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HALIFAX, THURSDAY, APRIL 29, 2004

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

1:42 P.M.

CHAIRMAN

Mr. William Dooks

MR. CHAIRMAN: Good afternoon, ladies and gentlemen. I call the committee to order at 1:45 p.m. Today we are continuing with the estimates of the Department of Energy and I welcome you all here. At this time we will inform you that the NDP has 41 minutes left in turn and I understand that the Liberals do not have any further questions today; their caucus is finished with questioning. So I would like, Mr. Minister, to turn it over to you, to see if you have any opening comments and then we'll go to the NDP caucus.

The honourable Minister of Energy.

HON. CECIL CLARKE: Mr. Chairman, in the fairness and fullness of time I think we can proceed directly into questioning from my good, honourable colleagues from the New Democratic Party.

MR. CHAIRMAN: The honourable member for Cape Breton Centre.

MR. FRANK CORBETT: It's always how you're measured at the end and not at the beginning, so I don't know how good we'll be at the end. For the minister's information, and staff, most of my questioning today - and I'll be sharing my time with my colleague, the member for Dartmouth East - my comments will be around offshore projects, particularly the SOEP deal and EnCana and most subjects will revolve around that.

I want to bring to the minister's attention, and I tabled this document and, if he wants to see it, I will pass it on to him, it's regarding the budget and the story appeared in The ChronicleHerald on March 24, 2004. I will just read part of it and then I'm going to ask you a question on it.

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"Nova Scotia has scored a victory in its battle over oil and gas revenue. Tuesday's federal budget revealed the province will get a $30-million rebate because Ottawa plans to change when it started the equalization clawback on offshore revenue. The clawback started in 1993 with Cohasset-Panuke, a project that didn't produce as big a flow of revenue from oil and gas as first expected. Now the clawback will be "reset" to 2000-01, when the Sable gas project started. Nova Scotia can expect a cheque from Ottawa of $24 million to $25 million in 2004-05, with the remainder to follow in 2005-06, the federal finance official said Tuesday."

I tabled that, Mr. Minister, if you want to look at it directly, just to refer from it - but, did you get the cheque yet?

MR. CLARKE: It's as good as in the bag. No, actually in all seriousness, this is a positive in terms of a recognition and a formal move forward with the Government of Canada with regard to the issue of the reset mechanism that's in place. However, it's an official agreement, the officials right now, our officials and the federal officials are just working out the details associated with the funds that have been transferred and, as you recall, the federal budget did commit to that vicinity. So at least it's a definitive number and one that is being forecasted for out years as well.

[1:45 p.m.]

MR. CORBETT: Mr. Minister, with that said, if - I shouldn't say "if" - when we receive that money is that going right into consolidated funds or will it be in a particular account?

MR. CLARKE: It's my understanding - to the member, Mr. Chairman - that it does go into the consolidated funds for the province.

MR. CORBETT: I would like to just ask a few questions then around the Sable and SOEP agreement. You know we've often, especially from this side of the House, bemoaned the fact of believing we got a bad royalty deal. In the recent news the forecast of reserves has been downgraded by 40 per cent, which is troubling, and given that Nova Scotia's projections for the year 2007 to 2011 would be the most lucrative from the revenues with a total estimate of over $1 billion for the lifetime of the project, has your department come up with a revised forecast of royalties over the newly downgraded life of SOEP?

MR. CLARKE: The answer to that is yes, and it's also a working calculation. As you would recall at the time of the adjustment, with the downgrade of the reserve we indicated what we anticipated, which had been in the vicinity of upwards and over $2 billion to go down to $600 million to $1.1 billion potentially. And the reason it's an adjustment in that area is the fact that it's going to have to be dependent on actual production levels. So it did reduce from $2.1 billion, so we do the average at $750 million as a result of the decrease in those

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estimates, and really took it from $2.6 TCF to $1.7 TCF. That has been substantial and as this project moves forward, it could even be that it gets adjusted upwards, but everyone has to be prudent and the reason for the announcement coming forward was the necessity to report for shareholding interests on full disclosure for corporate governance and accounting purposes.

MR. CORBETT: In the budget just announced, the royalties are scheduled to be not more than the $20 million as previously announced?

MR. CLARKE: That's right.

MR. CORBETT: And you know a lot of this is being blamed on the strength of the Canadian dollar, but with that you wonder about the atmosphere that that deal was negotiated in. Doesn't that just go to strengthen what a bad deal we negotiated around the Sable project?

MR. CLARKE: Well, if you look at it - and you are correct, I mean the amount of royalty adjustment had to be corrected appropriately. That adjustment, aside from the Canadian dollar, really was affected as well by production levels being down and thus current efforts, and with the Alma platform, the production levels have risen back up. So it was the dollar and a reduced volume from anticipated flow of gas, and that has been adjusted and of course, as you know, there's the compression deck project by ExxonMobil as a result of that, and obviously, where do you move forward? Well, the Deep Panuke project - and we can talk about that if you wish - will be additional capacity. But to go back to your terms of what the deal is about, I don't think it's about whether or not the royalty mechanism is working. The actual mechanism worked. The issue is how much money the Province of Nova Scotia is receiving as we are and should be, and we maintain as a province that we are the principal beneficiary of our offshore resource - and when only 19 cents on the dollar is coming back, that's the fundamental error.

If we were receiving the full royalty benefit from the Government of Canada, that would be in place. You and I could sit and pontificate about what the best royalty deal would be, but the reality is that the previous government had concluded that and we are committed, and the process of achieving royalty targets and processing that, I think, actually does work. The people do their job, and the officials and the professionals that we have.

Part of what we've been talking about, and that's where the reset comes in, it's about acknowledging that there isn't as much benefit that has been derived by this province, and I'm glad to see that on the federal stage all Parties are talking about the importance of us being the principal beneficiary and that Nova Scotia should be the direct beneficiary from the economic spinoff and benefits from these projects. There's work, not only with our efforts with industry, but also within governments and it's something that Nova Scotia and the Province of Newfoundland and Labrador share and something that we've worked collaboratively on, as most recently as the Atlantic Energy Ministers' Conference.

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MR. CORBETT: I thank you for your answer, Mr. Minister, but I'm still a little bewildered. I realize that we'd all like to have a crystal ball when we do these deals, but I would also contend, as you mentioned in your answer, that this was done by a previous administration. I would go so far as to say one wonders about their moral right to do that when the timing, if you think of it, basically if not election day, awfully close to it.

I guess a more proper question around that deal is what mistakes did we learn from there and how can we use that in going forward if, hopefully in the future, we have other projects?

MR. CLARKE: Obviously, one of the things we've looked at was - we've all assessed and I think your Party and the Party that I'm part of - have had our political interpretations of what that deal was about - or not about, as the case may be.

However, what we have learned is that in all of this there wasn't clarity as to the benefit to Nova Scotians. We're still trying to work that clarity out, even with the Government of Canada. So there was an intergovernmental issue aside from a corporate or around the SOEP and the partners associated with that and what the royalty regime would be. Because a deal's a deal, one would have to look at other things where we respond and what we have to look at is the process around future projects such as Deep Panuke, any development plan, and it being looked at in a much different light than the previous one, and as well as SOEP, because at least now we've had the benefit of a major project in our region and something that we can look to benchmark for future projects.

One of the things we've talked about is the difficulty when you get to the regulator trying to work through process as to what people will or won't do, what they intend to do, what the benefits are. Part of the process is to have those discussions up front to get them clarified, and one of the reasons we have been pushing Ottawa to move forward with us in clarifying the whole regime of benefits is so that we can better interpret what resources are going to be available to Nova Scotia if a Deep Panuke goes forward. We have to have that clarity. We do not want to see a project that could be in the vicinity of $0.5 billion or more and the associated project activity and future development being at risk because Ottawa has still yet to clarify what, for them, is a legal, legislated obligation to this province. While years go by, the opportunities also can put the subject to risk if we haven't had government-to-government clarity.

I've been very pleased that it has been supported that we actually achieve that by all political Parties, I think, that want to see Nova Scotia as a principal beneficiary. What we've looked at is what was there before and how to basically move forward because we have some history of examples of what happens when a project actually is implemented. As a result of that, I think we've followed all the ups and downs along the way and one of the things that has been consistent in all that is further clarity as to what Nova Scotia can expect and be able to project for the well-being of our citizens. It makes it very difficult if 81 cents on the dollar

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is not coming back, and what makes it even more difficult if a government and the objective of all this is to get from have-not to have status is that every time you make a gain in development of the offshore it's clawed back in equalization.

There's a fundamental issue of fairness that has to be addressed here over our ability to stabilize and to grow the Nova Scotian economy, to have the level of regional diversification that people want us to have and to have the resources coming to Nova Scotia so we can spend them on the priorities of education, training, regional infrastructure - whether that's a supply base in the Strait area or a fabrication facility in the Port of Sydney or the people in Shelburne or Sheet Harbour who want to see other opportunities for development. It's awfully difficult to do that if you can't realistically project how much money you can invest in development funds around those projects.

What we've clearly heard is that Nova Scotians are fully prepared, and communities are prepared, to step up to the plate and be part of this, but government is only going to be able to do what we have within our means, and we're going through estimates as part of a budget reality of what scarce resources we have and what Nova Scotians can afford to actually pay. Part of the next step is not letting up, continuing to move forward on getting Nova Scotia truly as the principal beneficiary and getting these agreements that are in effect and the letter of law becoming the practise, the practicalities for government operations.

MR. CORBETT: Thank you, Mr. Minister. I don't know if you answered my question. You took a lot of time doing it, but I do appreciate that, I do. The fact is that I think one of the parts you went towards was acknowledging the anticipation, and I even go back to the days of them standing around this very building shaking a little container with what was supposed to be petroleum in it. I've never been convinced that it really was, but nonetheless the anxiousness around that by many communities in this province.

In earlier testimony we talked about whether it was Strait Area Gas wanting to look at distribution, Heritage play in here now, the idea of a Strait area LNG plant, where I totally agree with you, and the fabrication possibly at Sydport - all these things - we're hearing from communities that are looking for - particularly from another portfolio you had, Economic Development perspective of what this could mean. I'm always worried about the idea of a balance of being negative, but being a little tired of prosperity is just around the corner. I think you can appreciate where I'm coming from, that there has to be a balance here. We have to deal with communities so they're not just kind of on a wing and a prayer hoping that on New Year's Day this year their community is going to blossom.

In discussions you and I have had, away from this table, it has always been my position to you that I know in some communities it's not easy to be patient, but what I would really appreciate coming from your department is, when we talk about development, that we're straightforward with communities. Communities, from time to time, whether it was under other regimes or not, they were led to believe that prosperity is around the corner. I'd

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appreciate when we're making announcements concerning this industry that it's put forward to people in a very plain way - if it's a fab plant at Sydport, that it is 20 jobs. And there's no problem with the government, as a matter of fact I think it's gratefully appreciated when government says there's 20 jobs, but when they use the old media release saying up to 200 jobs, we really know that's the "pie in the sky" figure. I would appreciate, when we move forward, that we give communities wanting to partake in the offshore resource a realistic idea of what we're about and be able to measure growth within that scope.

