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HALIFAX, TUESDAY, MAY 10, 2005

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

1:45 P.M.

CHAIRMAN

Mr. Mark Parent

MR. CHAIRMAN: We will call the meeting to order. The Liberal caucus has four minutes left.

The honourable member for Cape Breton South.

MR. MANNING MACDONALD: Thank you very much, Mr. Chairman. Actually, this was the second four minutes you gave me and I appreciate it. I got a little confused about whether the four minutes was the end of the day or the end of my talk. Most people who know me know that it takes me four minutes to introduce myself, and when I get on a subject it takes a lot longer than four minutes to complete the particular line of questioning that I embark upon. Having said that, I'm going to say nothing more than to turn the floor over to the NDP. Thank you.

MR. CHAIRMAN: The honourable member for Hants East.

MR. JOHN MACDONELL: Mr. Chairman, I want to thank the member for Cape Breton South, I didn't know he could be that brief.

I want to come back to the minister, particularly on Richard Thompson and Foggy Hollow Farm. I think I was so close on time yesterday, but I think you got to respond, and the point I want to raise is that you mentioned in terms of disaster relief the federal government had actually stepped in at Hurricane Juan and that the province had gone above the relief that the federal government was offering and, in particular, it was the province who created a program or dollars for agriculture.

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It would seem to me that the province still has that ability without any intervention by the federal government, so I'm just curious as to why the province wasn't interested in doing that. I guess maybe for two reasons: the damage would seem to be appropriate, the winds that we got that caused the damage were extreme; and certainly even though it covered a broader part of the province I don't think that there has been an indication that the dollar values would be as extreme as they were in Hurricane Juan. I'm just wondering why the province doesn't feel that is appropriate to try to help out?

HON. ERNEST FAGE: As I explained yesterday, the federal DFA that the province has for disaster relief, commonly known as the DFAA, one of the federal guidelines is it has to be an uninsurable loss. If the loss was an insurable loss it would be automatically not allowed to apply for the program or be disallowed. Because of the severe damage and the time frame the federal program takes to engage, the province decided an expanded DFA was in order because of the severity to the resource industries, and that was a one time only for the expanded DFA, with a maximum budget amount in that particular year. Those funds, as we know, the industries eligible were the agriculture industry, the fishing industry as in wharves, sheds and those types of things, bait sheds, and a harvesting subsidy for the forest industry. That was a single-policy stand alone.

Yesterday, as I commented on Mr. Thompson's case, it would have to be an uninsurable loss and I can't tell you specifically in his case whether he would have been eligible. He could have gotten insurance for his greenhouse for wind damage, which in most cases you probably can. Given that, it may not meet the guidelines of either of those other two programs. There is no standing program in Nova Scotia for single damage type events like that. Hurricane Juan was provincial dollars allocated to specific needs in the resources sector that were beyond the scope of the federal program agreement to handle.

MR. MACDONELL: Thank you, I understand what you're saying. If you could tell me this, are you saying that absolutely nobody got any help if the loss was insurable and even in the case if it was insurable but they didn't have insurance?

MR. FAGE: What I'm saying is under the federal program, where we are co-signers, it has to be an uninsurable loss or it doesn't qualify for the program. Under the expanded DFA for Hurricane Juan, there were circumstances in that one where insurance, certain limits, especially on the cost of some farm buildings particularly, that was the group where there were special limits set for the provincial program - that was a one-time only program for damage suffered under Hurricane Juan.

MR. MACDONELL: This is moving in the right direction.

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It would seem to me that one time only - I'm quite sure that this province will continue long after you and I are gone - the notion that one time only means one time only seems a bit ridiculous. Whether it's another hurricane that is the same as Hurricane Juan, or worse than Hurricane Juan, or some other disaster, it would tend to make me believe that another government would be interested in looking at a program. I can buy the notion that you might have reservations about entering into another program and not really wanting to spend any more money than you have to, but I see the similarity in events here to be great enough that I think this is one that the province could look at. In particular, when you mentioned about farm buildings, I would think greenhouses would come in under farm buildings and I'm thinking that this amount of money, since there's only one person that I know of, wouldn't necessarily be so significant, so I'm just curious as to why the province doesn't see the same similarity that I do?

MR. FAGE: I think there are two things that always have to be considered. In any disaster relief program, a disaster can have many definitions obviously, but it is generally more widespread than one specific instance. Secondly, people have an obligation to purchase insurance and protect themselves. If government policy creates a situation where replacement occurs, regardless if it could be insured or not, nobody would buy insurance anymore. Those factors, when a crisis or disaster occurs, I think, whether it is this government or any other government in the future, they would have to weigh those circumstances. A standing policy regarding that anything would be eligible would be very problematic to administer and would relieve the business or the person of the obligation to protect themselves.

MR. MACDONELL: I think that's a legitimate argument and I could twist my own argument to come in line with that, but I'm not going to. I'm only mentioning one case, but I know that there were at least two others who were affected by this windstorm, dairy farmers, one in Shubenacadie and one in Fort Ellis in Stewiacke in the member for Colchester-Musquodoboit Valley's riding. So those were two individuals for sure that I know of who were affected by Hurricane Juan who were also affected by this windstorm. It just happened that Mr. Thompson wasn't affected by Hurricane Juan, but he was affected by this windstorm.

I guess what I'm seeing is that your one-time only program, which actually was created to help people in the agricultural industry, affected those on a very narrow track that the hurricane travelled. This windstorm actually, I'm not sure how many other people, I only know of this one gentleman who wasn't affected by Hurricane Juan, but was affected by the windstorm. I can see that this is a similar situation. I don't think that as much as my Party has been in support of public auto insurance, I don't think we're looking at, you know, the province taking on an insurance policy for other purposes, but definitely I guess my impression is you offered help from Hurricane Juan and this just happened to be a guy who was lucky enough to be missed by Hurricane Juan but not lucky enough to be missed by the second storm and there's no help for him. I guess that's where I'm going.

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MR. FAGE: I think it's important to remember under Hurricane Juan the expend of DFA, there were caps and limits set on those dollars for the resource sector. A lot of research and thought went into those caps obviously. When you look at the size of some of those structures, especially in the farm sector, if they were a number of years old, obviously you had to bear in mind the reality that nobody would carry replacement insurance.

MR. MACDONELL: Yes.

MR. FAGE: They would be cost-prohibitive when you look at structures that may run into the hundreds of thousands or millions of dollars, you know, people would not carry replacement insurance. So there were caps, a lot of thought to be proportionately fair to everybody, in that particular circumstance so that event was covered in that manner. I think it's also important when we are subjected to weather circumstances, given our location, you know, it can be fairly severe which is quite normal for this province and grows more normal. I mean if you move down to Cheticamp, or some areas in Inverness she gets up over 100 kilometres an hour pretty easy and those are weather conditions that you have to deal with in your locale.

I think it's also important to note that's why people carry insurance and are responsible for themselves because it's my understanding the other two situations you mentioned, they invested their money and bought insurance and the insurance is repairing the damage to those other two sites and farm structures. The insurance was there, I would think, you know, I'm not an insurance agent, but the circumstance exists, the three you've named, two chose to buy insurance it appears and are being repaired; one chose not to. There is no policy that would cover that circumstance and if every circumstance was covered by the public purse, nobody would buy insurance.

MR. MACDONELL: I'm not saying every circumstance. It would appear to me that 155 kilometre an hour winds, which was the same speed of winds for Hurricane Juan, when they happen again and you don't call it a hurricane, you just call it a 155 kilometre an hour wind, any damage that's received, I don't think it would be considered to be normal wind whether you're in Cheticamp or where you are. I guess it appears to me that there were people helped without insurance. I think you've indicated that.

MR. FAGE: And if I may just for clarification, some were helped without and with. There were caps. It was across the whole sector.

MR. MACDONELL: Yes.

MR. FAGE: Because of the devastation of the hurricane. Normal circumstances, I'm suggesting to you, if it's an insurable loss under federal DFA, which are the guide rules, if it's an insurable loss, they wouldn't cover it.

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MR. MACDONELL: Yes. Well, I think Mr. Thompson is probably going to fall under without or with, one of those categories, and I would say that the windstorm would not be what you would consider normal. I can see I'm not gaining lot of ground here. I don't want to think that he had the misfortune of being missed by the hurricane. I guess the impression I'm getting, if he got hit by a hurricane, he might have got help, you know, 155 kilometre an hour hurricane, you can get help. If it's a 155 kilometre an hour windstorm, you can't, but anyway I'll relay our debate.

MR. FAGE: There is just no policy in place to do it.

MR. MACDONELL: Oh, no, I recognize that. That doesn't mean you couldn't create one, but with that, Mr. Chairman, I'll give my time to my colleagues and I thank the minister and his staff, I appreciated it.

MR. CHAIRMAN: The honourable member for Timberlea-Prospect.

MR. WILLIAM ESTABROOKS: Mr. Minister, I'm used to catching a little heat at hockey games.

MR. FAGE: How was the hockey game last night?

MR. ESTABROOKS: I didn't go to that, I haven't got time for that, I've got to play.

MR. FAGE: You and I both didn't make it last night.

[2:00 p.m.]

MR. ESTABROOKS: And we all know our background in athletics, but I want to take you to a hockey game in March. The game was not too bad, pretty mild, and there were a few refreshments being had afterwards when into the dressing room came a certain Keith Dauphinee and Mr. Dauphinee was angry. Do you know what, he wasn't so upset at me and how I usually play hockey. He wanted to talk about Snair's Bakery and he was upset. Needless to say, we had to adjourn, out of courtesy to the next teams coming in. And I would like to particularly make recognition to a member of your staff who is leaving the table and the good work that he did through some difficult times in my community and I want to thank him, okay. I think we know of whom we speak.

I want you to take me through this because, you know, I have the clippings here and I know the Snair boys and the whole works. I also know Mike Currie, you see, my wife is an Islander, right, and guess what, Black Point's loss, St. Margaret's Bay's loss is Summerside, P.E.I.'s gain. Mike Currie, who holds a similar position to you in the Government of Prince Edward Island, I'm sure that it will be a comforting thought this summer when I happen to run into him that this is a wonderful business that we have gained from Nova Scotia.

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Now, the topic revolves around the fact that Snair's didn't have a good enough business case. I could be wrong with this but, you know, I have the clippings here and I've followed what was said in the media and so on. I would be the first one to tell you that I took this to the media, okay. The satisfaction level in the community was not being met and the fact that the decision was made to go into Prince Edward Island was an unfortunate one. You said in your comments and if you wish to refer to them, I'm not going to quote you directly, that people in your department spent months working with the Snairs. Would you tell me how many months and what kind of work they did with these two legendary St. Margaret's Bay businessmen?

MR. FAGE: Approximately I believe June, July, a year ago, they and their hired consultant approached myself and the department in regard to the situation they were having with their business. It appeared it was the type of situation that would require some work submitting a business plan and they were looking to borrow some money and we felt that it fit perfectly for the mandate of Nova Scotia Business Inc. and they were referred there. So Nova Scotia Business Inc., as they always do, immediately met with the Snairs and their councillor representative and began that process shortly after that. I believe it went to November before they were given a final answer on the information supplied.

MR. ESTABROOKS: Let's not get into the rumours but let's deal with it. The story is the business case wasn't thorough enough, or well prepared enough, or didn't have all the t's crossed or the i's dotted, whatever the appropriate discussion revolves around. Their business plan did not meet the expectation of the decision makers when it came to assisting this small business?

MR. FAGE: My understanding is Nova Scotia Business Inc. assigned one of their top people to the case to go through the business case presented by Snair's on what they hoped to accomplish with the business, with regard to debt and financing upgrades. They went through those discussions with them and unfortunately, the recommendation at the end of the day was that the request was denied.

