The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

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HALIFAX, WEDNESDAY, JANUARY 22, 2003

STANDING COMMITTEE ON PUBLIC ACCOUNTS

8:00 A.M.

CHAIRMAN

Mr. William Estabrooks

VICE-CHAIRMAN

Mr. James DeWolfe

MR. CHAIRMAN: Good morning. I would ask the members to take their seats. It has just turned a minute past 8:00 o'clock and, of course, each of us has a day's schedule ahead of us. We will regularly adjourn at 10:00 a.m. Before we get into our presentation, I would remind you that next week we will be meeting in the committee room, as we have an agenda-setting session. Caucuses are reminded to come with suggestions. Have them in to Mora in advance, if you could, please, so that we could have the lists available for circulation. Mr. MacKinnon, a question?

MR. RUSSELL MACKINNON: No, I was just wondering, perhaps before the proceedings, if we could have the indulgence of the committee members and our guests to have a moment of silence for the three fishermen.

MR. CHAIRMAN: Excellent motion. I congratulate you. Go ahead, considering the circumstances, Mr. MacKinnon, you have the floor.

MR. MACKINNON: Mr. Chairman, I would ask that we stand for a moment of silence to pay respect to the following gentlemen: Benji Tate Waybret of Clam Point, Curtis Malcolm Jones of Kentville, and Richard (Ricky) Paul Spencer of Kingston. As we all know, all three were involved in a tragic accident earlier in the week. I think given the issue that we have here today and recognizing that these fishermen have fished in some rather fierce and unfriendly environments that we should at least take a moment, one minute of silence.

MR. CHAIRMAN: That's agreed. Could we stand, please.

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[One minute of silence was observed.]

MR. CHAIRMAN: Thank you, be seated. Thank you, Russell. Our condolences and deep sympathy to the families and the communities involved.

Our regular procedure, for the guests who are here today, is we're going to ask you to introduce yourselves. I've mentioned that for the moment I would like you to keep your comments to the 12 minute to 15 minute range, however, prior to that, customary to our session, I would ask the members present to introduce themselves.

[The committee members introduced themselves.]

MR. CHAIRMAN: Mr. Underwood, could you introduce yourself and your associate, and the next 15 minutes or so is yours.

MR. PETER UNDERWOOD: Mr. Chairman, my name is Peter Underwood, and I am the Deputy Minister of the Department of Agriculture and Fisheries. With me I have David Hansen, who is the Executive Director of our Legislation and Compliance Services Branch.

Thank you very much for the opportunity to be with you here today to discuss the issue of illegal trade of fish and fish products in Nova Scotia. I have just a few opening remarks by way of background and the current situation, some of the initiatives that we're involved in to address this issue. First of all, I think it's probably useful to just give you a brief outline of the constitutional responsibility with respect to fisheries and fish trade in Canada.

The Constitution places exclusive jurisdiction for the management of our seacoast and inland fisheries with the federal government. However, once the raw material lands ashore, the provincial jurisdiction then attaches, and the licensing of people for the purposes of purchasing fish and the processing of fish is one of provincial responsibility. Obviously, fish can be illegally caught on the water and then fish can be illegally bought and sold once it hits the land, so it really is a matter of shared jurisdiction as the product moves from the boat to the throat, so to speak.

Prior to 1998, the Inspection Services Branch of the former Department of Fisheries and Aquaculture focused its attention on seafood quality and the licensing of fish processors and fish buyers. We were primarily interested in ensuring that the product was safe and that there was an orderly conduct of the business of buying and processing the fish products. Then I guess it was probably in the mid- to late-1990s, we began to experience problems with respect to the Aboriginal food fishery. There were a number of cases, the most notorious one, I guess, would have been the Sparrow decision from the Supreme Court of Canada which created a right for a food and ceremonial fishery for Aboriginal peoples. That, at the time, was

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being exercised for more than that purpose. There was a lot of that product moving into the marketplace, beyond the purposes of food and ceremonial fishery.

We created a task force, which included the Department of Fisheries and Oceans, ourselves, Canada Customs and Revenue Agency, and the RCMP. The focus of this task force was the Aboriginal food fishery at the outset, but we began to see that this was probably a more widespread issue. Then, of course, on September 17, 1999, we had the Supreme Court of Canada decision on Marshall, which really created a number of new issues for us.

The current situation, and I want to just be cautious about estimates of what the value of the illegal trade in fish is. Obviously it's clandestine, so we don't know exactly what it is, but the collective intelligence of the Canada Customs and Revenue Agency and the Department of Fisheries and Oceans has estimated that over the past four years there's been $200 million worth of lobster, in particular, changing hands illegally. If you use the rule of thumb that the people from Finance tell us is appropriate, about 10 per cent of that would represent lost tax revenue to the province. You're talking about 10 per cent of that $200 million over that four-year period. Now, that is something that, again as I said, is very difficult to put an exact number on, but that's the kind of range of estimate in illegal trade that we feel is out there.

Then it was made very clear by the current administration, in its blue book, that it wanted to address this whole issue of the illegal trade in fish and fish products by increasing enforcement efforts. We've undertaken several initiatives in that regard over the last couple of years. First of all, we have made amendments to the Fisheries and Coastal Resources Act, the Fish Buyers' Licensing and Enforcement regulations and the inspection regulations, as well.

Just to give you an idea of the sorts of things that we've done, in the Act we have increased the fines, increased the limitation period for which people can be charged in the regs. We've tightened up the definitions of what constitutes illegal fish. We also amended those regulations specifically to deal with the Aboriginal food fishery by making it an offence under our regulations to purchase fish that was caught under the Aboriginal food fish rights and a number of other technical improvements or enhancements were made to the regulations.

Most significantly, I think, though, is that we have been able to enter into memoranda of understanding with the other agencies that have jurisdiction and responsibility for this issue. With the Department of Fisheries and Oceans, we have a memorandum with them where we share information on investigations. With the Canada Customs and Revenue Agency, they are very concerned about this issue as well, obviously, because that represents a loss to the federal government in terms of income taxes and also with the Canadian Food Inspection Agency regarding information sharing.

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I think this is very significant. We have been able to cross-appoint all of DFO's fisheries officers - there are 150 of them - 30 of the Canada Customs and Revenue Agency's officers or auditors, 35 of the CFIA or the Canadian Food Inspection Agency inspectors and 23 of our food safety personnel which reside in the Department of Agriculture and Fisheries. So that means we have been able to put authority to administer our regulations into the hands of a wide array of federal inspectors and auditors so that they now all can act as if they were officers - well they are actually, they are appointed under our regulations. I like to refer to that as I think a pretty good exercise in uploading. We hear about downloading all the time, but we've been able to get some help from other agencies to work on this issue.

We have also increased the staff complement of our department. Commitment was made to enhance our budget by $200,000 per year with another $50,000 in additional recoveries. We now have four new positions in the department that will help us to further deal with this issue.

We also have a directive from the minister to the registrar which is Mr. Hansen, our Registrar of Licensing, to defer licence-related requests from applicants and licence holders who are under investigation until that matter is resolved. So if we have an operator out there who is under investigation for a violation of our regulations, then we will not process requests to amend a licence.

We are also working with the Legal Services Division at Justice to develop a licence-sanction program and procedure to be followed regarding the minister's power to amend, suspend or cancel a licence for non-compliance with federal-provincial requirements. The power in the Act is there for the minister to suspend, cancel or amend a licence, but we have to make sure that that power is exercised in a manner that it will stand up in the courts should that be challenged.

We are also conducting joint enforcement activity with DFO involving a number of species, in particular lobster, snow crab, soft-shell clams and now groundfish with some of the concerns with respect to the misreporting of groundfish catches. We are conducting joint enforcement activity with CCRA regarding books and records of 40 licensed buyers in Nova Scotia and we have expanded licence conditions pertaining to record keeping and in certain circumstances requiring information to be submitted weekly to the department as is the case now with snow crab and soft-shell clams.

There are presently 15 matters under investigation which include buying and/or processing without a licence and buying fish that is illegal. In 2002, seven investigations led to further legal proceedings being initiated and guilty pleas for those have been entered and fines have been imposed by the courts ranging from $300 to $2,500.

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[8:15 a.m.]

The department licenses 292 fish processing establishments and 432 buyers. The fish processors and fish buyers licensing policy provides the direction to the Registrar of Licensing on how a licence is to be issued, amended or renewed in accordance with the eligible species. Those are my remarks by way of introduction, and I'm yours to question.

MR. CHAIRMAN: Thank you for staying within the guidelines that I asked earlier. My colleague, the member for Hants East is apparently on his way, but road problems or whatever, not that it makes any difference. Our usual way is 20 minutes to each of the caucuses. I am under the impression that the member for Cape Breton West will begin. Mr. MacKinnon, the next 20 minutes is yours. It's 8:16 a.m.

MR. MACKINNON: Deputy minister, I'm looking at the latest statistics here for fisheries in Nova Scotia, regions by county, and the latest statistics are for the year 2000. I see where we have effectively 50 per cent of the number of vessels out there fishing today than we had some time ago. No, I'm sorry, in the southwestern region of the province, 50 per cent of the vessels, of the total provincial number, fish out of there. I believe, for example down in Pubnico, I think that's the largest. Am I correct?

MR. UNDERWOOD: The southwest part of the province is clearly the area where there are the most number of vessels and the most number of licences.

MR. MACKINNON: What percentage of the total fishery is out of the southwestern part of the province?