I make that as a statement. I don't know whether you want to respond to it or not. It's not by way of admonishing you, but it's a way of putting out a real concern.

[2:00 p.m.]

MR. CLARKE: I would want to echo your concern and as I've stated, and we've had to state on a few occasions - probably more than we would care to in the last year - there has been a lot of second sober thought about the realities of the energy sector, but specifically to offshore oil and gas activity, and we've been very careful not to suggest that the next mega- project is on the horizon, it's moving. When Deep Panuke was withdrawn for a new development plan, we're talking very realistically about what that can be, and we anticipate what it's going to be is not a stand-alone like Sable, it's going to be integrated potentially into that infrastructure because the economy is necessary. But the project is very valuable, it's a new gas field outside of the Sable region. It will complement, providing jobs and opportunity, and significant nonetheless, but what we've also stated is that, as I said, we took a year.

Last year was a year of taking stock of where we are and where realistically we go because I was very pleased to work with community groups, you know our investment towards the Mulgrave Marine facility as part of their objective, our investment in Sydport towards Laurentian Energy, towards fabrication, and we continue to explore other related marine service activity that may be possible. But we're not going out and making, as you say, any grand announcements, because until the contract is there the jobs do not exist in any real measure outside of what current activity is.

We are following the strategic directions, for instance, with the Gardner Pinfold study that identified the opportunities and that we had to get focused, region by region, and we have to get people recognizing there isn't an A to Z and there's more to the oil and gas sector than just four blocks in the downtown core of Halifax for those accountants and engineers, who are very vital to the process, and the Halifax Harbour infrastructure - it is an all-Nova Scotia perspective and it's a difficult challenge to achieve those things, but it's a necessary mandate for us to take on to overcome them.

I do agree that if we move forward - and that's why I want to go back to the point about even future development - we need to talk in advance of going to the regulator with this stuff, so when we come out of the regulator process we have better acknowledgments

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and awareness of what really will be the benefit and, as you've noted previously, we've indicated our concern over ExxonMobil and with the EPCI contracting and wanting to get that clarity of what the $250 million meant for Nova Scotia content. Now I've been assured by ExxonMobil that is not - and as I said publicly - about a storefront where a cheque comes in the mail, it's about contract activity that Nova Scotians are engaged in and there's Nova Scotia benefit as a result of that, and the compression deck project is one that we're going to look at because it puts not just one particular corporate interest, but anyone operating, to show what they state on paper is indeed reality in the outcome. So that's a current one, and I would say that you and I will have an opportunity to reflect on that in the coming weeks.

MR. CORBETT: Mr. Minister, I've got a few more questions and then I'm going to hand it over to my colleague, the member for Dartmouth East.

You mentioned Deep Panuke and where EnCana has gone back to the drawing board to reconfigure or redevelop their plan. Shortly after that announcement, and rightfully so, you did go to Calgary to meet with EnCana. What came out of that meeting, I guess, is the short question?

MR. CLARKE: What came out of it and what was during it was, as your quote "be full and frank dialogue around what the realities were." I think there was an acknowledgement that the last process, when it went before the regulator, the previous development plan, there were many questions and outstanding issues that were brought forward and put in place, or created uncertainty and people wanting, as I said before, the clarity. It was about re-emphasizing that. It was an opportunity to look realistically at, and you can appreciate what the two, the Margaree and the Marco finds, what that means, where they are with their timeline and the pacing towards a development plan.

Industry doesn't indicate positive news about a reserve or a find unless it is positive news. They were positive on this and it was very positively reported, and what we did say was we want to plan and we want to have a plan that is known, that is achievable, and that will be realized to the points you've raised about making sure that our expectations going in are going to be the realities on the other end, barring any unforeseen conditions, market or otherwise, but based upon that development.

We've also indicated our willingness to be here as facilitator, to work with our industry associations, whether that's CAP or with OTANS, and with communities about how we make this work. So there was, as you would appreciate, the normal discussions as a project would go forward and the respective confidentialities of their developing their corporate plan; also, just further to that discussion, other meetings with corporate interests that also see value to this and have a recognition that we need to move forward in a manner that has been different than past outcomes and that has been very successful and upfront.

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So it was very positive, but when we talk about taking stock, there was nothing - you know this isn't about saying it's a guarantee and I'm going to be cautious in trying to say, yes, Deep Panuke, I have not been out doing that. What I'm saying is we want to make sure that a development plan should it come forward, is going to be recognized and commended for being a good development plan and one that we're going to be able to support right from the beginning.

MR. CORBETT: Mr. Minister this will be my final question. It's about the cleanup from Cohasset Panuke and it's still unresolved between CNSOPB and EnCana. What action has the government taken to see that the cleanup is conducted and is done in a timely manner?

MR. CLARKE: That item is currently under review at the board at this time, and of course the board has its process and will report back. As you know, there have been some requests and consideration around the infrastructure associated with that project that are on the sea floor. So we're awaiting some clarity from the board on the review at this time.

MR. CORBETT: Those are all my questions. I would like to turn it over to my colleague now.

MR. CHAIRMAN: The honourable member for Dartmouth East.

MS. JOAN MASSEY: My questions this afternoon will be around Nova Scotia's Energy Strategy, PROGRESS REPORT, and I would like to state a couple of concerns on the overall document first. Such wordings as "regulatory efficiency" make me a little bit leery about the impact that that's going to have on public consultation time with the communities that may be involved in the kind of development that you're looking at. I'm concerned that it may lead to less strict regulations and perhaps even watered-down environmental regulations. Having said that, one of the issues that you do address in your progress report is climate change and I'm just wondering, since we do know that climate change is going to have an effect on Nova Scotia, what are you currently doing to address the climate change problems that we are going to face, such as rising sea levels?

MR. CLARKE: I do want to address both of those and the first one is very timely as well. When we talk about regulatory efficiencies, one of the things that we can look back at is some of the history we have around when you do a first effort and/or the developmental piece of the initial project. So there are lessons learned because you actually have a baseline of knowledge about process that otherwise would not be there. If you're doing anything the first time, most times it takes longer to do those project approvals and no different than your honourable colleague asking about Strait Area Gas and some of the concerns and/or frustrations about the regulatory process in the first application, and part of what we said is we are obligated to go through the due diligence around that, and with Heritage Gas and this one, anyone else in the future who looks at whether it's New Glasgow, or Truro, or Amherst, will have a blueprint, a process to help streamline where they go. So what we have to do

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when we talk regulatory efficiency is look at the lessons learned and process improvement as a result of that that does not impact on proper due diligence and processing of an application.

One of the other areas in that whole lessons learned component and one of the items we faced is being able to have concurrency of process and not just waiting for one aspect of review to finish before another one is actually triggered, such as reviews that are incumbent upon the Province of Nova Scotia versus those of the Government of Canada. That's what we're trying to do, get some concurrency in place that will take down time. It doesn't mean that the process gets shortened or the activities that are required are less, it means that the timeline, you can do it because you have two processes happening at once rather than one completing and going to the other, and working with Ottawa and industry through the Atlantic Energy Round Table on ways to indeed improve that, and we've committed with industry and other governments to do just that.

We worked through the Atlantic Energy Round Table. We met as four Atlantic Energy Ministers with five of the respective federal ministers in Ottawa just a short time ago, and the concerns that you've raised are part of the working issues that we have brought forward to them. And one of the other items, of course, is, not that we anticipate any watered-down environmental regulations or processes, we need to have as much clarity as well because even at the Government of Canada you can have Natural Resources Canada working in one silo, the Department of Environment and Labour in another silo as you noted and wanted to improve the process by saying the Atlantic Energy Round Table has representation from ACOA, from Fisheries and Oceans, from Natural Resources Canada, but there is no representation from the Department of Environment for Canada.

It's hard to talk about achieving better process if the federal government is not at the table. We've made that public request. It is something we reiterated and I reiterated to Minister Anderson, that they need to be part of this because if they do have concerns, if they do have process requirements, then we want to hear that directly and not just as a sidebar commentary to a hard-working effort by everyone else. So there's that aspect about our commitment to recognize it's not about doing development at any cost. We have to be stewards of our environment, we have to protect especially our marine environment because of the significant importance of the fishery, and as just an overall responsibility for good stewardship of the environment, which also relates to your question on climate change and comment around that, and concern.

But one of the things that we've also raised as part of the working groups that governments are working on here in Nova Scotia is appropriate climate change initiatives and activity. The province has worked very hard to achieve as much balance as possible, and one of the things that we have seen is wanting to work on individual initiatives, like our household and consumer education piece about household energy efficiency and when you achieve that. We sent out over 120,000 mail-outs to the HRM and CBRM areas, also with foam insulators as a sample that can help reduce drafts and tips about energy efficiency in households. We are

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working and highlighting Nova Scotia as a leader in R2000 home technology and when you start taking all those measures in 120,000 households it does impact ultimate emissions.

We've been in discussions and we all want to look at clean technology such as clean coal technology as we go to the future. When we look at natural gas distribution, it does reduce emissions. One of the things with the current issue around Imperial Oil and the refinery is associated with the type of improvements they're making, substantial improvements over emission controls. So every litre of petroleum that's being processed through new major investments at that refinery will ultimately reduce what's getting emitted into the air and will benefit all of us. We work on green energy power, as you know, with wind energy, in looking at new sources not only for independent power production, but also for regional economic development purposes as associated with that, and that has been something that we've had much interest in.

The government is committed with our own buildings to an energy efficiency review. We are also using - what's it called? Biofuel, correct? That's the official title? Yes, we're also burning biofuels, which is a combination of putting the fish oil in - and that's something we've done in partnership with Wilson Fuels who are working in partnership with Ocean Nutrition as a byproduct, so not only reducing waste, but actually improving emissions as a result of better and more efficient utilization of resources available here. So we're actually responding with industry on an energy efficiency program within government buildings and making improvements on that front.

[2:15 p.m.]

So as we see natural gas now being distributed to commercial and household units, all of those items will culminate to where we move. But there is one significant item I would mention, Mr. Chairman, to my honourable colleague for the NDP, and that is our request for clarity from Ottawa on what they have set as our targets as a province. Our Atlantic Region, as ministers we've asked for that, because of our willingness to comply with the Kyoto Protocol, our willingness to meet the challenges that have been set are being questioned, or are in question with regard to our capacity as a province, and we don't know with the official targets that are being set by Ottawa, or being clarified, what our ability or capability is versus our willingness.

We're working on any number of things, but major significant climate change initiatives, even if those are industrial and/or individual initiatives, can only be identified if we have a sense that there are going to be federal supports for us to achieve the type of outcomes we're willing to work towards. As an economic opportunity as well, the climate change is requiring investments in R & D, it's requiring modernization of equipment and upgrading of processes and machinery that ultimately is going to benefit reducing emissions as well. But we do have a challenge because we have continuing reliance on more electricity. We have a continuance of demand as a result and we've had peak periods. So we need to look at how

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we're going to have future power generation stability throughout the province and, as we increase capacity, what types of things are going to be needed.

