MR. CHAIRMAN: Order, please. I will now call the estimates of the Department of Economic Development.
Resolution E3 - Resolved, that a sum not exceeding $34,708,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Economic Development, pursuant to the Estimate.
MR. CHAIRMAN: The time that this meeting began was 1:55 p.m. I would ask the minister to make any opening comments and introductions as he wishes and then, after that, we will start the questions.
The honourable Minister of Economic Development.
HON. GORDON BALSER: Mr. Chairman, on behalf of the department staff, I want to thank you all for the opportunity to go through the estimates debate for the Department of Economic Development. But before we get into that, I would like to introduce the people who are here in support of me today. They are on my right, the Deputy Minister of Economic Development, Ron L'Esperance; on my left, the Finance Director, Kate Johnson; and behind me, seated in the bleachers, so to speak, is Paul Taylor from the Petroleum Directorate.
Mr. Chairman, I do want to start by laying out a bit of what has been accomplished over the last year. I believe that Nova Scotia has seen a strong year in terms of its economic performance. Recent media reports have indicated that our economy has grown by 3 per cent over the last 12 months and, at the same time, unemployment has fallen in this province, provincially, to 9.1 per cent.
Much of that growth is attributable to the Sable gas initiative. But, Mr. Chairman, other sectors of our economy are also growing. The fact that our economy is doing so well gives me confidence in the future and reinforces for me that the directions that our department has taken over the last year are the right ones. While we do, in fact, have a long road ahead of us, we should stop, reflect on our success, celebrate our success and be proud of our accomplishments.
Mr. Chairman, one of the efforts I am most proud of this year has been the department's work in developing an economic development strategy for the province. I would remind members of the committee here that it is the first economic development strategy for the Province of Nova Scotia in a decade. It was nearly one year ago, during the main estimates debate, that I spoke of the province's need for just such a strategy, for an economic development blueprint, a framework that would help guide this province and the people of Nova Scotia into the future.
I am very pleased to tell you that we have that blueprint, drafted in concert with Nova Scotians from one end of this province to the other, the department unveiled opportunities for prosperity last fall. It represents our plan for the economic future of the province, a strategy that we believe is our best course of action if we are to make the most of the opportunities that lie before us.
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This is not about the people in this room, it is about our children and our grandchildren and their children to come. I believe that we are poised on the cusp of a bright future. Through the process that brought forth opportunities for prosperity, we looked at past practice and we looked at best practice. We looked at what was working in other jurisdictions, jurisdictions that are similar in nature to Nova Scotia. We considered the competition and we talked, literally, to hundreds of Nova Scotians. We listened to their concerns and their ideas.
The strategy reflects what we believe is the best of the research that is available. It provides a sense of direction and it focuses on the areas in which Nova Scotia can develop a competitive advantage and it reflects truly what Nova Scotians have told us they feel are necessary to bring about positive results. Its purpose is to outline key directions in which targeted actions can be taken to produce the best rate of return for Nova Scotians. In
particular, the strategy defines the role of government in economic development and, more than ever before, asks business and community leaders to take a leadership role in making the decisions that will grow Nova Scotia's economy.
Mr. Chairman, our growth strategy now serves as the foundation upon which we intend to develop further our economy and create the kind of environment and infrastructure necessary for Nova Scotians everywhere to succeed. To this end, Economic Development staff have invested a great deal of time and talent this past year developing the framework, the structure that will best enable us to realize our strategic goals. Throughout the consultation process, people told us that they wanted change. They wanted the decisions around economic development to be made as much as possible at arm's length from government.
The establishment of Nova Scotia Business Inc. is a direct result of these discussions and their input. The mandate of NSBI will be to stimulate economic development opportunities throughout this province. The private sector-led corporation will manage and coordinate the province's front-line business development functions, including investment attraction, trade development and business lending. The new Crown Corporation will take over the many lines of business that are currently carried out by Economic Development.
Mr. Chairman, we are well on our way to establishing this organization. Last week, the approval of the Standing Committee on Human Resources brought forward 12 Nova Scotians who were appointed to serve as the province's first board of directors for NSBI. These individuals are business and community leaders, representing large and small business, many of our vital sectors and, virtually, every region of the province. They are a strong group of people who are committed to getting Nova Scotia Business Inc. off the ground and giving the Crown Corporation the kind of momentum that it will need to produce the kinds of results that Nova Scotians expect.
Mr. Chairman, beyond our work in developing a strategy, putting in place NSBI legislation and restructuring the department, which will enable us to deliver on the strategy, staff have also been very active in promoting trade opportunities and attracting investment. Their success is evident. During the past year, EDS Canada opened an office in Sydney and announced plans to open a second office in Port Hawkesbury. Thanks in part to the province's investment, more than 1,200 jobs are being created by that one company alone.
In addition to EDS, the province has also been a factor in attracting on-line support to Kentville, establishing CanJet in Halifax. Our efforts also help existing companies such as ICT Group, Oxford Frozen Foods and Sobeys, not only to stay in the province, but to expand their operations in rural Nova Scotia. During the year, we also renewed our approach to trade development through focused trade programs and key markets like Boston and Washington. As a result, a great many local companies have had the opportunity to begin to market their products and services in an export-oriented fashion.
I am also pleased to know, Mr. Chairman, that my department and the Government of Nova Scotia are working diligently with the community, with the federal government and with business partners to help create new economic opportunities in Cape Breton. Together with our partners at ECBC and HRDC, we have established an integrated approach to administering the federal-provincial Cape Breton Growth Fund. Our contribution to the fund and our participation on the joint management committee are just some examples of how our commitment to Cape Breton has taken on form.
Mr. Chairman, community economic development is very much a part of how we will address the economic challenges we face. Strengthening our regional capacities and giving our communities the tools and the power they need to grow their own economies is a large part of our economic growth strategy. As we continue to support the core budgets of regional development authorities and we continue to develop strong working relationships with Nova Scotia community groups, we are in fact ensuring that their future will be prosperous.
Mr. Chairman, our focus in Economic Development for the upcoming year is quite simple. We want to continue to grow on the successes of last year and move closer to realizing our goal, as outlined in the growth strategy. We will do this by improving Nova Scotia's business climate, thereby making it easier for businesses to start. We will also do this by strengthening our partnerships with industry, with business, with government at the federal and municipal levels. We will also do this by engaging in continuing conversations with our communities. We are going to embark on an aggressive trade and investment strategy, developing further potential for the Nova Scotia workforce and by marketing Nova Scotia to the world.
