: The former minister also said, and I've quoted it already: "It takes $1.8 billion off of business and puts it on consumers." What comment does the minister have on that comment by the former Finance Minister?

Hon. C. Hansen: You know, I think I'll use an example that I assume the member can relate to. You take the operations of a small law firm, which is a business. If that law firm had to buy a new computer, they would be paying today 5 percent GST on the computer, and the law firm would also be paying 7 percent provincial sales tax on the computer. As the member will know, that law firm gets a rebate of the 5 percent GST.

The 7 percent PST that that business is paying is passed on to the clients of that law firm. It has to get built into the price of the services that that business provides. Quite frankly, if businesses today did not pass on the cost of the PST that they pay, then they would be out of business very soon. So I think that anyone that feels that there is PST today that is paid by business and is not subsequently built into the cost of goods and services is not looking at it realistically.

B. Ralston: Then I take it from his comments that he includes the former Finance Minister in that category of people who are not looking at this question realistically, and I suppose we can leave it there. I think it's a surprising conclusion, given the vantage point that she brings to the debate as a former Finance Minister.

But also in that same interview, as the minister will be aware, the former Finance Minister said of the tax, which is due to be implemented in this fiscal year and therefore, I think, an appropriate topic for consideration here: "But I think the bigger issue is that just before the election, he promised that they would not do the harmonization of the sales tax and then right after the election decided to do it." So does the minister agree with former Finance Minister Carole Taylor that the government was elected based on misinformation and even deception concerning the HST?

Hon. C. Hansen: The member stated that there was a promise made that HST would not be implemented prior to the election. No such promise was ever made.

B. Ralston: Well, clearly, the minister disagrees with the former Finance Minister, but that's something that perhaps they'll be able to sort out in some other forum at some future date.

The minister did say, though, that no promise was made, and I noted that in today's newspaper — the Province — there's a letter that has his name on it. It's about the HST. I'm wanting to confirm that that's a letter that he wrote and agrees with or at least was written on his behalf and he signed as agreeing with.

Hon. C. Hansen: Not only do I agree with it; I wrote it.

B. Ralston: This letter appears in the Province newspaper Tuesday, May 18, on page A17. I'm going to read briefly from the letter. The minister will be familiar with it, but just for the sake of the record.

[1510]

"Did the B.C. Liberals promise during the election that there would be no HST? The answer is no.

"What did happen? During elections political parties receive dozens of surveys from organizations. These surveys are answered on behalf of candidates by individuals working out of the party headquarters. In response to two surveys asking about
[ 5514 ]
the HST, the answer was sent out, quite correctly, that the HST 'is not something that is contemplated in the B.C. Liberal platform.' Other than those surveys, the subject of the HST was never raised during the election by the media, the NDP or in any of the debates."

So is the minister saying that when a response to a survey is answered in an election campaign in his party by party officials, it's not binding on those people who are running for office and, therefore, should be disregarded?

Hon. C. Hansen: It sort of reminds me of some of the promises made around carbon tax, actually, during the election campaign as well.

What that response stated quite clearly in those surveys is that the HST was not contemplated in the B.C. Liberal platform, and that is an absolute factual statement.

B. Ralston: Well, the responses to the questionnaire were a little bit broader than saying simply: "It's not contemplated." The B.C. Restaurant and Foodservices Association reported in their response…. I'm quoting here from the response of the minister's party talking about why the party would not harmonize the PST with the GST.

"It would extend the PST tax base to a broader range of goods and services that are presently exempt from the provincial sales tax…. This is a major concern. The B.C. Liberals are also mindful that a harmonized GST would reduce the provincial government's ability to unilaterally adjust sales tax rates." In short: "A harmonized GST is not something that is contemplated in the B.C. Liberal platform."

It wasn't a question of just saying it's not there. It was a question of a series of responses that cast doubt on the wisdom of the policy and made it very clear that as a logical consequence of having doubt about the premises of that policy, it would not be implemented.

So is the minister saying that he doesn't stand by that promise, that he never regarded it as binding on the party and that in the future any promise made in those circumstances should be disregarded as having no value?

Hon. C. Hansen: I repeat: there was never a promise made by the B.C. Liberal Party or anybody speaking on behalf of the party that the HST would never be brought in. What it said was that the HST was not contemplated in the platform, and if the member wants to go back and read the platform, he can confirm that for himself. That was the reference document that the individuals working out of the party office were utilizing.

HST is something that this government has looked at. As far as I know, it has come up probably every year or at least every second year as part of the prebudget deliberations.

Because of the lack of flexibility shown by the federal government at the time in terms of the scope of what could or could not be exempted as well as the rate, which is specific to the point that the member just mentioned…. The rate was also inflexible. So until the discussions that took place after the election, the provincial government was not aware of the fact that the federal government was prepared to entertain a rate other than 13 percent.

For the province of British Columbia to go to that national rate that the various federal governments had been promoting would have meant that 1 percent increase in the total aggregate rate of the consumer tax in British Columbia. That was one of the reasons, among others, that the decision was made previously that we would not go down that road.

Those changed with information that was made available to us following the election. We made the decision to revisit our previous opposition to it, and based on the new information that we determined, we took that forward to cabinet, which subsequently made a decision in July.

[1515]

B. Ralston: Well, certainly the minister has offered an explanation of a sort of what was said and what was promised in this response to the questionnaire. But others interpret it much in the manner that I'm interpreting it, and I think that perhaps most notably, Ian Tostenson, who was the president of the B.C. Restaurant and Foodservices Association.

He wrote an open letter, and in that letter just after the HST was announced on July 23 — and I'm going to quote from the letter — he said:

"Last week the Minister of Small Business told me that all impacts of harmonization would have to be considered before any implementation would be contemplated. What a difference seven days make. In my opinion, this was a Ministry of Finance decision based on billions of dollars of incentives that the federal government grants to participating provinces."

He was completely surprised, based on the assurances that had been given to him in writing before the election, and expressed his surprise and outrage in this letter.

Obviously, Mr. Tostenson's interpretation was inaccurate as well. I suppose that's what we'd have to conclude. There seem to be a number of people who didn't agree with the interpretation that the minister is now offering. They thought it was a simple promise not to do it and if it was going to be contemplated that there would be a consultation process, not a single announcement, as there was on July 23.

Hon. C. Hansen: Hon. Chair, I can't speak for Mr. Tostenson. That's a question he'd have to put to him.

B. Ralston: Well, Mr. Tostenson's position is very clear.

Does he have any comment on the representations made by a cabinet colleague? Apparently, the Minister of Small Business told Mr. Tostenson that all impacts
[ 5515 ]
of harmonization would have to be considered before any implementation would be contemplated as recently, according to Mr. Tostenson, as seven days before the announcement was made. Does he have any comment on that?

Hon. C. Hansen: I have no knowledge of what the Minister of Small Business may have said or not said to Mr. Tostenson.

B. Ralston: Well, much time has passed. Is the minister saying that he's never discussed that point with either Mr. Tostenson — I believe he's met with him subsequently — or with his colleague the Minister of Small Business, Technology and Economic Development? I believe that's the full title. Has he not discussed that with him either? So no discussion with Mr. Tostenson about this and no discussion with the Minister of Technology about this. Is that the minister's position?

Hon. C. Hansen: I've had many discussions with Mr. Tostenson, and I have had many discussions with my colleague the Minister of Small Business, Technology and Economic Development. The letter that the member has quoted from is a letter that I am not aware of, and I am not aware whether the quotes that are attributed to my colleague are accurate or not.

B. Ralston: Well, frankly, I'm surprised, because this letter received a great deal of currency, media comment and led to requests for meetings with the minister. But I can see that the minister doesn't wish to answer these questions. I appreciate that they're probably uncomfortable and, really, tend to undermine the position that he seems to be trying to advance here in these estimates. So I think I'll have to reluctantly leave that topic.

I would say that it's very clear, I think, to most people, whether in the media or members of the public, that a promise was made not to implement the HST without consultation. That promise was broken on July 23, and that's part of the reason for the anger of the public ever since.

The minister can choose to reject that if he wishes. That's his right, and I suppose that'll become part of the public debate in the future.

Now, the Premier said on July 23 that the HST was the single best thing that could be done for the B.C. economy. Does the Minister of Finance still support that view?

Hon. C. Hansen: Yes.

[1520]

B. Ralston: Can the minister explain why he still regards that one policy alternative, notwithstanding all that's taken place since July 23, as the single best thing that could be done for the B.C. economy? When one comes to look at economic policy, there's a broad range of alternatives available, certainly in debate. Other jurisdictions have taken a different route to what they regard as economic prosperity. So can the minister explain why he stands by that position?

Hon. C. Hansen: The vast majority of countries globally have already adopted this value-added tax. British Columbia not only is one of the last jurisdictions in Canada to make this shift, but Canada is one of the last countries in the world to fully embrace a value-added tax system. It's actually one of the things that has been flagged internationally as one of the impediments to Canadian competitiveness and productivity growth in Canada.

If you look at the work that's been done by leading economists over the last number of years, and you look at the work done by the Progress Board…. Actually, I know the member has a very high regard for it because on their new economic forum website they suggest that readers of that website, if they want more information, should go check out the Progress Board. The Progress Board last year actually said that the adoption of the harmonized sales tax was the most important thing for the B.C. economy.

Also, if you look at the marginal effective tax rate on investment, at a time when the world economy is recovering, we need to ensure that British Columbia is an attractive destination for the global investors that can actually help us build the B.C. economy of the future to take advantage of the huge opportunities that we have in this province. Without that international investment coming to British Columbia, we would never be able to realize those jobs and those economic gains and the overall increase to the standard of living and the quality of life in British Columbia that those investments will lead to.

You know, you can look back over the last ten years of B.C. history, and there was probably not a time when the adoption of this value-added tax is more compelling than it is now, given the fact that we are in the early stages of recovery. There are literally trillions of dollars of investment globally that are looking for a home, and we want to make sure that that home is British Columbia.

B. Ralston: When did the minister become convinced of this very emphatic view that he's advancing — that this is the single best thing that could be done for the B.C. economy?

Hon. C. Hansen: During the second half of May last year.

B. Ralston: Now, as the minister will recall, he and the Premier and his deputy met two days after the election. The Premier, it's reported, said: "Go out and find how we're going to meet the budget target of $495 million."
[ 5516 ]
Does the minister disagree? Obviously, Mr. Whitmarsh, who is present beside the minister, was there as well. Is that what the Premier said at that particular time?

Hon. C. Hansen: I am reluctant to get into any kind of a substantive discussion about confidential discussions between the Deputy Minister of Finance and the minister, between the Minister of Finance and the Premier, or among the three of them. I think that within our parliamentary system, those discussions are by nature blunt and private.

I can tell the member what has been stated publicly — that there was virtually no contact between the Minister of Finance and the officials within the Ministry of Finance. I certainly did not initiate any conversations. The only conversations I did have with the Deputy Minister of Finance were issues and conversations that he had initiated. I think there might have been two or three of them, maximum, during that period of time.

As is customary, the ministry officials and the Deputy Minister of Finance in particular would be briefing the Minister of Finance on a wide range of issues that had developed during the election period to make sure that the minister is brought back up to speed as quickly as possible. That was the context of those meetings.

B. Ralston: Just to clarify, I think that the minister and I are referring to the same meeting. It was May 14. The Premier doesn't seem to have been quite so reluctant to discuss what the topic of conversation was there.

[1525]

There was a meeting with the Minister of Finance himself and Mr. Whitmarsh, the Deputy Minister of Finance, and he informed Mr. Whitmarsh: "Go and find out how we're going to meet the budget target of $495 million." Does the minister disagree with that attribution to the Premier of, at least, that direction to Mr. Whitmarsh arising from that meeting of May 14?

Hon. C. Hansen: Certainly, information that was presented in those discussions that day with regard to new revenue projections that the ministry had done actually on May 12, two days prior, showed a further erosion of revenues that had not been anticipated. The Premier was definitely anxious to ensure that we do everything we could to make sure that the deficit for the province was as low as possible, and ministry staff did some subsequent work on that.

