HALIFAX, WEDNESDAY, MAY 9, 2007

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:00 A.M.

CHAIR

Ms. Maureen MacDonald

VICE-CHAIRMAN

Mr. Chuck Porter

MADAM CHAIR: Good morning, I would like to call the committee to order, please. Today we have witnesses with us from Service Nova Scotia and Municipal Relations with respect to Petroleum Products Pricing, Regulation and Administration.

Before we begin, I would like to ask the members to reflect for a moment of silence. Today is the anniversary of the Westray Mine disaster and the loss of 26 miners. I think it would be appropriate if we observed a moment of silence before we begin.

[One minute of silence was observed.]

MADAM CHAIR: Thank you. I've been asked by the Hansard people to ask members and guests not to move the microphones. I see there's one microphone that's sort of upright, I think it should be brought back to its proper angle. Now, could we begin with introduction of the members.

[The committee members and witnesses introduced themselves.]

MADAM CHAIR: Thank you very much and welcome. We will begin by offering the floor to Mr. Keefe for some opening comments.

MR. GREG KEEFE: I'd like to thank you, Madam Chair, and the members of the committee for providing Service Nova Scotia and Municipal Relations with a chance to discuss the work and policy around the Petroleum Products Pricing Act.

I have with me today Mr. Cameron MacNeil, Executive Director, Program Management and Corporate Services. He's the operational lead for the team responsible for this Act. Also with us is, to my right, Mike Duda, Director of Corporate Development and to Mike's right, Dean Johnston, Senior Policy Analyst.

Along with other duties they monitor the daily market activity and supervise the data collection required to set prices. Regulation of gasoline and diesel fuel - and in some cases, heating oil, propane and associate distillates - now exists in some form or another in all Maritime Provinces. The policy seeks to balance the interests of the free market and the interests of consumers when dealing with a commodity that most Nova Scotians consider a necessity.

Gasoline and diesel fuel regulation is not new to Nova Scotia, having been in place up until 1991. What is new is the constant and increasing volatility of global energy markets and with it increased public focus on energy costs in general and gasoline and diesel fuel in particular.

I would like to step back for a moment, if I may, and provide a little context to how we arrived at this point. Bill No. 79, the Petroleum Products Pricing Act, was brought forward in the Spring session of 2004 in response to public concern over spiralling gas prices that were generating public sticker shock. At that point, regular unleaded gasoline had just crossed the $1 per litre threshold. For many consumers, the price of gasoline was both inexplicable and, in the eyes of some, unjustified.

When Bill No. 79 was stayed, the Legislature unanimously passed a resolution on May 13, 2004, to establish a Select Committee on Petroleum Pricing. The committee's primary mandate was to examine petroleum product markets and the factors that impact prices. The intent was to make a determination whether the current prices were justified. The committee goal was to recommend what were just and reasonable product prices at the consumer level. In terms of retail and wholesale margins, the committee was to recommend actions to correct imbalances in the distribution and sales of these products. Beginning July 14^th, the committee held a series of meetings throughout Nova Scotia and delivered its final report to the House on August 31, 2004. A minority report by the MLA for Halifax Citadel was delivered September 1^st of that year.

The primary finding of the committee was that Nova Scotia is to explore the policy of divorcement, essentially forcing the breakup of integrated oil companies in order to create less of an oligarchy. Failing that, the all-Party committee recommended a regulatory model similar to that in place in P.E.I. In October 2004, the government announced that it would not proceed with the policy of divorcement.

In the Spring session of 2005, the Petroleum Products Pricing Act was passed, giving the province authority to regulate the price of any designated petroleum product. Approval by the House included a clause that required Service Nova Scotia and Municipal Relations to conduct an independent review of the industry as it existed at that time. Gardner Pinfold Consulting Economists were contracted to provide an independent report. While the initial Gardner Pinfold report did not pass judgment on whether or not government should proceed with regulation, it estimated the cost associated with regulation to be in the range of 1 cent to 2 cents per litre. The government of the day reviewed the report and opted not to proceed with regulation of gasoline and diesel fuel available to the general motoring public.

As a follow-up, Service Nova Scotia and Municipal Relations selected a mediator agreed to by the Retail Gasoline Dealers Association of Nova Scotia and the Canadian Petroleum Products Institute. The mediator's task was to determine if there was a common ground or an alternative method to deal with the concerns noted in the Gardner Pinfold report. After a series of exploratory meetings, the mediator concluded that wholesalers and retailers were unable to agree on a basis for dealing with the issues such as declining margins and loss of retail outlets. While the Gasoline Dealers Association favoured a regulated market such as P.E.I., the Petroleum Products Institute supported an industry equilibrium as determined by free market forces.

In Spring 2006, the government again revisited the policy, partially in light of the fact that New Brunswick announced it would go to a regulated marketplace for all petroleum products effective July 1, 2006. At that point, the department initiated a series of extensive discussions with stakeholders representing every sector of the industry as well as other jurisdictions. The department also had a strong existing knowledge base that had experience with regulation in Nova Scotia prior to 1991. This was supplemented through work in support of the select committee and the initial Gardner Pinfold report.

While P.E.I. was used as a starting point for developing Nova Scotia's model, the staff at the department modified the regulatory model to reflect factors unique to Nova Scotia. These factors included cross marketing, greater geographical distances that require the implementation of zones, broader competition and a larger number of rural-based wholesalers. The department also closely monitored the hearings of the Utility and Review Board in the Fall of 2006 as it appeared for the transition from the department to the Utility and Review Board. That step was delayed pending the most recent Gardner Pinfold report, which was shared with Cabinet and the caucus offices prior to being released to the public last week.

The report contains four recommendations that had been reviewed; three of them have been accepted and will take effect on Friday, the day after tomorrow, or at some point in the future, in the case of the review. The fourth remains under review while they assess the impact of changes to the regulatory model. In the interim, the department continues to act as a regulator and it is at this point that my colleagues and I are happy to answer any of your questions.

MADAM CHAIR: Thank you very much. The floor is now open to the NDP caucus.

Mr. Steele. You have 20 minutes.

MR. GRAHAM STEELE: Thank you very much, Mr. Keefe. I'm going to direct my questions to you but if you think one of your colleagues is more suitable, you can toss the question over to them.

The latest Gardner Pinfold report was released just under two weeks ago and the interesting result was that the Conservative Government claimed that the report showed that regulation was working; the Liberals claimed that the report showed that regulation was not working. So somehow they managed to read exactly the same report and come to diametrically opposite conclusions.

It seems to me that one of the reasons for that is that the government has never clearly stated what its own objectives are for gas price regulation. Now Mr. Gardner, who doesn't speak for the government, offers a few suggestions about what the objectives are and then he evaluates the regulations against those objectives, but now that you're here in front of us, my first question to you is if you could tell us what, in your view, are the objectives of gas price regulation.

MR. KEEFE: One of the most difficult things for that whole period I just discussed in my opening remarks was determining exactly which of the various problems associated with fuel prices we could tackle with a regulatory model. The price itself is probably one thing that was on most people's minds but it turns out that's largely determined by forces outside the control of the Government of Nova Scotia, it is world markets.

The other issues that were involved were the volatility of the price, the variances in prices across the province that didn't seem to be explained by cost alone and also the protection of the rural infrastructure of Nova Scotia, the small, sometimes remote service stations that seem to be disappearing at quite a rate. So the focus of the program was to accomplish those latter two goals, to try to smooth out the variability in the price changes and to provide some protection for the rural service stations.

MR. STEELE: Now in his report Mr. Gardner also suggests a couple of other things as objectives of regulation and I note that you didn't mention either one of them in your first

answer, and the first is dealing with price variation within the province. The price volatility overall is one objective but another one is dealing with price variation within the province. Then, on the same page, while I guess purporting to restate that objective, Mr. Gardner puts it in a completely different way, saying that another objective is avoiding significantly higher gasoline prices to consumers, where higher prices could result from the actions needed to maintain price stability and the higher margins needed to maintain industry infrastructure. Are those also objectives of the gas price regulation regime?

MR. KEEFE: They're factors in it, certainly. I thought I mentioned it but I may have missed it, the variance in prices across the province was one of the things we're attempting to address. Those variations were largely caused by local market forces. Nova Scotia is a market in itself but within Nova Scotia in various communities they have their own market.

It seemed that that wasn't particularly acceptable to members of the general public so as part of the regulatory regime, those differences in price now are totally tied to the transportation costs between the refinery and those locations.

MR. STEELE: Now elsewhere in his report Mr. Gardner suggested that of those objectives that we've talked about, the primary objective is to smooth out price volatility, that where there is a conflict between the objectives, and there is, that you can't meet them all simultaneously, where there is conflict that the primary objective is smoothing out price volatility. Do you agree with that?

MR. KEEFE: I wouldn't say that's the primary. I don't see a whole lot of difference in importance between that one and the protection of the rural service stations. Recognizing that's quite a tightrope to walk, I would think both are quite important.

[9:15 a.m.]

MR. STEELE: Now, I'll tell you what I heard in my own constituency, and other members will have time to speak for themselves later, but before we had gas price regulation, the calls and e-mails that I got were about something completely different - not completely different but is none of those objectives - and that was the widespread and persistent idea that Nova Scotia consumers were being gouged by oil companies. That was the word people always used - gouged. We are being gouged. The consumers could not understand why prices were moving the way they were moving.

There was a general feeling that there was opportunistic profit taking. For example, just before a long weekend or a holiday, prices would shoot up and then they would come down again after a holiday and yet that is a different objective than one that I've ever heard the government identify or the one that Mr. Gardner talks about. Why is it that this idea of elimination of unfairness or elimination of gouging, or verification of fairness in pricing, why is that never stated to be one of the government's objectives?