Mr. Chairman, I would also be remiss if I did not comment on the province's efforts to further develop our offshore through the Petroleum Directorate. Our offshore is in transition and so too is the directorate. What started as a project with Sable, is now an industry. Exploration in the years to come will be very high. To capitalize on these opportunities and the development that this presents for Nova Scotians, we are setting forward a number of critical initiatives, among them the development of a revised energy strategy in co-operation with the Department of Natural Resources.
We are also bringing forward a government skills agenda strategy with our colleagues in Education. I believe, more than ever before, departments within government are co-operating to move forward common agendas. The fact is, Mr. Chairman, we are well positioned in Nova Scotia to develop the offshore, to expand the key sectors, to increase local exports and to grow communities that will help continue to keep Nova Scotia as a wonderful place in which to live, work and raise a family.
With that, Mr. Chairman, I would open it to questions.
MR. CHAIRMAN: The honourable member for Sackville-Cobequid.
MR. JOHN HOLM: Mr. Chairman, as I showed the minister earlier, I only have a few little topics that I want to address with him so it shouldn't take more than a couple of hours. No, it won't take that long, hopefully. First of all, I want to say to the minister that I couldn't agree more with one of his closing statements and that is that Nova Scotia is in an excellent position to capitalize on the resources that we have offshore, speaking of the oil and gas resources, as well as the resources that exist under our onshore lands. Whether or not Nova Scotia gets the full benefits, which I don't think that we have been to date, that we deserve, is going to depend upon the will of this government, in part, and also the co-operation that we can get from the federal government, as well as from industry. There are a number of things, if I could start though, dealing with those kinds of things.
On a topic that is closely tied to it and let's go, first of all, on the assumption that there is going to be the resource available onshore to be made available to Nova Scotia. My first question, I guess, is, would the minister agree with the statement that having access to natural gas is an enabler for local businesses and local communities to develop and expand?
MR. BALSER: On the face of it, yes, that would be the case. However, as everyone in the room is very aware, over the last year, the price of natural gas has been somewhat of a roller coaster ride and, in actual fact, in light of the awarding of the franchising licensing to Sempra and their initial pre-marketing of gas to the residential communities of Antigonish and even in Dartmouth, there was little interest at this juncture for residents to look to convert from an alternate source of fuel to natural gas. That is not to say that over time, the markets will not change. But you are right, having gas available in communities in Nova Scotia is going to be, over the long term, critical, and I believe will happen as the market dictates and as opportunities present themselves.
MR. HOLM: I think the minister would agree that if you take a look at where new virgin markets are being opened up and developed where natural gas is, especially when it is foreign to that area, that the take-up by the residential communities is often a little bit slow. Even when our gas lines were being piped through Bangor, Maine - and in the United States, of course, they have much more history with it than we do down here in the Maritimes - the take-up initially, as the lines were being laid, was very slow. However, once it becomes available, particularly in areas of new construction and also in areas where there are conversions taking place because furnaces expire, then people, residents, will switch to it.
But what I am getting at, more so than the individual residential homeowner, I am thinking about businesses. There are many businesses now, some of which would be using propane and some others use other sources of fuel, especially if there is to be a discounted rate for the natural gas being available, if it is available to them, they have competition, they can compete for the price that they will pay for fuel for Nova Scotia Power or for oil products or for propane and so they have a bit of a competitive advantage.
Where I am coming from, Mr. Minister, is the fact that the Government of Nova Scotia was registered as an intervener at the Utility and Review Board. Others at the board have suggested that if Nova Scotia Power is able to selectively reduce the power rates that they charge to large customers in areas where natural gas is to be made available, but they are not going to provide those same reduced rates in areas where natural gas is not available, you set up what some might argue would be a predatory pricing situation.
I see the member for Cape Breton North, one of our new members in the House, at the table today and I am sure, at least I would hope, that the member for Cape Breton North is as concerned as I am for industrial Cape Breton and other areas that do not have and, in the foreseeable future, are not expected to have natural gas. They won't have the option, businesses in those areas which were hoping to develop, of getting cheaper power rates because there is no natural gas in competition.
So my question to the minister is, if it is an enabler, which the minister believes that it is, if some have access and others do not, is it not also, therefore, the reverse of an enabler? You might say that it would be detrimental to the development of new industry and businesses and make it harder to maintain existing businesses that depend heavily upon energy resources if the natural gas is not available in those communities and if Nova Scotia Power offers cheaper rates elsewhere. It is a long way to put what is a very simple question.
MR. BALSER: You are somewhat noted for that. I would say, in response to that, you are correct. Obviously, the availability of gas, when it is an appropriate source of fuel or part of the business plan, would make it attractive for a particular company to grow or expand and the absence of that gas would work against them. In terms of having the ability to offer competitive sources of fuel, that very much is a concern of the Petroleum Directorate and of the Department of Economic Development in terms of making sure that economic opportunity presents itself fairly across the province.
There are many factors beyond access to natural gas that will dictate what a company chooses to do in terms of where it will locate. Certainly, we have had discussions with the URB about the appropriateness of Nova Scotia Power offering discounted power rates to compete against companies that would be looking at natural gas as a fuel source. Certainly, we want to make sure that over time and one of the reasons that made the Sempra proposal attractive was that they had made a commitment to supply gas to, I think, 70 per cent of the population in all counties over a seven year rollout and the expectation is that as long as they are here in the province and working towards that.
MR. HOLM: Mr. Chairman, the minister said, in his comments, that he has had discussions with the URB. I am not aware that the government has made any presentation to the URB on this issue. Could the minister correct me? Am I wrong? Did the government make a formal presentation to the URB?
MR. BALSER: We did, in fact, have legal counsel make submissions and there will be a final submission made to the URB.
MR. HOLM: When were those submissions made?
MR. BALSER: The department participated at the public phase of the hearing. There were no written submissions. There were comments made at the public hearing around the concern.
MR. HOLM: That is interesting because the minister will recall that I asked him about this question in the House and why the province hadn't made any submission and the minister suggested that I was trying to get the government to interfere in an arm's-length process and that I was doing something that the minister must have considered to be bad.
Mr. Chairman, now I am being told that government supposedly did make a representation, it wasn't a written one. Could the minister provide us with a copy of what position the government, through their legal counsel, presented to the URB on NSP's application?
MR. BALSER: My understanding is that it was a form of oral questions to that panel, that there will be, at the end of the process, a written submission. That would be a public document.
MR. HOLM: Okay, so you asked questions. You haven't put forward, at this point in time, any government position?
MR. BALSER: That is correct.
MR. HOLM: Do you know what the government's position is that you are going to be putting forward? I don't mean for you to read the whole thing, but are you for or against NSP's application?