MR. ESTABROOKS: I certainly couldn't put together a business plan for a small business in this province. I'd be the first one to admit that. I would expect that I would get some help along the way. I'm not saying the government has to, or an arm's-length organization such as Nova Scotia Business Inc. is obliged to assist small-business people. You've probably seen the pictures of the Snairs brothers in the paper, hard-working men who inherited the business from their dad, a perfect family business. Obviously, what they put together for a business plan was not up to scratch, that's the reason for the denial, it seems to be the reason. At any time during those discussions, if you're allowed to tell me - I'm going to ask it anyway - did the fact that Prince Edward Island was in the bidding for this company ever get discussed?

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MR. FAGE: Two things. I think it's important to note, as you pointed out earlier, I believe they hired consultants and they were certainly well qualified to put forward a business case and supply all the information in my meeting and dealing with Nova Scotia Business Inc., that individual was always present. At no time did Snair's relay to me that they were looking at a P.E.I. option. Apparently it probably came up, is the word I'm told, in the discussions within Nova Scotia Business Inc.

MR. ESTABROOKS: Aside from the fact that Summerside aggressively promotes itself, and that's a compliment to the Mayor, they, as a community, have recovered, rebounded from the loss of the base. They aggressively - the Schurman family particularly is out there, you know that, of course, because of the proximity to the island. They never stop promoting themselves. They have ended up with a classic family business that has left Nova Scotia.

I know I'm going to be asked this question this Summer at Brackley Beach, are you saying that the business plan that wasn't good enough for Nova Scotia, apparently is good enough for Prince Edward Island, because Prince Edward Island stepped to the plate and took this business out of our economy?

MR. FAGE: Obviously I'm not at liberty to discuss any of the Snair's brothers' business or personal information. Certainly, if they want to relay anything, it's up to them. I really couldn't comment any more than that.

MR. ESTABROOKS: I'm aware of the fact that at Public Accounts, Stephen Lund said there was an eight-page report from the staff member who worked on the Snair's file and that's all the stuff that was connected with the negotiations. I'm wondering if it's possible for you to make that report available to the members of this committee?

MR. FAGE: My understanding is that they were requested to make that eight-page report available to the committee. Nova Scotia Business Inc. is conferring with their legal advice but if they are required to present that, they intend to present it to the committee.

MR. ESTABROOKS: Mr. Minister, no reflection on the legal profession - yes, a lot of reflection on the legal profession - it's a direct question. We're talking about funding for a small business and we have to consult with lawyers on whether we make something public. That seems to me not to be where I want to go on this because the key thing that I want to come out of this - because the political points have been scored, if there is such a thing, we all know there's a by-election there. I'll guarantee you, I will knock on every door in Black Point, every door in Boutiliers Point and the message will be very clear, so good luck to Ms. Streatch. What lessons, if any, do you feel that your officials have learned because of what has happened with the Snair's case in Nova Scotia?

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MR. FAGE: First of all, only Snair's can release their business case and personal information. I guess we'll see if anybody moves to P.E.I. at the end of the day and a performance loan for $150,000, for example, a forgivable loan, is what P.E.I. is offering. All I can say in defence is job numbers are growing in rural Nova Scotia because of the agencies and the structures we have here in Nova Scotia. Unemployment rates are down, last month another 5,300 jobs, the proportion, almost half of them outside of HRM. We're doing something right here in Nova Scotia.

The reality of each individual business, obviously, there has to be a go-forward that makes economic sense. As elected officials, ministers responsible and agencies, these are public funds and we have to be accountable for them. Due process, proper business plans are part of ensuring that the best protection is afforded to those public dollars.

MR. ESTABROOKS: And I point out, don't get me going on the HRM, please, Snair's Bakery aside, Black Point is in the HRM and I'm very well aware of the fact that in rural Nova Scotia - and I live in rural Nova Scotia, this doesn't . . .

MR. FAGE: My definition is Black Point is in rural Nova Scotia.

MR. ESTABROOKS: Fine, but you're talking about HRM . . .

MR. FAGE: You and I are of the same definition, I think.

MR. ESTABROOKS: Right on. If you have your own well and septic system you live in rural Nova Scotia.

MR. FAGE: That's my definition.

MR. ESTABROOKS: Okay, but the point that has to be made here, and I understood what you said on value for dollar and all those sorts of things, but I'm aware that in that community along the bay, there was a loss of jobs at the Chester Plastics Ltd. operation. Snair's Bakery, the skill part - and I'm not saying that marketing and delivering the product is not a skilled business - of Snair's Bakery is moving lock, stock and flour to Summerside. The other reasons for that decision are unfortunate, in my opinion, it's something that I hope your staff, or the people at Nova Scotia Business Inc. who are answerable to you, look at more thoroughly in the future, because I think we have some lessons to learn from the process.

MR. FAGE: I certainly couldn't agree with you more. Each case is dreadful when you have a long-term business in rural Nova Scotia, or urban Nova Scotia, when they either move to another jurisdiction or are having business operating difficulties. As I said earlier, the Snair brothers are still operating at Black Point and it will be interesting to see where they are operating a year from this date when we meet again, whether it is Black Point as well.

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[2:15 p.m.]

MR. ESTABROOKS: With the remaining time for the NDP, I will share it with my colleague, the honourable member for Pictou West.

MR. CHAIRMAN: The honourable member for Pictou West.

MR. CHARLES PARKER: Thank you, Mr. Chairman, and perhaps a year from now we will be meeting right here and who knows who will be on which side of the fence here, but we'll talk about that. I want to follow up on my colleague's points around small business development.

Certainly, it was a shame to see Snair's Bakery disappear from our province. It's just an example of a good family business. Small businesses in rural Nova Scotia are vital, very important to our economy and every job counts in Nova Scotia, especially in the rural parts of this province.

The complaint I get at my constituency office is that there's lots of help out there for the big businesses but there's nothing for the small guy. Maybe this Snair's Bakery is a good example of that. If you're a large corporation, there seems to be lots of help for them. I know yesterday, Mr. Minister, you talked about the credit union loans that are available to some small businesses and perhaps that will be a benefit to some, but the general impression is there's not much help for the little guy. I do know of one program that you have and again, it seems to be slanted towards the big fellows, your payroll rebate program. I want to ask you particularly about that.

Is there a one-size-fits-all for businesses or are there different criteria for different types of businesses? What are the criteria? What do they have to meet in order to get assistance under the payroll rebate program?

MR. FAGE: That's a very good question and if I could just pull back a bit to before the payroll rebate program, you were mentioning the credit union loan program which the credit unions, the co-ops, which are the backbone of rural communities and small business. It has been a great partnership. If you ever have the chance to talk to your credit union or your co-operative, they'll inform you how well that program is going and the opportunities it provides for small business, loans up to $150,000. As well, there's CEDA, the venture capital funds, community, and those have been moving forward and received very well in Nova Scotia.

There's over $18 million total invested now in local communities through those various projects. Also, I think it's critical, as we look at all the development agencies we have in this province from the Farm Loan Board to the Fisheries Loan Board, to NSBI, to OED, the film board, to InNOVAcorp and a number of RDAs in federal/provincial. The key

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is the coordination, allowing what tools each department or agency has, it may fit a particular business very well. Other businesses would require a combination of OED, NSBI, Farm Credit Corp., Venture, other levels of government and many projects, large and small, requires support from all three.

I think it is important to look at businesses. There's two major categories, and they're large and small. Greenfield Manufacturing, for example, four walls and a manufactured good or service, many times require a front capital for equipment and machinery. OED and other agencies can provide funds and loans through the Industrial Expansion Fund. For a company that may be more service orientated, IT orientated, the payroll rebate program would be a much better fit. As we discussed with the honourable members from the Liberal Party, it is a great tool because payroll rebates allow protection, not only as an incentive to support a company to establish or expand here but it provides protection for the taxpayer. They have to pay those payroll taxes for a year. The audit is done. They meet their obligation. Away it would go.

The size for the payroll rebates generally hinge on that 50 employee mark and up would be the ones that would be eligible for the payroll rebate. That is just one tool in a whole host of how we try to support industries and companies of all sizes in the province.

MR. PARKER: I guess I want to follow up on this Payroll Rebate Program. One of the employers in my area that has taken advantage of that program is Convergys and they, of course, are in other parts of the province. Without giving any specifics of that particular company, do they have to have X number of jobs for a X length of time? Are those full-time jobs or are they people on the payroll, or how does that work?

MR. FAGE: The rule is they would have to employ those people for a year, resubmit the validation for that and then receive a percentage of their payroll rebate, but it's all calculated in FTEs, full-time equivalents.

MR. PARKER: Full-time equivalent is 40 hours a week?

MR. FAGE: It's 37.5, and we can have that verified for you.

MR. PARKER: It's almost based on the number of hours that the total workforce is working, not necessarily the number of employees . . .

MR. FAGE: Full-time equivalents.

MR. PARKER: I guess that has been the concern here with Convergys in New Glasgow. They've been hiring new people. They've been laying people off. They've actually cut back on the hours for a number of the full-time workforce. While they're hiring new people, there are others who are getting only 80 per cent of the work they have had all along.

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MR. FAGE: Certainly, from an economic development standpoint, there would be no advantage to 37.5 or one FTE. There's no advantage whether that was a full time or part time. It wouldn't advantage them in how much payroll rebate they would receive. It would make no difference.

MR. PARKER: There may be some good reasons why they're hiring new people and laying others off for part of their work shift. I'm not sure. You say it's not to take advantage of the payroll rebates, the company has to have the full-time equivalent hours and that is what the rebate is based upon?

MR. FAGE: It would be no advantage to them in how many hours they were allocating. It would make no difference to the payroll rebate they would receive.

MR. PARKER: I only have a few more minutes here in my time but I was going to switch topics and ask about the Nova Scotia Fisheries Loan Board. Your department is responsible for that. I know that board has been going since 1937 and it lends money to new entrants into the fishery. The problem is today, the cost of getting into the business is extremely expensive. It could be $0.5 million. It could be $1 million or more. Some of that is to buy a new boat or gear. A lot of it today is the cost of the licence and that may be up to $1 million, just for a licence. While a licence is an intangible thing, it's still a very necessary part of what the fisherman is buying into.

I understand the loan board does not lend money on licences so that leads young fishermen to look elsewhere for help and if it sets up trust agreements it could be controlled by almost anybody. I understand in Quebec now they are looking at lending money on licences, up to 70 per cent of the market value, and it would sure help our fishermen here if that was done. Is that something that the Nova Scotia Fisheries Loan Board might consider to help our young fishermen get into the business?

MR. FAGE: It's a good question but the Minister of Agriculture and Fisheries is responsible for the administration of the Fisheries Loan Board and if I answered it I would only be offering a personal opinion. I think it would be important to take it up with that minister.

MR. PARKER: I thought though that the Nova Scotia Fisheries Loan Board was under Economic Development?

MR. FAGE: No, it's administered by the Department of Agriculture and Fisheries.

MR. PARKER: I'll ask another question then. You are responsible for economic development and to me one of the most important things to improve the economy in rural Nova Scotia is to improve our roads. If we have good quality infrastructure we're going to attract business, we're going to have new businesses expand and to me it makes sense where

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economic development in this province - you're the minister responsible for it - if we fix our roads we'll attract new business. I would like your comments on that.

MR. FAGE: I certainly see two vital highways in Nova Scotia for economic development. One is the asphalt type and the other one is the information highway, for example, high-speed broadband Internet. I'm pleased to be part of the government and the Executive Council that sees the need for roads and infrastructure upgrades. I'm pleased every year since our administration began in 1999, we've increased the road budget. This year there was certainly a large increase at $30 million, in addition to the capital budget on roads.

The maintenance, improvement and capital improvement of our roads, there's no question, is a key infrastructure piece for the economy, the public safety and well-being of our citizens. I'm pleased to see this administration allocate another $30 million to capital improvements this year. Is it enough? I certainly think we have to continue to expand the number of dollars going into our highway programs. As the citizens of Nova Scotia indicated to the government in their approval rating, the roads are getting better, we have to get them fixed.