MR. KEEFE: Probably a couple of reasons. Number one, in comparing Nova Scotia to the rest of Canada, and there are probably three large markets in Canada - the East Coast, central Canada and the West - Nova Scotia was not particularly out of line. Actually historically our prices are probably a shade lower than the West, a shade higher than central Canada, particularly southern Ontario where it's a very competitive market. So there's no particular evidence that Nova Scotians were being treated a lot differently than other Canadians for that matter. So if the opportunistic actions and gouging, as you said, were taking place, they were taking place in the whole country, not just in Nova Scotia.

The other issue, a lot of the volatility in fuel markets is traced back to two sources; one, the price of crude; and separate than that, the price of gasoline which is a commodity traded all by itself. Obviously, the price of crude puts somewhat of a floor on the price of gasoline. Refineries are not going to continue to operate in North America for a long period of time if their selling price is lower than their costs but gasoline itself is its own commodity market now determined by supply and demand. If you look at the numbers over time, you'll see the large differences in the margins that refiners make are usually low in the winter and high in the summer, basically tracking supply and demand.

None of those factors can be under the control of the Government of Nova Scotia without seriously risking supply. We don't have our own supply here. Government certainly has the right to operate how anyone does business in the province. Government doesn't have any authority to require of someone, if I can put it that way. So we were quite concerned if you try to push it down to that level, we would be worried about the supply in the province. Also the federal Competition Bureau has done several studies now, I think it's three or four and they have found certainly no evidence of collusion in the industry although a lot of people feel that's the case, but they've studied it at least three times, if not four, and I believe they're about to launch another one, I read the other day, but they have found no evidence that that is the case.

MR. STEELE: One of the benefits of gas price regulation that I see is those kind of calls I talked about have been completely eliminated. Now that pricing is done according to a known formula and is reviewed by government officials every week, everybody knows that there is now no opportunistic profit taking. In fact, I was interested to read from Graham Conrad of the Retail Gasoline Dealers Association when he appeared before a different committee of the Legislature, he remarked that there was one long weekend after regulation where the price went down before the long weekend and he said that in all his years in the business he had never seen that happen before, which, to me, was an anecdotal indication that prices being reviewed by a regulator, there was no longer any room for that kind of gouging or, what is just as important I think, the suspicion of gouging that was so widespread.

I've just always been puzzled that if that's one of the major objectives of regulation, why nobody ever talks about it because, to me, based on the concerns expressed to me by my

constituents, that was one of the major things that we were aiming at. Now, there is always a concern, of course, about when you have something as important and significant as regulation in the hands, ultimately, of an elected official. Again, it doesn't have so much to do with the reality of the situation as suspicion and I know Mr. Gardner remarks that there is a healthy dose of suspicion toward the government generally dealing with this kind of thing.

One of the early ideas in gas price regulation was it would be done by the independent, arm's-length regulator, the Utility and Review Board. Yet, the original deadline for that to happen passed and we've had no indication from the government that I am aware of on when that responsibility is going to be taken out of the hands of the minister and put in the hands of the well-known, well-respected and thoroughly independent Utility and Review Board. When is that going to happen?

MR. KEEFE: You are correct that the original plan was indeed to turn the regulation over to the Utility and Review Board. We let the deadline go in October pending the current review that has just been completed. We've made some changes to the program as a result of that review, so the current plan is to review the program again in 12 months after a full seasonal cycle has gone through. At that time should government decide to continue with the program, hopefully the program design is stable at that point and at that point the plan would be to turn it over to the Utility and Review Board.

MR. STEELE: I hear what you're saying but I don't understand, why couldn't the Utility and Review Board do all that? If there is a 12-month review to be done they can do it, if there are design changes to be made they can make them. Why is that in itself a reason not to hand this responsibility over to the Utility and Review Board?

MR. KEEFE: I guess that would be a question for government, but that is the position they have at this time.

MR. STEELE: Let me continue with this idea of consumer protection because, of course, to me that is what it is supposed to be all about. I'm not ideologically committed to regulation or against it. What I want is for the people that we all represent to get a better deal, to get the best possible deal and not to simply leave it up to the oil companies to do what they think is best for us. I'm wondering what steps if any the department is taking to track consumer confidence or belief in the regulatory system? For example, has the department done any public opinion polling on that topic?

MR. KEEFE: No, I don't believe we have asked a question about public confidence as such. There has been some polling, I believe there might be one out now on the support one way or another, does the public support price regulation or not.

MR. STEELE: You said there is one out now, is that being done by the department?

MR. KEEFE: No, there is an omnibus poll that is done regularly, and departments always get an opportunity to add some questions to it if we can.

MR. STEELE: Has the department done any public opinion polling on any aspect of gas price regulation?

MR. KEEFE: The department itself I don't believe so but I'll check with Cameron to be sure.

MR. CAMERON MACNEIL: Nothing independently.

MR. KEEFE: No.

MR. STEELE: I'm just worried about the way you are hesitating over the answer. If not your department then are you aware of some other unit of government having done public opinion polling about gas price regulation?

MR. KEEFE: There are lots of polls out. Did we use the omnibus poll last year, Cameron?

MR. CAMERON MACNEIL: Yes, we did.

MR. STEELE: Okay, so you used the CRA omnibus poll and you put that question on. Were those results released publicly, I don't remember?

MR. CAMERON MACNEIL: I don't believe so.

MR. STEELE: Is there any reason why you couldn't table that with the committee?

MR. CAMERON MACNEIL: Absolutely not, sure.

MR. STEELE: Okay. Is the department doing anything else to track public response, even if it is a matter of totalling up numbers and kinds of complaints or compliments about regulation. If it's about consumer protection what are you doing to evaluate how consumers feel about it?

MR. KEEFE: Not in a formal way. Certainly since regulation has come in the volume of letters and calls that we've received has gone down quite significantly. I haven't done an actual count of the letters and calls and compared them over time, but it's quite obvious there has been a significant change.

MR. STEELE: So you're talking about letters and calls from before regulation compared to after regulation?

MR. KEEFE: Yes.

MR. STEELE: What was the tenor of the letters and calls that you got before regulation?

MR. KEEFE: It depended actually on the way the wind was blowing, if I could put it, at the time. Through this period sometimes government seemed to be moving toward regulation and at other times during that period government seemed to be moving away from regulation.

When they were moving toward regulation the letters were against it, when they were moving against regulation, the letters were in support, so as the messaging changed or the apparent direction seemed to change, the letters themselves changed, which I think reflects the fact that the general public, there's certainly not consensus on the issue.

MR. STEELE: And what about after regulation?

MR. KEEFE: The letters dropped off quite a bit, mostly the things we get now are more from industry in terms of some of the issues. There are more calls to the staff than letters. Some of the issues around regulation, how does it affect a particular situation and so on.

Some of the letters we still get just basically talk about the absolute price of gas - it is too high or why are they buying it for 80 cents in Ontario and we're paying a dollar-something here. They're more of that tenor than anything else.

MR. STEELE: Let me move on then to what seems to be the nub of the response to the latest Gardner report and that is whether regulation is or is not costing consumers money and, if so, how much?

I'm going to read a sentence or two here because it seems to me that the opponents of regulation can't have read the report to say the things they're saying. So I'm going to help them along a little bit by actually reading it. Here's what it says on this point, "Computing how prices have changed with regulation is one thing. Concluding that the change is due either in whole or in part to regulation is another. The difficulty in drawing any firm conclusions lies in the absence of a reliable basis for comparison." Then, further down the page he says, "Evidence that the pump price is higher than it would have been in the absence of regulation is largely circumstantial."

So, essentially what Mr. Gardner is saying here, and what he said publicly, is that it's not clear yet, it's too early to say what the cost of regulation is - there may be a cost or there may not be, it's too early to say. Yet, the headlines, the screaming headlines in one of the local dailies was that regulation is costing consumers $10 million or $11 million which is

not, of course, what Mr. Gardner said. Does the department have a view on how this report should be interpreted, about the cost to consumers of regulation?

MR. KEEFE: A view I think is similar to those expressed by Mr. Gardner. In his comparison, the data speaks for itself. There has been an eight-tenths of a change in the margins, upward, from the period prior to regulation to the period during regulation. How much of that was caused by regulation, how much of it was caused by other factors, is open to speculation. I guess there's no real - it's not an easy comparator to make.

I know he drew some comparators to the other Canadian markets where actually I've seen margins rise even more in that period of time, but that could be their unique factors in those markets that aren't impacting ours. It's very difficult to make those comparisons.

MR. STEELE: I know the six-month report was, in a sense, forced on the government by the Liberals and the essential conclusion that Mr. Gardner comes to is that it's really too early to say. Do you regret having undertaken the six-month review costing $130,000 when the essential conclusion is that not enough time has passed to really evaluate it?

MR. KEEFE: No, I don't regret it. Our job is to do what government directs us. The issue with the six months versus a year is that this market is fairly seasonal. Most of the period reviewed by Mr. Gardner, we were in a period of falling prices. You can imagine what regulation does; you would have a curve with peaks on it, which is the market. We turned that into steps so when the market is falling, we set a price, the market keeps falling, so the margins tend to be a little bit higher during that period than the formula would dictate. We're always trying to catch up.

When the market is rising, which is the period we're going to be in from now, I guess until mid-summer if history is any indication, the opposite takes place where we set a margin and the wholesalers continually get squeezed as the market rises beyond them. So I think until you look at the full year, it's going to be difficult to compare what the margins are.