MR. UNDERWOOD: Off the top of my head, I would just be guessing, but the lobster fishery is one of the largest in the province, that's about $300 million, and probably three-quarters of that would come from Southwest Nova. Really the only place now where there's much by way of groundfish taking place is out of Southwest Nova on Browns Bank and Georges Bank. Those stocks, at least the haddock, are under recovery, and there is still some more groundfish in that area.

The scallop fishery, of course, on Georges Bank is a major part of our industry, and that takes place in the southwestern part of the province, ranging from Lunenburg around. There's a rapid expansion in the quotas for the inshore scallops, which over the last 10 years or so have been in a very serious state of decline, but that's now coming back quite rapidly. That's based in small ports all around Southwest Nova. Again, it would be a guess where you draw the line and which species you use to calculate the percentages, but I would say probably two-thirds of the fishery would emulate from the southwest portion of the province.

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MR. MACKINNON: I've spoken to a fair number of stakeholders over the last number of weeks; fishermen, lobster fishermen, ground fishermen, like crab fishermen, codfish, what little is there, fish buyers, processors, provincial regulators, inspectors, federal and so on. In the final analysis I've come to the conclusion that there's a considerable lack of confidence and respect for government and the way it regulates the fishing industry. Have you found that to be the case? If so, what are you doing about it?

MR. UNDERWOOD: Well, as I mentioned at the outset, it is a complex jurisdictional issue. My objective, since I've been with the department, is to make sure that we have in place mechanisms that ensure that the agencies that have a responsibility are working in co-operation with each other to ensure that there are no overlaps and that we have as seamless as possible a management regime. There are certainly constant frustrations with the federal government on the decisions that they make and the way that they manage the fishery.

We see it as our responsibility, despite the fact that we don't have constitutional authority for the management of the fishery, to engage very regularly and aggressively in the process that DFO has established to manage the fishery, which is a very complex one. We have three experts, one for each of the types of fisheries, the shellfish fisheries, the pelagic fisheries and the groundfisheries that are totally committed and involved in that process, representing the interests of the province in the management negotiations and meeting structures.

We always hear a lot of concerns, unhappiness about individual decisions, but I've always seen it as my job to make sure that our department, within the jurisdiction that we have, does what we can to make sure that we are at the table, representing the interests of our industry. We place a lot of stock in the consultation and the communication process. We have the capacity on the ground to do that. I guess that would be the answer that I would give.

MR. MACKINNON: The impression I'm receiving is that the government seems to be painting the image that all these fishermen who are out there are all partaking in illegal activity, and it's up to them to prove themselves innocent, which I find very discouraging. When you're out there in pretty rough seas, like we've seen in the last week, and some of the tragedies that can occur - and I'm not trying to defend illegal activity in any way, shape or form, but I think it's most unfair, the way government's - in particular what we've seen over the last few years - words and actions seem to be two different things. For example, on May 28, 1999, one of the Conservative members who is now a senior member in the Conservative Cabinet stated quite emphatically that we don't have enforcement officers within the department. That's referring to the provincial Department of Fisheries. This individual is very well versed in the fisheries industry.

MR. CHAIRMAN: Mr. MacKinnon, just for interest's sake . . .

MR. MACKINNON: I will table it.

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MR. CHAIRMAN: That is what I was going to ask you, if you would table that.

MR. MACKINNON: It's Hansard, so it's no problem. It goes on to say that we could hire 40, 50 or 60 enforcement officers and just break even with the amount of money that could be recovered from the illegal fishing. But nothing seems to be quantified. There's lots of words out there, beating the living daylights out of there, but what I'm asking is for you to put the substantive evidence before us so that we as legislators can deal with it. Can you do that?

MR. UNDERWOOD: There were a couple of questions there. First of all, it's not just government that's complaining about the illegal trade in fish products. As a matter of fact, there has been considerable pressure from organizations within the fishing industry for us to stop, to do what we can to stop this illegal trade in products. It's not everybody who's involved in this. Like any kind of illegal activity, there's a small component, but what the industry is telling us is that makes the playing field unlevel, that you can't have a few out there messing it up for the legitimate operators. So it's not just a matter of the government saying that there's this huge amount of illegal fish trade going on, it's the industry that's telling us that.

In terms of the number of officers, as I mentioned in my opening remarks, we have five inspectors and two inspector-investigators who are specifically focusing on the enforcement of our buying and processing regulations, but we also have 150 DFO fisheries officers and 30 Canada Customs and Revenue Agency auditors and 35 Canadian Food Inspection auditors who have, as part of their tools when they're doing their respective inspections and enforcement, our regulations as well. For example, Canada Customs and Revenue Agency auditors would normally be dealing with income tax returns from the previous year, and they would go in and do an investigation. They also now have the ability to use our regulations, which require the keeping of records and the tabling or disclosure of information about what they have bought, what they have processed, who they bought it from, and where it goes. So, if you look at the inspection enforcement complement, it is quite large.

To get to your question about putting evidence before the House with respect to the facts about how much actually is being done by way of illegal fish trade, that's a difficult thing to do. As I mentioned, we have a number of investigations underway and we will be laying charges but by its very nature, this is clandestine activity and we can only speculate as to how serious it is and we only know when we've charged somebody - and people are innocent until proven guilty - we have to charge them, we have to prove the violation of our regulations or federal regulations and then it's up to the courts to levy the fine.

MR. MACKINNON: Well, you really haven't answered the question. What is the province doing on the enforcement side, itself? That is essentially the position that was taken

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prior to the election and during the election, the lack of enforcement from a provincial perspective.

MR. UNDERWOOD: What we're doing is, number one, we've entered into these co-operative agreements with the federal agencies; we've enhanced our enforcement capacity; we are currently conducting joint enforcement activity with DFO, with the Canada Customs and Revenue Agency; and as well, we've expanded our licence conditions pertaining to the keeping of records. So there are a large number of activities underway focusing specifically on this issue and it is beginning to bear some fruit.

As I mentioned, we currently have 15 matters under investigation. Last year we had seven successful investigations that led to charges and guilty pleas were entered as a result of those investigations. So there is a lot of activity going on by us and jointly with the federal agencies that have a stake in this. Obviously, I can't get into the details of the individual investigations but we're pretty confident that we're going to continue to lay charges and get convictions for this illegal trade.

MR. MACKINNON: So are you saying then that the framework that you have in place now with the collaborative efforts you also have with the various agencies, both the federal and provincial, will ensure that you will be able to gain control of this problem that you say you have?

MR. UNDERWOOD: Well, ensure - we've enhanced our capacity. I personally believe that if we're able to successfully charge some of the major operators, that that will send out a signal. It's like any kind of enforcement activity, you never get everybody but the deterrent is the risk. I think that the initiatives that we put in place, collectively and co-operatively with the federal agencies, is greatly increasing the deterrent factor here. There is now, I would say to you, a higher risk of getting caught and a risk of greater penalty once you are caught.

The Canada Customs and Revenue Agency is a very powerful ally in this campaign against illegal fishing. I think that those co-operative efforts, particularly with CCRA, will bear some fruit for us.

MR. MACKINNON: Would you come to the conclusion then that we have less illegal fishing today than we did five or 10 years ago?

MR. UNDERWOOD: That's hard to say. Again, it is a clandestine activity and by its nature it's hard to quantify. I haven't heard any new estimates from CCRA and perhaps I could refer to David. I don't know if there has been anything more by way of estimates so we can compare whether the amount of illegal activity is decreasing through time.

[8:30 a.m.]

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MR. CHAIRMAN: Mr. Hansen.

MR. DAVID HANSEN: Good morning. We are in constant contact with CCRA and we're working together with them on a number of joint activities. Certainly, from their audit perspective, they have given indications that they are gaining compliance, they have not come to the table saying to us or to the industry that they've gained a stranglehold on the issue. However, from what I am gathering from our industry colleagues and from CCRA and from DFO and our own recognizance, we are seemingly making some progress.

On one point about the industry and the perspective and perception, I can say from a compliance perspective - and the deputy minister has alluded to the fact that we require information from our buying community - that compliance is excellent. We have an industry that's in - for the most part - compliance. I do not want to leave the committee with the impression that we have an industry that is running rampant with misreporting and what have you. There are very serious pockets of misreporting.

MR. MACKINNON: In what part of the province?

MR. HANSEN: It's widespread and I wouldn't want to put the finger on any part of this province and that's part of what evolved from our task force, which the deputy minister has spoken to. It started with the food fishery and the Aboriginal component and that piece. And we've looked across the province at a number of very high-value fisheries such as soft-shell clam, lobster, snow crab, and it's widespread. But I would say that our buying and processing community, from a record-keeping point of view, have come to the table and provided good, solid information for the most part.

MR. MACKINNON: The 17 pending cases that you have, what does that represent, percentage-wise of your total fishing complement?

MR. HANSEN: They are 17 individual cases. We licence over 400 buyers in this province, so that may give you some feel for what it represents.

MR. MACKINNON: So that's less than 3 per cent.

MR. HANSEN: Perhaps, something in that nature.

MR. MACKINNON: Is that in keeping with other jurisdictions?

MR. HANSEN: In reference to - I would ask back to you - other areas of business activity?

MR. MACKINNON: No, other provincial jurisdictions.

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MR. HANSEN: We are probably the only provincial jurisdiction in Atlantic Canada with agreements on the ground with DFO and the Canada Customs and Revenue Agency and working together in partnership. In other jurisdictions they have similar problems and they are dealing with it and they're looking at what we're doing but they're dealing with it unilaterally in many cases.