MR. PARKER: You can travel around this province and find lots and lots of crumbling roads and that is affecting our economy. It's affecting businesses' ability to expand and to locate in certain areas. I would think as the Minister for Economic Development, working to improving the asphalt, the roads, the infrastructure in that regard would certainly help business improvement in the whole province. Anyway, I'm glad you agree with that and I know much more needs to be done.

I think, Mr. Chairman, my time is probably up for our Party, I think we had 40 minutes, so I'm going to turn it back to you, if I could. I think the other Party wants to have some time.

MR. CHAIRMAN: Thank you very much. We'll turn to the Liberal Party.

The honourable member for Digby-Annapolis.

MR. HAROLD THERIAULT: Mr. Chairman, Mr. Minister, staff, ladies and gentlemen, I want to talk about our resources. I think everything comes down to economic development, especially in our resources. I want to read a statement from the Department of Agriculture and Fisheries first. The mission is: "to serve, develop and optimize the Nova Scotia fish harvesting and aquaculture industries, for the betterment of our coastal communities in the province as a whole."

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[2:30 p.m.]

I want to talk about West and South West Nova, first, that's where I'm from. We have a big lobster fishery down there, 60 million pounds a year. About 20 per cent of that is not really saleable for live market, Europe and the United States. So about 20 per cent of that, eight, 10, 12 million pounds of it every year is shipped out of the province to go to a cannery in the province next door, most of them. I've often thought of that, personally, of doing something there myself. The jobs I thought that would create over the past 10 years.

Anyway, has the Office of Economic Development, do they search out resources and find this value add for this province, which I think would create a lot of jobs in West and South West Nova six months of the year at least and possibly once established, I don't know just how many are going to New Brunswick from all over this province, of lobster, crab and whatnot, but just down in that area alone I can see a lot of jobs being had from that resource. Has the Office of Economic Development ever done any research in that area?

MR. FAGE: There's no question the resource sector is very important to the well-being of our economy, especially the rural economy. I guess that's why this government, through OED and other agencies and departments spends a lot of time searching out those opportunities. If we're approached by individuals or companies to look at opportunities for expansion, whether it's Ocean Nutrition Canada, the Mulgrave operation on the bio side and hiring young Nova Scotians using resource products, whether it's Shelburne supporting the value add on the fish skins industry there, whether it's Frito Lay in the Valley, Oxford Frozen Foods, 800 jobs there processing blueberries and other vegetables and snacks and allowing that farm production or rural groups to have a buyer who is a major player on the world market is one of the key ways, as we all know, of our primary producers being able to sell their goods at reasonable prices and have a venue into the world market out there. I think we can go on with a lot of examples of that.

I think the key we've seen today in some of the discussions and questions in Question Period, is whether Nova Scotia has always been a free trader and believes in the free market. When we look at these opportunities, do you want them to be government enterprises or do you want them to be private enterprises? Certainly, our province's view is it should always be private enterprises and compete out there in the marketplace. When you look at lobster, if you take that commodity, as you've pointed out, there is opportunity there but I think it needs to come from the private sector.

I know in the area that I represent, a number of those lobster that can be manufactured on a commercial basis, they don't meet market quality, there's 75 people working every Fall in the jurisdiction I represent and the majority of that is coming from South West Nova because the season is open then. There are opportunities for other processors in several other provinces in Atlantic Canada that would also look at that supply. If there's a private business out there that sees opportunity, our government and agencies would work with them to try

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to exploit that opportunity, but we would do it in the context of a competitive, open-market situation.

MR. THERIAULT: But the Office of Economic Development has never tried to promote this or have you ever been approached by a private company? I'm not saying government should run a lobster cannery in South West Nova, I'm just wondering if any companies ever approached the Office of Economic Development, or has the Office of Economic Development tried to promote that in that area?

MR. FAGE: I can assure you that officials from the Office of Economic Development, I, as minister, and NSBI are approached on a very regular basis by people in lobster and all fish processing, exploring opportunities where they could improve their market situation and in many cases, employ more people. It's finding that business case that works for everybody that is the challenge lots of times.

MR. THERIAULT: And it does come down to - I want to read something on planning and delivering a strong economy. "There are a wide range of factors that go into supporting a growing economy: fiscal stability; a competitive tax and regulatory environment; support for research and development; a strong integrated transportation network; a quality education system; and, of course, quality of life."

A competitive tax and regulatory environment. In the fishing industry in New Brunswick, the Workers' Compensation Board has no authority over anyone in that industry with less than 25 people, either in a boat or in a fish plant. Here, we are three or more people and we are taxed with Workers' Compensation. Do you believe this resource could be going out of this province because of this tax in this industry from the three-person rule to the 25 rule just across the border? Do you believe that's possible?

MR. FAGE: There's a whole host of factors that goes into competitive advantage. Obviously, taxation, compensation rates, cost of product, distance to market, cost of labour, there are a huge host of factors. The government that preceded us decided to put the three-person rule in place and I certainly wouldn't question their wisdom in doing it. I assume they put it in place to protect the workers in Nova Scotia, which I think we all have a responsibility and should always be very cognizant of, and I truly believe that is why they put it in place.

Compared to other jurisdictions, whether it is three or 25, that's one piece of the competitive advantage block. I'm certainly not in a position to make a judgment call on whether that single piece would allow a new company to begin here or not. They would have to put their whole business case forward. Based on that would be one of the smaller factors. Obviously, it's the supply cost of product, how much to build a plant, what the compensation or wage rate is to their employees, what kind of contract they can negotiate into the marketplace for the sale of those goods, and whose retail chains are involved in it, or

[Page 437]

distribution. There are a lot of pieces to that puzzle of competitive advantage. I certainly wouldn't take that one particular piece and say it makes or breaks any operation. Everybody has advantages.

MR. THERIAULT: But I think that's something that the Office of Economic Development would have to look at, wouldn't it, if you're trying to compete with the province next door on the same resource?

MR. FAGE: I think if we look at the fishing industry and compare outcomes, New Brunswick's total fishery, I believe, is something in the range of $800 million. Nova Scotia's fish output is in the range of $1.25 billion to $1.35 billion. I would strongly contest that our free trade policy where we buy and sell throughout Atlantic Canada, Eastern Seaboard, as far as Russia and China, has allowed us to maintain and grow our industry, even through the changes of the rise and fall of the stocks of groundfish, a whole host of issues. Our processors, suppliers and fishermen have managed through their sound management, hard work and effort to keep us number one in Canada, and still see the gross numbers continue to grow. I would certainly applaud them for their efforts and give them every benefit of a doubt that they know how to overcome the competitive obstacles to make sure they're in business.

The regulatory environment which I think there always has to be a balance between protecting the people involved and the industry, so they are not subjected to situations that would endanger their health, or economic returns that they couldn't survive on. That is part of the government's responsibility and to try to do that in such a manner that it can be properly funded and paid for, for example, Workers' Compensation Board. There are other ways, as you've seen in this budget - and I certainly applaud the efforts of Finance as an economic tool - and that's the lowering of the large corporation tax. That means that large corporations will continue to be here or locate more head offices or jobs here.

As well, to balance that off, the small business exemption in this budget, if it passes, rises another $100,000. Those are things that also provide on that regulatory environment front of economic development, the checks and the balance. I don't think we are ever going to be the lowest in every column in Canada, but we want to be fair to the people who work and live in Nova Scotia, and provide the best economic environment, through the balance of a whole host of those factors that government would regulate. We don't need to be the highest, we have to be competitive, though.

MR. THERIAULT: I know we have a great fishery in this province and I believe we can double it. I know we can double it. I want to talk a little about balance here and I want to come to the ground fishery. This could be a little sensitive to some people, but too bad. It's a fact.

[Page 438]

Out on this coast, from Cape Breton to the Bay of Fundy, we have an inshore, midshore fishery here that's going - I was going to say, to the dogs - to the seals. We have a seal herd out on this shore that in the last 10 years has gone from 10,000 to 400,000. These animals weigh 800 pounds apiece, they're not cute little seals, they're big animals, big as moose, big as deer, that we keep culled on land. If this was happening in the agriculture business there would have been an all-out war on them eight years ago, but out there, nobody sees it but the fishermen.

These seals are eating 20 pounds of fish a day, apiece. That figures out to 2.2 billion pounds of groundfish being eaten right here on this coast with the fishermen having a quota from Cape Breton to the Bay of Fundy of 26 million pounds. The seals are eating 88 times more than our human fishermen are allowed to take. These seals have grown by 50,000 since last year, 350,000 to 400,000; next year they'll be between 450,000 and 500,000. I don't know when it will stop. I have a feeling nature will stop it after awhile maybe with a disease or something but I believe we have thrown it out of balance, humans have thrown the climate out of balance. We've taken the sharks out of the water that used to keep them down.

For 15 generations off this coast - and I know because I've been in the inshore fishery for 15 generations - we have fished out there alongside those seals that stayed from 8,000 to 12,000 of them for 15 generations. In this past 10 years we've screwed it up somehow and they've taken over.

The fishery is getting worse. We have bankruptcies happening in the inshore. They're getting out of it. Overfishing, overfishing, is all we've heard. The fishermen aren't catching the fish yet the fish aren't coming back because there's over 2 billion pounds being eaten out here every year and they're growing. I know it's a sensitive issue but if it was happening - we keep the moose culled, we keep the deer culled - out in the prairies or in this province in our gardens, there would be an all-out war on it. I guarantee it. There's something that we have to do there.

[2:45 p.m.]

We have to. We cannot let animals starve us out, not out of something that we've had in our heritage for 400 years. It has to be looked at. It has to be looked at by all levels of government and by people who really know that this is reality. It's not a cute little furry animal that we see flashes of on pictures. It's an animal that's starving our people to death on the coast of Nova Scotia, destroying the ground fishery, keeping the ground fishery destroyed.

If we could bring that balance back to somewhere near normal, we could double the economy in that fishery again, but we need the will to do it. Does the Office of Economic Development of this province have any will to look into this?

[Page 439]

MR. FAGE: The issue of the near-offshore and mid-fishery and seal numbers, obviously, on those issues the Minister of Agriculture and Fisheries would offer policy and advice to the federal Minister of DFO. From my perspective, again not being the minister responsible, I can only offer thoughts or observations, I was responsible for the Department of Agriculture and Fisheries for four years previously and obviously the seal population in Atlantic Canada is of huge concern because it has grown from a population of slightly over 1 million in the late 1970s, to now somewhere near, if you include all species, between 5 million and 6 million seals.

MR. THERIAULT: In the north, yes. I'm talking about our shore.

MR. FAGE: That's the zone we all live in, fish in and where the resources come to be processed here in Nova Scotia. It's of huge concern. I can tell you, obviously in my time as Minister of Agriculture and Fisheries, many representations on the subject were made to the federal minister. Many discussions were held on the particular issue. We were advised by the federal minister that that was federal DFO jurisdiction and that they were responsible. They would listen to our suggestions and concerns, but they were responsible for managing the seal herds.

Certainly, I know the current Minister of Agriculture and Fisheries interacts on those same issues and shares the same concerns of the volume of fish that is being consumed and the ever-expanding population of the various seal species around our coast. I think it's key for the fishing industry and, as you say, all Nova Scotians to be talking to the federal Minister of Fisheries and Oceans. It's his purview and his department that sets the rules out there and will quickly inform you of that when you're dealing with him.

MR. THERIAULT: Mr. Minister, I have a couple more but I'll save them. I'd like to share my time with my colleague, the member for Annapolis.

MR. CHAIRMAN: The honourable member for Annapolis.

MR. STEPHEN MCNEIL: Mr. Minister, staff, just to follow up on that question, would you mind sharing with us what your discussions were and our stance on the seal population off the coast when you were minister, since you opened that up there. I would be curious to know.