MR. BALSER: As I said to you in response to an earlier question, we have concerns about Nova Scotia Power being able to apply discounted power rates where there would be the opportunity for direct competition with natural gas. That is the position we are looking at, and that is the nature of the questions that were asked to determine exactly where Nova Scotia Power was going in terms of their application.
MR. HOLM: You say that the government has concerns with that. So, is it the government's position that if Nova Scotia Power is to be allowed to provide discounted rates in one area that those same discounted rates must apply to all parts of the province?
MR. BALSER: That last part again?
MR. HOLM: Let's just say that in metro where gas is going to be available, if Nova Scotia Power is wishing to provide discounted rates in metro to compete with natural gas, is it the government's position that those same discounted rates should apply across the province, even in those areas where natural gas is not available in competition?
MR. BALSER: The issue from our perspective - and, of course, the Department of Natural Resources has an involvement in this as well - the discussion and the questions were related to that issue. The issue is to ensure that there is a level playing field in the province amongst all the fuel sources and that the opportunity would present itself to be fairly applied across the province.
MR. HOLM: You can't have a level playing field if one rate is charged in one place and a different rate is charged somewhere else?
MR. BALSER: That would follow, and obviously that was the nature of the questions that were asked to determine . . .
MR. HOLM: And that is the position of the government?
MR. BALSER: At this point, as you know, we are developing an energy strategy, and that is the point of discussion. Obviously, that would be what we were looking towards.
MR. HOLM: At this point it is at the discussion stage, it is a strategy yet to be unfolded, but the government hasn't yet reached the decision that fairness is to be the government's policy?
MR. BALSER: Certainly, fairness is a cornerstone of how we see a way to ensure that all regions of Nova Scotia have access to natural gas in a fair manner. At this point in time we are looking towards the strategy of Nova Scotia Power, in terms of whether or not they are going to be using discounted rates to make them competitive with natural gas. As I said earlier on in response to a question, at this point, with the price of natural gas where it is, it is not a factor.
MR. HOLM: Let me just ask you this question because it sounds like I am getting some mixed messages, that might just be the head cold and so on that I have that it is not just sinking through, so I will ask it this way. Would the government feel that it is fair for Nova Scotia Power to charge, let's say, Bowater a higher cost for electrical energy than they charge, let's say, Kimberly-Clark if Kimberly-Clark would have the option of switching to natural gas, or should they both pay the same power rate?
MR. BALSER: Again, that is the issue that is being investigated. Obviously, on the face of it, the concern is to ensure that the level playing field applies from one part of Nova Scotia to the other.
MR. HOLM: That is what is being looked at, but you haven't quite gotten to the point of saying that it would be unfair to have different power rates.
MR. BALSER: The final submission has not been completed and, as I said in response to an earlier question, we are embarking on a review process that will engage Nova Scotians, industry, municipal levels of government, and so on in a discussion to determine what the energy policy should look like. From the outset, in terms of the blue book commitments that were made by this government during the last election campaign, the object of the exercise was to ensure that if natural gas is provided to communities in Nova Scotia that it is not done so at the detriment of other alternative sources of energy.
MR. HOLM: Of course we can't wait for the energy policy to be developed before the government gets its written submission into the URB. The decision will be made long before that policy paper is completed. I wonder if the minister could tell us when his department will have completed the final paper that you are submitting to the hearings, and when will that be made public, so that we can understand what the government's view of fairness is?
MR. BALSER: I don't have the exact date but it is fairly soon, and I know that the department is working to go through the transcripts of the comments that were made to determine exactly what was discussed with a view towards preparing the final document.
MR. HOLM: In the shorter fullness of time we will know what the government's view of fairness is?
MR. BALSER: If I may, the cornerstone, as I said, of moving forward is that we create an environment that is fair whether you live in metro or you live in Port Hawkesbury or you live in Shelburne. The object of the exercise is to ensure that companies located there are not placed at a disadvantage as a result of the availability of either electrons or molecules.
MR. HOLM: And the same would apply for private individuals?
MR. BALSER: At this point. Again, the issue before us, in terms of private individuals, is the fact that because of the current price of natural gas there is not a particularly large degree of interest in converting from oil-fired furnaces to natural gas. While the view is that over time the market price for natural gas will move back down to some reasonable level, it will be the market that determines whether or not individuals will choose to look at replacing their furnace with a heating system that uses natural gas.
MR. HOLM: Just one other thing before I leave that general area and leave the URB behind. You had mentioned the fact that Sempra had won the contract for distribution, quite correctly. The minister will, of course, also know that there is discussion going on - to use that word - between his government, the Department of Transportation and Public Works and
Sempra over the laying of pipes or the lines. There has been some indication that if they don't get government approval, the rollout plans for Sempra could alter. If Sempra, for whatever reason, chooses or decides that it is not, under the regime that the government lays down, vis-à-vis the roads, feasible for them to honour their 70 per cent commitment, would it be the intention of the government to have their licence franchise revoked or at least consider revoking that?
MR. BALSER: The issue of the road shoulder is one that has been a subject of some concern, but that is not the only factor that has weighed on the situation in terms of how quickly gas will be provided in the Province of Nova Scotia. There are issues, as we said earlier on, about the price fluctuations; there are issues related to approval processes that were outside either the control of the province or Sempra itself in terms of the federal government. They made a commitment in the course of the URB hearing to provide gas to, as I said, 70 per cent of Nova Scotians . . .
MR. HOLM: In certain time frames.
MR. BALSER: . . . in a certain time frame. As I say, we are aware of that, and we expect them to honour their commitments. Again, there are situations currently that may impact on their ability to complete in that timeline.
MR. HOLM: If it is not because of delays brought about by the federal government, but if it is that they are unwilling to proceed because they can't lay them in the roadbeds, has the government considered the possibility of revoking the licence to Sempra for the distribution, or is that something the government would consider?
MR. BALSER: It is certainly one of the things to be considered, and that ultimately would lie with the URB, to determine whether or not the franchise should be revoked. Obviously, that is a significant step in any direction. There was an extensive process that saw the awarding of the franchise to that particular company. Obviously, a decision to revoke the licence would impact on how quickly gas would be supplied, and there are the issues, as I said earlier, relating to a volatile market that could make things problematic as well.
MR. HOLM: Before I get to the offshore, I will switch to some more onshore, something I spoke to the minister about before. The number of acres of land onshore that the government has currently given companies leases to explore for oil and gas, how many leases and how many acres?
MR. BALSER: There are currently 16 exploration agreements onshore, and I believe it constitutes 1.6 million hectares.
MR. HOLM: It is 1.6 million hectares, so that would be about 3.5 million acres?
MR. BALSER: Something in that range.