B. Ralston: Was the HST as a policy alternative mentioned by the Premier or by the minister himself at this meeting on May 14, 2009?

Hon. C. Hansen: No.

B. Ralston: Why not?

Hon. C. Hansen: The subject did not come up.

B. Ralston: Well, as the minister knows by now, the following day, on May 15 — according to a freedom-of-information request tabled by Canadian Press and responded to — the provincial head of tax policy contacted his federal counterpart to request information about the HST. That's a fairly high-level discussion between officials following immediately upon the meeting between the Minister of Finance, the Premier and the Deputy Minister of Finance.

Is the minister saying that he, in that discussion, played no part in that inquiry being made, that it was simply a coincidence that one day later this inquiry was made of the federal government?

Hon. C. Hansen: Yes.

B. Ralston: I'm sure that the minister can appreciate why it might be difficult for some to accept that. What other policy alternatives, aside from…? The minister says that HST wasn't mentioned, and the minister has said that the Premier was clearly preoccupied with dealing with the deficit.

According to the minister, at this meeting further financial information that the deficit was far greater than the $495 million spoken of by the Premier, particularly on April 23 — the $495 million maximum…. So there was some sense of urgency in dealing with the deficit. The minister says that the HST was not mentioned as a policy alternative. What other direction was given in terms of the range of policy alternatives?

Hon. C. Hansen: As I've mentioned earlier, I'm not going to get into a discussion as to what was or was not said during private conversations between the Minister of Finance and the Premier, but I will answer the member's question in a higher level, and that's that as governments are facing deficits that they wish to avoid, they have several options.

Certainly, governments have the option of raising taxes if they wish to bring deficit levels down. They also have the option of reducing spending as a way of bringing deficits down, or they have the third option, and that's allowing higher deficits.

B. Ralston: Well, I think these are fairly straightforward options, and it was a fairly open discussion, I gather, from the way in which the minister has described it, on May 14. Which one of those options was discussed, if any, and what direction was given?

Hon. C. Hansen: We tabled a budget on September 2, 2009, I believe it was, that reflected the final decisions that were made by government.

[1530]
[ 5517 ]

B. Ralston: Well, as the minister is well aware, that's not an answer to the question. Was there any other policy option discussed at this meeting? The minister has given a couple of hypotheticals but hasn't confirmed that there was any discussion. I'm a bit surprised by the minister's reluctance to discuss what took place, because that certainly wasn't reluctance expressed by the Premier in the previous estimates in the fall. Be that as it may, maybe that's a decision that's been made subsequently. What other policy alternatives were discussed?

Hon. C. Hansen: I know this subject was canvassed, as the member mentioned, during the Premier's estimates last year. A considerable amount of information was provided by the Premier about a private meeting that took place. I don't think it's appropriate for me to share meetings that were held in confidence.

B. Ralston: Is the minister, then, simply not going to give any further answers on this topic? It seems that the conclusion I should be drawing from his response is that a meeting between him, the Deputy Finance Minister and the Premier in their public capacities, not in their private capacities — fulfilling their public obligations discussing the finances of the province — is now a private matter that will not be revealed to anyone. Is that the minister's position?

Hon. C. Hansen: Perhaps the member can share with us the private conversations that he had with his leader over whether or not, if an NDP government were ever elected in this province, the HST would be scrapped. If the member wants to share with me those private discussions, then maybe we will consider whether or not we should violate some of the principles that actually drive a parliamentary process with regard to the confidentiality of discussions that take place between cabinet ministers.

B. Ralston: Well, the minister seems to be enunciating here a new principle of law about confidentiality of discussion between individual cabinet ministers. This was not a cabinet meeting. This was not even a subcommittee of cabinet. As I understood the description of it, it was the deputy minister, the Finance Minister and the Premier sitting down for a briefing on May 14, two days after the election. The minister was acting in his public capacity, talking about the budget of the province.

I take it from the minister's tone of his comments that he's going to insist on this position. But I think it's unfortunate, and frankly, I think it's wrong. So will the minister reconsider his answer just given and answer the question?

Hon. C. Hansen: As I've indicated, governments have choices that they can make around issues of deficits or potential deficits. It includes a range of things from tax increases to other revenue measures to reducing spending in ministries or other parts of government to running higher deficits.

But to get back to the member's original question on whether or not the harmonized sales tax was discussed at that meeting, I told him that the subject of the harmonized sales tax was not discussed at that meeting.

B. Ralston: Well, I'm glad there's an exception to the policy that the minister has just enunciated, at least to issue a denial. I suppose that kind of logical conundrum is the corner which the minister has retreated to.

The minister says that the issue of the flexibility of the federal government did not arise until his discussion in late May 2009. Was the minister not aware of the position that the federal government took in their January 2009 federal budget? I'm quoting from the budget document: "Provincial retail sales taxes, RSTs, are outmoded and inefficient…. Modernizing these harmful taxes by implementing a value-added structure harmonized with the GST is the single most important step that provinces with RSTs could take to stimulate new business investment, create jobs and improve Canada's overall tax competitiveness." There's that "single most important" phrase again.

[1535]

That was set out in January 2009. Was the Minister of Finance not aware of that? Because he claims that he first became aware of federal government flexibility, as he calls it, only at the end of May 2009.

Hon. C. Hansen: Federal governments, going right back to the mid 1990s, whether they were federal Conservative governments or federal Liberal governments, have been strong proponents of provinces adopting the harmonized sales tax. So for that reference to be in that particular budget would not have been unusual, given the fact that previous federal governments had also taken similar approaches to encouraging provinces.

B. Ralston: Indeed, the Premier himself was in Ottawa for the federal budget, to listen to the budget. Is the minister saying that there was no discussion between himself and the Premier? I appreciate this might be what he regards as a private conversation. Frankly, I think it's a matter of public policy — but no discussion between himself and the Premier when the Premier returned from Ottawa or, indeed, while he was in Ottawa to listen to the federal budget about this initiative of the federal government?

Hon. C. Hansen: We had discussions about the federal government. The subject of the harmonized sales tax did not come up.
[ 5518 ]

B. Ralston: In the budget document, the "Federal-Provincial-Territorial Collaboration" section states the following: "The government remains committed to working with the provinces that still have RSTs to identify and evaluate potential areas where changes to the current framework for federal-provincial harmonization could facilitate provincial movement towards the creation of a fully modernized and efficient consumption tax system in Canada."

Was the minister aware of the offer of changes to the current framework? Was that a subject of discussion between himself and the Premier while he was there in Ottawa listening to the federal budget? I believe he met the Prime Minister. Obviously, this was high on the list of priorities for the federal government. Was there no discussion that was reported to him by the Premier of potential changes and the implementation of an HST?

Hon. C. Hansen: None.

B. Ralston: The Minister of Finance seems very emphatic on that. Has he checked his notes or consulted with his officials about any meetings that might have taken place upon the return of the Premier from listening to that budget in Ottawa?

Hon. C. Hansen: I will repeat it again. I talked to the Premier about the federal budget and his trip to Ottawa and some of his discussions. The subject of the harmonized sales tax did not come up.

B. Ralston: The other event that took place earlier that year, prior to the budget, and led to the policy that's now being implemented in this fiscal year and, therefore, the subject of these estimates was Ontario's decision to move to the HST. Is the minister saying that once again there was no discussion with either himself at the ministerial level or his officials at his direction in Ontario about the implementation of the HST there?

Clearly, we moved from an offer of federal government flexibility in the budget of January 2009 to an acceptance and negotiation by Ontario. The minister has been very insistent on the importance of this move by Ontario. Was there no discussion as a result of that shift?

The federal government makes the announcement. Ontario announces they're considering it and ultimately implements it in their budget that spring. Again, no discussion by the minister with anyone in Ontario, either by himself or officials at his direction?

Hon. C. Hansen: There were none.

[1540]

B. Ralston: The minister, then, is saying that the policy to shift to the HST or even consider it came as a bolt out of the blue at the end of May after this fairly wide-ranging national debate at both the federal level and at the Ontario level — and it became a subject of considerable public discussion in Ontario.

Is the minister saying that he participated in none of that? There was no discussion, and nothing happened. He wasn't even aware of it, didn't ask officials to report to him. Then only at the end of May did he become aware that there might be a possibility of this debate taking place. Is that his position?

Hon. C. Hansen: Yes.

B. Ralston: The minister has recently put out a list of those items which are covered by the HST and those which are not. This was after some debate. The policy was announced on July 23, 2009. The list only came out, and it affects the implementation of the tax as it comes into effect on July 1. Can the minister explain why there was such a lengthy delay in generating, through the auspices of his ministry, this very simple list?

Hon. C. Hansen: The harmonized sales tax is a federally administered tax. The process is the elimination of the provincial sales tax plus all of the machinery that goes along with the administration of the provincial sales tax. So this is a federally administered tax, and we have an agreement with the federal government that the tax base for this harmonized sales tax will be the GST tax base, with certain exceptions that we have negotiated with the federal government.

The principle, as has been clearly set out on our website, is that everything that is exempt from the GST, and that can be determined by the documents that are put forward by the Canada Revenue Agency, will be exempt from the harmonized sales tax — the harmonization of the 7 percent provincial portion with the 5 percent federal portion.

In addition to that, on our website we have clearly set out those goods and services that, while they continue to be subject to the 5 percent federal portion, will be exempt from the 7 percent provincial portion. We have set those out on the website. That is quite clear.

When people are asking for an exhaustive list, they are, in fact, asking for something that needs to be provided by the federal government, because that is the GST tax base. Ontario came out with a table, which the member has referred to. They came out with that table — actually, I think it would be about two and a half weeks ago now — of eight pages of examples of things that will stay the same and things that will wind up being more expensive because of the harmonized sales tax.

The very day that Ontario came out with their list, we obviously took a look at it. I was asked if we would consider doing something comparable, and the answer was yes. We embarked at that point to develop our own
[ 5519 ]
list that was tailored to the special provisions for British Columbia, that reflected things that were of interest to B.C. families.

Our list that we put out last Friday, two weeks after Ontario put out their list, is in fact, much more comprehensive than the Ontario list, covers more items, and we will continue to develop this list based on the various goods and services that people have an expressed interest in.

B. Ralston: Well, the minister seems to be suggesting that somehow the production of this list by the province is really a gratuitous act in the sense that it's really the federal government that should be doing this because it's the GST tax base. Has he had any discussions or have his officials had any discussions with the Canada Revenue Agency about producing such a list?

[1545]

I know in the list itself there are references to websites of the Canada Revenue Agency, but I sense a certain reluctance on the part of, certainly, the federal political apparatus to claim any ownership of this tax. I think they're happily leaving it all to the minister and his colleagues. Have there been any entreaties to the federal government to produce such a list?

Hon. C. Hansen: All of the information with regard to the GST tax base is available through the CRA website. The federal goods and services tax has been in existence now for, I guess it would be, 19½ years, having come in on January 1 of 1991. That tax base is very familiar to accountants across Canada, business owners, and it is on that tax base that this is based.

The table that we put out is meant to be examples to assist and guide British Columbians in what is or is not affected — the things that go up; in fact, things that come down; and the 80 percent of things that stay the same. It is not meant to be an exhaustive list, but to have that definitive interpretation as to whether something is or is not subject to the goods and services tax and, hence, the HST would have to be determined by the Canadian Revenue Agency.

B. Ralston: I don't sense that the Minister of National Revenue or any of the representatives of the federal government here are rushing to assist the minister, but be that as it may.

The minister has, in his descriptions of the continuing exemptions from the GST tax base, mentioned that he negotiated the continuation of some of the PST exemptions. One of those was children's clothing. As the minister is aware, under the PST, the exemption is for…. Children are eligible for it based on their age of 14 or under.

The exemption has now been described as an exemption for what is described as children's-sized clothing. I think it would be fair to say that many observers were surprised by that interpretation. Does the minister have some regrets about not having been completely clear about the difference between the two exemptions? Judging from the reaction of the public and commentators, that may not have been as clear as he might now wish.