MR. FAGE: My concern is definitely that the numbers have been ever-increasing, and control measures for the animals own welfare need to be in place. The harder decision is a plan that DFO come forward with that everybody could agree with.

MR. MCNEIL: As you're well aware, the Western Valley Development Authority, down in the Western Valley, is having some issues, financial. The municipality is questioning whether or not it is the right tool to spur on economic development in the

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western part of Nova Scotia. I'm just wondering what your relationship is with the WVDA, and where we're at.

MR. FAGE: The RDA model here in Nova Scotia, as I said yesterday, has been operating for 11 years and has been very successful in communities throughout the entire province. The Western Valley Development Authority's particular circumstances, we continue to operate under the agreement, or the model, that we would have with all the other development authorities. As the member has raised, there are some situations connected with the Western Valley Development Authority that are of concern to him, and we will continue our discussions with the sponsors and the authority to find a solution.

MR. MCNEIL: Is part of the discussion on the table creating a new RDA with a renewed mandate, or are you attempting to - I guess - dump money back in to revitalize the existing one?

MR. FAGE: Certainly each one of the RDAs, on their core funding, are treated the same, in the dollar amounts and the new increases announced this year would be there for everyone. In the situation, given the concerns raised by the municipal units, we are prepared to continue the discussions with them based on the current model that's in place to see if there are modifications that can address their concerns at the present time.

MR. MCNEIL: Discussions with who? With the municipalities or with the WVDA?

MR. FAGE: Both, I'm informed.

MR. MCNEIL: Has there been a new model put on the table?

MR. FAGE: I'm informed that discussions with representatives from the county have occurred, and they've agreed to come back to us with clear modifications, if they wish any, and what form they would appear in. So currently, we're waiting for that from the municipal unit's officials.

MR. MCNEIL: When do you expect to hear back from the municipal units?

MR. FAGE: Staff expect to hear from them no later than June 1^st.

MR. MCNEIL: You mentioned earlier in one of your presentations around broadband. I'd like you to expand a little bit on that and tell me your role and the province's role in the broadband across Nova Scotia.

MR. FAGE: Broadband, as we were talking earlier, yesterday and today, is one of those core pieces of infrastructure with a future that has the ability to really keep our local communities and rural communities on the economic highway. Currently there's over 300

[Page 441]

CAP sites, and we've signed an agreement for the next operating year with the federal minister. I guess he was here about six weeks ago. On the project or RDA fronts, there are a number of projects throughout Nova Scotia that we've signed on as sponsor and part-funder with Industry Canada. A number of them are up and running, have completed their project and have high-speed broadband available for the communities affected. We continue to work with the RDAs to encourage more communities to sign up and reach agreements with us, Industry Canada and the local telecommunications provider.

MR. MCNEIL: Is somebody in your department monitoring that to ensure that they're reaching their mandated goal?

MR. FAGE: Yes.

MR. MCNEIL: Is it possible to get a copy of your assessment of, I guess I'll speak of, western Nova Scotia? I'm one of those people who live on the Highway No. 1 in rural Nova Scotia. Many of my neighbours and through different parts of the County of Annapolis are beginning to question who's hooked up and who isn't. You would begin to wonder the route that you would be taking. I'm kind of curious about how this is all happening.

MR. FAGE: The current process, as I understand it, is that it is driven by the local RDAs. They would look at and interact with a group of communities in their specific area. They would come up with a business plan for that and submit an application per se or a request to be hooked up for high-speed broadband Internet. That would be evaluated, and if approval is given, then funding would come forward between the private partner and two levels of government.

MR. MCNEIL: I'm being, of course, contacted by constituents who are being told to contact a service provider who, in turn, is contacting me, suggesting that perhaps government should be putting more money into a program. I'm hearing that 80 per cent of my constituency is supposed to be already hooked up. It doesn't make a lot of sense. I would assume that if 80 per cent of Annapolis is hooked up, somewhere along the way the most travelled stretch of highway would be the one that would be hooked up. So I'm beginning to question whether or not you're monitoring this or whether you're just accepting the numbers that are being thrown around as being actual fact.

MR. FAGE: I have no reason to dispute the numbers supplied by the private carrier or the RDAs or the department. I can certainly have an evaluation done of the hookups in your area and try to address any areas of you or your constituents' concerns. That's not a problem. Your raising it is the first that I've heard of it.

MR. MCNEIL: You will send it to me? Great.

MR. FAGE: We'll get you that evaluation.

[Page 442]

MR. MCNEIL: I'm wondering a little bit on the terms of if I have a business in my constituency that is requiring some funding, looking to wanting to start up a new company, and they come to me as the MLA for the area, who do I send them to?

MR. FAGE: If you have a constituent who came forward?

MR. MCNEIL: Yes, they want to create a factory building apple boxes. Who would I send them to?

MR. FAGE: I think the most important contact, first of all, is your local RDA. They would then be able to hear the business plan or the concept, and then they should be referring them to NSBI, if that would be the appropriate avenue for them to proceed for the financing component. The management or development or other services from export to market evaluation, those types of things, the RDA, with their resources, could supply some of that, but they should be recommending them on to OED to help them with those services as well.

MR. MCNEIL: What if NSBI says no?

[3:00 p.m.]

MR. FAGE: If they were going for a loan application - and we're being very hypothetical here - they could go to NSBI for a dozen different services.

MR. MCNEIL: It was my understanding - and I'll plead ignorance as a new kid, I can only do that so long I guess - that NSBI was the lending institution for your department.

MR. FAGE: Yes, and that's the reality, as I noted earlier, if it was a lending component, I would expect that the local RDA would refer them directly there as the initial point of contact, would refer them to NSBI. Certainly, if you think the business plan is strong and they approached you, you could refer them directly yourself to NSBI.

MR. MCNEIL: More than likely I would do that. I guess my question is, what's your role in your department? Obviously you're lending money. Now we're talking about if there's a lending component, are you giving money away? Your department is handing out money, so I'm just wondering if I was to go to NSBI I would be getting a loan, so if I send them to you, are they going to get free money or interest-free, how does that work?

MR. FAGE: The Department of Economic Development, through the Industrial Expansion Fund, has the ability to supply some incentives. It also has the ability to charge interest rates on the loans. We would use all those circumstances, depending on the individual account, what would be required.

MR. MCNEIL: Why did you set up NSBI in the first place?

[Page 443]

MR. FAGE: NSBI was set up as an arm's-length institution of government to look at . . .

MR. MCNEIL: Why are you lending any money? If you believe in the program that you have right there, why wouldn't you just transfer that program to NSBI and allow them - you don't think they would be able to manage that program, or is there some other reason to do that?

MR. FAGE: I think you have the two functions confused. NSBI has the ability to loan money, take an equity position. They do not have a program that would allow for - let's say it took a technology upgrade incentive to locate a particular company in a region, they don't have the ability to grant that money. We do; we would partner with NSBI, they would approach us. At that point we would partner with them to allow that to happen.

MR. MCNEIL: So your money is grant money? Is that what you're telling me?

MR. FAGE: It's totally flexible money. It's industrial expansion money. To give you an example, look at Crossley Carpets in Truro, NSBI has the ability to loan them money and, as an incentive to deal with them, has the ability to do a payroll rebate. If a large amount of money is required up front for capital and you're dealing with competitive circumstances from a number of jurisdictions across North America or the globe, if employment targets are met through the Industrial Expansion Fund, we have the ability to partner with NSBI on an account like that to lend forgivable money to allow for that equipment and capital upgrade to the plant to secure, in that case, 250 more workers.

MR. MCNEIL: Why are you involved? I recognize what you're saying. I guess if you believe in NSBI and they're going to be the voice of the lending money of the Department of Economic Development - and I have no issue with that, the issue is around, if you trust them to say to me that company X is eligible for a payroll rebate and they're going to set up and they're going to decide whether that's a good investment, why aren't they dealing with the investment that would allow them to enhance the technology around it? Why are you involved in it? It almost seems counterproductive, really.

MR. FAGE: No, not at all. It's a great co-operative and collaborative effort in a partnership. The Government of Nova Scotia, whether it was the previous government or this one, will always have the ability to approve industrial expansion or incentives. NSBI, as you well know, would bring forward any payroll rebate or major loan, given the limits, for Executive Council approval. The Industrial Expansion Fund requires Executive Council approval, the checks and balances there, regardless.

[Page 444]

MR. MCNEIL: Britex has been an ongoing issue since being elected. You guys foreclosed, tried to recoup your money. Where are we at this point with Britex?

MR. FAGE: The receivership is still in progress. I've been informed by officials of NSBI that the property is currently being offered for sale.

MR. MCNEIL: How many of your outstanding loans have you recouped so far?

MR. FAGE: My understanding is the province's funds have been recovered; they had first call. The lender, Nova Scotia Business Inc., recovered some of their funds - and the property is up for sale, and it appears they will try to recoup as much as they can from that.

MR. MCNEIL: Whose department was responsible for the ponds that were on-site, to make sure that they were remediated properly and to ensure that the sludge had been taken care of?

MR. FAGE: It was the responsibility of NSBI and the receiver.

MR. MCNEIL: Is it possible to get a record of how those ponds were dealt with, and where the sludge from the ponds was taken and destroyed?

MR. FAGE: I'm informed that we can get that for you.

MR. MCNEIL: One of the issues that I hear a lot about in the constituency around the existing building is the fact that it has basically been gutted. There's nothing left, not only the equipment is gone - it didn't matter if it was screwed to the wall or not, it's gone, and what you have is a shell of a building. I'm wondering why that would have been to that extent. I'm hearing of everything from electrical panels taken off the walls to - and of course this is all hearsay, I haven't been in the building, but I'm beginning to wonder what use of the building would be left.

MR. FAGE: My understanding is the equipment has been sold off, but as to the condition of the building, I don't have that information.

MR. MCNEIL: The building has been empty now for awhile. Obviously there's a little bit of work going on, the removal of equipment and so on and so forth. Who's maintaining the building? Is anybody doing any maintaining?

MR. FAGE: My understanding is that NSBI is maintaining the building through the receiver.

[Page 445]

MR. MCNEIL: The adjoining house was sold separately, I believe; it has already been sold, and a certain acreage. It is also my understanding that a ball field will be deeded to the community. Is that correct?

MR. FAGE: You're correct, the house has been sold off separately, and the intention is to deed the ball field to the community.

MR. MCNEIL: On that note, I want to recognize NSBI for responding to the call of the community and recognizing, even though that was on company land, it was really a project of the community. I want to thank them very much for responding to that community. Also, there were some lots, to my understanding, along the river, below the railroad tracks. Were those being deeded separately? Were they going to be sold with the building? Was it one lump, do you know?

MR. FAGE: I'm not aware of what's happening there, but we can find that information out for you if you'd like.

MR. MCNEIL: That would be great. I'm curious if there has been any expression of interest in the building at all.

MR. FAGE: My understanding is there has.

MR. MCNEIL: To go back to look at the constituency of Annapolis, I'm looking for a vision from your department on what role you feel you play in the economy of Annapolis, if any. I'm just curious where you're coming from on that.

MR. FAGE: As we talked earlier, obviously the first line of opportunities for local business and people making enquiries is your RDA. Obviously in all regions of the province there are OED officers and NSBI officers responsible to administer each area of the province. So there are those individuals or officials there. Certainly in regard to projects like the Cornwallis Park area, those ones we would deal with businesses that are looking at opportunities there. We've made announcements over the last several years on increased employment in that particular section, near the area there.

Any particular approaches by companies or individuals who would be looking to locate in Nova Scotia, certainly your area would be referenced and referred to as an area where we would like to see more economic development or growth.