MR. HOLM: When that land is put out for lease, companies bid on it. Could you tell me, is the bidding process the same as the offshore, that is that the companies promise to spend x numbers of dollars over a certain period of time?
MR. BALSER: They actually pay for the licences. I would also indicate that the commitments to the 1.6 million hectares constitute roughly two to three years' worth of work and something in the neighbourhood of $15 million in expenditures by the company.
MR. HOLM: Okay, $15 million worth of expenditures. Could the minister tell me how much the companies pay for those leases or those licences?
MR. BALSER: Our forecast this year is something in the neighbourhood of $230,000.
MR. HOLM: What does that work out to per acre for the land - about what, 25 cents?
MR. BALSER: Something in that range.
MR. HOLM: About 25 cents. Does the minister have any idea what companies are paying per acre to explore on land in places like Alberta?
MR. BALSER: We will get that for you.
MR. HOLM: How about if I was to tell you that I think the last one was about $120 an acre?
MR. BALSER: The other factor is that when you look at a mature industry in the Province of Alberta, prospectivity is a known quantity. There was some historic involvement in onshore exploration, it was abandoned because of the viability of the finds. What we are attempting to do at this point is capture the interest that has grown in the offshore and move it to some degree to the onshore, and in light of some of the recent success of seismic exploration that has occurred onshore, North Star, I believe, has indicated they will be back next summer to do more seismic; and there are, in fact, wells being drilled at this juncture.
MR. HOLM: I appreciate that Alberta has a mature industry onshore, as Nova Scotia's is very young. The minister also knows that one of the main reasons why onshore exploration hasn't been viable in the past is that there was no distribution system. Now that we have a main line going across and a distribution being put in place, Nova Scotia then becomes a prime area to be looking. If the geological structure onshore is the same, really, as that offshore, it doesn't have the water on top of it today, once upon a time it did, but the probabilities are not necessarily for the same size of a find, but you don't need to have as big
a find onshore because the costs for exploration onshore would be what, $100,000 to drill a well; whereas offshore it could be in the millions, $20 million, $30 million sometimes for a deep well. Normally, not quite that much, normally around $15 million, I think, for an offshore one, but $100,000 is not a bad investment.
Even if we got $100 an acre instead of 25 cents, that is a lot more money coming in that could be used for a lot of other needed programs in the Province of Nova Scotia. Who set the rate? How do we determine that we get 25 cents an acre rather than what some might consider a fair market value?
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MR. BALSER: The rate is set in provincial regulations.
MR. HOLM: When was it last set?
MR. BALSER: The other thing the member should be cognizant of is that we are attempting to grow an industry, he was very right in saying that the pipes do now exist to transport gas. In the absence of that, the value of those particular leases was not as significant. We are moving slowly from an industry in its infancy to one that will be matured. Obviously, one would assume that over time, as there are successes in the onshore, the value of the prospectivity will increase.
MR. HOLM: One of my concerns, as we are talking about that, is if you can pick it up for 25 cents an acre, by the time - oh, I am sorry, my colleague has corrected me. I was misspeaking, it is 25 cents a hectare, 10 cents an acre. We are only getting less than half of what I thought we were getting for an acre of land. So, at 10 cents an acre now, we have given away 3.5 million acres at 10 cents an acre. I am just wondering how many acres are going to be left once we become a mature industry or a mature site to be getting a fair rate of return per acre on our development costs or our leasing costs?
MR. BALSER: Again, I would remind the member that there are timelines in place during which time this initial round of seismic analyses and so on has to be undertaken. We look to the current situation as an opportunity to begin an onshore industry that did not exist, and as we move through the development the prices will find an open market, fair value price.
MR. HOLM: How many years do they have to complete that work?
MR. BALSER: Two to three years.
MR. HOLM: Two to three years, so three years. Let's say they strike something in that three year period, is that like offshore, if they start the work do they have to have completed spending all of the money within that three years? Or, if they started a spur, as they would call it I think in the offshore, does that give them an automatic extension?
MR. BALSER: If they find a discovery, they are allowed to hold the lands. I will get the details as to how long they have after they have announced they want to go . . .
MR. HOLM: Was it fashioned after the offshore-type of agreements?
MR. BALSER: I don't know the answer to that but I will get it for you.
MR. HOLM: I sure hope not, because that would be for perpetuity, pretty well. Once they get a significant find offshore, they get their significant licence, whether they develop it or not they hold it. Does the minister have any idea as to how many more acres - there is a lot of province - surely through the Petroleum Directorate, they must have an indication of some of the seismic work that has been done onshore? Does the province have any idea how many more acres are out there that companies might be interested in bidding on at 10 cents an acre?
MR. BALSER: The amount of land that is attractive from the perspective of its geological composition, I don't have that information but, obviously, there are vast regions of the province that have very little value in terms of their prospectivity.
MR. HOLM: That's my point. Does the minister have that information back at his office or would the staff have that information? Would I be able to get that information, maybe later on today?
MR. BALSER: We will make that available.
MR. HOLM: Could the minister also tell us when the last time (Interruption) My colleague has what you call a mind that is a trap for remembering all the factual details. He has an encyclopedic-type of memory. So that is about one-third of the province you say is already into these licences. So I guess we haven't got all that much left to give out. I am wondering if the minister could tell us when government last visited the rate that they charge per acre for onshore exploration.
MR. BALSER: I don't have that information here. I will certainly take it under advisement to provide it.
MR. HOLM: I think if I were to pass the minister $100, that would entitle me to 1,000 acres, not a bad investment. That's really going to bankrupt a lot of these big companies that would like to tie it up. Anyway, I shouldn't be . . .
MR. BALSER: Then again, in response to that, there have been hundreds of kilometres of seismic shock and not every area, every lease, provides the opportunity to develop a project. So, again, this is a speculative industry at best, and you have to acquire fairly substantial land leases in order to make the project viable. As was said earlier, when you have a two to three year turnaround, there will be pieces of leases, there will be leases that return to the province for re-release, if you will.
MR. HOLM: I would quite honestly hope that there are significant portions of those leases that are returned to the province for re-release, and I would certainly hope that by the time that happens that the province will have increased their fee from 10 cents an acre to something that is reasonable and justifiable. I don't expect you're going to find too many in the industry complaining about the 10 cent fee, but you might find some Nova Scotians complaining about the 10 cent fee. I mean that's not even peanuts.
MR. BALSER: But, again, part of the reason that these companies are interested in onshore exploration at this point in time is that the infrastructure has recently been put in place that makes the development of small finds economically viable and without that infrastructure the leases would be worth less than 10 cents and this is, in terms of the onshore, an industry very much in its infancy and one that we see changing over time.
