2015 Legislative Session: Fourth Session, 40th 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)

Monday, July 20, 2015

Afternoon Sitting

Volume 28, Number 5

ISSN 0709-1281 (Print)
ISSN 1499-2175 (Online)

MONDAY, JULY 20, 2015

The House met at 1:32 p.m.

[Madame Speaker in the chair.]

Routine Business

Introductions by Members

Hon. M. Polak: I had the pleasure today of enjoying lunch with a very special person to us in the Ministry of Environment and, I think, to all British Columbians. We’re joined in the gallery today by Conservation Officer Simon Gravel of the Sea to Sky zone and his daughter Clementine.

Now, the reason he is here is because Officer Gravel is the recipient of the 2014 Outstanding Officer Award in recognition of his exceptional service and commitment. This award has been awarded since 1992 and recognizes a conservation officer who goes well beyond the basic duties and expected standards of their job. Certainly, Officer Gravel represents this. He was recognized with the North American Wildlife Enforcement Officers 2013 Life-saving Award for having rescued a woman who fell off her paddle board into Howe Sound last May near Porteau Cove.

Would the House please make them very welcome.

J. Darcy: It gives me great pleasure to welcome some friends who are here today for the Commonwealth Parliamentarians Association Conference and who are here for the conference of women parliamentarians: Chris Charlton, a member of parliament from Ontario; Lorraine Michael from the House of Assembly in Newfoundland and Labrador; Catherine Fife, a member of the provincial parliament in Ontario; and Jennifer Howard, a member of the Legislative Assembly of Manitoba.

Would the House please join me in making them all very welcome.

Hon. R. Coleman: I’m pleased to introduce in the gallery today. First of all, my daughter Jacqueline Johnson and my wife, Michele, are here. But that’s not really the importance of this visit.

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The reality is this. There are two individuals in the gallery that have actually been introduced into this House — one seven years ago and one almost four years ago — when they were born. Two of my grandchildren are here today: Josephine Johnson and Gabriel Johnson, my two sweet grandchildren who are the motivation for why I’m still here. So it’s their fault that I’m here. It’s also their fault if I never go from here, because their future is important to me. I just want to make them both welcome.

L. Krog: Here for her first post–high school graduation visit from Nanaimo is one of our most active New Democrats, Avery Valerio. Would the House please make her welcome.

Hon. A. Virk: I have the honour of introducing today in the House two women who I just met with this morning. Their company, RevenueWire, with 80-plus employees, is a global e-commerce platform. They’ve had 400 percent growth in the last several years, and they’re based right in Victoria. With us, we have CEO Bobbi Leach and vice-president of business development Sue Connors.

I would ask all my colleagues to join me in please making them feel welcome.

J. Shin: A Globe and Mail interview this past May says that our very special guest joining us in the gallery today was a fierce member of his high school debate club before becoming a computer science major at the University of Alberta. Then the New Democratic Party came calling, and soon he found himself in the thick of a provincial election.

Not only did he run against the Conservative incumbent in Edmonton–South West. He won his seat while writing an exam, when his constituents, sick and tired of the corrupted old government, decided to honour him with 5,400 more votes than the next runner-up. Not bad for a young man who just turned 20 the day the election was called.

Mozart composed his first symphony at age 8. Stephen Hawking extended the singularity theorem concept at age 26. I don’t doubt — no pressure — that our guest today, too, as the youngest member in the Alberta Legislature, will be making big splashes in his new government with fresh ideas.

Would the House please welcome Alberta’s freshly minted New Democratic government MLA Thomas Dang.

L. Larson: I don’t often get to introduce people from my riding. So it’s my pleasure today to introduce, from Grand Forks, Everett and Deborah Baker.

Would the House join me in making them welcome in this House.

Tributes

LESLIE KARAGIANIS

M. Karagianis: If the House will bear with me, this is not an introduction. It’s a farewell that I’d like to bring to the House today.

On May 5, 2010, here in the Legislature, I did a statement on the 100th anniversary of the navy. My uncle, Leslie Karagianis, was here in the audience that day, and it was also marking his 100th year. The House gave him a standing ovation, which touched him very deeply, and he was very proud of it.
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I’m here to talk about Leslie Karagianis’s passing, if you’ll indulge me for a moment.

Les Karagianis went to sea when he was 15 years old, in the days when you could do that. He signed up with the merchant marines. He then travelled the entire world before he was 20 years old. He enlisted with the Canadian navy in 1930, served as a supply sergeant during World War II and went on to have a very illustrious career in the navy.

He met his wife, Gladys, in Halifax when he was very young and said it was love at first sight. They were married quite quickly, before he was deployed overseas, and they were married for 73 years. They had a lovely love story and a lovely life together.

Les Karagianis has passed away. He was predeceased by his wife, Gladys, ten years ago and by his son Les Jr.

Last week we had a family gathering on Thursday morning, and we buried his ashes — and his wife’s and his son’s — at God’s Acre, the veteran’s cemetery here in Esquimalt, which is a beautiful location.

My Uncle Les would have been 105 years old in August. He lived a fabulous life. I’d like to mark that today in the Legislature.

Introductions by Members

M. Hunt: It’s my pleasure to introduce a colleague of mine for six years in Surrey council. Mind you, since we’re talking about ladies in parliament, I must admit that was during the time when we had six female councillors and only three of us males on council.

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Barinder Rasode is here with us today. She is working with Resource Works, which puts themselves forward as bringing people together for a respectful, fact-based dialogue on responsible resource development in British Columbia. I would ask the House to make Barinder welcome.

Hon. S. Cadieux: Today in the gallery is one of the most important people in my life. During the most difficult time in my life, when I spent nine months in hospital, she was attending the University of Victoria. She spent every Saturday on the ferry coming over to visit me for those six months that I was in hospital. She is here today with her daughters. My best friend, Jeanine Cocking, is here, and I would like to make her and her daughters, Isabelle and Emily, very welcome.

A. Weaver: It gives me great pleasure to introduce David Coon to the House today. He is, as you will know, the leader of the New Brunswick Green Party and the MLA for Fredericton South. Would the House please make him feel very welcome.

Hon. T. Wat: I’m very proud to introduce a very good friend of mine and also a very talented young woman professional, who is seated just behind the Deputy Premier’s family. She’s Julia Yan. She’s the vice-president of regional sales at TMX Equity Transfer. She’s also the president and director of the Association of Women in Finance for the past four years.

The Association of Women in Finance is a group of financial professionals dedicated to supporting the advancement of women in finance. She is also a passionate supporter of social entrepreneurship. She is an invited speaker at women-leadership-focused summits in Vancouver and Calgary. She has also hosted and moderated numerous economic forums and finance-focused speaker series. Would the House please join me to welcome Julia.

Hon. J. Rustad: It’s been a pleasure to work with the B.C. Bioenergy Network over the years and have an opportunity for plenty of meetings. I’d like to introduce to the House today four individuals from PCS Technologies: Peter Dodge, Alexis Mackintosh, Michael Weedon and Marnie Plant. They’re here to meet with a number of people over the course of the day to talk about the great work that the B.C. Bioenergy Network does. Would the House please make them welcome.

Statements

CANADIAN ATHLETES AT
PAN AMERICAN GAMES IN TORONTO

Hon. C. Oakes: It truly is my delight today to talk about the tremendous job that Canada is doing both hosting and competing at the 2015 Pan Am Games in Toronto. The games began July 10, and Canadian athletes have already won almost 150 medals, the second-highest gold-medal count from any Pan Am Games we’ve competed in since 1955. Hopefully, we can break this gold-medal record that was also set in 1999.

Today I would like to recognize a few members in this House and in this building that are connected to what’s happening in the games with some personal stories.

One of those athletes is Jusleen Virk, who is a five-time national champion and junior Pan Am champion in karate. She’s competing in the 50-kilogram class, and her competition begins Thursday. She’s leading Team B.C. athletes. Jusleen also has the dubious distinction of being the eldest daughter to the Minister of Technology, Innovation and Citizens’ Services.

I’d also like to congratulate Evan Carey, a Victoria man who graduated from Oak Bay High School and just won gold in the men’s team sprint cycling event.

Over the next day we are going to hear our Parapan Am Games announcements. I know we’ll have another exciting announcement of a member that we know and love dearly in this House. Please stay tuned. We’ll celebrate more as the days move forward.
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Introductions by Members

Madame Speaker: Hon. Members, I’ll take this opportunity to recognize a colleague of mine. The Hon. David Laxton, Speaker of the Yukon territory, has joined us. Welcome.

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Introduction and
First Reading of Bills

BILL 31 — OMBUDSPERSON
AMENDMENT ACT, 2015

Hon. S. Anton presented a message from Her Honour the Lieutenant-Governor: a bill intituled Ombudsperson Amendment Act, 2015.

Hon. S. Anton: I move that the bill be introduced and read a first time now.

Motion approved.

Hon. S. Anton: I’m pleased to introduce the Ombudsperson Amendment Act, 2015. This bill makes two very focused changes to the act that together would ensure that non-disclosure provisions contained in other provincial enactments do not apply to an Ombudsperson investigation if the investigation is undertaken as a result of a referral from this assembly or a committee of this assembly.

As members are aware, this bill is the product of ongoing discussion between government, the Ombudsperson and the Select Standing Committee on Finance and Government Services in the interest of making a unanimous referral to the Ombudsperson to investigate the Ministry of Health employee terminations that occurred in 2012.

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

Bill 31, Ombudsperson Amendment Act, 2015, introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

BILL M228 — HUMAN RIGHTS CODE
(RECOGNITION OF GENDER IDENTITY AND
GENDER EXPRESSION) AMENDMENT
ACT, 2015

S. Chandra Herbert presented a bill intituled Human Rights Code (Recognition of Gender Identity and Gender Expression) Amendment Act, 2015.

S. Chandra Herbert: I move a bill intituled Gender Identity and Expression Human Rights Recognition Act be read for a first time now.

Motion approved.

S. Chandra Herbert: This bill — and this is the fourth time I’ve moved it in this House now — would explicitly add gender identity and expression to B.C.’s human rights code.

The vast majority of Canada has taken this step. Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, Prince Edward Island and Northwest Territories have all decided that it’s important in those provinces to make it explicit that when somebody who is transgender is attacked or discriminated against, they know, because they can read it right in the human rights code, that their rights are protected.

It is well past time for British Columbia to act. While I know members on all sides will express concern for people facing discrimination and hatred, we actually in this House have an opportunity to do something about it beyond express concern. We have the opportunity to act.

I move that this bill, which would explicitly protect transgender British Columbians in our human rights code, be placed on the orders of the day for the next sitting after today.

Bill M228, Human Rights Code (Recognition of Gender Identity and Gender Expression) Amendment Act, 2015, introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

BILL M229 — ENERGY AND WATER
EFFICIENCY ACT, 2015

A. Weaver presented a bill intituled Energy and Water Efficiency Act, 2015.

A. Weaver: I move introduction of the Energy and Water Efficiency Act, 2015, for first reading.

Motion approved.

A. Weaver: I’m pleased to introduce a bill intituled the Energy and Water Efficiency Act. If this title sounds familiar, it’s because the act was initially introduced in 2012 and passed second reading with the support of the official opposition on April 24, 2012, but the Committee of the Whole House was never called during the fourth session of the 39th Parliament and so the bill died on the order paper.

This bill reflects the new language in the Greenhouse Gas Industrial Reporting and Control Act. As noted by the Minister of Energy and Mines at the time, this bill would reduce consumers’ energy bills and lower operating costs for B.C. businesses.

This legislation replaces the current Energy Efficiency Act and would enable administrative penalties to ensure manufacturers, distributors and retailers comply with energy efficiency guidelines; broaden the scope of ener-
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gy efficiency requirements to include commercial energy systems, industrial reporting and water efficiency; and enable the minister responsible to enact regulations for technical standards.

It was a fine, widely supported piece of legislation that was introduced after engaging more than 40 organizations and 60 individuals representing industry, utilities, governments, public interest and academia.

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

Bill M229, Energy and Water Efficiency Act, 2015, introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

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Statements
(Standing Order 25B)

EXPORT OF BLUEBERRIES

S. Gibson: Just last week my colleague the MLA for Abbotsford South reminded this House that the people of Abbotsford are the most generous in Canada — charitable donations that are the tops. Abbotsford is also quickly becoming known around the country and around the world for something else: blueberries. Now, I know we’re not allowed to have props in the Legislature. In my beautiful riding of Abbotsford-Mission there are productive blueberry farms everywhere on both sides of the river.

In June the federal government and China made significant progress on a deal that will eventually lead to an exciting new export market for B.C. blueberries. Blueberries account for 50 percent of B.C.’s total berry production. Exports are currently $154 million. China is now the second-largest export market for our agrifoods.

By removing trade barriers between our two countries, this agreement could raise our exports by $65 million a year. That’s good news. New markets in the Asia-Pacific region will continue to grow. Our customers will develop a passion for one of our world’s most healthy exports.

Congratulations to the hon. Minister of Agriculture for leading a successful trade mission to China last year. They obviously made a favourable and lasting impression in what was no doubt a jam-packed tour.

ARENA IN HAZELTON

D. Donaldson: The temperature hit an extreme 40 degrees Celsius several times in the last couple of weeks in the Hazeltons, and there was a lot of talk about lack of ice. But it’s not the cube variety, to keep our drinks cold, that the talk is about. It’s more the flat stuff that you skate on, because the Ken Trombley Memorial Arena was condemned in March, and demolition begins next week.

There was a celebration — a kind of wake, I suppose — last Thursday at the arena. A barbecue was held outside, and more than 100 people attended to tell stories and plan for the coming skating season. Many of the stories spoke to the great volunteer effort, the community effort, that went into building the current arena 44 years ago. That effort was on display again last week at the barbecue, which was also a fundraiser for the demolition project.