I noted in Question Period today you had referred to Tufts Cove and some of the conversions there, and, of course, we have natural gas being utilized and, again, reducing emissions because the Province of Nova Scotia, like all of North America, is going to have a long-term reliance on coal-fired power generation and that is going to be a decade-long process at this current point in time, but it doesn't stop us from working and achieving things from the mega-scale to the small-scale in the sense that everything is important, whether that's energy efficient lighting, LED lighting systems for stop lights or whether that's working on the bus transit system here in Halifax for greater efficiency but it's also our initiative with Saint Mary's University, the U-Pass at Saint Mary's for students, to encourage people to use the bus as a form of transportation. So there are many things we're doing, and consumer education and awareness is one of the fundamental things we have to do at this time both on how we can all make an individual impact, but recognizing the big items. They're going to be big-ticket items and we're awaiting Ottawa's clarity and we've asked for that as a region.

MS. MASSEY: I would like to just make a comment on your comment about waiting for Ottawa to come up with the types of reductions that they deem are appropriate. I'm wondering at the same time if it's not appropriate for the government of this province to go ahead with the numbers that we do know are there now. For example, would it not be possible for us to bring in legislation that would restrict emissions from certain kinds of power generating plants? Would that be a possibility? For example, we know that Nova Scotia Power only produces 2 per cent of its electricity by using renewable sources. That's not a very big number. Waiting to see what Ottawa is going to tell us to do is going to take us down a long slow road.

So I'm wondering, in the very near future are we going to be putting restrictions on our industries, on our power plants, to enable them or to force them down the road of looking at more renewable energy sources? A perfect example of that is Nova Scotia Power right now, where they're adding on their generating power and saying that they're going to put in a gas-fired turbine, but there's no guarantee that they will burn natural gas because they're not burning natural gas now and they actually could be. So I'm afraid we've got to take a stronger approach to this very quickly. So I would like to see what your response is to that.

MR. CHAIRMAN: Mr. Minister, you have two minutes of the NDP time to be used up, with the Liberals' indulgence.

MR. CLARKE: Just with that, when you talk about the lower percentage of renewable resources by wind power and what we've seen is the actual establishment, whether that's in Pubnico, getting that up - and I think it's going to be officially launched as a result of the efforts there and that will expand - and the initiative by Nova Scotia Power to work with our Aboriginal communities in terms of putting up wind towers to try to create power,

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so there are partnerships that are in place and are growing. We have communities looking at this.

We have an acknowledgement, for instance, from the Town of Canso, wanting to look at how wind power can benefit that community and how they might be able to be the recipient. I have written back as minister, and we're in discussions with them about the things that are necessary for potential wind power in that community. We've seen the tests in Cape Breton, and there are indications towards more of that, and there's an Atlantic Wind Power Review, as part of the Energy Ministers' Council, to look at the total capacity of the entire region.

One of the things is that we are, in the Canadian context, smaller provinces, so some of our opportunities are going to have to be cumulative, as a region, to achieve those outcomes. We can come back to this one - there's a lot around this, but we also have to recognize the ability of Nova Scotians, so we could impose standards and restrictions ultimately, but right now if we don't have a means or mechanism in place that goes beyond the standards that are being set elsewhere, the ratepayers of this province are not going to be able to afford to do that. So it's about finding a balance.

We're working very hard at the provincial level to do our part. We continue to work on that front, and we will continue to see wind energy expand. Nova Scotia, in terms of Atlantic Canada, has one of the most diverse sets of power generation opportunities, whether it's wind, whether it's hydro, whether it's coal-fired or gas-fired. That's a positive for us, because at least we have choices of what we can do. What we'll be able to do is ensure we work on it.

I acknowledge your concern, and I want to confirm to you that we are working so that Nova Scotia is not sitting back - we're taking the lead, and we've taken the lead to say to Ottawa well, you've said this, now what do you want? Tell us what you want because we're already moving forward, but we don't know where you're going as a country and we need that clarity so that not just Nova Scotia but all of Atlantic Canada can work co-operatively to achieve a better environment.

MR. CHAIRMAN: The honourable member for Victoria-Lakes. You have an hour.

MR. GERALD SAMPSON: Mr. Minister, thank you for being here to accept some questions. I'm going to concentrate on some of the issues that are basically around the Sydney Bight area, for the exploration. I understand the seismic testing has been completed in that area. Has there been any follow-up to see what results were achieved or what damage has been done - has there been any data regarding the before and after results of the seismic testing?

MR. CLARKE: On the western Cape Breton portion?

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MR. GERALD SAMPSON: In the Sydney Bite area. Has that seismic testing been done yet, or completed?

MR. CLARKE: No.

MR. GERALD SAMPSON: That hasn't been done?

MR. CLARKE: Just as sort of a preamble to that - as you know there was much attention and very divided opinion on either end of the spectrum over the seismic program off western Cape Breton. One of the things that we recognized and acknowledged was our responsibility as government to be responsible stewards and facilitators of process, and to do that meant we were working to try to achieve the balance required for both the traditional fishing industry and the emerging oil and gas industry, to co-operatively work in the same environment, and we've had a number of meetings around that.

What the western Cape Breton example did was also define our commitment to establishing concrete science. We've partnered with Fisheries and Oceans, the Department of Energy and are working in putting in place the science. As you know, there is a study underway around the crab and the management, that has been part of this whole seismic program. As we get those results - and to date they've been positive results - we will actually have tangible Nova Scotia-based research that will form the basis, I would say to my colleague, of any potential development in Sydney Bight and is going to at least be looked at in context to the process off western Cape Breton.

Any process in Sydney Bight is based upon the proponent, Hunt, whether or not they are going to partner and proceed with the development plan this year - to date there has not been any confirmation of intent to do that. So we are continuing to await the research of the western Cape Breton one. We will move forward in a very responsible manner should there be one received for Sydney Bight. As of our sitting here today, there is no formal application or indication they're going to proceed at this time.

MR. GERALD SAMPSON: No procedure for the seismic testing in Sydney Bight at this time, is that what you're telling me?

MR. CLARKE: There's no indication that they're going to proceed with an application for seismic testing at this time. What we've indicated is that we will ensure that all appropriate measures that have come through - as you know, there was an exhaustive two-year process around the actual applications by Corridor and Hunt. That process was one where we heard clearly from those who were concerned about the environment, the concerns of those about the environment from which they make their living, and the concerns of those who want to grow opportunities in the oil and gas sector as well. Ultimately, it was about achieving a balance that Nova Scotians have asked us to do, and any application that comes

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forward will go through the same stringent process before the regulator, as was the application for Corridor.

MR. GERALD SAMPSON: Now I would like to mention something that was rather a hot topic when we had the oil and gas hearings down at Wagmatcook, the new centre there. The subject of munitions came up and apparently all these sites are completely documented and mapped out and whatnot, and of course there has been a lot of talk about mustard gas. I spoke with Mr. Terry Long, who has extensive experience in munitions and in, I would suppose, remediating and neutralizing sites. They refer to them as legacy sites that were left behind by government activity over a period of years, and the dumping of munitions in the areas after the wars, and apparently they're quite sizable. Some of these explosives can be detonated with very little irritation, I suppose, from seismic testing.

One explanation he mentioned to me was you could have a 250-pound bomb laying on the bottom and if it were to be set off by seismic testing, with the amount of water that would be up above it, you wouldn't even know that that explosive was detonated, you would see no evidence on the surface; therefore you could have explosions and the release of contaminants into the ocean and not even be aware of it.

[2:30 p.m.]

Over and above the mustard gas, he explained to me that the two worst and the most dangerous contaminants that are contained in the munitions are lead and mercury. Those are well-documented as being agents that no one wants to be associated with when it comes to health and safety. What I was wondering was do you have a plan, or could you explain to me the plan or what it is the department plans to do in regard to those sites, whether remediation, extraction, protection - which mode is the department proceeding with for the protection of the general public, and the fishing industry in particular?

MR. CLARKE: That's actually a very good question, and it's a timely one that you raise. I, too, had the opportunity to speak to Mr. Long, and he presented, as you've reflected, the exact same thing. One of the things that I indicated at that time is no one is going to knowingly go into an area or a situation where there are identified or high-risk circumstances associated with that. Any application will have to define the exact areas that they would plan to do seismic testing in, and those can be compared with data from, in this case, I would assume mainly federal government and/or military sources with regard to munitions in whatever form that may have been left there.

What's often not realized, there was an incident in western Cape Breton, in the same area that the seismic program had taken place, there were thousands of kilometres actually of seismic shot in the past there, and as many people know there was actually drilling in that region as well, there are wells that have been capped previously in that region, so there has been activity previously, when you look at that. There's also been seismic activity in the

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Sydney Bight area, and some of it, nearer the shore than what we proposed in this case, because a lot of it would have been seismic mapping of the coalfields as well, looking at where the actual resource in that sense would be.

So there would have been near-shore and, in this case, close-to-shore development. Anything that will happen will have a defined block program and it will be subject to public consultation. Any concerns from any groups, and in this case those related to this specific item of Mr. Long's, he will have the opportunity to put his case before the regulator, and for that to be assessed and an opinion given.

MR. GERALD SAMPSON: Another portion of that, dealing with the remediation of sites, I understand from the information that he provided me that there was around $3.5 billion set aside by the federal government for the remediation of legacy sites created by government departments. I was wondering if your department was aware of that, or is there any possibility of accessing some of those funds to help the province in its search for energy?

MR. CLARKE: I think that one in particular is related to a lot of land-based sites, if it's the same budget item, federally, that you're referring to, and one of the items associated with that, for instance, would be the Sydney tar ponds initiative, as it was identified in the budget. Also, another aspect of that was former mining sites, which isn't as public because of the media attention around an awareness of the tar ponds project and the desire to see that move forward. So there are a number of projects associated with that.

To my knowledge, there has been no sort of framework and/or indication that any of those things would apply to offshore-related. I think the Government of Canada would see that as the regulator's responsibility to do an assessment and/or proponents to identify. With that, it really would be something I would have to make an enquiry to the Government of Canada directly. We've noted that, and I will be able to report back to you through the committee chairman, to give you a response to that, because I don't have a full answer for you now.

MR. GERALD SAMPSON: Natural gas. The meetings that I attended from the first inception of natural gas coming to Nova Scotia, it was never defined but I guess it was automatically assumed by every gas meeting and every gas person who tendered on gas, it was basically an unwritten rule that the gas lines would be located in the shoulders of the roads, and that is why we had more than one company tender, and they pulled out immediately when that fell by the wayside.

What I was wondering is, is there any possibility of gas ever coming ashore to Cape Breton, simply because if we go back - now I'm older than you, Mr. Minister, and I take that as a compliment of wisdom, I suppose, or maybe having a little bit more knowledge of back a few years prior to - when I was a kid in North Sydney, if you didn't know a fisherman, you had to go to Boston to get Grade A Cape Breton fish, because that's where it went. Fifty

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years late, we get natural gas, and the first ones to get our gas, you go to Boston and they have it.

I'm not asking for a half a loaf - I'm not even asking for a slice of the loaf, just give us a little bit of the crust, give us a little piece. If it's our gas, is there any extreme possibility - and I know you're dealing in billions of dollars with this gas industry, everybody needs an income tax write-off, so why not allow a line to come ashore somewhere in Cape Breton, down in our end, so that we could at least - it's almost like having the high-speed Internet - well, you get it later than everybody else, but when it comes it's sure nice to have it. It will never level the playing field, because we won't have the capacity to have it that other areas do, but I'm just wondering if there are any plans at all for any of that natural gas to come ashore in Cape Breton, so that we can benefit from what we're calling "our" gas?