MR. HOLM: Yes, 20 years ago or before any kind of infrastructure was being put in place or contemplated, yes, those leases would have far less value, but we do know, Mr. Minister, that the infrastructure is being put in place so that 10 cent fee, I would suggest to you, is no longer suitable, which is why I asked, when was the last time that fee structure was visited by government? Do you know approximately when that would have been?
MR. BALSER: You've asked that particular question three times and we indicated that we would get that information and provide it for you.
MR. HOLM: Okay, but obviously it hasn't been recently?
MR. BALSER: It hasn't been recent, no.
MR. HOLM: Hopefully my questioning will spur the government to look at that quite seriously. If I might, on the royalty regime for the onshore site, we know what it is based on offshore and it is a profit-driven royalty regime, one and two, then three, then maybe five and possibly more. Could you tell me what the royalty regime onshore is?
MR. BALSER: It is the generic royalty regime that's in place.
MR. HOLM: The same as offshore?
MR. BALSER: That's correct.
MR. HOLM: But the risks onshore are so much smaller and the costs to develop an onshore well - so if they strike, what is it, 1 per cent?
MR. BALSER: It is 2 per cent and moving to 5 per cent and 20 per cent to 35 per cent.
MR. HOLM: Is it 2 per cent profit based?
MR. BALSER: Gross royalties, and then moving to net royalties as they recover the cost of development.
MR. HOLM: How does that compare to Manitoba, how does that compare to Saskatchewan? Do you have comparisons for what they charge in royalties? I will concede we are a new market, a new industry; they were once, too.
MR. BALSER: Again, it is difficult to compare apples and oranges, if you will. The issue in Nova Scotia is to encourage development. We don't have an onshore find that is in production, that if you compare the royalty regime that's in place in Alberta now, it is slightly different than the one that was in place in the early years of development.
MR. HOLM: Yes, but we have already given one-third of Nova Scotia at 10 cents an acre over for exploration licences, and at a royalty regime that starts off at 2 per cent of net . . .
MR. BALSER: Two per cent of gross in the early stages, then it moves once the costs are recovered.
MR. HOLM: Two per cent of gross. I couldn't tell you exactly, because I will concede that the royalty rates can vary from one area to another, one well to another area in Western Canada and elsewhere, but it ain't no 2 per cent of the net of gross. The rates range in 20 per cent, 25 per cent, 26 per cent; 2 per cent on 10-cent acres ain't bad for the industry, Mr. Minister.
MR. BALSER: Again, if you're comparing Nova Scotia to some of the sedimentary basins in Alberta or some of the areas where there have been significant exploration activities for the last 30-odd years, it's very difficult to look at the two and say they are the same. We are in a very young industry here. In fact, the interest in the onshore has only really emerged in the last little while as a result of the infrastructure coming into play. Again, the member would indicate that we have given over these lands. In fact, they are leased for a particular period of time with a particular commitment and, by and large, many of the leases will return to the hands of the province so they can be reissued at a future date. Once we have some fields that are in production in the onshore, the level of prospectivity risks will diminish and the interest on the part of companies would obviously increase. So what we are looking to
is to set a climate that will allow an industry that doesn't exist at this point in time in the onshore to begin to grow and develop.
MR. HOLM: I hear the minister's argument and it can sound totally logical, but I am sitting back - excuse me if I am a little bit of a skeptic because I don't think Nova Scotians got a share of it to date - I am looking at this, here we have over one-third of the province given for 10 cents an acre for a period of time to these companies to explore for their oil and gas. You can be darn sure if they haven't already shot the seismic work over the shortest period of time possible, they will be shooting what they consider to be the highest prospect areas and be drilling as fast as possible trying to meet the minimum requirement, at least to lock it in and the royalty rates, if they hit, are going to be 2 per cent. Could you tell me what are we getting in the way of Nova Scotia economic benefits? What commitments and what method of enforcement do we have to ensure Nova Scotia content on these 10-cent acre explorations?
MR. BALSER: Again, the member would like to compare industry development in Nova Scotia to that which has occurred in Alberta with the view that we can entice some of these large onshore drilling operations to come to Nova Scotia. If you compare the attractiveness of two regions, I would think that the companies that are looking to onshore development would stay in the Alberta sedimentary basin where they know the level of risk and they have the infrastructure in place and that, at this point in time, requires some commitment on the part of the province in terms of a strategy to encourage companies to look to onshore exploration.
The member is very knowledgeable in terms of the oil and gas industry and recognizes full well that most, if not all, of the interests at this point in time, are focused on the prospectivity in the offshore. In terms of benefits that accrue to the province on onshore development, we have the people who are involved in shooting the seismic. We do have some exploration drilling going on at this point in time and those people are employing Nova Scotians to do that work. So it is a point of trying to ensure that in its infancy this industry has a chance to grow and develop and to try to capture results that were 30 years in the making in Alberta, and try to apply them to Nova Scotia, which really has an onshore industry that has only come to focus in the last year, and a bit in terms of the infrastructure being available. It is very difficult to compare the two on a flat basis.
I think there are factors that need to be weighed from a provincial government perspective about what is the appropriate course of action and, as I say, when we move from the very beginning steps of the onshore industry to what may exist in this province 5, 8 or 10 years from now, what's happened is, because of the interest in the offshore, the infrastructure is now in place to make the onshore exploration more attractive. As I said earlier on, the commitments are two to three years in terms of lease agreements, and those will expire in some instances and be reverted to the province.
MR. HOLM: Mr. Chairman, I know the two are not equals, that one is more mature and one like ours would be considered to be a little bit higher risk, but I have trouble believing that our acres are worth only one-one thousandths, or one-twelve hundredths of what a company considers to be primary to explore is worth in Alberta, nor that our royalty regime should be about one-thirteenth of what it is in Alberta, especially when we are already putting under lease approximately one-third, or a little over one-third to Nova Scotia. So I am obviously not going to get from the minister agreement on what I am saying, but hopefully I will get the minister's agreement to go back and have a very hard look at what Nova Scotia is getting.
Here we are, we are going on a Campaign for Fairness across the country and we're looking for - and I support 100 per cent that Nova Scotia should be the primary benefactor from our offshore development and we haven't been getting our fair share, but if we are not getting it offshore, which we aren't, we have 100 per cent control of onshore and we damn well better make sure that we are getting the maximum benefit for our Nova Scotia businesses in terms of Nova Scotia content, Nova Scotian citizens in terms of employment opportunities and, of course, to the taxpayers of this province, maximum return for what is onshore if we are to have any credibility whatsoever looking for more and a fairer deal in the offshore.
