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April 9, 2002
Standing Committees
Economic Development
Meeting topics: 

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HALIFAX, TUESDAY, APRIL 9, 2002

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Brooke Taylor

MR. BRIAN BOUDREAU (Chairman): I will call the meeting to order since it's a couple of minutes after 9:00 a.m., the meeting being scheduled for 9:00 a.m. I want to welcome our guests. I am the co-chairman of the committee. In the absence of Chairman Brooke Taylor, who is out of town today, I believe, I will be chairing the meeting as the co-chairman. I want to welcome our delegation: Ms. Karen Oldfield and Mr. Dennis Creamer, they are from the Halifax Port Authority; and Mr. Malcolm Swinemer, Vice-President of Marketing for the North Atlantic Marine Terminals, the representative for Sheet Harbour here this morning.

First of all we'll introduce committee members, just for courtesy, and we'll start with Mr. Chipman.

[The committee members introduced themselves.]

MR. CHAIRMAN: What we normally do is allow approximately 20 minutes for a presentation, or if it's longer, that's fine. Then we will open the floor for questions from the members. Ms. Oldfield.

MS. KAREN OLDFIELD: It's over to us. That's great. Thank you, Mr. Chairman. We have handouts. Just while Darlene is passing those folders around, you mentioned my name, Mr. Chairman, Karen Oldfield, and I have, as you know, recently taken a position as President and Chief Executive Officer of the Halifax Port Authority. With me today, I have Mr. Dennis Creamer who is the Vice-President of Finance and Administration at the Halifax Port Authority. We've put together a little handout that you will find in the pamphlet which is called Halifax Port Authority Briefing. That is what we will be referring to as we go through our presentation this morning. In addition, also in the folder you will find a harbour map for the Port of Halifax to which we may refer from time to time, as well as a facilities guide for the Port of Halifax.

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Turning then to the briefing document, we've noted the vision statement for the Port of Halifax. It is a fairly ambitious vision, "To be a leading, viable North American Gateway". I would just like to pause to highlight the word viable, because, as we will explain in a few moments, the Halifax Port Authority is a port authority under the Canada Marine Act. The Canada Marine Act was enacted as a federal Statute in 1998 and the Halifax Port Authority was formed under that Statute in 1999. Under the Canada Marine Act, port authorities are required to be financially self-sustaining, so the Halifax Port Authority, in terms of being a viable port, must be a financially self-sustaining port.

Many of you, considering the fact that you look out upon Halifax Harbour as you come into the city to perform your MLA duties, will be familiar with some of the obvious advantages of Halifax Harbour, but what you will find on Page 3 of our presentation is just a little listing of some of the natural advantages that we have here in Halifax, including the fact that we are strategically located close to the major shipping lanes, we do have an ice-free harbour year-round with minimal tides and no currents. We have very deep water by international standards, with 60 feet in the main channel and 45 to 50 feet at berth. We are lucky, in Halifax, that we have on-dock rail service, daily double-stacked departures and we have a very good labour force. You will see some of the other advantages that are noted there.

In terms of the depth of the water - I just want to stop there because many of you will be familiar, Mr. Downe would be particularly familiar as well as some of the MLAs who were here as MLAs during the post-Panamax bid when Halifax was attempting to win post-Panamax business with the Maersk Sealand shipping line - depth of our harbour is a very important part of post-Panamax, of being able to have post-Panamax vessels come to Halifax. Post-Panamax vessels require between 45 and 50 feet to actually come alongside and to dock, which gives Halifax, because it has natural depth, a natural advantage. If you compare that, for example, to ports in the northeastern United States, including New York, for example, and Baltimore, they have to undertake very expensive dredging programs to dig out their harbours to get to a depth that Halifax has naturally.

I mentioned a few moments ago that the Halifax Port Authority was established in 1999 under the Canada Marine Act as a Canadian port authority. Now I note, from looking at some of the last minutes of the Economic Development Committee, that there seems to be question, I think, with respect to the jurisdiction of the Halifax Port Authority. That is something that I want to touch on right now. If you look at Page 6 of the handout, it is a geographic map of the Port of Halifax, but the same map is also in the handout in a much larger version. On the map, you see Bedford Basin, you see Halifax Harbour, you see the imaginary line which represents the harbour limit and you see the Northwest Arm. That is the jurisdiction of the Halifax Port Authority - Halifax Harbour, Bedford Basin, Northwest Arm. So our jurisdiction does not extend to, for example, the Port of Sheet Harbour that Mr. Swinemer will talk about in a little while, or to any of the other ports; even though, for example, Sheet Harbour is in HRM, that does not come under our jurisdiction.

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In becoming a port authority under the Canada Marine Act - and I mentioned earlier that we have to be financially self-sustaining - one of the things that that means is that we are responsible for building and maintaining our own port facilities. Our dollars come from operations, dollars that we generate at the Halifax Port Authority.

On Page 5 of the handout, just by way of additional background, the Halifax Port Authority leases to the terminal operators, namely Cerescorp and Halterm, the container terminals that you will see noted on the large map. Cerescorp leases the container terminal known as Fairview Cove; Halterm leases the container terminal down by Point Pleasant Park. Those properties, the physical land, is actually owned by the Halifax Port Authority, but those lands are leased to these companies to operate the container terminals. It enables Halifax to have a combined capacity, between the two terminals, of approximately 400,000 containers per year.

Two other points of note. Autoport in Dartmouth does not come specifically under the jurisdiction of the Halifax Port Authority. In fact, if you look at the harbour map, it is physically outside of what would be known as the Halifax Harbour limits. However, I note that we do, in terms of calculating overall port volume, include the cargo that is moved through Autoport. Similarly, Imperial Oil and a number of other private companies, such as National Gypsum, though they are inside the Halifax Harbour limits, their volumes, in terms of the cargo that they move through their facilities, are included in total port volumes, although, obviously, they are both private enterprises.

In our presentation today, we really want to talk about four main areas, including the economic impact to the Province of Nova Scotia of the Halifax Port Authority and the Port of Halifax. We want to talk a little bit about container cargo, talk about the importance of rail and, as well, the burgeoning cruise industry. With respect to the first category, economic impact, I'm going to ask Mr. Creamer to speak to the four or five slides under that heading.

MR. DENNIS CREAMER: Mr. Chairman, this is on Page 8 of the handout. We had an economic impact study done by Gardner Pinfold, so it's done independently, these numbers are not generated by the Halifax Port Authority. The gross domestic product is defined as the measure of income paid to owners of labour and capital used to produce the goods and services. The GDP and the income are used interchangeably. The effect is $670 million on the Province of Nova Scotia. Of that amount, $480 million is local, HRM, and $190 million would go to the rest of the province.

The total employment impact of the Port of Halifax on the Province of Nova Scotia is 9,090 jobs. The direct expenditures are $578 million. There's a slight difference between the GDP and the direct expenditures. The direct expenditures are defined as the gross revenue of all businesses and government agencies providing goods and services directly to the vessels in the movement of cargo, where the GDP is the effect of all activity related to the Port of Halifax.

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If you go to Page 9, the next page, this gives a breakdown of the impact by cargo type. You can see that containers are by far and large the most important cargo handled at the Port of Halifax. As a matter of fact, it's in excess of 80 per cent of the cargo. We are primarily a trans-shipment point for containers. About 20 per cent remains locally, and the rest goes to other destinations inland.

[9:15 a.m.]

The next slide, Page 10, is really just a breakdown of the GDP. Of that $670 million, $250 million is direct income, and $420 million of that $670 million is spinoff activity. The direct income would be the salaries paid to the local labour force, for instance, the stevedores, the agents, the ship chandlers, that sort of thing, and the spinoff effect, the multiplier, which is certainly over 100 per cent more, in spinoff and secondary spending, which would give the total impact of $670 million.

On Page 11 is probably the more important slide, which identifies the impact of the Port of Halifax, which is the number of jobs created, the 9,090. As you can see there, the direct employment is 3,460 jobs, and that would be waterfront workers, agents, terminal management, government departments, CN workers, those kinds of jobs. The spinoff effect is 5,630 jobs for the total of 9,090 jobs. For your information, all of the direct jobs would be in Halifax, so that 3,460 jobs would be in HRM. Of the spinoff jobs, 3,570 would be local and the balance, 2,060, would be for the rest of the province, which gives you the 9,090 jobs. I will pass it back to Ms. Oldfield.

MS. OLDFIELD: Back to me. The next topic that we thought might give you a little bit of useful background is with respect to the container cargo trade going through the Port of Halifax. You will see on Page 13 a slide which represents the growth of containerized cargos since 1997. The overall increase from 1997 in container traffic going through the Port of Halifax is 20 per cent. You will also see that the bulk of that increase came, in essence, in one year.

In 2001, the year just ended, just over 550,000 TEUs, as they call it in the business - which I've come to learn means 20 foot equivalent units, and what that really means is those big old boxes that you see coming off of the container vessels. I just want to pause on this because it is an important fact, which is that if you look at the comparison of numbers, TEUs, the year 2000 and the year 2001, it's very similar when you look at the chart. That is a very significant thing for Halifax, because as you all very well know, beginning about the middle of the year 2001, perhaps even a little bit before the halfway point, the economy, not just in Nova Scotia but in Canada and North America started to take a turn for the worse.