MR. STEELE: I don't have a lot of time left, but before I turn it over to my friends in the Liberal Party, I just wanted to mention a few things about what you're likely to hear from them. You have to bear in mind that the Liberal Party has flip-flopped all over this issue. On the select committee, their members couldn't agree on the result, but a majority of them favoured gas price regulation. Then they decided they were against it. Then, when Bill No. 79 came before the Legislature, they decided they were for it and actually voted for it.

So, they voted for the regulatory regime and in fact, their critic at the time, on third reading, gave an absolutely gushing speech in praise of the bill - I suspect because in the gallery were some of the retail gasoline dealers that would be affected by their decision. In any event, then they decided that they were against it. They demanded a six-month review, costing $130,000, the central conclusion of which was that it was too early to say whether

regulation was working or not. They declared on the day regulation came in that it was wrong and had to be dumped and so they've been seeking evidence ever since that it's not working. They don't seem to want to pay a lot of attention to the facts and ultimately what they want to do is just give up and surrender to the big oil companies and believe that they will do what's right for Nova Scotia consumers. With that, I'll turn it over to my friends in the Liberal Party.

[9:30 a.m.]

MADAM CHAIR: Order, your time has now expired.

Mr. Samson, for the Liberal caucus. You have until 9:51 a.m.

MR. MICHEL SAMSON: Thank you, Madam Chair. First of all, I can appreciate what a challenge this has been for your department and your staff, knowing how the government has been all over the place on the issue of regulation, from when we had Premier John Hamm to Premier MacDonald with the exact opposite view of regulation and the benefits to Nova Scotians, in general, and the fact that Premier Hamm rejected the notion of regulation, saying it would not benefit this province, only to see Premier MacDonald adopt it and say that suddenly, although he was a member of Cabinet, most of his current Cabinet was in the Cabinet of John Hamm, who had all rejected it, suddenly found favour with regulation.

One of the bits of history that the member for Halifax Fairview has not provided you with is that the reason we have regulation in this province is because of the NDP, which believes in regulating all industries and this was just one more step. That's what he hasn't provided you with and it's interesting to hear in his comments that he's not even sure whether he likes regulation or not, so I think that's just a bigger sense of the division within his own caucus that exists, but regardless, the NDP is quick to take credit when the times are good, but when the issues of the day are not getting them the political credits they'd like, obviously they take a different view. I think the comments by the member for Halifax Fairview clearly prove that in itself. What was the position of the Department of Service Nova Scotia and Municipal Relations when the initial Gardner report was provided in the Fall of 2005?

MR. KEEFE: Our position, as bureaucrats, basically is to try to analyze the data, create options and try to point out to government what the various consequences of decisions may be, to the best of our ability. In the terms of the department, for example, if you're asking me as deputy whether we support regulation or not, it's irrelevant. It's what government wants to do. It's the analysis of the facts that we try to do. We try to get as much data as we can, make that as accurate as we can and do an analysis to try to make predictions what the consequences, both intended and unintended, might be and present this to government for a decision.

MR. SAMSON: In the Fall of 2005, obviously you would have written up a report recommendation to Cabinet which Cabinet would have reviewed at the time and we all know subsequently the decision by the Premier of the day, John Hamm, was to not adopt regulation. The comments by him and various of his colleagues were that regulation was not in the best interests of Nova Scotians, would lead to higher prices, a whole host of things. Are you in a position to be able to provide us with any of the documentation that your department would have put together following the initial report by Gardner Pinfold, as to the pros and cons of regulation, and as a follow-up to that, do you recall if you made a specific recommendation to Cabinet or you just left it to them to decide?

MR. KEEFE: I can't remember at that period if we actually made a specific recommendation to Cabinet or not. I know it was at that time we were trying to work with the industry, as I mentioned in my opening comments, to see if there was some other way we can deal with this. Generally, I don't believe I'm free to share any recommendations we made to Cabinet one way or another anyway.

MR. SAMSON: Is there any of the correspondence there, outside of the Cabinet documents, that you are able to provide to this committee that this committee hasn't received yet, regarding the initial Gardner Pinfold report in 2005?

MR. KEEFE: Yes, I'd have to go look and see what we would have.

MR. SAMSON: Okay, and I guess, Madam Chair, if I could request that the Chair follow up on that and if there is information that could be provided to this committee to give us a better insight as to where your staff saw the pros and cons of regulation.

Now obviously, Mr. Deputy, you realize that the government in the Spring of 2006 took a completely opposite view of what had been taken by former Premier John Hamm in regard to regulation. I'm curious, can you indicate to this committee, was your department asked to once again make a recommendation to Cabinet or provide Cabinet with information on the issue of regulation prior to the government's announcement in the lead-up to an election, that it was suddenly in favour of regulation?

MR. KEEFE: No, I think what would have been our job at that time, once the decision was made, would be to go into Cabinet with the regulations. Departments usually draft those and bring those in to get passed.

MR. SAMSON: Okay, so let me get this straight here, is it your position that Cabinet made a decision on regulation, following that, your department was asked to provide or to take the necessary steps to implement the decision that was made by government?

MR. KEEFE: Yes.

MR. SAMSON: Okay. So leading to that decision, your department wasn't asked to provide any new information or any recommendations regarding regulation, this was strictly a Cabinet decision that did not involve your department directly, prior to that decision?

MR. KEEFE; Yes, we would be providing regular updates on the markets, where they were going, what the margins were all through that period of time. There had been many various presentations and meetings going back, probably to 2004, 2003, but nothing specific leading into that period of time.

MR. SAMSON: Were you aware that government was contemplating changing its position on regulation before it was announced?

MR. KEEFE: Only from observing the election, the various platform positions.

MR. SAMSON: So as a deputy minister who would be responsible for this, you were not made aware that this decision was coming, prior to it being made?

MR. KEEFE: No.

MR. SAMSON: That's a fair answer because it has always been our belief that this was a political decision, not a department decision or a bureaucratic decision. It's important that that be made clear to Nova Scotians today, that in no way do we hold either of you four, or any of your staff, responsible for what we believe was the poor decision to implement regulation. At the end, you are the servants of the people and servants of the government so it was important for me to clarify as to how regulation came about. Without a doubt to me it was a political decision that was initially sponsored by the NDP, who don't seem to be so clear now on where they stand, but that the government followed and we believe much to - at the end - the chagrin of our economy and to the chagrin of Nova Scotians and we're certainly happy to continue to be the lone voice, unfortunately, on behalf of Nova Scotia consumers but we'll do that.

You said that the two goals of regulation - and I think this is the first time that it has actually been clearly set out from government as to what the goals of regulation were, but you said it - were to smooth out the variability in prices. The decision last week for the government to go to a one-week standard means that pretty much we're going to get 52 possible price changes a year. It is possible that from one week to one week the price will stay the same, but potentially, 52 price changes.

Then we also have the option of the interrupter clause being used, depending on factors as well that may cause the department to make a change prior to the one-week period. In 2004 there were 50 price changes during the year. In 2006, whereas one would have believed that there were hundreds of price changes, there were actually 64. We're now going

to 52 price changes. Is it still the position of your department and the government that this is the stability that regulation was going to bring outside of an open marketplace?

MR. KEEFE: Again, yes, and I agree there is a potential for 52. I don't know if we'll hit 52. Even in the current market we've had two periods now, we've gone two weeks where we didn't need to change the price. But yes, no question, the potential is there. It again reflects the fact that the two objectives we have there can be a little bit contradictory but we're trying to balance them both out.

One of the things that happens over a two-week period, particularly in a rising market, is the industry obviously doesn't make the margins that the model would predict them. For some of the larger companies that is not so much of a problem, it is a cash flow problem, but they're big, they can handle it and they can wait until things - it's what we call the re-sellers, these are folks who buy from wholesalers and sell to retailers. They're generally very small. They serve a vital part of this whole industry. They tend to supply the small, more remote retail service stations - one of the things we're trying to protect. If those folks get jammed too hard, it can affect their viability and maybe they won't be able to be there in the future for us. So one of the things we want to move to, recognizing that may well have some impact on smoothing out the prices, is greater protection to those folks. So it's an attempt to try to balance the two goals.

MR. SAMSON: It's interesting you point that out and what Mr. Steele fails to recognize is that regulation actually put the squeeze on these small resellers because suddenly it dropped their margin that they were able to make and it made it almost impossible for them to be able to make a profit. In fact, I'm aware of at least one who just got out of providing gas to the small stations and focused instead on the home oil delivery. I have Boudreau Fuels in my own riding and I'm sure you're aware of the pressure put on them and the fact that they provide gas to stations that nobody else will because of how remote they are. So how ironic that while regulation we were told was supposed to help rural Nova Scotia, this actually put the squeeze on this company, a small family-owned company, and the stations it provided that were on the verge of possibly losing their supply.

So it's ironic that we've gone to regulation only to provide stability by not having as many price changes to only now say we need at least a weekly review because of the impact it was having on these small wholesalers, resellers I should say, and in turn the small rural stations that they provide for. So ironically regulation certainly wasn't working in their best interests when it was first introduced.

One of the other goals of regulation you indicated was to protect rural gas stations. Mr. Deputy, with the research you've done and knowledge of your department, when we look at the P.E.I. experience, could you indicate to us as to whether regulation in that province has prevented the closure of rural gas stations in that province?