Hon. C. Hansen: It was very explicit as of July 23, when we first made our announcement, that this exemption pertained to children's-sized clothing. If the member wants to go back and look at any of the communications material that came out at that time, it clearly indicated "children's-sized clothing."

B. Ralston: I accept what the minister is saying in that respect, although I think it's fair to point out that not in every instance did he refer to children's size. I'm looking at Hansard. On April 28, for example, of this year he referred to children's clothing and footwear — not paying the additional 7 percent on children's clothing and footwear — although later in the same debate he then returned to "children's-sized clothing."

Would the minister agree that perhaps he wasn't as precise as he might have been in every communication in order to alert the public to the difference in the two exemptions?

Hon. C. Hansen: I think in all of the discussions that I have undertaken, if I failed to explicitly use the term "children's-sized clothing," that was definitely the exception and not the rule.

B. Ralston: I accept that explanation from the minister. Looking at the list, there are a couple of what would appear to be anomalies. Perhaps the minister, with the benefit of the officials who are here to assist him, could help me understand these.

[1550]

The pages aren't numbered, but for "Clothing, Footwear and Accessories," there's "used adult clothing purchased for less than $100." It has no PST now and will attract HST, although there is a footnote that says: "All sales of used or donated goods made by a registered charity are exempt from HST." So for a secondhand store that sells used clothing that's not operated by a registered charity, would the purchases of clothing attract the HST? Perhaps the minister can clear that up for me. I don't quite understand what the rationale is for extra tax on used clothing.

Hon. C. Hansen: The principle around the application of GST and, hence, HST is that anything that is sold by what's referred to as a "registrant" — that is a company, a commercial operation that has an obligation to collect the GST currently and, hence, the HST — would
[ 5520 ]
be required to collect the 5 percent and the 7 percent provincial portion of it. That applies to used clothing as well as new clothing.

B. Ralston: This is an example perhaps of the forgone flexibility of the provincial PST system that was referred to in the Liberal Party's response to the restaurant association. But I digress.

On the next page over, there's "repair to certain household appliances" — stoves, ovens, refrigerators, washers and dryers. No PST now. July 1 there'll be HST, moving to 12 percent. Yet "repair to household electronics" already attracts GST and PST and will remain at 12 percent. The difference between household appliances and household electronics seems to be, at least to me, a little bit of a nuanced one. Can the minister explain the difference in why there'll be that increase?

Hon. C. Hansen: When this exemption to PST would have been introduced with regard to certain household appliances — stoves, ovens, refrigerators — it would have been clearly indicated in the tax bulletins that would have gone out at that time how, presumably, the repair shop would have to differentiate as to which ones would have been applicable to PST and which ones not. I think this is a very good example of some of the complexities that exist in our existing PST system that will be eliminated as a result of the HST system.

An example of what…. It really puts onus onto the small business to determine whether or not PST should be charged or not. It's the subject of lots of feedback that we've had from the small business community over a number of years now with regard to the complexity of our PST system, and it's one of the reasons why we will see the HST system much easier to administer.

B. Ralston: Undoubtedly. Perhaps it will be easier to administer, but it'll be easier to administer because people who get stoves, ovens, refrigerators, washers and dryers repaired will be paying more tax. That's the price, I suppose, that's to be paid.

Computer repair services don't appear in either one of these. Which category would that be in now? I presume that it would attract 12 percent HST after July 1, but which category is it deemed to be in at this time?

Hon. C. Hansen: Computer service repair would, in fact, be subject to the harmonized sales tax. But it's interesting, whether we're talking about stoves or appliances or televisions or computers, that any of the parts that are used in those repairs today would be subject to a 7 percent PST. Therefore, on the parts there would be no change at all. It still remains at the 12 percent. It's actually the labour component of these repairs that would wind up costing slightly more if it was for an individual consumer.

[1555]

Now, if you've got a small business operator, like a law firm, for example, if they have to get their computers repaired today, they would be paying 12 percent on all the parts, and they would be paying 5 percent on all the labour. They would get the 5 percent portion back as an input tax credit. That small business would have to build the 7 percent on the parts for the computer repairs into its costs of doing business and hence pass it on to its customers.

Under this system, any small business that incurs computer repairs would wind up being able to use the full 12 percent as an input tax credit.

B. Ralston: But the cost for those repairs would go up by the increment of the 7 percent that would be added on, as I understand what the minister said.

Following on, then. In the section marked "Home purchases" there's a footnote which I think really demands some explanation. There's an estimate that's given that "the embedded PST in new homes in B.C. is on average equal to about 2 percent of the price." I know that's something, I think, that's asserted on the website as well, but could the minister refer me to the study that confirms that?

Hon. C. Hansen: Those calculations are based on StatsCan data. When you think about the costs incurred by a builder building a house….

First of all, let's say as an example that you've got a builder. He's building a house for a spec sale. The builder will wind up buying, obviously, concrete for the foundation. He will pay 5 percent GST on that concrete, and he will pay 7 percent provincial sales tax on the concrete. The 5 percent he gets back as a rebate, as part of the input tax credit process, from the federal government. The PST that he pays on the concrete has to get built into the cost of the house.

Typically, what a contractor will do, who is a builder who is building a house…. They will total up all of their costs for the entire construction process. They will then add their profit on the top, and that's what they will sell the house for.

Throughout the entire construction process virtually all of the materials that are used in building a house — whether it's the concrete, the 2-by-4s, the wiring, the pipes for the plumbing, the flooring, the gyproc on the walls, the fixtures, the kitchen cabinets, the counters…. Literally everything, right down to the kitchen sink, has PST that the builder has to pay on it, and the builder has to build that in the cost of the house.

Based on Stats Canada data, we've been able to calculate that that actually amounts to about 2 percent of the cost of building a house. Under the harmonized sales tax, not only does the builder get back the 5 percent GST, but the builder will in fact get back the full 12 percent harmonized sales tax and therefore does not have to reflect that in the cost of the finished product.
[ 5521 ]

B. Ralston: Would the minister agree that…? That may be the way the economic theory works, but does he actually believe that those cost savings will be passed on? He seems to have some faith that that will take place. Beyond that act of faith, is there any suggestion that the ministry will be monitoring or calculating in a broad way the impact of the HST on the alleged reduction of prices that is, in the economic theory, supposed to take place?

As the minister will be well aware, economic theory has taken quite a beating in the last couple of years — 2008, 2009 — and many of the market-driven theories that the minister seems to rely on didn't really predict the crisis or assist in resolving it. Can the minister explain his optimism?

Hon. C. Hansen: This is not economic theory. This is just basic, simple…. Never even mind accounting. It's simple bookkeeping.

[1600]

[S. Cadieux in the chair.]

I'll also point out to the member that for new homes that would be finished prior to June 30 but not yet sold, not only will the embedded PST come out, theoretically; it will actually come out in tangible ways. Because on the purchase of that new home, there is a rebate that we will provide of 2 percent of the value of the house to reflect the fact that there is embedded PST in the cost of building and constructing that house.

So when you start talking about new-home constructions, it's not theoretical. It's direct, and it is quantifiable. Builders will be able to reap the same amount of profit out of the sale of a house and still, on average, be able to price that house, generally speaking, about 2 percent less than they otherwise would have had to price that house, for an asking price.

If you want to look more generally at the broader marketplace and the broader economy in terms of all goods and services, a very good study was done by Prof. Michael Smart, the University of Toronto, following the adoption of the harmonized sales tax by the Atlantic provinces in 1997. What Dr. Smart's analysis shows…. With all other factors taken into consideration, including the reduction in the provincial tax rate and other factors in the economy, his analysis demonstrates that the vast majority of that embedded provincial sales tax comes out of consumer prices within the first 12 months.

B. Ralston: I appreciate the reference to Lessons in Harmony, Michael Smart's paper. We did discuss that in the fall. The conclusion that the minister draws from that paper is not one I agree with and I don't think is supported by the paper itself. He said that overall, the impact of the HST was mildly regressive and led to increases in housing and footwear — I believe, from memory.

Leaving that aside, what effort, if any — or is it simply going to be a matter of anecdote? — does the minister expect to monitor the decline in house prices of 2 percent that he anticipates? I would suggest that that won't happen. But in order to resolve this debate in the future, what effort will be made, if any, by the minister or any agency that he's aware of to monitor that alleged impact?

Hon. C. Hansen: I know from reading the member's comments on this subject in other forums that I have much more confidence in the competitive nature of our economy than he does. I actually, before getting into public life, owned and operated a small business with 20 employees. I know how competitive that industry is, and quite frankly, any small business in British Columbia that can find cost savings in order to get a competitive advantage over their competition will take advantage of that.

I would argue that we live in a more competitive economy in British Columbia today than Atlantic Canada did in 1997, yet as Professor Smart's study does show, the vast majority of embedded PST costs came out within the first 12 months.

B. Ralston: I'm reminded of Carole Taylor's comments about this being an ideological shift, based on the minister's answer. But I want to shift topics now.

The minister has said — and this is in a rationale that he seems to have abandoned in recent months — that one of the reasons for implementing the HST was to fund the cost of health care in the province. On page 21 of the budget document, the "Canada health transfer", there's a series of funds that are projected out into the future, with a steady increase each year. In addition, the Canada social transfer also increases steadily each year.

In 2010-11 there's a 5.8 percent increase; in 2011-12, a 2.5 percent increase; and in 2012-13, a 5.4 percent increase. As the minister is aware, it's a ten-year agreement. It expires in 2014.

[1605]

The provincial government has as part of its revenue — again, as the minister is aware — federal transfers. Those are only part of the federal transfers on page 12 of the budget document. In this year's budget the federal transfers total $7.685 billion this year. My rough calculation of that is approximately 18 percent, I believe, but I stand corrected by anyone who chooses to correct that. In any event, it's a substantial amount of federal transfers.

Given that the agreement is about to…. It will expire in 2014. There's already some debate nationally about the impact of that and what might be anticipated in terms of future federal contributions, because this was
[ 5522 ]
negotiated, I believe, when Prime Minister Martin was the Prime Minister.

What is the long-term modelling about the impact of the expiration of that agreement on provincial revenue in the future?

Hon. C. Hansen: Actually, I was very familiar with the discussions among first ministers in September of 2004. That was a meeting of Premiers and Health ministers, and I was the Health Minister at the time and attended those discussions in Ottawa while Prime Minister Paul Martin was in the Prime Minister's Office.

That was an agreement, as the member mentioned, that takes us through to 2014. The current federal government has indicated that we provinces can count on certainty and stability with regard to those transfers. There will be discussions that will be embarked upon between provinces and the federal government with regard to the renewal of that agreement. We are still at the very early stages of that process.

B. Ralston: The Auditor General, in previous reports, has expressed or at least commented on the dependence of the provincial government on federal government transfers. One looks at $7.6 billion in the last fiscal year, and I think it's a projected decrease in the following year but, nonetheless, remaining above $7 billion.

Is the minister not concerned about, as the Auditor General pointed out, that apparent dependence on federal transfers? Obviously, the fiscal situation of the province would be different were it not for federal transfers. The impact of the renegotiation, when it takes place after 2014, if it were to trend downwards, would obviously put further pressure on provincial budgets.

I'd be interested in the minister's views. He's in an exceptionally knowledgable position, having been a former Health Minister, having participated in those negotiations and having some sense of the reality of fiscal federalism, and I'd be interested in his views on that.

Hon. C. Hansen: In fact, the total in federal transfers that we're seeing this fiscal year and the previous fiscal year is actually lower than its all-time high because, of course, it was not that many years ago that the province was also receiving significant equalization payments from the federal government due to the have-not status that the province was in.

Now that we are once again a have province, we are no longer entitled to those equalization payments, but aside from that, there has been relative stability in terms of federal transfers to the province, and that's been a pretty important revenue source for all provinces, not just British Columbia.

[1610]

Of course, as a percentage of our total revenues, British Columbia's transfers from the federal government are not as high as other provinces that are receiving equalization payments. We are, of course, interested in ensuring that those transfers with regard to the federal health transfer continue after 2014, and we'll be negotiating that with the federal government over the coming years.