A gweey’ya was held, which is a Gitxsan ceremony where participants are given the opportunity to dance up and contribute money to the pot for a specific cause. Nearly $4,700 was raised, an incredible show of generosity from local people and a testament to how much the arena means. Everyone is pulling together to make sure there will be skating at the site this winter.

The demolition work will be tricky. Large wooden support logs and the shell of the building need to be removed while protecting the ice surface and boards that will be used to turn the arena into an outdoor skating rink for this winter.

Skating under the stars and moon might sound like a memorable experience, but don’t get too enamoured with the idea. Residents of the Upper Skeena know that this is not a permanent answer. The Upper Skeena recreation centre project committee continues on a parallel track. The facility committee has raised $5 million for a new arena and recreation facility to be built beside the old one. They are waiting to hear about provincial and federal support, especially when it comes to gas tax dollars.

All in all, the spirit of community is pulling together, is there today as it was 44 years ago and shows the true character of the people living in the Upper Skeena.

ROTARY CLUB OF PORT MOODY
AND RIBFEST EVENT

L. Reimer: I’m so pleased to stand in front of you today to thank the Rotary Club of Port Moody, who hosted the Port Moody RibFest last weekend. This was the first RibFest, and many said it was the best community festival ever held in Port Moody.

The members in this club are a diverse group of individuals who represent a cross-section of the community’s business owners, executives, managers, community leaders and professionals. They are people who give of themselves to others, all while having fun. The motto of Rotary is “Service above self.” Special thanks go to co-chairs Ian McPhail and Al Stjernegaard, who worked selflessly to make this a success for our community.

Rotary International is the oldest service club in the world, with more than 32,000 clubs in over 200 countries. Club members have many opportunities for humanitarian service both locally and internationally. Programs address areas such as the eradication of polio, assisting people who are hungry and living in poverty, encouraging literacy and access to clean drinking water.
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While RibFest wasn’t held as a fundraiser, proceeds will go to Eagle Ridge Manor, Mossom Creek Hatchery and sending kids to Camp Jubilee.

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Because of the Rotary Club’s dedication to Port Moody, we hosted over an estimated 40,000 people in our community last weekend — 40,000 people who came out despite the little bit of rain to enjoy great food, music and each other. While I know the Rotary Club of Port Moody won’t want to take all the credit for the success of RibFest, without them, it wouldn’t have happened.

Would the House please join me again in thanking them for their wonderful contributions to our community.

COMMUNITY RESPONSE TO STORM
DAMAGE AT LAKESIDE PARK IN NELSON

M. Mungall: On June 29, out of nowhere, the clouds grew black over Nelson, and the worst storm in anyone’s memory hit — lightning, torrential rain and winds gusting at 105 kilometres per hour. The pressure in Nelson’s underground gravity-fed storm sewers was so great, manhole covers blew off in the flash floods. Power was out, and lines were down all over the area.

The trees were the scariest; 100-year-old trees, dry from drought, snapped and were falling everywhere. The worst hit — Nelson’s prized and loved Lakeside Park. City councillor Anna Purcell was in Lakeside when it hit. “All of a sudden, the air was white with rain and wind. Then trees started cracking,” she said. “People were still in the water when the storm hit. They were running out of the water and appeared to be dodging falling trees. People were screaming, looking for cover.”

Just after 20 minutes the sun opened the clouds, and we all surveyed the damage. There wasn’t a part of Nelson unaffected, but Lakeside got the worst of it. The playground, the greenhouse, tennis court, beach and all the wonderful shade trees in the park — a disaster zone.

Without radio or Internet, and phones on low battery, the gossip about town was that our beloved Canada Day celebrations in Lakeside would be cancelled. “Not so,” said the city of Nelson, and members of CUPE Local 339 and IBEW Local 1003 got to work with the help of many others.

Chainsaws roared through the night. Roads were blocked to keep people away from downed power lines. The playground was cleaned up and safety measures on broken equipment put in place. In less than 24 hours Lakeside was a picture of its old self — unless you looked up to see where those massive branches fell.

So on July 1 Nelson headed down to Lakeside Park to celebrate our nation’s birthday and our community. To our city workers, all we can say is thank you, thank you, thank you.

DAWSON CREEK FAIR

M. Bernier: In 1922 Dawson Creek started a tradition that’s been going strong ever since. This year marks the 93rd annual Dawson Creek fair, which takes place August 4 to 9. It’s six days of an excuse for everyone to come up to my riding and don their cowboy hat and their big, oversized belt buckle.

Beginning August 4, the fair kicks off with a concert featuring Dallas Smith. And for my friends from the big cities, that’s a country singer. Then, starting Wednesday, 36 wagons from the World Professional Chuckwagon Association and 20 wagons from the GMC Western Chuckwagon Association race in two divisions for five full days of exciting, action-packed racing. Friday is also a Tough Enough to Wear Pink Day, where the western industry has joined together to raise awareness and raise funds to fight against breast cancer.

Friday is also the annual fall fair parade hosted by the Rotary clubs of Dawson Creek. This year’s theme is “Agriculture is for everyone” and will feature our very own Minister of Agriculture, who will be riding a horse and leading the parade. The event also features the Canadian and U.S. dual-sanctioned Wrangler Canadian Pro Rodeo featuring Canadian and American pro cowboys and national finals rodeo stock.

In addition to all of this, there is an agriculture fair, a midway, rodeo clowns, trick riders and fireworks every single night. Hailed as the greatest show in the Peace, our annual fair and rodeo has something for everyone and sees tens of thousands of people through the gates every single year.

A huge thanks goes out to Connie Patterson and the Dawson Creek Exhibition Association executive, the directors, the committee members, the staff and all of the volunteers who have worked so hard each and every single year for 93 years to make this event happen. Hope to see you all there.

VANCOUVER PRIDE PARADE

S. Chandra Herbert: Well, I’m proud to stand today to invite you all to one of the biggest protests — in fact, it is the biggest protest — in B.C. It’s been going for 37 years. It’s 12 days away. People hold signs. They shout. Maybe they dance. Maybe they smile. Maybe they sing. I speak, of course, of the Vancouver Pride Parade.

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It’s also, of course, not just a protest but a celebration. It’s a protest against inequality. It’s a protest against hatred, and it’s a protest against those that seek to put others down for being who they are. It’s a celebration of how far we’ve come. It’s a celebration of equality. It’s a celebration of justice.

I’d like to thank the Vancouver Pride Society for helping shepherd this incredible protest celebration for so
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many years. Now, they say it has been 37 years. There’s a lot of debate even about that point because, of course, there were rallies and protests in the ’70s, in the ’60s, even into the ’50s. But the parade itself has been going for 37 years, or so we’re told.

In the early days politicians wouldn’t be seen at such a thing. No, it was people having to put paper bags over their faces because their employers would fire them. They would end up in jail. They would have media find their homes, target them and shame them. But, you know, they soldiered on. They continued.

First it was gay liberation. Then it became gay pride. Now it’s just pride. Why is that? Because we acknowledge that transgender people face difficulties, lesbian people face difficulties and bisexuals and gay men, as well, all face challenges. But we also face incredible opportunities of love and unity. That’s what pride is about.

There are picnics, prayers, tea, dances, runs, breakfasts, barbecues, lectures and calls for action on transgender rights. I would like to invite you all. I hope you’ll be there this Sunday, August 2.

Have a great day, hon. Speaker.

Oral Questions

CHILDREN AND FAMILY DEVELOPMENT
MINISTRY HANDLING OF CHILD PLACEMENT
CASE AND COURT ORDERS

J. Horgan: Last week we asked the Minister of Children and Families to explain why her ministry disregarded Supreme Court orders and put children at risk in British Columbia. For two days we asked those questions. She refused to answer in how many other cases the government had chosen to disregard the will of the court and deliberately put children in harm’s way.

We asked in light of the recent ruling that found that a one-year-old child, as a result of the government disregarding a court order, was put back in the hands of a predator, a deviant, an abuser. Again, the minister refused to take action for her responsibilities over three years now.

My question is a simple one to the minister. When did she first become aware that her ministry had put children at risk by disregarding a Supreme Court order?

Hon. S. Cadieux: People who work in child protection in the Ministry of Children and Families do not ignore court orders. There are times when different levels of court hear cases and make orders that involve the same set of people, the same set of facts, and social workers are in the middle of doing the best they can to protect children based on that.

That said, no matter what level of court makes a decision, child protection workers must act in the best interests of the child as defined in the law. They do that while also relying on legal advice from lawyers representing the director of child protection.

Madame Speaker: The Leader of the Official Opposition on a supplemental.

J. Horgan: I guess the minister wasn’t reading the judgment last week, as she suggested. She wasn’t listening when we were reading excerpts of that judgment in this place. It was pretty clear — scathing. The judgment by the Supreme Court was scathing of the minister and the ministry’s actions in this regard.

The first ruling in this instance came on June 25, 2012, just a month and a half before the minister was sworn in to her current position. The judge at that time said the following, that the children were put in “the hands of,” to be “sexually abused” — three of the children — and physically assaulted, as well as the mother. Further, the judge said: “One of his disciplinary techniques is to cover their mouths in such a way as to impede breathing.” That was the court’s ruling three years ago.

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The minister became responsible for this file, responsible for protecting children in British Columbia, shortly thereafter. I would assume that one of the first briefings the minister had would have been on such a grievous case as this. When you have a ruling from a Supreme Court judge calling into question the activities and actions of the ministry. Were it my responsibility or were it the responsibility of most of the people in this place, they would have made that a high priority.

But instead of acknowledging the failure of the ministry, instead of taking corrective action, instead of ensuring that those children were protected, the minister made another decision. She chose to spend millions of dollars and three years in court defending the indefensible.

My question is to the minister. Why would the public have any confidence in a minister that would allow that type of decision to go by for three years?

Hon. S. Cadieux: As I’ve said before, social workers’ decisions affect lives and futures. There is no argument that their work is extremely difficult. I know there’s no argument from the other side of the House that that is the case.

The judgment calls that they are asked to make on a daily basis are made against the backdrop of many different situations and sometimes multiple court proceedings. Some of the most complicated — as is evidenced in this case, one with tragic circumstances — involved both custody and child protection situations.

The decision by the judge rendered last week is extensive, extraordinary. It requires thoughtful consideration and necessitates action by the ministry to review policy, procedures and HR implications, all of which I have committed to.
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Madame Speaker: The Leader of the Official Opposition on a further supplemental.

J. Horgan: The minister’s first priority is to protect the children of British Columbia. If children come into the care of the ministry, her first priority is to protect them, not to defend decisions that were made on her watch, not to defend what is clearly the indefensible.

This is what the judge said in the most recent judgment. He was very clear. It says the ministry “steadfastly acted to advance the interests of the father as opposed to those of the children.” They put the abuser ahead of the children.

It’s a horrific case. Everyone in this House agrees with that. But in light of the fact that the minister in her first week on the job would have been briefed on this file and allowed three years to go by. For a second, more scathing judgment to emerge. Clearly, that’s evidence enough to the people of British Columbia that an internal review is not acceptable.

My question to the minister is: based on what you have done over the past three years, why should the people of B.C. have confidence that you and your ministry can do an appropriate job investigating the most grievous case I’ve ever heard in my entire life?

Hon. S. Cadieux: As I stated last week, and I continue to wholeheartedly believe, the safety of children, vulnerable children, is and always will be the first priority of this ministry.

British Columbians all deserve to understand, to know, that their child welfare system is responsive, guided by the best interests of children and accountable for the decisions it makes. This case and the judgment rendered last week speak to challenges with that.

There is no question. There are extremely strongly worded recommendations or findings by the judge. They are being reviewed thoroughly. I have committed that there will be a review. The shape of what that review will look like I have not committed to, but I commit to this House to make the details of that known by the end of this week.

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D. Donaldson: The minister speaks to challenges. The B.C. Liberal government’s belief that they are above the law led to the sexual molestation of a one-year-old girl. Instead of taking immediate action to investigate how and why this happened, the B.C. Liberals spent millions of dollars defending the indefensible. Three years have passed since the first judgment in this case — year after year after year. Can the minister give this House one good reason why anyone should trust her ministry to investigate itself now, three years later?

Hon. S. Cadieux: While the opposition will use this as a platform, I do not believe this is a partisan issue. This is a very serious situation. This is a very serious judgment rendered by a court. It takes into account the complexities of the law that social workers interact with on a daily basis in British Columbia. In a situation like this, where there are multiple court proceedings in a complex dispute, there needs to be resolution to how social workers, how the ministry, will deal with those ambiguities going forward so that there are no more ambiguities in the law.

Ultimately, despite all of that, what matters most is that there were children at the heart of this; there were children that were harmed as a matter of course in this. Those children need to be at the centre of every decision that is made on this case, just as other children need to be the centre of every decision going forward.

Madame Speaker: The member for Stikine on a supplemental.

D. Donaldson: Here are some words from the 2012 judgment. The father “sexually abused his three older children.” The father “is quick to anger and has openly bragged that he can easily kill young children and women.”

The ministry participated in this 2012 case. They paid for experts to testify on behalf of this man. They paid for lawyers to help him get custody of his children. The minister knows that now, and she knew that three years ago. If the minister didn’t investigate in 2012, why should we trust an internal investigation now?

Hon. S. Cadieux: As I have said and will say again for the member, this is a serious judgment. I am taking it extremely seriously, as is the ministry. As such, there will be a review. The nature of that review, how it is conducted into policy and practice implications and any human resource implications has not yet been decided. I have endeavoured to make that public by the end of this week.

M. Mungall: First, let me say that questions to the minister are about accountability for children. They’re not about partisanship. The reality is that the minister should have…

Interjections.

Madame Speaker: Members. Members.

Please continue.

M. Mungall: …investigated three years ago when the custody trial revealed that the ministry defied a court order, allowing a sexual predator to access his children. But she didn’t. She chose another path. She chose to spend millions defending the indefensible.

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Her ministry was far from exonerated. In the most recent trial we learned that things were even worse. We learned that ministry staff interfered with the witness during cross-examination, they backdated information, and
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the father was told to use the phone so his e-mails could not be disclosed. This is incredibly, utterly unacceptable.