MR. MCNEIL: Give me one thing that your department has done. You're talking about Cornwallis Park - let's be up front about it. We were offering buildings for nothing; that was the attraction. It's wonderful. It has been an outstanding success story for western Nova Scotia. But what has your department done for the riding of Annapolis other than -

[Page 446]

quite frankly, I'll use Britex as an example, in my term, well, prior to me, under my predecessor, we've lost more jobs than we've gained.

MR. FAGE: Again, you would know the geographic area much better than I, but I would certainly assume that a few people at Convergys work there, few people at Shaw would, a number of residents would be involved in those manufacturers and industries around that particular area of your riding.

MR. MCNEIL: I stated that, but I said let's be up front. It wasn't your department that attracted those people to that constituency. It was that community that said here is the asset that we have, you come here - for example, Shaw Wood - here's the asset, we will provide you the opportunity. Let's be clear, they were the lead on that. I guess what this really comes to is I'm wondering if you do any kind of analysis.

I'm not one way or the other on this issue, I would just like to see some detail on it, whether the RDAs actually are a cost benefit or whether or not we would be better off to have on the road somebody who is actually knocking on doors and saying come here, these are the assets that we have. Forget all the window dressing and all the window space, who's on the road knocking on doors all over this country or the Eastern Seaboard saying there's an opportunity in Atlantic Canada, there's an opportunity in Nova Scotia?

MR. FAGE: I guess, to be very factual, it was this department and this government that took to Executive Council and work with the agencies to ensure that Convergys, and I guess the only factual thing I can really say is the current member for Annapolis has never approached me with a job opportunity or business opportunity in the last two years.

MR. MCNEIL: That is unfair, and you know that's not true. I knocked on your door more times, let's be honest - and you pull that string constantly about Britex, and do you want to know what you did? You missed the boat.

MR. FAGE: Not one new job; not one new opportunity.

MR. MCNEIL: You missed the boat when the community wanted to take it over, you missed the boat because what you did was . . .

MR. FAGE: Not one new opportunity.

MR. MCNEIL: . . . you took them along and you kept stringing their chain, until finally you had no choice but to foreclose . . .

MR. FAGE: Mr. Chairman, not one new opportunity has he ever brought forward.

[Page 447]

MR. MCNEIL: That was the opportunity, and you screwed up. That is a cheap shot, and you know it.

MR. FAGE: Not one new opportunity.

MR. CHAIRMAN: Order. Order. (Interruptions)

MR. MCNEIL: That was a cheap shot by him.

MR. CHAIRMAN: A recording will be made of what members are saying, so if we could go one at a time. The member for Annapolis has the floor.

MR. MCNEIL: That is a cheap shot, quite frankly. You know you pulled the string and you screwed around with the lives of the people of Annapolis, and you played politics with it, quite frankly. That is a bunch of horse manure . . .

MR. CHAIRMAN: Order. Order, please.

MR. MCNEIL: Let me finish my next question, Mr. Chairman.

MR. CHAIRMAN: Watch your language.

MR. FAGE: I dealt fairly and honestly with the members of Britex, the business community and all agencies involved, as well as the honourable member. The honourable member asked . . .

MR. MCNEIL: You hid behind NSBI is what you did. You didn't have the courage to stand up.

MR. FAGE: . . . me a direct question . . .

MR. MCNEIL: You didn't have the courage to stand up.

MR. FAGE: . . . of what new opportunities had come forward. I answered honestly. We have dealt on Britex - he has not brought any new opportunities forward for me to explore with him.

[3:15 p.m.]

MR. CHAIRMAN: Order, please. One member at a time and the discussion has to flow through me.

[Page 448]

MR. MCNEIL: Thank you, Mr. Chairman. It's good to see an honourable member of the government. In the Office of Economic Development there's a cost of about $600,000 for Fringe Benefits Costs. I'm wondering what that pertains to, on the very bottom of those numbers?

MR. FAGE: What page honourable member and in what document?

MR. MCNEIL: Page 128, Public Accounts.

MR. FAGE: Those would be the costs associated with the salaries of all members of OED such as medical, dental, compensation, all those benefits that would be with the Civil Service plan and the NSGEU contract.

MR. MCNEIL: On the same page just below that there's Nova Scotia Business Inc. - what's the $165,000 for?

MR. FAGE: Those would be the costs of seconding two members of NSBI to OED staff. They have since been transferred to OED, but that would be the salaries and costs of two employees from NSBI seconded to OED.

MR. MCNEIL: What were the two employees doing for $166,0000?

MR. FAGE: That is their salaries and expenses.

MR. MCNEIL: I recognize that, I want to know what their jobs are.

MR. FAGE: Their jobs are involved in industrial growth and economic development for the Province of Nova Scotia.

MR. MCNEIL: And they have now gone to your department?

MR. FAGE: Yes.

MR. MCNEIL: I'll go back then - so if that job opportunity you were speaking about in western Nova Scotia becomes available, do I send them to NSBI or do I send them to you?

MR. FAGE: I would recommend you send them to both.

MR. MCNEIL: Thank you, Mr. Chairman.

MR. CHAIRMAN: We'll turn to the NDP caucus. Any further questions on economic development? Any further questions by the Liberal caucus?

[Page 449]

The honourable member for Digby-Annapolis.

MR. HAROLD THERIAULT: I just want to touch on our children leaving the province, Mr. Minister. It's not so bad that our children are leaving, I can read a piece here about what's going on - and I think we all know what's going on - all over rural Nova Scotia. A lot of our children are leaving and going out West. It costs us as parents and taxpayers approximately $100,000 for every child to put them through to Grade 12 - that's a lot of money. It's a big investment to educate our children, only to find out in the end, after we do this, there's nothing here for a lot of them to stay. I'm wondering if Economic Development has some kind of strategy in the future to working towards keeping more of our children in this province, especially in the rural areas?

MR. FAGE: I think that's one of the key questions and thrusts of this government, and certainly, of Economic Development, and it will be for governments in the future. It's one of those situations where you balance on one hand - I guess I would never personally determine that you would ever want to force them to stay home, young people always want to have the choice to work, be educated, travel, do all of those types of things and take part in that opportunity. The real challenge for us as a province is to ensure if they want to return or stay here that there is a job or an economic opportunity for them.

That is why this government has committed and spent large funds in research and development with our community college system, the largest single expenditure ever in the Province of Nova Scotia - $125 million, approximately, so we can increase the capacity of the community college. That is the training, technology, education component for our young people, so that they are the best educated and, obviously, once they've acquired that education, everybody wants them.

Creating a climate here in Nova Scotia that allows them to get a meaningful job with reasonable wages is also part of that equation that we have to fulfill. When you look at the numbers over the past three or four years, the raw numbers, certainly the out-migration trend has slowed. I believe last year's numbers were something over 7,000 left the province, and something over 6,500 returned to the province. So those numbers are improving - they're some of the better ones we have seen in recent years.

Part of the challenge as we look at the newer economy and opportunities for young people, a lot of it is associated with technology, the biosciences, making sure we can extract something from a resource product, manufacture it in the pharmaceutical, industrial, or cosmetic industry, that those people have an opportunity to be here in Nova Scotia to do that work. One of the examples that is out there right now that I like to use is Ocean Nutrition.

Ocean Nutrition is extracting omega-3 fish oils here in Nova Scotia. They employ 140 well educated, young Nova Scotians in Mulgrave, Nova Scotia. Mulgrave is not known as a large community and it is definitely rural. Those are the types of enterprises that I think,

[Page 450]

through InNOVAcorp, research and development, the training of our institutions, and research and development for the products from our universities, where we have a real opportunity. When you look at the IT side, whether it's Keane, CGI, or Convergys, many of them are top software development companies in the world. We have concentrated on them and NSBI has done an amazing job to attract them to Nova Scotia as the hub of the world for that type of software and development.

They are offering very fine financial rewards as far as wages. They are highly trained young people who are taking those jobs in those types of firms. Those are the opportunities we have to continue to grow and expand through research and development, through the courses and training we offer to our young people through the community colleges and universities so that they have the training and there is a job here with them. It's a big challenge. We have had a little bit of success over the last several years, and we need to make sure that continues to grow and provide those opportunities.

I think you've raised the question that is most fundamental and key, how do we achieve more younger people, not only Nova Scotians, but immigrants coming into this province? That's the biggest key to our economic well-being as a society in the future. Somebody is going to have to keep you and me in a few years and it's going to have to be younger people.

MR. THERIAULT: That's right. We have a lot of work to do yet, that's for sure. Thank you.

MR. CHAIRMAN: Are there any questions from the Progressive Conservative caucus? Closing statement, Mr. Minister, and if you could read your resolution.

MR. FAGE: First of all, I especially want to thank the members of the House of Assembly for taking part in the debate and I want to commend them on the quality of the questions that they asked the Department of Economic Development, all the related agencies I'm responsible for as minister, as well as many other organizations that make up the economic effort from all levels of government and individual citizens across this province. I want to acknowledge those who are not here in that regard.

I want to thank all the staff and agency people who were here to support the estimates yesterday and today. I want to sincerely thank them for their hard work and efforts every day throughout the year. They work hard on behalf of Nova Scotians to grow our economy, to bring information to them, and to protect us in times of crises. I want to acknowledge that and it is very much appreciated by myself, the people of Nova Scotia and, I know, all members of the Legislature.

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With those brief closing remarks, I would like to read the following resolutions:

Resolution E12 - Resolved, that a sum not exceeding $4,091,000 be granted to the Lieutenant Governor to defray expenses in respect of Communications Nova Scotia, pursuant to the Estimate.

Resolution E13 - Resolved, that a sum not exceeding $1,008,000 be granted to the Lieutenant Governor to defray expenses in respect of the Emergency Measures Organization of Nova Scotia, pursuant to the Estimate.

Resolution E20 - Resolved, that a sum not exceeding $29,993,000 be granted to the Lieutenant Governor to defray expenses in respect of Nova Scotia Business Inc., pursuant to the Estimate and the business plan for Nova Scotia Business Inc. be approved.

Resolution E37 - Resolved, that the business plans of the Nova Scotia Film Development Corporation, the Nova Scotia Innovation Corporation, the Trade Centre Limited, and the Waterfront Development Corporation Limited be approved.

Resolution E41 - Resolved, that the business plan of the Nova Scotia Liquor Corporation be approved.

MR. CHAIRMAN: Shall Resolution E24 stand?

Resolution E24 stands.

Shall the resolutions carry?

The resolutions are carried.

Thank you, very much. We'll take a five-minute break and then we will reconvene with the Department of Energy.

[3:28 p.m. The committee recessed.]

[3:34 p.m. The committee reconvened.]

MR. CHAIRMAN: Order, please. I will call this meeting to order. We will have opening remarks by the Minister of Energy.

The honourable Minister of Energy.

[Page 452]

Resolution E5 - Resolved, that a sum not exceeding $9,619,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Energy, pursuant to the Estimate.

HON. CECIL CLARKE: Thank you, very much, Mr. Chairman. I do have a prepared statement with regard to the Department of Energy initiatives and overview going into 2005-06. However, in the interest of engaged dialogue what we've done is supplied my colleagues with a copy of this and it will be tabled with Hansard, as well. With that, the copy is available if people have comments on it, otherwise, I'm open for questions.

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

MR. FRANK CORBETT: I'm caught flat-footed but not tongue-tied, Mr. Chairman. I appreciate the information given to me by the minister.

Mr. Minister, in this first hour allotted to me, it's not unusual to try to cover as much of the waterfront, as they say, as we can. The areas that we will be talking to you about is the recent NSBI agreement, some renewables and other energy-related tracks and, obviously, we'll talk about what's going on in the offshore, some would say what is not going on in the offshore.

Where I want to start off will be around the offshore. Without any sarcasm to be read into this question, and it's very serious, because the largest technologies conference in the world just ended in Houston, and I want to know what our role was and what you perceived as gains coming out of Houston?