The good news in this slide is that notwithstanding the economic downturn that absolutely affected Nova Scotia and, in particular, the Port of Halifax is not immune to that, the port did manage to hold its own and to achieve the same levels that it had over the

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previous year, which is not insignificant because such a big jump had been obtained the year before. The port, with all its partners and so forth, was able to hang onto that cargo. So it was a very positive outcome for the year 2001.

The next slide really just gives you an indication of what the world growth trends are for containerized cargo. You see in terms of what's going through world container ports, and these are average numbers. So starting back in 1999, there was projected to be a 10 per cent increase, which was obtained; 12.5 per cent in the year 2000, and a big dip in comparison to the 12.5 per cent number, but still an increase overall in 2001. Then, this year, 2002, there is projected to be a 5.6 per cent increase. It's too early in the year, yet, to know where our port and, in fact, other ports are going to stock up with respect to this projected increase. However, it's going to be interesting to see if these projected trends turn into actuality.

In terms of the second bullet there, World Container Capacity, that has to do with ships, ships coming onstream, specifically container vessels. You will see in the year 2001 quite a few ships came on, and in the year 2002 there are projected to be quite a few more ships, resulting in an overall container capacity having a 14 per cent projected increase. Well, what does that mean? There is a lot in the shipping industry right now worldwide, and we are not immune to global trends here in Halifax, but worldwide there is what might be called an overcapacity. There are more ships than there is cargo to take from A to B. So there are many ships that call on ports that are not fully loaded, so we say there is overcapacity.

Notwithstanding that fact, more ships are being built to become more efficient, to try to realize some of the efficiencies that could be realized with bigger ships; they can take more cargo and make less trips. Interestingly enough, on a side note, I was invited to attend an inaugural call on Friday evening last week of a new Zim vessel which was calling at the Port of Halifax for the first time and she's on her maiden voyage, it is not a post-Panamax vessel but it was one of the largest vessels just under a post-Panamax vessel and one of the largest vessels to call on Halifax in a very long time. Zim, itself, is putting six such vessels on its routes this year, just representing the fact that the lines are definitely bringing more ships on and now we just have to fill them with goods to make sure that the capacity is taken up.

Where are we in terms of ports ranking; we, meaning Halifax. If you turn to the slide on Page 15 you will see that Halifax is ranked in the top 100 ports in the world. In the year 2000, as a result of the TEUs which came through the Port of Halifax, Halifax ranked 84th. This was up over the year 1999, at which point Halifax was ranked 90th out of world ports and this was with respect to cargo systems; so TEUs, amount of cargo flowing through our port. You'll see there that one of our competitors, namely the Port of Montreal, was ranked 59th in the year 2000, 54th in the year 1999, but the real difference is with respect to the cargo going through the Port of Montreal which is just about double what you see here in Halifax. It goes up rather astronomically after that if you take a look at volumes going through New

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York, Los Angeles, Rotterdam, Hong Kong. We're doing well, but we sure do have a ways to go if we want to compete with some of those ports.

That was a snapshot of world port rankings. Where are we in terms of our primary competition which is the North Atlantic ports and, again, the point of reference is TEUs, 20-foot equivalent units, and you'll see that Halifax, the fourth one down, experienced fairly significant growth in that year, 1999 to 2000, and in terms of our primary competition here, which is here at Halifax, it is New York, New Jersey, it is Montreal and it is some of the other ports that you see reflected there. Interestingly enough, all of the shipping lines and the vessels that call here in Halifax also call on the Port of New York/New Jersey.

The next point that we wanted to raise for discussion is just with respect to rail. In Halifax, just a couple of facts. The first fact is that 65 per cent of those boxes coming off the vessels calling at Halifax move out of Halifax and out of the Province of Nova Scotia by rail - not truck, rail - and 17 per cent of the total port TEUs move out of Halifax into the U.S. Midwest; that would be primarily Chicago. It is important to note that that is a market that for Halifax really didn't exist in the early 1990s and it wasn't until the opening of the St. Clair Tunnel outside of Montreal that this market opened up to the province and to the Port of Halifax.

The third point is an extremely important point in terms of the overall competitiveness of the Port of Halifax, which is that rail costs here account for up to 85 per cent of the cost of moving a container through our port. Those three factors mean that it is very important to the port, but also to our province overall, to have an excellent partnership and relationship with CN and that is one of the strategic objectives that we have to pursue, certainly at Halifax Port Authority, as well as with our provincial, municipal and private sector partners.

The next page really just gives you a snapshot of some of the rail connections, and the one route that I would just highlight comes from the point from the previous slide which is that now 17 per cent of the cargo coming through Halifax actually goes from Halifax through Montreal and down into Chicago.

The last category that we thought you may find of interest deals with the newest part of the business streams at Halifax Port Authority, which is the cruise business. The cruise business has seen a fairly significant growth in our port, but all over the world in the past number of years. So, for example, the next slide actually shows what the forecast of world demand is likely to be into the year 2010. What is happening in Halifax and in other areas in Atlantic Canada reflects some of the growth in the cruise industry.

So, for example, let me just share some facts and figures with you. On Page 22 is a five-year snapshot of cruise calls at the Port of Halifax since the year 1997. You will see that the number shot up in the year 2000-01. Last year, 2001, there were 98 cruise vessels calling

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at the Port of Halifax. That number is forecasted to be down a little bit for the year 2002, but the number of cruise ships calling is only part of the equation; the other part of the equation is the number of people on the vessels.

You have different categories of cruise ships. You could have small cruise ships which have historically been the kinds of vessels calling on ports like Quebec and Montreal where, because of their harbours or the seaway, it is more difficult to manoeuver a larger ship and, obviously, the smaller ships take fewer people. So if you take a look at the other part of the equation on Page 23, which is the number of cruise passengers, you will see that that number has increased fairly significantly year over year since 1997. So that last year, the year ended 2001, just under 160,000 people visited Halifax from cruise ships which called at our port. That number, notwithstanding the fact that the number of cruise vessels is likely to be down a little bit this year, the actual number of passengers coming onshore will be roughly about the same this year.

[9:30 a.m.]

How does that compare with some of the other ports of call around Atlantic Canada? Unfortunately, this slide isn't in colour, so if you just take your pencils, I will tell you what that chart means. That first one on the far left is Halifax. The second one is Saint John. The third is Quebec. The fourth is Newfoundland and Labrador. The very dark one is Montreal. Next to it is Sydney and last in the column is Charlottetown. So this is a comparison of vessel calls, number of ships calling. The next page shows passenger counts, the other part of the equation. Again, I am just going to read out what places those columns indicate. Starting from the left, it is Halifax, Saint John, Quebec, Newfoundland and Labrador, Montreal, Sydney and Charlottetown. Now, the point to be made here is not all the same vessels are calling at each port. The ports have different market niches; they have different kinds of vessels that they can accommodate and so a vessel that comes to Halifax may or may not be able to go to some of the other ports of call reflected on this comparison.

In terms of the last couple of slides, Page 26 gives you a snapshot of what the vessel calls are here in Halifax by month. What that really shows is that our cruise season starts in June, but the bulk of it is really August, September and October. I should say that that would stack up, basically, across Atlantic Canada in terms of the actual cruise season. So one of our objectives is to extend the season. So, for example, when you talk to cruise lines and people who make decisions about where cruise vessels are going to go, they think of Atlantic Canada and, specifically, they think of Nova Scotia as a fall destination. So one of our challenges is to extend it because the last time I looked, we had some really good things going on in Nova Scotia in the summer months too. So one of the challenges is to extend the marketing effort to look at other components such as the summer months.

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An association has been formed in Atlantic Canada, which is the Atlantic Cruise Association. Many of the ports in Atlantic Canada - for example, Sydney and, I think, Shelburne - have membership in that association. Some of the other ports and places of call around Nova Scotia and also around Atlantic Canada have come together to form an organization to actually undertake this marketing effort.

Some of the cruise highlights for 2001, last year, again, a 200 day cruise season, but the bulk of it coming in the fall of the year. There were nine inaugural call vessels last year, nine new vessels, 14 different cruise lines. There was a new port record for passengers coming off the vessels, and a very important number, which is the economic impact of crews to Halifax, to the province is the fact that when people come to shore they spend approximately $95 a passenger on travelling, food, drink, souvenirs and so forth.

This year we are forecasting 10 inaugural calls out of a total of 87; we are also looking again at approximately 160,000 passengers. We will have the first call of Celebrity Cruise Line, and Holland America has significantly increased the number of ships that will be coming to Halifax.

Mr. Chairman, that completes our formal presentation. We're happy to take questions now or after Mr. Swinemer speaks, and I hope that we've been able to provide you with a little snapshot of some of the things that are going on at the Halifax Port Authority together with our private and public sector partners.

MR. CHAIRMAN: Thank you, Ms. Oldfield, obviously a very detailed and informative presentation, and I want to thank you and congratulate you for that. I guess the feeling of the committee is to continue with the presentation and then ask questions. Mr. Swinemer, you're on.

MR. MALCOLM SWINEMER: Yes, I would first just like to thank the committee for the invitation to pass on some thoughts on ports in Nova Scotia. My particular focus, I thought since the conversation I had with Mrs. Henry that I would make my comments more directed at Sheet Harbour, because some of the things that we see in Sheet Harbour, I'm sure there are a lot of common threads that will run through a lot of the other smaller ports. So I intentionally have made my remarks geared for Sheet Harbour and then we can go from there.