B. Ralston: Well, just on the topic of federal-provincial financial relations, I wanted to ask a question about the arrangements that were made for the payment of Olympic security costs. The minister will recall that there was ultimately a deal struck where the province would complete its obligation by paying $63.7 million by March 31, 2009.

I'm reading from…. I think this is the information bulletin from the ministry.

"The province has therefore agreed to increase its share of federal-provincial major infrastructure costs by up to $165 million over the next three years. This money will be used for needed infrastructure projects such as roads and bridges. These funds have already been provided for within the provincial budget that was just released and will come from the province's capital contingencies allocation, which is shown on page 34 of Budget 2009."

Has the minister had any discussion with the comptroller general or, indeed, had any representations from the Auditor General as to how this deal will be accounted for in the public accounts? As the minister, I'm sure, will concede, it is a little bit of an unorthodox arrangement — or if one put a more favourable interpretation, a creative arrangement. How will that be accounted for in the public accounts of the province?

Hon. C. Hansen: The member mentioned that the Auditor General has commented on this. There have been discussions between the office of the comptroller general and the Office of the Auditor General and, indeed, between the comptroller general and the Auditor General with regard to the accounting treatment of this particular portion of the Olympic security funding obligations, and there is no disagreement between the two of them in terms of how it should be dealt with.

B. Ralston: Just for the record, can the minister then explain how it will be reflected in the public accounts of the province?

Hon. C. Hansen: That will be finalized between now and the finalization of public accounts.

B. Ralston: Well, I appreciate that one of the goals of the ministry in the service plan is to complete the public accounts by June 30 of this year for the last fiscal year, so I appreciate that may be imminent. The minister seems unwilling to at least share the decision with us at this point. Is that because a decision has not been made finally or that he just chooses to release it later in the public accounts?
[ 5523 ]

Hon. C. Hansen: It would not be relevant to the budget for the ministry for this fiscal year we're in now, but it would definitely be relevant with regard to public accounts, and that's the appropriate place.

B. Ralston: One of the justifications that the minister offered, although he seems to have retreated from it in recent months, for introducing the HST was that it was going to be used to fund health care. Indeed, in the HST bill, which passed recently by closure, there is a mechanism for accounting for the revenue from the HST and describing what portion of that would be set against the health care budget of the province.

Is the minister still of the view that the HST was an important measure taken to fund health care, or has he discarded that as rather ineffective political rhetoric?

[1615]

Hon. C. Hansen: As Finance Minister, I believe it's important that the general public make the connection between the taxes that we pay as citizens and the services that we receive. What we have said is that we are going to earmark 100 percent of the HST revenues that come to the province for health care.

As the member will know, what we will set out in each budget document each year, as required under the statute, are the five revenue sources that we will earmark for the health care budget. I think, as the member knows, it pretty graphically shows that connection between the taxes we pay, the revenues we receive and the services that we expect.

When you take the total amount that we collect under the harmonized sales tax, under the tobacco tax and in terms of federal transfers and the health special account from lotteries…. I'm missing one. I used to know these all. Sorry, of course, it's the MSP premiums, which of course is another big one.

It's amazing, when you talk to people, and people assume that somehow the MSP premiums that they pay cover all of the health care costs, and of course, it does not even come close. That is why in every budget document we will set out the total amount that the province collects from those five revenue sources and show graphically how it doesn't even come close to covering off the total cost of our Health Services budget.

B. Ralston: Well, I suppose the question does arise, if this is the minister's rationale, at least in part, for implementing the HST, why that was not part of the public discourse. He never said that until very much later, after July 23, when the tax was first announced. It seems to have come as an afterthought and perhaps an assistance by those who devise these kinds of political and rhetorical slogans to help, if I can put it this way, sell the HST. What explains that delay in coming up with this rationale for implementing the HST?

Hon. C. Hansen: As I mentioned at the outset, there is, I think, a disconnect on the part of a lot of citizens between the taxes they pay and the services they receive. I think if we want to make sure that we have a strong public health care system in British Columbia that's there for families when they need it, we also need to make sure that government has the tax revenues necessary in order to fund those services.

B. Ralston: The minister, I would say, seems to be at least confirming in part the view that I've expressed that this was an effort to convince people of the merits of the HST by attempting to make a connection between raising the revenue from the tax and expenditure on health care. I'm not sure how that's any different from raising revenue in general revenue and then spending it on the health budget. It seems to be a nuance. In any event, I don't think the minister is going to insist on that, because he hasn't insisted on it publicly very much in recent months.

I want to change the topic, because the issue of revenue sources does give rise…. This is an issue where the minister said he'd be pleased to canvass it in estimates when we debated the bill itself, although we didn't get through the bill because it proceeded in closure. We only completed about 50 of the 200 sections of the bill.

The issue is the underground economy and the degree to which the implementation of a new tax will be respected by the public in a sense that our system is one of largely voluntary disclosure. I'm wondering: is it anticipated by officials in his ministry that there will be a collapse or a falldown or a dropping off of anticipated revenue due to an increase in the underground economy?

Certainly, the experience in academic studies showed that when the GST was introduced, there was, by using some analysis of cash balances, a significant evasion — particularly in smaller services, more at the margin of the economy — and, therefore, an impact on government revenue.

[1620]

Does the minister anticipate that there will be a decline in revenue as a result of tax evasion? If so, what steps is the government proposing to take to deal with that problem, and would the minister agree that the tax's unpopularity may, rightly or wrongly, contribute to further evasion?

Hon. C. Hansen: The short answer is that we do not expect any reduction in revenues because of the HST exacerbating the problems with the underground economy. There's no question that that is a challenge globally for countries collecting taxes.

The Canada Revenue Agency has very good programs to tackle the issues of the underground economy and individuals who would be motivated not so much by avoiding
[ 5524 ]
the GST but avoiding income tax. That, of course, is subject to the penalties at the full extent of the law if somebody is charged and convicted with income tax evasion. There are certainly penalties there for tax evasion generally. We know that the federal government, through the CRA, will continue to enforce and follow up in all cases.

I think that the other thing that's important…. It's an area that I've done a bit of personal research on through Internet sources — the challenges of the underground economy globally. There are actually many writers and commentators that look at the value-added-tax system that countries have adopted as a way to diminish the underground economy.

Part of the reason for that is because of the way that the input tax credits work. If you take a tradesperson, for example, who is plying their trade, they will be paying the value-added tax at 12 percent on a whole range of their inputs, whether it's their accounting services, their legal fees, buying the new pickup truck, their tools or all of the materials that they would be using on a project. The only way that they can actually recoup that expenditure by way of input credits is to be properly filing their returns.

Because there is that built-in mechanism, there's actually a disincentive for individuals to engage in the underground economy. If they do engage in the underground economy, they would not be able to get the reimbursement of their value-added tax expenditures.

B. Ralston: I understand that they may well claim their inputs but underestimate the sales on which those inputs are based, so that that becomes a problem.

Some of the academic writers suggest that in areas such as home renovation, retail tax collection and cross-border shopping, there will be an impact. Has the minister anticipated any study on the impact of cross-border shopping, for example — either in the Lower Mainland or in the northeast of the province or in the areas along the Canadian-American border — across the province?

Have there been any studies in anticipation of cross-border shopping that might have an impact on revenue projections? This would seem to be a matter of due diligence and caution in anticipating revenue, if there's going to be that kind of effect from the introduction of this tax.

[1625]

Hon. C. Hansen: Most of the things that would be involved with cross-border shopping would be goods, and the vast majority of goods are not negatively impacted at all because of the introduction of the harmonized sales tax. But I think that it's important to point out that if this weekend the member wants to go down to Bellingham or Seattle, he's going to be paying a sales tax if he is shopping for goods in those communities.

So there is not much of an incentive, even today, to go down and shop if the sales tax is the sole issue. As I say, those goods are today in British Columbia subject to 12 percent for the average consumer. After July 1 they will still be subject to 12 percent, and that's the same with border communities between B.C. and Alberta. If an individual buys substantial items in Alberta and brings them back to British Columbia, they are required to remit the provincial sales tax. After HST it will still be the same 12 percent and 5 percent, just as it is now.

B. Ralston: Yes, I found the reference. This is a study that I was referring to earlier. The study of value-added taxation by Alan Tait of the International Monetary Fund emphasized the prevalence of evasion at the retail level.

"Understating sales is the most usual way to evade VAT. The taxpayers may be picked for audit if their reported sales as a ratio to purchase inputs is lower than average over a period of years. But where shops carry many different lines, when trading practices are changing and lines stocked alter and when the shops carry on business in different localities, such checks are imprecise and more sophisticated methods of detection may be called for."

Given the possibility, certainly…. Has the minister had any discussion, as part of the negotiations with the federal government and the enforcement mechanisms of the CRA, to protect the revenue sources of the provincial government — since in this case the money, according to the minister, is going to health care — to protect services for health care by making sure that the tax is paid when it's due?

Hon. C. Hansen: The vast majority of goods and services, as have been noted, do not change as a result of the introduction of HST. About 80 percent of goods and services wind up having exactly the same treatment under HST as they are currently treated today under our PST system.

In most cases where there have been challenges around underground economy with the introduction of a value-added tax system, it is when they have introduced a value-added tax, as opposed to shifting an existing tax.

Also, the Canada Revenue Agency has a very robust audit team that regularly ensures that we have compliance and appropriate charging. I have every confidence that they will do a very thorough job on behalf of British Columbia's interest. The one good thing about this is that we will have one tax system, not two tax systems. Therefore, we will have one set of audit undertakings, and that will be done by the CRA on behalf of both the federal and the provincial governments.

B. Ralston: I'm just going to ask my colleague from Victoria–Swan Lake to ask…. He'd given notice on his behalf that he wanted to ask questions about the Pacific Carbon Trust, and I think he has questions about PST exemptions.
[ 5525 ]

R. Fleming: I wanted to ask the minister a few questions and, in the interest of saving time, maybe table a letter with some of them on it, because these are things that he may or may not, and likely not, have available to him.

[1630]

This has to do with the line of questioning by my colleague the Finance critic around the implementation of the HST and the elimination of PST exemptions, particularly to do with the loss of PST exemptions where public policy deemed the waiving of PST to be in the interest of the environment and energy conservation goals in the province.

It's specifically for Energy Star appliances; bicycles, which has been a longstanding tax credit for three or four decades in B.C.; electric hybrid and zero-emission vehicles; heat pumps and high-efficiency furnaces; and green building products. I've made them into those five categories. I know there are a number of goods that were exempt — a range of goods and model numbers and brands and products that have those ratings and were eligible for PST exemption — which no longer are.

I'm really interested to know the total dollar amount and how many British Columbians were able to access those in recent years. I would ask the minister, maybe in writing, to respond to this information request. I will pass this letter to the minister through the Chair.

I wanted to ask the Minister of Finance some questions around the Pacific Carbon Trust, because the Ministry of Finance is the exclusive shareholder on behalf of the province to the Crown entity, the Pacific Carbon Trust. I want to ask him a few questions about carbon neutrality requirements, which are coming on line this year, for the first year, for public service organizations. I think there are 130 of them in total.

I'd like to ask him about accountability mechanisms. Maybe the first question to ask the minister is whether the operation, the Pacific Carbon Trust, continues to be funded by government. I know it received $9 million in startup and has had at least $5 million in additional moneys to establish itself, with the approximately one million tonnes of carbon to be offset across the public sector in the SUCH sector. That should, by my calculation, bring in $25 million of revenue for the Pacific Carbon Trust this year.

If he could verify that figure and also answer the question as to whether there's an additional allocation to fund the operations of the Pacific Carbon Trust this year.

Hon. C. Hansen: First of all, to set out the three goals that government is endeavouring to accomplish with the establishment of the Pacific Carbon Trust.

First of all is the goal for a carbon-neutral government. We are on track to achieve that goal.

Second is with regard to stimulating a carbon market in British Columbia, which we believe will be a model for North America, as will the carbon-neutral government.

Third is as a tool of economic development in British Columbia. We anticipate that the disbursements from the Pacific Carbon Trust will be specifically aimed to encourage economic development opportunities for British Columbia.