MR. MACKINNON: Then I think we're developing a focus here, clearly. It's not as pervasive as the perception would lead one to believe. It's not as rampant through the industry as some individuals would suggest. That's really what you're telling us.

MR. HANSEN: What I'm telling you is that we've got a very serious problem and the figures that have been provided by Canada Customs and Revenue Agency on misreporting are real, they relate to lobster. But we've looked in a wider scope along with them and other high-value species and we're finding a lot of the same situation.

I'm not here to tell you - the industry is very co-operative. Our people who we licence, our processing and buying community who we licence and view as our direct client, have been very co-operative in trying to deal with this problem.

MR. MACKINNON: So you don't even know if it's a $50 million loss?

MR. HANSEN: No, I didn't say that. What I'm saying to you is that the people who do books and records, audits, CCRA and our industry, have been there - and we have as well - and determined that on an annual basis in lobster it's about a $50 million misreporting issue in Nova Scotia. I think that is significant.

MR. MACKINNON: I guess my concern and I guess in this context I pick up for the fishermen and those on the front lines doing the work and bringing the product to market so to speak, I think it's unfair. Rightly or wrongly, I believe government has an obligation, particularly the provincial government here because they've raised it so many times in the House, to clear the air for a lot of legitimate operators and stakeholders in the industry.

Until government comes forward and does that, I think everybody seems to be under a cloud of suspicion. It's almost like they're guilty until proven innocent, as I've said before. That's my plea to yourselves as senior bureaucrats who are advising your minister, because the minister doesn't seem to be saying anything on this issue, other than a few of the pronouncements that were made subsequent to the initiatives that were taken in 1998-99 by the previous Fisheries Minister, Keith Colwell.

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MR. UNDERWOOD: Perhaps if I could, I think it's important to keep this in perspective. Your point is well taken. We are not painting the whole industry with the brush of illegal activity. We've got over a $1 billion-a-year industry in this province, and for the most part it's ticking along very well and generating a huge amount of economic activity in our coastal communities. But we do have a problem in some areas with some people, and I think that we've been able to muster the capacity, through co-operation with our federal colleagues, that we're getting a handle on it. That's important. It's important not just for the purposes of taxation, it's important for the purposes of conservation of the resource, and making sure that we have good data and information on what's being caught and where it's being caught, because that's the foundation for prudent decisions with respect to the management of the fishery.

I take your point, but I hope that - because we're focusing on illegal fish trade in this meeting, that's not the industry in this province. We could easily have a two-hour session on all of the fantastic things that are happening with the fishery and the revenues that are being generated and some of the opportunities, and some of the problems and issues, but we're focusing on the illegal side. I don't want to leave the impression that that's the industry.

MR. CHAIRMAN: It's 8:38 a.m., the next 20 minutes belongs to the government caucus. Mr. Hurlburt.

MR. RICHARD HURLBURT: Good morning, Mr. Underwood and Mr. Hansen. Welcome to our committee this morning. I happen to live in, I think, one of the richest fishery communities in Nova Scotia, and I have a keen interest in the illegal fishery. Prior to 1999, sitting on Main Street in my home community, there were people selling lobster out of the backs of trucks. We have curbed that a lot since 1999, and I think that's due to the new task force that was introduced in 1999.

But I think the awareness of the industry, of the fishermen themselves doing their own policing, would you not agree that they're helping out the Department of Fisheries, DFO, and Canada Customs and Revenue Agency by doing the policing themselves?

MR. UNDERWOOD: I will get David to respond to that as well. I think you're right. The reason I say that is because a lot of the pressure for us to get a handle on this issue is coming from the legitimate players in the industry. That, I think, is important. It's not just big, bad government out there trying to meddle in the economy of the province. The industry itself is telling us we have to get a handle on this. David is the fellow who works on the ground on this.

MR. HANSEN: You're very correct. I think in the lead-up to the formation of the task force, there were many communities and many fishers and many buyers and processors who were ultimately concerned, not just with the financial stability of their industry and the level playing field, but I attended meetings, in Yarmouth and across this province, where

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people were very unsettled about the social fabric of the community. That was a change from my dealings with the industry. Normally you went to a community, you talked about quotas, you talked about issues around fish and what have you, but we were seeing people come to meetings and were very concerned about the social fabric, my neighbour was selling under the table but I wasn't, and that sort of thing, and I don't want to tell on my neighbour and all these things that emulate from that type of activity.

We took them very seriously, and we reported back. I think, today, we have tremendous co-operation from our fishing industry. Certainly they're not always happy with some of the responses from all agencies, but they're at the table, they're talking about this and it's not about telling on their neighbours, it's about putting the issue in perspective in relation to the industry.

You're correct, in Yarmouth there was rampant selling of various products and that's not there today. In large part, I think that's due to the agreements that have been reached with the First Nations and the positive side which that has taken for all concerned.

MR. HURLBURT: But was the awareness by your department and DFO - remember the demonstration in Yarmouth, when I think we had 500 boats or something like that tied up at our wharves. The awareness started from that date on. The buyers were responsible, as much as the illegal fishermen out catching in the harbours, who were out there taking the resource from our oceans. Am I correct?

MR. HANSEN: Oh, no question. There has to be a number of participants in order for an illegal act to take place. The fish is illegally caught and landed, but there has to be a buy. From our perspective, we take that very seriously, because that's our jurisdiction and our responsibility.

MR. HURLBURT: The four departments of the task force, you're still all working together as we speak today, are you not? The task force is still there?

MR. HANSEN: It's taken a bit of a different view. We do meet jointly. There's an upcoming meeting with DFO, CCRA and ourselves which will be held in the next couple of weeks. However, we as a province have signed individual agreements with the three respective agencies, and the RCMP are always at the table in any case, whereby the task force was a joint initiative. I will point out that CCRA was not signatory to that task force but were participants. We now have a signed document with CCRA, DFO, both Maritime Region, Gulf Region and our CFIA counterparts. We work closely with those agencies.

MR. HURLBURT: DFO has taken a more responsible role in policing the illegal fisheries than they did prior to 1999, would that be a correct statement?

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MR. HANSEN: I wouldn't want to comment on DFO's role, respective of their view prior to 1999 or hence. However, what we've been able to provide for DFO was another tool in their toolbox with provincial jurisdiction and the provincial hat. When they go into a situation, they're not with any of our officers, they're operating, many times, on their own under policy and direction. But they have a new tool in the toolbox, which is our licensing program and their appointment. So I would suggest that they have, certainly from the provincial perspective, stepped up their involvement.

MR. HURLBURT: All the First Nations have now agreed to the regulations? Have they all signed on, or is there still . . .

MR. HANSEN: I do believe there are still some bands, some First Nations who have not signed agreements with DFO. However, in relation to many of the problems, they've been mitigated. Some of the issues are before the courts, unfortunately, but they are working their way through that process. From a compliance perspective, it's a much better situation.

MR. HURLBURT: Thank you. I will turn the floor over to the member for Kings West.

MR. CHAIRMAN: Mr. Carey, you have 14 minutes.

MR. JON CAREY: Good morning. You talked about the industry having about $1 billion in total revenue from the fishing industry. Can you break that down a little bit for us? The lobster industry, you talked about over four years, roughly, you felt that there was approximately $2 million in illegal trade or whatever. How does it break down out of this $1 billion per year?

MR. UNDERWOOD: I'm going to have to do this from memory. We can certainly provide you - we have those statistics available. I can give you a rough idea.

MR. CAREY: Is lobster the big player?

MR. UNDERWOOD: Yes. It's about $1.15 billion in 2001. That's $1.15 billion in exports. That's generated out of a landed value of about $760 million. We expect 2002 to be higher again. There's been a steady increase in the export value and the landed value of our fisheries all through the 1990s as a matter of fact, despite the collapse of the groundfish fishery. It's really been replaced in many ways, in terms of value at least, by high-valued species like lobster, snow crab, shrimp.

[8:45 a.m.]

If you look at the numbers through time, the decade of the 1990s, you will see a steady increase in the export value of fish products from Nova Scotia. It was, until gas, the

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number one export every year from the province, historically. Fish is number one in Nova Scotia, in the renewable resource sector at least, and number one in Canada. It breaks down something like this: lobster is about $325 million, so it's a big chunk of it . . .

MR. CAREY: A third or so?

MR. UNDERWOOD: Yes, about a third. Then you have scallops, which is probably $150 million, $180 million, something like that. Scallops is a very important component of that. You have snow crab which is increasingly important, particularly in the eastern portion of the province. It's been growing very steadily. I think last year that was over $100 million, snow crab. Then, of course, you have your pelagic fisheries, which are significant: tuna, swordfish, herring; tuna and swordfish, probably in the $35 million to $40 million range. Then a broad range of others. Shellfish is 80 per cent, in terms of value.

MR. CAREY: To get to the illegal part of the fisheries, if 80 per cent is in the shellfish, is that where we find most of the charges being brought against people in that industry?

MR. UNDERWOOD: Yes, it stands to reason that people are going to want to engage in illegal activity with the species that has the most value. You have a truckload of lobster, 250,000 pounds of lobster at $6, $7, $8 a pound, you have yourself a pretty valuable load in a pretty small space.

MR. CAREY: Realizing that you work together with the federal department, the fish, when it comes to the wharf, becomes a provincial responsibility. Is that a correct statement?