My intention is to try to follow the three Bs of public speaking: be sincere, be brief and be seated. So I'm one-third of the way there. I will just give a quick overview of these topics that we'll run through here. A snapshot on some very brief history; some current activities that are taking place in Sheet Harbour; some short- to medium-term outlook prospects that we see; some of the issues that are affecting smaller ports like Sheet Harbour; a few of the positive aspects that we continue to make note to potential customers when we

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try to convince people to take a very serious look at Sheet Harbour; and some general comments on infrastructure requirements or improvements.

I do not have a lot of detailed history on Sheet Harbour. The terminal was around approximately 10 years before I became involved with Sheet Harbour, but I understand the terminal was constructed between 1987 and 1989, with the full intention of being able to take advantage of pending oil and gas development off the coast of Nova Scotia. Approximately 10 years later, overlapping 1998 and 1999, we handled the Sable Gas Project, Phase I, across the Sheet Harbour terminal, which was an extremely interesting project and one that had a tremendous impact on the local community. I believe there was in the neighbourhood of 130 to 150 jobs created up on the hill through the Shaw & Shaw program and in 1998 that ran for approximately six months, and then I believe they had probably at least 40 people the following year for their load-out phase and that created a lot of spinoff as well for our stevedores on the terminal both in 1998 and in 1999.

I had an attachment that gave a recap of the vessels and tonnages that had gone through Sheet Harbour during the past nine years. The information was provided by Nova Scotia Business Inc. for the first four and a half year period; the following four and a half year period is a recap of our numbers through 2001.

Some of the current activity in Sheet Harbour and the types of cargoes and the mix of cargoes moving across the dock are wood chips, copper slag, and barite; those are all bulk commodities. Rebar is one we've been up and down with, project cargoes, general break bulk, and of course the offshore, Sable Gas project, both inbound and outbound cargoes.

Just to give you an indication of what we see happening just over the next month or two, through April, May, we have two vessels scheduled in Sheet Harbour this week to kick off the Sable Phase II. We have both the iron ore and the pipe that's required for that line arriving. Of course, Murphy's Law, both ships are scheduled to show up the same day. We will just have to deal with that when they hit there this week. Also, later this month, we have a CSL vessel coming in and discharging wood chips, which is a bit odd, because normally we're shipping them out, but we have a cargo coming in. We have a shipment of rebar scheduled at the end of the month. We were very pleased after what has transpired in the past year.

In May we expect to see at least two more wood chip carriers, another shipment of rebar, and we already have a couple of cargoes that I would say are firm, but we still do not have the exact details on those two yet. In the next month or so, there certainly seems to be a bit of an upswing, and we hope that will continue.

Potential business. Again I just threw in some commodities that either have moved through Sheet Harbour in the past or we continue to have ongoing conversations with people involved in those commodities - lumber, fish meal, roundwood, fibre optic cable. That was

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a very interesting one. We did a vessel-to-vessel transfer in Sheet Harbour, and during that transfer we had created, I believe, between 6,000 and 7,000 man-hours in about a nine to nine and a half day period, which, even for one ship, you could see the spinoff in the local community. Several of the small businesses spoke to us and said what a positive impact it had, whether you owned a restaurant or whether you had a motel, that type of spinoff.

The outlook, short- to medium-term. There are a few commodities that have pretty well established themselves as regular movers, the wood chips, the barite that we bring in for the offshore - actually that has some additional spinoffs because that gets trucked to Upper Musquodoboit, and Mosher Limestone gets to process that material before it comes back to the city. So it gets trucked at least twice in the province, and provides the additional work at Mosher as well.

A couple of commodities that we have had some ongoing problems with - rebar and steel products in general. We first started, convinced a couple of customers to put that product through Sheet Harbour in 1999, and then in 2000 we saw increased shipments. In 2001 they were planning to triple the traffic through, and we were supposed to handle about 17,000 to 18,000 tons, and through a very effective lobby by the steel producers in Upper Canada they convinced the government that some of this product was being dumped on the market and duties were increased anywhere from 25 per cent to 45 per cent overnight.

Our customers that we had worked with and were planning to move that product through, the tonnage went from $17,000 budgeted to zero; that certainly had a negative impact on our longshoremen. We probably would have had an extra 3,000 or 4,000 hours minimum from that traffic. Local truckers didn't get to haul 700 truckloads of product. So the spinoffs go in a quite far-reaching fashion.

[9:45 a.m.]

Lumber is one that we continually discuss with people. One mill in particular, MacTara for example in Upper Musquodoboit, we still feel that ultimately some of that traffic can and will move over to Sheet Harbour. The ongoing dispute with Canada and the United States on the softwood lumber issue has certainly kept this in turmoil. A couple of years ago we were very close to getting the regular shipments going, and the prices dropped by about 50 per cent within a month or two.

There are some ongoing issues there, but those types of issues, we will continue to look at. Those items are on our agenda day in, day out, regardless of whether we've had success or not. On the rebar side, we have just this week confirmed two shipments for May, prospects for another one in June, but there are also a few dark clouds. There's a safeguard action that the government is putting in place; whether it causes additional duties and kills the business again, we'll have to deal with that come summer.

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Because of some recent actions by the U.S. Government on import duties and quotas on steel out of the United States, the Canadian concern is that a lot of that surplus capacity that is out there for tonnage that was earmarked for the United States could find its way into the Canadian market, and if that happens you could see the federal government, with their safeguard action, taking our projected shipments for rebar for the balance of the year and putting it back to zero again. That's just something we just have to find a way around, if at all possible.

Also, with products like lumber, when we look at Ship Harbour, there is not enough base cargoes in the immediate area that we can get ships to come in on stand-alone calls. We worked very closely the past year with some people who were operating a service out of Beldune, New Brunswick, where they had peat moss and lumber and lead and so on, but were looking for additional traffic. That option is still out on the table, and we will twin with them if we can, and combine Sheet Harbour and Beldune on a service that was running down to the U.S., South Atlantic. That's still in the works.

We even went as far as, aside from being a terminal operator, to the point where I got directly involved and was partially brokering a deal, and these things can get a little bit out of hand, but we even got into an issue of handling 100,000 tons of sulfuric acid in a tank on a vessel that would provide a base cargo to help sustain the call for the other traffic, so they can head out in all directions.

On the offshore projects, we've developed a very good track record, both from a productivity level in the terminal - the labour force did an exceptional job - and people like Shaw & Shaw and the caliber of people they were able to train in Sheet Harbour for their projects, which I think will put us in good stead for going after future projects like Deep Panuke or the Blue Atlantic project. That one, the Blue Atlantic project, when I was first contacted on that a year ago, when they were doing some preliminary budget numbers for that, the numbers on that project were quite astounding. It would be the equivalent of about eight Sable Phase I projects, all in one, if that Blue Atlantic project were to go ahead.

Some key issues that we see in Sheet Harbour. In the presentation by the Port of Halifax, the emphasis on rail is pretty obvious. When you look at small ports and the attempt to try to attract cargo, without a rail connection, you are already taken out of the loop for a lot of cargoes, and it has a very direct impact on just where you can go to try to get your hands on a more diverse cargo base. Highways are a major issue. I don't think there is a single customer we talk to who does not say, you have a major problem in Sheet Harbour: (a) you have no rail, and (b) that highway is terrible. We try to put a positive spin on that, there are improvements coming and there will be gradual upgrades, but in the short term, it is an issue and we can't escape it. We just have to try to find a way to work with it.

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The location goes both ways. We get customers, in the case of the Sable Project, for example, where the proximity to the actual drilling areas is a plus. When we talk to people in the offshore business from, say, a supply service side, they look at the location as a negative. I think that is more the case - at the present time, the people who are responsible for those offshore bases are sitting in an office in Halifax and in five minutes they can be on the terminal. It makes it very easy for them to view if there are emergencies. The other side of that is that we think the location of the terminal, vis-à-vis the actual drilling and production sites, in the big picture is a lot more positive.

Physical limitations - we do not have a 60-foot channel. We do not have 45 feet on the berth. We do have about 34 feet or 10.2 metres, but for a small port, that is quite acceptable. We have a single berth, and that will create a problem this week when we have two ships trying to come alongside at the same time. But, again, we have a bit of a break; the company that chartered the vessels is also responsible to pay for the discharge. They ordered the ships, so we are dealing with one consignee who ordered both ships. So it is not as much of a nightmare as we might normally face.

Another issue that we continually have to deal with is the lack of industry in the area. There is, aside from Northern Fibre, no natural draw for cargo for Sheet Harbour. Without question, Northern Fibre's position in Sheet Harbour - and they are continuing to work very hard to grow their business. This year, I think, we will do probably at least eight of eight wood chip vessels, so we are talking 300,000-plus tons of wood chips with Northern Fibre. So we commend them on the job they have been doing.

Some of the positive aspects that we continue to push for a port like Sheet Harbour are no congestion and - I put here no pier pressure, and you can spell that two ways. I spelled it p-i-e-r. There is ample backup land. We have quite a good area on our main wharf, our general lay-down area, plus if there is need to expand, there are 6,000 acres on that peninsula down there. It would not be hard to find a few more acres. I understand from talking to NSBI that there certainly are an additional 100 acres already set aside for further expansion to the park, as and when needed.