In terms of the capitalization of the Pacific Carbon Trust, it started in the '08-09 fiscal year. In the first year of the establishment of the carbon trust there was $9 million built into the budget and then subsequently $5 million, $5 million and $5 million for each of those years. We anticipate that after that it will be self-sufficient.

[1635]

R. Fleming: To the minister: picking up on his answer and going back to the part of my first question, I don't know if I'm approximately right, but about $25 million of revenue will come from the public service organizations that are part of the carbon-neutral requirements this year. I'm just basing that on an estimation of about a million tonnes, and it's $25 a tonne that is levied. So if you could correct me or let me know if I'm in the ballpark there.

The Pacific Carbon Trust is given revenue at the rate of $25 per tonne by the public service organizations. My question is: what do they then purchase the offsets for from the private sources on the other side of the equation? What is the per-tonne rate?

Hon. C. Hansen: We anticipate that the total value of those offsets from government would be in the $20-million- to $25-million-a-year range, so the member's calculation would be at the high end of our estimates right now. Those are priced at $25 a tonne, as the member mentioned. The experience to date in buying offsets is that we are able to identify offsets that come in under $25 a tonne at this point. But that is not something that…. There is still some volatility in terms of what future expectations would be.

R. Fleming: What I'm trying to get at is just to figure out how…. When the Pacific Carbon Trust becomes self-sufficient, basically what percentage of the offset moneys they receive and then purchase for could be considered overhead or administrative cost or contingency within the organization? I don't know if the minister can provide any more details on that.

I know that they are using different sources, obviously, and a lot of the Pacific Carbon Trust's effort has been on acquiring new source projects throughout B.C. Is there a different price they pay for different types of projects based on a risk factor or any other criteria? If you could give me an indication as to what they're purchasing these offsets for per tonne.

[1640]
[ 5526 ]

Hon. C. Hansen: Currently, as we go through the startup phase for the Pacific Carbon Trust, their overhead this year is about $4 million. It's not yet at a level of maturity that we can anticipate what the projected overhead cost might be once we get into full operations.

There are different prices for different projects. A lot of that depends on risks. It would depend on permanence of the offsets that are taken into consideration. These projects are selected based on a competitive process and an open call that goes out.

R. Fleming: This is a huge year, a significant leap for the Pacific Carbon Trust. They will be going from literally tens of thousands of tonnes of carbon that they manage and offset to millions of tonnes. I wanted to ask the minister, because it is such a significant step being taken: what kind of status reports will be issued in the interim that detail some of the expenditures and the offsets that have been acquired? Are they going to be quarterly?

I think it's important, because it's such a significant year, that there be some kind of public reporting on it. I know that he has a lead role in coordinating with other ministers and some shared responsibility for this — but directing this corporation specifically. I'm hoping he won't say: "Wait for the public accounts a couple of Julys from now." But the question remains whether there are going to be status reports issued on perhaps a quarterly basis for this very important year that we're entering now.

Hon. C. Hansen: There is a statutory reporting requirement that's in the act. It actually is incumbent upon the Ministry of Environment, which has been charged with the responsibility to report out by June 1 of every year with regard to government's targets and the actions that they've taken to meet those targets.

As far as reporting on offset purchases, that is something that we do. We don't wait for the next quarterly date or annual date or semi-annual date. Once we make a significant offset purchase, we will be putting out press releases. We certainly want to run those up the flagpole as soon as they're public information.

R. Fleming: The minister mentioned earlier in one of his responses that the province is on track to meet the carbon-neutral requirements. I'm just wondering if he could give me an idea of what percentage of GHGs in the public service organizations are estimated to be achieved by the purchase of offsets?

Hon. C. Hansen: That part of the program is actually monitored and administered by the Ministry of Environment. Our role in the Ministry of Finance, through the Pacific Carbon Trust, is for the purchase of the offsets on behalf of the province. I don't have at my disposal the specific answer that the member is looking for. That would more properly come through the Ministry of Environment.

[1645]

R. Fleming: I know that the relationship is complicated and that a number of the minister's colleagues are involved in it, but the administration and oversight of the trust is the Minister of Finance's responsibility. So the trust itself must ensure that delivering the offsets is in accordance with the regulations in the legislation of the province.

If I could appeal to him on that basis, I'm very curious to know, in terms of the strategy and in these early years, what percentage of the public sector's greenhouse gas reductions are going to be managed by offsets? Some of the legislation is very specific about targets, and some of those targets are very close to us — in 2012 that there be a net actual reduction of GHGs.

In these early years I'm very curious to know what percentage is going to be made through a cash transaction purchasing offsets as opposed to reducing the tonnage emitted into the atmosphere.

Hon. C. Hansen: What we would know and what we have information on is the amount of offsets that we are being asked to purchase through the Pacific Carbon Trust. In terms of what percentage of the targets would be achieved by buying offsets, I don't have that information with me. It's not something that the officials with the carbon trust are familiar with. We would have to go to the Ministry of Environment to ask that specific information.

R. Fleming: Okay. Well, maybe the minister can answer this in a different way. He issues a letter of shareholder expectations to the Pacific Carbon Trust. There's no such target or outline of legislative compliance in that letter — I don't have the letter with me — around the blend of GHG reductions achieved by offset versus net reduction in the tonnage of emissions.

Hon. C. Hansen: The Ministries of Citizens' Services and Environment, but primarily through the Ministry of Environment, will tell us how many tonnes we need to purchase through Pacific Carbon Trust for government to meet its targets. We don't play a role in really determining what percentage comes from where, but rather, it is simply a communication to Pacific Carbon Trust in terms of how much needs to be purchased in order to achieve that target. That's where we fit into that equation.

In the service plan for the Pacific Carbon Trust it would not set out what the percentage targets are for government, simply the role the Pacific Carbon Trust would have to play in purchasing those offsets once they are advised by those other ministries.
[ 5527 ]

R. Fleming: I appreciate the minister's response about his responsibilities in this equation. The reason I ask is because, in the ongoing negotiations and some of the interim principles that have been agreed to at the Western Climate Initiative….

One of them is that each jurisdiction that's a member of the WCI does not achieve GHG targets by using more than 49 percent of their calculated reduction through the purchase of offsets. That's a cap-and-trade system that hopes to be in place by 2012. It's on a very aggressive and tight timeline now, and there's all kinds of political momentum at work to the south of us and the east of us that is challenging.

The reason I ask is that I think it is fair to say, as we look in years ahead, that under a WCI system, there'll be a disproportionate burden, if you like, on the public sector in B.C. to achieve significant actual net reductions internally because private industry, depending on which sector you're talking about, is going to have greater difficulty in achieving that.

That's why I ask what percentage now the minister anticipates is going to be achieved by the public sector actually reducing its emissions versus purchasing offsets to cover that.

[1650]

I'm just wondering: in his guidance to the board of directors, because I think they report to him, is there any discussion about how this is going to unfold between now and 2012 and 2016, where we have some ambitious targets to achieve, net reductions in B.C.'s emissions level? I say that in the context of 2008 being a disappointing year, when B.C. was the only province to see its emissions rise in Canada.

Hon. C. Hansen: I don't sit as a member of the climate change committee of cabinet, and I would not want to speak for…. I guess the best way to say it is that I cannot speak on a firsthand basis about the deliberations with the Western Climate Initiative, as I am not as familiar with it as many of my colleagues, in particular the Minister of State for Climate Action as well as the Minister of Environment, would be.

Our role is specifically with regard to achieving carbon-neutral government by 2012 and the purchase of offsets through the Pacific Carbon Trust that allows us to achieve that goal. I wish I could help to enlighten the debate on issues around the WCI, but I must say that I'm not as familiar as some of my other cabinet colleagues would be.

R. Fleming: Maybe the minister could just enlighten me on one aspect of that, though. The negotiations and the discussions and the implementation, the movement towards an implementation, the schedules that are being produced for B.C.'s participation in WCI…. There are obviously hard costs attached to that. I'm just wondering where that is funded from, if not in his ministry.

Hon. C. Hansen: That would be through the Ministry of Environment, and I think, as the member knows, the Minister of State for Climate Action is attached to the Ministry of Environment. His functions would be funded through that budget as well.

R. Fleming: Okay. I thank him for that, because it wasn't obvious from any of the service plans or any of the line items in the budget. I'll ask at another forum what those costs might be.

Just in terms of the internal cost to the Pacific Carbon Trust, I wonder if the minister can tell me what moneys are budgeted for third-party scrutiny of the quality of the offsets that the Pacific Carbon Trust purchases. This is obviously an important part of the credibility of the PCT and any offset organization.

It doesn't come for free. It often requires audits and site visits. It requires people in the field to assess whether there's additionality or any of the other perils involved with securing offsets that are ranked in terms of good or bad quality. I'm just wondering what the budget is for that kind of third-party verification.

[1655]

Hon. C. Hansen: In terms of third-party validation, it comes in two stages. First of all, there is a validation by an engineering firm that the processes we'll be undertaking will in fact achieve the carbon reductions that they purport to. That is done by an accredited engineering firm. The second verification is the formal verification report that is done by an accounting firm that is properly accredited to do this work specifically to carbon reduction.

In terms of the costs, that is part of the overall budget of the Pacific Carbon Trust, as I indicated earlier. It's $4 million for this year. Because we are still in the early stages of establishing this process, these are dealt with on a project-by-project basis and the costs determined on a project-by-project basis.

R. Fleming: If I'm reading it correctly, then there'll be $20 million of new revenue into the Pacific Carbon Trust this year from offsets. The overhead is somewhere around $4 million, as the minister said on two occasions here. Am I reading that correctly? It's about 20 percent overhead, the cost of administering the buying and selling of offsets?

Hon. C. Hansen: The Pacific Carbon Trust is in a startup phase at this point, and we anticipate that revenues will grow over time. At this point the $4 million of overhead on the revenue base…. As I indicated earlier, $20 million to $25 million is what is anticipated, but we expect that revenue base to grow.
[ 5528 ]

R. Fleming: When I asked about third-party verification, the minister said there was an engineering firm. I just heard it singular. Is it plural, more than one? Multiple. Okay, thank you.

I want to ask a question about an aspect of the Pacific Carbon Trust that, as far as I'm aware, relies on a sole source agreement. That is the offset supplier. It's a singular contract with offsetters.ca as far as I'm aware. I'll wait for the minister's answer on this, but I'm curious. I'll ask him. Is that the case? Is there just one offset supplier currently affiliated with Pacific Carbon Trust?

Hon. C. Hansen: The selection of the offset suppliers is as a result of an open call that goes out. The member is correct that Offsetters was one of the successful offset suppliers for the first project that we undertook. The second project that has now been finalized and is public is through a company called Sempa Power. That is also public information. We are in negotiations on several other projects now with multiple other suppliers.

R. Fleming: Just based on the minister's answer, I'm not sure if he's confusing an offset broker or supplier with a project-based firm. Sempa is a company that has projects which I believe Offsetters has sourced. Am I correct?

Hon. C. Hansen: These are separate firms. They are separate contracts. In the case of the Offsetters contract, that is a contract that actually involves five different sites in British Columbia. In the case of Sempa Power, there are ten different sites.

[1700]

R. Fleming: The minister mentioned there was…. Something he was describing I think is the competitive tendering process for the contract that was awarded to offsetters.ca. I'm just wondering what kind of evaluation or bottom-line screen the ministry uses in awarding those contracts.

It was interesting. There was a comprehensive ranking of offset firms in Canada that was done recently by a number of leading ENGOs and academics involved in monitoring carbon offsets, and offsetters.ca didn't rank very well. They actually were in the second tier of the firms that were evaluated and placed ninth of the 20 Canadian firms that were available.

One of the areas where they scored incredibly poorly, a bare pass, was in vendor transparency. I'm just wondering if the minister was aware of that and whether there are moves to correct and look at how they get involved in looking at the evaluation of contracts with offset providers and whether they're looking to increase or raise the bar, if you will, the quality of offsets that are being procured by firms that they're in contract with.