MR. CLARKE: Very timely, as we were there for OTC in Houston last week. For the record, the Offshore Technology Conference is the largest conference of its type in the world. Previously, they had numbers of 50,000 delegates and participants throughout that, this year it reached 65,000 people. Nova Scotia, through the Department of Energy, led our trade delegation again this year. This was a very positive year, we had 31 organizations join with us. If you put that in context, for instance, with an oil producing province with interests in the oil and gas sector, there were 30 delegate organizations for Alberta and 31 for Nova Scotia. So in context with the size of their energy play versus ours, I think it is indicative of the level of interest by Nova Scotian companies.

I think it is fair and safe to say, because the records show it, last year was a difficult year with regard to a lot of transitioning, market movement. We were trying to incent some next steps in development but there were issues around forfeitures, which were very publicly discussed here. That resulted in about $55 million in the last period, although there is zero anticipated for the upcoming year.

[Page 453]

As a result of OTC, it provided us an opportunity to put to the test the various working efforts of governments and industry through the Atlantic Energy Roundtable. Provincial and federal initiatives, for instance, are looking at consolidating and allowing people to consolidate work commitments to get drilling activity going in the offshore. So we felt good about that. We have a number of Nova Scotia companies, there's two recent examples where EC Industries in Dartmouth, as well as PDI in Dartmouth signed trade agreements while they were in Houston. I was able to participate in some activities in doing one-on-ones around the show. There were a number of positive outcomes. We're seeing a lot of company response just coming in from the Offshore/Onshore Technologies Association of Nova Scotia.

What we have also seen is all the major companies, for instance, Norsk Hydro taking an active play now and looking at being an operator in our offshore. When you see Bass Enterprises making a commitment for $40 million U.S. toward their contribution of a drill offshore Nova Scotia, with estimates by them of 800 million barrels of oil and over 250 billion cubic feet of natural gas - just to put it into context, 800 million barrels of oil is a Hibernia, potentially, off Nova Scotia, and that's what they're going to explore.

What we saw, as well, were positive discussions with Marathon, Anadarko, El Paso. El Paso having a continued interest in operations here. We were very pleased with the fact that for the first time there was an Atlantic symposium at the conference, which was very well attended. The conference actually wants to look at enhancing that for next year. The U.S. Department of Commerce has indicated that the Bush Administration has a very significant interest in Atlantic Canada and the opportunities here. We have focused, as well, on offshore, as well as onshore activities. We have a $1 billion investment in the Sable pipeline come ashore through Maritimes & Northeast, enhancing that and, of course, the two major projects in Nova Scotia proposed, Keltic Petrochemicals in Guysborough County, for a $4 billion initiative, as well as the Anadarko, LNG facility at Bear Head in Richmond County, Cape Breton. Both counties were represented there by a delegation that was out working the conference very well.

If there are any specific items, what I can say, we came back and I think we've seen that this was probably one of the most successful OTC attendances that we've had. I'm feeling very confident as we go forward just by the fact that the market has responded very favourably to our initiatives and as a result of that, we hope to see production activity. As you know, EnCana is looking at the Deep Panuke play, looking at other tie-ins, for instance, with Annapolis, into the Sable field. ExxonMobil, we had the opportunity to talk to officials there when we dealt with the working groups that we've had, the Houston World Energy Council, we met with them and we worked in collaboration with Newfoundland and Labrador as well about the Atlantic opportunities. It was significant, it was very impressive and, quite frankly, I can say not only did we meet our expectations, we definitely exceeded them in terms of the type of response we were able to garner.

[Page 454]

MR. CORBETT: Mr. Minister, you sent a release out from OTC last week and the lead paragraph in the release was, "Offshore petroleum exploration could get a boost from a more flexible approach to licensing rules. The province is proposing to allow exploration license holders to consolidate exploration commitments from their own licenses and other licenses." Can you expound on that?

MR. CLARKE: Yes, I'll try to use an illustration as well that is specific to our offshore. Basically, in the concept, if you look at this particular model, blocks 2377, 2410 and 2411, these three are actually together, they're on where there actually was the Annapolis well. Right now there are work commitments on individual blocks and they can have varying capital costs. Let's just say for the sake of an example that all three combined have a work commitment of $2 million on them. Right now, your commitments would be delineated only by which blocks. One may be $50 million, one may be $100 million, another $150 million.

By being willing to enable a consolidation, it would mean that if the prospectivity were higher in that first block then, under the right conditions, you could spend up to the total work commitment for all three in that one block just to try to make sure you get the type of drilling success. The objective there, as we forecasted for 2005-06, is zero in forfeitures, and we want 2006-07 to be zero in forfeitures. The way to do that is to get people out there drilling and, rather than giving penalties, giving us royalty cheques instead. It's not unique to Nova Scotia, it's just that is hasn't been applied at this point in Nova Scotia with regard to our particular offshore, but it has been done elsewhere. I think off western Newfoundland and Labrador was the case, the North Sea and in the Arctic of Canada on the Devon field.

It is a policy shift and it's one that wasn't going to be a one-off for one particular operator, so to do that we had to do it inclusively and to roll it out. We were looking for feedback from industry and we have a resounding level of response. With that particular measure, coupled with the regulatory efficiency piece, it changes the economics of many different plays potentially in the offshore.

MR. CORBETT: If I'm understanding you correctly, Mr. Minister, what you're saying is if a company has three blocks and they're delineated in price of 50-50-100 and the 100 is the most desirable, most potential, if they spend 200 in that one block then they would be excused from the 50-50 block?

MR. CLARKE: They would have made their obligation. It's the prospectivity in being able to achieve that in one area so that they can get the investment decisions necessary. The good thing that will do, as people have looked at drilling budgetary commitments, is this will change some of the economics of particular plays by certain companies whereby they'll commit sooner, or to more drilling, in the offshore.

[Page 455]

[3:45 p.m.]

If you have that type of activity going on while the final decisions are coming forward - and I would think in the near future, for instance on the Deep Panuke project, then that really will incent a lot of activities. If you look at the rationale - and we've heard it in the House and others about some of the controversy about penalties coming back to government as not being an incentive, this allows for the member organizations of an OTANS for money to be spent directly in our offshore that employs people directly, and the benefits will be accrued elsewhere in terms of tax benefit, personal income tax, other spinoffs to our local economy. So I would rather have $200 million being confirmed.

If you look at the 33 blocks remaining in our offshore, those 33 blocks have $1.15 billion in work commitments on them. It is our intention to make sure that we achieve and maximize the outcome, and this move has received overwhelming endorsement from industry.

MR. CORBETT: Still with the offshore, but a little different shift, Mr. Minister. We had hoped to see in this sitting of the House, and I think you, as much as I, would have liked to have seen them, OH&S regs around the offshore. I realize what we want is a set of rules that are the same across Atlantic Canada. I guess it's a two-pronged question. One, what is the state of play with them; and if they're with the federal House in any way, how would an election affect those moving forward? Would they obviously die on the order paper, like everything else?

MR. CLARKE: Actually, with occupational health and safety, we've been able to work quite well with the Government of Canada in getting concurrency. One of the things we required - to your point - is agreement within an Atlantic framework, especially for us right now with Newfoundland and Labrador and the discussions that they are having. One of the distinctions, of course, is we know that a lot of the recommendations that came forward from the Westray disaster and the report, we're trying to envelope and capture them in the Nova Scotia perspective. Where part of the deviance of interpretation comes is when you look at the Newfoundland and Labrador experience and their occupational health and safety response and recommendations that came out of the Ocean Ranger disaster. So we're trying to take two different types of major industrial-related activity and workplace safety issues and accommodate them under the framework of reports that were accepted by governments.

We have moved with the Government of Canada. I think we have a framework. There's draft legislation and I think we'll be able to have a final agreement, but as you know, and you've kind of alluded that if there is an alteration or change to the federal House before this Fall, we'd be hopeful that we'd actually have final legislation before the provincial House and the federal House this year. If that changes, it won't impede the ability for at least

[Page 456]

Nova Scotia to debate and pass legislation, if that's the will of the House here based upon the agreement. I think we have a good framework in place.

MR. CORBETT: Yes to that, Mr. Minister, I guess is my reaction. I would have liked - and I'm not putting words in your mouth - and probably you would have liked to have seen those come forward in this sitting of the House. The industry is not full of strife and injuries, I realize that, and by and large they're fairly decent at looking after their own house in a lot of ways from the perspective of occupational health and safety, but at the end of the day you always want to have something that says this is the law. Failing anything concrete coming out of the federal House this Spring, are we then to assume that this House should be dealing with a bill come this Fall regarding offshore health and safety?

MR. CLARKE: I think regardless of what happens we need to be focused, that the Fall is when we would want to do that. The process of getting our legislative agendas in tune, federally and provincially, has worked quite well to the point that Nova Scotia could move in the near term. One of the things we want to do with the final piece of legislation is get that out for consultation and make sure it has the full benefit of all the feedback necessary when it comes to the House this Fall. Regardless of what happens with the federal House, we have a piece of legislation we have to move forward and I think we're more than prepared to put that foot to the House.

MR. CORBETT: This is not really offshore, but it's tied to gas exploration, not necessarily off our shores either, the LNG plant, you mentioned both of them earlier, Anadarko and Keltic. Have either one, both, or none, secured a resource for themselves to go forward?

MR. CLARKE: To your point, I'll go back to the OTC and meetings. There was also another meeting held with the Richmond County Energy Office, with the warden and councillor, as well as representatives from OTANS and Nova Scotia Business Inc., who had been doing some land transaction on the Anadarko-Bear Head project. That particular project, they have twinned that to come into operation in 2008 in the construction timeline. Construction activity has already gone on, the pad for the first tank onshore has already been put in place and they're working on the second.

What they are looking at is if you look at the major international market, it's anticipated that new incremental supply for LNG will not increase until 2010. In 2008, what Anadarko has talked about is a bridging to the 2010. Rather than one - I'll use Qatar as the one that people identify now - having one major supply base coming directly from Qatar, over two years that bridging will be taking an assembly from any number of places to feed stock into their facility for transference in the pipeline.

The other good thing is the sign-up factor. When there was the open season there was sign-up for 1.5 billion cubic feet a day and, as a result of that, it just showed the level of

[Page 457]

commitment. On the Anadarko proposal, obviously companies don't want to talk about where their suppliers are, but when you commit to the level of financial obligation they have, and looking at what they've explained - and I've been quite open about the bridging versus long-term supply - the other thing, of course, is with Keltic Petrochemicals. You have two projects at different phases of development. With Keltic Petrochemicals in Guysborough County, that right now is going through and we'll be getting ready for the regulatory for the environmental review. Once that is submitted in its entirety, we have a team assembled no different than with the Bear Head project, across government there's a working committee of departments, so when a submission comes in, if it's basically regulator-ready, it will make its way very quickly through a full concurrent review in the province, so that we're not holding up any decision times necessary for a major project.

Again, for a project of that nature, that's a different one altogether because there is a petrochemicals proposal and development associated with it. There is the LNG, which is one facet of it and then petrochemical activity. The business case for both is different, what is common is an LNG feedstock coming into both places. Again, as I stated at OTC in Houston, both are credible proposals but they're put in context as well with the initiative in New Brunswick by the Irving Group. What we have to look at in a Nova Scotia context is what's happening in the northeastern United States and in the United States in general.

Our market is 42 million people in the northeastern United States. The Sable gas and the infrastructure we have in terms of getting it into that market is as much as we can produce we'll be able to put it into that one market area. We're not trying to target all of the United States of America. We have that one geographic area that will consume supply. We are a stable supply base. We are seen, both from a political level as well as security of supply issues there. We have been very accommodating for our projects, unlike a lot of the proposed American sites. We've seen some push-back with regard to the Quebec sites, so as a result of that we've had very positive uptake to the point that the U.S. Department of Commerce specifically noted in media reports that the United States sees Atlantic Canada as a priority area.