MR. CLARKE: With that, again another good opportunity to kind of go through some of the profiling that's been associated with the near-shore seismic activity that we just spoke about. Ultimately, any gas finds, if you have them and they're commercially viable, you have to find a landfall site and/or some other processes, but for us it's getting it to a land site, and it's much more practical if there is commercial and/or significant quantities in the area, that that landfall is going to come directly into an area where we want distribution to be.

What we've also seen is that we now have, as a result of the core infrastructure, the pipeline went where the markets are for the price points for natural gas, now we have distribution being not only promoted but being installed here in the metro area, with Heritage Gas, both business and household. Because there's an anchor load - there has to be an anchor and here it's dense population and large industrial opportunities to link into. In Cape Breton, there's was an opportunity of taking a line over because of a large industry such as Stora.

As a result of having the infrastructure that flowed with that, there is now an application, as you know, by Strait Area Gas to look at how to get into more residential and/or community infrastructure for gas distribution. One of the items we've had a discussion with Newfoundland and Labrador, when they look at the LNG facility that's being proposed for Bear Head and what it could potentially mean for a lot of the stranded gas they have, because there are good quantities of natural gas off Newfoundland and Labrador, however getting it to the market is the most difficult challenge, so, thus, compressed natural gas, or CNG, could be potentially viable, and they look to see where the LNG proposal is going.

There's that item, and to look at it we have to assess if we're going to, one, allow the exploratory activity to happen and, two, if industry is going to invest in exploring and doing development, drilling. Ultimately, if you do any of that, it's to the goal of having a development project. We're in a position where, hopefully, we will see that. We are working with, for instance, the Strait Area Gas to work through what is a stringent process, because we have to make sure any regulated industry follows due diligence, but we're co-operating

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because the communities want and see that as part of their vision, what they want to see for the benefit of their area.

I think we're seeing it; it's happening now. As Heritage expands here, it's going to be next into Truro, Amherst, and New Glasgow. There were discussions going on with the Federation of Alberta Gas Co-ops that were just in with the Strait Area, meeting with officials in Amherst, as well as the three RDAs from the Strait Area. People are working towards commercial market-based and supported initiatives. So we're on our way. What we do have to see, though - and industry looks at this - is we want access to natural gas, but are we going to allow access to exploring for it. There's a bit of a dichotomy there, and that's part of the uncertainty that people look at about investment decisions.

MR. GERALD SAMPSON: Mr. Minister, my experience with natural gas is it would take a tremendous amount of population to make it worthwhile, business-wise, for natural gas to be distributed to homes. So it's distributed to homes as an offshoot of the supplying of the large commercial ventures. What I was wondering is - down in the Cape Breton area, in the Sydney area, we have three power plants - is there any possibility that one or two of these plants are considering the possibility of turning to natural gas? If they were, that would allow the spinoff to some households. Without a large industrial user, it's just not viable. So I was just wondering - do you have any information that Nova Scotia Power may convert one or two of their plants to natural gas?

MR. CLARKE: Again, you have to have a consistent, stable supply. Until we identify what resources are available in the Sydney areas and into familiar turf for you, of course, with the Point Aconi facility that is not deemed at this time to be something that would be feasible just in terms of the sheer infrastructure costs. However, it's a different story, as you mentioned, to your point - it's dead-on - you have that ability in the Strait area. When you look at Point Tupper, they have access. It changes the dynamic in terms of what options people can explore. So, again, how do you get it there? As you know, the geography of getting a gas line even from Port Hawkesbury we'll say, pick Route 4 or Route 5, there's a lot of geography and a lot of intense expense with infrastructure just to get to an uncertain market place, as to how much uptake you're going to have.

I think there is something that needs to be clarified, and that is I believe, as you would hear, there's a desire by utilities and by corporations to have access to natural gas as an energy source. What we want to be able to do is have a long-term supply, then we would be able to do that. Again, if there is natural gas and/or development plans around western Cape Breton or off western Cape Breton or in the Sydney Bight area, that would strengthen the ability to do that and for that to be enhanced, but right now it is in the core Port Hawkesbury area, in the Cape Breton or eastern Nova Scotia sense.

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We recognize that everyone's looking at can this work, how best will it work, do we have the ability to move this forward? The other thing that's related to this, and we've talked about the Bights, but last year was probably the busiest year for onshore seismic activity in Nova Scotia over the past 20 years. The county that you represent is one where there's been significant . . .

MR. GERALD SAMPSON: That's my next question.

MR. CLARKE: That was your next question - well, Mr. Chairman, I will wait for the next question.

MR. GERALD SAMPSON: Before we get to that one, we will just finish with the natural gas. Having been involved in the natural gas in its infancy stage, and, as you're aware, the gas that has been sold was sold off with all the butane, methane and byproducts in it. If and when the gas comes from the finds that are out in the well fields offshore, will that fall under the same regulation that the gas is sold off with all the goodies in it, or will that be coming with the raw components in it? That's where your plastic industry comes from.

There was a gentleman we were dealing with at one time who said you can't take on the big giant mega-plastic producers, but if you find a niche market, and he said I'll give you one small example that would employ probably anywhere from 275 to 300 people in a small plant in the Strait area. He said you don't realize but the plastic in the cap of a tube of toothpaste is totally different than any other plastic. So he said how many billion little caps are there on the market? It's things like that that you could supply. It's too small for a giant corporation to tackle, but as an offshoot in a small area it would create employment.

[2:45 p.m.]

So what I was wondering is if the deal that was made for the present supply of gas has gone by the wayside, all the goodies are in it has been sold and somebody else is getting the byproducts, when gas comes ashore - supposing that it will - will that rule and regulation encumber that, or will we be getting the natural gas with the byproducts already in it that we could develop a plastics industry or something?

MR. CLARKE: You raise a good point, because part of why we would like to see some clustering of activity, and what an LNG plant offers as well is another core supply source of gas that can go to markets and/or stay in the area, and then you have a long-term stable supply that can be broken down, as you say, and the propane, the butane, and the condensate can be stripped out and sold separately, but the ethane is left in the gas stream as well. To your point, is it possible. Would it be something that's desirable? Yes, very much so.

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MR. GERALD SAMPSON: But will we fall under that regulation where the initial gas was sold without anything being stripped? With this new supply of gas, will that come to us in its raw state, allowing us to own the gases that we could strip?

MR. CLARKE: One of the things - just as a clarifying point - was once you deal with the base requirements and commitments for the supply of gas that have been established, then, like everything else, whether it's gas coming to metro as a surplus supply and/or a committed supply there is renewed commitment. That's why, for instance, the Deep Panuke Project is of great interest, because it's going to mean, where we've had a downgrade in reserve with Sable, additional capacity is going to mean an additional ability to have access to more domestic supply for uses, and thus the interest, as well, of having an ability to see a mix of opportunity from offshore-specific, as well as that that would be imported to a facility. Again, if we look at Newfoundland and Labrador, if in the future there's an ability to see a lot of their stranded gas find a home here, because it can be cost-effectively delivered to a landfall on the mainland to be transmitted to a network.

I guess the point was, is there a petrochemical industry opportunity? All of us who are behind and supportive of an LNG, that's part of what we see. It anchors a spinoff opportunity. Whether that is, in this current sense, if it's over in Richmond, one side of the Strait, or the Guysborough County side, because you have infrastructure in both at this time, or, in the future if it's right in the Sydney area, that's part of what we have to look at.

MR. GERALD SAMPSON: Then, for clarification, this new gas will be in its raw state, allowing the possibility of a petrochemical industry to develop, whether it's at Bear Head or wherever. The new finds will be new gas, and they won't be subject to what I would call the penalty of somebody else getting it in its raw state. I just want to know if this new gas, we will have the authority and the ability to strip the ethane and butanes from it to create a petrochemical industry and sell the natural gas, rather than the way it's going now, where we lose it all?

MR. CLARKE: The answer to your question is yes. We have that ability today. It's really around the market and the proponents to support actually doing that. I know what you mean, as we bring on additional capacity, because we know where our gas is going now.

MR. GERALD SAMPSON: It's like this pencil here. I sold it off completely, unsharpened and everything else, and it went for 5 cents. But if I take it and polish it up and sharpen it up and everything, I can get 15 cents for it. I want to know, if the gas is coming ashore, it will be in its raw state, but are we subject to the rules of losing it, the goodies that are in it, like we did before, that's all? If that's unsure or unclear . . .

MR. CLARKE: I would say the answer - I guess to simplify it - is yes but it's going to be those that have a market-driven opportunity to capitalize on it. One of the things people are looking at is capacity, in terms of access to supply beyond the current levels. So I think

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that's where we see why other new opportunities, and/or expanded exploration to be fundamental to achieving that outcome.

MR. GERALD SAMPSON: That would be the raw stock that would be required for the petrochemical industry over and above gas?

MR. CLARKE: Yes, correct.

MR. GERALD SAMPSON: We will move to Boularderie Island. There was a lot of onshore, on-land drilling in the past year, and there was a lot of exploration going on where they just cut little narrow paths and they went in, drilled little holes, and took core samples, hardly disturbed anything, took their samples and they left. I attended all their meetings prior to that and they did their drilling, but I haven't heard anything since. I'm just wondering if there's anything you could report for the benefit of the residents of Boularderie and the public, in general, of the possibility that we're all going to become millionaires in a short period of time?

MR. CLARKE: I think it was in 1869, the first drilling opportunity or drill activity, exploratory-wise was actually at Lake Ainslie. Subsequently, people are looking at going back, they liked it so much in terms of following the geology of the province.

To your point, there was a successful seismic program that was undertaken this past year. There are continued and new interests continuing on that, to the point, just to put a plug in for the good officials within the Energy Department, they are in Calgary as we speak working with the companies that do onshore exploratory. There is a specific trade mission right now from the Department of Energy and there was a series of things, but an invited series to sit down and look at what the plan would be for Nova Scotia in the coming year and how we could sell getting more onshore activity. When I was out in Calgary on one of my recent trips, we made sure that onshore exploratory was on the agenda because we get so caught up in the big aspects that we sometimes lose sight there are some real onshore opportunity

The area in question that you indicated, the program went very well, the data has been collected and now the geophysicists are analyzing that but so confident in the sense that we're getting good data in science that we are marketing it to other companies and sharing with them the opportunities onshore throughout Nova Scotia. I would expect in the coming weeks - there has been no official seismic review at this point - they are actually analyzing all the samples. But to the point, it went well, it was very respectful. I don't know if you heard anything, member, I don't think there was community concern or individual concern. There were appropriate measures taken and people seemed to feel very positive about it. It just goes to show that we have potential there and I would say to the staff and the people who have worked on that, it just goes to show the level of professionalism they had that that all happened, and unless you were directly involved, you never would have known.