Hon. C. Hansen: The evaluation that is done on these proponents and the Offsetters and the projects is based on some of the most rigorous standards and procedures. The B.C. offset regulation, which is administered by the Ministry of Environment, follows some of the highest international standards.

In the case of Offsetters, as I understand the ranking that was done that the member mentioned, one of the areas that was of concern was with regard to transparency on some projects. It's not these projects. These projects are totally transparent. All of the documents pertaining to these projects are set out on the Pacific Carbon Trust website.

R. Fleming: I thank the minister for his answer.

[H. Bloy in the chair.]

I wanted to ask him in terms of within the budget envelope of the Pacific Carbon Trust if there is any money that is allocated as a contingency for some of the risks that the Pacific Carbon Trust may bear around offsets that could in future be disqualified. Is there a line item within the Pacific Carbon Trust or a fund that is being managed in the event of those kinds of occurrences?

[1705]

Hon. C. Hansen: The portfolio of offsets that are being sought out by Pacific Carbon Trust are in those areas where there is minimal risk. Recognizing that with some offsets, perhaps, in the future where there may be risks, rather than carrying a contingency, as the member has suggested, the approach would be to actually purchase more offsets than necessary to provide for those risks to be appropriately covered. But many of these offsets have zero risk.

For example, if an offset involves fuel switching or energy efficiency, then the application of the offset is with zero risk. It is 100 percent certain that once that fuel switching takes place, the objective is achieved, and there is no residual risk. With the offsets that have been purchased to date, 100 percent of them are in areas of fuel switching or energy efficiency.

R. Fleming: One area that I think holds potential but is also a bit of tricky business for offsets in the strategy and the sourcing the Pacific Carbon Trust might pursue is around forestry and the carbon storage potential there. I wanted to ask the minister, at this point in time, if he's aware to what extent the Pacific Carbon Trust is depending on forests to meet offset acquisition goals in the future.

Hon. C. Hansen: We recognize that the forests of British Columbia, as a potential for the storage of carbon, have huge potential for British Columbia. It is
[ 5529 ]
certainly something that we think has a huge economic development benefit for the province. It is something we're obviously looking at today. We have not quantified in any way what the potential mix might be between forestry offsets and other offsets, as the opportunities there are still being explored.

R. Fleming: We'll ask the minister on that, maybe in the future, as some of these offsets are purchased and deals are negotiated with the forest sector, because I think some of this is affected by international agreements on forest emissions that currently are not counted by the United Nations. There are all kinds of things that are going to make it, probably, a tricky business to get credits.

Then, of course, how you calculate a forest's carbon storage potential varies greatly, and I think there is a lot of risk for any of the suppliers that the Pacific Carbon Trust is working with.

I wanted to ask the minister. We have some projects that we can now evaluate that form the track record of the Pacific Carbon Trust. Of course, there will be many more as 20 million or more public sector dollars flow through this Crown corporation this year.

Some of the early recipients on the other side of the offset equation include Lafarge cement. They include a number of greenhouse growers in the Fraser Valley for energy curtains and for fuel switching, and those sorts of things. Then, of course, we have a number of heating systems.

It seems that a lot of the sourcing has been done in the luxury spa and resort areas in particular. They're obviously large energy consumers and may have been selected on that basis, but a number of resorts in Whistler and all across the province.

I'm concerned about the spectacle of school boards and cash-starved entities that are managing scarce health care resources transferring money, being obliged and required to purchase offsets and that that money goes to the private sector.

[1710]

The thing we must be vigilant about is to ensure, if it's the Whistler Westin Resort and Spa, when they get money that essentially comes from schools and hospitals and community colleges to support an energy system upgrade or project, that it's something they weren't going to do anyway. That really is critical if there's going to be any public trust and confidence that the Pacific Carbon Trust is doing its job. That's something that I think the minister and government and the public service are going to have to watch very closely.

I want to ask the minister if there's any flexibility on the horizon. Instead of precluding and disallowing public sector entities who, of course, have projects that they could and wish to advance to achieve GHG reductions in their operations and, therefore, reduce the offsets they have to buy annually…. Would that kind of flexibility be allowed in future, where public service organizations — there are now 130 of them paying the per-tonne fee into the Pacific Carbon Trust — can then advance projects that may be the beneficiaries of the Pacific Carbon Trust as offset projects?

Hon. C. Hansen: As we were discussing here, this is primarily driven by the Ministry of Environment in terms of that relationship with the school districts and their commitments to carbon neutrality. Most of the school districts, of course, have been working on this now since 2007 to do their part in reaching those goals.

There have been facilities grants, of course, that get transferred to school districts to assist them with that. We know there was a challenge in that for the one year. Obviously, we weren't able to flow as much as we would otherwise have liked to have flowed. But school districts, I think, are rising to the challenge of striving to hit carbon neutrality, and there's good progress that is being made. But that is under the auspices of their relationship with the Ministry of Environment.

Our role is specifically with regard to the Pacific Carbon Trust. Again, should school districts have to purchase offsets, the purchase of those offsets would come through Pacific Carbon Trust, that would make those purchases on their behalf.

D. Donaldson: I have a question regarding this vote, regarding procurement, and I'd like to pose that to the minister. I'll describe the question and see if he has the appropriate staff here to respond. This question deals with the procurement governance office under the office of the comptroller general.

Under the Ministry of Finance website, the procurement governance office buys more than $4 billion worth of goods and services each year on behalf of British Columbians. The minister has described the upheaval and the earth-shattering, unprecedented events of the last couple of years when it comes to the economy.

[1715]

One way governments around the world and in other jurisdictions have begun to deal with these upheavals is through supporting social enterprises through government procurement policies. Social enterprises play a key role in the economy in Canada — in retail, banking, other services.

In fact, there have been governments in other jurisdictions that have used the government procurement capabilities to support social enterprises, and I'll describe a couple of those here. In the U.S. and in Europe these governments have provided technical support to social enterprises to increase their capacity to win bids in public tenders. They've reserved markets for certain types of services, and they've integrated social impact measures in public tenders.
[ 5530 ]

David LePage, with the Enterprising Non-Profits and the Social Enterprise Council of Canada, has also written a document on this kind of policy. He points out that the government of Manitoba in their community economic development strategy has introduced an aboriginal procurement initiative aimed to increase aboriginal-owned businesses. He points out that a single focus on return on investment actually does an injustice to the taxpayer when it comes to procurement, and the real taxpayer return on investment would be to have government use their purchasing to contribute to a fully sustainable economy.

My question under this budget vote concerns the procurement governance office. Would the minister see the benefits of adopting some of what other jurisdictions have done on procurement policy to support the goals of building a more sustainable economy? Would he see the benefit of that by directing the office of the comptroller general to study and make recommendations on how to infuse this approach regarding procurement so that it will add environmental, social and cultural values to communities while paying a competitive price and maintaining quality of goods and services being purchased?

Hon. C. Hansen: In terms of the procurement through the office of the comptroller general, they do follow core principles which include the principles of fairness, openness, transparency, value for money. In terms of social procurement, that is something that the office has explored and will continue to see if there are opportunities for government to be more engaged in that approach as well.

K. Corrigan: I want to ask a couple of questions about the Olympics. The Olympic report has now come out, and it indicates, first of all, that the Minister of Finance had an honoured guest accreditation that provided access to Olympic family tickets. But I notice, as well, that in the report it's reported that the minister attended six ice hockey games and one speed skating game, for a total of $2,947.

[1720]

Perhaps I should have mentioned this first of all. In the interest of time, I was wondering if it's possible for me just to read all these questions in, and I'd be happy to get an answer later from the minister on almost all of them. There's one I would like an answer on today. Maybe I'll just run through them all, and I'd be pleased to get an answer later in writing.

Just a confirmation that that would be the cost associated with the accreditation even though there was no cost actually with those tickets, because there was no price on the honoured guest tickets, and that there were no other events that the minister attended.

In addition, I would like some information on the volunteer program. The Minister of Citizens' Services issued a press release last week with the accounting for the volunteer program as well as the secondment program.

I noticed it mentioned that there were 20 people from the Ministry of Finance involved in the volunteer program, and there were 24 employees involved in the secondment or what has been called the employee loan program. There are totals in the report of the cost across various ministries, but nothing broken down. I'm wondering if the minister could provide the costs of the volunteer program — those 20 people — as well as the 24 employees that were involved in the secondment.

Finally, the question I would like to ask today and get an answer, if I may, is…. I noticed that in the ticketing report and in the report on the employee loan program and the secondment program, there's no mention of Partnerships B.C., which is a wholly owned subsidiary of the Ministry of Finance.

I'm wondering how many tickets Partnerships B.C. purchased and what the value of those tickets were, who they went to, whether or not there were Partnerships B.C. employees seconded to VANOC, whether or not there were Partnerships B.C. employees involved in the volunteer program and whether or not there were any other costs related to the Olympics that were undertaken by Partnerships B.C. That's a mouthful. I just hope I could get an answer on the very last question about Partnerships B.C.

Hon. C. Hansen: I would be prepared to address as many of these issues as she wants now, but I gather she just wants me to comment on Partnerships and then provide the other information, which we'd be pleased to do.

With regard to Partnerships B.C., the organization did not buy any tickets for the Olympics and did not second any employees. There were employees that took leave in order to work as volunteers, but there were no secondments.

K. Corrigan: I'm wondering if we could get at a later time — or if we have it now — the value of those volunteers. What would have been the wages and benefits associated with that?

Hon. C. Hansen: I did put it in plural. It was actually one person on the staff of Partnerships B.C. who took their vacation entitlement. That one individual took vacation leave and volunteered during the Olympics. There was no cost to Partnerships B.C.

K. Corrigan: Just for clarification, when I was talking about volunteers, I was talking about the volunteer program where in other ministries the employees or employee would have taken one week's holiday or two weeks' holiday, and it would have been matched by government. Just a confirmation that that is not the case
[ 5531 ]
in this case, so there would be no costs associated with government.

Hon. C. Hansen: That is not the case. There was no cost to Partnerships B.C.

B. Ralston: I wanted to resume some questions. As we're nearing the end here, there will be a couple more on HST. Then I think I'll move to the P3 area, although we really don't have enough time to deal with it.

[1725]

The minister has said publicly, in response to a discussion or an exchange of correspondence that he had with the Chief Electoral Officer, that the government planned to release a leaflet after July 6 and not part of the period of the petition. I'm wondering: what estimates of the cost of that leaflet describing the benefits of the HST does he anticipate spending on behalf of the public?

Hon. C. Hansen: That project has somewhat gone back to the drawing board, you might say, given that we were not able to put out the timely information about how the HST works and why it's important for the province of British Columbia. We have revisited the layout and the design of that. It's undergoing a bit of a refocusing in terms of what would be timely, given when we are going to be able to put that out. So at this point the costing of that is not finalized.

B. Ralston: I just wanted to confirm, though, that the minister hasn't abandoned the idea of doing some form of publication after July 6 and that there will be a cost to the public, obviously, of doing that. I just wanted to confirm that, if I could.

Hon. C. Hansen: It is our intention to put out a householder after July 5, and the exact contents and design of that are still being discussed.

B. Ralston: Based on previous householders of that type, what would the minister estimate the cost likely to be? In the range of $1.5 million or so?

Hon. C. Hansen: I can't give the member that estimate at this stage because there's still costing being done.

B. Ralston: 99 of the budget document talks about temporary input tax credit restrictions. There are a number of areas for large businesses with over…. It's described as "$10 million annually." I think that's $10 million in revenue, but perhaps the minister could confirm that. And could he explain the policy rationale for restricting input tax credits in the areas that are set out on page 99?

Hon. C. Hansen: As we've heard a lot of the public debate around the harmonized sales tax and people…. Well, I guess initially what I heard a lot was that this was actually going to hurt small business and that it was all for the benefit of big companies. Then more recently I hear discussion that, well, there are some benefits for small business, but it's really big business that benefits overwhelmingly.

In fact, because of this temporary restriction on input tax credits by companies with revenues in excess of $10 million a year, this actually skews the benefit in these initial years very much in favour of smaller companies. It does not flow the full benefit of a value-added tax system through to these larger companies.