Will the minister do the right thing today and ensure that her ministry is not investigating itself?

Hon. S. Cadieux: The ministry and government have an ongoing duty to protect children. There is, I believe, in this House a misunderstood aspect of this circumstance, and that is the manner in which the case was considered by the courts. The Supreme Court made decisions under family law. The Provincial Court made decisions under the CFCSA. Those orders were in apparent conflict until the two matters were brought together under the Supreme Court.

Child protection workers in the ministry every day are confronted by horrific situations, and they must try to make the best decision for the child at all times. They endeavoured to do that.

I have committed that this situation and this judgment by Justice Walker require and necessitate a thorough review of policy, practice and HR implications. I have committed to make the details of what that review will look like, what shape it will take, by the end of this week.

Madame Speaker: The member for Nelson-Creston on a supplemental.

M. Mungall: Well, the minister is right. The ministry’s job is to protect children. But here we have a case where not once but twice a judge has said very clearly, without any ambiguity and in incredible detail, that that was not the case. More than once, this ministry acted in bad faith and misled the court.

The judge, like I said, was clear. “The director provided a ‘false and highly misleading’ report to the Provincial Court about the circumstances in which the children were apprehended.” He goes on to say: “There is no excuse for the egregious factual errors, misstatements and omissions.”

The minister didn’t just find out about this last week. The original custody trial was three years ago, and she knew at that time that the ministry made severe errors. So there is no way that she should be the one responsible for overseeing this investigation. Will she do the right thing and hand this over to an independent body so we can get to the bottom of this for the benefit of children?

Hon. S. Cadieux: Like everyone in this House and those in the public who are following this circumstance, I have heard the very real impacts that this has left on a family and on children.

The Ministry of Children and Family Development. Our mandate and our statutes state that we are in place to protect children and to work in their best interests. Every day social workers are confronted with very difficult situations, and they have to make judgment calls. That said, no matter what, they must do that with the best interests of the child at heart. They must do that while relying on legal advice representing the director of child protection in any child welfare proceedings.

I have committed that the seriousness of the judgment and of this case and the facts in it require a thorough review, and I will make details of that review known later this week.

[1420]

S. Simpson: The minister has been, I think, somewhat deliberately vague in some of her answers. She would say it has to do with individuals and cases of individuals, but there has been some vagueness here. She has talked a lot about the role of social workers and that.

My question for the minister is a pretty simple one. Does the minister accept the findings and the rulings of the Supreme Court, or is that in question for her — Justice Walker’s findings? Are they in question at all for the minister, or does she accept the findings and the rulings of the Supreme Court in this case?

Hon. S. Cadieux: What I have stated is that the seriousness of the judgment and the facts contained within it require thorough and thoughtful review before decisions on actions are taken. I have committed that the decisions related to any further action government will take around a review will be made by the end of this week.

HEALTH MINISTRY INVESTIGATION

A. Dix: A question for the Minister of Health.

This weekend Mark Isaacs, one of the many people whose lives were permanently harmed by Liberal misconduct and the wrongful dismissal of health researchers, spoke up for the first time. He detailed how he was wrongly attacked and threatened and lost his position in spite of having done absolutely nothing wrong.

In fact, numerous researchers, in addition to those wrongfully dismissed, saw their careers, work and reputations permanently and negatively affected by government threats and smears, through no fault of their own. These include, for example, researchers such as Barbara Mintzes of the therapeutics initiative, researchers at the University of British Columbia and the University of Victoria and many others, including Mr. Isaacs.

In particular, UBC and UVic researchers were smeared in the second paragraph of a press release by the allegation, crafted by the Premier’s communications team and spoken by the Minister of Health, linking them to a non-existent RCMP investigation.

Does the Minister of Health even know how many people were damaged by Liberal misconduct in this affair? Does he not need to provide some public explanation for the smears by the previous Minister of Health of those researchers on September 6, 2012?
[ Page 9099 ]

Hon. T. Lake: The member well knows that the Finance and Government Services Committee is considering a letter that I sent to the committee asking them to refer this matter to the Ombudsperson’s office. I know the committee is working hard and in good faith. I fully expect and hope that they will send that referral to the Ombudsperson’s office so that all of us may understand all of the circumstances regarding this particular case.

Madame Speaker: The member for Vancouver-Kingsway on a supplemental.

A. Dix: Well, the minister and the government seem to believe that they can smear without consequence, because that’s what has happened in this case. No information was forwarded to the RCMP from the Ministry of Health. Yet they saw fit to smear agencies, to smear literally dozens of researchers, without consequence.

When I asked the minister last week about the therapeutics initiative, he claimed that they’d always had a good relationship with them. Other conclusions he described as “insane,” except the public record is clear. They cut off their funding, threatened their existence and smeared their researchers with the taint of an RCMP investigation that didn’t exist for 2½ years. These smears were perpetuated by Liberal politicians and the Premier’s communications team. The public was repeatedly misled with respect to these issues.

Does the minister responsible believe Liberal members and the Premier’s team have that right, to smear people without consequence? Does he have any explanation for the deliberate effort to link researchers at the University of British Columbia — and this was the Minister of Health — and the University of Victoria to a non-existent RCMP investigation?

Hon. T. Lake: I have commented on the member’s penchant for wild speculation and complex conspiracy theories.

[1425]

Let me say this. There was concern that data had been misused. That’s a serious concern. There was concern about awarding of contracts and procurement practices. That was a serious concern. Members of the ministry met with the RCMP.

Interjections.

Madame Speaker: Members.

Hon. T. Lake: Members of the ministry met with the RCMP on several occasions in 2012 and 2013. The RCMP were interested in the work of the office of the comptroller general on contracting and procurement practices.

If the member wishes to have all of this information clarified, he would encourage the members of his committee, the Finance and Government Services Committee, to send this to the Ombudsperson for a full review.

IMPACT OF WHOLESALE LIQUOR PRICING
CHANGES ON CRAFT BREWING INDUSTRY

D. Eby: On March 5, 10, 11 and 26, April 23 and 30 and May 25 the opposition rose in this place and told the government their wholesale price reform for beer and wine pricing would lead to higher prices for consumers and hurt B.C. businesses, especially craft brewers. The Attorney General told us we were “beer-mongering.”

Now, three months after the policy change, the Minister of Transportation is telling the media: “I can assure craft brewers inside and outside of Kamloops that government’s intention is to fix this.” The member for Richmond-Steveston has also suddenly announced a review of the Attorney General’s policy changes.

That her new policy would increase craft beer prices was entirely predictable. Will the Attorney General fix it, and when?

Hon. S. Anton: I am pleased to be able to report to the member opposite and the members opposite about the success of the craft beer industry. Congratulations to the craft beer makers in British Columbia for the success of their industry and for producing a product that people love and for creating so much employment and creating a really interesting industry in British Columbia.

In the first three months of this year the craft beer sales at B.C. liquor stores have increased by more than 50 percent over last year. That would be April, May and June, the first three months of the changes in liquor distribution in British Columbia.

Craft beer sales have almost tripled over the past five years. In the past two years alone nearly 50 brewery licences have been issued throughout B.C., and the number of licensed breweries has nearly doubled since 2012.

The member opposite has trouble with the liquor changes, Madame Speaker, but I can assure you British Columbians don’t.

Madame Speaker: The member for Vancouver–Point Grey on a supplemental.

D. Eby: I’m sure all the members here can hear why craft brewers are so incredibly frustrated with this member. When the Campaign for Real Ale wrote to the Attorney General and told her about the craft beer price hikes, she said it wasn’t her fault. She said: “A variety of factors can impact a product’s retail price, including increases or decreases in supply-related costs, the strength of the dollar, price rounding and price promotions.” Only the Attorney General could blame the price increases in products made of Canadian products and produced, retailed and consumed in B.C. on the American dollar.
[ Page 9100 ]

Three Ranges Brewing, Red Collar Brewing and others say the Attorney General’s policy changes raised prices and are hurting their business. Will she listen to them and change her policy?

Hon. S. Anton: This government is extremely supportive of the craft beer industry. We have a very granular interest in the industry, so much so that my parliamentary secretary for liquor and my staff are speaking to every brewery that brings a concern to government. We do want to know what the issues are and to make changes if we need to make them.

[1430]

But let me continue: 112 breweries in British Columbia, and 90 of them are craft breweries. Since April 1, six new breweries have started making beer in British Columbia.

Madame Speaker: Thank you, Minister.

Hon. S. Anton: Madame Speaker, I have to add a note here. South Vancouver now has its first craft brewery. Congratulations to Dogwood Brewing in the wonderful riding of Vancouver-Fraserview.

LIQUOR SALES AT FARMERS MARKETS

K. Corrigan: In the spring we asked the Attorney General a number of interesting questions about the wholesale pricing model, questions like: why is this government intent on creating confusion in B.C.’s liquor industry and why is this government raising beer and wine prices? Rather than acknowledge the damage the wholesale pricing model would cause, the Attorney General would focus her answers on an unrelated topic, farmers markets.

Well, I have some good news for the Attorney General today. We plan to actually ask a question about farmers markets because, unfortunately, the B.C. Liberals couldn’t even introduce this change to the policy without problems.

In Kelowna vendors who sell wine, beer, spirits and ciders are having to turn customers away for the first hour that the farmers market is open because of a regulation that prohibits alcohol sales from 8 a.m. to 9 a.m. To the Attorney General, how is it possible that the Attorney General could not even get this right? And will the Attorney General include the farmers markets in the annual review?

Hon. S. Anton: It must really hurt the members opposite to go to a farmers market and see their local manufacturers there. I hope they avert their eyes.

I had the pleasure. Thank you to the MLA for West Vancouver–Sea to Sky for hosting me at the Pemberton Festival this weekend. Guess what they had. They had a site licence for alcohol service during the day. I hope none of the members opposite go to one of these festivals over the summer and are forced to see people walking across the grounds with a beverage in their hands. That will be very tough on them because according to the members opposite, liquor policy is a failure. Luckily, according to the citizens of British Columbia, it is a big success.

[End of question period.]

Petitions

A. Weaver: It gives me great pleasure to introduce a petition to the Legislature of 7,195 British Columbians who are respectfully requesting that the government end their singular focus on LNG, withdraw from the generational sellout embodied in the proposed PDA with Petronas and instead move towards supporting a diversified and resilient 21st-century economy in B.C.

M. Bernier: I rise also to present a petition, of 318 signatures presented to the provincial government from the Swan Lake Enhancement Society.

Reports from Committees

J. Thornthwaite: I have the honour to present the annual report of the Select Standing Committee on Children and Youth for the fourth session of the 40th parliament.

I move that the report be taken as read and received.

Motion approved.

J. Thornthwaite: I ask leave of the House to move a motion to adopt the report.

Leave granted.

J. Thornthwaite: In moving adoption of the report, I’d like to make some brief comments.

This report summarizes committee activities from February 2014 to March 2015. During this time the committee reviewed four reports by the Representative for Children and Youth, as well as the representative’s 2013-2014 annual report and 2014-15 to 2015-16 service plan.

[1435]

We also met with officials from the Ministry of Children and Family Development to receive updates regarding their work to implement recommendations from the representative and selected other ministry initiatives.

As noted in the House back in March 2015, the committee was required under the Representative for Children and Youth Act to conduct a statutory review of that act and, informed by mutual agreement between the representative and the Ministry of Children and Family Development, concluded that the section of the act providing for the representative’s key oversight functions should not be amended at this present time.
[ Page 9101 ]

This report also provides an overview of the second phase of the committee’s special project to examine youth mental health. During the reporting period covered by this annual report, the committee released a stand-alone interim report on youth mental health with the results of our first phase of consultation.

The committee did additional planning to move the special project forward during the reporting period. The committee has been meeting with invited expert witnesses and taking down written submissions in recent months. The committee looks forward to issuing a special report with recommendations on child and youth mental health in the near future.

I’d also like to pass on my thanks to the current Deputy Chair, the member for Stikine, and Kate Ryan-Lloyd, the Deputy Clerk and Clerk of Committees. We had a very positive working relationship, and I look forward to working with all of us, all committee members, in the future.

In closing, I would like to acknowledge the Representative for Children and Youth and her staff as well as the Ministry of Children and Family Development. On behalf of all committee members, we thank you for this important work that you do.

With that, I move adoption of the report.

D. Donaldson: I, too, would like to speak to this annual report submitted today and thank the work of the Chair and the Select Standing Committee on Children and Youth members from both sides of the House.

There was a lot of work outlined in the report, and I’d especially like to highlight a couple of the topics that the Chair mentioned, especially the statutory review that the committee was to undertake on the role of the Representative for Children and Youth.

I’m pleased to report that the representative and the deputy minister for the Ministry of Children and Family Development both agreed that performance measurements as envisioned by the hon. Ted Hughes were still not in place in the ministry to the extent that he envisioned, and therefore, the role of monitoring and oversight by the Representative for Children and Youth still needed to be undertaken. We totally agreed with that joint letter that they wrote to us.

Secondarily, I’d also like to really make special mention and acknowledge the work of the Chair and the committee on our special project on youth mental health. As pointed out in the report, the first phase pointed out that the committee unanimously agreed that there is an urgent need for action to improve mental health services and supports for youth. We continue that work.

I look forward to presenting this chamber with our annual report next year, where we’ll have the recommendations from phase 2.

Madame Speaker: Hon. Members, the question is adoption of the report.

Motion approved.

J. Tegart: I have the honour to present the final report of the Special Committee on Local Elections Expense Limits. This report covers the second phase of the committee’s work in relation to local election expense limits.

I move that the report be taken as read and received.

Motion approved.

J. Tegart: I ask leave of the House to move a motion to adopt the report.

Leave granted.

J. Tegart: In moving adoption of the report, I’d like to make a few brief comments.

This report builds on the committee’s first phase of inquiry in late 2014 into principles for the relationship between electoral organizations and their endorsed candidates with respect to expense limits and principles for establishing expense limits for third-party advertisers.

