[Page 145]

HALIFAX, THURSDAY, APRIL 10, 2003

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

1:58 P.M.

CHAIRMAN

Mr. David Hendsbee

MR. CHAIRMAN: I would like to call the committee to order.

The honourable member for Hants East.

MR. JOHN MACDONELL: Mr. Chairman, I'm going to give the minister an opportunity right off the bat - I think he wanted to address one of my questions from the other day.

MR. CHAIRMAN: The honourable Minister of Economic Development.

HON. CECIL CLARKE: One of the questions raised during the last session was regarding the increase in funding to NSBI. We discussed that towards programming, but there's a specific purpose that the majority of that was designated for and that was for commitments related to the payroll rebate program.

There was another item with regard to some of the business successes. When we had that discussion, John, just about getting some of the success stories, even though some of the numbers don't always add up, we're going to be bringing that forward, so hopefully before estimates are over I'll have some of those stories for you.

MR. MACDONELL: Okay, thank you.

MR. CHAIRMAN: I would remind members to speak closer to the microphone for the purpose of the recording of Hansard.

MR. MACDONELL: Thank you. Yes, and I think you've had to remind me a couple of times, so I'll try to pay attention.

145

[Page 146]

Mr. Minister, you brought me to a question around the payroll rebate program. Can you specifically outline what that program is or what that means?

MR. CLARKE: I can talk about the intended purpose, of course. The payroll rebate program is a business incentive used to help support business expansion and job creation in the Province of Nova Scotia, but it also builds on a premise that it is payment based on performance and being very key that any commitments under a payroll rebate, subject to the type of jobs created, and it flows through a model of 50 or more. Usually that was a standard.

[2:00 p.m.]

MR. MACDONELL: If you're more jobs . . .

MR. CLARKE: Positions being created, yes, in terms of creating substantial employment in communities throughout the Province of Nova Scotia. As a result of that type of incentive, any commitments that are made, and you will hear announcements made based upon projections - most recently was Teltech, with a commitment of up to $11.8 million, but that was based upon achieving 1,500 jobs, and the first centre being designated here in Halifax with at least one other in rural Nova Scotia and another area within the province as well.

Until they achieve that however, the $11.8 million has to be booked. If they do not achieve those numbers, then they will not receive the funding. So it's a good incentive from the point of view that it ensures that people are complying to what it is they stated they would do. It's not just a direct cash infusion - they have to cash flow that.

Obviously, it has been utilized quite substantially to the point of additional funding being allocated because of the number and the demand for that as an incentive tool. I think it has worked very well. I think if we look down the road we want to look towards that in context to what other incentives are needed that ensure businesses come for the long haul. The nice thing about the payroll rebate program is it does require a time commitment and that's essential, as we all know the fear people have investing is that companies go away once funding runs out - this is put funding in and achieve reward for making your commitment.

MR. MACDONELL: You said that the funding has to be booked, but they're not going to receive it unless they meet their commitments, so it's booked when you sign an agreement with them? I'm just wondering - that would show up in estimates, I assume - if that money's booked, you have to account for it in your estimates for the province, but it may not ever be used or it may not be used for another year.

MR. CLARKE: That's correct.

[Page 147]

MR. MACDONELL: So I'm wondering why you don't book it in the year that it's used, if it's used?

MR. CLARKE: It's booked and it's cash flow when it's anticipated. It's my understanding and I will clarify it, we will just note to clarify that. Chris Smith will be joining us from Nova Scotia Business Inc. for their administration of that program. It would be booked for the period of time . . .

MR. MACDONELL: If the agreement is in place.

MR. CLARKE: Right. That's my understanding, but I think it's appropriate we just clarify it.

MR. MACDONELL: Okay. I'm curious about the term "payroll rebate", because companies don't actually pay anything to the province in terms of payroll so we're not really giving them a rebate of anything that they've contributed. It's money that's used as an incentive if they hit certain job creation targets - that's really what a payroll rebate is. It really has nothing to do with a company paying the province anything regarding their payroll and then us giving a rebate back to them, so the term is a misnomer then.

MR. CLARKE: Well, actually, no. It does reflect a percentage of tax paid. It is a payroll rebate because it reflects a percentage of the actual pay that has been . . .

MR. MACDONELL: . . . paid to the employee and sent to the province.

MR. CLARKE: Right.

MR. MACDONELL: Okay.

MR. CLARKE: I think if you look, on average that reflects as an 8 per cent payroll rebate when you look at the type of scenario if you build it out. With the Teltech, 1,500 jobs, I think it would run around 8 per cent rebate.

MR. MACDONELL: I'm curious - in all of these agreements then, from what you said I should assume that in any of these agreements that are written around payroll rebates that they must at least produce 50 jobs - some agreements would be more, but the standard would be for 50 jobs at least.

MR. CLARKE: Correct. Actually, if you don't mind, we're just joined by Chris Smith now. All right. We're doing okay, John. Actually, that's correct - it's based on 50 jobs and it is booked over the period of time as projected to be drawn. I don't know if there's any other . . .

[Page 148]

MR. MACDONELL: No. I don't know why I'm caught up in something that may not be significant at all. I am curious about when you book it, because if it were booked over two years how do you show it on your books? The same amount each year, but actually it wouldn't be drawn until they meet the requirement, but yet it would be the same amount showing in the books as long as the agreement is in place.

MR. CLARKE: Okay, just for clarification. How it would be reflected, it would show as a contingent liability and it would be a note to the financial statement, noting the period and the time and the details reflective of that.

MR. MACDONELL: Okay. When you said you were waiting for Chris to come and you indicated he's connected with NSBI, is it only NSBI that gives payroll rebates? Like, does InNOVAcorp give payroll rebates?

MR. CLARKE: No, InNOVAcorp's programming has not been related to payroll rebates. Obviously, when you look at the whole transition as a result of the restructure of Economic Development and with the Office of Economic Development it's not exclusive to, although it's administered by and the program is focused. In an extraordinary situation, or in a situation where we feel that, for instance the industrial expansion fund, that same model could work.

MR. MACDONELL: Or the Film Corp. . . .

MR. CLARKE: They may have a business, for instance if it were an active business they may have brought that forward, but it's something that could be considered under industrial expansion.

MR. MACDONELL: Now, I'm curious about the $3.5 million in payroll rebates that were guaranteed to Sobeys - I think it was to create 140 jobs and to maintain more than 300 - I guess I want to know did Sobeys actually get the money? Did they hit their targets? The jobs they were to create and maintain, have they done that?

MR. CLARKE: It's a good question. Obviously, a commitment made and no different than any of the others we have or we'll discuss. I will have to clarify for you what level of draw or commitment has come out of that. It's anticipated that over - in actually two more years, over the next two years, they will have fulfilled their commitment.

MR. MACDONELL: They've partially filled it?

MR. CLARKE: Yes, that's correct.

MR. MACDONELL: So how much of the $3.5 million have they received to this point, or do they not get it at all until they completely fulfill it?

[Page 149]

MR. CLARKE: I can clarify the first three, but if you look at what is projected over the ensuing two years, it's in the order of $1 million remaining.

MR. MACDONELL: So they've received $2.5 million, is what you're saying?

MR. CLARKE: But I'll clarify that for you.

MR. MACDONELL: Okay, that would be great. I don't have my booklets here so I'm going by memory. I think it's in the Crown Corporation Business Plan, and I think it's for NSBI. Somewhere I read that the government wanted to move away from payroll rebates and was looking at other incentives that they could use. I can't find the page but, anyway, some of those incentives were land - you probably know what I'm getting at even if I don't seem to.

MR. CLARKE: Mr. Chairman, the member for Hants East brings up a timely matter, because there was actually a recent media report to that effect, about incentives. As I mentioned earlier on, as we started, payroll rebates as an incentive always has to be something we review. Like any program, you have to look at its success, its outcomes and what other types of incentives are necessary in other jurisdictions. I think there's something equivalent of 3,000 governments in North America that have incentives out there, so we are in a highly competitive environment when it comes to attraction and retention initiatives, and you have to be open-minded enough to say what is going to put us in a position. When you look at the efforts to put NSBI in place, as they grow into their mandate they may find that the tools that they need are not just specific to a payroll rebate, there may be some other things and thus their business plan reflects that we have to look at that.

I would say there is nothing specific today in terms of core programming changes, but ultimately we have to look at it. What I do like, and I think it's very good for the taxpayers of this province, an advantage of the payroll rebate program is based on performance, it's pay for performance and actually proven outcomes, so there is the taxpayer reflected there. I did say to the media and I would repeat here, I am concerned about any large-scale, just outright financial incentives that are tied to making a decision but not tied to their growth and long-term commitment.

MR. MACDONELL: Well, I'm glad to hear that. I think our Party has expressed concerns over payroll rebates. I guess we're not entirely convinced that even if they hit their targets that they necessarily go far enough in terms of long term, and that once they've hit their target, and assuming that they would, that they would draw down on all of the funds that they have in their agreement, and if somebody else is offering something after the term expires, if it's five years or whatever, they would pick up and go.

[Page 150]

I'm thinking about, and you can tell me the name - I don't think it is Teltech, but my memory tells me that there was supposed to be a call centre opening in Queens and I think Dartmouth, am I right? I knew something was going to happen around April 1^st about a commitment whether they were actually going to show up, because there was some noise that maybe they weren't, and I'm wondering, can you tell me where that stands?

MR. CLARKE: I would be pleased to. You raise a good point, and that is in the business planning process as there are challenges that come along. There are two sites, one is actually Liverpool and one in Cornwallis Park. Both of those sites are developed for Service Zone, the name of the company. Obviously, with regard to accounts that were anticipated for that, there was some corporate inability to secure that; however the commitment from Service Zone was not to walk away from it in terms of they were intent on making sure that their lease commitments were honoured, so it didn't leave any of the community development people on the hook with regard to the anxiety of having a project with anticipated jobs and then having a financial pressure, because a lot of money was invested in the fit-up of these sites.

[2:15 p.m.]

Service Zone's commitment to make sure that their interest in Nova Scotia is serious and sincere was to honour those leases, and it is their intention, when the accounts happen - as you know the volatility of the marketplace, the global marketplace as such, it has caused some repositioning - Service Zone has made it clear it's their intention to operate those sites. We look at that, when they do operate those sites and meet the performance targets, then there will be an ability for them to look at any commitments that have been targeted for them.

MR. MACDONELL: I'm sure the Municipality of Queens has put some money into refitting a building for this - and you can clarify for me whether the province has actually contributed in any way to that - the company has said that it wants to honour its commitment, but we don't have a clue when.

MR. CLARKE: Sorry, can you repeat that?

MR. MACDONELL: The company says it wants to honour its commitment to the leases whenever it gets the accounts basically to do that, but there is absolutely no indication of when they will ever get those accounts, or if.

MR. CLARKE: That is a good question and a point to raise. It's something that is subject to any business that makes an investment. Now they've made an investment and they're honouring their commitment that they've made to both those sites. On a positive point of view, it hasn't left either area struggling with regard to how they're going to meet the anticipated revenues that would come in through lease payments. So their honouring that alone suggests that they're actively working on filling those sites. I don't know the current

[Page 151]

status of where the company is - and that's something worth pursuing - but I do believe it's their full intention, if they're going to spend that level of money for leaseholds, and as far as the payroll rebate for the province, until the jobs are created and payroll has been paid, there won't be any provincial money drawn down.