Certainly, in terms of the principle of a value-added tax and how it should work in the most effective way, it would be nice to not have to have this restriction right from the outset. However, as a transition move between where we are today and where we want to get to in a number of years, this temporary restriction on some limited input tax credits is necessary.

Primarily, it is to try to maintain some level of consistency with the other HST provinces in Canada. Quebec currently has an input tax credit restriction that is similar to this, and Ontario, of course, had announced this input tax credit restriction. To provide for a degree of consistency with those other provinces, we felt it was appropriate for us to make the same measures in British Columbia.

[1730]

B. Ralston: I believe that the observation in Quebec is that what were classified as temporary input tax credit restrictions have evolved into what are essentially permanent ones. But I'll leave that aside for the time being.

One of the debates that takes place in relation to tax policy is the debate about productivity. The member for West Vancouver–Capilano has referred to the governor of the Bank of Canada as being a model for — and, I guess, the embodiment of — Canadian fiscal prudence. In a recent speech reported in the Globe and Mail, he expressed his concern about Canada's productivity record. I'm quoting from the article:

"He called on business executives to become more aggressive, expressing disappointment with their reluctance to invest and suggesting their caution is a primary cause of the country's abysmal productivity record.

"In a speech in Ottawa Mr. Carney said business leaders are failing to take advantage of significant policy changes that are meant to increase business spending. To emphasize his point, he noted that productivity growth declined in the last recession, something that hasn't happened in three decades. Theoretically, this shouldn't happen.

"Productivity is generally defined as output per hour worked, and when demand declines, as it does in a downturn, productivity tends to improve because companies try to do more with fewer workers.

"Though the global economy is improving, Mr. Carney said he sees little evidence that Canadian companies are positioning themselves to take advantage. Money is available, and balance
[ 5532 ]
sheets are relatively strong, yet investment intentions are modest and mostly driven by government stimulus programs."

It goes on to quote:

"'In general, while there is always more to do, governments have put in place conditions for productivity revival,' Mr. Carney said yesterday: 'Business thus far has been disappointed.'"

I'm interested, because some of the HST debate that the minister has brought to the public does focus on the issue of productivity. Does he share the views of this man — widely reputed, now one of Time magazine's top 100 people in the world, praised by the member for West Vancouver–Capilano? Does he share those views of disappointment with business and its reluctance to invest?

Hon. C. Hansen: Certainly, I agree that productivity is an issue that Canada needs to address, that British Columbia needs to address. To go back and quote from the Progress Board report, it actually says — I'll quote directly from the report: "Harmonization of the PST with the GST, due to its effect on investment and hence productivity, was the main recommendation in the board's 2008…Investment in B.C.: Current Realities and the Way Forward."

Indeed, when you look at the writings of many of Canada's leading economists on the subject of HST and productivity, they actually all point to the fact that the adoption of the harmonized sales tax is very significant in stimulating the investment that is necessary if we're going to see significant gains in productivity.

I think the reason why it's important is because gains in productivity translate into quality of life, standard of living, higher wages, more wage-supporting jobs in the province, and I think that has a real direct and tangible benefit back to individual families.

The adoption of the harmonized sales tax. We were talking about this a bit earlier, but I don't think I got to the point of the difference it makes on the marginal effective tax rate on investment. In fact, that one measure, the adoption of the harmonized sales tax, reduces the tax on investment by 40 percent. What it will mean is that with our implementation of the harmonized sales tax, we will actually have a lower marginal effective tax rate on investment than Ontario or Alberta will have.

As we are looking to the private sector to make the investments necessary to ensure that we can enhance productivity — and hence enhance job security, competitiveness and wages in the province — the adoption of the harmonized sales tax is vitally important.

B. Ralston: I had asked whether the minister shared the views of Mr. Carney — notwithstanding the economic environment that may have been created by government action across the country — about disappointment in the failure of business to invest, because those productivity gains don't come if business doesn't invest. Mr. Carney has expressed that view. He's hardly a radical person, by virtue of his position, yet he's expressed, from his position as the governor of the Bank of Canada, a very serious concern on the failure of business to invest.

[1735]

I must also add that the TD chief economist, Mr. Drummond, in a recent speech in Vancouver again commented on the failure of business to invest. "They absolutely blew it. From 2003 to 2007 was a golden era for Canadian business to have corrected their deficiency in machinery and equipment. We had unprecedented retained earnings, so it wasn't that money was not available. We had a rise in the Canadian dollar, knocking down the price of imported machinery and equipment."

He claimed — this is the TD economist, not myself — that business had wasted the economic boom and that it had stalled the productivity gain.

I'm interested, from the perspective of the minister…. Often government policy of his party tends to be tax policy, but what makes the minister think that these criticisms are not justified and that there ought to be some proper concern about whether there will be business investment to take advantage of the environment that's been created?

Hon. C. Hansen: Certainly, I'm not going to stand here and somehow blame business for not investing in Canada generally or in British Columbia specifically. I think what government should do is actually create an environment that attracts the investment. If you wind up with global investors who are looking at a jurisdiction where they can place their investments, we want to make sure that British Columbia is at the top of their list.

Today this is actually one of the reasons why it was imperative that we make the shift to the harmonized sales tax in as timely a way as we did. I know that people are surprised that we made that decision in the space of about six weeks, but it was very clear to us that if Ontario was in a value-added-tax world and British Columbia was not, we would not be able to attract the kind of investment necessary to realize the kind of productivity growth that I think Governor Carney would like to see in Canada.

B. Ralston: The minister, I take it, is unwilling to even acknowledge that there might be some merit to the views of the governor of the Bank of Canada and the chief economist of the TD Bank. These are hardly radical figures heading to the barricades, waving red flags. I think those questions that they pose really do pose very serious questions for the economic future of the province and ought to be addressed. But the minister seems reluctant to mouth any criticism, even tangentially, of the business sector, broadly speaking.
[ 5533 ]

I know that the minister has spoken very highly of Mr. Mintz. One of the issues that Mr. Mintz has expressed in the Progress Board report, in a separate study, is that the rate of small business tax being significantly lower and the commitment as a government to reduce it to zero create a disincentive for small businesses to grow.

I'm quoting from the Progress Board report:

"Mr. Mintz underlines a number of other potential distortions created by the preferential tax treatment of small businesses, including the possibility that high-income investors could reduce personal taxes by leaving their income in small Canadian-controlled corporations, the creation of private management companies to benefit from the $500,000 capital exemption and the tendency for some high-tech employees to form their own startups to benefit from the much greater R-and-D tax credits for small business."

What the remedy that's recommend here in the progress report…. I think it's important, because when we had the HST debate, the minister and some supporting the government said: "Well, it was disclosed in the progress report." I don't want small business at some point in the future to encounter a surprise, and I would be interested in the minister's views on these recommendations.

"A realignment of the general corporate income tax rate with the small business…tax rate would create a more neutral system. It would be preferable if that were to result from a lower general corporate income tax rate rather than higher small business…tax rate if welfare gains are to be maximized. A good first step would be to refrain from further reducing the small business corporate income tax rate when the general corporate income tax rate is lowered, opening fiscal room for even lower general corporate income tax rates."

[1740]

I'm interested in the minister's views on this. It is future policy and not, strictly speaking, a subject of debate, so I suppose the minister could decline to answer it. But is this the nucleus of a future policy concerning the small business tax rate where, given the weight that the minister gives to Mr. Mintz, he will be taking this advice — ending the reduction of the small business tax rate and trying to even out those two so that it doesn't act as a disincentive for small business to grow into large businesses?

Hon. C. Hansen: The policy of this government has to been to ensure that we have a tax regime in British Columbia that's attractive to the investors and the job creators that can help us build the economy. That is certainly a policy we will continue to pursue.

I'm not at liberty to get into speculation around what may or may not happen in tax policy in the future, other than what we have already announced. But the reduction of the small business tax rate from 4.5 percent, as it was nine years ago, down to 2.5 percent…. Then of course, as the member indicated, we will be totally eliminating the small business tax rate in 2012.

That's important, I think, for driving the small business sector of the economy. The vast majority of businesses in British Columbia are small businesses that fit within that $500,000 threshold. We want them to thrive, we want them to survive, and we want the incentive for those owners to reinvest their retained earnings in those companies so that they can grow. We think that's an important part of building the economy of the province in the future.

B. Ralston: I thank the minister for that response.

Mr. Drummond expressed a very similar view and pointed out that while corporate tax rates have fallen in the past decade, small business tax rates have fallen even further, creating a tax disparity between small and large business.

I'm going to quote him here. "If you get close to $400,000 in income, you cap your growth. You bonus out; you split your company. You do anything not to become a large company because you get a whole set of provincial and federal regulations that kick in if you're large. It's insane, yet we're driving further and further in that direction."

He said that fewer larger businesses translate into less research and development, one of the key components of increased productivity. "I have nothing against small business, but records show they have a lot less R and D and have a lot less productivity." Once again, a prominent economist, a well-recognized commentator on business matters in Canada — although I think he's left as the TD economist and gone off to a university — is expressing a similar view.

Particularly when the minister has expressed such concern about productivity — as many do and as Mr. Carney has, as well — does he not see the logic, to some extent, of the argument being made here? I'm just thinking, on behalf of the small business owners, that they may be faced with the reversal of the government's policy in the future, given that it's in the Progress Board report and the TD Bank, which sometimes is listened to by certain members of the government.

Hon. C. Hansen: Actually, if it were to be a problem in 2012, when we have a zero small business tax rate, then it will be less of a problem than it was ten years ago. The reason I say that is that ten years ago you had a general corporate tax rate of the provincial corporate tax of 16.5 percent and at the same time had small business tax rate of 4.5 percent. The differential ten years ago was 12 percentage points between the small business tax rate and the general corporate rate.

[1745]

What we will have as of 2012 is a general corporate tax rate of 10 percent and a small business tax rate of zero. Therefore, the differential is going to be only 10 percent, so there would actually be much less of a disincentive for these small companies to grow into big companies in the future than there was ten years ago.
[ 5534 ]

B. Ralston: Well, I appreciate that. I think the minister is ignoring the general point. A zero tax rate is, many would claim, very attractive and certainly welcomed by the small business sector. But given the importance of the productivity debate, which the minister has talked about, I don't think he's really acknowledging the impact on productivity that is so vital — it's claimed by many — for our economic future. But with that and those responses, I would like to move to another topic.

I know we don't have much time left, but I want to ask a few questions in the area of Partnerships B.C. If I can just have a brief moment here to gather my material, I'll begin some questions.

Perhaps I could start with this. The minister spoke at a conference in Toronto, which I also attended, put on by the Canadian partnerships association. I forget the exact title.

Interjection.

B. Ralston: The Canadian Council of Public-Private Partnerships, I am reminded.

There was debate on a number of topics there, and presentations. One of the themes was the degree to which this sector was absorbing the impact of the global financial crisis. One of the ways in which that was being absorbed and….

The consequences were the relative absence of banks financing the flight of monoline insurers from the field and a general view that longer tenures of the type we've seen here in British Columbia of 25 to 30 years were no longer sustainable and that given that, the tendency in the future in any deals that were struck would be for shorter tenures, certainly not longer than 20 years and in many cases as short as ten to 15 years.

Can the minister confirm that that's a general direction that is being reflected in the decisions that Partnerships B.C. may be making in its evaluation of projects that come before it at the present time?

Hon. C. Hansen: There is no question that the fall of 2008 and throughout 2009 was a very turbulent year for financial markets, and P3s were obviously profoundly affected by the global economic challenges. There was a period of time — certainly, at the time that I gave that speech in Toronto — when projects were going more short-term because of the uncertainty and the volatility. But given what's transpired in the ensuing months, there is a return to interest in long-term projects.

K. Corrigan: I wanted to ask some questions about cash flows. The Partnerships B.C. value-for-money report for the Kicking Horse Canyon phase 2 project said: "To compare the public sector comparator and the final contract, the cash flows for the term of the contract must be discounted to a common point in time so that a comparison that expresses the present value of money that will be spent or received in the future can be made."