So I say to the minister, you don't have to agree with what I am saying. I am not pretending for one second to have all of the insight, but just in my gut I feel from everything that I have seen that we are not getting what should be our fair deal onshore either. I ask the minister and his department to have a very serious look and review of that.
MR. BALSER: Certainly in terms of benefits accruing to Nova Scotia, we're always monitoring that. A bit of, not necessarily a correction, but a clarification, the member would seem to be inferring that the kinds of benefits associated with offshore development would be naturally associated with onshore. Remember that a lot of the benefits accruing to Nova Scotia in the offshore are related to opportunities for metal fabrication, supply vessel operation.
MR. HOLM: I appreciate that.
MR. BALSER: The fact that in Alberta, I think in a sedimentary basin, they drilled something in the neighbourhood of 14,000 exploratory wells last year, because the costs associated can be in the range of $100,000. The cost to drill wells in the offshore, as the member is well aware, can range anywhere from $30 million to $53 million. So just by virtue of magnitude and scope, the benefits accruing because of onshore development in terms of benefits and access will be less than those associated with the offshore. Again, there are companies shooting seismic in the onshore, there are exploratory wells being drilled in the onshore. The supplies are coming from Nova Scotian companies and it would be our intention to ensure that over time, as this industry in the onshore grows and develops, that
that continues to happen, and we do make every effort to ensure that Nova Scotian companies have the ability to compete and offer services.
MR. HOLM: I apologize if I left the impression that I thought that the benefits on the onshore, on a scale, were the same as they were in the offshore. Obviously, they would not. However, the concept certainly should be the same even though the amount of water that's going to be in the bowl, or in the bucket, is going to be less onshore than offshore. We want to make sure that we're getting our proper cupfuls. I guess in an articulate way that's the point I am trying to make.
MR. BALSER: Absolutely, and I think if you want to compare onshore and offshore, the fact that the Sable project was developed and followed very closely by some positive finds, but PanCanadian had been the impetus to see companies like Kerr-McGee, Marathon and Phillips and so on here in the offshore in a larger presence. The same, I believe, will occur once we have some significant discoveries in the onshore, that if we can look out past the day to, as I say, an industry that is, if we compare it to Alberta, 30 years old, I think you will see an onshore industry that is different.
One of the big positives in terms of creating an Atlantic Canadian attitude towards onshore exploration is the fact that Corridor Resources Inc. have been encouraged by some of their work in New Brunswick and in P.E.I. So I think what has happened is that an overlooked opportunity is now becoming much more prominent in people's radars, if you will.
MR. HOLM: Let's take a look at the NSRL sale for a moment. Could you tell me, and I know the price, I know the total package and the PanCanadian portion is $65 million-plus, approximately, then the rest is for the assets on our share, and SOEP on Sable, but could you tell me when the valuation of the gas reserves was done?
MR. BALSER: As it relates to NSRL?
MR. HOLM: Yes, the value of the resource.
MR. BALSER: It was done last fall when the company was determining what course of action should unfold.
MR. HOLM: Last fall?
MR. BALSER: I believe that's correct but, again, I would remind the member that the NSRL file is one that doesn't reside with the Petroleum Directorate.
MR. HOLM: Okay, and could you tell me what the price of natural gas, when the valuation was done, what assumption was placed on the price of natural gas, how much per whatever-it-is unit they talk about?
MR. BALSER: That analysis was not done by the Petroleum Directorate. That particular file, the NSRL issue, that particular file does not reside with the Petroleum Directorate.
MR. HOLM: No, but you surely have access to that information, do you?
MR. BALSER: We certainly can tell you the price of gas last fall, but as far as the work analyzing the detail, we . . .
MR. HOLM: Who has that? Is that Finance? So I must ask your colleague - I am not interested in what it was selling for at the time, necessarily, but I want to know what value was placed on a unit of the natural gas and what it actually was at the time so one can try to get a figure on that.
One of the rationales for having NSRL and one of the great things about owning the 8.4 per cent of the resource was always stated that that ensures that Nova Scotia has access to natural gas, that we have a supply available for Nova Scotians. Once it is sold, what guarantee do we have? Do we have signed contracts with all of the partners that they guarantee that they will meet Nova Scotia's natural gas needs first?
MR. BALSER: We have a commitment from SOEI to supply 10 million cubic feet of gas into the Nova Scotia grid to meet our demands.
MR. HOLM: How much gas can the current line handle?
MR. BALSER: Which line are you talking about?
MR. HOLM: The main line, let's say the main lines to Halifax and the much now shrunk line to Cape Breton?
MR. BALSER: They can handle between 60 million and 80 million cubic feet per day.
MR. HOLM: They can handle 60 million to 80 million.
MR. BALSER: It depends on whether the load is - and with compression and so on.
MR. HOLM: Yes, but 60 million to 80 million?
MR. BALSER: That's correct.
MR. HOLM: And we have a commitment from SOEI to provide us with how much?
MR. BALSER: It is 10 million at this point.
MR. HOLM: It is 10 million, so in other words, the lines that we have in place can handle eight times the amount of gas that we have a commitment that they will guarantee to provide us with?
MR. BALSER: That's correct. Nova Scotia Power also has a commitment, or has access to 62 million cubic feet per day. I would remind the member opposite that this is the first of - one would hope as we move to an industry and certainly in light of PanCanadian's development that it only makes sense that there will be additional lines at this point and, in fact, one of the major issues that has been a point of discussion with the industry, certainly from a marketing perspective, is the fact that at this point you have a one-straw theory, if you will, of gas supply and distribution. Again, if you look at the types of leases that have been let off the coast of Nova Scotia and extending down the carbonate bank to New England, that there will be, over time, we believe, future developments that will provide additional pipelines onshore that will make it less burdensome in terms of if 10 million cubic feet per day is not sufficient to meet the demands, and certainly at this point in time it would appear that it is, but as we grow potentially, industries related to access to natural gas in the province, there may be opportunities presented by new lines and new models.
MR. CHAIRMAN: I would advise the member that you have 10 minutes left in your time allotted.
MR. HOLM: Certainly 10 million is enough to meet the need when we haven't developed anything yet, but once we start to get the take-up, I start to question that. There are a whole bunch of other issues around PanCanadian and issues of where they're going to be doing the development or processing, onshore, offshore, all kinds of issues about safety. We haven't got the regulations for onshore/offshore safety yet, a year after they were supposed to be worked on. Before I get to some of those, I just want to continue a little bit on some of the offshore business as well.