The committee was pleased to make the first report public last December and table it in the House in February 2015. I’m pleased to say that the committee worked cooperatively throughout the review and unanimously agreed to all the recommendations for limits on what candidates and third-party advertisers can spend in local election campaigns in B.C.

The committee feels that the recommendations allow reasonable spending while promoting fair and accessible local elections. The recommended limits are also intended to recognize the different needs of smaller and larger communities as well as the differences between mayoral candidates and candidates for other locally elected offices.

[1440]

Public and stakeholder consultations and a detailed analysis of what was spent in 2014 B.C. local elections led the committee to recommend limits of $10,000 for mayoral candidates and $5,000 for candidates for council, school trustee and other local offices in jurisdictions of less than 10,000 in population. In jurisdictions of more than 10,000 people, the committee recommended a four-step per-capita formula. The committee further recommends that the limits apply from January 1 and on in the calendar year of local elections.

A limit of 5 percent of a mayoral or other applicable candidate’s limit was recommended for third-party advertisers, along with an overarching cumulative limit of $150,000 provincewide.

As an open data initiative, the committee posted to its website the 2014 local elections spending data used to inform its recommendations. The spreadsheet contains spending information for more than 3,500 candidates, electoral organizations and third-party advertisers.

In closing, I would like to thank my fellow committee
[ Page 9102 ]
members, including the Deputy Chair, the member for Coquitlam-Maillardville.

With that, I move adoption of the report.

S. Robinson: I’d just like to take a moment to thank the committee members and the Chair for doing some great work together in developing these recommendations. Committee members had all represented their constituents in local government. This common experience did a really good job of bringing us together with common understanding and common purpose, and I believe that this helped to make us a very effective and efficient working group.

I also want to take a moment to just express appreciation to all those who took the time to make a presentation to the committee, to complete an on-line survey or to just send us a note about the things that we ought to be considering in our work. The presentations facilitated our discussion and debate and helped us to plow through the reams of data and to develop these recommendations.

I also do want to do a special shout-out to the staff who supported us in doing lots of number crunching and taking our deliberations and actually putting it into a coherent document. I’m sure that was no easy feat. So I, along, I think, with the committee members, look forward to seeing the legislation that’s proposed that comes out of these recommendations.

Motion approved.

Tabling Documents

Hon. M. de Jong: Pursuant to the Budget Transparency and Accountability Act, I have a couple of reports to table: the government strategic plan, as required by that act, and the annual report documents, which are presented in these three binders. The first binder contains the annual reports for the Office of the Premier and the 18 ministries, and the second and third binders contain annual reports for 26 Crown corporations.

Orders of the Day

Hon. M. de Jong: Continued committee stage debate on Bill 30.

[1445]

Committee of the Whole House

BILL 30 — LIQUEFIED NATURAL GAS
PROJECT AGREEMENTS ACT

(continued)

The House in Committee of the Whole (Section B) on Bill 30; D. Horne in the chair.

The committee met at 2:49 p.m.

On section 1 (continued).

B. Ralston: I wanted to resume where we left off on Thursday. I was asking a question about the termination clause in the agreement.

Before I do, there was an intervening public statement by Mr. Keane, who is the B.C. LNG alliance president — David Keane. I wanted to ask the minister some questions about his statement, because it seems topical and certainly related to the bill and to the agreement — just so that the Chair doesn’t give me a hard time.

[1450]

One of the justifications, the minister will recall, for lowering the LNG income tax take from up to 7 percent to 3.5 percent was that the bulk of the revenue would come from either royalties or corporate income tax. And we’ve dealt with that. Another significant source of revenue was projected to be provincial sales tax. Indeed, I can’t show this because that would be using a prop.

In the document that every Liberal MLA has referred to in their speeches there’s a projection of estimated provincial taxes and royalties for the Pacific NorthWest LNG project, based on the LNG price of Henry Hub plus $7. Henry Hub is the domestic American price, which, of course, fluctuates and is now well below the projection that is in place.

In the years 2017, ’18 and ’19, according to the graph, there’s an estimated close to $300 million in 2017, I would say, just judging roughly on the graph; $350 million in 2018; and in 2019, over $300 million, slightly less than 2018. Those are projections of a return to the province from the provincial sales tax. Certainly, that was factored into the projections that have been made and presented here, very solemnly and earnestly by B.C. Liberal members, about the government revenue that was going to be generated.

Now, what Mr. Keane is quoted as saying — and I’m quoting from Dirk Meissner’s story — is this. This is Mr. Keane: “There are things that can be done in terms of some of those taxes, like the PST” — and afterwards it says in brackets ‘provincial sales tax’,” — said Keane. “These projects will pay hundreds of millions of dollars in PST, which, typically, if you are classified as a manufacturing facility, you are not subject to.”

It goes on to say the “Finance Minister” — his name is there, and I can’t use that in the assembly here, unlike the British House of Commons —”firmly rejected Keane’s suggestion that the LNG industry should be considered for PST relief.”

Given that the ongoing negotiation with the government appears to be briefly abated and now resumed, are these the opening positions in a new negotiation about forgiving provincial sales tax for this facility?
[ Page 9103 ]

Hon. M. de Jong: I won’t endeavour to speak for what might be in the minds of someone else, but the answer from the perspective of the government, myself, is no. We’ve made our position clear in terms of the package that we believe meets the test for being balanced. The member has referred to some of the estimates that we’ve included in the package around the benefits that will accrue to British Columbians.

I will say this. Under the terms of the agreement that we are presenting — and I emphasize this for reasons that the member and the committee will, I think, understand — a future government down the road would not be precluded from either reducing the general provincial sales tax rate of general application or increasing it. But the government of British Columbia and I do not intend and are not prepared to provide specific provincial sales tax relief to the LNG sector.

B. Ralston: Mr. Keane also says on behalf of the industry, and I presume on behalf of Petronas and the Pacific NorthWest LNG consortium: “‘I think there’s more work to do in terms of making sure we are, in fact, globally competitive,’ said B.C. LNG Alliance president David Keane. ‘I think the government has more to do.’”

[1455]

Does the minister agree with Mr. Keane? He appears to be suggesting that the B.C. LNG tax regime is not globally competitive. Therefore, his representation on provincial sales tax. Does the minister agree with what Mr. Keane has said about it not being globally competitive and the province having more work to do?

Hon. M. de Jong: I would offer this caution. I can’t remember if this was in the article or if the hon. member was simply paraphrasing. The member, in his preface to his question, thought that Mr. Keane…. I think the words the member used were that he was “presumably speaking” for Pacific NorthWest. I would be cautious about making that assumption.

The intentions of Pacific NorthWest LNG and the views around competitiveness of Pacific NorthWest LNG are reflected in the signature they have applied to the agreement that is before the House. They have made a determination — admittedly one that applies to their project — along with their partners as reflected in the adhesion agreement.

It is possible, I suppose, that others engaged in this work, in exploring and in trying to advance projects, may have views about what they see as an advantageous taxation policy. I have come, over the years, to discover that when dealing with business people, they generally advocate for lower taxation rates. But the best indication of what is viewed as commercially viable, what is viewed as being competitive, is when the market speaks.

The agreement before the House in terms of the legislation and the agreement that we have been focusing upon, I would suggest, is a very specific and, happily, very positive indication of what a portion of the market deems competitive, that portion of the market that seeks to move forward the quickest.

B. Ralston: The minister did say that he couldn’t know what was in the mind of Mr. Keane. I note that the Pacific NorthWest LNG alliance is a member of the B.C. LNG alliance. He’s speaking for the members of that alliance. It’s not an organization with a lot of members. Certainly, Pacific NorthWest would be a key member of the alliance.

Is the minister, then, saying that, in his view, Mr. Keane is not speaking for Pacific NorthWest when he advocates for reduction in the future of provincial sales tax, a substantial revenue which looks to be — on the projections, admittedly hypothetical — in the neighbourhood of $1 billion over three years if the project were to go forward?

Hon. M. de Jong: I hope the member accepts that I am trying to be as precise, direct and forthcoming as ever. The point, I think, of the member’s submission is this: is the government contemplating changes — and by changes, I presume he means relief to the PST paid by the liquefied natural gas sector — of the sort referred to by Mr. Keane, and I said no.

Now, will those involved in LNG advance, in their own interests, the proposition or the proposal for taxation changes that favour the sector? I expect they will. I expect that that will not be limited to the PST.

[1500]

I expect that, in the same way that the forestry sector from time to time advances arguments for changes to taxation policy, a growing, vibrant, established LNG sector will do the same. What I have said a few moments ago and will say again, either in response to the member’s question or propositions and submissions and statements by others, is the government is not proposing any PST relief that would be specific to the LNG sector.

B. Ralston: Perhaps just for the record, the document that I’m quoting from is one that was provided at the briefing, the LNG in British Columbia project development agreement, July 6, 2015. The chart is a few slides in.

I’m wondering if the minister, through his staff, could simply total the projected amount of PST that would be paid, assuming the given rate and no tax reduction, between 2016 and 2019. My rough endeavour to sum it would be somewhere in the range of $800 million or $900 million. But that’s simply just projecting the numbers on the chart and not knowing the actual numbers. I wonder if that would be possible to do, just for the record.

Hon. M. de Jong: I apologize to the member. I was chatting while he was, to try and anticipate the question. But I think the member was asking for the data between years 2016 and 2019. If it’s agreeable to the member and
[ Page 9104 ]
the committee, we’ll tally that up and provide it in a few moments.

B. Ralston: Has the minister, in his discussions? I don’t know whether the minister met personally with Mr. Keane or not last week.

There’s nothing in the public report that says this, but has the minister received any word from Mr. Keane or, indeed, from the principals of the Pacific NorthWest LNG alliance that further progress — in other words, advancing the project — depends on serious consideration by the government of reduction of the PST and a commitment to do that prior to them making a decision to proceed further?

Hon. M. de Jong: I did not meet with Mr. Keane last week. I was fully occupied with the member and members of the committee. I’d have to check what formal submissions we have received of late from the association.

With respect to Pacific NorthWest, let me say this: the answer is no. That proponent’s, that agency’s, intentions are reflected in the commercial investment decision that they have taken, the signature that they have affixed to the agreement and the signatures affixed by all of the partners as represented in the adherence agreements. No, there has not been any further submission relating to the provincial sales tax.

B. Ralston: Have there been any discussions with Pacific NorthWest LNG about the application of provincial sales tax to items fabricated offshore?

As the minister will recall — and I think he and I engaged in a very extensive debate about the return to the provincial sales tax — when an item which is produced elsewhere comes into the province, there’s a process whereby which there’s to be a self-declaration of the value of that in an effort to assess provincial sales tax.

So has there been any effort to quantify in these numbers the degree to which the sales tax revenue would be dependent on fabrication done abroad — as Pacific NorthWest has very clearly said they intend to do because labour costs and materials costs are cheaper offshore in Korea or China or wherever they’re sourcing from — and the manner in which that would be assessed when it entered the province?

If there have been discussions or consideration of that, can the minister please give some details?

[1505]

Hon. M. de Jong: I will try and do this in some semblance of order. Hopefully, it’s helpful to the committee and the member.

There were in the development of the modelling, as the member has pointed out, some assumptions made based on some initial conversations with Pacific NorthWest LNG — the notion of developing modules and bringing them in and assembling those modules within British Columbia.

The member is, I think, from his own experience and our conversations earlier, aware and alive to the fact that modules that are brought into the province attract PST as it relates to all of the costs that the owner, the proponent, has experienced with respect to developing those modules, including labour costs.

I am advised that as they move forward, more specific plans will be made with respect to the development of the modules, and there will be business decisions made around that. There’s no question that in the initial stages of the project, the PST represents a singularly important source of revenue to the government.

B. Ralston: I’m wondering if the calculation of the total PST amount between 2016 and 2019 is now available. It would appear to be simply the sum of four totals that appear in a graph which most Liberal MLAs who have spoken on this have referred to. I can’t imagine it’s something very difficult to calculate.

[1510]

Hon. M. de Jong: Dealing with the LNG facility itself and for those first four years referred to in the graph, the forecast, the estimate for PST payable is $383 million.

B. Ralston: So $383 million. I’m looking at the graph. Forgive me if. I’m not allowed to exhibit the graph here, but I’m sure the minister has the graph. I’m just drawing a line across from $300 million. It looks as though it’s above $300 million in 2018. It’s above $300 million in 2019. In 2018, very close to $400 million, which looks to be about $700 million. In 2017 it appears to be just short of $300 million.

So is the minister saying that this graph is wrong? Or are there other sources of the PST that are included in these numbers? If so, just for the sake of clarity, I’d like to know the composition of that number.

This is something that’s been referred to in the Legislature and distributed widely to the media as a calculation of the government revenue that’s going to result from this project, so a fairly serious number, a fairly serious submission. I would think that some detail would be in order, in order that that be accurate.

Hon. M. de Jong: Before we get too worked up about discrepancies, may I alert the committee that the number I gave. I may have misunderstood the question, so it’s my fault. I restricted the calculation to the LNG facility. The graph includes upstream and midstream PST.

I take it, therefore, that what the member is looking for is a number for the first four years that includes the LNG facility, the midstream and the upstream. I’m quite happy to provide that number as well. I thought the member was specifically interested in the LNG facil-
[ Page 9105 ]
ity. I’ll take a moment and obtain the figure for all three parts of the project.

That number is $992 million.

B. Ralston: I heard the minister say it was $383 million for the liquefaction plant. Would the division, then? What would be the other headings of the upstream and the midstream? One would be the pipelines. The second would be. Midstream, I think, is a bit of insider jargon. Upstream would be the drilling activity and compression up in the northeast.

Could the minister give some more detail about those two numbers?

Hon. M. de Jong: I will lurch my way to a complete answer for the member.

[1515]

For the upstream for the period the member has inquired, the PST payable is estimated, forecast, to be $441 million. The midstream for the same period — the forecast, the estimate, is $168 million. For the facility itself, I’ve already indicated $383 million.