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MR. GERALD SAMPSON: I only received two calls from people who didn't attend the meetings and their concerns were about their private wells and there was enough information given at the public consultation that they would stay far enough away from any well, and it was only a 2 kg explosive they were using, which would be minimal, and it pacified everybody. From what I understand there was no - and I didn't personally receive - negative remarks, only, like I said, two phone calls over and above the meetings I attended, so it went very well.

MR. CLARKE: What I would offer to the honourable members, is an opportunity to sit down with our lead to give you a sense of what their program was like and what their assessment of the Cape Breton geology would be. The more we can get out about this the better it is on the exploratory side in getting the level of investment necessary. So I will be happy to report to you, and/or facilitate an opportunity for a briefing on this because it's one of those items where it is key and the region you represent is one of the single, largest interest areas. I would be happy to do that and report on what success we've had in terms of this year's commitments, as well.

MR. GERALD SAMPSON: Thank you, Mr. Minister. I will share the remaining time with my colleague.

MR. CHAIRMAN: The honourable member for Preston.

MR. KEITH COLWELL: Mr. Chairman, excuse me if I ask some duplicate questions, I haven't been able to sit in on this session so far. Natural gas, when, realistically, do you think it will be in Burnside?

MR. CECIL CLARKE: It is there now. Halifax now can say they have both - actually more than just industrial because - the Future Inn is where the line comes through into Burnside Industrial Park but there are actually households connected at this time, as well. We celebrated that and that was - in fact without going to my notes, the official announcement, it was a significant investment. When you look at a $120 million activity, it's nice to see it actually anchoring.

Here, the issue, I guess, is not now is there access to Burnside in Dartmouth, it's a question of how to get across to the peninsula and that's where discussions are. We're sitting in here where there are very large institutional facilities that could be clustered, as well as - I think there is somewhere in the vicinity, if I'm not mistaken - 12,000 homes right on the peninsula that would be anchor accounts that could see it grow. As it does, then it allows - like any business case, to go out to other regions that have lesser populations but it's still commercially viable because you've anchored that.

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Right now, there are eight commercial customers in Burnside and eight residential customers in Crichton Park, and that is all since Christmas. There are 25 waiting to be connected at this time.

MR. COLWELL: How widely distributed is it through the park, is it pretty well through the park or just isolated locations that the pipe is in now?

MR. CLARKE: I remember in the late Fall, the construction going into the winter was across the roadway there and there was some visible, very tangible signs of natural gas being laid. Part of what their distribution plan was to get to some anchor tenants and then move forward from there, and it's not overly complex.

When you are talking about the lines, a commercial line would be about four to six sizes larger in width than the pen you're holding right now, and residential being about two or three of those, so it's not huge pipe going in. The pipe estimates, in terms of length, the industry tells me that it's the type of durability that has a 100-year lifespan, so it's not just temporary infrastucture that's going in, in terms of ability. I can find out more specifics on where they are with their full distribution network at this time, but I don't have the exact details in front of me to report to you right now.

Just for clarity, we do have maps at our office that shows the distribution plan and network. I would be happy to be able to have our staff brief you on that.

MR. COLWELL: That would be very interesting, actually. I would appreciate it. How many oil rigs are going to work off Nova Scotia's coast this year?

MR. CLARKE: We had an 18-month plan with regard to drilling activity offshore. As we go into the Offshore Technologies Conference in Houston, we will have further meetings at that time. Your honourable colleague from your caucus, MLA Mr. Gerald Sampson and MLA Mr. Frank Corbett will be attending on behalf of the NDP at that conference, where a lot of the announcements of future activity will take place. It is one of the world's biggest oil and gas shows with over 50,000 delegates and 2,800 exhibitors, so it is not a small effort.

The Canadian contingent there this year is going to be very large. We're pleased that aside from our government partners, both within the province and the federal government, we have 37 companies from Nova Scotia going, which is, I think, probably one of the highest numbers that we have ever had. This has been one of the highest delegations and so there has been a shift to your point and I come back to the question of, how many wells? We expect to meet our target and the current ones we were looking at were two and two. The objective,

to finish out our target was two exploratory and two development wells and with some increased momentum and as we continue to build our business case and work with our federal colleagues and our colleagues in Newfoundland and Labrador, it's our hope that we'll be able to exceed those targets and make sure that we're not looking at these great magnificent

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structures sitting in the harbour for any length of time. They're nice when they come in for refit, for the economic spinoff, but it's not great to have them stand there any longer than they have to and the people want to be out offshore working.

[3:00 p.m.]

MR. COLWELL: It's my understanding from talking to the industry, and my information is limited so if my information is wrong, please correct me, that the RGV is going to go off Sable Island this Summer and so is the Galaxy, is that correct?

MR. CLARKE: Yes, that is correct.

MR. COLWELL: And the Erik Raude, where is that going?

MR. CLARKE: With the Erik Raude, one of the major contract items that it's looking at, which has been previously published, was that they're dealing with a contract off Cuba, but we also have the Pathfinder, which is another drill ship, with associated Marathon's drilling plans as well. So we will have activity in the region and the Erik Raude will be working on the Cuban contract but, obviously, anyone who's looking at other drilling activity outside of what has been established, we'll be in discussions with them and I would probably say because of the commercial sensitivity a lot of that will not be divulged unless they're prepared to make their go-forward announcement.

MR. COLWELL: Does it appear at this point that there may be more exploration this year or less exploration this year than last year or is it about the same?

MR. CLARKE: At this point we'll achieve our target that was set which will be consistent in terms of previous activity, but if you look at some of the other forecasting and if all the conditions come together, we will exceed that and that's our hope. I mean we're working very aggressively and that's why there are 37 companies as well as the Canadian and the provincial delegation going down - to make sure we are promoting this and building the case and there will be many meetings around that as well. So I hope that we'll be able to report going into the third quarter this year, not only meeting, but exceeding our targets, but we'll definitely have met them.

MR. COLWELL: The Deep Panuke project, what's the holdup on that?

MR. CLARKE: Well, the Deep Panuke project, the last time before it was withdrawn, when it was gone before the regulator, there were long and protracted discussions over questions around the project and its development. The subsequent decision by EnCana at that time was to withdraw it and to submit a new application on a revised smaller scale project and one that anticipates integration into the Sable infrastructure and to do that you have to talk

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to the Sable partners as well. It's not as simple as just connecting two pieces of pipe and flowing gas.

What is positive around that is that the Margaree and Marco wells, and Marco being in the Deep Cohasset, is identifying commercial quantities of natural gas in a new field outside of Sable and that's a plus. So one of the things we've been doing as a department is in dialogue with the proponents to have the discussions that are necessary before a development on benefits, before it goes to the regulators, that the regulator processing time can be greatly improved. So we are working with optimism. There are no indications to say that they are not still working forward on their development review and we just have to wait their corporate decision which means an investment decision to be backed up in the process.

MR. COLWELL: From what industry has indicated, the Deep Panuke project was put on hold because of getting through the regulatory process and I would like you to answer this question for me. Evidently, when the application goes in, if there are any substantial changes and not total changes, they have to resubmit the whole application, is that correct, rather than make an amendment to it?

MR. CLARKE: Well, in the Deep Panuke instance the whole scenario completely changed because they integrated another well area and that was the Marco. As a result of that, it fundamentally changed the application so thus the withdrawal and it was easier to withdraw and put a consolidation than to try to have a parcelled effort. So that's the particular item there but, you know, we have a regulator for a reason and that's to make sure a comprehensive review and all due diligence has been followed and the interests of the Government of Canada and the Province of Nova Scotia have been addressed at the same time and all the regulatory adherence that is necessary is in place.

So I think what they've done is taken stock and what they have established is there's very positive news about us having commercial quantities of natural gas outside the Sable block and that's very important for others that will chose to explore in this area to see that type of progress and, as you know, the Weymouth well is under drill at this time and as that proceeds and the partners analyze that, we will await what type of response we get, but of the five wells, if you look at it, you have two that were very positive, two that were identified as non-commercially viable quantities of gas that was noted, and one that's under drilling. So the success rate if you look at the number, is not something insignificant when you consider that offshore Nova Scotia has had under both exploratory and development, I think just under 200 well drills. Compare that to the Gulf of Mexico with over 40,000. So we have a long way to go and a lot of work to do to even get even a small portion of that in terms of the exploratory and that's why we've been talking about streamlining efficiencies to continue to build the case and whether that's removing the import tariff on international drill ships, just to build a case, because every time you do that and you remove needless millions of dollars up front, it can change decisions on whether or not to proceed with a drill.

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MR. COLWELL: What about the process, back on regulations again, has there been any move towards getting a common set of regulations for all Atlantic Canada - Newfoundland, Nova Scotia, New Brunswick and P.E.I.?

MR. CLARKE: There was an initiative by the previous federal Minister of Natural Resources Canada for an eastern, what he was calling an eastern framework, or an accord, or a set of criteria and that was Minister Dhaliwal at the time and, subsequently, Canada has moved away from that position just by virtue of the logistics because it also included the four Atlantic Provinces and Quebec. Where we look at moving forward is the efforts between Nova Scotia and Newfoundland and Labrador of how our processes can be twinned as much as possible in that the transition from Nova Scotian part of Canadian waters to Newfoundland and Labrador are seamless from a business case point of view because we do have two regulators and we do have two sets of conditions and governing structures in place. So we continue to work and improve upon that.

That's why we have the Atlantic Energy Round Table and the working groups that come out of that, both on the efficiency side, and what regulatory requirements are going to be necessary. In all fairness, I have to say we've made very good strides on that aspect with the Government of Canada and there has been positive working relationships with our regional colleagues. Part of what has happened is Nova Scotia and Newfoundland have had a primary focus and it has been out front on oil and gas. In our discussions with New Brunswick and Prince Edward Island, you had a stronger emphasis on the power aspect of things to the point that in June we'll be having our Atlantic Energy Ministers Conference in Prince Edward Island and that will focus specifically on our electricity marketplace issues. Our round table, depending on federal election timelines, will be adjusted so the Government of Canada can be a full participant. There's no purpose in having a round table without the

key federal ministries at the table with us. We're hoping that all these things that are out there will come to bear, and we'll be able to continue to advance on regulatory efficiency and streamlining.

MR. COLWELL: There was a rumour in the industry as well, that there's a rift between the Premier and the government and oil companies. Is there any truth in that?

MR. CLARKE: There's no truth in any rift between our Premier and the oil companies. (Interruptions) My honourable college, the member for Cape Breton Centre - do you want to put that on the record? (Laughter) That's just not the case. The Premier advocates on behalf of Nova Scotia, no different than I do, with regard to Nova Scotia benefits and content and our achieving that.

The Premier has, for instance, with the compression deck project, emphasized the same things that I have as minister, with regard to Nova Scotia content and benefit. We've done that no differently with them than we've done it with Ottawa on our fair share as the principal beneficiary of our offshore resource. That's just putting the facts on the table the

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way they are. If advocating for Nova Scotia's interest is not seen, in someone's eyes, potentially, if that's the perception there, as being warm and fuzzy, well, that's just probably because sometimes the truth hurts. The truth is Nova Scotia is not going to give up on defending our right to be the principal beneficiary of our offshore resource and to make sure that Nova Scotians are integrated, fully, into offshore activity.