MR. MACDONELL: You say they've made an investment, can you tell me what that was - what was the investment the company made in those sites?

MR. CLARKE: From my understanding, Service Zone is paying the leasing costs and the operating expenses of the two facilities associated with that. It is my understanding, and I will just clarify, both facilities were fitted up for operation by the respective communities, and those investments were made by them and that's why the sensitivity around honouring the lease arrangement, because those groups would be very negatively impacted if that had not come true. The overall payroll rebate that was projected for both of those sites was $8 million. Had everything proceeded normally, both sites would have hopefully been in operation.

MR. MACDONELL: So it was $8 million for the two sites and a payroll rebate, which they won't draw until they meet commitments of jobs, but as far as the company itself spending any dollars in the province for the refits or any other investment, have they done that?

MR. CLARKE: I would have to make an actual inquiry with both parties to do that.

MR. MACDONELL: Mr. Chairman, can you tell me how much time I have? I know I didn't start with a full hour.

MR. CHAIRMAN: I believe you have 12 minutes, until 2:33 p.m.

MR. MACDONELL: I'm going to move on to Orenda. I'm wondering if you can tell me what's actually going on with that company now, and its relationship with the province?

MR. CLARKE: Just to start the dialogue on Orenda, as you know - and I will pull out my file respecting that - the current situation with that is that it's been a challenge. They had a very innovative product, the Recip engine, that they brought to try to commercialize in the marketplace, an 8-cylinder engine. Technologically, it's been very successful, but the market conditions and the timing has been less than fortunate right now with regard to the company and its performance. Part of the whole repayment was based on royalties coming back on sales, and to my knowledge, there was one royalty payment received back to the Province of Nova Scotia. Obviously, the people who have been working there have worked very diligently and the company had been committed to trying to market, I know from aerial space shows that they've been out marketing the engine. However, I believe it's fair to say that it's

[Page 152]

a significant challenge as to overcoming some of the current market situations and the take-up for that particular model at this time.

MR. MACDONELL: I thought that that engine never ever received approval, whatever approval that would be. So you're telling me that as far as the engine and its ability to be put on the market that that's fine, they're actively pursuing markets for that engine?

MR. CLARKE: Actually, it's my understanding that every aircraft that you would want to utilize that engine on, not only does the engine have to go through a certification process, it has to be certified for the aircraft type, because this was going to be marketed as a replacement engine. The real market that people saw as an area of opportunity was agricultural planes, that type of sector, where there would be utilization of that from a cost point of view and an operating efficiency. The market being what it is and the reality has presented a challenge, I don't think it was the type of certification that they were looking at. From my understanding, they did achieve the certification on the aircraft they were looking at. I would have to get the detail on the aircraft.

MR. MACDONELL: I wouldn't mind knowing that because I was thinking that they really hadn't achieved that, therefore, that was part of the problem in . . .

MR. CLARKE: Can you just give me a moment? I will just review my notes to make sure. I don't have the certification information, but we will get that for you.

MR. MACDONELL: I would appreciate it. So you say that they've made a royalty payment, so I'm assuming they sold one engine at least. Was that an engine produced in Nova Scotia or was that from their Mississauga plant and those royalties came from there?

MR. CLARKE: It's my understanding the sale was based upon a unit produced at the Debert facility.

MR. MACDONELL: Do you have any idea how many engines have been sold?

MR. CLARKE: I do not, but I can make an enquiry.

MR. MACDONELL: All right. Can you tell me how many jobs, right now, in Nova Scotia?

MR. CLARKE: Are at the plant?

MR. MACDONELL: Yes.

MR. CLARKE: I believe it's 13.

[Page 153]

MR. MACDONELL: What was the arrangement in the agreement with them, targets for jobs - you said it had to be 50, I'm assuming it's the same plan, with them it would have to be 50-plus. Do you know what the number . . .

MR. CLARKE: If you actually look at Orenda, it isn't a payroll rebate program itself, it was an industrial expansion fund investment through a loan.

MR. MACDONELL: Were there targets they had to hit to get that expansion fund?

MR. CLARKE: If I'm not mistaken, that would have been in the range of somewhere around - they're anticipating, I believe, 50 to 60 full-time . . .

MR. MACDONELL: Over what period of time?

MR. CLARKE: That, I do not have. That's one of the items you get when you come into a portfolio with taking on the files from a previous time in administration.

MR. MACDONELL: But you can get that for me?

MR. CLARKE: I can get that information, yes.

MR. MACDONELL: I think I may have a copy of the agreement here. You may not have this right in front of you, so I will hand this over to you if need be. Clause 3.01, subject to all provisions of this agreement, the province will make a contribution to Orenda Recip Inc. to be known as the investment amount and will be the lesser amount of one-third of eligible project costs limited to the Nova Scotia eligibility costs to the year 2000 from this contract signing date, plus one-third of all expenses incurred from May 7, 1996, including all fixed assets purchased on the project to the date of physically transferring assets and manpower to Nova Scotia, or $9,331,000. That looks to me as if we've actually entered into an agreement that would give them money for a period that they weren't even in Nova Scotia, like back-time.

MR. CLARKE: I can confirm what I do know about the expenditure made. There was a $9 million payment, or payments, of the amount indicated were made by the province and actually matched by an equal payment by the Government of Canada. When you look at this file, and having been involved in my responsibilities as minister taking in the aerospace industry, when you look at the types of investments for aerospace, they are significant. There is nothing low cost about the aviation or aerospace industry when it comes to any of the business development or operations, for that matter. So any investment in a project like that is going to be significant.

[Page 154]

As I said, you have an $18 million commitment shared jointly by the Government of Canada and the province, and obviously a significant investment by the parent company, which is Magellan. I don't think anybody would have gone into making those types of investments anticipating not having market success. However, the realities of markets is that they ebb and flow, and unfortunately in the timeline of this, it hit the downturn and it hurt their ability to produce to where their business plan had projected.

[2:30 p.m.]

MR. CHAIRMAN: The member for Hants East has about three minutes.

MR. MACDONELL: Okay, I'm not sure if I should ask something else and come back. I don't know if three minutes will do that. I'm wondering about the proposed aquaculture site at Northwest Cove, I don't remember the name of the company, I had it in my agricultural notes, thinking that the Minister of Agriculture and Fisheries would have put money into that, but he said his department didn't. I'm wondering if you're aware if your department has put any money in that site?

MR. CLARKE: Mr. Chairman, I would ask, and I think the opportunity will be provided to come back, if you could supply me with the actual name of the company. I will make an official inquiry from there. Otherwise, I'm just going to be . . .

MR. MACDONELL: It's not something that sticks out in your mind? There has been some controversy around this site, but a flag doesn't go up for you that the province . . .

MR. CLARKE: No, it's not something that, obviously, would be anything that I would have had an active involvement with since becoming minister.

MR. MACDONELL: And none of your staff here can tell you?

MR. CLARKE: No. If you give me the name of the company, I will make the inquiry for you.

MR. MACDONELL: I will do that. I think I'm done.

MR. CHAIRMAN: Thank you very much . . .

MR. MACDONELL: My pleasure, and hope, squeeze a little time out of my colleague, and I'll get back to you.

[Page 155]

MR. CHAIRMAN: I was certainly interested in that last question, because I think the company you referred to was a company in Chester-St. Margaret's. Is that correct, Northwest Cove? As far as I know, I do not believe that they worked with Economic Development, it would have been aquaculture. I don't think anything has been done in that regard.

Now we have the honour of the member for Cape Breton West. The time is 2:33 p.m., and you have an hour.

MR. RUSSELL MACKINNON: Mr. Chairman, I want to thank the minister for his opening remarks, there was some good detail. I will try to make my questions as short as possible, in nature, of course. I will still use my full hour. I noticed Doc. #42140 that's referred to as Exhibit 1 in the Province of Nova Scotia's Annual Report, Form 18-K to the United States Securities and Exchange Commission for the fiscal year ended March 31^st last year. I am not sure if the minister would be familiar with that. I will table it for his benefit. The seal on that is upside down, and I was a little taken aback to see that we would send something to the New York Securities Commission that would be in such a questionable state. I will table it. (Interruptions) That could very well be. I don't know if they're trying to say that the ministry is in distress or the way that we handle our business.

It's a small point but it's a very important point, because when the people down in New York pick those documents up and see that they're not properly affixed in legal form, it kind of leaves a negative impression. I don't know if the minister was aware of that. I know that comes more under Finance, but since we're dealing with securities and so on . . .

MR. CLARKE: Mr. Chairman, is that an electronic copy or is that the print copy?

MR. MACKINNON: That's a print copy.

MR. CLARKE: Obviously there is an apparent error that's been made with regard to the Coat of Arms of the Province of Nova Scotia on that document, you're correct. Obviously I can just say, duly noted by myself and it will be reported as such and reflected in the transcript of these proceedings. However, as you know, and I think everyone here shares a great respect for what that Coat of Arms represents. To your point, adherence to its proper use and application is very important, and we will note that with the appropriate staff, for them to be more attentive when publishing reports.

MR. MACKINNON: Mr. Chairman, through you, I thank the minister for that point because it leads me up to the next point I would like to make, and that's with regard to concerns that were raised over the last year with the Enron scandal. There were some suggestions through media reports and the like that the paper trail landed back here in part to Nova Scotia. Is the minister aware of any such action, and what was the impact on Nova Scotia business and, indeed, the Department of Economic Development, the bottom line for the province?

[Page 156]

MR. CLARKE: Mr. Chairman, just with that particular inquiry, obviously just with all of that, with the legislation as it applies to companies, there was an instance where because of the way the Companies Act - and I will get the detail for you, member, on that, but you do refer to a point that was picked up, but as far as negative impact, financially or otherwise to the province, it is my understanding that there isn't.

MR. MACKINNON: There is no impact?

MR. CLARKE: No. I will clarify that.

MR. MACKINNON: I noticed in the latter part of 1999, I think it was October, the present Administration amended the Maritime Telegraph and Telephone Company Limited Act. In effect, what it did, as best as I can ascertain, is that it allowed the protection of having a head office in Nova Scotia to another jurisdiction. I'm not sure if the minister is aware of that or not. When that Act was firmed up - well, it goes back to 1910 - under the Stanfield Administration, he was very keen to ensure that Nova Scotia interests were protected. That was a factor. But that was, for whatever reason, removed when it became a partner in Aliant. I've noticed, as a result of that, and I may be wrong, there was a loss of jobs in Nova Scotia. Would the minister be aware of any of that situation, and would he be prepared to comment on that?

MR. CLARKE: Mr. Chairman, just with that, in speaking on the Aliant merger of companies, there are a couple of things within the industry sector itself, in telecommunications, one is obviously a consolidation and the competitive nature and the need to be on top of both the provision of the service but also the technology, obviously meeting the demands of the board of directors and the shareholding interests. With specifics to Aliant's job allocations, it is my understanding, member, that when there was a merger of interests that some of the position and personnel allocations were adjusted, but again, with that, given the nature of Aliant, I will note it for acquiring a follow-up for you.