MR. CORBETT: A lot of that goes without saying, and I agree with you, Mr. Minister. What I want to touch on again is about the infrastructure that now exists around pipelines. Where are we vis-à-vis that line, that everything is great, Anadarko gets their plant built, gets their supplier - tell me about infrastructure and out capacity for that infrastructure to be workable, and be safe and secure.

MR. CLARKE: There are two components of that, one is the existing pipeline infrastructure and capacity - 400 million cubic feet, I think is the average rate now going through. I think it goes up to 650 just on the current capacity. So we are at 400 million cubic feet a day, today, on average. The pipeline as it is can go up to 650 without any compression stations, without getting increased capacity. Obviously, if there were some capacity issues - and again, looking to the future, we can't forget while there is one pipeline in play, El Paso

[Page 458]

has a proposed pipeline for Nova Scotia. As you look at, for instance, where do we end up with volume? We're going to bring extra production in, hopefully with Panuke, Sable tie-ins, potential tying into an Annapolis field or others to keep production levels up, the compression deck by ExxonMobil is still on schedule to come on play with $750 million, and you don't make a $750 million player decision without the intention that you're going to have gas to flow through that compression deck.

I was going to say the other one is there will be a new lateral required to get from Bear Head to the main line, so there's going to be new pipeline - I think that's a minimum 24-inch pipe, that is what my understanding was. A couple of things with the compression on the Canadian main line side and with regard to the offshore pipeline, it may have an ultimate capacity of 900 million cubic feet a day which is over double the current ability, and that will be the equivalent of two Sable projects.

MR. CORBETT: Going back directly to the offshore again, the Laurentian Sub-basin. I think Nova Scotians were disappointed in the proportion that was allotted to Nova Scotia, and I don't know if anybody different sitting in the chair wouldn't have tried to put a positive spin, but what we got is what we got, right? We asked for a bike for Christmas and got a scooter. The fact of the matter is, what is the state of play either from what we're doing, because I firmly believe that there's a spinoff for us in the Newfoundland and Labrador jurisdictions, if there's aggressive work being there that there is potential for Nova Scotia - so can you give us kind of the state of play of Laurentian?

MR. CLARKE: I'd be happy to. As you know, there have been development initiatives on now the Newfoundland and Labrador side with regard to the government messaging development for exploratory activity. What I can say, with recognizing some of the commercial sensitivities of particular plays in our offshore, there is movement right now in assessing in the sub-basin on the Nova Scotia side in the near two areas of the Laurentian play. What we're seeing is, if you follow even off Sable, the Carbonate Bank which runs 600 kilometres all the way from Nova Scotia right down to the Bahamas, that Carbonate Bank, is where Deep Panuke and others are - so the prospectivity issues of following through the geology, both near and forward, are off Deepwater, I should say, both of those plays are important.

[4:00 p.m.]

The fact that we have Norsk Hydro moving forward and they are the fifth largest deepwater operators in the world, taking a significant play in moving and consolidating in Nova Scotia to become an operator, and now has been consolidated and named Hydro. Hydro's play is going to be another positive one with regard to development. Just in terms of some of the activity, Murphy, Conoco, Phillips and BHP Billiton are in the Laurentian Sub-basin as partners and the exploration licence will be activated shortly for that. Again, Norsk Hydro or Hydro will be a player in the basin.

[Page 459]

MR. CORBETT: I'm going to change my focus a bit now, Mr. Minister. During the recent rate case for NSPI, the company said if they didn't get the 14 per cent increase they sought they would come back for further increases on a regular basis. Now you know that the residential customers, the increase that was granted was only a third of the original sought, so what's your government's analysis of the likely future trends when it comes to NSPI seeking these rate increases?

MR. CLARKE: The future trends - sorry?

MR. CORBETT: They said we didn't get our 14 per cent, we only got a third of that so do you expect them to yearly be knocking on your door?

MR. CLARKE: I think a couple of things. The board did what it's assigned to do and that's to look at what are reasonable and fair increases, and what are the cost implications and pressures that necessitate those increases. What we're seeing as well is our ability to put in place checks and balances and, as you know, we came out with legislation for a consumer advocate to have the prerogative of the board and/or government to make sure that person can be there to deal with residential customer issues.

I think we have to go to the core of where are we in Nova Scotia with regard to the reality of how we produce power in this province versus other jurisdictions. As you know, the majority of our power generation is done through coal-fired generating stations in the province. The other aspect is, for instance, as you know in New Brunswick some of the challenges they face with regard to nuclear. Obviously for us, looking at cleaner coal technologies, looking at ways that we can continue, we're going to have a long-term reliance on continuing to utilize coal, so we have to try to provide stability.

The one thing that happens, of course, is where are the world markets in terms of volatility versus coal, versus gas, and versus other power generation means. It's nothing unique to Nova Scotia, but we have had a very stable power generation supply in the province. Now there have been conditions that have come up through catastrophic weather and other things that have put pressure and strain on the system, but the power-generation ability in the province has not been challenged.

If you look at the Electricity Marketplace Governance Committee, it was all about trying to do the predictability, the reliability and the integrity of the system, and working towards an Energy Act for Nova Scotia as well will be part of doing that. That is why, even if you look at how do you stabilize things - well we're looking at renewables in a significant manner and I'd be happy to deal with that, but Nova Scotia will soon have over 100 megawatts of power being generated by wind power in the province. There are just over 400 in the entire country of Canada. Part of what I've been messaging recently and been dealing with is we want to see hundreds of megawatts of green energy, wind energy produced in this province.

[Page 460]

If you want to look at it, the 500- to 600-megawatt power production would be the equivalent of a Lingan, just as a comparison. To move up another 400 megawatts, 500 megawatts of wind energy in the province would provide that.

If you look at how does it come back to consumers, the infrastructure cost of a wind project is very definable. You can determine the period of amortization, you can determine the reliability of that and you can plan for it. Again, that becomes some of the predictability but it also is part of taking some of the volatility that occurs in the marketplace if there are shifts. You are taking out all the unpredictability that international, for instance, coal markets might have as an adjustment over a season by season.

The reason Nova Scotia is a leader in the country with regard to wind energy now - and will hopefully continue to lead in proportionate share - is that we have a wind regime that supports that. We're seeing initiatives not only all across the province, in Pubnico, and we're seeing the new announcement in Lingan for 12 megawatts, but we can actually have the potential of hundreds of megawatts and they're all being done by independent power producers as well, which is another plus by diversification of players in the electricity marketplace, again, through regulations. So if you can bring on that wider level and we have to look at new ways for power generation supply, again we've talked about some initiatives with regard to the capital district that will use energy better and more wisely.

One of the other things that we've committed to as a government - and our budget this year reflects that - is trying to deal with consumer awareness. One of the things we're going to do to control energy costs in this province is we have to control the use of energy and reduce the use of energy by all consumers. We have a government best practices initiative underway and if you take all of that in its totality, look at co-generation opportunities, the fact that we do have the capacity for natural gas to generate power here, it's about diversifying the mix.

We will not in any near term go away from the use of coal, but we will definitely be working towards a diversified mix which also is part of our undertaking to deal and also be Kyoto-compliant. We don't have the resources just to go out - it's not about buying credits, we want to earn those credits, and to do that means we have to be responsible stewards of the environment in what our activities are.

Some of the coal initiatives are going to be using scrubbers, but all of it comes down to what is the basis of a stable marketplace. Thus, why we - and I know as Energy Minister I have been very supportive of the Donkin Mine development - when you have one of the largest coal reserves in North America sitting there untapped and proposals that are under review at this time, that also means the potential for domestic coal supply again, that factoring in in terms of a long-term domestic supply is very important.

[Page 461]

We will be able to try to find the best mix and I don't think anyone can define today what it is, but at least we have put measures in place and planning. That diversified mix really comes back to that whole process of how do you stop the regularity of rate increases, and then you look at the rate increases and what they're based upon. Into the future, we are going to have next generation infrastructure investments that have to be incurred, we are part of an international standard with regard to power now, the Open Access Transmission Tariff and part of that world we are a part of - and it's good there is a standard, and that's something we can be held to. We're looking at regional opportunities with regard to other provinces and that's where the Atlantic Energy Ministers are trying to work in collaboration as well.

So there is no easy answer to that question you have other than, I believe, all these other major initiatives provide stability. Again, we're trying to provide enough direction so there is predictability, and because of our wider networks we're part of as a province we will have the integrity in place.

Hopefully, on consumers as well there's an obligation, and part of the message is there's an obligation on everyone, governments, business, especially residential households, to try to do energy efficiency planning, and that's part of the project for next year. We've added an additional $1 million, and that $1 million is to leverage other things and we're going to try to put that into how much consumers can reduce power consumption as well.

MR. CORBETT: I'll move on a bit and come back more directly to NSPI in a minute. You mentioned, particularly when you talked about the wind project in Lingan, I can tell you a couple of reasons that the residents of that area where quite upset when that was brought forward because, just move back a bit, nobody really entertained what the residents thought when they plunked the Lingan coal generating station where they put it - and, again, they came forward with a wind farm and nobody speaks to the community. Nobody spoke to the elected officials that represent that community and I can tell you that for sure.

The community is upset by the fact that NSPI is passing them by, quite literally. They were trying to arrange a meeting with Nova Scotia Power at their community hall to get some answers, because everyone was saying it's bad enough we're living next to this other thing - so that causes distress for that community.

The other problem with that is, basically, I believe because Nova Scotia Power considers that for its size it has an over-abundance of energy it has to pay an extra surcharge for that power to get on the grid - I think I'm right in that - I think it's allowing NSPI to pretend that it's being environmentally friendly when actually it's punishing that group, because it's the area that has - and these are not my words - the largest polluter in eastern Canada at their back door. How do you reconcile NSPI charging a premium plus, and they haven't engaged the community in a meaningful way about the wind farm?

[Page 462]

MR. CLARKE: With regard to community consultation, one expectation that I would have expected was there would be a wider consultative process - you are talking about, again, activities that are regulated. In some ways I would really have to say that that is a matter I will take up directly with Nova Scotia Power as to the process around that consultation and the need for that.

Nova Scotia Power's offer was done for private businesses to respond as independent power producers, or IPPs. Those independent power producers are coming forward with submissions and Nova Scotia Power has actually oversubscribed what they initially went out into the market for. I do want to come back to whether it's Nova Scotia Power or independent power producers, one of the things we will be extremely mindful of is the concerns of a community and the people.

There was a lot of community dialogue around the Pubnico project. When you have 17 turbines going up that is a significant new characteristic to the traditional landscape of the area. However, there also has been the benefit of how much power is actually generated in that particular area of the province. From a point of noting on the official record, I will, number one, look at the process, and I can get you a chronology of how that project evolved, I'll get that to you, and number two, I want to see more renewable energy in the province. So I wasn't aware of those concerns myself but I do want to make sure that we have successful wind energy projects and renewable energy in this province. I will get you the chronology of that one, and we will also set out to make sure that as we deal with stakeholders that there is a defined process for appropriate consultation, because this is an opportunity, it shouldn't be a problem.

[4:15 p.m.]

MR. CORBETT: I appreciate the undertaking by the minister. I guess to go more to some problems around Nova Scotia Power, UNSM put forward to your government a list of priorities which was to bring NSPI in full taxation. We've seen some baby steps toward realigning that grant in lieu but, Mr. Minister, as you can see first-hand with the roads to Point Aconi, I see first-hand with the roads and infrastructure going out to Lingan, these roads are in abysmal shape, because especially the Lingan Road, it was never constructed to handle that type of traffic. It was very much a rural country road until about 30 years ago until the two mines opened at Lingan and the generating station opened. The only reason those people used those was for residential purposes who lived out there, or for recreational purposes because Lingan Generating Station took over what I would say was one of the most spectacular beaches in this province. It was named after a former member of this House, Mike Laffin's family, Laffins Cove.