We have very competitive labour rates in Sheet Harbour. We have a union that we work with. We have very good rates with our union. The manning requirements, how we deploy people, are very flexible. The port structure, the other port fees again are very low and there have been minimal changes in those over the last five years. One of the things that we mention to our union when we're discussing it with them, or with anybody in general, is that when we look at a port like Sheet Harbour, or any other small port in the province, when you are trying to compete for business, keep your own identity. Don't try to be what some other port is. In Sheet Harbour's case, there is a bigger issue because we are close enough to Halifax that we have to remain very distinct from Halifax to have any opportunity at all to keep some cargoes going through that port.

[Page 13]

As far as infrastructure improvements, we could all write a wish list and there are lots of things we could put on that. The highway is a major issue for us and if there was a rail connection, the highway issue would be less significant because you would at least have an alternative. But with the absence of rail, it is absolutely critical that the highway be improved. I probably shouldn't have even said that here because I am probably sure the rest of the MLAs hear that far too often from another member of the panel.

The side wharf which was built in Sheet Harbour with the dolphins there to allow barges to come alongside many years ago for the Scott Paper barge operation down to Chester, Pa., and the possibility of cribbing in that side wharf and allowing supply vessels, for example, that serve the offshore to come and go unrestricted is one thing that we seriously have to look at as well, if we are to be successful with some cable contracts that we have been working on. To be able to guarantee people 24 hour service, seven days a week is absolutely essential, particularly in the offshore. If we said, look, we will load you tomorrow, that is not good enough. We can get around that problem for the short term. We did it during Sable Phase I where we had a large wood chip carrier on the berth, and they take four days to load. While that vessel was on the berth, we did load at least three or four pipe carriers and a supply boat by putting them on the end of the wharf and moving a crane up to the end and shifting a vessel down a little bit. So you can do things in emergencies and get by with it, but in the long term, we need to have a more permanent solution.

In closing, I would just like to say that in my mind there are no magic solutions. A lot of the problems are very deep-seated and it is going to take a long, hard grind and I think you have to keep your nose pointed in the right direction and don't give up. Governments, I think, need to assist as far as improvement to infrastructure, particularly the highways. As a local port, or any local port, the key is to be a low-cost operator. It is an absolute must. In that, of course, I have high productivity noted here and to be a low-cost operator, you are going to need low rates and you need high productivity combined. Diversify to the extent possible; that's easily said, it is a lot more difficult to do.

In Sheet Harbour's case, we see Northern Fibre, for example, as a key building block for that terminal. We keep looking at what we can do and some of the conversations and ongoing discussions we have is to try to get two or three other items like that that are ongoing businesses, 52 weeks of the year, but will allow us a little bit more breathing space and then all the other spot cargoes, the bulk project cargoes, really will complement what we can do if we can get two or three building blocks in place.

In closing, I ran across something the other day when I was making some notes for today that sort of put this whole thing in perspective. There was an article in the Sunday Herald, April 7th Edition. The headline reads: Sheet Harbour rallies as Stora mill closes. I thought, gee. What's going on here? That sort of caught my eye. I read the article. It says: "Faced with the loss of their main employer, the Stora pulp mill, the people of Sheet Harbour were determined not to let their community become a ghost town. The imminent closure of

[Page 14]

the mill had devastated the community, with a ripple effect hitting local businesses and their suppliers. The Sheet Harbour Board of Trade had obtained a $21,000 government grant to study alternative industries that might be developed.

Under the direction of Harry Weldon, 16 people, in communities from Sheet Harbour to Ecum Secum, were studying the economic opportunities and human resources in the 1,000 square-mile area. So far, we're just gathering information on what's available, said Weldon. Then we hope to project it into the future industry. One suggestion was to explore the economic feasibility of developing silica deposits in the area. Tourism, said Weldon, hasn't really been exploited to its fullest potential. Agriculture, forestry and fishing were also being studied. We don't want to wait for a government handout, stated Weldon. The people who know what's best for the community are the people who live there. One problem, he added, was the need to speak with a united voice. The area, he said, hasn't any centralized community power. That was the week of March 31 to April 6, 1972.

[10:00 a.m.]

So 30 years later, people are saying the same things. When I read that, I said, gee, that sort of put the thing in focus for me, because what we do today, there is no magic cure, there's no quick fixes, and when that article was written 30 years ago and if you read that today, what has changed 30 years later? With that, I say thanks for the opportunity, and open for questions.

MR. CHAIRMAN: Thank you, Mr. Swinemer. We appreciate your detailed presentation, as well. We're going to move right along. We do have a limited amount of time, so we're going to move right along to questions. Today, because the time is limited, we're going to provide 10 minutes to each caucus, then we will open the floor up. Mr. Dooks, you're first.

MR. WILLIAM DOOKS: Thank you, Mr. Chairman. Ladies and gentlemen, nice to see you here today. I would like to thank the Port of Halifax for your presentation, but I'm going to zero in on the Sheet Harbour presentation, of course, because you know that I'm the MLA for Eastern Shore. I'm the representative of a geographically and economically oppressed riding. I don't think there's any doubting that comment. I've sat at this table, I think on this committee for a couple of years, and have often brought up the situation. I've sat with my caucus colleagues and members of Cabinet and discussed this issue many times.

I guess it's ironic that that piece would come in the paper on Sunday, I read it as well. I looked at that piece, and am saying, oh my, nothing has changed in 30 years, only that possibly the situation has worsened, the spirit has dampened. Here I am the MLA, and forging out and trying to make a difference. The Eastern Shore is a very long riding, 125 miles long, split to east and west. On the west part, closer to Halifax, we're not having the problems that we're experiencing on the eastern part. My colleague, Howard, the member

[Page 15]

for Halifax Chebucto, has heard me talk about this many times on the HRM Council as well. The Board of Trade, Chamber of Commerce in Sheet Harbour calls Sheet Harbour the heart of the Eastern Shore, and that's true. It's located pretty well in the centre of the Eastern Shore.

When we talk about heart, we talk about emotions, we talk about feeling well, healthy, physically, mentally, and that all ties in very well. It's been my philosophy, unless a mother or father are providing for their family financially, they're unable to have good health. We talked about this, which leads us to this very situation today. Back in the 1980s, I believe the government, in response to the cry of the community of 30 years ago, decided that they had to do something for the Eastern Shore. So the then-federal government and then-provincial government decided to put a wharf in Sheet Harbour to grasp or to haul out the benefit for the offshore. The federal government put a lot of money in that wharf, as also did the provincial government. I applaud them for that, but I also criticize them for not finishing their job. We wouldn't build a house without a driveway. What would be the point of building a rink without any access to appreciate the rink or the recreation that would be inside?

The port was built in Sheet Harbour without any thought of infrastructure, and that is our problem, our main problem. No, we do not have any rail; no, we do not have a proper highway; and, of course, you all know we do not have air support. That is the beneficial problem that a number of companies that have managed the port have been experiencing.

We say the Port of Halifax has no relationship with the Port of Sheet Harbour, that's true in effect but, on the other hand, Cerescorp, the company that has the responsibility for the traffic in the Port of Halifax, is also responsible for the management of the Sheet Harbour Port, so there is a connection, maybe not a relationship as far as the port is concerned, but they certainly do have an involvement.

I see one part doing very well - and I congratulate the City of Halifax for doing very well - and on the other hand I see the Town of Sheet Harbour doing very poorly. Malcolm, I know you well, and I am sure you try your very best. We go to meetings, the Chamber of Commerce, or we've met, and I've had the Premier and all ministers to the Port of Sheet Harbour to explain the difficulties that I'm experiencing there, to try to liberate the Eastern Shore's economic oppression.

Basically, nothing's changing. We can have our stats and we can talk about the potential business, but that does nothing for the people who are there who are not working now. In 2000, I think we had 17 vessels - that's a little bit more than one a month. In 2001, 11 vessels - that's less than one a month. I think you have to put the amount of traffic that is tied up to the port in perspective to understand how successful we are with the port in Sheet Harbour. Seventeen in one year, and 11 in the other. We know we had more traffic

[Page 16]

back when Shaw & Shaw was there, and that was a successful time for Sheet Harbour, but it only lasted a very short time.

Two local groups were managing the port and, for whatever reason, their contract was terminated - we won't get into that, Malcolm, because you weren't there at that time - a tender was put out, and I believe that your company - not believe, I know - won the tender. It has been brought to my attention that the government has just renewed the five-year contract with North Atlantic or Cerescorp, and I have some concerns surrounding that. I'm just going to ask you a couple of questions, Malcolm.

The tender was put out five years ago for, I believe, a 15-year term: five, five and five. Is that correct?

MR. SWINEMER: That's correct.

MR. DOOKS: A renewable clause in there.

MR. SWINEMER: Yes.

MR. DOOKS: How much are you paying for the lease of the wharf per year?

MR. SWINEMER: Well, I can give you an answer, but I'm wondering if this is the forum for that. Because I understood coming here today we were to talk about the issues small ports face in developing traffic, and the contract is a contract between North Atlantic Marine Terminals Limited and the Province of Nova Scotia, and I honestly think this forum is the wrong forum to talk about the contract itself. I think we should be talking about things we are trying to do to develop business, and I thought that that was what the focus was scheduled to be.