MR. COLWELL: Talking on the offsets for Nova Scotia companies, what is the short version? What offset programs do you have for Nova Scotia companies now, actually in place? In other words, work on the rigs or work on the offshore, the oil industry, that's essential for Nova Scotia companies.

MR. CLARKE: Well, there's any number of activities that are in place. In fact, the current initiative across the harbour is a $12 million to $15 million initiative, three-quarters way through of being complete. That's working with ExxonMobil on a component. If you're looking at it from the point of view of offsets or what are the benefits for Nova Scotian companies, that's why we work closely with OTANS, Offshore-Onshore Technology Association of Nova Scotia, as well as with CAPP, which represents, obviously, the petroleum producers' perspective, to ensure that the developer and the supplier are both adequately participating in the development of the industry.

One of the things we would look at is all the various components that go along with this, so that we've had development and supply of services, whether it's with the jack-up rigs or semi-submersible, the supply vessels around that, the helicopter contracts that go with it, the exploration management that is associated, the project management activities, whether that's from the engineering side of things, which has been a large aspect, the legal framework, just the simple supply of millions of dollars of goods just for the refit of these vessels as well. When you look at food services alone, it contributes a lot of money to our local and area economies, and when you look at the Sable infrastructure, not now that it's constructed, but also the maintenance of that is an ongoing item where there's contracting opportunities. Then, of course, you look at the fabrication and construction of the South Venture topsides and other Sable or other area structures.

So, what we constantly have is trying to strike a balance where there is an acceptable level of local content or Nova Scotian content in any project. Part of the role of our regulator, our joint federal/provincial regulating body through the Canada-Nova Scotia Offshore Petroleum Board, is that they have to monitor benefits and expenditures, and Nova Scotia content. That is done on a monthly basis.

MR. COLWELL: What percentage of Nova Scotia content are you getting month by month for the last year?

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[3:15 p.m.]

MR. CLARKE: They're reporting in the vicinity of 34 per cent.

MR. COLWELL: That's averaged every month?

MR. CLARKE: That's on average.

MR. COLWELL: Do you have monthly reports on that that you could submit to us?

MR. CLARKE: Those are between the regulator and the department. Those are confidential documents, in terms of monitoring. We have the broader reporting on that. So what I will do is take your request, and we will report back to you. The Sable one - the month-to-month ones, because of the activities associated with it, are different than the actual annual review, which actually breaks it down by activity. One of the things you have to look at are things that can be delivered from Nova Scotia versus that are required, either Canadian content and/or international. A lot of the international cannot be associated around activities that are just not capable of being undertaken in the region. There's always going to be that reality. If you go to Aberdeen, Scotland or if you go to Stavanger, Norway, where they have mature industries, there's still the mix of involvement, and that's the nature of a global business such as oil and gas.

What we will do is get you some statistics around the actual levels of participation and the sectors that the activity is flowing into. We can break out by where the services were versus some of the contract aspects, the professional services and the like, and get that to you.

MR. COLWELL: You talked about Aberdeen, Scotland and Stavanger, Norway, both of those cities or countries have reaped a lot bigger impact in the offshore oil and on-service facilities than Nova Scotia has. There's absolutely no comparison, none whatsoever. They did develop some of that expertise with the help of the government and themselves. What are you doing to ensure or trying to ensure that some of these benefits accrue to Nova Scotia?

MR. CLARKE: The difference that you have is looking at areas where the whole region - if you look at the North Sea, it's a mature environment. What they've done is they've had their exploratory, they have their development, they have their post-development and subsequent exploratories as they branch out. They have the capacity to derive much benefit because of the sheer volume of activity associated with that. We are no different in the sense of where we are in the stage of development. Nova Scotia does not have a mature offshore, we're still in our infancy as we work through. We have many working issues that we're trying to refine and define, whether it's with the Government of Canada or industry associated with our development.

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What we're doing to get around that, to move forward, is to continue to move that if we're not drilling, if we're not moving forward with that program of continued seismic activity. We had a record year of seismic activity offshore Nova Scotia last year, and that data is essential to the type of decisions people make about exploratory drilling and then development drilling. If we're not doing either one of those, all the other benefits aren't going to happen, if no one's going into a development phase. So we continue to move on the exploratory and the drilling agenda, and with the Sable and the compression deck activity, then there's a $250 million commitment that's part of that, from ExxonMobil, for Nova Scotia content, direct, real activity here in the province.

We continue to work and monitor - and to your point - and to make sure that $250 million is realized as Nova Scotia content, and that we look down the road and, hopefully, not in the too distant future with Encana's go-forward, once they've done the review on Deep Panuke. It's Deep Panuke that's going to produce another wave of construction requirement, of procurement activity, and we have communities, not only here in the metro area, but whether that's Guysborough County, Richmond County, in the Strait area, Port Hawksbury, the Sydney Bight area, all trying to position themselves for project-related activities. We've been working and have been investing with them in the process.

MR. COLWELL: I remember the developments in Aberdeen and Stavanger in the 1970s, when they were probably a little bit ahead of where we are now, which was tremendously more rapid and more local content than we have here. There's no comparison at all, even at that point when they were in their infancy. We're nowhere near where they were then. You mentioned Deep Panuke, when, in reality, do you think that may really get underway, even with the revised process that they put forward?

MR. CLARKE: There's two things. One, you have to compare apples to apples. If you look at the actual reserves that were either identified or known in the North Sea versus here, when you look at the actual environment that they would have to explore in versus off of Nova Scotia, it is not cheap to do drilling and exploratory activity off Nova Scotia's coast, just by virtue of our geology and the realities of deep water exploratory activities. We have, and drilling costs are one of the fundamental things we work with industry to try to say how do we reduce that, and the process time around it, because it's all costing tens of millions of dollars. As a result of that, we need to work steadfastly in continuing the exploratory agenda. We don't have what they did, a region where other development had happened, not just off of Aberdeen but that whole region. They had a multitude of interests at play.

We are doing no different. But I think what we look at is the benefit to a place, like Aberdeen, as a result of the activity that's been there. When we were there for the Offshore Europe show, one of the things that was presented that was interesting was here we have the Kingfisher with about 100 per cent Canadian, in fact Nova Scotian crew on board, providing that global service. So some of that benefit that's over there, it's coming home because they're paying their taxes here in the province. That's a way that there's residual benefit.

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Nova Scotian offshore workers work in the Gulf of Mexico, work here and other places, and because of that, Nova Scotia benefits from the tax revenue.

If you look at the timelines around the types of development, I think we're not doing too bad. The other thing we have is a region aggressively working, and I mean Nova Scotia and Newfoundland and Labrador, to move forward with a joint development strategy. It's a question of, we're only going to be able to accelerate development once we get more finds. That's why the momentum behind the Margaree and Marco wells bodes well. We'll take stock of what happens at Weymouth once those results are known.

MR. COLWELL: Also, working in the North Sea, the water is very deep there, as well. I know that for a fact. It's maybe not as deep as some of the locations here, but it is very deep, because some of the technology was developed for the North Sea and the deep dive system, and I did work on some of that as well. The deep water is not a reason for a difference. I know the icebergs are still a problem here, that perhaps some ports of the North Sea don't see. The weather conditions in the North Sea are as bad or worse than they are here. I think maybe you should do a little more research on that, just to make sure.

MR. CLARKE: And I would say, if we want to get into a full analysis, we have to look at the realities of not just the depths of our waters, but we have to look at the conditions of ours seas that we operate within. Mother Nature, as anyone would tell you, from Houston to Aberdeen, can be very aggressive off our coast. All those factors, and we saw what an ice floe concern could do with regard to our offshore platforms, just this past Winter. So there are conditions that create challenges. We hear it from industry. So, rather than just your interpretation or mine, go to Houston or Aberdeen and then talk about Nova Scotia and/or eastern Canada. They will talk about the conditions being more costly than in other areas, and that's why the decisions they make for investment around exploration or development are all based upon, it costs more.

It's not that there's not an interest, because they do see this as an area for future potential and future access to gas and oil. So it really comes down to everyone in the broader sense acknowledging that our environment and the realities of our geography, while convenient in terms of access to a northeastern United States market is a plus, there's also the challenge of what being on the North Atlantic provides versus being in the North Sea.

MR. COLWELL: We won't have that debate today. I have been in Stavanger and I have been to the offshore oil show that the people are going down there for. I used to do work for the offshore oil industry, so I'm not guessing about this stuff. I'm still not satisfied with the question on the Nova Scotia content. Is there a real program in place, not just sort of how you track it and all those sorts of things, which definitely should not be confidential, that should be public information, how much Nova Scotia content there is, unless the government doesn't want to know that there's not very much Nova Scotia content, so that information should be public information - is there a real program to make sure that Nova

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Scotia industries are having an opportunity to bid on these projects, with the reality of having the equipment and the expertise to do the work?

I know that is a problem, and it's a problem to get the financing to do those kinds of things, and it's very expensive to get the certifications you need, the equipment you need and the people trained that you need for a market that's quite small, if you only concentrate in Nova Scotia. Some of those things can be exported.

MR. CLARKE: Just to come back to the regulator itself, the Canada-Nova Scotia Offshore Petroleum Board is where benefits are monitored and not just regulatory adherence to standards. It is about the overall development plan that is submitted, with the objectives that have been stated out, and content, and Nova Scotia-Canadian content is identified, that those levels are being achieved. So there is a very structured format to monitor Nova Scotia benefit. There is the aspect of ensuring that companies can do their procurement, and it is monitored that they're doing it, but companies make commercial decisions that are also commercially sensitive.

So it isn't about trying to hide statistics, we report on the benefits with regard to benefit derived, but in mid-process, as you know from working in the industry, companies don't show other people their cards. So government monitors what their activity is, and we have to be able to, in confidence, know what they're doing and be assured they're meeting those targets before the activity is undertaken.

There is a process in place, it works, and we're hitting the targets that we have established. As we grow and we grow industry opportunities and supply opportunities, we need to be looking towards, how do you move from 34 per cent, well, you need to have more activity. That's why the proposed development of Deep Panuke is very important, and hopefully it's going to be very timely in the development phase so that Nova Scotia companies can see a new wave of investment and access to opportunity that goes beyond just operational supply activities on current Sable infrastructure. And to the point about meeting our drilling targets for the 18-month period, if we see our drilling targets met and/or exceeded, then Nova Scotia content around that will only increase as well.

So we talk about this hopefully being a momentum-building year, where last year was one where we took a lot of stock of the realities of being in the oil and gas business. One of the realities is we're just as susceptible to world and market trends as anyone else is.

MR. CHAIRMAN: The time for the Liberal caucus has finished. You can come back, if you want. We will move to the Conservative caucus, if there are any questions. No questions. The NDP caucus.

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MR. KEVIN DEVEAUX: Mr. Minister, I get a lot of calls from constituents who are in the trades, particularly around the work going on in Woodside with the oil rigs when they come and go, with Irving. I know that some of this involves immigration issues, so I don't expect a complete answer, I'll give you that wiggle room now. I'm trying to get a sense of, they often complain about the fact that there are tradespeople here who have trades, and - I'm trying to remember, specifically in what areas - most of them would be pipefitter, instrumentation - it's a fairly specific trade, dealing with the instrumentation installation on the rigs when they're refitting them. What they're telling me is a lot of these people are being brought in from Scotland and England and the United Kingdom when there are people here who have the training and the ability to do the job.