The comparable cash flows for the public and private sector option were published in that case, and they were also made public, I believe, in the Sea to Sky Highway.

[1750]

My question for the minister is: can the minister commit to publishing those nominal estimated cost comparisons for the public and private options for the various other P3s? I am talking about the ones where it hasn't been made public and where there have been numerous requests to get it.

That would be the rest of them: the Abbotsford Hospital and Cancer Centre; the Bennett Bridge; the Golden Ears Bridge; Surrey out-patient hospital; Royal Jubilee Hospital; Kelowna and Vernon hospitals; the Fort St. John Hospital; and Kicking Horse Canyon, where they talked about that methodology, but I don't believe they actually provided that raw data.

I'm not talking about the final-point comparison that's in the value-for-money reports. I'm talking about the data that was published for the Sea to Sky Highway, where there were the nominal cash flows for both the public option and the private option, and it was right in the value-for-money report. That's the data I think would be helpful for the public to take a look at so that they could understand what the actual costs or the nominal costs were — comparison between the public and private options.

Hon. C. Hansen: We're not sure that we've actually got a full understanding of the member's question, but certainly, in terms of the value-for-money reports, the P3 model is set out as well as the shadow model, if it were a public sector traditional model.

If there is data in addition to what is set out in those reports, we could certainly take a look at it. Whether or not there's commercial sensitivity to that data would be one of those issues. I think if we had a fuller understanding as to what exactly the member is looking for, we could certainly consider that.

K. Corrigan: Well, as I said earlier, what the Partnerships B.C. value-for-money report for Kicking Horse Canyon says is that the way you compare the public and the private options is that you compare the cash flows for the term of the contract for the public and private option.

Those cash flows for each and every year — year 1 to whatever it was in that project, year 1 to 25 or 1 to 30, and what the cost was for the public option — versus the cost for the private option were compared through the life of the contract. That is the information that I'm requesting from the minister for each and every one of those public-private partnerships that I mentioned.
[ 5535 ]

I would point out that in a report that was done by forensic accountants Ron Parks and Rosanne Terhart they said this is the information that has been published, and this is the information in a couple of projects. This is the information which has, after it initially was published in the Sea to Sky Highway, now been not published. This is the information that he, as a forensic accountant, needed to do a true evaluation on whether or not there was value for money in public-private partnerships.

That's the information that I'm requesting. I would appreciate an answer to that. Otherwise, I would certainly be willing to wait, if there is an assurance from the minister that that information could be provided to us at a future date.

Hon. C. Hansen: We'll certainly take a look at it. As I say, we'd have to look at it in the context of what is commercially sensitive information involving some of the data and information.

[1755]

But yeah, we will take a look and see if we're in a position to provide the member with some of that.

K. Corrigan: I appreciate the assurance that the minister will take a look at it. Can I receive an assurance from the minister that if there is not commercial sensitivity, the minister will provide that information?

Hon. C. Hansen: I guess we are trying to fully understand exactly what it is the member is looking for, but I will certainly get her a response, and we will look at what the implications of releasing that data would be.

B. Ralston: I believe the term is "the nominal operating and life-cycle costs that are used to calculate the net present value."

Mr. Parks, when this report was put together, reviewed four projects: Abbotsford Hospital, Sea to Sky, Diamond centre and Canada Line. I'm quoting from the report. "We found that critical information and documentation" — and this is him saying this, and the other accountant who prepared this — "in support of the value-for-money reports was, for the most part, denied in response to freedom-of-information requests. In our view, this suggests a general lack of transparency and public accountability."

A distinguished forensic accountant made those requests of Partnerships B.C. specifically to make those kinds of calculations and analyze these four projects. That was denied, according to him.

Is the minister going to make a commitment here that he will look at that request and, in the interest of public accountability, make that disclosure?

Hon. C. Hansen: The Auditor General has reviewed the methodology that is utilized by Partnerships B.C. in doing their value-for-money audits. I believe he has done that on three different occasions and has validated the process or the methodology that Partnerships B.C. is utilizing. If there was a denial of information because of freedom of information, it would be because there are legitimate reasons under the FOI legislation that would provide for that information not to be released.

K. Corrigan: Well, the Auditor General reviewed three projects early on and received a lot of criticism for reviewing the projects because of the methodology that the Auditor General used, which was a review as opposed to an audit. The review simply addressed whether or not the findings were plausible.

They did not go in and look at the assumptions. It did not, for example, take a look and evaluate whether or not the discount rate was appropriate. It simply said: "This range may or may not be appropriate and this finding…." The report said that it's plausible. It did not go into the various assumptions that were made.

I would also note that after that final review was done and there was a lot of criticism of the Auditor General's report, the Auditor General has stopped reviewing the value-for-money reports. So I think that the concern is legitimately carried on, that at one point government was releasing the cash flow comparisons between the public and private.

I'm certainly happy to speak to anybody in the ministry staff and point out exactly what those cash flow comparisons were. We have them for three projects — sort of for four, but three for sure — and they show that the actual costs for the private sector deals are much higher than for the public costs. For that reason, we request that information.

[1800]

Hon. C. Hansen: I think, first of all, I should point out that there is an entire process around that quantitative analysis that is followed by Partnerships B.C. That document is on the website, and it's there for everyone to look at.

Secondly, we don't tell the Auditor General what to audit. He has those powers, and if he wanted to do a more fulsome review, that would certainly be in his powers to do. He felt that the reviews that he did, and the reviews of those three projects, were obviously appropriate. I think, finally, if there have been requests made pursuant to the freedom-of-information legislation, and access to information was denied, and if the member or anybody else feels that that denial is inappropriate, there are always the avenues of appeal to the Information and Privacy Commissioner.

K. Corrigan: I wanted to ask a few questions about a change in the financing model for P3 projects over the last couple of years. That happened as a result of the
[ 5536 ]
change in the world economy and the falling-through of the Port Mann bridge project, wherein it changed from private to public financing. I wanted to ask….

I guess I'll frame these questions particularly around the Fort St. John Hospital project. It started with the various reports in the international media suggesting that Partnerships B.C. was using a different model of financing for the Fort St. John Hospital, and these referred to a wide-equity model, wherein essentially earlier the private partner had provided perhaps 90 percent of the financing or some portion of the financing, but a large part of it was through borrowing, and a much smaller part was through equity.

In this new model the province provides 80 percent of the capital — so a lot more — and then asks the private partner for only 20 percent. Of that 20 percent, it's possible that it is not all equity.

So I guess my question is: could the minister confirm what proportion of the total capital costs, including money provided by the hospital region, is being funded by the private partner in that particular private-public partnership? My understanding and calculations would put it at about 12½ percent, but I just would like a confirmation on that.

Hon. C. Hansen: The closing on the Fort St. John project was at a very unique time in the global financial turmoil that was going on at the time.

We acknowledge and always have acknowledged that in the P3 approach, where the private sector consortiums are borrowing on open markets to finance the projects, they will not get the same interest rate as the province of British Columbia with its triple-A credit rating could get, but that is more than offset by the risk transfer. I think when people do reviews of value for money, you have to quantify and have to factor in the risk transfer, because as we know in previous years the vast majority of public sector construction projects were over budget or late or both.

In the P3 environment, there are all of the incentives to make sure that these projects come in on time. Also, more importantly, if there are any cost overruns, it's not the taxpayer that is on the hook for that. So there is a value for that.

[1805]

At the time of the closing of the Fort St. John project, the spreads that were being charged on investments and financing globally were, quite frankly, off the map, if you look back on sort of the charts that track those spreads.

What we were able to accomplish with the financing for the Fort St. John project was quite unique. We still benefited from all of the risk transfer, because the private sector proponent was in for 22 percent of the equity financing compared to 78 percent for the province — the province's share of that. They were at first risk, so if anything had gone sideways on that project, it was their 22 percent equity that would be first at risk, and the province's would not be compromised.

By doing that, we were able to bring down the borrowing costs for the project and at the same time maximize the risk transfer to the private sector. We have since looked at that model for other projects. We think there's merit in that mix of financing where we can get the best of both worlds, and we are pursuing that approach with more P3 projects that are on the table now.

K. Corrigan: Well, the minister mentioned 22 percent, I believe, but that's 22 percent of 60 percent of the project. That means it's only about 12 percent of the project. Essentially, we're putting 12 percent into a project. The minister is saying that somebody gets a 30-year contract, a 30-year guaranteed cash flow, for putting in 12 percent of a project.

I'm wondering how the minister can justify this guaranteed cash flow for 30 years with the 12 percent investment in a project, particularly considering that for years and years this government has said that the justification for doing P3s is because the private sector risks so much of its own money. Now, suddenly, when it doesn't make any sense to do it anymore, it doesn't matter that the private sector is putting such a small amount of money into the project.

Hon. C. Hansen: First of all, I think our goal is to make sure we optimize the use of the private sector dollars that come to the table. We want the risk transfer. We want to make sure that the risk to the taxpayer is absolutely minimized.

To correct something the member said, there is no guaranteed cash flow for these projects. There are performance benchmarks that have to be met in terms of construction. If there's any risk in construction, that risk is against that private sector's 22 percent, not the taxpayer's dollar or the money borrowed by the taxpayer.

If there is any deficiency in terms of the operating targets that must be met according to the contractual arrangements, the penalties are applied to the private sector proponent, including a total loss of the equity they have in the project if they fail to deliver on their obligations.

K. Corrigan: Just one more quick one on that. Then, if I have time, I hope to ask a couple of questions about one other thing.

Would the minister please let me know, when you're talking about risk transfer, particularly when money is so much cheaper publicly than it is privately right now, why it is that projects cannot be done publicly, given that almost all of the risk or the great majority of risk takes place during the construction period? If you do a design-build project which does not involve a 30-year contract, you can transfer the majority of the risks doing it that way.

[1810]
[ 5537 ]

Hon. C. Hansen: I think, first of all, under a defined contract, a fixed-price contract under design-build, you do mitigate some of the risks with regard to construction. Under P3s you not only mitigate the cost of construction, but you mitigate the risks on operations. The building, if it's built, has to function and work for 30 years according to the operating standards that are set out, and the building needs to be designed and must function in order to achieve those standards.

Secondly, we are not pursuing P3s as the only option. We made that quite clear in the discussions regarding the Port Mann bridge — that we are fully prepared to pursue P3s when they make sense. Based on the value-for-money analysis, if it is not in the best interest of the taxpayer to pursue a P3 route, we won't go there.

Whether it's design-build or whether it's P3s, we want to look at what it is that we're endeavouring to achieve on behalf of the province, how we can minimize the risks and how we can get the best value for the taxpayers.

K. Corrigan: Perhaps one more question. I just wanted to ask quickly about the South Fraser perimeter road. Will that project be…? What is the funding model that's going to be used for the South Fraser perimeter road? Is the government planning on using the same, what I've called, wide-equity model?

Hon. C. Hansen: That project will be combination financing, so there will be some provincial government financing that will go into the project. But again, the same principles apply. We want to make sure that the risk transfer to the private sector is maximized and that the province and provincial taxpayers get the benefit of that risk transfer in terms of the overall completion of the project. In terms of exactly what that mix is, it's still a subject of negotiations.

[1815]

Vote 32: ministry operations, $58,480,000 — approved.

Vote 33: Pacific Carbon Trust, $5,000,000 — approved.

ESTIMATES:
MANAGEMENT OF PUBLIC FUNDS AND DEBT

Vote 46: management of public funds and debt, $1,300,598,000 — approved.

ESTIMATES:
OTHER APPROPRIATIONS

Vote 47: contingencies (all ministries) and new programs, $450,000,000 — approved.

Vote 48: capital funding, $1,750,696,000 — approved.

Vote 49: commissions on collection of public funds, $1,000 — approved.

Vote 50: allowances for doubtful revenue accounts, $1,000 — approved.

Vote 51: B.C. family bonus, $6,379,000 — approved.

Hon. C. Hansen: I move that the committee rise, report resolution and ask leave to sit again.

Motion approved.

The committee rose at 6:16 p.m.

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