MR. DOOKS: That's fine; I appreciate that. I know the cost - and you know I know - the amount. Malcolm, as we talk about attracting business, clarify for me, your company, were they expected to build buildings on the wharf to facilitate different types of businesses that would come, warehousing, refrigerated units? Before I get into the promotion of the port, in the contract, without talking about dollars and cents were you expected to promote by putting buildings and infrastructure on the wharf yourself?

MR. SWINEMER: I've gone through that contract, Bill, and tried to get some of that history that happened before I was there. There are certainly some grey areas there. That's a question that I have raised myself on several occasions. However, during the past four and a half years there have been buildings that are already empty on the terminal that we had access to use. To build a building with no immediate use, when there were already at least two empty buildings sitting adjacent to the terminal, didn't seem to be the prudent thing to do, but I will take that one step further.

[Page 17]

In some recent conversations that we've had regarding another project that we have been working on for some time now could entail, and one of the two proposals had asked us about warehousing and a certain size building, we simply went back and said to them, because this particular project is one that was stepped out a ways and was probably a year to a year and a half down the road, and our comment to them very clearly was if we need an additional building and it's tied to a contract, we'll put the building there. The building in question was 2,500 square metres or about 26,000 or 27,000 square feet. We simply went back to them and said if that's what it takes to get that business, and they were looking at it for a minimum four or five year contract, we said we're onside and we'll do what it takes, end of comment.

MR. CHAIRMAN: Mr. Dooks, I'm sorry, I have to jump in here. Your 10 minutes is up, but we will come back. Mr. Epstein.

MR. HOWARD EPSTEIN: Can I ask Ms. Oldfield a couple of questions. Under the Canada Marine Act , Section 48, there's a requirement to put in place a land-use plan? I try to follow these things a little bit, land-use planning, but I must have missed this. Has a land- use plan actually been adopted and, if so, is it available or could you tell me what process was gone through or, if it hasn't been adopted, is there a plan to work on one?

MS. OLDFIELD: Thank you for the question, Mr. Epstein. There was a process and actually in terms of the process, if that is of interest to you, I'm going to ask Mr. Creamer to explain the process which was undertaken.

MR. EPSTEIN: All I need to know was whether it was an open, public process, that's really all I need to know.

MS. OLDFIELD: Yes.

MR. EPSTEIN: It was?

MS. OLDFIELD: Yes.

MR. EPSTEIN: So there is a plan?

MS. OLDFIELD: Soon, very soon. (Interruptions) Actually I've only met him twice, so we never had that discussion. (Laughter) There was a public process, the process was gone through. It's all in the works. Also, under the Canada Marine Act, you may be aware that that must be filed with the federal minister in any event and the public has to be notified that there is a land-use plan.

MR. EPSTEIN: Yes. Will the plan itself be made public, that is will we be able to have access to it?

[Page 18]

MS. OLDFIELD: Yes, yes.

MR. EPSTEIN: Okay, that's fine. Can I make a request to be sent a copy when it's ready?

MS. OLDFIELD: Absolutely.

MR. EPSTEIN: That would be great. In the planning process, did the port authority turn its mind to the question of a sewage treatment plant? Was that one of the items that came up in the planning process? I guess what I'm really wondering is, according to what criteria a decision was made that this wasn't a desirable facility?

MS. OLDFIELD: That which one wasn't . . .

MR. EPSTEIN: A sewage treatment plant in the area?

MS. OLDFIELD: That's predating my time and I'm going to ask Dennis to speak to whether or not the actual sewage treatment plant was discussed in terms of the public process.

MR. CREAMER: No, when we were developing the land-use plan, which was within one year of us becoming a CPA, which was March 1, 1999, the areas we looked at, our areas of interest did not include a sewage treatment plant. So our land-use plan was developed and, certainly, there was in that development process, there was not consideration of a sewage treatment plant because we were focusing on our own property, how we use our own property and, if you look at the map, we are basically land poor; we have very little land at the Port of Halifax.

MR. EPSTEIN: Can I follow up on another aspect of this. I am just wondering to what extent there's any provincial jurisdiction involved here. The province appoints one member of the board.

MS. OLDFIELD: That is correct.

MR. EPSTEIN: But beyond that there really isn't any provincial jurisdiction, is there?

MS. OLDFIELD: Well, jurisdiction in what respect? I guess the province under the Canada Marine Act, the province does have the right to appoint one representative to the board of the Halifax Port Authority, that's correct.

MR. EPSTEIN: But in terms of legal jurisdiction over any of your activities, really it's entirely within your own jurisdiction once the authority is up and running?

[Page 19]

MS. OLDFIELD: In part in the sense that, you know, we are federally regulated in terms of coming under the umbrella of the Canada Marine Act. We do have a board and we are to be financially self-sustained.

MR. EPSTEIN: But, again, as the provincial jurisdiction, you're really here out of the kindness of the port authority?

MS. OLDFIELD: Yes.

MR. EPSTEIN: Thank you very much in that case. Is there a policy on tendering contracts? I noticed, I think it's the Financial Administration Act generally doesn't apply to the port authority, but I'm wondering what policy the authority has when it comes to tendering of contracts for goods, services or anything that you might purchase. Do you generally follow the guidelines of the Financial Administration Act or do you have your own guidelines or are there any policies in place at all?

[10:15 a.m.]

MS. OLDFIELD: I guess the short answer to the question is that we do have guidelines that we follow. Some of them are under the Act and some of them are internal.

MR. EPSTEIN: When would you normally tender things?

MS. OLDFIELD: If there's a specific contract that you wanted to get at, I would be happy to try to address that.

MR. EPSTEIN: Your legal services?

MS. OLDFIELD: Legal services predate my time, and I think that that's not really an area that I'm prepared to get into today.

MR. EPSTEIN: Are they tendered or aren't they tendered?

MS. OLDFIELD: I do not believe that they are tendered.

MR. EPSTEIN: And what firm does your legal work?

MS. OLDFIELD: McInnes Cooper and Robertson.

MR. EPSTEIN: Your former firm?

MS. OLDFIELD: That is my former firm.

[Page 20]

MR. EPSTEIN: Mr. Swinemer, can I ask you, the lease under which you operate with the province, would you be prepared to provide us with a copy of that?

MR. SWINEMER: That's a contract that we have specifically through Nova Scotia Business Inc. and I would leave it, if NSBI were . . .

MR. EPSTEIN: But NSBI isn't here; I'm asking you. Can we have a copy of the lease?

MR. SWINEMER: I would prefer not to . . .

MR. EPSTEIN: Well, the answer is no.

MR. SWINEMER: Yes.

MR. EPSTEIN: Okay, and didn't you have an obligation to put in place $500,000 in capital improvements? Have you put those in place?

MR. SWINEMER: That was a combination and, from what I can understand from what was agreed to, that included equipment and anything that was put on site to help handle traffic and that included . . .

MR. EPSTEIN: The press release at the time said that the company intends to spend $500,000 in capital improvements to the port, including building construction and equipment purchases for the efficient and safe handling of cargo. So has that happened?

MR. SWINEMER: As far as the warehouse, no, but I believe the dollar figure was surpassed through equipment purchases that were put in that terminal in forklifts, yard hustlers, flatbed trailers, and bulldozers that needed to be put in place.

MR. EPSTEIN: Are there plans right now for future improvements to the wharf to attract business?

MR. SWINEMER: We're wide open on that. As I mentioned to Bill, I recently did an exercise on the cost of putting a warehouse on the dock if that's what's required to get a contract that would come into place in, I believe, 2004. So we have ample time, if we secure the contract, to build the warehouse. We've already done some preliminary costs, so we could go back and say, yes, so that will be done. But to build a building like that, whether you pay $500,000 or $1 million, and then not have a use for it when there are already surplus buildings sitting there isn't a prudent thing to do.

MR. EPSTEIN: I understand your point.

[Page 21]

MR. SWINEMER: But at the same time, are we prepared to do that? Categorically, yes.

MR. EPSTEIN: If the business is there.

MR. SWINEMER: We've already quoted a company saying, subject to sitting down and finalizing a contract, here's an approximate rate per square foot. We'll build the building; they lease the building, and yes, we certainly will.

MR. EPSTEIN: Mr. Swinemer, I think you told us that part of the history - or maybe it was Mr. Dooks who suggested that originally the idea about developing the port facility there was to tie in with the development of the offshore.

MR. SWINEMER: I understand that when it was built, that was one of the key things, to get offshore traffic there.

MR. EPSTEIN: So can you explain to us why it was that you think SOEP went to Goldboro rather than Sheet Harbour?

MR. SWINEMER: I think that had to do with where the pipeline had to come ashore and their master plan through Nova Scotia and New Brunswick. I think that's a little bit closer from the actual wellhead straight to landfall, without question.

MR. EPSTEIN: Yes. So the original thought wasn't where landfall would be for a pipeline?

MR. SWINEMER: No, I think it was maybe for a service base and/or - somebody else told me some time ago that they thought there was a plan to build a gas plant or build some kind of - Bill might have more information than that. It's prior to - I don't have the details, so I would be speculating, but I had heard that there were different plans at the time.

MR. EPSTEIN: So in retrospect, was that realistic or not realistic?

MR. SWINEMER: I think the oil and gas companies are the ones that would have to answer that. The fact that they built the line where they did, we assume that was the most advantageous route for them. It's there, we have to assume that.

MR. CHAIRMAN: One last question, Mr. Epstein.

MR. EPSTEIN: It's fine.

MR. CHAIRMAN: You're fine?

[Page 22]

MR. EPSTEIN: Yes.