B. Ralston: Looking at the $383 million number, can the minister…? I don’t have a calculator here. I’m endeavouring to calculate. Assuming that that is roughly 7 percent of the total amount, can the minister give me the amount on which that $383 million would be paid? I’m relying on another MLA here, who is, I think, making the calculation. But if he doesn’t provide it in the next short while. He is claiming it’s deficient technology that’s holding him back.

Can the minister explain that? It would seem to me. The calculation of the total cost of the liquefaction facility was about $11.75 billion. So I’m wondering what portion of that it is anticipated the $383 million would relate to.

Hon. M. de Jong: As the member might imagine, lots of assumptions are built into these numbers. Probably the relevant one here is the notion that based on the degree of modularity that has been referred to, about half of the value of the liquefaction facility would attract PST. The estimate is about $5.5 billion.

Now, the actual amount, I suppose, can change if the degree of modularity changes. If there are cost overruns on the project, that, obviously, can impact the PST payable as well. That’s the rough calculation built around the assumption that I’ve indicated to the committee.

B. Ralston: That’s helpful.

Can the minister state? In those assumptions about the PST, what was the calculation of how much of the cost of the plant — that is, elements of the plant — would be produced offshore and barged to the site?

[1520]

Hon. M. de Jong: I’m not sure how helpful I’m going to be to the member on this one, just from revisiting the conversation here.

In terms of the projections and the calculations, the focus tended, I’m told and advised, to be on the cost associated with the facility. I don’t want to leave the impression with the member that we received a detailed breakdown on what degree of modularity the proponent in this case intends to proceed with.

The other thing I caution myself against, and I suppose it might be helpful for members of the committee. It’s easy to think of that term “modular construction” and think of anything from a series of mobile buildings that are stuck together or a space station and having these constructed in their entirety elsewhere and brought over, floated over, and simply stuck together. I’m told that’s not really an appropriate or applicable example.

Within the context of a fairly elaborate facility, modularization can take place in a variety of levels. The applicable taxation structure, though, is intended to capture the value and ensure that British Columbians receive the benefit of the applicable PST and, I think it’s also fair to say, to encourage, via the application of our PST laws, the maximum degree of work and construction activity in British Columbia.

I guess I should end where I began. I’m not, to my knowledge, aware that at any point we received confirmation from the proponent that X percent of this project would be the result of modularized construction. Instead, for the purpose of the graph that we have been dealing with, the focus was on the value and the overall cost associated with the construction of the facility and then the calculation of the tax — the various taxes, including the PST — that would be payable on that.

B. Ralston: I will conclude, and the minister can correct me if I’m wrong, that there is no firm calculation in those numbers of the amount of the project that will be constructed or assembled outside the country and brought to British Columbia and that which would be sourced within British Columbia. That’s perhaps because — I’m sure the minister will agree — there’s no specific requirement in this agreement that any degree of construction be sourced within British Columbia or take place within British Columbia, in terms of the elements that are necessary for construction.

Given that, would the minister not agree? I’m wondering, again, if this is included in the calculation of the tax payable. There is a difference in both, I suppose, enforcement and ultimately collecting PST when something is sold within the province and when something comes from outside the country and one relies upon, essentially, self-reporting — that’s the basis of the statute, subject to audit — of the value of the element brought in and the way and the labour component and the total cost.

[1525]

Certainly, one can well imagine that that really is consistent with the self-declaration system that we have here in many things, including income tax — but provincial sales tax in this case.

Is there any calculation of the uncertainty or percentage of likelihood of collecting those kinds of calculations in this number? Because it’s a very big number, and government members have been trumpeting this as revenue, potentially, to the province.

I’m just wondering about the degree of certainty that it’s proper to attribute to a calculation of tax that’s self-assessed on material manufactured or built or assembled outside the country and brought to here, because, obviously, the difficulties of audit in those cases are extreme.

Hon. M. de Jong: Two things. I’m not sure I agree entirely with the member’s proposition, but in any event I would offer this observation.

The applicable construct here is one that has guided the development of the forest sector, for example, for decades in terms of the importation of manufactured equipment. The greenhouse sector would be another example.

But maybe the point that I would make to the member as well…. In previous discussions in this forum he has correctly drawn attention to this point. We will watch very carefully to ensure that there is symmetry between what is reported with respect to the value of the products, such as they are, brought into the jurisdiction and that all-important capital account that the member knows has a great relevance and significance with respect to the payment of the LNG income tax.

For that purpose, of course, proponents will seek to include every possible qualified cost, and we will be very diligent, I can assure the member, to ensure that that figure matches what has been declared for other purposes.

B. Ralston: I want to, then, turn at this point back to where I ended last day, on the termination. I was making a point about the date of December 31, 2025, and the lack of any real legal pressure in the agreement upon the proponent between the date of project certainty, coming two years after the agreement was ratified. That time, a very lengthy period of time.

The minister said that if the company weren’t to proceed during that period of time. He said:

“But practically, after they have signed the contracts, after they have issued the notice to proceed to these suppliers and these construction agencies in a timely way. We have a role to play in that. We get to approve that. And then they say: ‘Well, no. We’ve changed our mind.’ Well, I wish I were a litigation lawyer, because it’s going to be happy days for a lot of people on the litigation side — not so happy days for others. If I’ve missed the point, forgive me.”

That’s a quote from the minister back on Thursday last in response to my question. The remedies in the agreement are very carefully defined. I had not noticed that there were any litigation remedies. If by that the minister meant that might trigger arbitration, that is something else, I suppose, analogous.

[1530]

Can the minister explain what he meant? I’m looking at section 7.1. There are very specific termination rights. They’re very narrow, I would submit, and very carefully defined, and the failure of the company to proceed to construction in 2022, say, or 2023 does not, as I read the agreement, trigger any remedy whatsoever.

I’m somewhat mystified by the suggestions made by the minister about relishing being a litigation lawyer and seeking some kind of legal remedies. Perhaps he can point me to the place in the agreement where there are remedies available to the government in that circumstance.

Hon. M. de Jong: I fear that in my commentary I was less clear than I should have been about the analysis that I was applying and where the litigation relevance would accrue from. It was not in the bilateral relationship at all between the Crown and the proponent.

At the time we were having this conversation, we were talking about the features of the agreement that obligate the proponent to present to the government, for review and acceptance, the contracts they have signed with suppliers and other third-party agencies. Those contracts, we will have to be satisfied, provide for the timely commencement — actual contracts that include executed agreements that provide for the commencement by third parties and, by implication, the expenditure of moneys by the proponent. The notice to proceed, procurement and construction contracts.

If I was unclear on this, I apologize. I was not in any way trying to point to litigation provisions within the agreement. What I was pointing to and highlighting was the practical reality. As per these sections, the proponent will have entered into these contracts with third parties. We will need to be satisfied of that. We have an entitlement to review and agree that that has taken place.

If, in the scenario that I believe the member was advancing last week, the proponent were to suddenly say, “Well, we’ve changed our minds,” the bonanza of litigation that I referred to would involve not necessarily the Crown with the proponent, but the proponent and these third parties, whom we would know have contractual relationships and contractual entitlements from the proponent. That is the nature of the litigation that I speculated about in the example given by the member. If I was less than clear, I apologize.

B. Ralston: Can the minister, though, look again to the termination clause, section 7.1, which is “Specific termination rights for the province,” and agree with me that the remedies available to the province in this agreement are not triggered — assuming project certainty has been passed and the province has certified that — until
[ Page 9107 ]
the proponent misses the commercial operations date of December 31, 2025?

[1535]

Then and only then under section 7.1, specific termination rights for the province, “The province may terminate this agreement by notice in writing to the proponent if: (a) project certainty date has not occurred by the long stop date,” which is the project certainty matter.

The one I’m concerned about is 7.1(b): “the proponent has not achieved the commercial operations date” by December 31, 2025, as extended pursuant to clause 5.3.”

Will the minister not agree — notwithstanding his suggestion that there may be litigation between the parties, the company and third parties — that the government doesn’t have a remedy of termination until that date of December 31, 2025? That seems pretty clear.

If nothing happens after achieving project certainty — notwithstanding the availability of all those contracts, as the minister has said, to feed the front-end engineering contract, all those conditions being satisfied and the province being satisfied of that — there is no remedy available to the province.

[1540]

Hon. M. de Jong: Referring to the termination provisions, I think we’re still discussing the scenario advanced by the member where project certainty matters have been achieved. I do need to highlight that that means we are, by definition, at a point where the decision has been taken to proceed. All of the contracts associated with construction that relate to billions upon billions of dollars have been executed with third parties and shown to the Crown in detail, including the construction schedule for commencement and proceeding with the project.

In the member’s example, something apparently happens at that point or somewhere along that path of construction — if I’ve got this wrong, the member can point that out to me — and Pacific NorthWest decides to down tools and say: “We are not proceeding.”

In addition to all of the other complications that arise for Pacific NorthWest in terms of third-party entitlements and third-party litigation, they have another reality that they need to contend with, and that is the benefits, to the extent that the member and others have described them as benefits, that flow from this agreement, flow with respect to the production of LNG. In the member’s scenario, that is not happening. So they suffer that additional negative consequence.

The provisions that the member has referred to in 7.1, I think, are relatively straightforward as they relate to the commercial operations date — that is a defined term — and what the province’s remedies are with respect to that and the date stipulated there.

B. Ralston: I’m not sure the minister answered my question. I’m going to go back to what he said on Thursday on the same topic. I think this was a clearer articulation of his position on page 42 of 45. I’m quoting the minister:

“Were there to be a delay or the company chose to delay through that construction window or have circumstances impose a delay upon them, the remedy available to the Crown is significant: the termination of the agreement, in which case all of those benefits that the member points out are contained within the agreement — none of which have flowed, none of which have bestowed any benefit — disappear.”

[1545]

Where is the authority beyond the termination date of December 31, 2025? Where is the authority on behalf of the province to seek the remedy that he says is available — that we’re not going to accept this and we have the authority to do that?

Hon. M. de Jong: I do want to make sure that I am, as best I can, trying to answer the member’s questions. Here is what I understood him to say about what I said, and we’ll see if somewhere through this I can get to the nub of what the member is saying.

On Thursday last and again today I talked about the benefits of the agreement, in the way that he and his colleagues have described, being associated with the production of liquefied natural gas — everything from the lower tax rate and the capital investment account.

Now, I think the member is saying: “Ah. Well, the only thing I can see in the agreement is this termination date of December 2025. How can the minister say that the other benefits associated with the agreement do not remain in effect?” I think that’s what his question is.

If it is, then my response to that is: to the extent that this agreement includes provisions that are beneficial to the proponent, the beneficial nature of those provisions flows when the LNG flows. The Crown hasn’t expended anything. It is the proponent who has expended through the construction phase. If I’m being unclear about the practical dimension to how the agreement is structured and where a proponent derives benefit, it is in that way.

In the scenario that I think the member is advancing, where construction. All of the contracts have been signed, some earth has been moved, and then suddenly there’s an intervening event and the proponent says, “Well, we’ve decided for whatever reason we’re not going to proceed.” First of all, they’ve got to deal with all of the complications associated with having signed contracts with third parties for billions and billions of dollars.

On top of that, any of the tax advantages, if you will, around the payment of the LNG income tax. First of all, that’s not even relevant until they’re producing liquefied natural gas. All of that is in limbo, and at the end of the day, the Crown maintains this date that is contained in the 7.1(b).

If I understand the member’s question, it is: how do I say that where there is delay, the benefits do not accrue to the proponent? It is a very practical application of the
[ Page 9108 ]
agreement that, without construction proceeding, without the completion of the facility, the certainty associated with this agreement is largely irrelevant.

B. Ralston: . The minister seems to assume from his perspective that the deal is so good that the company will not back out of it. What I am endeavouring to point out is this company and its partners operate globally. Petronas is active in 60 countries, a number of African countries, the Middle East, the Far East.

From their perspective, if market price doesn’t make the project economic at some point in the future, they may be willing to forgo the benefits of this agreement for better opportunities elsewhere.

[1550]

The whole assumption on which the minister is proceeding is that this deal is too good for the company to ever consider backing out of it. It is a great deal — there’s no doubt about that — from the company perspective. But given their success at driving a very hard bargain that’s very advantageous to the company here, that does not preclude them from making a calculation at some point in the future, in that long period that’s open to them, to go elsewhere.

I asked the minister last time why, in the contract, the commercial operations date of December 31, 2025, was agreed to. He didn’t answer. Can the minister explain why, in the process of negotiating this agreement, the proponent is not contractually obliged to begin and complete construction — given, say, the four-and-a-half-year window that the minister spoke of and having a commercial operations date of December 31, 2020? Why the additional time in that agreement? For what purpose is that in there?

My personal view and the view of people who have looked at this agreement on my behalf is that that affords Petronas and its partners considerably more flexibility and amounts to an option in which they’ve negotiated an agreement at a time when the province is very weak and prices are very low. Yet they’ll exercise that option later on if they see that prices don’t justify proceeding with further investment.

Yes, there may be some cost to making that decision. But in a company that’s the size and scale of Petronas — with the 28th, I think, verified, most oil and gas reserves, the 28th biggest oil and gas reserves of any oil and gas company in the world — that may be a risk that they are prepared to run in their own internal calculations about price.

The minister, I appreciate, understandably is a bit fixed on the perspective of the province, but I think that’s the very weakness of this deal. It does not reflect fairly a careful consideration of the reality of the commercial situation and the position of a company like Petronas and its global partners in this deal.

[1555]

Hon. M. de Jong: I think we’re having a legitimate disagreement about what the potential scenarios are. By the way, that’s why we have these discussions.