What we see now is a deterioration in infrastructure because of the large movement of the energy component, which is more or less coal, that's causing a problem there. I often get into discussions with the Emera folks and say, look, you have a great rail spur leading

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right into that, only in the case that you may need some gravel or something out there should you be shipping that commodity by truck. You're luckier than most, but yet we're still restricted to that. Then you have the building itself which is not being fairly taxed and, again, whether the people in the Lingan community are complaining about the noise when it blows off at night, or the folks in Dominion who are constantly complaining about coal dust that is ruining the siding on their housing, their vehicles and so on. It only seems to make sense that they're bearing the brunt of having that eyesore in the middle of that community, that full taxation should be taking place in the community. What are your government's plans in this? Do you think what we're doing today is adequate or do you, like most Cape Bretoners believe, CBRM at least should have rights to full taxation?

MR. CLARKE: We have the dichotomy of what people see to be the unsightly infrastructure but no one thinks a paycheque is unsightly when it comes in on a regular basis. Really, if you look back to the history, we had a Crown Corporation where governments directed a Crown Corporation and decisions were made in the overall generation needs of an entire province. It was no coincidence that Cape Breton, as a coal-producing area, had the plants and preponderance of plants for the infrastructure in place, because of our coal mining heritage and strategic locations that would be defined.

One of the things one would look at was if there was a new power plant to be built in Nova Scotia, where would it be built? Who would the host community be for that? To your point, all the dynamics have shifted fundamentally and the issues over taxation, for instance, would be, would there be a competition from other people to want to be a host community, or is there compensation to try to put your infrastructure in that community? That will be intriguing if that opportunity arises, as next generation issues come forward, or you just do it on site, but those are part of that issue.

The item around the taxation issue is once you get to the level - and to the point of your previous question and that's really the impact on the ratepayer - at what point do you transfer that cost? If you increase the taxation to full taxation, you're going to precipitate the business case and model for Nova Scotia's power generation to the point that it will be back

at the board to be seeking a rate increase to compensate for the extra cost in the taxation.

I'd like to deal separately with the infrastructure-based points you've raised, which I think we both know very well. I have had a broken windshield from driving behind those trucks more than once, and I think other people have as well. There are issues and frustrations as a result of having that whole network and system work at times. As concerns are raised, you try to make some process improvements and the like.

The issue of what looks straightforward, in terms of the taxation issue, is not necessarily so simple in its application in terms of it's going to impact rates at one point or potentially have that impact. The issue of public infrastructure necessary to support these major initiatives, the Spar Road, as you're familiar with, it goes through Cape Breton Nova's

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constituency and through the Sydney Steel Corporation site was a partnership road. That road, Nova Scotia Power did cost share to put in place so that infrastructure could be utilized. Now that infrastructure is actually spinning off, as you know, some other economics through the retail, the big box retail opportunity that's actually feeding off that in some of the retail cluster, which is kind of a spinoff that wasn't the original intended purpose of the road, but it's good that it is.

We have to look at those other plants and the generation that is there. For instance, I hear, when you look at economic opportunities and the like, with regard to gypsum. One of the things is the amount of traffic it creates on the road, especially in this case, heavy truck traffic. They call, as you know I have a fondness toward our railway and the utilization of rail, so I know full well of what you speak in terms of looking at the economics, especially the long-term volume issues.

I do agree that one of the things that we have to, as part of a long-term strategy, is address infrastructure utilized to make those facilities work and work efficiently. You can't have an effective plant operation if the network to get there is in disrepair or in need of another infrastructure. Getting fuel to a plant is no different than getting electricity out of it onto the grid. You have to have good infrastructure.

We expect, as part of the debate, that the transmission infrastructure should be there and we've had debate over that and we had a hearing to deal with that, with regard to the storm issues here and major power outages. Looking at the integrity of our infrastructure is something that is open to review and it's necessary that we do that, because we need that integrity of infrastructure to make the system work. To your point, we also need the integrity of the ground infrastructure that relates to communities to be whole as well.

I would say the next part of discussions needs to be, what is the balance. You can have all kinds of questions, so let's go to full taxation. Does that mean the road is now just fully maintained municipally? Someone is going to pay for that, or is it a specific to the direct activities of that plant to relate to the rate base to do that? Do you take a different model to make sure infrastructure is intact? As you know, there has been debate around that as part of a wider debate issue, especially within the CBRM, but that one debate alone, even in its entirety would not settle the wider debate, which is part of. I think it would also create different outcomes. That's why we have to look at the power utility producing power for the entire interests of all ratepayers in this province, the location of that infrastructure and the benefits. Here is part of the offset, the hundreds of people who make a very good living working for Nova Scotia Power and supplying services to Nova Scotia Power Inc. from Cape Breton mainly based, or eastern Nova Scotia as a primary focus. It's a big balance sheet to try to figure out the inputs and the takes but it's not something that is going to be resolved overnight either.

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MR. CORBETT: Therein lies the large problem. The dirty jobs - if you will - for NSPI, on the production side, are in Cape Breton and the cleaner side is clearly, when they had a chance to keep jobs in Cape Breton, vis-à-vis their call centre, they were pretty quick to pull them out of there. The point I do agree with you on is it is unbalanced. Clearly, if I wasn't fully successful in my debate on full taxation I would at least like to see the meaningful debate start. Right now I don't think we're getting the share we deserve. Our backgrounds are considerably different growing up in New Waterford or growing up in Sydney Mines. If it was dirty and noisy, we were making money but for various reasons we've gone past that. Yet, the onus of dirty and noisy is still with us and I don't think we're getting the respect and indeed, I would suspect that the proper financial funding that should come our way for doing that. The idea of us saying, by having these plants, what we're doing quite simply is subsidizing the rest of this province.

When they shut down the coal mines nobody said, boy oh boy, thanks a lot guys, you kept the lights on for us in the 1970s when oil was in short supply and we're going to look after you on the way out the door. Well, nobody said that and I'm quite of the same mindset when the day comes that those plants become unusable, that they're going to say to the one hundred and some people who are employed there, way to go, folks and we're going to look after you. I have no faith in NSPI doing the honourable thing there either.

I don't know how you can reconcile, Mr. Minister, that we're producing energy and what we're doing it at the ability to subsidize the rest of the province. It just doesn't reconcile with me.

MR. CLARKE: Part of that balance sheet we talked about, the reality is that all Nova Scotians expect to pay a reasonable rate for power generation, but it's a universal rate of power, it's not regional based. We do have one major utility in the province. We will now, as we diversify, for instance with renewables, have varying areas of the province where that will come in. For instance, one of the areas we'll be dealing with - you mentioned that - what composes in terms of review and the issue of municipal taxation on wind infrastructure projects. What constitutes how much is actually taxed? That whole review is another debate.

MR. CORBETT: The pipeline.

MR. CLARKE: Pipelines and others. Part of what we have to deal with is the reality that we have a historical base that has been evolving. The pipeline was new. It was planned. It was defined. It was in the context of a new project. The power generation issue in this province and that's why it is not simple, I think Nova Scotia Power has a 50-year history of moving forward infrastructure, by the way in terms of existing plants, for about another 30 years, the regular life cycle. We will probably continue for some time to have debate on the perspective and what people deem to be the appropriate balance that is going to be required.

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We've dealt, as best we can, with the realities of today and how we go forward. Part of why we're putting so much emphasis, for instance, in the electricity marketplace governance committee report, in developing an Energy Act, in having some of the best occupational health and safety legislation no matter what sector it is, is that we have the framework that has integrity to it.

The other component is if those plants were elsewhere, if Nova Scotia Power's main power generation was on the southern part of Nova Scotia and transmission comes through, part of that whole cost of transmission, I mean every customer, no matter what the cost, is a uniform rate. There is an offset and that is getting it through a grid and that grid, to a person on the other end, is expecting to receive and pay for the power generation. No one is begrudging anyone the economic opportunities that come with those power plants and the regions they are in.

Again, I know I don't have the answer you are looking for or probably would want, and maybe the perspective you would bring to this issue. It is evolving. It is one that you know, as we've talked with regard to the energy issues that will come up for more structured public comment because we are trying to do proper, public review of the energy realities. The good thing about that is and the good aspect of this particular House and our processes is, if we bring forward a full Energy Act it will come to this House for debate. It will come to this Chamber for review and public input and there will be a full opportunity to have an engaged discussion around those aspects because the idea of an Energy Act is to be all-encompassing.

I think we do have a framework that will allow varying interests to be able to have their say and we'll be back at the balance sheet again, but we do have a process that is currently being worked on. I think that will be coming forward before the public in the very near future.

MR. CORBETT: How much time left, Mr. Chairman?

MR. CHAIRMAN: Five minutes.

[4:30 p.m.]

MR. CORBETT: Since you agree entirely with me there, I'll move on to win another one - energy efficiency. Mr. Minister, it's probably fair to say that there's a considerable backlog in the energy home audit program that's administered by Clean Nova Scotia and I think it's SHE Consultants. I also understand that the feds have sole-sourced this contract to SHE Consultants of Wolfville. What steps is your government taking to ensure that more homeowners have access to these energy audits to improve energy efficiency and then reduce their energy consumption?

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MR. CLARKE: Actually, this past year I think the last tally was just over 12,000 home-furnace - I know there is the energy audit but even with our own provincial program - over 12,000 coupons that were taken advantage of and that was a plus. As you know, we're doing the energy kits and some of them have been random and there's a whole other process where we will actually be going out and using them for public information, through elected officials and others, to get out into the communities. One of the things we're trying to do is find the feedback of what mechanisms would work.

The home energy audit initiative - are you talking about the Energy Canada initiative?

MR. CORBETT: Yes.

MR. CLARKE: Part of that, especially if you look at where our budget is targeting the additional million dollars, one of the things we're trying to deal with are programs that target low- and modest-income level Nova Scotians that really need the benefit of, and would participate, if there was some incentive and ability to do that. One of the things we're looking at is how do we leverage the additional million and how do we come up with a program, because that is supposed to leverage dollar-for-dollar against federal, so we can actually improve outcomes and numbers here in the province.

We will be getting research back because the people who got the energy efficiency kits, as well as home audits, there will be samples to determine did people see a reduction in fuel costs because of better burning systems, did people utilize our energy saving kits, what did they use, what was the maximum benefit, what things can we bring into a new program. If certain components of that kit - and it is a test - are not being utilized then we want to improve it and we also want to deal with a reality in Nova Scotia, and that is, we have a large number of older homes. The issues of energy efficiency, as you know, in an older home are much different than something that has been built more recently and the needs that are required.

We also had to be mindful of any programming. There isn't one shoe that fits all when it comes to energy efficiency because you have to recognize the nature of a province with the heritage and age of Nova Scotia, where we have a lot of homes that are over 100 years old, and how you help people deal with some of those energy efficiency things, versus someone who is trying to do power reductions in a more modern house, newer furnaces, that kind of stuff. We will be compiling and we're looking at what the federal Kyoto, and I've indicated before, we hope to have a framework document out in the near future that will outline major, next steps across, and that includes everything, wind energy, but especially the energy efficiency piece and how we can value add to what's there.

Some people don't have $150 to have someone come into their home to do an audit and what we're going to try to target is those who want an audit, those who are prepared to do something as a result of an audit. Then we have to help incent them to do that because the

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outcome will be some of those wider objectives to reduce power, save on heating costs and others, to try to keep a lid on energy pressures. Energy costs, globally, are not waning. So we have to act, provincially, to try to control a few things. So I would indicate to your point that I will be more than happy to deal with low-income and moderate-income Nova Scotians with our plan that we'll bring forward.

MR. CHAIRMAN: The time for the NDP caucus is finished. We'll now turn to the Liberal caucus.

The honourable member for Halifax Citadel.

MR. DANIEL GRAHAM: Mr. Minister, staff, thank you for being here this afternoon. I'm not sure whether I'll use up the full hour, in the circumstances, but let's get going and see