MR. CHAIRMAN: Okay, Mr. Downe, it's your turn.

MR. DONALD DOWNE: Thank you very much. I want to welcome our guests here today. The reason we asked the port to come here today was we felt it was an economic driver for the economy and because of that, we felt it was imperative to hear first-hand what are some of the efficiencies or opportunities or challenges that the ports have. The issue of the post-Panamax and part of the fact that we're picking up some extra activity on TEUs. I understand that obviously you can't get into New York with a full load on a post-Panamax ship as it is now. They have to take down part of the bridge or the aerial top and they have to wait until the tide is right and then they've about a metre or so to go in the berth. In fact, the negotiations on the post-Panamax work has actually put Nova Scotia on the map, or Halifax on the map, as a port to go to.

One of the key components of that success will be if you don't have a rail, you don't have a port and if you don't have a port, you won't have a rail so herein lies the challenge. Can you please tell me where the negotiations are with the rail and the carriers currently that are working out of the Port of Halifax?

MS. OLDFIELD: I guess I need some further understanding of your question, Mr. Downe.

MR. DOWNE: There was some concern not that long ago about how the negotiations were going. What I understand from the lines, whether it's Zim or whatever, they are here, not because they just love Nova Scotia, although that's a great virtue, but it's about cost and it's about efficiency and it's about the mid-west access and it's about TEUs costs delivered to the end product. So, the negotiations that were underway with different lines were somewhat in question. Have all those negotiations been completed with the rail and the major carriers so that we have stability at the port at this point?

MS. OLDFIELD: I believe that what you're referring to specifically are the negotiations that took place with ACL and that was the last quarter of 2001. Those particular negotiations were put to bed successfully. ACL, as you may recall, had been pondering whether it would actually remain in Halifax for some of the reasons to which you refer. Those specific negotiations were concluded. ACL has remained at our port and in Nova Scotia and those are the negotiations that I'm aware of.

MR. DOWNE: Was the port authority involved in those negotiations?

MS. OLDFIELD: Collaterally.

[Page 23]

MR. DOWNE: Did they do anything to deal with CN to make sure they were at the table and not held hostage by one rail for the future of the port development?

MS. OLDFIELD: Yes.

MR. DOWNE: And what activity did you do?

MS. OLDFIELD: I personally did not do any activity. I just want to be clear in terms of dividing the line.

MR. DOWNE: Did your law firm do anything with regard to those negotiations? Your ex-law firm?

MS. OLDFIELD: One question at a time, I guess. I'm happy to speak to the negotiations. The port was involved as a facilitator, as a component, naturally, of the negotiations that took place at that time. In terms of whether or not the law firm was involved, I can't speak to that.

MR. DOWNE: I'm glad that they were the facilitator - that's exactly the role to play there. It was a concern for the board, I'm sure, when the negotiations were not working out very well.

I understood that CN had indicated publicly that their future is strong in Atlantic Canada and strong in Halifax and that they were looking at making some capital investment in the future of the port in Halifax. Can you tell me what plans they have with regard to any additional capital? Is there any discussion with regard to possibly co-locating Cerescorp and Halterm as one unit, moving locations to Rockingham, or are we leaving everything the way it is right now? Has there been any discussion along those lines?

MS. OLDFIELD: I have not had those discussions with CN and, as you may know, CN is having its annual general meeting here in Halifax next week on April 16th. So there will certainly be an opportunity, if CN intends to make any particular announcement with respect to Halifax, that may be an opportunity to do that but, in terms of specific discussions with CN, I have not had those along the lines that you have talked.

MR. DOWNE: Have you had any discussion with CN in regard to their annual meeting coming here, that it would be a good time to make an announcement about the future rail carrier?

MS. OLDFIELD: No.

[Page 24]

MR. DOWNE: I am happy to see the cruise ship industry growing. Tourism is important to the area. What has the Department of Tourism specifically done? Do you know of anything with regard to the marketing of the Port of Halifax as a cruise destination, or has it been the independent bodies that have basically done it?

MS. OLDFIELD: What I can say to that, Mr. Downe, is first of all the Port of Halifax wants to and is actively engaging in striking partnerships because, quite simply, we can't and should not try to do everything ourselves in terms of these different lines of business. One of the key components to the success of the port has to be based on a partnership approach. So specifically with regard to that question, I guess it is multi-faceted in the sense that the port itself has had discussions with the Department of Tourism about some of the things that we have talked about here today, including an extension of the cruise season.

As well, however, the Department of Tourism is one of the parties involved in the Atlantic Cruise Association that I refer to - I am speculating here - but the sister departments in both New Brunswick, Newfoundland and Labrador, and in Prince Edward Island, because clearly this is an issue of economic importance to the region in addition to just our port here in Halifax. So one of the ways to get at that is through provincial departments, and so those departments are part of the Atlantic Cruise Association.

MR. DOWNE: So they are working both in Sydney and in Halifax . . .

MS. OLDFIELD: That is correct.

MR. DOWNE: You mentioned that 85 per cent of the cost of the TEUs, when they are doing their overall costing, is rail. One of the issues that we have often fought with Ottawa about is the argument that we are the ice-free port. We are currently subsidizing the ice-breaking capability along the St. Lawrence, and yet navigational aids are being costed out at a fairly high rate for Atlantic Canadians, and certainly specifically here in Nova Scotia. What is the port authority doing with those negotiations with Ottawa with regard to allowing us to have a more level playing field?

MS. OLDFIELD: The issue to which you refer is one which is actively being pursued by, among other groups, the shipping federation here locally, the local shipping association, and one of their arguments is, in essence, along the lines that you raise, because at some stage in the game there would be constituent members who would subscribe to that view. So the port has discussed this issue specifically with our local shipping association and I believe, again pre-dating my time, there have been letters of support written specifically on the issue. It is not one which is, at this moment in time, a hot-button issue, as some of the other ones are that we are grappling with.

[Page 25]

MR. DOWNE: To Mr. Swinemer. It was interesting, what is different from 30 years ago? Who was in power 30 years ago? (Interruption) Is that what is was 30 years ago? Can you tell me, sir, who was the legal counsel representing you in the renegotiation of your contract?

MR. SWINEMER: I believe there was no legal representation. The wording of the contract, I believe, is such that it is an automatic renewal if the - I believe the wording is - manager of the facility can exercise the option to renew and has to give six months written notice of their intention to do so. It is something like if you had an apartment and you were going to move out, you would need to tell the landlord you were going to move out or whether your intent was to renew. We simply gave notice of our intention to renew; the province received that notice and then, in due course, came back and confirmed the extension.

[10:30 a.m.]

MR. DOWNE: Has the province indicated any displeasure with the leadership and work of Cerescorp in regard to managing the facility? Has the minister ever indicated that they are unhappy with what you have done there?

MR. SWINEMER: I have had no direct conversations like that.

MR. DOWNE: So they have been happy with the performance you have shown in that area?

MR. SWINEMER: Well, we're not happy with what is going on in Sheet Harbour.

MR. DOWNE: No.

MR. SWINEMER: I certainly am not. I grew up in the Musquodoboit Valley, and I know what it is like to live in an area where there are no jobs and you have to move away to get a job. When I accepted responsibility to try to help find cargo for Sheet Harbour, I thought, gee, if I can just get some jobs down there. When I look at a piece of business for Sheet Harbour, I don't just look at a vessel the same as the cruise ship numbers or big vessel or little vessel. The most lucrative piece of business that we have handled in Sheet Harbour, as an example, since I have been involved with the port, from job creation and creating employment for people, was from a piece of cargo that never touched the dock. So you never know sometimes how those things happen, and that was the cable business. We have 64 people a day working on that ship. I think it was 32 out on two 12-hour shifts. So, suddenly, here were 7,000 man-hours over a nine and a half day period. So for me, it is job creation.

[Page 26]

I have had the good fortune of being involved with the shipping industry for a lot of years. I was the general manager of ACL, so I am very in tune with the issues that face the Port of Halifax from a ship owners' point of view versus the port. I have worked in Saint John with the Irving Group, as the Vice-President of Kent Line, for awhile and that was very much an interesting experience. Then I moved back to the Port of Halifax and was involved with my own container agency, which was a nice little operation until Sealand decided to sell to Maersk, but that is another issue. I have had good success, in the different businesses I have been involved with, in developing traffic. The situation in Sheet Harbour is very frustrating when we look at where we have to try to draw cargo from or to move that cargo to or from the dock, or the types of conversations that we have ongoing with potential users for those services or infrastructure.

Are we happy? Absolutely not. That is probably the most disappointing thing I have done and the most frustrating because it is a nice little terminal. Yes, it's not as deep water as you would like, but with the labour contract that we have in Sheet Harbour, which has no minimum manning requirements, you hire what you need to do the job. The rates are attractive and we have not raised our port fees in, basically, the five years we have been there. When we look at traffic that we are currently putting through that port, I could cite quantities like the bar rate. I think the rate is up 30 cents on a ton in four years. We reduced the rate of rebar to help offset the fact that the customer couldn't haul triaxle loads because he had done his costing on 30 tons since that is what he always hauled. He never thought about it.