Let me say this to the member and the committee. Insofar as the member advances the proposition that the proponent — in this case, Pacific NorthWest LNG — may decide not to proceed even following passage of this legislation, if it were to pass, he is correct. That is not my wish. It is not the government’s wish. It doesn’t, in my view, represent the wishes of the proponent. But insofar as the member makes the statement and the proposition that the passage of this legislation does not guarantee the commencement of construction of an LNG facility by Pacific NorthWest LNG, he is correct.

Now, I’m not aware of any agreement — and the member and some of his colleagues have pointed to examples in Australia — where there has been a contractual obligation built into the agreement at this stage. If he has one, I’m happy to see it. But I will agree with the proposition that passage of the legislation does not automatically guarantee the commencement of construction.

But the member’s proposition is, I think, a slightly different one. It relates to the project certainty matters, provisions, and a scenario in which the agreement has been triggered by virtue of the work that the proponent is obliged to do, the contracts that they are obliged to enter, the liabilities that they are obliged to assume, the notices that they and their partners are obliged to give for international securities law purposes. Then they come along and say, for whatever reason: “Well, that’s fine, but we’re going to hold off.”

The member speculates about why they might want to do that. I am advised, having crafted the agreement and sought advice, that there simply isn’t an example of that scenario playing out. That doesn’t mean there aren’t examples of proponents choosing not to proceed with a particular project. That is certainly the case. But the member’s scenario is very different than that.

It is to have taken not just the commercial investment decision but the final investment decision, to have signed all of these contracts, to have issued the international securities notices, to have done all that work, fulfilled all of those obligations, engaged all of those liabilities, on the part of the proponent, and then to simply say: “Well, we’re going to wait.” It’s not a scenario that we are aware has developed elsewhere. And as I said, the prejudice in that case accrues entirely to the proponent, as opposed to the Crown or the people of B.C.

[1600]

B. Ralston: Given what the minister has said, would the minister say that that’s not a scenario that was contemplated as a possible outcome in the negotiations? Therefore the protection. That’s why we have a 2025 commencement of commercial operations, rather than one in 2020, for example?
[ Page 9109 ]

Hon. M. de Jong: Let me offer this to the member. If we accept that from the commencement of construction through the construction phase and into the commissioning phase, we could be looking at a four- or 4½-year period. If we accept, by the way, that insofar as the proponent in this case requires one other significant approval, which is the environmental assessment certificate from the federal government, it is possible — not our preference, I might add — from the vantage point of today to consider a scenario in which even a ready, willing and anxious proponent did not begin construction until 2016. So now we’re into a nine-year period.

Is it possible that an unanticipated event might intervene, perhaps — let us hope not — an environmental, and by that I mean weather-related, event? Surely, those things are possible.

[R. Chouhan in the chair.]

Maybe the member’s question and submission is that if we really wanted to pin this down, we would have calculated what the construction period is, speculated as to when the start date is in the next number of months and assumed that construction would proceed and would have gone from 2015. I think the member said 2020. Everything would have proceeded directly according to schedule.

Well, I suppose, someone else is investing the money here — billions of it. It strikes me that with a 4½-year construction window and quite possibly a nine-year window to complete that work within, providing a measure of contractual leeway — in this case, perhaps four years’ worth — is not horribly unreasonable. But the member may have a different take on it than I.

[1605]

B. Ralston: It seems like the minister is now agreeing that this start date of commercial operations — December 31, 2025 — was deliberately negotiated in order to accommodate the proponent. That doesn’t seem to be what was said previously, but if that’s a shift in position, then so be it.

What he said on Thursday was Pacific NorthWest. He had verbal assurance; they had a good relationship. To quote him, that desire is “as strong as ever” to proceed.

Given those assurances, given that relationship…. None of that, of course, is contractual. But upon project certainty being reached, why wouldn’t the company be obligated to begin construction? And if there were a difficulty in completing — of course, I’m not talking about…. There is a force majeure provision, section 5, which would protect the company if there were unforeseen circumstances, and an obligation to extend the agreement.

There’s also the independent right of the government to extend. But extending the agreement when the project is, say, 90 percent complete and they’re going to miss the final deadline is something different than simply exercising right of termination on December 31, 2025, when nothing has taken place other than achieving the project certainty horizon. It seems to me that was an option.

The minister now seems to be saying that this was a deliberate, a chosen, conscious strategy to afford the company more time to complete construction. I think his words were “reasonable.” Can the minister, then, just clarify his position and perhaps land on a definitive one?

Hon. M. de Jong: There’s a fundamental…. I’ve tried to be as comprehensive and forthcoming as I can, but there’s something very revealing about the member’s last question when he says nothing but project certainty. I don’t know if the member is deliberately choosing to diminish or minimize the significance of that event or doesn’t understand it. I don’t know which.

But to say “nothing,” to use that descriptive around a defined term in this agreement that in precedent after precedent after example demonstrates the seriousness of the intention to proceed, that triggers obligation after obligation with respect to publicly traded companies…. Again, I don’t know if I’ve done that poor a job communicating the significance of how that section of the agreement operates or whether the member doesn’t understand or doesn’t want to understand.

He can conjure up…. I don’t want to use that term. It is appropriate to explore how these provisions apply. It is appropriate for the member to explore how they might apply or they might be interpreted by others, including the proponent. But he does, in fairness…. He seems unwilling and seems intent upon ignoring the significance of the step that project certainty matters, represents. The member can say: “Oh well, big companies just walk away from….” Big companies with internationally obligated legal requirements to report contractual arrangements worth billions of dollars do not actually — in the way that the member has described, in a cavalier way — simply walk away from those contractual obligations and liabilities.

[1610]

I’m relatively certain nothing I’ve just said is convincing the member otherwise, but I do feel obliged to place on the record my observation that the member seems unwilling to recognize or accept that the scenario this conversation has revolved around.

It is not the ability of the proponent, from today forward, to delay commencing the project, because I have already acknowledged that that right exists. The scenario, though, that we are describing is a very different one, in which all of these other things have taken place and the member continues to stand and say: “Well, I don’t believe you. I don’t believe them. They’re just going to stop.”

I am, as best I can to the committee and to the member, suggesting that the mechanisms created in the agreement, coupled with all that we have learned from studying other aspects of how this industry has operated internationally,
[ Page 9110 ]
minimizes to the greatest extent possible the possibility of that scenario playing out.

B. Ralston: Well, I appreciate the minister pointing out to me my apparent lack of understanding of the agreement. I don’t think that’s an opinion that’s justified. I have read the provisions of what is required to achieve project certainty. Those are set forward in the agreement. I’ve referred to them repeatedly. I’m well aware of them.

My point is simply a legal one — that notwithstanding achieving that particular milestone, there is flexibility in the contract to the proponent to do something else other than commence the project. He may not like that. He may choose to disparage my understanding of the terms. That’s totally within his purview. I get that that happens in debate sometimes.

But that’s the scenario that I’m endeavouring to draw to the minister’s attention. Nothing that I’ve heard from him causes me to change my opinion in that respect.

One thing the minister said on Thursday — which he has not said today, so I’ll draw it to his attention — is one of the reasons that, in his view, the matter would go forward. He said, on page 36:

“The member, I think earlier in his submission, made observations around pricing — pricing assumptions, pricing models. I would say two things in response.

“One, in assessing the economics of this project and perhaps future projects, one needs to be a bit cautious insofar as we are led to believe, but are not privy to all of the details, that supply contracts have been signed between this agency and others. Those agreements may well involve prices other than what is the market price today. So one has to be cautious about making assumptions for the purpose of calculating.”

What specific knowledge does the minister have about those supply contracts? The language there is fairly elliptical — that we are “led to believe, but are not privy to all the details.” Have those contracts been produced? Has the minister seen them, or are they confidential commercial information of the company and have not been provided? Are they the subject of verbal assurances by the company during the course of negotiations?

Given the statement that he’s made in the House, on what basis does he make that statement?

[1615]

Hon. M. de Jong: The first thing I’m inclined to do is express sympathy to the member for having to read my comments of last Thursday over the weekend. But they are, undoubtedly, helpful in terms of, to some degree, pursuing our conversation today.

The short answer to the member’s question. I was not intending to be elliptical or otherwise vague. In the case of Pacific NorthWest, they have alerted us to the fact that they have negotiated and executed supply agreements with purchasers for the liquefied natural gas they intend to produce. They have not shared those agreements or the terms of those agreements with us, nor have we seen them otherwise.

B. Ralston: Well, I suppose the basic question would be: have they said who they might be with, any of the other counterparties in those agreements? Have they volunteered at least that much detail? Or is it simply an assertion that we’ve signed agreements with unknown counterparties at prices and for terms that we choose for commercial reasons not to disclose?

Hon. M. de Jong: I don’t have specific information for the member or the committee, which isn’t to say that perhaps during the course of a conversation, the representatives from the proponent, Pacific NorthWest, may not have alluded to a prospective customer. But I don’t have definitive information on that and may well, if I did, be precluded from sharing that kind of proprietary information.

B. Ralston: In his defence of his interpretation of the agreement, the minister has made reference to public companies. I believe Indian Oil, Sinopec and JAPEX all have an element of public ownership. Brunei oil does not. The principle, Petronas, as far as I’m aware, does not either.

Indeed, in a study by an agency, Research for Social Advancement, which is a researcher in Malaysia funded by USAID, an American development agency — the United States Agency for International Development, just so that the minister will have some sense that this is at least, arguably, a credible organization.

The view of the disclosure and transparency of Petronas’s financials is rather weak. In the 2013 resource governance index by the Revenue Watch Institute Malaysia received a weak score of 46, below the global average of 100, placing it 34th out of 58 countries, assessed on the quality of their governance in oil and gas and the mining industry.

[1620]

There are a number of other criteria. They say:

“There are other clear weaknesses. These include parliament not having the authority to ratify contracts, as well as little to no operational information on quasi-fiscal activities, transfers to state governments or joint ventures being publicly disclosed.

“Revenue transparency is essential for responsible resource development and ensures public accountability by government and the corporations involved in the extractive industry.

“In the case of Petronas, while information about its overseas operations is available, it is limited in scope, forreporting of country-specific payments made to host countries is not publicly accessible, and Petronas does not disclose country-by-country figures in its annual reports.”

Part of the argument I think the minister was making — he referred to this, and perhaps I’ll give him this opportunity to explain it — was that because these were publicly traded companies, therefore, there were additional obligations upon them for disclosure. That does not appear to apply, according to my research, to the principal, the majority partner, in this particular operation.

To the extent that that’s true, does the minister agree
[ Page 9111 ]
that that diminishes his argument about the obligations expected of public companies?

Hon. M. de Jong: I’m not sure I agree with the proposition advanced by the member, and here’s why.

Because, whilst I do agree with his observation that the disclosure requirements governing the various agencies may differ depending on whether or not they are publicly traded — as, for example, JAPEX is listed on the Japanese exchange — the manner in which these provisions apply create a circumstance and a situation in which where one of the participants is obliged to disclose the information, it is information relevant to the entire entity.

So if I can use this term, it only takes one. There are, in fact, I think, more than one, but it only does take one to trigger the obligation to provide the window that securities law provides into these endeavours.

The second thing I would say is that Pacific NorthWest LNG, of course, will be operating pursuant and subject to the laws and requirements of the province of British Columbia. Hopefully, that is abundantly clear and not a statement that the member takes issue with.

[1625]

To come back to Petronas, which the member focused upon in his question, this is not their first foray into the British Columbia jurisdiction, the British Columbia economy. Of course, they were, I think, the sole participant, sole purchaser, in a multi-billion-dollar transaction several years ago relating to upstream gas rights and drilling rights. They are today a major investor and participant. Actually, to the extent that the member is troubled by that, I imagine I’ll hear now or at some point.

B. Ralston: Well, it would be wrong for the minister — if that’s what he was trying to do — to attribute to me some unspoken motive of uncertainty.

Interjection.

B. Ralston: It would be wrong for the minister to attribute, if that’s what he was doing, some oblique motive to the issue of Progress Energy and the purchase of Progress Energy. That was reviewed federally — a bit controversial because of the foreign ownership element. I think initially the federal government resisted the purchase but ultimately agreed to give it the requisite approval. I’m not quite sure what the motive is in doing that, in suggesting some oblique motive to me, but I’m not troubled by that.

Certainly, that’s a decision that the company made. They’re continuing to operate Progress Energy. Indeed, Mr. Culbert, who’s the CEO of Pacific NorthWest, works in Vancouver for Pacific NorthWest on Monday, Tuesday and Wednesday and on Thursday and Friday works for Progress Energy in Calgary. They work very closely together. I think the minister is aware of that, so I’m not quite sure what was being driven at there.

My point, I think, was that the parent company — and that’s what this research paper says — is headquartered in Kuala Lumpur. There were some comments in that paper about low levels of transparency and accountability there for the company — that is, the parent company. That may have some impact on an ability to find out information about the activities of the company here in British Columbia. That was my question.

With that, I would like to move to another topic, if I might. But perhaps, given the hour, the Chair would entertain a short recess before I embark on a new topic.

The committee recessed from 4:28 p.m. to 4:44 p.m.

[R. Chouhan in the chair.]

B. Ralston: I wanted to turn back to some questions — because we’re still on section 1 — on the incentive program, which is a defined term in section 1. I had some further questions based on that.

The minister may recall that the Ministry of Environment put together a briefing document for presentation on October 20, 2014, on the Greenhouse Gas Industrial Reporting and Control Act and set out how greenhouse gas emissions would be dealt with in the schedule at the end of the act.

[1645]

Now, there was mention from Mr. Horne. I don’t think the minister. I didn’t check this specifically over the weekend, but as I recall, the minister didn’t disagree with Mr. Horne’s calculation about the $411 million that would be paid over the life of the agreement. That was based on a greenhouse gas intensity of 0.22, which apparently is from a KPMG report Pacific NorthWest LNG commissioned. The environmental assessment for Pacific NorthWest cited a greenhouse gas intensity of 0.27.

But I am told that, for example, LNG Canada. A similar report was done for their environmental assessment certification application, and they indicated they would get to an intensity of 0.15. It is understood that that included their entrained CO₂ emissions.