MR. KEEFE: No, P.E.I. has had closures of rural gas stations. I believe if you look at the period a couple of years prior to regulation, it wasn't at quite the pace it was elsewhere but closure of rural gas stations is phenomenal, it's right across the country and it exists in P.E.I. It will probably exist here. Regulation is no guarantee that everybody stays in business. These will come and go. I think we had some numbers, or even during the period, although it balanced out at the end. There were some closures and some openings.

MR. SAMSON: Now, if I'm not mistaken and I may have the numbers here, but we can certainly get them quickly, the Gardner Pinfold report in 2005, the first one that Premier Hamm rejected, actually said that on a per capita basis over the same period of time, P.E.I. under regulation has seen as many gas station closures as Nova Scotia with a free market. Do you accept that statement that that was one of the conclusions drawn?

MR. KEEFE: Yes.

MR. SAMSON: So knowing that, how can we turn around and tell Nova Scotians that regulation is going to protect rural gas stations when we know it failed to do that in P.E.I. because at the end of the day, as I mentioned during the Economic Development Committee, regulation does not stop rural depopulation. That's a reality. So why would the government still say that one of the goals of regulation is to protect rural gas stations when it knows that it failed to do so in P.E.I? Why would we try to sell that here to Nova Scotians?

MR. KEEFE: What we have tried to do in our regulatory model is to address that issue. One of the things that rural gas stations depend upon, as you pointed out, is those small resellers who are keeping them supplied. We recognize the challenge this model presents to them and I think we've done a fair bit actually to try to address that issue. For example, I believe it may have even been prior to the regulatory model, we changed some rules around our fuel tax where prior to that a wholesaler had to have their own supply of tanks. We relaxed that restriction. We felt that with today's technology and auditing we could do that without threatening the revenue. That allowed some of these companies like XTR, in particular, to actually be a little bit more successful in the marketplace because they didn't have that capital cost and they could perhaps then buy direct from the refinery rather than have to buy from someone in the middle.

Our model is not - we did not force people to buy into the guaranteed margin for retailers. We allowed them where they thought the arrangement they already had was better, they could opt out and, therefore, split some of that margin between the retailer and the supplier, but one of the things that was primarily directed at was exactly the folks we're talking about. So if they could reach a better business deal for them, both of them, than the pure application of what a minimum margin would achieve, they were totally free to do so. One of the other things we did, of course, just recently is lift the cap on the full-serve gasoline. That was largely intended, again, to help the smaller, rural stations by allowing perhaps a little bit more margin in there than otherwise would have been the case.

[9:45 a.m.]

MR. SAMSON: Let me just put the question to you directly, Mr. Deputy. In your view, and the view of your department, will gas regulation in Nova Scotia stop the closure of rural gas stations in Nova Scotia?

MR. KEEFE: I believe it will slow it. I don't think, at the end of the day, it will stop it. As you pointed out, there are a lot of other forces going on.

MR. SAMSON: Now when you say it will slow it, do you have any evidence you can provide this committee here today to show on what basis you are reaching the conclusion that you think it will slow it?

MR. KEEFE: Our experience in the last seven or eight months, for example. Since we started regulating, there have been eight closures in Nova Scotia, there have been 12 opened. Of those eight that closed, seven were rural but of the 12 that opened, nine were rural. Now some of these are changing. It's not the same type of station opening, perhaps, that closed. For example, maybe they are using an above ground tank rather than an underground tank and trying to react to the economic realities. As Mr. Gardner said, it's too short a period of time for that to be conclusive but I think it does point out that for the few months that we have been involved in it so far, things seem to be working not too badly.

MR. SAMSON: How updated is your information regarding closures in the province? In other words, I'm wondering, of those eight, are you including the one in St. Peter's that closed in my riding?

MADAM CHAIR: Mr. MacNeil.

MR. CAMERON MACNEIL: Those numbers would reflect what happened in the marketplace between July 2006 and March 2007.

MR. SAMSON: Do you have the information as to where those stations are located, the ones that closed?

MR. CAMERON MACNEIL: Yes.

MR. SAMSON: Okay, and is the one from St. Peter's one of them?

MR. CAMERON MACNEIL: No.

MR. SAMSON: I am being a bit facetious asking you that because I believe there is more going on than what is being made available to Nova Scotians because I think day by day these changes are taking place and when one looks at the P.E.I. experience, one should

not be surprised that regulation is not going to stop the closure of rural gas stations because if you don't have enough people, you can't justify continuing to operate when the market forces aren't there, regardless of what scenario you are going to put in. So it's a ruse to say that it's going to protect rural gas stations and I believe time will show that as well.

With the few minutes I have, I'm curious, when you saw the amount of independent retailers - because we know that the corporate stations weren't going to buy into regulation, everyone knew that, so let's accept that - the fact that less than 50 per cent of the independents bought into regulation, were you surprised by that figure?

MR. KEEFE: No, I wasn't overly surprised by that figure.

MR. SAMSON: Let me ask you why because the people that this was supposed to protect, 50 per cent of them determined that they had a better deal going and better margins than what you could provide under regulation. So less than half of the people we are supposed to be protecting even bought in to regulation. Do you not see that as a failure to regulation and who are we out to protect to start off with if 50 per cent didn't even find that you were offering a better deal than they were getting to start off with?

MR. KEEFE: I think the people who were protected were the 50 per cent who bought in who didn't believe they had a better deal and therefore bought into the minimum margin.

MR. SAMSON: How many stations was that?

MR. KEEFE: Oh, 130-odd.

MR. SAMSON: Out a total of how many stations do we have here in this province? Do you know the percentage?

MR. KEEFE: There are 442 stations, in total, in the province and 265 of those are independent.

MR. SAMSON: Okay, and how many bought into regulation?

MR. KEEFE: Opted in, I believe it is 136.

MR. SAMSON: So that's about 25 per cent. Is that fair, somewhere in that range?

MR. KEEFE: Yes, it is about half of the independents but about 25 per cent of the total.

MR. SAMSON: So about one-quarter of all gas stations in this province have bought into regulation. So we have a system in place that's actually supposedly going to protect one-quarter of the stations that we have here in this province. Is that a fair statement?

MR. KEEFE: Yes.

MR. SAMSON: Now, I only have about a minute but I will probably come back to this. When you say you have lifted the cap on full-service stations as to what they can charge, are there any limits on what they can charge? Is there a formula or they can just charge an extra 10 cents, 20 cents, 30 cents? Are you just leaving it to common sense market forces or is there any formula tied to the removal of the cap on full-service stations?

MR. KEEFE: No, right now we are leaving it to market forces. Obviously we're going to monitor the situation. The Act has not been amended and at any given week when we set prices we could put a cap back in if we thought it was necessary. We believe the market will control that gap quite handily.

MR. SAMSON: And we believe that the markets would have controlled that before regulation as well. So with only 30 seconds, Madam Chair, I would be happy to move on to the next questioner. Thank you.

MADAM CHAIR: Thank you, Mr. Samson.

Mr. MacLeod from the PC caucus. You have 20 minutes.

MR. ALFRED MACLEOD: Madam Chair, I want to welcome our guests today and thank them for coming.

One of the questions that I hear from my constituents all the time is how come gas is cheaper in Halifax than it is in Cape Breton? I know there are six zones and varying reasons for that, but when you're trying to explain that it is not an easy thing, so I was wondering if you could help us out with that.

MR. KEEFE: The basic difference is the cost of transportation. The vast majority, if not 100 per cent of the fuel that is sold in Nova Scotia comes from the Imperial Oil refinery over here, regardless of the brand - they obviously do various things and mixing and everything else to create brands after it comes out of the refinery, but this is where it is shipped from. It just reflects the transportation costs to get that from here to Cape Breton, which I believe is a little over a cent a litre, 1.2 cents, almost 2 cents.

MR. MACLEOD: The other question that I hear on a pretty regular basis is people are watching television and they ask how come New Brunswick is so much cheaper - again, is that a supply issue or what?

MR. KEEFE: One of the difficulties in communicating the issues around pricing regulation - to regulate the price in terms of regulating industry we had to look at the price without taxes. The consumer obviously cares about what they pay at the pump, not the price without taxes. If you compare Nova Scotia and New Brunswick, ex tax, you will find very little difference. Again it is reflective of the two different models we have - when the price is rising, New Brunswick will tend to be slightly cheaper; when the price is falling, Nova Scotia is going to be slightly cheaper because of the differences in the two regulatory models. The difference at the pump is taxes between the two provinces.

MR. MACLEOD: So the fact that we only have one refinery, does that play a big role in the prices in Nova Scotia?

MR. KEEFE: No, I don't believe it does at all. This is a very competitive market on the eastern coast of North America period, not just in Nova Scotia where we are fortunate to be part of it. The New York spot market is one of the most competitive markets around and that's what our prices are based on here. Atlantic Canada as a whole is very well served with refineries. We have three of them here - there is one in Newfoundland and Labrador, one in New Brunswick, and one here. So in terms of the amount of supply being refined it way exceeds any demand in Atlantic Canada, but that product is shipped out to the United States for the most part.

MR. MACLEOD: Is there a regulation built into the formula so that the retailer is guaranteed a certain amount of profit?

MR. KEEFE: Not a certain amount of profit, a certain margin - and there's quite a difference there. The regulation gives them between a 5 cent or 5.5 cent margin. The turndown in the profits is one of the big challenges here. We have a lot of small stations in Nova Scotia, but even if you considered someone pumping 1 million litres a year - and we have probably over 100 or even less than that - on 4 cents to 5.5. cents, that's $40,000 to $55,000. With that he has to pay his rent, heat, lights, salaries, all of this before you come to a profit. If most of that gas is paid for by credit cards he is losing almost 2 cents of that 4 cents to 5.5 cents just to the credit card, it doesn't even get to his bank.