[3:30 p.m.]

They're quite annoyed about it when this has happened - it's happened more than once - and I'm trying to get a sense from you as to whether our provincial government, (a) is aware of that issue, and (b) whether or not they have some either ability jurisdictionally or a desire, if we do have jurisdiction, to try and address it so that the people with the trades here have an opportunity before people from other countries are brought in to do the work.

MR. CLARKE: There are two parts to that as an answer. The one in terms of addressing it, yes. Do we have the ability to work and that's part of the whole discussion over content and employing Nova Scotians, especially where Nova Scotians are able to compete and meet the standards and do it as competently and competitively as anyone else. There's that aspect.

The second one, I would offer more as an offer - not as an answer - that is, if there is a specific group, organization and/or individuals who want to sit down with their specifics. I'd be giving you hypothetical scenarios at this point, but I'd be happy to sit down and have a meeting with you and any of these groups and with our officials to say, what do they see as a problem? What specific examples do they have? We will work with the various companies that they identify to try and address that. I don't have a problem with where we are competitively and competent - there's no reason why we can't ensure and advocate on that part. I would leave it as an offer to be willing to sit down and address it in more of a working format. I would say this, I don't have any current issues or complaints before me that have been brought to my attention of that nature. So if you have some examples of some people, I'd be happy to meet with them.

MR. DEVEAUX: I recall when it happened, I ended up calling the federal Department of Immigration because I thought if these people were being brought in for a certain job and they were doing something different, there might be some rules that were not being applied.

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I need to understand for my own purposes, one of them was with the Erik Raude when it was here and I think there was another one more recently, in the last six months, but I'm just trying to get a sense that when there is some sort of deal to refit, are there certain limits put on? I'm talking specifically about people coming from outside the country. I understand with trade agreements within the country it may be more difficult, but people coming from Europe over here to do work - is there some sort of limit on that with regard to their ability to bring in workers on a short-term basis?

MR. CLARKE: Just to clarify the immigration process a bit for my benefit. One of the things that I think is materialized around that is, obviously, through the immigration process people have to have a reason to come in. One of the facts . . .

MR. DEVEAUX: It has to be a lack of those people in the trade here.

MR. CLARKE: I was going to say, one of the reasons I was giving as a precipitating factor is job postings or opportunity identification where it's been there and it hasn't been a formal response or a lack of a number of responses to facilitate that. But to the point of our skills agenda and the desire to make sure Nova Scotians have the necessary skills, where people are being imported on a frequent basis as well - sometimes if it's specialty or very infrequent, well, we're trying to make sure we're investing in training and job readying people for careers.

So, what I would again sort of offer is say, let's sit down with these folks, let's look at what their concerns are for that area, in this case, as you mentioned with pipefitters and instrumentation, and we'll factor that in. I'll be happy to put it into our skills agenda as far as the industry is and try to address some of those concerns. But barring doing that, I don't think I can give you any more fuller an answer on that subject.

MR. DEVEAUX: Let me turn to Newfoundland. The other concern I hear from local people is that Newfoundlanders are coming in and doing certain work on these rigs in Woodside as well. Obviously being a country that has mobility rights, there's much less we can probably do if someone, or a company, from Newfoundland wants to bid on a particular project. Maybe you've already answered this for someone else, but for my purposes could you explain, are there certain limitations? Is there certain ability to favour Nova Scotian workers or companies or is it a wide-open process and how are we addressing that?

MR. CLARKE: I think the single largest aspect of that is when people are looking at the development plan and actually submitting is about the issue of Nova Scotia content, it's entirety and where that comes from. That's why, even with the compression deck issue for ExxonMobil, of the $750 million, of the $250 million that's targeted as Nova Scotian. What we've clearly said is that we want to know that truly is Nova Scotian content. Very important to know that.

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MR. DEVEAUX: It can be built here, but then if they bring all the workers from Newfoundland . . .

MR. CLARKE: Right. So we've been clear. The way the content issue goes is Nova Scotian content and then Canadian content. When you have 34 per cent as your current average, that doesn't mean it's not Canadian content. We would monitor it from that.

Again, if people are coming in from other provinces for specific jobs that would be seen as an ongoing requirement, then we have to identify - and we're willing to work with people to identify that there's a consistent role over here and if we have a ready and able workforce to do that, then we can engage in that discussion as part of the contents portion of that. But, as you say, there are certain realities of being part of Canada and mobility issues and contract opportunities that will come forward. However, if a Nova Scotian company received a contract in Newfoundland, I know they'd be advocating no differently than what you're discussing right now.

MR. DEVEAUX: There's a sense, I think publicly, and again, maybe you've already answered this for someone else so I apologize if I'm repeating, but from my perspective I hear often from trades people that they think Newfoundland somehow is either more diligent or has a more stringent requirement for Newfoundlanders to be hired than Nova Scotia. In my mind, I've always thought maybe that was because they have a different accord with the federal government and maybe that allows them more influence over those decisions. Is that actually the case, or is Newfoundland under very similar parameters to Nova Scotia?

MR. CLARKE: I would think that one of the things that, in terms of jurisdictional, for instance, the organization of a regulator, the two boards and the like, it's a joint accountability - provincially and federally. One of the things that occurs is Newfoundland truly is - at least the island itself - is more isolated and there's issues of mobility and access and the like that provide the dynamics that changes once you come to Nova Scotia.

We are no different. I think, even recent comments by Premier Williams, they're not satisfied with those levels. In fairness to one of the most major projects and that was at White Rose. With the White Rose project, the proponent behind that and the major financing interest made a commitment, a personal commitment, and they honoured that commitment. It meant that there was a very positive resonation in Newfoundland as a result of that. That's why issues around trying to define and continually work and that's where OTANS plays a key role for local companies and their interests and we try to find the balance with petroleum producers and CAPP to say, how are we finding it?

That's why the Atlantic Energy Round Table has become very effective for us because it puts the two provinces and our federal colleagues at the same table and we actually have working groups that have been very effective in trying to get through some of the process stuff, but also trying to say, how do we try to have as much as possible a twinning of process

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and effort so that there is much more seamless approach. We also recognize, my colleague Minister Byrne and I, that we're also committed to trying to sell Atlantic Canada as an investment region. Ultimately, when we talk about the benefits, when we talk about LNG, if there's a strand of gas off Newfoundland and it can find a way to Nova Scotia, then we both win.

MR. CHAIRMAN: Could I can interrupt for just a moment, please, honourable member?

MR. DEVEAUX: Sure.

MR. CHAIRMAN: I just want to provide a welcome to visitors who are watching. They are tour guides for the Halifax Citadel on a familiarization tour of some of the sites to visit so that they will be able to speak authoritatively about them when tourists come to the Halifax Citadel. Right now we're going through estimates or debate on Supply, or not debate on Supply, estimates which is looking at the various line items in the various departments. The Department of Energy is being asked questions, the honourable Minister Cecil Clarke, and the various Parties take turns asking questions about items within the budget of the respective ministries.

So we will turn it back over to the MLA for Cole Harbour-Eastern Passage and thank you for the interruption. (Interruption) Estimates is often by the old-timers. The reason for that outburst is estimates has often been compared to watching, for some of us, paint dry on the wall and so that's why I said you deserve a clap for sitting through this, but it's actually at times much more interesting than that, especially when the honourable member for Cole Harbour-Eastern Passage asks his questions.

MR. DEVEAUX: Yes, well, I'm not going to correct you on that one since you were so kind and welcome. So a couple other quick questions. My question is, are the accords identical because I understood back in the 1980s when these were being negotiated that Newfoundland might have had, because of their terms of Confederation, a better hand to play. Are the accords identical in the jurisdictions of both provinces related to the federal government?

MR. CLARKE: I would say in terms of the accords, I would say yes. However, governance structure is different.

MR. DEVEAUX: What do you mean by that?

MR. CLARKE: Well, as you know, well, they're similar to the point that it would be hard to notice a difference other than, probably, some technical things, but the actual governance structure is somewhat different in terms of the two boards. As you know, we

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have two provincial and two federal and one jointly approved chair here and then you have your CEO and they have their chair and CEO . . .

MR. DEVEAUX: Separate.

MR CLARKE: No, they have it combined and so in Newfoundland and Labrador they actually combine that function and it changes how the operations then would happen.

MR. DEVEAUX: In favour of Newfoundland?

MR. CLARKE: All I can tell you is when I met with Minister Byrne and some of his officials, they were very satisfied with their relationship with their board and felt it was very workable. However, I think, like all of us, I mean we always look at governance-related issues, no different than why we're here, but by virtue of that position being different, operations change as a result so it looks different, but the structures aren't.

MR. DEVEAUX: Now, the other part of the Newfoundland was, particularly when Hibernia was built and maybe White Rose, I'm not sure, there was a lot of federal influence and/or money put into that. Did that result in Newfoundland having, because I believe Mr. Crosbie at the time, the minister, had a lot of influence over that process. Did the development of Hibernia at that level create more Newfoundland jobs as a part of that?

MR. CLARKE: I think you couldn't help but have that kind of investment and not have the type of spin-off point, but to that, and that's one of the issues of contention for the Province of Nova Scotia, when we come down to the issue of principal beneficiary and the royalty structure with Ottawa and our objection to only receiving 19 cents on every dollar of royalty coming back here and then when we do get it, it's subject to clawback and, you know, our sense that you cannot possibly transition in the same way that Alberta, for instance, did and has and continues to from going from a "have-not" status to have. If all we're going to do is make one step forward and then have two clawbacks on it, I mean it's just . . .

[3:45 p.m.]

MR. DEVEAUX: Right.

MR. CLARKE: So that's really where the working issues are and, as you know, it has made its way on to the federal stage in terms of I think all of the political Parties noting it in terms of the ones we reflect here.

MR. DEVEAUX: How much do we think, and I was briefed on this so I apologize for not remembering the specific name, but there's a name from the legal framework in the 1980s when it was set up and there's an argument that Nova Scotia has that we are owed money and I forget . . .

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MR. CLARKE: Through the Crown Share Agreement?

MR. DEVEAUX: Crown share.

MR. CLARKE: Crown share, yes.

MR. DEVEAUX: How much do we think we're owed through the Crown share - ballpark?

MR. CLARKE: Let's put it this way, it's significant. Let me just (Interruption) What I will do is try to get back to you and when I say substantial, we're not talking tens of millions of dollars, it is a substantial amount of money.

MR. DEVEAUX: Are we talking billions?

MR. CLARKE: Well, potentially, and really again, and the reason I want to, there is an ongoing negotiation and the challenge is our number versus their number.

MR. DEVEAUX: Yes, I know.

MR. CLARKE: And their interpretation of what would actually trigger, you know, a Crown share versus ours, so for me to put out numbers right now and actually I can probably come back and tell you it's substantial, but you could go from, you know, one amount to a very high one and then I'll be into having to come back another day and really while that discussion and negotiation is ongoing, it would remain in the realm of confidentiality around that.