Given that this is, as the minister will know, another major proponent, LNG Canada. The principal is Shell, but there are, as in Pacific NorthWest, other subsidiary partners that have been brought in — most notably, I think, Kogas, Korean Gas.

Can the minister explain why, given the apparent commitment of LNG Canada to achieve a 0.15 intensity, it was felt necessary to create an incentive program which will effectively pay Pacific NorthWest LNG for being at a higher intensity level?

[1650]

Hon. M. de Jong: I’m just reviewing a bunch of the numbers. If I understand the member’s question correctly, and he can correct me if not, the essence of that
[ Page 9112 ]
question is why the Crown has agreed, for the purposes of this agreement, to an incentive program to incent a certain type of behaviour and pay to incent that kind of behaviour where another proponent is pledging to replicate or, indeed, exceed the targets contained in the incentive program. Maybe I’ll stop there. Have I correctly? The member is indicating that that is so.

The first thing I would point out — and I think the member and, hopefully, members of the committee know this — is each proponent is confronted by different circumstances as it relates to the availability of an energy supply, the availability of electricity, of the transmission capacity to carry that. From that point of view, the two projects are very different.

In a general way, what I can say is that in achieving their targets, their world standard–setting targets, the other agency that the member referred to would also qualify. The incentive program is intended to be one of general application. Insofar as it is relevant to the calculations and the business case that Pacific NorthWest has conducted and factored into their analysis, similarly it would be relevant to other proponents who are conducting their analysis and working on their business case.

B. Ralston: Reading from the LNG Canada export terminal environmental assessment certification application, they say the following. “The project is expected to reach an emission intensity of 0.15 tonne CO₂ per tonne of LNG produced, including domestic shipping activities, which is low compared with other global LNG facilities.” I don’t think there’s any doubt. I recite that just so that there’s no doubt of the source of what I’m saying. That’s based on their filing.

The question arises, I suppose, for the public. Here’s a corporation that says they can achieve a target. I’m wondering: why is any incentive program — that is, payments to the company for doing that — necessary? If they can achieve it, the regulation is put in place. They’re going to meet the target. Why should they be paid for meeting a regulation which they say they can meet?

[1655]

Hon. M. de Jong: Maybe the way I’ll endeavour to answer the question in the first instance is to describe the choices or try to summarize the choices that I think were available to government as we embarked upon these discussions in the lead-up to the development of the incentive program.

Conceptually, the choices, it seems to me, that were available to the government were to follow what some jurisdictions have done and be silent on the issue, which would have simply involved measuring emissions and applying the carbon tax. That was one choice.

A second choice was to look at what the prevailing world standard was, the world average, and set the benchmark at that level and more or less leave it at that and collect the carbon tax on the resulting emissions.

A third option was to go beyond that and set more aggressive standards — if I can use that term, aggressive standards — and recognize that in challenging proponents to achieve those standards, there are additional costs involved. Are we prepared to create a program that (a) incents that aggressive approach to minimizing emissions and (b) take the count and offsets, if I can use that term in a different way, the additional costs associated with achieving those higher standards?

We have clearly, through the incentive program, opted for that third approach, that third choice.

Different proponents, if we look ahead to a day when there is more than one LNG operator operating in the jurisdiction, may well approach this differently and, depending on what standard they achieve, may be obliged to purchase offsets, which represents an additional cost to them. In other circumstances an operator, having reduced their emissions to a certain level, may be in a position to sell offsets and derive an additional benefit from that.

Those are the scenarios. The member’s question, I think, was: why do anything at all? I think the short answer was to create an environment that incented and encouraged agencies to reduce, in the most aggressive way possible, the resulting emissions but also to realistically recognize that there is a cost associated with reducing those emissions.

B. Ralston: Well, my question wasn’t why do anything. That was not my question. My question was: why not simply set a regulation at the level that is proposed to be set but not pay incentives — that is, money to the companies — for meeting that target? That was my question, not the one that the minister rephrased it to be.

[1700]

In the LNG Canada submission they do talk about individual variability between various sites, and they talk about how emissions, to some extent, to a minor extent, are site-specific.

Can the minister explain what the process was in terms of receiving industry estimates of the cost of achieving the actual emissions in regard to this particular project? How were those costs communicated to the government? Through to the proposed regulator? Or given that they form one of the four areas in which there is an indemnity to be paid should there be a change in the liquefaction-specific targets.

Can the minister explain how that came about in the negotiations?

[1705]

Hon. M. de Jong: There was, I am advised, a conversation around the costs associated with achieving certain benchmarks. I think it’s also fair to alert the committee to the fact that some of that would revolve around the
[ Page 9113 ]
available technology. It would revolve around the requirements that the Crown imposed in terms of the use of electricity versus other energy sources. And in developing the model, of course, the objective was to ensure that all operators were operating below a certain level and incenting them to move to a particular standard through the use of technology, through the use of offsets.

Some of the conversation, I am again advised, would have focused, not surprisingly for the member, on the cost difference between the purchase of offsets versus the installation of technology and the cost associated with that. Those are all factors and issues that were discussed and did come up in the conversation with Pacific NorthWest.

Just for the benefit of the committee. To be fair to the member, he is not asking questions about other proponents, although he has certainly referenced some documents. But my comments, just to be clear for this exchange, relate to the conversations that took place with this particular proponent.

B. Ralston: Okay. If I might continue, then. I want to pursue this topic.

In the LNG Canada filing — just by way of comparison with the project which we’re considering, but I think it’s a fair comparison — LNG Canada talks about best achievable technology. I’m quoting from their submission, their environmental assessment certificate application:

“LNG Canada completed a detailed internal analysis to identify the best solutions using criteria such as effect on schedule, capital and operating costs, operational reliability, expected equipment utilizationeffect on GHG emissions and fuel efficiency. That analysis involved identifying potential technologies and eliminating those not technically feasible, ranking those that were reliable and economically viable based on GHG emission reduction potential and then choosing the BAT.”

It stands for best achievable technologies.

Then they go on to describe what they’ve selected here:

“The selected BAT” — best achievable technology — “scenario is predicated to achieve an emission intensity of 0.15 tonnes of CO₂ per tonne of LNG produced, which is the lowest GHG intensity of all LNG facilities in the world due to its efficient aeroderivative turbine technology, combined with the selected dual-mixed refrigerant technology, waste heat integration and the use of the B.C. Hydro grid for auxiliary power. In general, the project also benefits from the efficient liquefaction processes due to its location in the colder average ambient temperature and its access to cold cooling water from the Kitimat River.

“Sequestration of CO₂ is not considered feasible because the amount of CO₂ which could most easily be captured — i.e., CO₂ vent gas — is expected to be low, and the distance and cost of transporting thisto an effective sequestration zone is high.”

[1710]

That’s their assessment of how they can achieve that. They’re estimating a 0.15 tonne intensity. So my question is: if they can achieve that, based on their analysis — and there is a slight site-specific element to that, I concede — why, then, is it necessary to set up an incentive program that pays this project to achieve a higher level of intensity?

Hon. M. de Jong: Again, if I understand the question, it is: in a circumstance where one agency, one proponent, is saying they can achieve a certain emissions standard, why is the government purporting, through this agreement, to provide a second proponent with a…? Why is it necessary at all to provide an incentive to that second proponent when the first one says they can achieve an even higher standard without an incentive?

If that’s the question, the thing I’d want to point out is that in developing their modelling, my understanding is that the first proponent is assuming that there is an incentive program to which they have access. In fact, by driving their emissions lower, under the way in which the incentive program operates, they would receive a greater amount or be entitled to a larger incentive payment than the Pacific NorthWest group that we’re talking about.

In both cases, I would say, the member or the committee has to take into account that proponents have taken the existence of the incentive program into account and are basing their business cases, their analyses, their cost analyses on that fact. And the member has fairly pointed out that there is an element of site specificity that also impacts on the calculation of costs and that relates to energy supply, energy transition. So those would be the two factors that weigh upon the calculation, I would suggest.

B. Ralston: According to the briefing note or slides that were presented on October 20, 2014, if a facility is below the benchmark, it will receive a performance credit that can be sold or banked.

[1715]

So in the case of…. Given that they are proposing 0.15 as opposed to 0.22 for Pacific NorthWest, Pacific NorthWest for not achieving the target will be paid an incentive, and LNG Canada for achieving the target will be paid an incentive as well.

I’m just struggling. I’m sure members of the public would wonder why if you miss the target, you get paid by government, and if you achieve the target, you get paid by the government.

Can the minister quantify, in the manner that Mr. Horne did for LNG Canada, the $411 million payments over 25 years to Pacific NorthWest? I haven’t heard him dispute that, but if he wants to, this is probably the point to do that. Can the minister calculate what the payment to LNG Canada would be for achieving 0.15 intensity?

Hon. M. de Jong: I’m a bit confused. The member referred to the $411 million figure with respect to LNG Canada. I think what he means is a figure he cited last week with respect to Pacific NorthWest energy, and I’m happy to try and deal with that.

What I’m not in a position to do, nor intend to do, is delve into an entirely separate project and endeavour to calculate the costs associated with that, and I don’t have that material, in any event.
[ Page 9114 ]

But if I’m correct, maybe the member could indicate the number and put the question to me about the figure from last week and the project.

B. Ralston: The figure is Mr. Horne’s, not mine. That’s in his briefing note that’s published. I’m sure that’s available to the minister through his very capable staff who are there to assist him in these matters.

That’s his calculation based on 0.22, based on the $25 per tonne of CO₂. That’s his calculation over the 25-year life of the agreement. I think this would be the point at which to say he agrees or disagrees with Mr. Horne’s calculation.

Hon. M. de Jong: Thanks to the member for the clarification.

Here’s the modelling that has been done. I think it is a variation on the numbers that the member has been quoting from Mr. Horne. Pacific NorthWest LNG in the PDA defines its facility as having a capacity of approximately 12 million tonnes of LNG annually. The report that I think the member is referring to included an analysis which estimated a total emissions intensity of 0.22 carbon dioxide–equivalent tonnes per tonne of LNG.

I think that the emissions intensity estimate was based on the PNW Summary: Independent Review of Power Options Evaluation and Selection Process, conducted by KPMG. So I think we’re in the right area there.

[1720]

Based on those figures and a $25-per-tonne compliance-cost ceiling, Pacific NorthWest LNG’s gross annual compliance costs equate to roughly $18 million, with a total gross compliance cost over 25 years of $450 million. With an emission intensity of 0.22 tonnes of CO₂ per tonne of LNG, Pacific NorthWest LNG would receive an environmental incentive payment of approximately just over $10 million per year, which over that 25-year period would work out to just over $250 million.

B. Ralston: They’re receiving that payment because at 0.22 they’re below the upper threshold of 0.25. Is that why?

Hon. M. de Jong: The eligibility threshold, I am reminded, is 0.23.

B. Ralston: If I might then continue. In the environmental incentive program. We touched upon this on Thursday. I believe the member for Oak Bay–Gordon Head did mention this when he talked about entrained CO₂ emissions. There is a definition in the environmental incentive program material.

Just for the sake of reference here, for those who may want to follow this later on in written form, it means: “Total emissions of carbon dioxide removed from transmission of pipeline-quality natural gas by an LNG operation or a facility purifying transmission pipeline-quality natural gas for use by LNG operations, excluding any emissions of such greenhouse gases that are not attributable to the LNG operation under GGIRCA during a calendar year.” That’s the greenhouse gas act.

The question that I have is: when was the decision made to exclude entrained CO₂ — and parenthetically, emergency emissions, but my focus is on entrained CO₂ — from the incentive calculation? Apparently, this was not mentioned as being excluded in the original documentation for the incentive program when it was announced last fall.

[1725]

Hon. M. de Jong: I guess the first point I should make — if I didn’t make it last week on the record, although perhaps I did — is that for the purpose of calculating achievement of and compliance with the benchmark and for the purpose of the obligation that accrues to purchase benchmarks, entrained CO₂ emissions are not excluded. I think that I need to say that and to emphasize that point.

Exclusively for the purpose, though, of calculating the incentive program entitlements, as the conversation. I think the member’s question was when. I’m not sure I can point to a single moment in time, as the conversation evolved, around the makeup of the incentive program.

I think the submissions were made, and there was an exchange of information around the practicality of including that for the purpose of calculating the incentive. Pointedly, with respect to achieving the benchmarks and the need to acquire offsets, there is no exclusion.

B. Ralston: What I’m advised is that, based on the environmental assessment documents for Pacific NorthWest LNG. The question is this. What is the anticipated GHG intensity for Pacific NorthWest LNG, and what portion of this would be entrained CO₂? It’s obviously difficult to estimate emergency emissions, but the government should have good estimates for anticipated GHG density for Pacific NorthWest and the portion that would be entrained CO₂.

[1730]

Hon. M. de Jong: I think the member said this, but if he didn’t, I’ll repeat what I said earlier, that this is relevant from the point of view of calculating the incentive as opposed to meeting the benchmark for the purchase of offsets.

I’m advised that the data collected by the Environment Ministry — and I think the member is looking for a number, so I’ll try to give him one — could be up to 2 percent.

The rationale that flows from not including it for the purpose of the incentive relates to the argument that there is a greatly diminished element of control that the operator of the LNG facility exercises over the amount of CO₂ that might be present in the pipeline. We want them to assume absolute control and responsibility for the CO₂
[ Page 9115 ]
emissions that derive from the liquefaction activity. That argument was ultimately persuasive, as revealed in the methodology included in the incentive program.

B. Ralston: I’m going to have to ask a question of clarification. Is the minister saying that because the release of entrained CO₂ is under the control of the operator at the plant, that is the reason for excluding it from the calculation to qualify for the incentive program? Is that what is being said?

Hon. M. de Jong: Hopefully, I’m getting to the point here by observing that the rationale behind the decision with respect to the incentive program relates to the relevance of the release of entrained emissions for the purpose of calculating the incentive program and the technology — the degree to which the operator of the liquefaction facility has control and responsibility for the implementation and application of technology or the purchasing of offsets to control that.