MR. MACKINNON: One of the big issues over the last year, as we would all note, is with regard to Kyoto Protocol. Has the minister and his department allocated resources in the upcoming budget fiscal year to help industry deal with that?

MR. CLARKE: No.

MR. MACKINNON: Is there any particular reason why?

MR. CLARKE: Mr. Chairman, to the member's question, why we don't have - I know I have not had any specific representations, either by any of the large industrial interests of the province at this time or whether that be through the CFIB, and just conferring with NSBI in terms of any major overtures from industry with regard to any forms of assistance right now with compliance to the Kyoto Protocol. The member does raise a valid

[Page 157]

point. It's widely discussed, about how businesses will be able to comply. It is something that will definitely, if fully implemented, impact some of the businesses in Nova Scotia, but I think to the member's question, we just have not had or received any specific requests to that point.

MR. MACKINNON: I must say I'm a bit surprised, because of the attention that was paid to this issue over the last year, in fact in the last five to six months, particularly since the Premier has publicly indicated that the cost of electrical rates would go up as high as 29 per cent, despite the fact that representatives from your department, I believe, either directly or indirectly - I would have to check the record - maybe through Nova Scotia Business Inc. or somebody from one of the government departments, the Department of Energy, I believe, indicated that we wouldn't be looking at any more than 12 per cent on the outside.

Since industry is a major component that we're dealing with here, has there been any discussion between your department and industry and the Department of Energy, as to what strategy the provincial government is going to apply to deal with this issue?

MR. CLARKE: Mr. Chairman, to the member's question but also just bringing it specific, the water context, with those it's something that obviously the Minister of Energy, I'm sure, would be more than willing to elaborate specifically on the type of initiatives they're looking at. I would think that they would have a keen and active involvement with the Kyoto process as it affects other industry impacts. I can speak from an Economic Development point of view to the member for Cape Breton West, and that is my own efforts to make sure that we've talked to major industry in looking at not only issues, every major industrial player here in the province, of course, energy and power supply become key factors. I have been touring every major industrial facility in the province, and it continues again this Friday as well, with Kimberly-Clark, Trenton Works, the Michelin plant, Stora.

From my perspective, from an economic development point of view, I am looking at all of the actual major industrial activity or manufacturing facilities here in the province, in terms of finding out first-hand, by doing the site visits and the discussions about where their current operation and long-term objectives are, to ensure that those mainstays of foundation industries are there and they're solid. In all of those, as well, I think there is always a general discussion that's had about Kyoto, but there has not been any specific requests to Economic Development, but there may be specific requests and/or industry dialogue with the Department of Energy. I can find out for the member.

MR. MACKINNON: With all due respect, I'm a little disappointed that we don't have some type of a strategy or at least some type of a policy paper to deal with this issue, since it's already been approved federally. Is the minister aware of a federal program that would allow the province to help industry adjust to meet the demands of protocol, in a real way, financially? Is the minister aware of that program?

[Page 158]

[2:45 p.m.]

MR. CLARKE: There's two things that are ongoing as well. There is an interdepartmental committee working specifically on Kyoto compliance with Nova Scotia Power, given, of course, the significance there. Really, with this, I will have to confer with my colleague, the Minister of Energy, when it comes to specifics on what sectoral consultation has been in place and the wider involvement. In fairness, just to answer the question, and my being very clear, I have not been actively engaged on the file or discussions with regard to Kyoto or its implementation.

MR. MACKINNON: Have you seen the plan that the Minister of Economic Development has developed, the written plan that he indicated in the House he has?

MR. CLARKE: Who?

MR. MACKINNON: The former minister, he's now the Minister of Agriculture and Fisheries, so I guess whoever took over the Energy portfolio would be responsible for that file. Your colleague, the former Minister of Economic Development and Energy, the Honourable Gordon Balser, indicated in the House, on several occasions, that there was a plan for the province to deal with Kyoto. Now you're saying that there's an interdepartmental committee that's studying and following it along. It seems to be a departure from the statement that was already made in the House.

MR. CLARKE: Mr. Chairman, to try to respond to the member's question and statement around that, I will seek to get clarity around that. He's referring to a document and a statement by a former minister. I think it's only fair that I make sure I confer with them in terms of what steps they've taken and where the current status is.

MR. MACKINNON: Presently, what's the status of federal/provincial economic development agreements?

MR. CLARKE: Actually there are a number of ongoing initiatives and dialogue . . .

MR. MACKINNON: Are there any agreements signed that are operational, presently?

MR. CLARKE: In terms of . . .

MR. MACKINNON: Federal-provincial economic development agreements, subsidiary agreements.

[Page 159]

MR. CLARKE: There are two: of course you're familiar with the EDA, in wrap-up stages right now, and the IBDA and that would be the Industrial Business Development Agreement with the feds that is currently in place. There has been no indication across the entire region of a desire to enter into any other sort of wide-scope development agreements at this point between the Government of Canada and/or the provinces. Now, there are initiatives, though, that have been ongoing, and I would like to speak to our dialogue and working relationship with ACOA, for instance, that working relationship and on project specific activity and a dialogue about, for instance, even, I am engaged in one about, how do we work with the CBDCs in the communities as well and what their mandate is.

Next week there is a national meeting with regard to rural development and the issues and the types of programs that may be needed or are possible there. Obviously, as we would both be familiar, there is the ongoing relationship with files, for instance, or projects through Enterprise Cape Breton Corporation growth fund.

MR. MACKINNON: I will focus on the rural economic development situation in a moment, but I am a little concerned that the federal government has a program to assist industry to deal with climate change where they are offering financial support and the minister and the department don't seem to be aware of this, particularly since the protocol has been approved.

In fact, a representative from the Halifax Chamber of Commerce is a very strong proponent in moving to that effect. I believe his name is Mr. Freedman, yes, from the Metropolitan Halifax Chamber of Commerce. He actually believes that the economy would become healthier based on renewable resources. He seems to take issue with the Premier's contention that the economy would be in jeopardy by the implementation of the protocol in its present form. In fact he says - it's from a Chronicle-Herald report, October 12, 2002 - that Mr. Freedman said the Canadian economy is relatively strong and won't collapse under Kyoto, and that the economy may actually become healthier based on renewable resources.

I bring this to the attention of the minister because I think there is a real opportunity for businesses in Nova Scotia to capitalize on that. I'm a little concerned because a lot of it is on alternate energy. I know in the past I have criticized my colleague, the member for Halifax Chebucto, about the issue of windmills. If perhaps I knew 10 years ago what I know now, I would probably be not quite as critical and fair is fair. I often wonder if perhaps the province is putting too much emphasis on just what Nova Scotia Power has to say and not what other stakeholders have to say. I've seen different proposals from other sectors of the economy that actually have, in fact there is one before government now. I'm not sure if it would be before your department, through you, Mr. Chairman, to the minister, but it would actually save money but Nova Scotia Power is balking at it but again I will leave that and come back to it.

[Page 160]

I will table this document. It's just some general information. I would encourage the minister to pursue this because I think there is some real economic development opportunity here, particularly for small business and more particularly in rural Nova Scotia, which by the way, as we all know, the 2001 census showed that the population in 13 of our 18 counties actually shrunk, declined, and the minister is indicating he is going to a conference to study that issue or there is a working partnership of sorts. But in the meantime, until something is done, these communities will continue to hemorrhage.

Has the minister given any consideration to a similar type program that was in place under a previous Liberal Administration, that was back during the Regan years, where they would go in and offer a capital incentive grant, of let's say $5,000 or $10,000 if anyone were to upgrade their business. It might be a small mom and pop type of business or it might be a small businessman or businesswoman with two or three employees who are saying, well, things are changing so much that we can't afford to upgrade. We can't afford to invest in all this computer technology because we don't know what the future is going to bring. It just goes on and on. I suppose I could extrapolate and present the argument a dozen different ways but I believe the minister understands it. Is there anything contemplated in this particular budget that would address that need for those 13 counties?

MR. CLARKE: Mr. Chairman, in response actually to a couple of items, but just one with regard to the energy strategy and specifically highlighting some alternative energy as it relates, obviously, to the Kyoto dialogue that we have been having, the Office of Economic Development has been supporting some of the development of wind power. There has been a CEDIF in the Valley area, which is actually where the initiative is underway, working with a community interest point of view, trying to work and support some of that piloting activity.

Specific to small business programming, first and foremost, when I look at what I've heard clearly, when I had my opportunity to do my tour of the province and meetings and consultations as a result of that, the number one issue that came forward consistently through every place I was, was the concern over access to capital by small business and that overrode most other things. Another area that was very much a concern, especially in all the rural areas, of course, was access to broadband and other related things such as cellular service and having full access around the province for small business to be competitive in a world that is being driven by technology that requires access to broadband. We are supporting initiatives throughout the regions of the province right now with the broadband - what is it, broadband, rural and northern (Interruptions) developments. Right, the federal initiative. The province is supporting the community proposals to assist in having more access to that.

On another point of view, to deal with the issues that really came forward, the pressing concern was how to deal with access to capital because there was a very real concern among businesses that the big banks were walking away and people were saying, we are capable of running our business but we need to have access to capital and we need to have a banking mechanism that works for us. To that point, I had a dialogue and discussion

[Page 161]

with the Nova Scotia cooperatives council. We had engaged dialogue with the Credit Union Central and the credit unions of this province. I think we have made good movement on what we see as being an ability to help support small business and ensure that they have the type of benefits in place. As a result of our own consultation as well in terms of small business and I know Chris Smith is here from NSBI. NSBI and its consultation around the province is enhancing its focus on the needs of small businesses as well and the supports.

Now with specific reference to the small capital initiatives, I'm looking at dealing with making sure that people have some mechanisms for investment in communities, in rural areas and I think that the Community Economic Development Investment Funds, the CEDIFs, they are starting to grow in popularity. We have looked, and as a result of the budget, have increased the ability for some in their regions to invest not at a ceiling of $30,000 but now up to $50,000 into a CEDIF. Further to that, we are looking at a wider review of how to make the program work in consultation with, obviously, the securities requirements in making it as flexible as possible for people to get access to that capital. We see the best way of doing it, rather than having a program specific to $5,000 or $10,000 here, is having communities support their priorities in giving them the tools for those types of investments at home.

So I think there are a number of things we can do and, of course, you have the labour-sponsored venture capital. My focus has been trying to get access to capital issues, Mr. Chairman, to the member, and I think by doing that it frees up a big barrier and allows people to get in and do it on the merits of their business rather than the impediments that are currently impinged upon rural areas.

MR. MACKINNON: Mr. Chairman, I thank the minister. He has mentioned Nova Scotia Business Inc. as part of the process and I'm looking at the backgrounder that I was provided by Nova Scotia Business Inc., financial transactions between November 6, 2001 and December 31, 2002. It authorized financing for 19 companies for a total of $15 million. Ironically, only 3 per cent of the total dollars provided by Nova Scotia Business Inc. went to Cape Breton Island, 3 per cent. Out of $15 million, $45,000 went to Cape Breton and I would think if the minister is from Cape Breton, he would want to see that interests in businesses in Cape Breton Island received a better shake than that. How does the minister respond to that?

[3:00 p.m.]