MR. UNDERWOOD: Yes, it's kind of funny, it changes hats as it moves along. On the water the governing of the fishermen, the licensing of the fishermen, the quotas, the areas and times, all of the conditions with respect to the harvesting of the fish is a matter of federal responsibility. Once the fish hits the dock and is subjected to either being purchased or being processed, the individuals engaged in that activity are under provincial jurisdiction. Then, of course, most of our seafood products go out of the country, probably 96 per cent of what we produce is exported from Nova Scotia. Then it gets back into the federal jurisdiction again because of interprovincial or international trade.

For all intents and purposes, I think all of our processing facilities are now engaged in exports, so they operate under two approvals. One is a licence to process fish from the province and the other is a certificate of export from the federal government, which they're required to have. We work very closely. It's not as if we're tripping over each other inspecting them. It would appear - I think the processors would tell you it's pretty seamless in terms of the co-operation of the government agencies involved.

[Page 15]

MR. CAREY: So when the fish comes to the wharf and if a fisher decides to illegally sell his product and the buyer is there, are they both charged?

MR. UNDERWOOD: That's a good question. If the fish is illegally caught, at the wrong time, in the wrong place or whatever, it's illegal in accordance with the federal regulations governing the conduct of the fishery. It is illegal under our regulations for a licensee licensed by the province to buy or process that product, to purchase that product.

So I guess the federal government could charge the fisherman for illegal fishing, but we could also charge the purchaser, the buyer or the processor of that product, because under our regulations it is illegal to purchase or process fish caught illegally. You could also have a situation where the fish is legally caught but the buyer doesn't record the purchase, and that may or may not be in collusion, technically, with the fishermen. So you could have a situation where you have very legally caught fish, but the buyer is paying for the product to the fisherman and perhaps not recording that he purchased that product, and moving it off to somewhere else. There's a whole bunch of scenarios. It can get quite complicated.

MR. CAREY: I think you talked about 15 or 17 cases on the go at the present time. If I understood you correctly, you said the fines ran from $300 to $2,500. Did I understand that correctly?

MR. UNDERWOOD: There were two pieces of information. The first one, we currently have 15 matters under investigation. Last year we had a number of investigations that led to guilty pleas in seven circumstances, and the fines levied as a result of those guilty pleas ranged from $300 to $2,500.

MR. CAREY: I don't know the circumstances of the case, but that sounds like a pretty light slap on the wrist. I know some of the purchases run into thousands of dollars, and if I can purchase $50,000 worth of fish and get fined $2,500, that's not going to stop me too much. That's the cost of doing business.

MR. UNDERWOOD: Well, far be it from me to question the wisdom of the judiciary, but that is an issue for us. We would like to see . . .

MR. CAREY: Is the department pushing for heavier fines or better . . .

MR. UNDERWOOD: I will get David to respond to that because this is one of the . . .

MR. CAREY: I know of fishermen in my area who have fished for years and a few, unfortunately for them, have had tax problems. They certainly got hit a lot harder. I know some who have paid $0.25 million in income tax and so on. So $300 or $2,500 looks like a pretty small deterrent.

[Page 16]

MR. UNDERWOOD: Traditionally - and I will turn it over to David, but just to give you my impressions - it's been a constant issue, not just with provincial regulations but with federal ones as well. The courts, I don't believe, have taken the issue of illegal fishing as seriously as they should. The fines, they're getting better, and I think this is a reflection, generally, of the opinion of the communities with respect to the seriousness of this. Historically, we've seen very low fines given the benefit that those who are involved in this activity can derive from the illegal activity. I will let David comment on the fine levels, because I know it's something he has spoken to me a number of times about.

MR. HANSEN: You're quite correct, and it's been a frustration of our federal counterparts. If you would see some of the more recent charges under federal jurisdiction, they're now looking at $5,000 to $10,000, but they've had a long hard struggle to get there. We've met and we continue to meet with PPS, our provincial Public Prosecution Service, and that's one of the things that I think we have to do and we are doing in getting that group more aware of the matter. As I say, as the deputy has spoken to, many of these situations are guilty pleas, and these are agreements between prosecutors and defence counsel. At that time, we're telling the Public Prosecution Service it's not good enough just to get the $300 penalty, because you're quite correct, it's not even the cost of doing business.

On another point, I want to stress the difference between our revenue agency counterparts and our own jurisdiction. These penalties are for misreporting, buying without licences and things like that. You're quite correct in saying that when our Revenue Agency folks come in on an audit, their penalty structure and their ability to recoup back lost tax, and misreporting is certainly far stronger and that's one of the reasons why we have a partnership arrangement with them.

The tax people, from an audit perspective, have and certainly get much more attention from the business community sometimes than anyone, be it our federal counterparts, DFO, or ourselves.

MR. UNDERWOOD: If I could just add to that. We're very happy to have CCRA as a partner in this because they really do bring a heavy stick to the table, there's no doubt about that. They are very happy to be in partnership with us because we have the ability to beef up our regulations, to change our regulations, to make them more useful not only for us but for them, in terms of record keeping. So now they have available to them a whole new suite of business transaction records that we hope will enable them to better do their job. As you said, if they can successfully find out that somebody has been cheating on their income tax, they're going to get a lot more than a $300 fine.

MR. CHAIRMAN: Mr. Carey, you have a minute remaining.

MR. CAREY: Perhaps, Mr. Taylor, if you could get your question in.

[Page 17]

MR. BROOKE TAYLOR: Could I ask a short snapper, Mr. Chairman?

MR. CHAIRMAN: You may, Mr. Taylor.

MR. TAYLOR: Perhaps we could say that a consequence of the Marshall decision in 1999 was the formation of the task force. You indicated earlier, based on that decision, that First Nations are entitled to make a modest living, at least, that you have several agreements with the First Nations bands. I wonder if some components of the agreements are greatly assisting with the legal trade of fish and fish products, compared to the non-Native fishery, if you could make a distinction, perhaps, something, a feature, perhaps of one of those agreements or all agreements included that greatly has increased the legal trade? Thank you, Mr. Chairman, I trust I wasn't over a minute.

MR. CHAIRMAN: Go ahead, Mr. Underwood, take all the time you wish.

MR. UNDERWOOD: Well, that's not really a short snapper but I think I'll take a stab at answering that question. I think - and again, I would have to look at our records - we have agreements with all but two of the Native bands in Nova Scotia at this point. What those agreements have done is clarified things.

In the immediate wake of Marshall, there was a lot of confusion about who was an Aboriginal, exactly what the right entailed, what was the food fishery, what was the commercial right to fish, and it was just a very tumultuous period that left open all kinds of opportunities for mischief. What the agreements have done is they have really clarified things, they've transferred licences that have been purchased from the commercial fishery to the Aboriginal bands and they've agreed, for this period, at least during their interim agreement, that that constitutes fulfilment of the right that was set out in the Marshall decision. So you really have no confusion about who is entitled to fish, you either have a licence or you don't. If you don't have a licence it's illegal, whether you're Aboriginal or whether you're not Aboriginal.

I think the biggest benefit of the agreements was the whole settling - at least for an interim period - of the definition of what the right is and the purchase and transfer of licences to the Aboriginal community. The other thing that has happened as a result of the agreements and the process of the negotiation of those agreements is, I think, an improvement in the relationship between the Aboriginal community and the commercial fishermen. Most of the agreements, for example, have mentorship components to them because you just don't get a licence, get a boat and go fishing, it's not quite that simple, as all of you would realize. So there's a relationship of mentoring taking place between the commercial fishermen and they're integrating the new entrants into the fishery. So the agreements were a clarification, specifically for the province.

[Page 18]

[9:00 a.m.]

We brought in amendments, as I mentioned earlier, to our regulations that specifically addressed the issue of the food fishery, which was particularly problematic down in St. Mary's Bay, where Aboriginals were fishing lobster under the auspices of the food fishery and then selling them. You can imagine how difficult it would be to lay a charge when there's really uncertainty as to what constitutes the food fishery, who's entitled to engage in it and at the time, we really had no linkage between our licensing provisions and the food fishery. We had a general provision that you cannot buy illegal product but determining whether or not it was an illegally caught food lobster was extremely problematic. So we amended a simple change to our regulations that said, thou shalt not purchase fish caught pursuant to a food fishery right which, because of the agreements, weren't clearly defined.

MR. CHAIRMAN: Mr. Underwood, I want you to know that Mr. Taylor is a sly fox in using his time. It's a very important topic and you've given an answer but it's 20 minutes to each caucus out of fairness, although I know we'll probably come back to the topic. Mr. Taylor, a point of order?

MR. TAYLOR: No, Mr. Chairman, I was just carrying on.

MR. CHAIRMAN: You were just being Mr. Taylor, I know, thank you. Mr. Underwood and Mr. Hansen, I would like to introduce you to my colleague, the member for Hants East, who has safely arrived, Mr. MacDonell. John, you have the next 20 minutes.

MR. JOHN MACDONELL: Mr. Chairman, I want to thank Mr. Underwood and Mr. Hansen and also Mr. Salmon and Mr. Horgan for being here today. I apologize for being late. I'll try to make these 20 minutes the best 20 minutes you've had to put up with so far.

I have a couple of small things, curiosity, I guess, as much as anything. I'm looking at two memoranda of understanding here between the Department of Fisheries and Oceans Canada and the Department of Agriculture and Fisheries. One is dated May 1, 2001 and the other September 13, 2001. The two agreements look to be the exact same to me, except the difference is the signatory was Neil Bellefontaine on one and Jim Jones on the other.

In the agreement it says that they will review these terms in a year but yet these two agreements are months apart. I'm curious as to why. Are there any more, like November 2001?