MR. DEVEAUX: Because I mean I would suspect that Nova Scotia, if they're going in the process of negotiating or hoping to negotiate, knows in the back of their mind, in their back pocket, what they see as both the high end and the low end?

MR. CLARKE: Right.

MR. DEVEAUX: And so I mean whether or not that's announced here or something else.

MR. CLARKE: Yes, and I will look into it further in terms of trying to get some more clarity where we are and just on that point, that is an area where, you know, Nova Scotia has a legislative legal right to be the recipient of Crown share. In Newfoundland and Labrador there's a provision for Crown share, it's just not enacted under legislation and that's something, of course, that will be subject to their own negotiation, but again to the point, we're trying to negotiate this and get a positive outcome because the only thing that trying

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to go a legal route, shall we say, you're just going to be spending lots of money on a legal process and a lot more time versus getting to a practical . . .

MR. DEVEAUX: Ten years. My last questions are around the issue of, about six months ago Frank McKenna, when he was still thinking of running, put up a trial balloon about the federal government allowing all the royalties, but splitting them amongst the four Atlantic Provinces. Do you remember hearing that?

MR. CLARKE: Yes, convenient if you're from New Brunswick.

MR. DEVEAUX: Yes, or P.E.I. So that's my question. Do you see that as something the federal government sees as a legitimate offer or is that with Mr. McKenna just a mouthpiece, a trial balloon, or is that something still on the table or do you see that as something that went nowhere?

MR. CLARKE: Well, just to maybe provide an antidotal one, you have to go no further than our recent experience with New Brunswick on our National Energy Board hearing with regard to the distribution issue. So I think if you took that, Nova Scotia's position wouldn't change much from that.

MR. DEVEAUX: But my question is, do you think the federal government sees that as a legitimate option that they're trying to pursue?

MR. CLARKE: It is not one that they presented to the province in any formal and/or informal way to me as a consideration and I think it may have been more a floating of the balloon to see what the policy uptake or not would be.

MR. DEVEAUX: Those are all my questions.

MR. CHAIRMAN: There is no one from the Liberal caucus here so I guess there are no further questions from the Liberal caucus and no further questions from the Progressive Conservative caucus or from the NDP caucus. Your closing statement then, please, Mr. Minister.

MR. CLARKE: Mr. Chairman, I just want to sum up by just noting for the record that over the course of the questions that we've had and some of the dialogue that we will report back, not only to the committee, but on those items that we've indicated to members that we would follow up, we will do that. We've been taking note of those and we will be happy to do any of the necessary follow up, such as meeting with individuals and dealing with some of the issues that have come up around the estimates debate and questioning. So I thank the committee for their indulgence and I appreciate the input from my legislative colleagues on this. I really do believe that the line of questioning helps up when we implement our business plan. So thank you very much.

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MR. CHAIRMAN: Do you have a resolution to read?

MR. CLARKE: Bear with me. Do you have it in front of you?

MR. CHAIRMAN: No, I don't have it in front of me. (Interruptions)

MR. CLARKE: Well, can I suggest we move the resolution. I had the two pages.

MR. CHAIRMAN: We'll take a five minute break right now and we'll have the Department of Environment and Labour come on immediately following that, just while we get the resolution.

MR. CLARKE: Yes, that sounds good, thank you.

[3:51 p.m. The committee recessed at 3:51 p.m.]

[3:56 p.m. The committee reconvened.]

MR. CHAIRMAN: Shall the resolutions stand?

The resolutions are stood.

Thank you for your presentation, I appreciate it.

We now will call upon the Minister of Environment and Labour. We'd appreciate, before your opening statements, if you could introduce the staff who are with you. Then we'll call upon you to make your opening statements. Please go ahead.

Resolution E6 - Resolved, that a sum not exceeding $26,152,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Environment and Labour, pursuant to the Estimate.

HON. KERRY MORASH: Thank you, Mr. Chairman. It's my honour to present to you, my colleagues and the people of Nova Scotia, with the details of this year's budget for the Department of Environment and Labour.

Before I begin, I would like to introduce my staff: Rosalind Penfound is the Acting Deputy Minister, who is on my right; Chuck Allen, who is Manager of Financial Services; and there are other members of our management team who are in the audience with us.

As you know, our mandate of the department is broad. Our mission is to protect and to promote the safety of people and of property, a healthy environment, employees' rights, consumer interests and public confidence in the financial services, insurance, pension services

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and alcohol and gaming sectors. Environment and Labour is responsible for more than 30 Acts and 120 regulations. We also are responsible for more than 20 agencies, boards and commissions, including the Workers' Compensation Board, the Occupational Health and Safety Advisory Council and our newest addition, the Nova Scotia Insurance Review Board.

The $26 million budget for Environment and Labour invests in programs that affect the health, safety and rights of our citizens and the protection of our environment. I'm proud to report that Environment and Labour has established a budget for 2004-05 that respects and protects our core business, planned priorities for the environment, the economy and for communities and families. Our business plan is both aggressive and realistic. It sets the direction for Environment and Labour to build upon its past accomplishments and to deliver the best possible services for our clients.

At this point, Mr. Chairman, I'd like to highlight a few specific goals that have been established at Environment and Labour for 2004-05. I'd like to begin with health and safety.

The province has made considerable improvements in changing both its own attitude and that of others when it comes to the importance of health and safety in our workplace. The last 10 years has seen a steady improvement in education and awareness. I'm pleased to report that the recent move of the prevention and education branches of our health and safety division to the Workers' Compensation Board has gone smoothly. The occupational health and safety division is now more tightly focused on standard development, inspection and compliance activities. Currently our main occupational health and safety regulatory priority is the completion of the Offshore Accord Act and the Occupational Health and Safety Offshore Regulations. We've recently begun distribution of an occupational health and safety guide for the fisheries industry and we look forward to participating with the groups that make up Nova Scotia's workplace safety and insurance system on May 5^th, as we hold our first annual system meeting.

[4:00 p.m.]

This meeting gives our occupational health and safety division the opportunity to report directly to the public on key programs, service initiatives and finances. It's a welcome complement to our yearly annual report and highlights publications. Of course, the department is also committed to the successful application of a new chronic pain benefit for injured workers and the implementation of other improvements to the workers' compensation system. A new approach to chronic pain will be a significant decision for injured workers. Our goal is to establish a system that will ensure equal access to benefits for all injured workers regardless of their injury or when it was sustained, and to ensure our approach is fair, sustainable, and that it addresses the constitutional issues raised by the Supreme Court.

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Activities pertaining to the protection of environment account for almost half of the Environment and Labour's budget. Our key priorities in this area are: to protect and manage provincial water resources through implementation of an action plan for year three, outlined in a drinking water strategy for Nova Scotia; to develop air-shed management plans and work with large industrial facilities to monitor major sources of air pollution from both within and outside provincial boundaries; to protect more coastal lands and other natural areas from development, including the designation of two new wilderness areas and five nature reserves and through private land stewardship partnerships; and to complete amendments to the Environment Act to update, clarify and strengthen the Act. Those are just a few of the department's major projects for the coming year and it represents only a part of our complete mandate.

We have a whole host of other activities taking place this year that relate to our other responsibilities and these activities include: participation in the creation of model pension legislation; conducting training for municipal fire inspectors; continuing to provide effective and timely conciliation services; and, of course, targeted inspection and investigation activities for the environment, workplace, public safety and gaming and alcohol facilities. This department is also engaged in a number of important national and inter-jurisdictional initiatives.

Climate change, in particular, remains an important national activity and I'm pleased that our department is playing an active role in supporting my colleague, the Minister of Energy, as he and his department lead Nova Scotia's participation in climate change initiatives. This year we also had the pleasure of hosting an International Association of Labour Relations Conference in partnership with the federal Mediation and Conciliation Services Organization. We look forward to this opportunity to share our experience and keep up-to-date on best practices in mediation, conciliation, arbitration and adjudication.

Mr. Chairman, I'm pleased to report that Environment and Labour has established its budget for 2004-05, without compromising staffing, without compromising programs, and without compromising our ability to carry out our regulatory responsibilities. This means that we will continue to have experienced staff in place to meet our commitments on a variety of essential activities, to explore partnerships, and to maintain the best possible services for our clients. Maintaining services has also required an increase in fees across the department. By raising fees to reflect the cost of living, we, like all other departments, are able to cover the increased cost of delivery of these services to Nova Scotia.

The department also introduced three new fees this year. The watercourse alteration administrative fee will partially recover costs for processing these approvals. The industrial air emission fee will cover costs associated with managing air quality in Nova Scotia. This will be applied to about 50 companies. The fee targets primarily large emitters of 33 gaseous pollutants, including sulphur dioxide and particulate matter. These emission volumes on which the fee is based are reported by companies in Environment Canada's national pollutant release

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inventory. Finally, the contaminated sites administrative fee will partially cover the cost of processing companies' remedial action plans for the closure of spills or contaminated sites.

Mr. Chairman, thank you for your time today and thank you to all others who are interested in Environment and Labour's estimates. I would like to say at this point in time with regard to insurance inquiries, we would be willing to entertain those during this budget process, but we would ask if they could be grouped, we would appreciate that and Minister Russell would come in and take my place to answer those questions at that time.

MR. FRANK CORBETT: Could I respond to that?

MR. CHAIRMAN: Would you like to respond to that?

The honourable member for Cape Breton Centre.

MR. FRANK CORBETT: I believe it's the wishes and it's the practice in these committees, that we will probably handle any of the jurisdictional stuff that's under Minister Russell's purview when he's doing his budget for his major portfolio which would be Transportation and Public Works, we would probably question Minister Russell at that time.

MR. MORASH: And if you don't mind, I would clarify why we offered that. The staff that we have here and the information that has been put together, Minister Russell is responsible for insurance, but the department is still handling all the work that goes along with that. So that was the reason that the suggestion was made.

MR. CORBETT: I appreciate clarification and I realize, you know, the intent of it, but with that said, it's certainly at this point our intention to pursue that line of questioning when the minister is there for TPW.

MR. CHAIRMAN: And that's historical precedence.

MR. CORBETT: Basically that's what we do, yes.

MR. CHAIRMAN: Any comments by the Liberal caucus on it? Thank you very much. Any questions by the government caucus? We will go to the Official Opposition.

The honourable member for Cape Breton Centre.

MR. CORBETT: The time is, Mr. Chairman?

MR. CHAIRMAN: The time is, we shall be official for you here, 4:05 p.m.

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MR. CORBETT: Well, Mr. Minister, thank you for being here and your staff. I appreciate the effort that everyone does put into these and it's either fun or stressful, I don't know which one, but I will try to make them a bit of both. I just have a few opening comments and then I will get into some questioning. Your ministry is presented with, to my estimation, a fairly daunting task and that task is looking after the workforce in this province. It's a task that I think - and I'm sure you do, Mr. Minister - is seen with the respect that's deserved because I truly believe that throughout this province we possess a tremendous workforce, a workforce that can be called upon in times of war, in times of peace, in hard economic times, and have always been relied on to do their job, do it well, and do it as safely as possible.

I not only respect the working women and men of this province, I respect your staff for the respect that they give to these workers that sometimes in these exchanges, as I've said, they