MR. CLARKE: Obviously these investments by Nova Scotia Business Inc. that happened last year were based upon successful applicants and also the demand and draw for the applications. If you look at the overall portfolio analysis of the accounts that NSBI is responsible for, and if you look at the number of clients throughout the province, there are 198 of which 48 are from Cape Breton. So the global picture has 24.2 per cent in terms of involvement, in terms of clients. So there are a number of clients throughout that I think in

[Page 162]

this year. The other aspect is and I guess (Interruptions) because I don't think the volume of applicants to NSBI from Cape Breton in that same fiscal period was a high number and, as you can appreciate and we all know, if you're from the area, as we are as members, the number one entry point a lot of the time, of course, is through ECBC and ACOA and their structure and it kind of flows out from there. I mean people tend to go through that process, as you know, just as much as having access, but if you're on the ground, we all know that's where people go first.

MR. MACKINNON: How many applications were received by Nova Scotia Business Inc. from Cape Breton during that period?

MR. CLARKE: I don't have the answer to that question.

MR. MACKINNON: Well, the Chair of our board is here, is he not? Is the representative from Nova Scotia Business Inc. here?

MR. CLARKE: Chris Smith.

MR. MACKINNON: Yes, can he tell us? (Interruption) Will he give us an undertaking that we will have that perhaps in the next day or so?

MR. CLARKE: Yes. What's important to your point and I think in terms of, we've been very clear and that is to be aggressive and going about marketing and promoting how the Province of Nova Scotia can partner and help be a facilitator or catalyst of development and to that point NSBI will have a presence in the Sydney area as well and obviously is in the Strait area now. Just as a matter of fact, the capital ideas road show is in Sydney today further consulting on this. So with a new business development executive in place for Sydney, I think it is sort of responding to part of your concern and that's making sure that the Cape Breton companies have access and are getting the full information of what NSBI can do for business in Cape Breton.

MR. MACKINNON: Perhaps when the representative from NSBI is securing that information, if he would give us the detail on the total number of applications that were received as well as the total number of applications that were received from the different jurisdictions around the province and, in particular, I guess for myself it would be Cape Breton, but as the minister can appreciate, of the total $15 million loaned, only $45,000 was loaned to one company, Laurie's Motel in Cheticamp, and I know that wouldn't have anything to do with the fact that it's represented by a Cabinet Minister, that's just coincidence, but I figured I would raise a little spark with some of my colleagues across the floor here because I know that wouldn't be a factor. The minister indicated about increasing the Department of Economic Development's presence in the Sydney area. My understanding is there are three or four staff in the Sydney office?

[Page 163]

MR. CLARKE: Yes, actually three at this time.

MR. MACKINNON: Three. How many were there last year?

MR. CLARKE: There would have been two last year.

MR. MACKINNON: Two last year and the year before that?

MR. CLARKE: I would have to find out. It was before my . . .

MR. MACKINNON: I think at one time there were 12 there, I think in 1999, and then shortly after that, that's when things kind of went downhill. So we were hoping with the minister's presence in that department, that we would see a lifeline passed along to the businesses in Cape Breton.

Another concern is with regard to subsidies that are being provided to various companies whether it be in the form of payroll rebates or whatever. The Halifax Regional Municipality, in particular the urban core, has a pretty strong and vibrant economy and that's good, we need that in order to make the rest of the province successful, I believe, but it seems a little perplexing that we would provide subsidies in an area where you have anywhere from 93 per cent to 94 per cent employment versus other areas of high unemployment and I'm sure down through Colchester County, or Kings County, or Hants, or even in the South Shore, those areas are the ones that would need more support and at the rate things are going, there will be a continued decline.

My question is, why does the government continue to pour rather substantive subsidies into businesses that would normally succeed in this type of an environment as opposed to other jurisdictions that could use that little extra boost to be able to establish the niche marketing that has been so successful in years past?

MR. CLARKE: Well, Mr. Chairman and members, if you look at the number of opportunities that have been realized, if you look at the current, I mean the March statistics are the highest number of Nova Scotians in the province's history, 436,300 were employed, and I recall a few months ago, one of the times when we reported higher employment statistics, I think it was about three reports ago, the honourable member for Cape Breton West criticized that, yes, but there was a 5,000 person employment level drop in the capital district, if I'm not mistaken, with that release.

So the reality is that Nova Scotia is at an all-time high and so if there was less in the capital, it means that the regions have been benefiting by increased levels of employment. However, it does indicate that there are cycles and there are realities of business and economies which means that there will be job fluctuations and the capital district is no different. So if there were 5,000 less jobs, one, if you were in the capital district, we would

[Page 164]

be saying that there's a need to make sure that the core, the capital itself, has some strength and so we have to look at the fact that I think we have in Nova Scotia a based effort, that we want to make sure the opportunities go to the right regions and the right places. I know we all want to see the rest of Nova Scotia, we're part of, I believe, a national, if not a North American dilemma, and that is urbanization and at the same time the stabilization of regions.

We see clustering of services into regional centres and the whole challenge of rural development, which is why we have a focus on that, is very specific and that is not something that was created overnight and it's not something that's going to go away overnight, but I do believe we have to ensure when an opportunity is right, that if there's 1,500 jobs available and 600 are immediate for the capital district, such as Teltech, then those 600 jobs, the last time I checked, there were a significant number of people who were applying for them. So it does mean that there are Nova Scotians who want those opportunities. Part of that though, and I think to your point, when you look at Teltech, it was very clear that, yes, they wanted to have a presence here. They are a major player in the whole customer contact business and relationship management sector. However, part of it was to have a base and to anchor that here in the capital area, but also looking at other non-metro locations in the province.

So I think even from a corporate point of view, they looked and saw the strength of what the rural areas and the regions have to offer and so their investment and their attainment of 1,500 jobs is based on 1,500 jobs throughout Nova Scotia. So I think that was a good investment and a good opportunity for those people who are needing those jobs.

MR. MACKINNON: Yes, and I in no way would want to diminish the points that the minister has made, but on the big picture, and I think the minister agreed with me on this point a little earlier, we have 13 out of 18 counties that are suffering because of that centralized view. I believe that we need a strong capital city and a strong capital centre to be competitive, not just nationally but internationally, but there's a fine balance there. You can't continue to strip the rural components of this province and expect rural Nova Scotia to survive because what happens is that puts increased pressure on your infrastructures because the argument is not as ably put at the table when there are less voices and there are less numbers to deal with. Metro itself is having, you know, some considerable growing pains and they have considerable concerns about the fact that the provincial government is not providing sufficient money to deal with its infrastructure problems.

I raise that because I understand the minister's dilemma there, but I don't think we have struck the proper balance to address the needs of rural Nova Scotia at this point.

MR. CLARKE: Right.

[Page 165]

MR. MACKINNON: I know it's difficult. There are a lot of competing interests and he could be there for 10 years and still not be able to get all of them in tow. I think he understands where I'm coming from and vice versa.

MR. CLARKE: Mr. Chairman, I think I, like every member of the Legislature, chose to get involved in politics to make a difference and we all go about doing that the best way we see fit to represent our constituents and improve the quality of life and living for every area and, indeed, collectively for the Province of Nova Scotia - both the governing side and the other Parties that are there to hold government accountable - and today's session is no different. I do want to speak to a couple of items in response to where I see the interests of rural Nova Scotia and the regions have not been forgotten by the government and respond as things have come up.

I think, most recently, when you look at the community of Canso, circumstances beyond that community's control had a very negative impact on its mainstay which was the fish plant there and as a result of that created a significant challenge. Everyone is very familiar, I believe, with that and some would argue that with 1,000 people or less in a community, then maybe there's better effort in transitioning that and seeing people on to other opportunities or saying, well, it's just the fishery is gone and there's nothing you can do.

Well, that wasn't the response. It was, this is a community, it's a community facing a challenge, and I don't know if the long-term future of that community will be anchored by the fishery. I know that the owners of that operation hope to operate again this year, but the challenge is, like it was last year, will there be enough time put in to get the hours necessary for employees to have a base for EI. So that uncertainty had to come back with a response and the response was everyone that had an interest in the development: the province, the federal government, the community and the development agency, formed Team Guysborough, came together trying to deal with that.

With regard to prospecting, NSBI was out looking and trying to put together and find a mix which is a call centre there, but very unique because they took the old Post Office, converted it over for development purposes, which now will maintain good infrastructure in the community. A beautiful historic building in the province will have active business activity within it and people employed. The point is the effort and the will to help the community transition, to help build on the Stan Rogers Folk Festival, to see that that area of Nova Scotia is worth investing in and that there are other opportunities I think that will be received, no different, and we well know the anxiety in Cape Breton over the railway issue and some would say it's just the way of the times and it's just another inevitable thing and you've got to accept it.

[Page 166]

[3:15 p.m.]

Well, I think we all rejected that because we believe that the railway was an important piece of infrastructure for the future of Cape Breton's economy and it's not one that we were looking at having train cars going in with a bunch of padlocks to lock the place up. It was to make sure we had access to economic infrastructure to grow the economy. I don't know what's going to happen in the offshore, but I know Cape Bretoners are investing their own money to try to realize opportunities and to position themselves and to message to industry that they're open for business and they want to be part of it. They're using CEDAs. They're having community leaders come together. You see both in the Strait area, the Superport Corporation, you see the Laurentian Group that has BCA Investment Co-operative, you have New Dawn Enterprises, Membertou reserve, Grow Cape Breton Partnership, individual investors coming together and raising $1.75 million because they believe that there is a future for the offshore and they had to produce. Well, that's something I see as positive and they're coming to government saying we want to be part of this and we recognize we have to make an investment.

So dealing with regional responses has to come first and foremost. In every one of these instances it was responding to a desire by the people in those regions to have control over their destiny, at least to have some input in overcoming some of their challenges, and I think we have achieved some positive success. As you mentioned, honourable member, we will always have challenges before us, but I think our ability to respond and manage issues is greatly improved and I think rural Nova Scotia is going to be very much and is very much a priority, I know of myself and my portfolio.

MR. MACKINNON: I believe the minister will certainly reflect on the fact that I was very supportive of that project in Canso.

MR. CLARKE: Yes, you were.

MR. MACKINNON: Although, equally so, I'm not an overly strong component of supporting call centres as a way to deal with a lot of our economic woes because, not that I've seen any substantive evidence to conclude that I shouldn't, but I'm maybe just a little nervous that we seem to be putting a lot of money into call centres and losing some other opportunities, for example in our manufacturing industries. Call centres, as the minister may be aware, like the downsizing of one of the call centres in Sydney just recently, with a loss of jobs there, it didn't receive a lot of public attention, but it's almost as if once the public subsidy dies off, then so does their interest to stay and I'm hoping what happened there is not indicative of the other centres because if they will help to grow the economy and create jobs and do a lot of good things for the province, that's great and I support that.

[Page 167]

Up until about 1999 we always used to have this booklet, the Nova Scotia Manufacturers Guide, a booklet on the move which would list all the manufacturers in Nova Scotia and so on and then for whatever reason in the Fall after 1999, the government stopped producing this and I'm at a little bit of a loss as to why. It was a very helpful booklet. I'm not sure if the minister is familiar with that, he's relatively new to the department, but would there be any consideration to reactivating that?