MR. UNDERWOOD: I'll take a stab at it and if I'm wrong, David can correct me. The reason there are two agreements is that the federal government, in the Department of Fisheries and Oceans in Nova Scotia, has two regions. There's the Scotia-Fundy region which runs from basically the tip of Cape Breton around through the Bay of Fundy and down to the

[Page 19]

U.S. border, and there is the Gulf region which is the west side of Cape Breton, the Gulf coast of Nova Scotia, then up around the whole Gulf.

If we're going to engage with the feds, we have to engage with two heads, in two different regions. So everything that we do from an operational perspective gets complicated because the office in Dartmouth doesn't deal with the Gulf coast, we have to deal with Moncton on that.

MR. MACDONELL: It's one of those cases where I'm not sure if two heads are better than one.

MR. UNDERWOOD: I would suggest to you that our experience has been that two heads are definitely not better than one.

MR. MACDONELL: I'm curious about the tone or the emphasis so far, from what I've been hearing since I got here. I'm not really sure if the issue of illegal fishing is really what seems to be paramount or the fact that we're not getting the tax from the illegal fishing.

I know they got Al Capone on tax evasion but I'm thinking that if someone was selling stolen goods, any other stolen goods - you know, if they broke into your home or into any business or anywhere - we wouldn't really be thinking of the tax loss, we would be thinking of the actual loss in terms of the dollar value of the goods and the impact on the people. I don't know if it's because we don't really look at the fishery or the fish as ours so therefore if nobody seems to want to take ownership for them, maybe it's the impact of just the illegal activity in terms of benefits to communities or whatever that we aren't giving it so much attention.

I'm curious around the comments in connection with the Marshall decisions and the Native component, are you making the statement that this $50 million in misreporting, which I guess is a way to put a dollar value on this, but this is fairly much because of a Native issue?

MR. UNDERWOOD: No, not at all. The Native issue really brought our focus to the issue of illegal fishing because the uncertainty associated with the lack of clarity of what the right constituted did open the door for a flurry of illegal activity but very clearly, when we began to focus on this issue, it was evident that there was activity well beyond the Aboriginal community. At this point, and again I will ask David to correct me, our focus now is not really on the Native issue at all. We think that that whole thing is well in hand. This is non-Aboriginal Nova Scotians, a small batch of bad apples, who are engaged in this activity.

MR. MACDONELL: I'm curious as to, I think you made a comment, I think in addressing Mr. Taylor's question around all but two bands have signed agreements. Is that true?

[Page 20]

MR. UNDERWOOD: Again, I would have to go back and check exactly but it's in that vicinity. Out of the 13 bands we have in the province, there is Indian Brook and Bear River that I think have not yet signed agreements. Indian Brook, as well, has an issue currently before the courts. But even the bands that haven't signed, it's my understanding, and I would have to clarify this, that they are still operating under a series of licences that have been given to them from the federal government. They haven't signed an agreement so they don't get the benefits of other grants and development things that were part and parcel of those interim agreements but they do have imposed upon them, I guess, here are a number of commercial licences and here is what your food fishery constitutes and we can argue about it in the courts, but this is the way it's going to be in the interim.

MR. MACDONELL: I'm curious where you see the weakest link in this process. It seems that it's obvious that there are a number of steps between getting the fish on the boat - for the most part are we talking lobsters here or are we talking other species as well? Is there a significant illegal fishery in other species? In that I mean, inshore, offshore, is there any way of knowing?

MR. UNDERWOOD: If I could ask Mr. Hansen to answer.

MR. CHAIRMAN: Absolutely. Some of that material was covered, John, but if you would go ahead, Mr. Hansen.

MR. HANSEN: I believe that you are quite correct in saying that there was a weak link and I believe it goes back to the way governments functioned in days of old where each and every one of them were entities unto themselves and there was little co-operation, if any. I can tell you from my career that we did have a working agreement since 1996 with Canadian Food Inspection Agency or DFO inspection but we certainly didn't have anything on the ground with DFO, our counterparts who police and provide licensing for fishers or harvesters, and we didn't have anything at all with CCRA.

I think the strength of what we have today is that we are talking, we are working together. We have joint appointments. We have been out in the field, our presence, and it's not every time we walk into an establishment or on board a boat that we find a problem and lots of times it's an educational thing and I think that's been one of the key ingredients in this mix in terms of getting agencies to co-operate, to talk together. We don't have the resources, we are not going to pretend that each and every one of us unilaterally can deal with this matter. So there certainly were gaps and hopefully over time we are closing those gaps to address the issue.

MR. MACDONELL: I know the province's jurisdiction starts really when the fish hits the dock so I'm curious as to how much easier that would be, I guess in terms of if the resources were on the federal side, if there were more resources on the federal side to kind of intercept this problem before it ever got to be the province's jurisdiction. Is that a

[Page 21]

possibility? Has anybody put a number value on what kind of resources it would take to do that?

MR. HANSEN: Well, I look at my federal counterparts with quite a bit of envy when I note that they have 150 officers in Nova Scotia who are deployed in actually working for compliance, I'll use that as opposed to the word enforcement. However, I think that perhaps in a collaborative effort, we have the right numbers. I think our deputy alluded to the fact that we have to move in and deal with some of these very focused issues and known people, perpetrators who are dealing outside the box in terms of reporting, misreporting of catch, and not reporting your tax both from the harvester side and the buying side. I wouldn't want to say that the numbers are right. If we had to put a policeman in every corner, that certainly wouldn't be right either, it isn't rampant. There are very many pockets of problems but we are hopefully trying to come to grips with it.

MR. MACDONELL: I raised that, I think, because I have a neighbour who works for the Coast Guard and the Coast Guard became tied in with DFO and one of his complaints certainly, to him, is a lack of resources to try to do their job and maybe them trying to do a job they shouldn't be doing.

I want to just touch, just for second, on the issue that Mr. Carey raised around the fines, not that I'm saying that that really falls into your area in a sense that all you can do is press for larger fines but certainly it would seem to me that if a fine was somewhere to the value of the catch, that would probably make illegal fishing less desirable if anybody was going to do it. If you can't gain from it, providing you can get caught - certainly the $300 to $2,500 would seem to be not much of a deterrent considering the large value in a small space that you talk about.

MR. HANSEN: You are quite correct and we have actually been talking with, as I alluded to, the Public Prosecution Service. We are getting impact statements in now before the courts in terms of what this actually means, in terms of the value. We have actually engaged with our industry now in discussions about their view of what seriousness this is to their level playing field and social unrest and upheaval in community. So we are working with our Public Prosecution Service to move forward on some of these things so the court gets a better view of the value of the industry, the impact it has, what a detrimental effect it will have.

As you alluded to earlier, it's not just about tax. I can tell you that I certainly have been in this business for a fair bit of time and when I have to go to meetings around the province, when the curtains are drawn and people are very worried about who is seen there talking to the tax guys and Mr. Hansen and company, that sends a very clear message. It's beyond just the tax issue.

[Page 22]

MR. MACDONELL: I read your introductory statement, "Several initiatives aimed at strengthening enforcement have been implemented and include the following:", I'm wondering about the timeline. Mr. Underwood, I think you were deputy minister in the previous administration under the Liberals, for Fisheries alone. I'm curious as to whether these initiatives started under the Liberal Government or under the present Tory Government or if it goes back even to previous Tory Governments.

[9:15 a.m.]

MR. UNDERWOOD: Well, let me think. It's probably bits of both. The amendments to the Fisheries and Coastal Resources Act were brought in by the previous administration. Just to point out, this House has spoken on fines, because this House amended the legislation to up the fines on a first offence to, I believe, $100,000, and $250,000 on a second offence. The House has spoken, we're working with the judiciary and the prosecutors, and they have not, I don't think, picked up on it to the degree that we would like, but that's something that we're working on. The MOUs, with respect to the co-operation and sharing of information of cross appointments of officers and whatnot, those are things that we've done more recently.

MR. MACDONELL: I'm wondering, if you had your wish list, I'm curious as to what you may be aiming for or striving for that are things that you would love to have as weapons in your arsenal on this but that you don't really foresee that you may be able to get. I guess if you were going to say, look guys, if you want to do something for me, here's what it would be. I'm curious, what I'm seeing on paper here as initiatives that are moving us forward, but what would you like to see that's not there or is there anything that's not there?

MR. UNDERWOOD: I don't think it's a matter of missing tools. I would like to see the courts take more notice, and if we are successful with convictions to provide for more appropriate fines. One of the pieces that we are working on, and I'm hopeful that we will be able to have a system in place where we can, with confidence, have the minister exercise his authority to suspend or cancel a licence, because in the end that is the ultimate deterrent. It's just that we have to be careful in that kind of situation to make sure that we have the procedure and the criteria well laid out. We're working with the Department of Justice on that now. I would like to see, in the next year or two, a couple of successful convictions of a couple of the bad apples, and yank their licences.

MR. MACDONELL: Did you say you would like to have the minister exercise his authority or you would like the minister to have this authority?

MR. UNDERWOOD: He has the authority in Statute, but you have to understand, the federal government has been through this and were successfully impugned in court for sanctioning or removing a licence because they didn't have the procedural requirements of

[Page 23]

natural justice, the opportunity to be heard, the proper criteria. I guess the court felt that the minister exercised his authority improperly.