So we had the deal in place. The first cargo moved. Everything went great and all of a sudden we hear this vibe that the ultimate receiver is unhappy because his delivery cost was higher. We went back to the customer we brokered the traffic with and said, look, you gave us a very good vessel. It was packaged better than normal. Our productivity was higher. We went and offered to reduce the rate, which took him a little bit by surprise, and we said, we trust though that reduction you are going to pass on to your ultimate buyer to help reduce that trucking cost. That is the type of approach we have had in doing business and we need to continue to do that.

MR. CHAIRMAN: Thank you. We are going to allow two questions to each committee member, beginning with you, Mr. Hendsbee.

MR. DAVID HENDSBEE: I wish I had more time. I have a series of questions, but I guess I will ask two quick questions.

MR. CHAIRMAN: We will come back, sir, if we have time.

MR. HENDSBEE: My two quick questions would be in regard to security of the port. It has always been the divestiture of the RCMP, and the Halifax police are now taking more responsibilities. What impact has that had on activity in the port, especially in regard to some

[Page 27]

of the covert activities that concern smuggling and other things that are going through the port? There are also these terrorism threats, and now with the U.S. authorities coming here to assist with that kind of security aspect, what issues does the port have about that? That is my first question.

My second question is about the Shearwater lands, the berth at the Nova Scotia Hospital, and the CN marshalling yards. You talk about being land poor, what opportunities does the Port Authority see in regard with trying to get more land assets around the harbour?

MS. OLDFIELD: With regard to the first question, I'm very pleased to have the opportunity to address that because my understanding in coming here today was that this committee wanted to take a look at, to review and talk about a potential strategy for port development in Nova Scotia. With regard to security, it is the number one priority at Halifax Port Authority to ensure that we have a safe and secure port - number one, top priority. In terms of an overall strategy, many things flow from that.

We have done a number of stakeholder briefings around the local port community with regard to the measures which have already been put in place with respect to security and our go-forward plan. I've referred several times today to the fact that the port is very much partnering with both private and public sector stakeholders. Security is a key issue which requires partnership; in other words Halifax Port Authority cannot deal with all aspects of the security issue. There are partners such as Customs, Immigration, Transport Canada, as well as the terminal operators, the police who provide 24/7 police servicing, the intelligence officers, and the list goes on. There are many private sector companies who ship goods through our port that need to know and want to know what the port is doing, and also are doing things on their own in terms of securing their own businesses. So it is a key issue and in terms of our own business strategy going forward; it is a primary component of it.

With regard to your second issue in terms of land, Mr. Creamer made the comment that Halifax Port Authority is land poor. That is particularly true when Halifax Port Authority and the lands managed and/or owned by Halifax Port Authority are looked at in comparison with other ports, not just in Canada but also in the United States. Part of our business strategy going forward would be to actively pursue acquisition of lands that makes sense for us in our business strategy.

MR. CHAIRMAN: Mr. Chipman.

MR. FRANK CHIPMAN: Thank you. Perhaps I will ask this question of Ms. Oldfield. What new or existing security measures are in place now, after September 11th, and what are the costs and benefits to those security measures?

[Page 28]

MS. OLDFIELD: Mr. Chipman, thank you for the question. Security is, as I've said, a key priority, and it has to be. We are not immune here in Halifax anymore to some of the activities that are going around internationally but which very definitely would or could have an impact on us here in Halifax. Some of the examples that would go to answering your question, very shortly after 9/11 the Halifax Port Authority struck a port security committee. The port security committee consists of some of the stakeholders that I just mentioned a few moments ago - Customs, Transport, policing, terminal operators, labour and some of the other players who obviously are concerned about and who have a part to play to ensure a safe and secure port here in Halifax.

The port security committee has met on any number of occasions since being struck shortly after 9/11. Interestingly enough, port security committees are mandated in the United States. They are not mandated here in Canada, to this point, but it is a good way of facilitating bringing together the people who obviously have a part to play in ensuring that we do have a safe and secure port. So through that committee we have also identified a number of issues to be addressed in terms of ensuring security is top priority, and after recognizing its importance to actually implement some of the measures.

So, again by way of an example, some of the things that we have done, either through the Halifax Port Authority or through the committee, would include increased perimeter fencing, particularly around our cruise area, increased surveillance equipment at many points throughout the property owned or managed by Halifax Port Authority directly. We have also started to work with stakeholders, including the MEA, Maritime Employers Association, and the ILA, as well as other stakeholders, both private and public sector, on the whole issue of credentialing which would be a way that we can have a picture ID which would apply to persons who have business on property owned or managed by Halifax Port Authority. Those are just examples. We also have a go-forward plan, specifically, that we are implementing along with our partners. So I hope that gives you a flavour.

MR. CHIPMAN: What do you see as our greatest perceived threat from whatever, and what jurisdiction would the American officials have here, say, as far as, I'm not going to say powers of arrest or detainment, but that sort of thing?

MS. OLDFIELD: We were very pleased to welcome the U.S. Immigration officials or Customs officials when they came to Halifax two weeks ago. I was personally pleased to meet them. We invited them, actually, to meet the members of our staff and to acclimatize them to operations at Halifax Port Authority, and we invited them to undertake a tour, because there are a number of different issues, if I may.

One issue deals with the business of getting cargo from A to B and, on that score, we are particularly keen to ensure that the Customs officials understand how we do our business, how we get cargo from A to B so that at the end of the day the cargo gets where it needs to go on time with the minimum of delay and/or cost difficulties. So what am I talking about

[Page 29]

there? What I'm talking about is the fact that inspection of a box, for example, has a cost; a cost of delay, a cost of opening the box, a cost of doing the inspection. Now, part of our challenge is to make sure that we are safe and secure but, also, that at the end of the day the goods get where they need to go, and that's not always an easy, smooth track. So, therefore, we wanted to make sure that we educated, as best we could, the U.S. officials coming here so they understand how we do business.

[10:45 a.m.]

The second issue, which I think is raised by your question, deals with the powers or what exactly the U.S. officials are here to do. You would have to speak to them or to Customs to get a specific idea of what they've been mandated to do, but in terms of a general understanding, these are individuals who are housed in offices in Burnside. They are not actually on terminals or at dockside; that is not to say that they could not at some point in time. But to my knowledge, at the moment, they are working in offices. They are operating on the basis of intelligence information which is provided to them through their own sources to assist Canada Customs with the whole issue of which box to inspect, for example. So in terms of their specific powers, I can't speak to that. I can give you the general understanding.

MR. CHAIRMAN: Thank you, Ms. Oldfield. I would ask for shorter answers, please.

MS. OLDFIELD: That is very difficult for me, a former lawyer, Mr. Chairman, but I will try.

MR. CHAIRMAN: I would appreciate that. Mr. Dooks, two short questions, please.

MR. DOOKS: Mr. Chairman, back on the Sheet Harbour port, of course. Two questions. I would like to use one question in the form of a comment. Malcolm, earlier you said that you were unhappy with the success or the traffic per se in the Sheet Harbour port, and so am I, but I can't really understand why a large company that has the contract and responsibility of managing port traffic in Halifax Harbour to the Fairview Terminal - that is obviously very successful - would have any interest in the Port of Sheet Harbour, where they are unsuccessful, where you are claiming you are unhappy with the success, where there is a cost for a lease agreement.

You spent $500,000 on equipment or upgrades of the wharf. You went through a five-year contract and now have renewed another five with the potential possibility of a five after, so we might as well talk in 10 years. I guess I will change that from a comment to a question if you would like to answer that, because in the world of big business, it is all about profit. As much as we know that some companies certainly have a sensitivity of building communities and also to create employment, but the Sheet Harbour port is approximately 100 kilometres away from Halifax and it is not working well. It cannot possibly be working well financially for the company . . .

[Page 30]

MR. CHAIRMAN: Question, please.

MR. DOOKS: Can you give me some explanation why they would be very successful in Halifax and still want to pay out, I believe in a losing side of the page, for Sheet Harbour?

MR. SWINEMER: That is a kind of difficult question to answer but, first of all, when you make the connection to the Port of Halifax, the traffic that goes across the dock, and it really doesn't matter whether it is the Port of Halifax or any small port across the province, the Port of Halifax, nor the Port of Sheet Harbour, has any cargo. Cerescorp does not have cargo. Shippers and consignees have cargo, which shipowners often have some say in the direction of that cargo. When we discharge boxes at the Fairview Cove Container Pier, "abc" line gives us a manifest for containers to come off their ship or to load on their ship. We have no manifest as to what is in any of those containers or generally, ultimately, other than a rail distribution, where that cargo may go.

The same with Sheet Harbour. As a terminal operator, we facilitate the movement of cargo on or off a ship. Terminals do not own cargo and have no control over cargo. We have to try to set the climate to make it attractive, but you don't have the cargo. When the port talks about a half-million TEUs, they have to try to set a climate for the lines to call there, but they don't control the traffic.

MR. DOOKS: Mr. Chairman, what specifically are you doing to attract offshore work to Sheet Harbour port, supply vessels for a supply base? What avenue are you using to direct your attention on the offshore business coming into Sheet Harbour, other than the pipe coating? We appreciate the pipe coating. We know it has been there and you have been a success with the pipe coating. We know we have a short one coming and we welcome more, but the thing is talking about offshore supply base, we know that we can entertain, we know we can support, and we know we can handle that . . .

MR. CHAIRMAN: Question, please.

MR. DOOKS: I've asked it, Mr. Chairman. I was just making myself clear.