Anyone who is trying to make a living only selling gasoline - it simply is not going to happen anymore, the world has changed too much. No, we do not regulate profit, what we are regulating is the margin.

MR. MACLEOD: My understanding is that the operator has three different options that they can choose from?

MR. KEEFE: Two. They can accept the guaranteed minimum margin or they can opt out of that and create their own contracting deal with the wholesaler. Various reasons they'd do that - one of which, as we were discussing earlier, is supply and worry about

maintaining the viability of his or her supplier. The other thing is this industry is fairly complex, there are a lot of remunerations going on other than margins - there are discounts at the end of the year and there are things called cross leases, where one owns the station and leases it to the other person. There are various ways that money flows and sometimes the arrangements that they negotiated, they see themselves better off than the guaranteed margin.

In other cases people weren't able to negotiate that deal, so the guaranteed margin is better for them. It's really a case-by-case study.

MR. MACLEOD: I think my colleague, the member for Pictou Centre has a couple of questions.

MADAM CHAIR: Mr. Dunn.

MR. PATRICK DUNN: Thank you, Madam Chair. You were mentioning about the regulation and the slow closure of rural gas stations and so on, and you mentioned about other forces that play a role in this - can you explain what other factors play a role in these small stations closing?

MR. KEEFE: Sure. This is a trend that started, I believe if you go back to the early 1990s - 1991 - the number of service stations today would only be half or a little less than half the number of service stations that existed back at that time. I think that's a general trend we're seeing everywhere - it's probably not the only industry. I'm not sure we have the same number of independent grocery stores or the same number of independent shoe stores that we had back then. We're seeing the big box stores - back in 1991 who would have predicted Wal-Marts in rural Nova Scotia? But they're there.

That's creating a change in buying patterns where people go to centres to do their buying, and they're probably buying some gas there as well. They might not be buying all their gas there, but they're buying some so that takes the volume away from the local station. People are commuting more, there are changes in lifestyles, and I believe it was already mentioned that there's a decline in population in rural Nova Scotia. All these factors come into play. It's a changing market.

MR. DUNN: What factors influence the world price of oil and gasoline?

MR. KEEFE: Whoa, that's a big one. The world price of oil is dominated largely, of course, by the dominance of OPEC in the production of oil, but it's also dominated as people worry about the risk to those supplies as various political situations evolve around the world. If there's violence somewhere or some terrorist activity somewhere threatening the supply, particularly in the Mideast where a lot of oil comes through a fairly narrow channel of water that can easily be threatened by any kind of war or insurrection or terrorist activities that could be going on there, that's obviously a major factor.

There's an ongoing factor, supply versus demand. Demand continues to increase despite efforts for conservation. Our economy is growing and supply isn't increasing. It's been quite a number of years since there has been a very large find of crude oil. This is good for Canada in a sense because the tar sands have now become economical - they would not have been able to be developed if you go back 15 years ago, because the world price of crude would not have been high enough to support the cost of pulling that oil out of the tar sands.

So certainly supply and demand, and there are the political tensions. The other thing though is on the gasoline side, which is a totally separate commodity. There again it has its own supply and demand. There has not been a refinery built in North America in, I believe it's something like 25 or 30 years. It's been a long period of time since there has been a new refinery built, and demand has continued to climb in that period.

If you look at the U.S. now, not only are they a net importer of crude oil, they are a net importer of refined gasoline product. The country simply cannot refine enough gasoline to meet its own demand, so that has created a commodity market for gasoline separate than the commodity market that exists for crude oil, which is why sometimes you'll see a story that gasoline is going up because crude has, but sometimes it's going up for totally other reasons, even when crude hasn't moved.

MR. DUNN: As far as self-sufficiency, looking at our country, Canada, when it comes to oil and gas, why can't we just set our own price - will we ever see the day where we can?

MR. KEEFE: I'm not sure I'm qualified to answer that question, you'd probably need an economist or experts in energy. But, you're right, Canada is, overall, self-sufficient in energy. On this coast we're not, we import energy; on the West Coast, or the Prairies, we export energy. I'm not sure we could have a made-in-Canada price anymore with things like the Free Trade Agreement, all the various trading we have with other countries - the impacts of that, I think, are an awful lot bigger than the price at the pump in Nova Scotia. Certainly it's something I haven't looked at, and wouldn't have any more than a general awareness, like any of us would, from just reading the press.

[10:00 a.m.]

MR. DUNN: Could you explain the six zones in Nova Scotia and what role they play as far as regulating pricing gas and so on?

MR. KEEFE: They were divided up to try to represent the cost of transportation. Actually when we were trying to set our numbers here, that was the number we had a lot of trouble getting a handle on - what was the real world prior to regulation, what were the costs? But anyway, working with industry, we came up with some costs that basically represented so many cents per hundred kilometres, so we tried to draw the zones to represent the

increasing transportation costs the further you got from Halifax - had to be a little bit more creative than that because certainly you didn't want service stations within a couple of miles of each other selling for different prices or having a different regulated price, so we tried to find where the boundaries between the lines didn't create an unfair situation where we could avoid it, but basically that's what they're set up for.

I believe the one extra zone was created up in Amherst - correct me if I'm wrong - in case we needed to do something there to react to the border situation with New Brunswick. Their activity since then of dropping the taxes by about five cents, once you include HST, pretty well eliminated that possibility - there isn't enough room in the margins to do anything.

MR. DUNN: The majority of Nova Scotians do not understand regulation, all they understand is what they're paying at the pumps. We all meet them at the pumps and they're often asking questions. Traditionally the prices at this time of year will rise, like you mentioned earlier, do you have any prediction what the peak summer price may be this current year?

MR. KEEFE: If I did, I could be a wealthy man. But no, I expect the trend will go upwards. The thing that could drive it to the numbers we saw a couple of years ago would be if anything happens to any refinery. As I mentioned before, that supply and demand is extremely tight - there's no slack in the system. So when you see something like what happened with Katrina a few years ago and a lot of capacity was lost down around New Orleans, that caused a tremendous price spike.

The other thing I think we need to keep in mind is that this market in New York is a commodity market and the people who trade, it is their opinion of where the price is going, if you will, that matters and not anyone else's, so whatever factors they might see that might indicate there could be trouble in the future is what's going to drive the price. It's very difficult to get a read on those folks. We do the best we can - we actually used to subscribe to that market so we're getting the same information they are, if you will, for us to be able to analyze it. But no, I have no prediction where the price will be this summer.

MR. DUNN: Thank you, Madam Chair.

MADAM CHAIR: There is time remaining. Mr. MacLeod, you have until 10:11 a.m.

MR. MACLEOD: Thank you, Madam Chair. Just going back to the report that was just released, and there were four recommendations. I believe three have been accepted and one wasn't - is there any particular reason why that route was taken?

MR. KEEFE: Yes. The one that wasn't, I believe that was the forward averaging piece where the recommendation was that we just create a formula that we can post, to create the amount of forward averaging we use, to make that more transparent and open.

Just a quick explanation of what forward averaging is - as I explained earlier, the market tends to be a curve that we're trying to turn into steps. So when the market is rising, the industry does not make the margins that our formula would give them. For example, if you looked at perhaps the last two weeks, the market was supposed to make 10.3 cents, they only made 9 because the price rose, so therefore we owe them 2 cents. So what we'll do on the next period is set the price a little bit higher than the formula would indicate so that they can make back some of that money they lost.

The exact same thing happens the other way. When the price is falling and the margins might have gotten up around 12 or 13 cents - therefore the consumers paid too much for those two weeks - we'd set the price a little bit lower than the formula would dictate to give the consumers back some of that money, so that over time the margins come out where the formula was set. That's essentially what we do with forward averaging.

To try to put that on a formula, it doesn't allow us to take advantage of late-breaking information that can change, and this is one of the differences between us and the New Brunswick model, but we like to be able to try to balance the size of those changes, as well as take - for example, maybe over the last eight days the New York market was fairly stable and then it started going way up in the last two. Well we would be able to take that into account and maybe make a slight adjustment for it. So we think it's safer in terms of both supply and in terms of serving the consumer and industry to be able to exercise a little bit of judgment with that formula. So that's why we didn't go with that model.

MR. MACLEOD: So going with a weekly pricing now, is there a benefit to the retailer for that?

MR. KEEFE: Yes. It takes some risk out because at the end of the day, regardless of what happens over time - I mean retailers don't buy gas every day, they buy it at a period of time, and if they buy that and the price starts falling, that can hurt them, just as when the price starts rising they make it back. I think it will give them a little bit more stability. Who it will help more though are the resellers we talked about earlier, it will benefit them and help them to survive somewhat better.

I think it will also help the consumer in the sense I recognize we're going to have more price changes, but they won't be as volatile. If you looked at the report, Mr. Gardner pointed out we would have fewer changes, but he points out the magnitude of those changes increased a bit. So we were seeing more five or six cent changes rather than a two or three cent change. By moving to weekly, the magnitude of those changes will come down and

actually the need for our forward averaging and interrupters - I won't say they'll go away but they'll be greatly diminished.

MR. MACLEOD: Were you surprised with the outcome of the six- month review?

MR. KEEFE: No, I wasn't overly surprised. Staff here spent a fair bit of time analyzing those numbers, just like Mr. Gardner did. So, no, I didn't see any surprises in those numbers.

MR. MACLEOD: What's the advantage then of going forward for a year and maintaining where we are and going forward for a year - what's the advantage to the consumer of doing that?

MR. KEEFE: I'm not sure, I think we'll just get better information to base the decision on.