It's very clear in the Act and in the regulations that the minister does have the authority to cancel or suspend a licence upon a breach of the conditions. But we want to make sure that we don't fall into the trap of cancelling somebody's licence and not being able to defend that in the courts. To me and to the industry, that issue is extremely important, to them as well. They understand that as soon as somebody loses a licence, this thing is going to come under control pretty quickly because that's taking away your livelihood.

MR. MACDONELL: I'm curious - and Mr. Hansen kind of alluded to this - about the kind of support you get from communities on this. Do you see it as there's a bit of a culture of illegal fishing or do you find that it's purely the opposite and that people are supportive and helpful? I know you mentioned that people in the industry are concerned.

MR. HANSEN: It's an interesting question in the sense that it varies around community to community. Some people are very timid and I can't blame them, even though we say it's an anonymous thing. They are very particular in terms of what they do say. However, we do have linkages through the industry that provide information, and I will be very frank on that one, we could not do this without industry support on what's going on more so than pointing the finger at various individuals. We need to know the locale, where it is, what's taking place, and we will take the ball from that point and move.

It varies from community to community. The communities, I think, across this province recognize that it shouldn't continue, it's not right, it's not correct, and by and large are supportive of what we're doing.

MR. CHAIRMAN: Mr. MacDonell, you have a minute.

MR. MACDONELL: I will just take that minute and say thanks.

MR. CHAIRMAN: That was five seconds, but we will take it. Allowing for a wrap-up for our witnesses, if we each take 10 minutes that should bring us up to 9:52 a.m., if that would be appropriate. So the next 10 minutes belongs to the member for Richmond, Mr. Samson.

MR. MICHEL SAMSON: Mr. Underwood, I have a few questions, very briefly. October 30, 1998, the Minister of Fisheries for the province announced that 104 federal Fisheries officers would be deputized as provincial officers in the battle against illegal fishing. Is that correct?

MR. UNDERWOOD: Perhaps I could get David to answer, he would have the detailed numbers on that.

[Page 24]

MR. HANSEN: That's correct. In 1998, they were DFO personnel. I believe the number stands at 150 today.

MR. SAMSON: The first MOU regarding the task force, that was in May 1999?

MR. HANSEN: That's correct.

MR. SAMSON: Could you tell me who the Minister of Fisheries and Aquaculture was at that time?

MR. HANSEN: In May 1999?

MR. SAMSON: Yes.

MR. HANSEN: I believe it was Minister Colwell.

MR. SAMSON: Now I want to take you to a statement made in the House of Assembly, Friday, May 28, 1999, after the DFO officers had been deputized, after the MOU with the task force. I'm just going to read a bit of the statement, it says:

"So when I talk about the investigation, one thing that I found as a failing, and I mentioned this to the minister the other day and I also mentioned it to the press, is that the minister is saying we will deputize 104 Department of Fisheries and Oceans enforcement officers and that is DFO, that is federal enforcement officers. Mr. Speaker, to say that those people have the time to dedicate to this type of work, I think is a fallacy. They are overstretched today to do the work that they are trying to do to work on the harvesting side."

It also goes on to say:

"When we talk about enforcement and we say we have five people in enforcement, well, most of those are in the office. A lot of them work on the fish buyers' side of it, the registrations and so forth, but you are going to need more enforcement officers to make this work. Whether you hire those on contract and whether you deal with the problem as the need comes on, if you are getting more reports, you hire more people to do more investigation, I think that that is in the best interests of the province.

I made this comment the other day and I am going to repeat it here today. When you have millions of dollars and I mean millions of dollars of lobsters being sold every year and you realize the income tax that this province is not receiving, plus the fact of the matter of the negative effect on

[Page 25]

the fishery, you could pay to have 40, 50 or 60 enforcement officers and you would break even."

Could you please tell me, after the new government took office in 1999, how many additional enforcement officers the Province of Nova Scotia hired, without getting into the MOUs or the federal side at all? How many did the Province of Nova Scotia employ?

MR. HANSEN: Four.

MR. SAMSON: Also, just before I get into the next part, before 1999, the Department of Fisheries and Aquaculture, was it a stand-alone department?

MR. UNDERWOOD: I'm sorry, could you repeat that?

MR. SAMSON: Before 1999, when the new government took office, was the Department of Fisheries and Aquaculture a stand-alone department?

MR. UNDERWOOD: Yes, it was.

MR. SAMSON: And today, is it still a stand-alone department?

MR. UNDERWOOD: No, it's not.

MR. SAMSON: Who is it affiliated with?

MR. UNDERWOOD: It's now the Department of Agriculture and Fisheries.

MR. SAMSON: I'm just curious, are you aware of who made the statement that I just read? Are you aware of who made that statement?

MR. UNDERWOOD: No.

MR. SAMSON: You're just not going to tell me.

MR. UNDERWOOD: No, I don't know.

MR. SAMSON: It was the then Conservative Fisheries Critic, the honourable Neil LeBlanc, MLA for Argyle, who is, today, the Minister of Finance, who indicated that we should have 40 to 60 more enforcement officers. In fact, under his government, we have four additional ones. There's also that statement in May 1999:

"That is the challenge for you as a minister and what you have to do is to convince your Cabinet colleagues that this is in the best interests of the

[Page 26]

finances of your provincial budget and it is in the best interests of the fishery. It is also in the best interests of this province that we make these changes and we bring about some enforcement level that is reasonable and it is going to be directed mostly in southwestern Nova Scotia because that is where the problem is."

I'm curious, Mr. Deputy Minister, could you indicate, with the merger of the departments, the status of the provincial budget for the Department of Fisheries and Aquaculture in 1999 compared to what it is today under the merged department? I realize it's a little difficult because the departments are merged, but if you could just briefly tell us whether the budget has remained the same, from 1999 for Fisheries and Aquaculture compared to where it is today, considering the staff you had, the program funding you had? Where is that, is it at the same level? I realize there's that second department, but could you just briefly indicate if it stayed the same, increased or where is it?

MR. UNDERWOOD: As you mentioned, it is difficult to disentangle this now that it has been amalgamated, but the first year of the amalgamation, with the exception of the elimination of one component of the Department of Agriculture, the Production Technology group, basically the new department was cumulative of the capacities and budgets of the previous two. On the Fisheries side, in particular I would say there has been an increase. That was primarily in the area of enforcement. We now have, in the budget for the combined Department of Agriculture and Fisheries, an increase of $250,000 per year, put in, I think, a year after or the year of amalgamation. It may have been split over two years. At any rate, the four new inspection officers, that's an enhanced capacity there.

If you look into the rest of the department, it becomes complicated because of marketing and all of that . . .

MR. SAMSON: But is it safe to say that those four new positions, basically that's the increase you've seen? So is it safe to say we now have a total of seven inspectors in Agriculture and Fisheries, both inspectors and investigators, that the total is seven?

MR. UNDERWOOD: Seven in the department and 150 DFO officers . . .

MR. SAMSON: No, just for the province, that's what I was referring to. We had the Minister of Finance in 1999 calling for 40 to 60 new officers, and under his government we have a total of seven. Am I correct in saying that there are 292 fish-processing plants in Nova Scotia?

MR. UNDERWOOD: It's close.

MR. SAMSON: That's in your own numbers there. And you have 432 fish buyers?

[Page 27]

MR. UNDERWOOD: That's right.

MR. SAMSON: So from a provincial level we have seven people investigating. I'm curious, the other question I had, on the conservation side, has there ever been a study or any investigation, when we do have poached lobsters or illegal cash sales of lobsters, do these lobsters meet the definition of illegal lobster in that are they regulation size or what are we usually seeing in this? Has DFO or the province looked at whether they are undersized lobsters, lobsters that have - I think it's called berried - their eggs in them? What is the impact on the conservation side on this? Has that been investigated at all?

MR. UNDERWOOD: I will let David answer that question, because he's more familiar with the details. It's important to understand that with lobster it is not managed by quota. There are lots of ways to have an illegal lobster, out of season, berried, short, whatever. There is a difference on the lobster side because we're not looking at a species, like all the rest of them, where there's a limit on the actual number of pounds or tons of lobster that can be caught.

MR. HANSEN: The predominance in terms of what constitutes illegal, it would not necessarily be a berried lobster, a short lobster, not v-notched or one of the other requirements that are laid on the harvesters by DFO. It's the unreported sale and an unreported remission of tax information that is more prevalent with the lobster sector.

MR. SAMSON: Yes, but I guess the question is, out of that unreported sector, because being as it's not being logged down anywhere, if there have been seizures, have there been some investigations as to whether these are the definition of legal-sized lobsters, or do we have a conservation problem in here also, that there are lobsters being taken out that under the normal fishery would be left in the ocean?

[9:30 a.m.]

MR. HANSEN: In these past investigations, more recently, some indication has been given that more of the illegally-caught berried lobsters, not v-notched, shorts, have been starting to appear. However, I would again say to you that it's not the predominant issue, it's money that has been translated, it could be coming from offshore, it could be just for the purpose of avoiding tax, and when you can take 40,000 pounds of commodity, which is a tractor-trailer load of lobster, at $8 a pound which is being paid in Westport this morning, and that translates into $320,000 of monies going down the road, if they're not berried, not short, what have you, it's illegal entity travelling on our highway. It's a very difficult issue.