MR. CLARKE: Mr. Chairman, just to that, obviously the publications that we have for industry and trade promotion, I mean anything to bring that together, I think one of the ways that it may be feasible to do that without a huge production cost is we may be able to look at an initiative to update that type of information and have it available online and everyone who is probably in that sector would have access to that if it's cost effective.

MR. MACKINNON: Well, either way, if the government were to do that I know it would take a little time to download a lot of that information, regardless whether it be in that form or this form, I think there's missed opportunity here and my memory - I could be wrong on this, but I think the total cost for the province was between $100,000 and $140,000, which is a small amount of money when you consider the benefits, when you could list every manufacturing industry in the province and if new businesses were coming in then they would be able to seek out where the opportunities to partner and network and so on, but that's gone now, and I would encourage the minister if he could do that, whether it be in booklet form or online, I think that would be a positive initiative.

MR. CLARKE: Also, the TargetNovaScotia.com site as well will be adding an e-business directory and we may be able to look at some twinning of that. I'll make sure that gets a full review and I'll get back to you on that.

Mr. Chairman, if the member won't mind, would he allow me about one minute?

MR. MACKINNON: Sure. We can recess for a minute.

[3:21 p.m. The committee recessed.]

[3:24 p.m. The committee reconvened.]

MR. CHAIRMAN: The committee is reconvened. It is presently 3:24 p.m., so Mr. MacKinnon you will speak until about 3:36 p.m.

MR. MACKINNON: My next question to the minister would be on the Cape Breton railroad. I know that we were lucky to see that collaborative effort to keep the railroad operational. Would the minister please tell us where the money came from, from the various levels of government? That was never clearly indicated as to where and how much each partner was putting in.

[Page 168]

MR. CLARKE: Actually, the whole, the encompassed part for government, that is what our involvement was, has been split evenly with the Government of Canada. Now, albeit probably for different types of activity, but one of the things that we dealt with is that over the two years of $1 million - so we've put a $1 million commitment.

MR. MACKINNON: A million for the province?

MR. CLARKE: Well, $1 million shared commitment. A lot of that, of course - through the whole piece we heard about deferred maintenance and capital infrastructure improvements to the line and the efforts that would have to be undertaken. One of the things we've always dealt with was we were dealing with the issue and trying to define all the various components at a time of year during one of the heavier winters we've seen for a number of years and, as a result of that, and you know everything was projected - so much was projected for railway ties, for rail bed improvements, clearing of brush along the line, all those things that would have to be undertaken, and of course the bridge, the scheduled maintenance activities and the like as related to the whole line, but in its totality, in the whole projected involvement, it would be $1 million, and . . .

MR. MACKINNON: But where's the money coming from? What pocket of money? Is it coming directly out of the Department of Economic Development?

MR. CLARKE: It's not coming from Economic Development - it's actually coming out of the general revenues of the province. It was actually directed through Sysco.

MR. MACKINNON: So, it's coming out of the Sysco fund?

MR. CLARKE: No. The funds are being allocated to Sysco.

MR. MACKINNON: To Sysco, and from Sysco to the railroad . . .

MR. CLARKE: Because of the project management and the monitoring nature, they have the capacity to do that without getting into some other complicated process to monitor something that they themselves have an interest in insuring, an involvement with the proponents - whether that's the coal . . .

MR. MACKINNON: But Sysco doesn't exist anymore. It's closed; the government closed it two years ago.

MR. CLARKE: Well, you know it's an entity with its own . . .

[Page 169]

MR. MACKINNON: It's a paper . . .

MR. CLARKE: I had the opportunity of hearing some of your commentary on Sysco with my colleague.

MR. MACKINNON: Insightful indeed. As you can appreciate my frustration when we're being accused of being subsidized to the tune of about $35 million a year for X number of years - well in this particular case it's a saving of 35 times 4 - it's fairly significant, about $140 million. The $12 million pales in comparison to that. What you're saying is, the $500,000 that the province is putting in for the railroad is coming from Sysco budget?

MR. CLARKE: No, the funds are being allocated to Sysco, so they're not taking it from their current budget.

MR. MACKINNON: Okay. What about the federal component?

MR. CLARKE: The federal component is being co-ordinated through Enterprise Cape Breton Corporation.

MR. MACKINNON: From what fund?

MR. CLARKE: I don't know specifically which fund they allocated it other than Enterprise Cape Breton on behalf of the Government of Canada - I'll find out for you. I don't know specifically.

MR. MACKINNON: So none of that $1 million is coming out of the economic diversification fund?

MR. CLARKE: Not to my understanding, no.

MR. MACKINNON: Another project I've received some complaints on, not that the railroad was a complaint - actually I'm quite pleased that federal/provincial governments were able to secure that - but a project that I had received some complaints at the local level, because one of the municipal councillors represents part of this area and that's in Glace Bay, the Glace Bay Revitalization Project. It was funded co-operatively between the municipal government and the federal government, and I'm just curious as to why the provincial government was not a partner to that?

[3:30 p.m.]

MR. CHAIRMAN: Could I just ask the members to speak louder, more clearly, and closer to the microphone. The noise outside is making it hard for me to hear, but also to make sure Hansard is picking you up.

[Page 170]

MR. CLARKE: Mr. Chairman, in response to the member's question, with regard to the Glace Bay Revitalization Project, of course as the member is also aware, there have been a number of planning processes, strategic planning and community planning initiatives that have been underway in urban Cape Breton, community by community as well as through the regional development authority, the Cape Breton County economic authority. The Glace Bay coordination, Economic Development was involved with regard to the upfront planning or the consultative process that was there. The next thing we know, the Government of Canada comes in and makes an announcement without any consultation to the province, any expectation of investment or any specific request. Subsequent to that, it's kind of difficult when someone makes this big announcement and the municipality, obviously through their normal capital works project, fits and complements, and that's a good thing for Glace Bay. No project of that size or scope would be unwelcome in any community, but with regard to provincial participation, it's been very difficult when you're not party to what the expectation of the project was.

I understand it's the prerogative of any government if they want to make an announcement, they have that ability. We weren't consulted, but subsequently the type of funding that was sought was significant and it made it very difficult to do any planning when you just had an announcement come down after a consultative process, and I have . . .

MR. MACKINNON: Was there any formal request? I understand and I can certainly appreciate the minister's frustration on that but, subsequent to that, was there any formal request made for the province to become a partner in this project?

MR. CLARKE: Subsequent to that announcement, there was discussion. Whether that's from local area councillors - obviously the MLA for the area has an interest in that project and the like, but any of the correspondence with regard to that was about participating but the level of involvement - and so I'm very clear, there is no identified project expenditure towards that initiative.

MR. MACKINNON: I'd like to switch back to the other issue, on manufacturing. Would the minister and his department be kind enough to give me the total number of manufacturers that we have here, today, in the province? I've spoken to different business people and they seem to think that the total number of manufacturers we have today has declined somewhat over the last four to five years, and if the minister could give me some indication as to whether those numbers are up or down. I'm asking because I see a lot of value-added opportunity in the offshore that, for whatever reason, we just haven't capitalized on. If the minster could do that, I would certainly appreciate it.

MR. CLARKE: Mr. Chairman, I will do that, and just to the member's point, there is a company in Cape Breton that is in the manufacturing sector and is very successful, and to that point they've been working very hard to try and cluster some other types of businesses and manufacturing that can actually provide them with feedstock for their plant activities.

[Page 171]

That's the kind of positive spinoffs we want to see in the manufacturing side. Specific to his question, we will look into the actual numbers and industry participants.

MR. CHAIRMAN: The time for the Liberal caucus has now expired. Are there any questions at the present time for the minister from the PC caucus? Hearing none at the present time, I'll go back to the NDP caucus. Mr. MacDonell, the honourable member for Hants East, your time is 3:36 p.m., and you have up to one hour for your questions for the minister.

MR. JOHN MACDONELL: I think I had left the minister with a question after Orenda, so I'm going back to the Orenda contract, and you don't have a copy of this.

MR. CLARKE: We can get a Page to make a copy.

MR. MACDONELL: I'll read it. I'm going to Section 5.01 and then there is from (a) to (j) in that section, and 5.01 says: the province shall not have any obligation to make any advances of the investment unless the following requirements are satisfied. So I'm going to (i): Orenda Aerospace Corporation or Orenda Recip Inc. shall invest at least $9,331,000 to the project on terms satisfactory to the minister. Actual incurred cost by Orenda Aerospace Corporation or Orenda Recip Inc. relating to the project will be deemed Orenda Recip Inc.'s equity investment.

I'm curious if you could tell me whether or not the company actually made that commitment, did they pay that sum? I think they were supposed to match the province's investment. Did they submit that amount of money?

MR. CLARKE: In terms of honouring their financial, the answer to that is yes.

MR. JOHN MACDONELL: Can you tell me if there was a job creation component in this agreement?

MR. CLARKE: I don't believe so. It is my understanding that that particular project, because of the matching interest of company/federal government/provincial government, that that was the item, I don't know if any staff have otherwise - and thank you for the copy - obviously the whole item was that the royalties that were coming back from that were the repayment terms. It was a loan, it wasn't a payroll incentive and in there were operations, staff, and the like.

MR. MACDONELL: So we're saying that the $931,000 as of Clause 3.01 - it says that "the province would invest the lesser amount", so I'm assuming $9,331,000 was what the province invested, that was the lesser amount and . . .

MR. CLARKE: It's my understanding there was a full draw on that.

[Page 172]

MR. MACDONELL: By the company?

MR. CLARKE: Yes.

MR. MACDONELL: Okay. Then we received, you think, one royalty cheque?

MR. CLARKE: Yes.

MR. MACDONELL: So can you tell me how much that was?

MR. CLARKE: Oh, I think it may be two.

MR. MACDONELL: Two cheques?

MR. CLARKE: If I'm not mistaken - I will verify the number - the figure I recall is $6,500.

MR. MACDONELL: That's in the two cheques?

MR. CLARKE: Well, I'm going to verify that for you.

MR. MACDONELL: Okay. Am I to understand from what you previously said that the $9,331,000 commitment that I read into 5.01(i) was really to be repaid, they were going to make their commitment by repaying the royalties?

MR. CLARKE: That's right. By virtue of sales, the royalties on each of the units sold would come back and be applied as payment against.

MR. MACDONELL: The $9,331,000 they got from the province.

MR. CLARKE: Right. Correct. And if you look at the type of investment that they were seeking, their outcome and their intended purpose in that sector, and had things really gone the way they had envisioned that was a reasonable royalty type of opportunity.

MR. MACDONELL: Okay.

MR. CLARKE: As you can appreciate, it's sometimes difficult, there's always the conditions at the time around that particular business agreement, and the fact that it was an agreement involving more than one level of government and a very large aerospace player, involving an area that would fall into the rural/regional classification and all done by another government - I'm trying to do third-party interpretation, and I think to the numbers, wherever I can, I'll make sure you get those facts.

[Page 173]

MR. MACDONELL: Under a section called Repayment, Section 4: The investment amount of such portion of it which has been disbursed shall be repaid out of royalties as specified in Section 4.01 - which is the section I'm reading, 4.01(b) - the royalty agreement will fundamentally be based on the following: and some of this is blanked out - Blank of net sales of three years beginning the first year of operation. "Blank" of net sales for the subsequent three years. "Blank" of net sales thereafter.