I won't go through what I think of the royalty regime. At the present time, by owning a share of SOEP, we would have access to the records of the costs for the production, correct? Because we have to pay an 8.4 per cent share of those costs. So we can, at least by looking at those books and knowing that, have a pretty good guestimate on what costs really should be assessed against that project and, therefore, what our royalty regime should be based on and the cost. Once we sell that 8.4 per cent, it is 100 per cent foreign owned. Where is our window, our inside look at the books?
MR. BALSER: Certainly in terms of the regulations that are in place, the costs associated with the Sable (Interruptions) They're well tied down.
MR. HOLM: Yes, but do we have the forensic auditors sitting down in Houston and examining everything on a constant basis?
MR. BALSER: The auditor is in the Office of the Petroleum Directorate, and he has access to that information.
MR. HOLM: So we can tell exactly how much is being . . .
MR. BALSER: That's correct.
MR. HOLM: I am glad you've got that confidence because a lot of others in some of the industries certainly don't. I hope you're right. This past year, do you know what the value of the gas, at market, was worth?
MR. BALSER: It was $900 million, will be approximately.
MR. HOLM: It was $900 million and we got?
MR. BALSER: We got $9 million.
MR. HOLM: We got $9 million, so that is 1 per cent?
MR. BALSER: It is 1 per cent, that's correct. As you are well aware, the royalty regime is structured so as to encourage initial prospectivity, the royalty regime was structured so that companies that were first in would be able to recover the costs of their investment in the early stages. In actual fact, if there is a benefit to the current situation with regard to natural gas prices, it is that these companies are recovering their investment costs earlier on, which will mean that we can move to the more attractive levels of royalty structure sooner rather than later.
MR. HOLM: I shouldn't wish time away, but I hope that we get to that in a hurry. If I could, you're getting rid of the Energy Conservation Board. One of the things that that board was supposed to be doing, that you're abolishing by legislation, Bill No.-whatever it is, that was introduced by you on . . .
MR. BALSER: Last week.
[3:00 p.m.]
MR. HOLM: One of the things that it was supposed to be doing was monitoring to ensure that Nova Scotia gets its fair share from the development, that Nova Scotians are the primary benefactors. That's one of the things that is supposed to be monitored, according to the legislation that's being abolished. Who is going to do that now?
MR. BALSER: We would monitor that. The regulations are taken care of by the offshore board.
MR. HOLM: We're not getting rid of the Canada-Nova Scotia Offshore Petroleum Board.
MR. BALSER: That's right. No, that's going to continue to exist.
MR. HOLM: Yes, I know it is. That's not what you're getting rid of. You're getting rid of the Energy Conservation Board.
MR. BALSER: That's right, and it is being transferred to the URB, those responsibilities for monitoring.
MR. HOLM: Some of the things are being transferred to the URB, but the responsibility for monitoring to ensure that Nova Scotia receives the maximum benefits?
MR. BALSER: The monitoring of the benefits is part of the responsibility of the CNSOPB, but from a provincial perspective, from a departmental perspective, we have people within the department who are tasked specifically with Nova Scotia benefits.
MR. HOLM: So now it is going to be the minister's advisers who will have the responsibility. I am sure the minister wouldn't assert that the Canada-Nova Scotia Offshore Petroleum Board has been doing a good job to ensure that Nova Scotians get the maximum benefits that we should be getting from the development, surely?
MR. BALSER: I think that Nova Scotia has received benefits.
MR. HOLM: No question.
MR. BALSER: Is it ever going to be enough? One would hope that 100 per cent of all opportunities would accrue to Nova Scotians. The fact is that there are some parts of the development, to date, that have not even been available to Nova Scotian companies because we don't have the ability to supply that particular service or expertise.
MR. HOLM: Have they met their targets? Have the targets been met?
MR. BALSER: It was 30 per cent for Phase I and between 30 per cent and 34 per cent for Phase II. When one looks at, for example, the supply of rolled steel, we do not have the capability to supply rolled steel in the province, nor do we have heavy-lift vessels.
MR. HOLM: But it doesn't say that we're going to get 30 per cent of the rolled steel. It doesn't say we're going to get 30 per cent of the lift, whatever, it talks about Nova Scotia content and benefits and it talked about us having received 30 per cent, or supposed to, in Phase I; 34 per cent in Phase II. We have not met those targets. The Canada-Nova Scotia Offshore Petroleum Board has no power or authority to impose penalties or to enforce those. They can monitor it, but they have no penalties that they can impose if it isn't met.
We keep talking about Nova Scotia benefits, and there is no question we are getting some. We're going to get more. This area is going to take off one way or the other, but getting the maximum amount of benefits to which we are entitled, surely the minister would not say that the Canada-Nova Scotia Offshore Petroleum Board has been doing a good job at representing Nova Scotia's interests. They have not got the power to enforce it, and I would suggest that they intend to be more federally inclined than Nova Scotia inclined.
MR. BALSER: Certainly the issue of ensuring maximum Nova Scotia benefits has been an ongoing issue for government, for me as minister, and certainly for the Premier, again, coming back to the fact that there are some parts of offshore development, which at this juncture are not available to Nova Scotian companies. The 70 per cent also, as we've said, we have 30 per cent to 34 per cent of the 70 per cent that was possible. Some of that stuff, in terms of either pipe-laying capabilities, rolling capabilities, does not exist within the province.
One of the things that has occurred, if you look to the recent announcement of PanCanadian in terms of its engineering, they were able to find and ensure that Nova Scotian companies participated. SNC Lavelin level and are part of the engineering group, and that's a direct result of the industry saying to Nova Scotian companies we are going to be moving in this direction, if you wish to participate in the opportunity, then you need to either joint venture or partner with a company that has the expertise, bring into your structure expertise that will be able to provide the kind of services we need, and that has happened.
If you look at the companies that are involved in metal fabrication, at least in Phase I, many of them brought in expertise that didn't exist within their structures prior to Phase I. So I believe that part of it is trying to ensure Nova Scotian benefits accrue, but part of it is also around ensuring that Nova Scotian companies are aware of the opportunities and build for themselves the capabilities to participate. So I think you will find, as we move to Phase II and as we move to the PanCanadian development, that more of the development will happen with Nova Scotia companies because the industry is beginning to mature. It comes back to the comments you made around onshore exploration and so on, that we are in the
early years of an industry that will have some 50 years to 75 years of potential development here.
So what we have to do is create an environment that allows that to happen over time, and as quickly as possible.
I agree full well with the member that we need to make sure that Nova Scotian companies do have the wherewithal to participate. I think one of the most significant comments made around oil and gas was when Larry LeBlanc of PanCanadian talked about the potential labour shortage around employment opportunities in the offshore. We have to anticipate where the province is going and make sure that our companies are there and our people are there, in terms of their training and their abilities.