MR. SAMSON: You get to pay more for longer.

MR. KEEFE: I think we'll be able to provide government with better information. I think you really need to go through a full price cycle to see the impact of regulation and that takes a full year. Hopefully, we won't have anything of the nature of Hurricane Katrina - for a whole lot of other reasons, not just regulation, but I hope there are no price spikes like that because, again, that doesn't help the analysis any, but I think you need a full year to be able to totally understand, once all those seasonal effects and we've been through the rises and the falls, then we'll have a good picture of what regulation does.

MR. MACLEOD: You mentioned earlier that there were a number of retailers who did go out of business, some of those were rural, and then you mentioned that again there were a number that started business. Geographically though, were they located in the same regions? I mean are there rural areas in Nova Scotia where it's a real challenge to find service these days?

MR. KEEFE: Just a quick glance down the list here - the challenge seems to be Cape Breton actually, there seems to be more closed there than opened. Some of the ones that opened in the rural areas elsewhere were Kings.

MR. MACLEOD: I think that's it for now, Madam Chair.

MADAM CHAIR: I will now recognize Mr. Steele for the NDP caucus. The second round will be 11 minutes per caucus.

MR. STEELE: I'm sorry, Madam Chair, I didn't quite hear you. Did you say 11 minutes?

MADAM CHAIR: Eleven minutes.

MR. STEELE: Okay, thank you. I would like to start by recommending to the Liberal Party that they actually read the Gardner Pinfold report, because a couple of the points that they made are answered in detail in the report. But on this issue, certainly they never let the facts get in their way - for example, the member for Richmond makes a great deal of the fact that only a quarter of the stations have opted in to regulation, but Mr. Gardner deals in detail with why, in fact, that is.

In fact, for example, of the 442 stations, 155 are owned by the oil companies and they have no interest in opting in; of the independent, only 181 are truly independent, and the other 85 accept their gas on consignment and so they have no real interest in changing their relationship with their suppliers, so they wouldn't opt in; the rest are cross-merchandising retailers like Atlantic Superstore, Sobeys, Canadian Tire and Co-op Atlantic. Again, because they are cross-merchandising, they really have no interest in opting in either because, of course, the purpose of opting in to regulation is protecting the retailer margin. Depending on the set-up, as Mr. Gardner explains in detail, that would explain perfectly why many retailers are not opting in. In fact, when you look at the number of true independents, the number that have opted in is actually, by quite a bit, the large majority.

One thing that causes me concern though, and Mr. Gardner does point this out, is that among the true independents, some seem to lack the information or the financial acumen in a very complex industry and environment to make the decision about what is best for themselves. In fact, a number of the independent retailers simply didn't reply to the question of whether they wanted to opt in or not. It should cause us some concern. What steps is the department taking to assist these independent retailers in making the decision that is best for them and their family and their community?

MR. KEEFE: The steps we can take as a department is to try to make sure that they have all the information available, what their rights are, what they aren't. Staff gladly meet with these folks, sit down and talk with them. What we can't do, of course, and I don't believe it would be appropriate to our role, is to give them business advice as to which decision they should take. That's up to themselves and whatever their business plans are. It's their call. The Retail Gasoline Dealers Association, I'm sure, is also available to them to give them a lot of advice on this but from the department's point of view, I see our role as to make sure they have the information available for them to do the analysis.

MR. STEELE: I take it you agree with Mr. Gardner's comment that some of the retailers simply do not seem to understand and don't seem to have the ability to do the financial analysis that is necessary to decide what is best for them.

MR. KEEFE: I would agree, some would need help to do that, yes.

MR. STEELE: Another part of the Gardner Report that I would recommend the Liberals actually read is on Page 41 where they talk about the number of stations. I think you referred to this, Mr. Keefe. When regulation was eliminated in 1991, we had over 900 retail gas stations in Nova Scotia. After 15 years of non-regulation, that number has been cut by more than half so that at the date regulation came into force, there were 442. Mr. Gardner explains, in some detail, what it is that is going on in the industry that has caused this contraction and yet the Liberals seem to say because regulation hasn't succeeded in stopping the closure of a single gas station in Nova Scotia, therefore it must be regulation's fault. I don't remember anybody ever saying that regulation was going to save every single station. What Mr. Gardner says is that since regulation, the rate has slowed dramatically. In fact, there is no net change. Two or three have closed, he says, and two or three have opened, although I'm willing to bet that the ones that have closed have been in the rural areas and the ones that have opened are probably in the more urban areas.

You have referred this morning to a list. I know that you have in front of you a list of the stations that have closed. I'm not sure if the member for Richmond asked you to actually table that but I wonder if you could do that.

MR. KEEFE: Yes.

MR. STEELE: Do you also have the list of stations that have opened since regulation started?

MR. KEEFE: Yes.

MR. STEELE: Okay, if you could table that as well.

MR. KEEFE: Okay. If someone has a clean copy, we will get it tabled.

MR. STEELE: Okay. One of the things that I have been curious about that hasn't come up before and is not discussed in Mr. Gardner's report is just the idea of advance notice to consumers. Now the way the system is set up, retailers are told what the new price range is going to be on a Thursday morning.

MR. KEEFE: Correct.

MR. STEELE: It is posted at Thursday midnight and consumers have no advance notice of what the price change is going to be. Now we do have kind of an indirect price notice because New Brunswick sets their price a day before us and their system is similar to ours, so if you look at what happens in New Brunswick, essentially you know it's going to happen in Nova Scotia. Not exactly, but very close. I wonder if you could explain to us, why is it that advance notice to consumers has been prohibited? What's the evil that we are trying to eliminate by preventing any advance notice to consumers?

MR. KEEFE: One of the things we were concerned about was having too big an impact on the buying patterns. We didn't want a tremendous run on gasoline, if you will, on the day before the price going up and perhaps causing shortages or outages - I think I've heard a few isolated instances of that happening already because New Brunswick does set before that.

[10:15 a.m.]

We were also given advice from P.E.I. who at one point used to do that, give advance notice, and they advised us if they had it to do over again they wouldn't do that because of the changes that can impose on the marketplace in terms of buying patterns. But I'm not so sure it's not a theoretical argument today because people are becoming much more aware of this, the press is covering it, and it's not that hard to predict whether it's going up or down. The amount, obviously, is hard to predict, but the general direction is not.

MR. STEELE: I can tell you, consumers are pretty savvy and there is already a little bit of a run on gas stations on Thursday if consumers believe gas prices are going up. Ironically, the nearest gas station to my own home recently closed - it was a Shell full-serve station on the Bedford Highway here in Halifax. It's now closed and gone, but the next two nearest are across the street from each other, an Atlantic Superstore and a Petro-Canada, and on a Thursday, if consumers believe the price is about to go up, there is a run on those stations.

I saw something in the paper recently, a letter to the editor, where a consumer pointed out - or maybe it was somebody working in a retail operation - that there are runs on retail operations now. If consumer protection and getting the best deal for the consumer is an element of the regime, or one of the several objectives, again why is it that we couldn't give the consumer the best possible deal in giving them some advance notice of what the next day's price is going to be? Those things you've talked about, do they outweigh the idea of getting the best deal for the consumer?

MR. KEEFE: So far, we believe they do. When you get lineups, when you get runs, there are safety issues to consider. I'm comfortable with the decision we have now. If at some point government decides to change it, I suppose we could, but I don't think at this point it would be the better thing to do, to telegraph our price changes.

MR. STEELE: Okay, because of course I'm not advocating against it, I'm just wondering what study your department has done, if any, of that particular feature of the regulatory regime. And just to clarify something from an earlier answer, did you say New Brunswick does give advance notice to its consumers?

MR. KEEFE: No, P.E.I.

MR. STEELE: P.E.I. And how much advance notice do they get?

MR. KEEFE: One day.

MR. STEELE: Has that caused the kind of runs, safety issues, supply problems that you've talked about?

MR. KEEFE: Cameron, do you want to respond?

MADAM CHAIR: Mr. MacNeil.

MR. CAMERON MACNEIL: Yes, as part of the lead up to designing the regulatory program in Nova Scotia, we consulted with the P.E.I. regulator - they've been regulating gas since the early 1990s - and the principle over there basically was that we avoid providing prior notice because in their experience, when they do that, they get lineups at the pumps and it can cause some safety concerns, as the deputy pointed out, so they recommended that we not do it.

MR. STEELE: Do you regularly keep in touch with regulators in other provinces to determine what issues they have, what's going well and what's not?

MR. CAMERON MACNEIL: Yes, we do.

MR. STEELE: And have you made any adjustments as a result of those consultations?

MR. CAMERON MACNEIL: Certainly at the outset we took much of their advice into consideration in the design of the program, and I guess in the application of forward averaging where we would do kind of a market scope, if you will, to determine what was happening out there generally, we would take their advice into consideration.

MR. STEELE: Yes. And it's worth noting, of course, New Brunswick has a Liberal Government and I haven't seen them move to get rid of regulation, so maybe our Liberals could persuade their colleagues in New Brunswick first before they impose their views on us.

You've said, Mr. Keefe, that there will be another report at the 12-month mark, which is rapidly approaching - when do you expect to issue the request for proposals for that?

MR. KEEFE: No, what we would be looking at is 12 months from now because we had the two new changes in place, so they'll be able to be evaluated as well. So it's 12 months from now as opposed to 12 months from the start of the regulation.

MADAM CHAIR: Order. The time has now expired for the NDP caucus.

Mr. Samson for the Liberal caucus. You have 11 minutes.