So, it doesn't indicate to me that the royalties are part of the company's investment. The commitment of investment that I read in Section 5.01(I) - that they shall invest at least $9,331,000 doesn't strike me that the royalties are actually supposed to be their investment; it sounds to me as though the royalties are a repayment of the province's investment.

MR. CLARKE: Correct.

MR. MACDONELL: So I'm just wondering - did the company ever invest its share, which was $9,331,000?

MR. CLARKE: The answer is yes.

MR. MACDONELL: They did.

MR. CLARKE: Yes, they would have had to in order for, I mean this was a binding agreement that was committed to. They would have to substantiate - and the reason some of those items are blank is because it's commercially sensitive information and thus the reason for that in any request that was made for some of the detail around it, but as far as the whole repayment component of that, just to be clear, it was on sales and not profit, so it was anticipated on a volume basis that it was built in that process and not on a profit component. If that had been the case, then I'm sure some people would have lots of questions.

MR. MACDONELL: Well, I'm kind of leaning that way. One other condition here: Orenda Aerospace Corporation or Orenda Recip Inc. shall provide satisfactory written evidence that it has established a new operating credit for use by Orenda Recip Inc. in the amount of not less than $3 million or such other larger amounts as Orenda Aerospace Corporation deem necessary to operate Orenda Recip Inc. effectively as to the satisfaction of the minister.

So, you're telling me that condition has been met?

MR. CLARKE: It's my understanding, and in terms of this - because as you know, this has been an issue before the Legislature previously and there's been media and other reports around that, so we're dealing with a well-known topic. One of the items around here, I think from a business agreement adherence point of view to the legality of the agreement, Orenda and/or its parent have complied with the conditions to that. The difficulty has been

[Page 174]

the lack of market success of the product, not the actual engine - the actual engine has proven to be a good engine - but the viability of the marketplace . . .

MR. MACDONELL: They can't sell it.

MR. CLARKE: That's right, they can't sell it.

[3:45 p.m.]

MR. MACDONELL: I want to come back to Section 4.01(b), and I know you can see what I can't, which is blanked out, but the royalty agreement will fundamentally be based on the following, and it's a percentage of net sales for the first year of operation up to three years of operation and part of net sales thereafter. To me, it almost seems that there's a bit of a loophole. I'm just wondering are Nova Scotians ever going to get their money back? I guess that's where I'm going with this.

To say that it's a percentage of net sales, but is there anything to indicate that if you don't hit some level of sales or we don't get some level of royalties back, we're going to stop giving you the money. Is there anything in this agreement that . . .

MR. CLARKE: What we're dealing with now is all the facts of the history of the file, because everything according to the numbers that are there has been disbursed. It's all post fact at this point in terms of a discussion.

MR. MACDONELL: Sure.

MR. CLARKE: So, your question obviously is, where does this particular deal lie?

MR. MACDONELL: That would be where I'd be going, yes.

MR. CLARKE: Right. What is the impact potentially on that money in terms of recovery? You're pretty much talking about how we're going to cost recover a $9 million investment.

MR. MACDONELL: Sure.

MR. CLARKE: And the last time that I actually had an opportunity - I think it was back in the early, mid-Fall of last year, maybe even the summertime when I was doing my tour - to do a site visit there myself, just because I'd heard about it and wanted to have a first-hand view of the operation and see what they were trying to do.

[Page 175]

Like everything else, in my discussions there, people are very dedicated to trying to see the market viability of their product. When it's your job you're very motivated to try and do it. So from a labour force point of view and a commitment to the product, I don't think any of that was unwavering. I think that when you look at the whole investment, I would say that the commitment was made and I suspect other funds expended, but because of the commercial sensitivity of the industry, you're going to be in a position whereby I don't necessarily - you know Magellan would have to speak on their own behalf. All I know is they've met the terms and conditions to trigger all the investment that was made by the province and the federal government. But right now we're looking at them trying to get market viability, and if that's not possible then it's subject to a well-intended investment that won't be successful.

MR. MACDONELL: The government issued them some money after 1999, the Progressive Conservative Party . . .

MR. CLARKE: That's correct.

MR. MACDONELL: . . . and so I would think that you would have some view of where this company is going before you would want to consider putting more money into it. I would be wondering what they do with the money. I'm not sure what's up there, but I'm pretty sure it's probably not $9,331,000 of anything. Have you ever asked what did you do with the money? I think Nova Scotia taxpayers would want to know that.

MR. CLARKE: There has been a full review process, obviously with an account of that significance and size. You're right, the final payments that were drawn against that loan were done because there was a requirement - there's a legal agreement that you're looking at parts of right now - that they were meeting the terms and conditions at that point in time to exercise the agreement that was legally binding the Province of Nova Scotia to participate in. If they were meeting it and they were investing and trying to commercialize the product, it's very difficult because I wonder what questions would be asked at that point. If someone said, that's it, pull the plug - pull the plug on what? I just mean in terms of we'd have a whole alternate one and that is what you are doing, putting people out of work when they're trying to put an industry in place.

But to the specifics of what I do know, there was a legally binding agreement and subject to the terms of that agreement being met, the final amounts that were due to the company were disbursed.

I could point fingers and talk about what a past government decided to do or not do, but what I do see and hindsight provides great clarity, doesn't it? I do understand the aerospace industry is a very high-cost and high-risk sector, and if nothing else this particular item helps to highlight that. Ultimately, I do not believe that both levels of government - the Government of Canada and the Province of Nova Scotia - would have invested to the degree

[Page 176]

they did if they didn't feel there was going to be a market opportunity. I want to give them the benefit of the doubt.

MR. MACDONELL: I think that's fairly honourable of you. I have to assume that when the government enters into these agreements - and it wasn't your government that did that in this case - we like to go on the assumption that this is for the betterment of Nova Scotians. It's their money, so they should get the benefit of that and certainly expect there to be checks and balances in place, and if they don't meet them, then either they're required to pay back the money or they're not going to get it all or whatever. I guess I'd like to know, because even considering - I can point fingers at the previous government too - what your government walked into, in this agreement, when you came in in 1999, you still saw fit to give money to this company, so I'm . . .

MR. CLARKE: It's not about seeing fit. It's about honouring a legal obligation, because a contractual agreement was set between three parties actually. If they were meeting the terms of what that agreement was in making those draws, I don't understand, what would you do with a legal agreement?

Technically, just for scenario purposes, if you don't honour some agreement, but they're meeting the terms of the agreement but you feel just because you don't like the deal and the way it looks to you because new eyes are on it, and you're not going to adhere to it, well the counter is someone has a good case to sue you for not honouring it, and any negative harm to them could cost the province even more than their investment.

The point is, there was a legal agreement in place. I suspect if I were the other company with that legal agreement and if all of a sudden one of the parties to that did not want to honour a component of it, they may seek other avenues to protect their interests.

MR. MACDONELL: Sure, sure. Absolutely. That can only raise the question to me, first of all did you - and it may not have been you at the time as minister - did your government investigate the legal ramifications of not giving more money? Did the government investigate whether or not this company, under this agreement, had a good case for suing the province if they didn't give that money? Did the government raise any questions about the fact that they weren't selling any engines and that they got $9,331,000 of Nova Scotia taxpayers' money? They were not selling any engines, and wouldn't that be deemed as breaching this agreement? Was that question ever raised?

MR. CLARKE: Just to those points and to the member in terms of response. In fairness to the type and the weight of the questions, and I think in fairness to the overall due diligence of the questions you've asked, it's going to be something I will look into and report back on; otherwise we're just being speculative at this point.

[Page 177]

MR. MACDONELL: Sure. I don't really want to be speculative. It says in 5.02: if the minister is of the opinion that Orenda Recip Inc. or its officers or directors are conducting their business and affairs in a manner that is inconsistent with this agreement or for the purpose of attaining any portion of the investment amount to which they would otherwise not be entitled as referenced in 11(a) of the attached B, the minister may refuse to pay any further investment amount, require Orenda Recip Inc. to revive correction action and if not forthcoming then, require Orenda Recip Inc. to repay the investment amount received plus interest at the rate of 6.5 per cent on the amount advanced to that date, less royalties paid.

MR. CLARKE: I have no reason - at the time that the draws would have occurred during the term of the current government's administration - to not believe that the terms and conditions of that agreement were not being adhered to. So as I indicated, and because of the levity of the impact of my speculating any further, especially on a legal agreement of that nature, I will report back on the detail of that.

MR. MACDONELL: You have indicated that there were no attachments to job creation on this. I have an Economic Development news release dated - it looks like 1997, I guess - anyway, it says: A new company called Orenda Recip Inc. is setting up an aircraft engine development and manufacturing facility at the former Canadian Forces station in Debert. Nova Scotia Premier John Savage and Cumberland-Colchester MP Dianne Brushett announced today in Truro. In addition to the 110 people Orenda Recip will employ at Debert, another 325 supplier jobs will be created over the next five years. So do you still contend that's not a condition of the agreement, that they would create so many jobs?

MR. CLARKE: I think what they've listed, if you read the language of their release versus the language of the contract, the fact that they were projecting the number of jobs that could be created and the number of spinoff jobs that could be realized as a result of the full operations of their plant.

MR. MACDONELL: Pardon? I apologize.

MR. CLARKE: No, no, I can just repeat that. Obviously, they are projecting the number of people who might be employed, as well as the spinoff benefits in terms of jobs as a result of their getting into full operation as per their business plan.

MR. MACDONELL: So your contention is they haven't breached any of this agreement then?

MR. CLARKE: What I've said is that to your question about the due diligence around the disbursements of the final amounts that this government would have been responsible to disburse, I will look at insuring compliance was met. To my knowledge, it was, but I'll confirm that.

[Page 178]

MR. MACDONELL: Okay, I would appreciate that. I don't know if there's much more that I can ask you to do in that regard. I'm worried, and I want to put this on the record that over $9 million of Nova Scotia taxpayers' money has gone to a company in Ontario that, as far as I can see, either hasn't had to live up to any obligations, because it hasn't sold any engines - except maybe one, where that royalty came from, it must have sold something - it hasn't even come within a country mile of the people that the government's news release said it was going to employ. So they must have had to base that on something, and then there doesn't seem to be any, therefore, there's no route for the province to get its money back as far as I can see.

MR. CLARKE: Which, Mr. Chairman, in answering that is why in previous efforts I've tried to continue to say that in helping the company and endorsing their efforts within the aerospace industry to sell and to commercialize their air product is the best thing that could be the outcome, but it's proven to be a difficult challenge for them.

MR. MACDONELL: Well thanks, Mr. Minister, whatever you can glean on this I would really appreciate knowing.

Just to make a comment around the information we get through freedom of information and the material that's blacked out, I think there's enough information in this agreement that we do have that we could say, raising these concerns makes it commercially sensitive. I think any specific number doesn't really add to any sensitivity of that, in the interests of the taxpayers.

[4:00 p.m.]

MR. CLARKE: Mr. Chairman, I would say, just to clarify, there were two royalty payments received for a total of $6,500, since we have that information to provide to the member.