MR. SAMSON: I appreciate that. As my colleague, the member for Hants East indicated, conservation is a concern. I just want to finish on one final point. Now while it might not be determined to be an ethically-illegal trade of fish, back in Cape Breton and in eastern Nova Scotia we would call it a morally-illegal trade of fish, that is the shipping of

[Page 28]

unprocessed crab outside of the province to be processed in other provinces. As you know, Newfoundland has on their regulations that they do not permit outside buyers to come in and buy crab in Newfoundland, nor do they allow any unprocessed crab to leave their province for processing. Yet Newfoundland buyers can come to Nova Scotia, buy a licence, buy crab in Cape Breton and in eastern Nova Scotia, and ship it to Newfoundland for processing.

As you have seen, there have been protests, the Causeway was blocked. The Minister of Fisheries in Newfoundland has indicated he will not budge on this, and yet our Minister of Fisheries has responded by forming some sort of a consultation group. I guess my question is, what action is the minister or the department prepared to take in dealing with Newfoundland to stop this unfair trade practice, trade barriers being placed against the people of Nova Scotia?

MR. CHAIRMAN: Could I have a short answer to that, Mr. Underwood?

MR. UNDERWOOD: Nova Scotia has consistently stated that we are free traders. We objected to the Newfoundland provision during the negotiation of the agreement on internal trade. They successfully received an exemption for what we see as a barrier to trade under the internal trade agreement. We're currently examining our options, subsequent to our request, formally, to the Government of Newfoundland to remove that barrier of trade and their response saying that they will not. We're examining our options under the agreement on internal trade. We're looking at what options we have by way of reciprocal action that are available to us. We're currently examining all of our options, in addition to working with the industry in Cape Breton, both the processors, the buyers and fishermen to try to prevent what happened last year.

MR. CHAIRMAN: That was under a minute, that wasn't bad, on an important issue. I don't mean to be short with you. Mr. DeWolfe, it's 9:33 a.m., and the next 10 minutes is yours.

MR. JAMES DEWOLFE: Welcome, Mr. Underwood and Mr. Hansen, to our committee this cold morning. I come from a constituency that's right on the Northumberland Strait, I live in a fishing village myself and represent constituents in various fishing villages along the coast from Lismore right up to Pictou. The fisheries is an important resource in my constituency, as you can well imagine. I tend to think that the issue of illegal fisheries is not predominant on the Northumberland Strait. Would that be a correct statement? It doesn't seem to be a big issue down there. Mr. Hansen, maybe you could answer that.

MR. HANSEN: I believe you're correct in that assumption. It has lots to do with the timing, when the fisheries, particularly the lobster fishery, is open. No, we haven't seen the level of activity of perhaps some other areas.

[Page 29]

MR. DEWOLFE: I just wanted that for my own information, essentially. We talked about the illegal fisheries and so on. I'm wondering if there have been any studies or estimates on the international illegal fishing that goes on? Certainly that would have an impact on our own bottom line, with regard to the associated processing and trade and so on. Has there been any study? Also, the sustainability, I guess, is a big issue too with that type of fishery going on. Has there been any federal-provincial involvement in that?

MR. UNDERWOOD: Yes, that's a huge issue and it goes all the way back, I guess, to the impetus behind the development of the Law of the Sea Convention. It goes back to the late 1960s and early 1970s where it was recognized that there were unsustainable fishing activities. Very clearly now we have a better regime in place than we did then. The coastal states now have the responsibility and the right to manage the resources within the 200-mile limit but there is still a big issue with respect to species that straddle the 200-mile limit. Fish don't really care about limits. The 200 miles was rather arbitrary. It was a global, legal compromise. Most continental shelves were about 200 miles so they chose 200 miles but we have the nose and the tail of the Grand Banks, in particular in Canada, where the fish exist quite happily on either side of that line.

There is a mechanism through the Northwest Atlantic Fisheries Organization to manage those straddling stocks and the stocks outside of the 200-mile limit. There are serious problems with the enforceability and the teeth in that agreement. The Law of the Sea Convention was not very helpful in dealing with straddling stocks, highly migratory species. We have, subsequent to the Rio conference in 1992, a convention that we participated in the negotiation of 50 United Nations with respect to highly migratory species. So we are getting a handle on that globally. It's a difficult issue because you've got the high seas, the rights to do whatever you want on the high seas, that long-standing right, competing with the responsibility to manage stocks. So it's a constant attention but yes, there have been huge studies done globally.

There are huge issues with respect to overfishing outside of areas of national jurisdiction and the United Nations and the countries of the world have been working to negotiate agreements to address those. We participate in a number of them. We do participate in the Northwest Atlantic Fisheries Organization both as a country and with provincial representation. The International Convention for the Conservation of Atlantic Tunas, we participate as a province and as a country in that organization which governs the setting of quotas and rules and conditions for the harvesting of tuna and swordfish. So it's a big issue. It's been 30 years of international work to try to deal with it. Is it perfect? No, and the work is still continuing to tighten it up.

MR. DEWOLFE: It must have a tremendous impact on the fishstocks, though.

[Page 30]

MR. UNDERWOOD: Absolutely. Not for Nova Scotia, no, in the fisheries off of our coasts because most of the fisheries that we prosecute are either totally within our jurisdiction, the Canadian jurisdiction, or they are governed by the conventions with respect to the harvesting of, as I mentioned, tuna and other straddling stocks. In Newfoundland, because of the problems associated with the enforceability by NAFO of the rules governing those straddling stocks, it's still a big issue.

MR. DEWOLFE: Thank you. It's an interesting topic. You floated a lot of figures today and just so I have it in my own mind, we talked about the $200 million loss in revenues to the province and so on, illegal fisheries, what percentage of the annual reported landings - let's deal with lobster, the total reported landings - what is the percentage of illegal compared to those total landed stocks?

MR. UNDERWOOD: Again, we have to be cautious about using these numbers because it is an illicit activity and by definition we don't know all about it.

MR. DEWOLFE: No, exactly, but the estimates . . .

MR. UNDERWOOD: If you take the value of the landings of lobster, which is let's say, just for round numbers, in the $300 million range, the estimates are that it's $50 million a year in lobster that's going unreported, sold under the table for cash or whatever. That's the kind of ballpark that you would be looking at.

MR. DEWOLFE: That gives kind of a better feel for the balance there.

MR. UNDERWOOD: And out of that, the rule of thumb on the tax issue is that 10 per cent of that would have an implication on our tax revenues. In terms of conservation, because lobster, as I mentioned earlier, are not managed by quota, unless they're being caught out of season or being caught short or being caught berried, there's probably not a huge conservation component of this, on the lobster side.

MR. DEWOLFE: Mr. Chairman, I know that my colleague, the member for the beautiful Colchester-Musquodoboit Valley got a very short answer to a very convoluted, complex question, so I would like to turn the rest of the time over to him.

MR. CHAIRMAN: Its 9:41 a.m., Mr. Taylor. You may begin.

MR. TAYLOR: Mr. Chairman, you're watching the clock very intently. I will carry on because we have a couple of questions. Along the same lines, firstly, as my colleague, Jim DeWolfe, CCRA, not to be confused with CCR, recently did estimate that some $200 million - well, it's very important that we do make that distinction, I believe.

MR. CHAIRMAN: As long as you don't break into song on me.

[Page 31]

MR. TAYLOR: Well, the band is having a reunion and we're doing a couple of tunes, Proud Mary which travels up and down the water . . .

MR. CHAIRMAN: Fine, it's 9:42 a.m., Mr. Taylor, you have one minute.

MR. TAYLOR: The illegal trade of fish and fish products was recently estimated to be $200 million. I'm led to believe that the task force, the Department of Agriculture and Fisheries working with the task force, is essentially leaving these projections as far as lost revenue and lost net revenue to the Province of Nova Scotia, new revenues to the federal agency. Would that be a correct statement or a fair statement?

MR. UNDERWOOD: No, I think it's important to understand that what we've done is we've taken all of the agencies that have a stake in this illegal activity and brought them together. It's much more appropriate for the CCRA to do the investigations that lead to charges for income tax evasion, because that is their stock-in-trade. What we bring to the table is a knowledge of the industry and a regulatory regime that requires very strict accounting of the transactions that you engage in. You put the two together and we make a pretty good team. It's not a matter of leaving it up to them, that's their responsibility. We're helping them with that, and by the same token we now have a whole new army of very powerful inspectors who will also help us get at the issue of the illegal trade in fish and its issues on conservation, which are important to us as a Department of Agriculture and Fisheries.

MR. CHAIRMAN: It's coming up to 9:44 a.m., and the next 10 minutes belongs to the member for Hants East. Mr. MacDonell.

MR. MACDONELL: Mr. Underwood, I would be interested to touch on the topic raised by Mr. Samson earlier. The department has hired four enforcement officers, fisheries officers since 1999, is that correct?

MR. UNDERWOOD: That's correct.

MR. MACDONELL: So what's the total complement now?

MR. UNDERWOOD: Seven.

MR. MACDONELL: So there were three under the previous administration then.

MR. UNDERWOOD: That's right.

MR. MACDONELL: Nobody is really falling over themselves to bring in a big wave of enforcement officers, I guess. When I asked if you had a wish list of things you would see as another tool in your arsenal, another weapon, you didn't mention enforcement officers. I'm

[Page 32]

curious, you did talk about the power of the minister to revoke licences. Do you have a number for enforcement officers that you think would be a more appropriate number?

[9:45 a.m.]

MR. UNDERWOOD: That's an interesting question. Having been 10 years now as a deputy, going through 10 budgets and very seldom having any increases, my culture of operating is to try to make do with what we have. It's my opinion, with the arrangements that we've made with the other agencies, I think we can do the job with what we have.