MR. SAMSON: I realize that things can be quite confusing in the world of the member for Halifax Fairview so I'll see if I can't help him out here a little bit. You started by saying that one of the goals of regulation was to protect rural gas stations. I believe you've acknowledged today that the evidence, looking at P.E.I., shows that regulation does not protect rural gas stations - on a percentage basis as many have closed in P.E.I. under regulation as what closed here in Nova Scotia in the free market. So that's accepted, regulation is not going to save rural gas stations and that's the point that we've made, and yet you started off today and the government and the NDP continues to say it will protect rural gas stations when we all know that is simply not the case.

One of the other numbers that the member for Halifax Fairview was fond of - reading the report he will see that of the 265 independent retailers across Nova Scotia, Mr. Gardner, in his report, sent them all a survey as to how regulation was working for them. Only 142 actually sent back the survey and there were 116 who answered the questions correctly. One would think that if regulation was working, if these small, independent rural retailers were really benefiting under regulation that there would be a flood in responding to Mr. Gardner, to say yes, regulation is working, we know there's political pressure to get rid of it, but it is really working.

Of the replies he received from these true independents, only 45 per cent concluded that regulation was working. I think that speaks volumes of what regulation has done here in this province - only 45 per cent actually believe that it's working for them. So again I've told you, it's only 25 per cent, to start off with, of the retailers here in this province who are even looking at regulation and now we see that, of those, only 45 per cent, less than half, actually think that regulation is working.

One of the statements made by the member for Halifax Fairview as well - he said that regulation was great because there was a known formula to set prices. I'm wondering, Mr. Deputy, could you table that formula for us here in this committee today?

MR. KEEFE: Yes.

MR. SAMSON: Okay. And that's the formula that you've been using consistently without any variances, is that correct?

MR. KEEFE: Yes, that's correct. The formula lays out what we call the base model price. What we adjust that by would be the forward averaging.

MR. SAMSON: Okay, and forward averaging, can you table that formula for us?

MR. KEEFE: There is not a formula, per se, for forward averaging.

MR. SAMSON: Then how does it work, if there's no formula? Because the member for Halifax Fairview said there was a known formula, yet you're saying there's no known formula when it comes to forward averaging. Who determines how forward averaging is going to work and what does it even look like?

MR. KEEFE: What it looks like is we compare the margins that had been made up to this point with the margins the formula would have given industry. If there's a difference, i.e., if the margins have either been too high or too low, then we adjust the amount set by the formula by that amount. So, for example, the price might dictate the price of gas needs to be 97 cents. If they made extra margins over the last little while, we might have pulled that back to 96 cents or if they hadn't made the margins, push it up to 98 cents, so that at the end of that period the margins will start to average out.

MR. SAMSON: So, in reality, if a Nova Scotia consumer was asking you, show me exactly the formula you use from week to week, you don't have one to show, do you?

MR. KEEFE: Yes, we do have the formula and we do have the mathematical calculations as well as to what actual margins were earned.

MR. SAMSON: Okay. And forward averaging, how often have you used forward averaging, or is that used at every price setting?

MR. KEEFE: It hasn't been every price setting - Mike, would you have an idea what percentage?

MADAM CHAIR: Mr. Duda.

MR. MIKE DUDA: We certainly have used forward averaging in the majority of cases, but not every case.

MR. SAMSON: Okay, could you table for this committee, all of the price changes that have taken place, which ones have used forward averaging - and if you could even give us an idea of how forward averaging works, because you are saying there's no formula. So obviously, for us as a committee here at the Public Accounts Committee looking out for the best interests of Nova Scotians, and the expenditures, while the member for Halifax Fairview says there's a known formula, we now know that there's partially a known formula and then there's an unknown that's left to your staff to determine what the price is going to be, and Nova Scotians have no idea how you're doing that because you have nothing to show us on that.

Are you concerned at all that your staff, unelected staff, are being asked to set the prices for Nova Scotians as to what they're going to pay for gas, knowing that you're using a lot of unknowns in your forward averaging in determining that price?

MR. KEEFE: No, I'm not concerned at all. We can certainly table the documents you asked for showing the amount of forward averaging that was applied at each price change. Those documents would also show the variance in the margins that were actually achieved over the prior period, and that's what that forward averaging is based on. So I think, when you look at that data, you can see there's quite a correlation there.

MR. SAMSON: When is Cabinet, or government, made aware of price changes and what the price change will be?

MR. KEEFE: Probably when most of the general public is made aware. We don't take any special effort at all to communicate to Cabinet what the price changes are going to be.

MR. SAMSON: When does the minister become aware of what the changes are going to be?

MR. KEEFE: The minister has to approve the price changes - it's his signature that makes them law.

MR. SAMSON: Could you indicate to us if the minister has refused to sign any price changes up to now?

MR. KEEFE: Never.

MR. SAMSON: He has accepted every one of them?

MR. KEEFE: Yes.

MR. SAMSON: As far as you're aware, is there any obligation or duty on the minister not to share with his colleagues, or with anyone else, the price changes? And the reason I bring that up is you'll know that under our budgetary process the Minister of Finance is prohibited from indicating any tax changes that might be of a benefit to people if they are aware of it before the budget is delivered. In essence, this is along the same lines because it is a bit of a tax change in that you're setting prices and there could be a benefit if people are aware of that. What safeguards are there in place to make sure that no one, either within your department or outside, is benefiting from knowing of price changes before consumers are aware of it?

MR. KEEFE: Well the fact that we don't make it public, I guess, is one safeguard. Perhaps Cameron, you could describe the process we use for releasing that to the industry, and the contractual arrangements we have with them around that?

MR. SAMSON: Well I guess if I can stop you there - I don't even want to know how it's getting to the industry, I want to know what safeguards there are within government. Do you have any policy statement on it or do you have any sort of procedure that you follow to make sure that no one, either within government or outside of government, is getting this information before consumers are getting it? Can you table any such policy or any such safeguards that exist within your department?

MR. KEEFE: The principal policy would be the legislation, the regulations themselves would say we can't do that. We don't release the price - except to industry obviously - before it's announced at midnight.

MR. SAMSON: How many people in the department would be aware of a price change, in your estimation?

MR. KEEFE: The four of us here, plus the minister.

MR. SAMSON: Okay and do you have any sort of policy statement or anything that says that you will not share that information with anyone else? In other words, is it treated in the same respect as budgetary items are treated in regard to tax measures?

MR. KEEFE: Yes, very much so. It's only on a need-to-know basis.

MR. SAMSON: Okay. But somehow you figure that the public is, just on their own, figuring out that there's going to be price changes, you're confident that there is no sort of leakage that's taking place or that people are being given heads- up, either through the press or anyone else, as to price changes? You figure it's just the public guessing that there might be changes - is that your statement today?

MR. KEEFE: Yes. That's correct.

MR. SAMSON: Okay. I want to touch on a few things in my short time left. First of all - and maybe you can get me this information afterwards - as far as the zones are, I'm still at a loss to understand why the Town of Port Hawkesbury is on a mainland zone and yet Richmond County, which is 10 minutes away, is in the Cape Breton zone, which means gas is cheaper in Port Hawkesbury than it is in Richmond County and we're 10 minutes difference. I don't understand why one town on Cape Breton Island can be put in with the mainland and nobody else is - so maybe you can get that information back to me.

I just want to close on this - I'm sure your department has heard concerns from the letters you've been getting and that, from seniors' groups and from people with disabilities, about the loss of full-service stations here in this province, and the fact that many of these individuals don't go to full service for convenience, they go as a necessity. I think it's important that the government be aware, and the member for Halifax Fairview and the NDP as well, that by removing the cap on full-service stations, the two groups that are going to be hit the hardest by this are going to be seniors and people with disabilities, who all of a sudden no longer have the protection of regulation, for whatever protection it's supposed to provide, and now will be paying a higher price. Did your department consider this, in any way, when it decided to remove the cap on full-service stations, the impact it would have on seniors and people with disabilities here in this province?

MR. KEEFE: We're certainly aware of that risk, if I can express it that way. We believe, as I mentioned earlier, the variance in margin between full serve and self serve is not going to change in the majority of cases. We only expect that to happen in a few fairly isolated service stations where the extra money is actually needed to keep them in business. But, as I also said, we're putting this in as a pilot and we're going to watch it very closely to see if the consequences turn out to be as we expected them.

[10:30 a.m.]

MR. SAMSON: I believe I have one minute left, Madam Chair, so just summarizing where we are here today, I believe we have established that by going to a week setting of the price, smoothing out variability in prices is not really happening. When one looks at the price changes in previous years and what we are looking at now, that hasn't happened. The numbers show that rural stations are not being protected and while the member for Halifax Fairview for the NDP says that six months wasn't long enough, he uses the six months to say that rural gas stations have slowed down in closing.

So he likes the report for certain aspects and doesn't like it for others. Let me remind him as well, while he has not touched on the issue of price changes going to a weekly basis, his colleague, the member for Halifax Citadel, said that this defeated the purpose of stable prices in regulation. So obviously he would do best to start talking to his own colleagues in his caucus rather than trying to throw digs over at our caucus, but . . .

MADAM CHAIR: Order. The time has now expired. Thank you very much, Mr. Samson.

Mr. Dunn for the PC caucus. You have 11 minutes.

MR. DUNN: Thank you, Madam Chair. Regardless, if we have regulation or not, do you think it is a fair statement to suggest that several small, independent retailers would probably have closed, some would have opened in the province?

MR. KEEFE: Yes, that is true. There had been changes, the situation hasn't stayed static.