MR. MACDONELL: And that's pretty close to what you said, you thought there were two and you thought it was $6,500.

MR. CLARKE: As well, I just want to go back to the investment side because I've been careful not to speak to the proprietary interests of a company that should speak on their own, and while I won't get into the numbers, what I can say is that the company has invested more than the combined investment of the province and the federal government together, into that project.

MR. MACDONELL: Here? In Nova Scotia?

MR. CLARKE: Yes, that's my understanding.

[Page 179]

MR. MACDONELL: Well, where is it? Is it in the building, is it in the land?

MR. CLARKE: It's part of the whole due diligence. If I knew the intricacies of building an airplane engine, I would probably be able to detail that a little more for you.

MR. MACDONELL: I would sure like to know, and I'm sure the people would. I did get the name of that aquaculture facility proposed for Northwest Cove, Aquafish Technology. Do you know if the province has given any money, either for that project in Northwest Cove or any projects by this company?

MR. CLARKE: What I will do is find out. They may have approached the regional development staff with regard to their project or the RDA in the area. I will look into it. I'm not familiar with Aquafish. We will find out. I would suspect involvement from us would probably, if it's a development initiative, look to the RDA and/or our regional development staff and the municipality to see what type of involvement may have been around for the development.

MR. MACDONELL: Yesterday I asked about the regional development authorities and I was told it was kind of a three-layer financing, but I don't think I ever clearly got if it's an equal three. Does the federal government, the municipality and the province all contribute? I have a number of $125,000.

MR. CLARKE: That's the provincial contribution.

MR. MACDONELL: Right.

MR. CLARKE: The municipalities put their money on the table, to the point which the province matches it. So obviously there would be a base of $125,000, matched by $125,000, and then the Government of Canada would come in on top of that. That would form the basis of the core funding. As I've said, there are a number of initiatives because of the nature of regional development and community economic development that are going to involve other partnerships and funding agreements as a result of that. Some of them have been, for instance, whether it's with some of the Internet for community business or it could be a building, it could be any number of things.

MR. MACDONELL: Could you explain the CEDAs? How is it that they create investment? Is there a dividend? What's the mechanism? I actually have to say, I think community economic development is so important for sustained economic development. So I think as much as the communities can be involved, that I think probably the outcomes are better. I would really be interested to know how those investment funds work.

[Page 180]

MR. CLARKE: A couple of things, community economic development or CEDAs, the investment funds, are proving to be a very useful tool with regard to raising local capital for investment in local initiatives where capital has been difficult to acquire. It forms part of a whole wide range of approaches to small business, especially in the regions that we're trying to encompass. There has been, for instance, in the last budget, in the regions where some investors do have the ability and they believe in their community, to raise the ceiling from a $30,000 maximum to a $50,000 maximum investment per investor. So that can really open up some good opportunities. What we've seen, clearly, is, I received a note about the BCA Investment Co-operative and they were very pleased that this year they were able to exceed their target by an additional $60,000. They're out investing in community projects.

We do a review, and we are reviewing to say, okay, because of the Securities Commission component we have strict adherence, and that's a good thing, with regard to compliance for investors and ensuring that things are there, but we're also looking at the interpretation, sometimes, of what constitutes active business, and when you get into community development sometimes the initiative may be, for instance, building a small incubator building or mall, say, that is to be housing the businesses that would go in it, but the community is willing to invest it. It wouldn't necessarily - well, it doesn't, unless you create nine or more jobs, I do believe, in terms of forming an active business.

What would happen is that that would be precluded at this point, and it's sort of saying, well, in a community, in a small town, that infrastructure is economic development and it's active to the business because there wouldn't be a private sector person looking to build that type of structure. That's the type of review to say how do we help facilitate broadening. So that process is underway.

For those with active businesses, and now in the province there are 13 different funds and that's growing, with over $5 million invested. There's 441 investors this year alone. So it's growing, and it allows Nova Scotians to have an investment but it's based upon some of the incentives, obviously. There's a 30 per cent equity tax credit, there's a 30 per cent, actually, self-directed RRSP or approximately 30 per cent, and a 20 per cent government guarantee over a four-year period. That's part of the incentive. In other words, to be competitive with encouraging investment, you need to have those incentives. Obviously, like any investment, people have to be aware of the risks and that's why there is the planning that goes into it and the adherence.

Having been involved with community developments and taking some people through that process, it is a very comprehensive one. The good thing about it is it's comprehensive to the point that those who come out of that process, the Securities Commission, really have gone through a good leaning curve and have gone through every element of due diligence that they're going to have to do follow-up for. So it's very positive for investors because the governance process and those managing it have been put through a very thorough process.

[Page 181]

The other component to this is, how does it fit into other programming and other opportunities for business. That's why there has to be other things. I was mentioning to the member for Cape Breton West the fact that we have had engaged dialogue through the Co-operatives Council and through the Credit Union Central and the Credit Union network to look at the issue of access to capital for small business. Just as much as they want to operate and seek investment, there are people who maybe don't need that large an investment but they need access to capital, and the big banks have not been there. So we're trying to deal with any number of things to ensure small business is considered. I was mentioning NSBI as part of it, its extensive consultation last year, and now they have the Capital Ideas road show, doing more along the lines of small business programming and focus. They will be articulating that further.

There are a number of things, CEDAs are one tool in development but we also have to recognize we have to make it as flexible as possible so that community can derive the greatest amount of benefit and encourage the greatest amount of investment, and how you take that and leverage other opportunities.

MR. MACDONELL: These incentives, are they the same as those I saw in your presentation for the Black Business Initiative?

MR. CLARKE: That's correct.

MR. MACDONELL: Are they identical?

MR. CLARKE: Unfortunately they didn't achieve their target with that, but the actual presentation with regard to the tax scenario was the same.

MR. MACDONELL: Anything that works. I sometimes wonder why - and maybe this is silos that are erected - in rural Nova Scotia, particularly in agriculture, I think they deal almost exclusively with the Farm Loan Board, and I just wonder if anybody has ever thought of other mechanisms as far as community economic development applying similar strategies to the agricultural sector or maybe even the forestry sector? I see in rural Nova Scotia these are really important. In particular with agriculture, these are not fly-by-nighters, these are 30-, 40-, 100-year commitments to the industry. Has anybody in your department thought we should stretch this flexibility to apply to a sector that really doesn't draw as far as the Department of Economic Development?

MR. CLARKE: One of the areas of priority - there's a yes and a no here. The no, with regard to direct programming targeting a sector where there is a department of government responsible to it. But yes, in the view to supporting - these are all small business people and they all experience the same frustrations in terms of access to banking flexibility. So we're looking at those items, access to investment capital. Because communities decide what types of business are worth investing in, some of these investment vehicles we can look at to keep

[Page 182]

regional money in regions and help grow the businesses that are there. In the wider, broader context, if they have better access to a banking function, to a lending function, to be able to raise capital, then that is the wider focus of how all businesses can fit in but not specific to the industry.

MR. MACDONELL: I only have one other question. I'm curious if you have a strategy around Cape Breton, particularly industrial Cape Breton. I think it was a real missed opportunity, the fact that the gas hadn't gone there. I'm just wondering what your thoughts are, because I see a lot of potential in Cape Breton. In terms of your department, are there initiatives you intend to bring forward or are there others that you would like to partner with in trying to create opportunity there?

MR. CLARKE: I agree that there's great potential and it's growing in Cape Breton. There is no shortage of examples where things are moving. When some people look at where gas should flow, and gas should be making its way to Cape Breton, well, there are other issues with regard to development, and that is the fact that settling the issue if they're going to develop and even be able to explore gas at their doorstep. If you have two areas of the province that have an ability to produce a core supply of gas near shore, with all the factors that have to be considered through the regulatory process, assuming all that stuff is there, then the case is it's a lot more efficient and a lot more effective to run it three miles rather than 150.

The other aspect to this is that communities are coming together, there are initiatives, I don't think anyone is giving up on oil and gas opportunities on the East Coast, communities are very much, in Cape Breton, working towards that, and the Superport Corporation, as I say, the Laurentian Group in Sydney, they're all trying to position to play different but complementary roles as far as the offshore sector and from a fabrication to a supply base point of view.

Obviously the issue with the Cape Breton Central and Nova Scotia Railway - talking about strategies - in dealing with the fact that you see a growth opportunity for an economy and both a need to retain such infrastructure, that was in place and the efforts were extended because there was a shared understanding, a belief and a knowledge that there is a need for that, and there is a sense the economy is going to fully grow. It has been going through a transition period and it's diversifying. There have been certain items, people focus on call centres but there are some very other key things that are happening in and around the area, whether that's advanced manufacturing, plastics, rope, all this stuff that's coming out of Cape Breton that is helping to stabilize and reconfigure the economy.

From a planning point of view, obviously, we do have our networks within Economic Development in the region, and a regional manager for eastern Nova Scotia and the team of people who are in place, our collaboration with Nova Scotia Business Inc., our involvement with the Cape Breton Growth Fund, we have a provincial employee who works directly at

[Page 183]

the fund and liases, we've ensured that, wherever possible, we're jointly planning, and obviously our RDAs play a key role in helping to facilitate any number of these things.

In its totality, there's a very positive growth mindset in Cape Breton, and the appetite to move on is growing more and more. We're seeing a lot of people coming up, whether it's investing in CEDAs or other things. It's been very positive.

[4:15 p.m.]

MR. MACDONELL: In closing I will say, I don't know if I want to wait too long to find out if there's going to be gas struck off Cape Breton and there's a fair bit of concern around weighing that against the potential damage to the fishery there, which generates a huge revenue, probably generating more revenue than the Sable offshore is generating for the province right now. So there's a question of, what are you actually going to gain? Also, the notion, my understanding and certainly it would be my hope that you are going to write a better agreement than the previous government when it comes to the offshore, that the people actually get a chance to use it. I can see that gas going right by, even if it comes ashore in Cape Breton, nobody may ever get any use of it. It definitely hasn't achieved anybody's hopes in Goldboro or Guysborough County, what's coming in there.

Definitely, I think the people would welcome it. I worry that Nova Scotians generally, but certainly if we compare the use of gas here for Nova Scotia Power and anybody who is getting a benefit, I think, an edge in this competitive market is going to do better. I think the fact that Nova Scotians are competing with New England for markets and they're getting our gas. Certainly, I don't really want to see Cape Breton left out of that picture of possibilities and having to compete with the mainland or compete with Halifax, because there has been a history of that recently. With those comments, I want to thank the minister. I look forward to getting the information back on those questions I raised that you didn't have the information on here. I want to thank the staff for their help. I appreciate that. I will request now, perhaps, an opportunity at some time down the road to come and talk to some people on your staff to improve my learning curve. It's something I've wanted to do for a while and haven't found the time to do it. If they would be willing to indulge me, I would be appreciative.

MR. CLARKE: We would be pleased to facilitate that.

MR. CHAIRMAN: I take it the NDP has finished their questioning of this minister for these departments?

MR. MACDONELL: They are.

MR. CHAIRMAN: We will now pass the time to the Liberal caucus.

[Page 184]

The honourable member for Richmond, Michel Samson may have some questions of the minister. Your time is now 4:20 p.m. You have one hour.