That is different, I am reminded, than the analysis that takes place or the impact of the entrained emissions — although, again, it certainly is relevant from the point of view of calculating the benchmark and the obligation around offsets.

B. Ralston: Again, probably another question of clarification. In the definition of entrained CO₂. I’m looking back at the definition in the environmental incentive program notes. Well, actually, it’s not the notes; it’s the program itself. It’s a schedule to the project development agreement. It means the total emissions of carbon dioxide removed from transmission of pipeline-quality natural gas by an LNG operation.

[1735]

The removal is — at least that definition suggests — deliberate and a choice rather than by accidental escapement. I suppose that would be the alternative. As a choice, it’s released. Then why would it be excluded from the calculation if it’s a choice to release it?

[D. Horne in the chair.]

Hon. M. de Jong: Hopefully, I’m getting to the essence of the member’s question. I will candidly alert, if it hasn’t become painfully obvious to the member and the committee, that I am relying, in large measure, to some very specific technical advice.

The point that I am advised upon, though. It’s not really a choice, as it relates to the operator and the need to purge from the supply of gas the CO₂ and the other — I guess the appropriate term in this case — contaminants.

It’s not merely a case of taking the gas as it arrives, freezing it and away we go. The process requires the purging of the CO₂ and the other contaminants. So it’s not a choice, per se, for the operator, which I think distinguishes it and distinguished it in the minds of the Environment Ministry from some of the other aspects of this process that are influenced by the employment of certain technologies.

B. Ralston: I understand the requirement to, at least notionally, clean the gas in order that it be of a sufficient quality to enter the liquefaction process. Is the concern or the reason for excluding it that otherwise one would then incent the release of entrained CO₂ somewhere down the pipeline? Is that the concern — that the idea is to at least have it focused in one location and attempt to mitigate that as much as possible at the plant site? Is that the reason for taking it out of the calculation?

[1740]

Hon. M. de Jong: Again, I think the member actually is correct here, but I will repeat my understanding of what I thought he said in the event that I was wrong in assuming that he was right.

I think the member’s question was: was this decision influenced by the desire to have this occur at the facility, as opposed to creating a circumstance where there might be an incentive to push that process — the release of CO₂ and other contaminants — further up the line or further upstream?

Insofar as that is his question and his query, I’m advised the answer is yes. There was a desire to ensure that this occurred in a place where you could measure those and where they would be calculated and taken into account around the achievement of the overall benchmark and the need to purchase offsets.

B. Ralston: There appears to be, according to the information I received, a disparity between the Pacific NorthWest LNG EA numbers and the KPMG numbers of the entrained emissions. If the EA numbers are correct, Pacific NorthWest wouldn’t qualify for the incentive program with or without entrained CO₂ excluded. If the KPMG numbers are correct, they would qualify for the incentive either way.

Merely to emphasize the point, how important is the exclusion of entrained CO₂ helping Pacific NorthWest LNG qualify for the incentive?

[1745]

Hon. M. de Jong: A couple of points I hope it’s relevant to make in response to the member’s query.

One, we have been dealing with estimates, forecasts, analysis, all of which are important. But the point I need to emphasize for the purpose of the committee is that when the time comes, to measure and determine whether minimum benchmarks have been achieved and when the time comes to measure the application of the incentive program itself in terms of entitlements, none of that will be based on estimates. That will be based on actual
[ Page 9116 ]
measurements, an actual assessment of what the actual emissions are. That is the first point.

Secondly, I have a number as it relates to what the potential impact would be, 0.16, so it’s a very small number. I’d be obliged to concede, if you were hovering right around the threshold, that that might be relevant. Again, there would be no speculation there. It would be based on actual measurements.

Thirdly, I am reminded, as well, that although we are quite properly having this conversation in the context of the agreement that is before us, the incentive program was not designed specifically for Pacific NorthWest LNG or any single proponent. It is designed to have application and to incent a certain type of behaviour amongst all those who choose to invest in liquefaction activities in B.C.

B. Ralston: In the incentive program, there’s a definition which is entitled “average compliance unit costs.” It is rather complicated. By compliance units, is offsets what is meant there? Is that a different term for offsets, or is this a totally different process? I must confess to not being familiar with the term “compliance unit.”

[1750]

Hon. M. de Jong: I’ll start here, and hopefully, this will be helpful to the member and the committee. So a couple of options available in terms of achieving compliance and purchasing compliance, if that’s an appropriate phrase for me to use.

One is offsets in the conventional way that we have come to know — the purchase of offsets within our jurisdiction. The other is a contribution to the technology fund that is contemplated within the program. Then a third way is something of a variation on the original offset option, which is the purchase of a unit from another LNG operator who has achieved emission standards below the 0.16 level.

Costing that through an averaging…. Each one of those may come in at a separate cost per unit. The term is intended to speak to a process by which the average cost is calculated as between those options.

B. Ralston: I think that’s helpful. Over the page, where it talks about program operation — this is in the last page: “To qualify for the incentive, operators of LNG operations will need to show receipts indicating the purchase price paid by the operator for the compliance units that have been applied by the operator for the purpose of meeting the LNG benchmark in a calendar year and any additional information necessary for determining eligibility or amount of the incentive.”

That would apply to — I think in the technology fund that would be a price set by the Ministry of Environment, as I understand it — the purchase of an LNG unit or a unit from another operator, presumably a market price bargained between the two of them, and an offset. Given the range of offsets available, that would be some form of a market price, I’m assuming, as well. Those would have to be documented in order to enter the process of compliance. Is that what is meant by this?

[1755]

Hon. M. de Jong: If I’ve misunderstood the question, the member will tell me. I’ve taken his question to mean: mechanically, how is this going to operate?

The best way I can summarize it is. At the time stipulated — I believe it’s May 31 through June and July — the documentation will flow from the operator in terms of the verifiable amounts of emissions — verified emissions and the LNG produced. Those calculations will occur.

With respect to qualifying for the incentive, it’s relatively basic around establishing, through the production of receipts, the purchase that has taken place, the purchase price paid for the compliance units that have been utilized in order to meet the benchmark. LNG-produced emissions receipts showing the cost associated with compliance — all of that material must be submitted and verified before any incentive payment can flow to the applicant.

B. Ralston: The incentive payments that flow to an operator — how would they be treated for income tax purposes? Would they be included as part of the corporate income of the LNG facility, or is there some other characterization? I’m just wondering whether they will be eligible for taxation as income, as part of the income stream of the operation?

Hon. M. de Jong: The scenario I’ve put to the very able folks that help is that I’m an operator. The calculations have occurred following the end of May, and I have qualified for and received an incentive payment under the program. For the sake of this conversation, it’s $10 million. Does that qualify as taxable income for the purpose of the LNG income tax?

[1800]

We believe it does. We’re just verifying now. I think we canvassed this a little bit, the member and I, when we debated the LNG legislation. We’ll verify. Similarly, we believe — and we are verifying — that it would qualify as income for corporate income tax purposes as well. We’re just verifying that.

B. Ralston: I’ll look for further clarification that may come perhaps tomorrow or, dare I say it, Thursday — no, Wednesday, if we are here on Wednesday. I don’t want to give anyone heart palpitations at this point.

I’m looking at the definition of “LNG tax change.” I think that is fairly straightforward, but can the minister explain what the purpose is, or an explanation, of subsection (b) that qualifies it to: “if the tax applies only in relation to liquefaction activities”? Can the minister explain the purpose for that qualification of that subordinate clause as opposed to the major definition that begins “an enactment”?
[ Page 9117 ]

Hon. M. de Jong: I want to confirm. Is the member referring to “LNG tax change” in the definitions contained within the act?

Interjection.

Hon. M. de Jong: Okay, thank you.

If I’ve missed the point of the question, I know the member will tell me. The inclusion within sub (b) of the definition is intended to make clear that an enactment that creates a capital tax or an income tax or any other tax on profit that applies generally is not precluded or does not trigger any of the indemnification provisions. One that focuses on liquefaction activity for the purpose of this act and the agreement that flows from it certainly would.

[1805]

Now, I’m going to use an example, and I’m not intending this to be as mischievous as the member might think. I, too, I suppose, can occasionally use examples. There was a time when a government chose to introduce a capital tax. I think you would make the argument that it was a capital tax of general application. Now, as unwise as I thought and think that would be, I think it’s fair to say that nothing about that would trigger indemnification provisions. A similar type of provision that focused on income or profits derived from liquefaction activities probably would trigger the indemnification provisions.

I hope that helps in terms of the member’s question.

Section 1 approved.

On section 2.

B. Ralston: This is the point at which, although reference has been made to the agreement, the minister had suggested that we begin some questions about the agreement itself. Fortunately, there is a definitions section, which will require some questions. I may not do these strictly in order within the definitions section itself, but I’ll attempt to deal with those all together in the definitions section in the agreement.

There is a definition of what’s called confidential information, and that’s related to a section about disclosure of confidential information later in the agreement. Section 6.4 permits disclosure of confidential information — and I’m looking particularly at (a): “to the extent required to comply with a request by the Legislative Assembly or the federal government or a committee of either.” And it goes on to put some qualifications on how that confidential information might be disclosed.

Can the minister? It says: “Any information disclosed by a party to the other party, whether in writing or in any other tangible form or orally or in any other tangible form.” For example, given that’s a very expansive definition of information, including oral representations or, it says, “in any other intangible form,” which really, is fairly wide open, is it intended that in certain circumstances confidential information, verbal representations during the course of, say, negotiations, could be disclosed in accordance with section 6.4?

I’m thinking particularly of. In some parts of our debate here we’ve heard some discussion or reference to oral representations by, for example, the proponent. That would certainly fall under the rubric of confidential, I would think, for many purposes. In the minister’s view, does that definition then trigger, possibly? I’m not asking for a definitive answer, but does that engage section 6.4 — disclosure “to comply with a request by the Legislative Assembly”?

[1810]

Hon. M. de Jong: I’m always a little bit hesitant around abstract questions, but the member has prefaced by saying he’s not looking for a definitive answer.

Are there circumstances in which, for example, what would otherwise be confidential information might be captured by 6.4 and — subject to (e), (f), (g) — be released to a member of the Legislative Assembly? I think yes. I think that this section contemplates that possibility. I can’t think of an example off the top of my head. But if we spent long enough, I might be able to.

B. Ralston: I thank the minister for that answer.

What is envisaged by “in any other tangible form”? That’s very open-ended. I’m not familiar with that phrase in any other context. Presumably, there’s writing, oral representation, video. I suppose there are oral representations that are not reduced to writing or simply are in the memory of an individual person.

I’m wondering why or what was envisaged by choosing in any other tangible form.

Hon. M. de Jong: I am reminded that, quite logically, if something is tangible, it captures those things for which there is a record — electronic, physical paper. Intangible would be information for which there is not, perhaps, a physical record or electronic record. The purpose of the section is to capture both.

[1815]

B. Ralston: Looking again at the operation of this definition in conjunction with section 6.4, is the minister saying that if the recollection or the specific memory of a participant — say, a negotiator — were not reduced to writing or recorded or videoed, it would not fall within this definition of confidential information?

Sometimes in arbitration, for example, the principals are called as witnesses, or the negotiators are called as witnesses, and give evidence as to their understanding of the specific term that may have been agreed to if there’s a dispute about its meaning. But they may simply be giving their evidence from their own individual recollection of that, unaided by any document.
[ Page 9118 ]

By the term “any other tangible form,” would that specifically be excluded?

Hon. M. de Jong: I took the member’s question to refer specifically to clause 6.4. My answer will relate to that, which deals with. The reason I say that is I think the member, in his question, referred to an arbitration process, and I’m not sure that’s captured by 6.4, dealing with disclosure to government.

With respect to 6.4, if it contemplates the disclosure of confidential information in the circumstances enumerated there, that would, by definition, cover tangible or intangible forms of communication.

Then the other aspect to the definition, which I have been reminded of, is that it’s information that was disclosed by one party to the other. As opposed, I suppose, to an analysis or a strategic document that one party produced for itself, it is information that flowed between the parties in either tangible or intangible form.

B. Ralston: Given the requirement that that would have to have been disclosed by one party to another party, information that would ordinarily be subject to solicitor-client privilege would not be captured by this definition. Would that be fair to say?

[1820]

Hon. M. de Jong: We’ve done a lot of this by way of example. I’ll make sure the member agrees with my example.

A party has obtained an opinion, material that is covered by solicitor-client privilege, and has not shared that with another party. In those circumstances, I think it’s pretty clear that nothing in this agreement would necessitate disclosure pursuant to the provisions of 6.4.

In a scenario where all or a portion of that has been shared with another party, my sense is that the client would still be entitled to rely on solicitor-client privilege. But I’m not making that as an authoritative statement without checking further.

B. Ralston: In the definition of “commercial operations date” — we discussed this earlier in some detail but not the definition itself — there’s a reference at the beginning. It means “the date on which the proponent issues a certificate of initial acceptance under the engineering procurement and construction contract for the first LNG.”

Can the minister explain what is meant by a certificate of initial acceptance? I don’t believe that is defined elsewhere in the agreement.

Hon. M. de Jong: We can pick this up. I can go on at length more about what is intended.

In terms of describing what a certificate of initial acceptance is, I’m going to suggest that the best place we can look is within the parameters of the definition itself, which describes when it will be issued after the work and performance testing has occurred, when the first cargo vessel has been loaded and left. It’s designed to be an articulation of when the proponent has signalled, themselves, that they have an operating facility. I’m sure we can pick that up when we reconvene.

With that, I’ll move the committee rise, report progress and seek leave to sit again.

Motion approved.

The committee rose at 6:25 p.m.

The House resumed; Madame Speaker in the chair.

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

Hon. M. de Jong moved adjournment of the House.

Motion approved.

Madame Speaker: This House, at its rising, stands adjourned until 10 a.m. tomorrow morning.

The House adjourned at 6:26 p.m.

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