MR. DUNN: With regard to - and we are in the infant stages of these four recommendations dealing with consumer protection, weekly versus biweekly, have you received any feedback from the public with regard to this weekly versus biweekly as far as consumer protection?

MR. KEEFE: No, I haven't seen any. I don't know if the folks who take the phone calls on a daily basis have been hearing much from the general public, but no, generally no feedback.

MR. DUNN: Mr. Gardner made four recommendations in his report. We know three of them have been adopted, could you explain why one was not?

MR. KEEFE: Yes, the one that wasn't adopted was in relation to the issue you were just talking about a while ago, the issue on the forward averaging, to turn that into a pure formula to take any judgment out of the process. That is the one we didn't recommend adoption for. The reason being is we still believe we need some flexibility there in this market. We don't want price changes to be too rapid. As I explained, forward averaging is to either take back or give back margins to industry where they were or weren't earned in a previous period, but at the same time we try to mitigate the amount of change at the pump both up and down - up obviously from the point of view of the consumer; down obviously from the point of view of putting too much pressure on the smaller businesses that would have more expensive gas already in their tanks.

So if the forward averaging turned out to be a large amount we needed to earn back, we might elect to pull that back over four weeks rather than two weeks, in other words to try to change the magnitude of the change. I think it would be fairly difficult, perhaps not impossible if I had a better background in math, to write a formula like that. I don't know, but we feel the way it is working now is quite good and minimizes most of the risks involved.

MR. DUNN: Thank you, Madam Chair.

MADAM CHAIR: Mr. MacLeod.

MR. MACLEOD: Thank you, Madam Chair. The interrupter clause, how many times was that used in the past?

MR. KEEFE: I think approximately three times.

MR. MACLEOD: And now that we are going to a weekly pricing, what are the chances of it ever being used again?

MR. KEEFE: The general interrupter is practically nil, because what we looked at was a change in 4 cents over five days. Well, now we are setting it every five business days. What is still there is what we call the catastrophic interrupter. Should something catastrophic happen to the industry and we get very large changes over very short days - an example of that would have been what happened back during Hurricane Katrina there a year or two ago - we still have that ability to interrupt should we need to, again recognizing that although price is certainly an issue, supply is a bigger issue. We certainly don't want any threats in supply for Nova Scotians.

MR. MACLEOD: Then what is the advantage of going from a two-week to a one-week - I mean if we had the interrupter clause there anyway, consumers knew that if the prices were set for two weeks, they knew what the prices were, and now we have changed it to one, what is the advantage to the consumer?

MR. KEEFE: The primary advantage is to the industry, as we have already talked about. I think the advantage to the consumer would be just the magnitude of the changes. By going weekly you will see the amount of the change will be less each week than on the two-week cycle. For example, instead of one large 6 cent change there might be two 3 cent changes, it's that type of thing.

MR. MACLEOD: You always seem to refer to them going up. Have you ever thought about referring to them coming down?

MR. KEEFE: That's probably the mindset because the market we're in right now is going up and all through the Fall they were going down, so you could just do an exact flip of everything I'm saying now.

MR. MACLEOD: On a more serious note, over the last six months consumers have expressed many different concerns over the pricing. In your shop, how many calls have you gotten, how many people have you heard from and what does that compare to with say a year ago in relation to the consumer?

MR. KEEFE: As I mentioned earlier I don't have specific counts, we don't track that, but just subjectively the volumes have gone down considerably since regulation. I know letters on this issue were by far the largest number we received on any topic in the department prior to regulation, perhaps with the exception of assessment cap for little peaks, but since then it has smoothed, it's almost a non-issue from a letter point of view, there's very few.

MR. MACLEOD: So at the end of the day would it be the department's feeling that the consumer is better served with regulation than it had been prior to regulation coming in?

MR. KEEFE: I guess so, if you could judge from the amount of complaints, yes, they have gone way down. We talked about the surveys before, I put some numbers down here, the

first we did in 2006 was 52 per cent and the other one was 57 per cent, so there is some support out there.

MR. MACLEOD: Would it be fair to ask the question that maybe some of the reason you're not hearing any complaints any more is that people have just given up and think that there's no hope anyway?

MR. KEEFE: That could be an assumption as well. (Interruption) Our job as administrators is to try to filter the complaints for issues with the mechanics of the system we're administrating and . . .

MR. MACLEOD: Thank you very much for your answers and, Madam Chair, that will be all for today. Thank you.

MADAM CHAIR: That concludes the questioning portion of our session here this morning. At this time I would turn the floor back to Mr. Keefe for some closing comments.

MR. KEEFE: Thank you. I think my closing comments are fairly short. Again, I'd like to thank the committee for their interest. I will say this is one of the more challenging files we had as a department to implement. It is very difficult, it is a very complex industry, there are competing goals, they are conflicting. I would just like to thank my staff here as well, I think they do a great job of staying on top of this issue. With that, thank you.

MADAM CHAIR: Mr. Samson.

MR. SAMSON: Madam Chair, I notice that we have visitors in our gallery. I'm wondering if the Chair might want to explain to our visitors exactly what we're doing here this morning and I'm sure the Chair will do so in a very unbiased way, but explain a bit as to why we are here this morning and what we are doing here.

MADAM CHAIR: Certainly, I would like to welcome, on behalf of all of the members here, our guests in the gallery today. This is the Public Accounts Committee of the Legislature. We are a committee made up of members from each of the political Parties in the Legislature. We have the government caucus members here, the Progressive Conservative Party members; the Liberal Party members; and the NDP members. Today we have with us officials from the Department of Service Nova Scotia and Municipal Relations and they are explaining to us policy around gas regulation, the setting of prices at the pumps.

We have also with us here our Auditor General and Deputy Auditor General; the Office of the Auditor General scrutinizes how the public's money is managed by the bureaucracy and by government. We meet on a regular basis, weekly, and it is our job to look at different government departments and to try to hold the government to account for how they're spending your money and your family's money and providing services to Nova Scotia.

So I hope that gives an adequate explanation of what we're doing. We're quite close to the end of our committee meeting here today, so welcome and I hope you find Province House as beautiful as we all do. Thank you. Mr. Steele.

MR. STEELE: Madam Chair, on an item of business. But I have to point out to the committee as well, as I understand it, our visitors in the gallery are from Sackville High School and the member for Sackville-Cobequid happens to be sitting right beside me here - and a very good MLA he is, too.

Madam Chair, this committee, by motion, had indicated its interest in inviting before the committee the honourable Peter MacKay, the Minister of Foreign Affairs, to discuss federal-provincial fiscal relations in the Atlantic Accords. I understand Mr. MacKay declined that request without indicating when he might otherwise be available. I did notice in today's ChronicleHerald an opinion piece by the Director of Communications for the office of Canada's Minister of Finance in which he makes the comment that the comments made this week to the provincial Public Accounts Committee are misinformed.

Of course, he was referring to last week's evidence from the Deputy Minister of Finance. It is, to put it mildly, provocative for a representative of the federal government to say that evidence given to this committee by the provincial Deputy Minister of Finance was misinformed. It led me to wonder, what is the status of our request to have Mr. MacKay or a suitable alternative person appear before us on that topic?

MADAM CHAIR: That's a very good question. As you know, a letter was circulated from one of Mr. MacKay's staff members in response to our request that he appear. We had made a request that he appear on a very specific date, which came open in April, but in the letter I sent him, I also asked if he would indicate what other times he might have available to meet with us. The response that came back didn't address what other times might be available. Certainly, if it's the will of this committee, I can follow up on that and ask for a specific opportunity to have the Foreign Affairs Minister come before the committee. I guess I would ask that to be made in a motion.

MR. STEELE: Although the motion was that we invite him - and to me that's just sort of a standing wish of the committee - he indicated he wasn't available on the particular day proposed to him, but I just want to make sure, especially in light of the comment in today's paper, that we don't let that drop. Presumably, that's still a standing request for you to pursue without a separate motion, but we can do it by motion if you like.

MADAM CHAIR: Actually I'm not sure if the original motion had just that specific date and when I wrote the letter, I added on if there was other availability. I would prefer if there was a new motion on it, frankly.

MR. STEELE: I therefore move that the committee direct its Chair to write to Mr. MacKay asking that either he appear or a suitable, informed alternate appear before the committee to discuss the question of federal-provincial fiscal relations.

MADAM CHAIR: The motion is in order. Is there further discussion on the motion? Mr. Samson.

MR. SAMSON: I would just suggest that I don't believe suitable alternate should be put in the letter. I think he can certainly be invited to bring along any other witnesses he would like to bring along, any other officials, but I do believe as Nova Scotia's voice in the federal Cabinet, certainly it's imperative that he, himself, would appear. I would suggest to Mr. Steele to change that motion and instead again invite Mr. MacKay and any other officials he deems necessary to assist him in his appearance before this committee. I would suggest if Mr. Steele wanted to amend that motion, that we could move forward on that.

MR. STEELE: Sure, that's fine. I just want to make sure we don't engage in an endless dance in trying to pin down a particular individual - particularly when it's the federal Department of Finance, of course, that carries the file.

However, I'm agreeable to amending my motion accordingly.

MADAM CHAIR: Great. Any further discussion?

I will call the question. Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

I would also just like to say to the committee that last week the Deputy Minister of Finance, Ms. Harnish, was asked to make further analyses that the department had done on the Atlantic Accord - new and old equalization - available to the committee. No documentation has been received and I will follow up on that request. Hopefully, we will receive documentation but if not that will find its way back for your discussion and direction.

So with that, is there any other business? I want to thank the witnesses very much on behalf of the committee.

We now stand adjourned.

[The committee adjourned at 10:46 a.m.]