MR. MICHEL SAMSON: Mr. Minister, as you're aware, the USG wallboard plant made a decision to cease its operations in the Point Tupper Industrial Park, which is located in Richmond County. I believe it had a total workforce of 87 or 89, skilled tradesmen for the most part. The decision was made to move their operations to one of their existing facilities in the United States due to the high cost of transporting the product to market. I know that NSBI has been working with the previous owners and with some prospective owners. I'm curious as to whether you could just provide me with a brief summary as to where we're at right now with possibly having a new operation come in there. I guess I should also remind you that I've been informed that all of the equipment that was at the facility is being removed by the previous operators to take to their other facilities. My understanding is it will be a bit of a shell of a facility, but it still has natural gas capability that is coming to the facility and everything else. I'm just curious if you could provide us with where we're at on finding a new company to take over that facility.

MR. CLARKE: It's probably a very good and timely question. What you're hearing is correct. There is an interest in the facility, and that is getting a full business case review. As you mentioned, Nova Scotia Business Inc. is leading that file with the interested proponent. However, as you can appreciate with anything like that, it's at that stage of development that's a sensitive one. I can clarify this, there is a very serious business interest there with regard to utilization of the facility.

MR. SAMSON: Could you give us any sort of time frame as to what your department is looking at as possibly having some sort of deal reached? The reason I ask is because the 80-plus tradespeople are now starting to see their severance packages come to an end. Some of them have taken the retraining options and some upgrading options, but at the end of the day, decisions are having to be made as to whether they can remain in the area or if they're going to have to make the unfortunate decision of leaving the area to find employment. On that basis, I know it's difficult to give a specific time, but are we anywhere near a deal or are we still looking at months of negotiations?

MR. CLARKE: A couple of things - and this falls in the category of the positive - that is there's more than one interested party, in utilizing the facility. All interested proponents are being given full consideration and the benefit of some review. To your question specifically, with regard to a timeline, I feel confident that we're not dealing with something where we expect to get a response 12 months from now. For the people who are there and bringing it forward, it's the issue that there are some very solid business proposals, that's been identified, it's been confirmed, and I think what you're seeing now is people looking to put the necessary financial components together. I don't think it's a long period of time, to the honourable member for Richmond, to expect an outcome of one potential project or

[Page 185]

another, but I think I want to be somewhat cautious in saying that it will probably take the next few months to get there.

MR. SAMSON: Is it safe to say that it's your department that is handling the negotiations, as to finding a new proponent to take over this facility?

MR. CLARKE: The account executive that's been handling this particular file has been with NSBI, obviously with the collaboration between Economic Development, because you're dealing with major industrial activity, my office would be engaged but it's led by Nova Scotia Business Inc. Obviously, we're aware of what is being proposed for the area, and as I say, it's now into the proponents really getting their financial commitments in place.

MR. SAMSON: I certainly appreciate the efforts by NSBI and your staff in this regard. I would encourage, even to possibly suggest to the proponents that one of the main attractions is the skilled workforce. As you keep moving further and further, since they have ended their employment, your chances of retaining that trained workforce and tradesmen in the area become less and less because more and more, some of them, I already know of a few of them who have found employment elsewhere, not being able to wait around - I guess that's the best term. I would just simply encourage your staff to make that point, that there is a time sensitivity here in the sense that the tradespeople who would be ready and the skilled workforce that would be ready to go and work for a new employer are, unfortunately, having to make decisions right now. I certainly hope that continues on a successful path.

One of the other issues I wanted to raise with the minister, this is something we discussed before you became the Minister of Economic Development, the issue of the Provincial Employment Program and the fact that under the current guidelines, elected members were not permitted to apply to have students come work in their offices. I'm curious if the minister could indicate whether he has looked into that issue or made any sort of progress on addressing that?

MR. CLARKE: Just as a preamble to your last point, and I would agree, USG was very clear as well with the satisfaction and the quality of the labour force that they had in place there. A corporate decision, obviously, has left a displacement factor and a lot of well-qualified good people are feeling the anxiety of what's next. Obviously, I would just echo that we share that same sensitivity with regard to trying to facilitate future operations and a new business operating there being key, so that it's not lost with regard to the timeline and the sensitivities around that.

To your most recent question with regard to the Provincial Employment Program and working in constituency offices and everything else, as you know there have been the pressures and demands. One of the things that I had talked previously about was some form of an intern program, because I think that we've all said it's something that students could have a meaningful experience from, to be part of that. As you know, that whole program has

[Page 186]

now been moved to the Department of Education. The focus of that has been specific to, of course, building with the skills agenda, and thus the delivery from Education and no longer Economic Development.

MR. SAMSON: So you no longer have . . .

MR. CLARKE: I no longer have . . .

MR. SAMSON: It's not in your budget numbers?

MR. CLARKE: No. It's been transferred out.

MR. SAMSON: The responsibility is now with the Department of Education. And it would be in their budget line. It's not showing up under your budget at all?

MR. CLARKE: No.

MR. SAMSON: So, not only control but everything. The reason I ask is that my understanding was that budget-wise it was still in your department but control had been transferred over to the Department of Education.

MR. CLARKE: It was transferred out.

MR. SAMSON: Everything is gone to Education.

MR. CLARKE: Yes. The only program - actually there is one program that has been retained as part of that, and that's the YES program.

MR. SAMSON: One of the other questions, Mr. Minister, one of the concerns that's been raised to me is that in the move to NSBI and the announcements made by NSBI, while good announcements, are for large projects. One of the frustrations, especially in rural Nova Scotia, is our economy is governed by small business. In my area, we're fortunate, we do have Stora, we have Statia, which are two very large employers, but other than those, the rest of our employers are mostly small business. One of the frustrations that has been expressed is that if you're a small business with five employees, 10 employees and you're looking for $10,000, $20,000, $25,000 loans to make sort of an expansion, renovations and that, there is nowhere to turn anymore. I have sent countless letters to your staff, before you were minister, in Port Hawkesbury saying, look, this gentleman came to see me, here's his business idea, here is what he would like to do, what assistance can the province offer in this regard? Repeatedly, the answer has come back, there is no program, there is no money for this type of project.

[Page 187]

The message has almost been that if you're a small business, the province is just not there for you, but if you're a large business and you're going to create a lot of jobs or make a big project, then we're interested. I am wondering if the minister could indicate if that is the case, that there is nothing there for the smaller business, and if he has any intentions of bringing forward - I know the minister had indicated when he was down in Isle Madame that there would be a big announcement coming for small business, and I thought it might be something along the lines of having some assistance available, and instead it was - I have concluded through the budget - additional tax credits and tax benefits that had been announced. I am curious, could you tell us, Mr. Minister, what message are you sending out to small businesses, and where can they look to your government if they have these ideas but they're on a very small scale as to how many additional jobs they would be able to create or sustain?

[4:30 p.m.]

MR. CLARKE: That is an excellent question, and I have had an opportunity with a couple of other legislative colleagues to kind of touch on some of the areas that we're trying to move in terms of small business supports. Obviously the tax one was evident in terms of the budget, but there's more than just that. It's quite wide-scoping in the sense of the number of players there. One of the things that was very clear and evident when I toured the province and as you meet with business, as you've articulated, is access to capital. Sometimes it's not significant capital, but getting access to capital and access to a banking function that's reliable and is understanding to the realities of what a regional economy can be like versus what Bay Street thinks the economic model should be for a company, and having that understanding.

We did come back after my tour, and I sat and I said, okay, how do we engage a process that supports small business but does it in a way that also helps facilitate them to do it in a very efficient way, without getting program-weighted. I had a dialogue and engaged the Nova Scotia Co-operative Council, as well as the Credit Union Central and the Credit Union Network, because throughout the entire Province of Nova Scotia and looking at what we can do in terms of programming, in the near future there will be an initiative that goes to the heart of trying to help support and putting in some flexibility that takes down some of the current barriers to access to capital, and does it from a local delivery point of view throughout the province.

The other aspect of all this is the work that NSBI has undertaken with regard to focusing in on how to accommodate capital and lending and supports for small business through their operations as well. That's something, obviously, they've done the tour of the province to help build up that, they're doing the Capital Ideas road show right now, in Sydney today, and following that, they will be articulating further.

[Page 188]

So there's going to be a number of positive small business components. The other thing is we've had a dialogue and I have current correspondence back-and-forth with the CBDC network in Nova Scotia, the Community Business Development Corporation, looking at the areas where there are gaps where there may be some co-operation amongst or between the province and the CBDCs and/or our federal partners to help provide core support for small business. That process has been engaged as well.

MR. SAMSON: I appreciate that. I can't encourage the minister enough to look at some ways to assist small business, because in many ways you just can't access the capital they need and with the interest charges and the sort of commitments they're being asked to make through traditional banking methods are just not within their reach. More and more, I can list numerous funding announcements that have taken place in our area, and HRDC is at the table, ECBC is at the table, Industry Canada is at the table, and the province is not at the table. That is something that in the past was different, the province was there, it was leading the way and it was a major partner. We are hoping to see the day when the province is back there as a major partner.

I don't want to take up too much time. The last thing I wanted to raise with the minister is, certainly as a member from Cape Breton, we're all pleased to see the solution was found to maintaining the Cape Breton & Central Nova Scotia Railway, but I can't tell you how many people in the Strait area have stopped and questioned me about the deal that was reached. As you know, coal was being landed down at Porcupine Mountain, which is just on the other side of the causeway, was leaving there, and no one ever asked for the coal, I can assure you, to come to the Strait area, I have never heard anyone say what a wonderful thing that we have ships coming in with coal and dumping it and then it being taken by rail, but people are baffled at this.

Maybe the minister can clarify it for me. Coal was being landed there, taken by rail maybe a kilometre and a half distance, if that, from where it was being dropped off, to the Point Tupper facility, Nova Scotia Power's generating station. Under this new deal, the coal will be dropped off in Sydney, at the pier there somewhere, then it will be put on rail and taken from there over to Point Tupper, which I wouldn't even want to guess how many hundreds of kilometres that is, but it's over 100 kilometres, at least. What people are asking is, great, we're happy you saved the rail line, but how can it possibly make economic sense for Nova Scotia Power to go from taking your coal a kilometre down the rail line to now dropping it off in Sydney and shipping it by rail all the way over to Point Tupper?

I guess the question they're asking is, who's paying for this? Maybe you can enlighten me and enlighten those people, because that's one part of this whole agreement that's never really been explained publicly, how that makes economic sense for Nova Scotia Power. At the end of the day, who is going to be paying for that obviously increased cost to them for shipping the coal?

[Page 189]

MR. CLARKE: Well, the current flow of coal traffic is actually from the Strait area to Sydney. The coal was flowing actually down the line, as we speak. It goes from the Strait area into the Sydney area by rail car at this time. Part of that is, Nova Scotia Power, a couple of things you will see, they have just had a tender out for expressions of interest to set into motion putting in their own off-loading facility in the Strait area for Nova Scotia Power, as well as having one in the Sydney area. One of the components that they found this year as well, with the weather, is that with extreme weather conditions, having alternate sites was logistically and strategically a good manoeuvre for them. The type of coal, it's not just Point Tupper, of course, there is also the Trenton plant that is part of