MR. SWINEMER: We have ongoing discussions on that and we have some current discussions going. We've even told some of the players involved that if it will help them sell the overall concept, we're even prepared to partner with another company that's actively involved in that industry to begin with instead of just trying to do it ourselves. If we can do it either way, we're prepared to do that. Unless there are further . . .

MR. DOOKS: With the limited amount of time, I'm unable to . . .

MR. CHAIRMAN: One question each. I have three or four more questions here. Mr. Epstein.

[Page 31]

MR. EPSTEIN: Ms. Oldfield, can I hear just a little bit more about the Halifax Port Authority's interest in Shearwater? It sounded a little vague to me. From what you said to Mr. Hendsbee a moment ago, did I take it that it is possible that Shearwater is property you might be interested in? Wouldn't it, in fact, be a fairly attractive property if it were available?

MS. OLDFIELD: I think the answer to Mr. Hendsbee's question is, first of all, a recognition that Halifax, in comparison to other ports both in Canada and in the United States, might be considered to be land poor. Therefore, opportunities which come available that make business sense for us, bearing in mind we have to pay as we go. Number one, we need a strategy; number two, if land becomes available that fits into that strategy, that would be something we would look at fairly anxiously.

MR. CHAIRMAN: Mr. Downe, one question, please.

MR. DOWNE: I would like to ask Mr. Swinemer another question. You indicated that the provincial government has indicated it has no problem with the management capability of you and your firm in regard to the location and the efforts that are being made, and so on and so forth. I asked a question about your lawyer. Can you tell me who Ceres' lawyer is in regard to its representation if there was any discussion with the provincial government? Who is Ceres' lawyer?

MR. SWINEMER: The last time that I had any discussion, it was with Metcalf and Company. That was back a ways; I have not had any recent conversations with them.

MR. CHAIRMAN: Mr. Langille, two questions, since you're . . .

MR. WILLIAM LANGILLE: Two years ago or more I had the opportunity to travel to Rotterdam and meet with the port authority. I asked for one full day to look at their operations. I haven't had that opportunity yet, but I look forward to it, in Halifax. At your capacity right now, with your facilities, what are you working at, and how much more cargo could you handle with your present facilities?

MS. OLDFIELD: Excuse me, Mr. Langille . . .

MR. CREAMER: I can probably respond to that in generalities, because it's a moving target. The capacity of the two container terminals is about one million TEUs, and that's the maximum practical capacity. The sustainable practical capacity is about 75 per cent of that, which is somewhere in the range of 800,000. We're currently operating at between 600,000 and 650,000 within the next five years.

MR. LANGILLE: My other question - I'm allowed to ask one more question. Just a scenario: if you have two ships travelling at the same time, one going to Montreal and the other going to Halifax - and the one in Halifax, of course, gets here faster and unloads its

[Page 32]

cargo while the other ship continues travelling up the St. Lawrence into the Port of Montreal - and they're going to the Midwest, which cargo would get to the Midwest faster, from here or Montreal? I'm looking at the figures, Montreal, I believe, being three times higher, cargo-wise, than Halifax.

MS. OLDFIELD: The short answer to the question is that the cargo coming through Halifax has a good chance of getting there sooner. There are variations on that theme. That's why, since the opening of the St. Clair tunnel, our cargo traffic has managed to increase since 1992-93, in that vicinity, with 17 per cent of the total cargo through the port going into Chicago. That market wasn't even there before. That is a very significant growth area for Halifax.

MR. LANGILLE: Just for clarification, if I may . . .

MR. CHAIRMAN: Sorry, Mr. Langille, but I do have Mr. Carey over here. In courtesy to him, he hasn't had an opportunity to ask any questions to date, so I would pass the floor to Mr. Carey.

MR. JON CAREY: Mr. Chairman, I have several questions, but obviously time is not going to allow. Not that long ago the post-Panamax vessels were in the news, and we were talking about dredging in New York and Baltimore and so on, and that was a major concern to the Port of Halifax. I guess my question is, New York, I understand - and you can clarify it perhaps - they were going to dredge and Baltimore perhaps as well, what impact is that going to have on Halifax or is that something that is settled out or where is that going? It's a major concern to shippers from the Valley.

MS. OLDFIELD: Sure. Let me try to address that. First of all, with respect to New York specifically, they are undertaking a dredging program. The dredging program will take a number of years and will have a very significant price tag attached to it. The first part of their dredging program is intended to get them in the vicinity of 42 feet to 45 feet so it's a significant long-term, very expensive, project to get the Port of New York to a position that luckily, Halifax enjoys naturally today. That's number one.

Number two, what impact will that have? If the dredging program proceeds at the Port of New York and that's in their bailiwick - there's nothing we can do that can have any control over whether they proceed or they do not proceed - but in terms of what's in our control and what the Port of Halifax can do, we have to look at that in terms of being a business reality, something that very well may happen. We have to plan for that. We have to be prepared to carve out our market niche and to ensure that we can meet the needs of local shippers, local customers, regional shippers, regional customers as well as we have been in the past going into the future - notwithstanding what New York does. That's what we're focused on.

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MR. CHAIRMAN: One more question, Mr. Carey.

MR. CAREY: I guess there are the niches out there that because at one time it appeared that this might be quite critical and may be devastating to the Port of Halifax - so that fear is not there any longer?

MS. OLDFIELD: I guess my reaction to that, Mr. Carey, is that we have a lot of really great things happening here at our port and it's not that we don't have a fear of that, it's just that we have a lot of things that we can focus on and grow. So, in the grand scheme of things, that is an element that we have to look at in terms of the overall business picture, but it is not the be-all and end-all.

MR. CHAIRMAN: Mr. Langille, just a point of clarification.

MR. LANGILLE: Just a clarification. St. Clair Tunnel - is that not in Sarnia? I believe you said Montreal, but was it not the tunnel in Sarnia that gave us the opportunity to go to the Midwest?

MS. OLDFIELD: Yes.

MR. LANGILLE: I think you said Montreal.

MS. OLDFIELD: Yes, you're right. I did.

MR. DOWNE: One point, if I can. The port is a phenomenal opportunity and you're very fortunate to have the job that you have, Ms. Oldfield and the board. What I would like, for all sorts of reasons, but for the economic opportunity for the Province of Nova Scotia and I think it would be - the presentation was not, we needed longer and what you've done here is excellent. Would the port authority be willing to invite the committee to do a tour and take a look at the post-Panamax cranes that we have at Halterm and what's going on at Cerescorp and to get a better feel of the opportunities that exist, but also the opportunities of - talking about our longshoremen - how positive the working relationship is there and the potentials that are there? I just ask that of you and I think it's an opportunity for this committee that's talking about economic development to really see first-hand the potentials that are there.

[11:00 a.m.]

MS. OLDFIELD: Mr. Chairman, if I could just respond because, quite frankly, one of the reasons why we were anxious to come here today is because we have a huge opportunity, not just for the Port of Halifax, Mr. Creamer gave you some of the stats of how it is not just about Halifax; this port deals with products of Michelin, products of Oxford Frozen Foods, products of Clearwater all over the Province of Nova Scotia. It is for all of us. So one of the objectives that we have is to basically open up a little bit. Let people see what

[Page 34]

the port really means to our province. In some of the States, for sure, ports are looked at in an entirely different manner than sometimes they are looked at here in Canada.

We don't have anything to hide. We want people to see because it's good stuff and, also, it's kind of neat, too. You go down there, there are some really interesting and neat things to see and part of what our objectives are over the course of the next year and beyond is to open it up a little bit so people can, in fact, see what is going on there. So as soon as we do a few more little things, I would be more than pleased to have the committee come down and do a tour and spend some more time with you, absolutely.

MR. CHAIRMAN: Thank you, Ms. Oldfield. One comment, Mr. Dooks.

MR. DOOKS: With respect to the member's request, I also would ask you, Malcolm, to invite the committee down to the Port of Sheet Harbour and to see the wonderful people and the potential that we have there that we must explore and to make sure that we understand, as a committee, the potential that that port, if properly serviced, would have to the people of Eastern Shore; smaller context, but the same things Karen said.

MR. DOWNE: Maybe we could expand that and do Sydney and down in Shelburne, as well, because there are ports in other areas of the province. In all due respect, I think it all has potential and we should be looking at them all.

MR. CHAIRMAN: Thank you, members. Unfortunately, as the Chairman, I have to recognize that we are now almost out of time. I want to thank our presenters for coming in and presenting a very detailed and informative presentation.

MR. SWINEMER: In response to Bill's comment, Mr. Chairman, I am wide open to do that, absolutely.

MR. CHAIRMAN: In Ms. Oldfield's case, I know you were just appointed the Chairman of the Halifax Port Authority and I, personally, and I believe it's fair for me on behalf of all committee members, to congratulate you on your appointment and wish you well in the future because, really, the Halifax Port Authority is a very important entity here for Nova Scotia and we wish you well in your endeavours.

MS. OLDFIELD: Thank you, Mr. Boudreau. I appreciate it.

MR. CHAIRMAN: With that, to the committee members, I would acknowledge that our next meeting is on Tuesday, April 23rd at 9:00 a.m. until 11:00 a.m.; the Port of Yarmouth and Shelburne Port Authority will be in here on that day. I will now entertain a motion to adjourn.

MR. HENDSBEE: So moved.

[Page 35]

MR. CHAIRMAN: Thank you.

[The committee adjourned at 11:03 a.m.]