You can always say yes, we would like to have more. But we really haven't had a chance to truly measure the effectiveness of the arrangements that we have engaged in. We have one year under our belt, we have some guilty pleas, the fines aren't what we would like to see, but this year we have 15 investigations underway, we're working on that sanction process for the minister, we're working on trying to get the fines increased by educating the Justice prosecutors and introducing impact statements into our sentencing process. I would have a hard time, I think, putting a case forward, myself as the administrator of the department, that we need more resources without waiting for at least another year or so to see if the arrangements we have in place are going to be able to do the job.

MR. MACDONELL: When you had three enforcement officers, did you feel you were doing the job then? You have seven and now you're going to wait a year to see whether the additional support . . .

MR. HANSEN: One of the things we talked about earlier in our presentation was the fact that prior to 1999, the focus of our group was the inspection of product and more quality assurance versus where we are today. Our four new individuals are specifically trained and come from enforcement backgrounds vis-à-vis some of our other people who have undergone training as well to move up. We've changed direction and focus. I would like to tell you that we're not out in all areas of the province. We're targeting and we're targeting with our counterparts, DFO and CCRA. So we are making the best use of the people we have in a targeted fashion.

MR. MACDONELL: I would assume that. I guess what I'm not getting - and maybe you can't tell me, I don't know, maybe I'm just fishing - I'm thinking when you're targeting that you must have some feeling that there are more targets than we can actually aim on here. That's what I'm trying to find out, whether you think you have enough people. That's my question.

MR. HANSEN: Recognize this, with CCRA and DFO, because we've given them abilities under our legislation, not all times and not every time are we accompanying them. That's my job, to ensure that our MOUs are working, that we have appendices to the MOUs and working arrangements and training. We just came back from the University College of

[Page 33]

Cape Breton, in terms of their new cadets who were coming on stream. We gave them a full briefing on our roles and responsibilities, and our legislative mandate, when their four new people that they're going to be deploying in Nova Scotia hit the ground. That's new for us and it's certainly new for them. You're correct, no one can say that on one given day or another - it would be nice but I think that we're effectively utilizing federal resources in combination with what we have to manage the issue.

MR. MACDONELL: Mr. Underwood, you mentioned about the value of the fishery, over $1 billion. Is it safe to say or true to say that although the dollar value of our fishery is going up that not necessarily our catch is going up?

MR. UNDERWOOD: Absolutely, there has been a de-linkage between volume - or pounds - and dollars, which in some ways is not a bad thing. We're fishing for dollars instead of for tons. But the real shift is from the groundfish to the shellfish. You have lower weight being landed but a higher dollar value associated with it. That's really what's going on there.

MR. MACDONELL: I'm all for the higher dollar value. I'm just concerned that if our mindset goes purely in relation to the dollar value that people will somehow think that in terms of the fish species themselves, or in terms of conservation, that somehow the fishery is healthy when the stocks may not be healthy. I think that's an issue for me.

I'm curious as to, you mentioned earlier that some of the lobster, or some fish, are caught legally but it's on the other end, the licensing or whatever after that, is an illegal process. So do you have any knowledge, and when we talk about illegal fishery, what's actually caught illegally and what's not caught illegally but still makes up the illegal fishery?

MR. UNDERWOOD: I think it's a combination.

MR. MACDONELL: I assume that too.

MR. UNDERWOOD: Again, because, in the lobster fishery, for example, where it's not managed by a quota, as long as you are fishing in the season, and you're not fishing above your trap limit, I mean you can bring ashore as much lobster as you can catch, unless it's a violation of season or one of those provisions, we are not talking about illegally caught lobster. It's when the transaction takes place in the dead of night with a suitcase of cash changing hands for a truckload of lobster that you are into the illegal activity.

There is another example where we are seeing now a disturbing trend with respect to misreporting of groundfish in Southwest Nova. That is not an issue, I don't think the incentive there is not to make a lot of tax-free cash. The incentive there is because the cod stocks are so low, the haddock stocks are so high, it's really hard to get your haddock without catching cod besides. So what happens is, you either get a dumping of the cod, and

[Page 34]

it doesn't show up on the books for the purposes of estimating stock biomass, or you get the illegal movement of that product under the table because it's illegal to have it.

So depending on which fishery you are talking about, the drivers for the illegal activity are different. We are concerned about all of them, again not just the tax implications. There are also conservation issues as well.

MR. MACDONELL: I think I had asked earlier about the species and we are talking about illegal fishing and the emphasis seems to be on lobster. I was curious about the groundfishery. I'm assuming from what you are saying that we are not in a situation where people are actively going out and catching cod illegally in a premeditated way to try to sell them.

MR. CHAIRMAN: You have a minute, Mr. MacDonell.

MR. UNDERWOOD: Again, I'm going by some of the briefings that I have gotten, particularly this year in 4X which is southwest Nova Scotia, Browns Bank, where the cod stocks are, there is some cod, but the trends are not good, the prognosis is not good, right beside a haddock stock that is doing very well by way of recovery. They do commingle so I don't think it's a matter of people going out and trying to find codfish, I think it's a matter of people going out to fish and they are catching haddock but they need a certain by-catch of cod that's not high enough to allow them to prosecute that haddock fishery.

MR. MACDONELL: The question around . . .

MR. CHAIRMAN: Excuse me, your time has elapsed, sorry. My math, perhaps, although I kept everybody to 10 minutes and we do allow a few moments for a wrap-up, I think maybe six minutes is a bit excessive. If you don't mind, I'm sure you can have a wrap-up of a couple of minutes. Is that correct, Mr. Underwood?

MR. UNDERWOOD: I have no need to . . .

MR. CHAIRMAN: Well, on that basis then, I don't mean to cut anybody off. I know that I was rather glib with my friend, the member for Colchester-Musquodoboit Valley. Does anybody have another question they would like to ask?

Yes, Mr. MacKinnon, then Mr. MacDonell.

MR. MACKINNON: Mr. Chairman, my question is about illegal activity in the fishing industry of a slightly different sort. On the Gaspereau River in Kings County, there are approximately 15 fishermen who have been adversely affected by rather questionable activities of Nova Scotia Power. My question to you is, why has your department done nothing to

[Page 35]

protect the livelihood of these 15 fishermen, which obviously is in severe jeopardy, and to me that constitutes as illegal an activity as you can possibly get?

MR. UNDERWOOD: I feel like I'm in Question Period.

MR. CHAIRMAN: Mr. Underwood, it's Question Period time.

MR. UNDERWOOD: I don't know. I'll have to check on that. I haven't been briefed on that issue.

MR. CHAIRMAN: Mr. MacDonell, a short snapper, if you could please.

MR. MACDONELL: I wanted to just touch on another point raised by Mr. Samson. He was asking about the illegal lobsters fishery. I'm curious, if people were catching lobsters illegally, certainly wouldn't that draw attention to them by having illegal lobsters? It would certainly make more sense to have legal-sized lobsters to move rather than those that shouldn't be in the marketplace at all. Is there much evidence, as far as a conservation issue?

MR. UNDERWOOD: I will let David take a crack at that. Just think as a thief for a minute, why would you want to have illegal product that was obviously illegal, whether it was berried or whether it was short? That would be a stupid thief to do that.

MR. CHAIRMAN: Do you want to add anything, Mr. Hansen?

MR. HANSEN: The only thing I could say to that is that some of that trade does happen because in some other jurisdictions around the Maritimes small lobsters are permitted to be caught. These lobsters may be taken for a reason and then shipped off to other jurisdictions around the Maritimes for further processing, they end up in a can or a pack. That may be the driving force behind that activity.

MR. CHAIRMAN: For whatever reason I've opened this Pandora's box, I will turn the floor over to the member for Colchester-Musquodoboit Valley.

MR. TAYLOR: Mr. Chairman, it's a pleasure to see how fair you are to all the caucuses. The question is, the provincial Department of Agriculture and Fisheries has a responsibility when fish arrive at the wharves, onshore, so to speak. I'm just wondering, if the department has knowledge of fishermen engaging in illegal transactions with international fleets and buyers offshore, where the province wouldn't have, perhaps, any jurisdiction, who would be enforcing that type of scenario?

[Page 36]

MR. UNDERWOOD: That was a relatively common occurrence way back in the 1970s, with respect to swordfish and the fact that there were limitations on the mercury content. We all heard stories about swordfish being transshipped at night on Georges Bank in exchange for suitcases full of cash. In recent years, I haven't had any indication that that is a problem. If it was, clearly the provincial jurisdiction would not attach, although, you could maybe make an argument that buying fish at sea is still buying within the province. We still haven't settled offshore ownership, so we might have some fun with it. It would precipitate a constitutional question.

MR. CHAIRMAN: Thank you, Mr. Underwood and Mr. Hansen. Do you have any other concluding remarks before I call for adjournment? Mr. Underwood, you have the floor.

MR. UNDERWOOD: I would just like to take this opportunity to thank the committee for having us in today. It's an important issue for us, but just to re-emphasize, they're not all bad apples out there. We have a very robust and successful fishery. This is a few bad apples, and we're going to get them.

MR. CHAIRMAN: On behalf of the committee I would like to thank both of you for appearing. It's been a very informative session, and I would like to say thank you for the co-operation of most of the members. (Laughter) I would like to remind you, next week we're going to an agenda-setting session and, in advance, could you have your possible list of witnesses to Mora so that it could be circulated to the other caucuses. I'm calling for a motion for adjournment.

MR. TAYLOR: I so move.

MR. CHAIRMAN: We stand adjourned. Have a good day.

[The committee adjourned at 9:59 a.m.]