MR. HOLM: I want to thank the minister for his answers. I know my time has expired. I would just say, as my first hour has expired, that while I appreciate the comments I would also say to the minister that sometimes you have to have a big stick to make sure that some of the big international players recognize the opportunities that exist within Nova Scotia to hire Nova Scotians, and to look at Nova Scotia businesses that can provide them with the excellent quality of services they need. Sometimes they need to be led by the nose to make sure that they are actually willing to look.
MR. SPEAKER: It is now time for the Liberal caucus to ask questions.
The honourable member for Cape Breton South.
MR. MANNING MACDONALD: Mr. Chairman, first of all I want to take a few moments to reflect on your comments about the fact that the Department of Economic Development has now been relegated to the Red Room instead of the Chamber. I think that is a direct result of the fact that this department is now only a shadow of what it once was in terms of its influence in government. I say that because the department's budget in the past two years has been gutted, and then gutted again, and gutted again to where it deserves to be in the Red Room and not in the Chamber because its significance pales in comparison to some of the other estimates that we have been discussing in the Chamber itself.
I want to also, Mr. Minister, state to you that you have indicated that there was and is a change of direction in this particular department. I believe I echo the comments of many when they say that if something isn't broken, why try to fix it? In this particular case the Department of Economic Development has had what I consider to be a great track record in developing business in this province and maintaining business in this province over the past number of years, to the point where it had a 96 per cent success rate in its dealings. That obviously meant nothing to this minister or his department, because we are now moving to change the direction of the Department of Economic Development.
Mr. Chairman, I believe that that is a direct result of political manoeuvring and influence in this province rather than sound business reasons. In short, we are back to the old boys' club in terms of how we do development in this province. Mr. Minister, I say to you that some senior staff in your department are very upset about this change in direction, and some staff have taken it upon themselves to decide that they might be better situated somewhere else rather than in the so-called new direction of this department.
Mr. Minister, I believe that we are going to be taking some time in this department, even though its significance is somewhat less than it used to be, simply because there are many questions that I think have to be asked and many answers have to come across this table before I will be satisfied enough to give way to some other department in this room.
I want to ask the minister: first how many staff have left the Department of Economic Development in the past year; how many are expected to leave this year because of budget constraints and budget changes; and what was the staff complement of the Department of Economic Development two years ago and what is the staff complement today?
MR. BALSER: In terms of the changes that have occurred within government over the last two years, obviously when we came to power there was the issue of a significant deficit. We, in our campaign, had indicated that we would be addressing that particular concern. All departments last year were under significant review. There were expenditure reductions associated with moving towards a balanced budget, and the Department of Economic Development absorbed their share of that, if you will. At the same time, some of the expenditure reduction is unique to historic situations - they were one time only.
Beyond that, the restructure that emerged in terms of creating Nova Scotia Business Inc. and the Economic Development Agency was a direct reflection of - as I said in my opening comments, the concerns that had been expressed throughout the province, through the consultation piece, that while status quo is something that people tend to accept, change is not necessarily inherently bad - there were clearly examples of economic renewal that had been predicated by a significant change in the approach that government had applied. The model that you see in terms of Nova Scotia Business Inc. is one that would be comparable to the structures that were put in place with the State of Michigan and with Ireland; the Irish model, everyone cites the "Celtic tiger" as being a very classic example of economic renewal at its best.
In terms of the staff complement at the Department of Economic Development today, it is 130 FTEs. I would reassure the member opposite that there hasn't been a significant staff turnover in the last year. Again, there are people in the department who may for various reasons decide that there are opportunities for them in other purviews at this point in time. That is perhaps not necessarily a bad thing, because rejuvenation and revitalization is certainly a big part of growth and development. There were two contracts at a senior level that expired last year. But again, I would say that to reassure the member there hasn't been
a great deal of staff turnover, whether it is attributable to opportunities in the private sector or simply a concern about the restructure that the department has undertaken.
MR. MANNING MACDONALD: Would you give me the staff numbers again?
MR. BALSER: There is 130 currently as FTEs; in terms of the complement two years ago, it was 145 FTEs.
MR. MANNING MACDONALD: I will go back to the budget figure after a little while, but in the budget I believe 55 is the number I see, in one part of the budget.
MR. BALSER: What will happen as we move from the current structure of the Department of Economic Development to the Nova Scotia Business Inc. and the residual department, the Economic Development Agency, a number of staff who currently have positions within the existing structure will - because their line of business transfers to Nova Scotia Business Inc. - be moving to that facility. For example, Trade and Investment, which is a big part of the strategy and also a big part of our department, those people who are tasked with the Trade and Investment part will be moving to Nova Scotia Business Inc. The same would be true with, for example, the function of the Business Development Corporation staff who are currently involved in lending, they will be moving to Nova Scotia Business Inc.
On the surface, if you see a large staff reduction from the current workforce to the Economic Development Agency, the fact is that a number of those staff will be moving to NSBI. In fact, the complement for NSBI will be in the neighbourhood of 56 people, with 55 people remaining with the department, 55.6.
MR. MANNING MACDONALD: Let's turn to Nova Scotia Business Inc. for a moment. Mr. Minister, Nova Scotia Business Inc. was formed this year. It has 12 members. It is not responsible to the Legislature, which I believe is a mistake. Ultimately, its business decisions in this province are not going to be subject to public scrutiny on a regular basis - on any basis. They are going to be responsible to the Cabinet eventually, which can instruct this Business Development Inc. to do its bidding at any time, without the public scrutiny of answering to the Legislature, and I believe that is fundamentally wrong.
The Nova Scotia Business Development part of Economic Development and Tourism in the previous government was responsible to the Legislature for its decisions and its actions; this group is not going to be. I find that offensive that they are going to be spending those amounts of taxpayers' money on a regular basis. I find it equally offensive, Mr. Minister, that you and the Premier keep talking about the need to do something in industrial Cape Breton particularly, in Cape Breton Island in general, when you go to Cape Breton. There is always the talk in the House about doing something about the economic situation, and that is all it is, talk.
How can you justify 12 members on this Nova Scotia Business Inc. having only 1 member from Cape Breton, the entire Island of Cape Breton, out of 12 on that board? How can you justify that? The member is the President of the Cape Breton Board of Trade and is a professional dentist; there is no representation from the small business community in industrial Cape Breton, or in Cape Breton Island at all. There is no representation from the various labour factions, as a matter of fact on the entire Nova Scotia Business Inc., as you now call it, I don't believe there is representation from anybody else other than business interests from mostly here in the central region, some from the South Shore, some from the other regions.
In particular, how can you justify your continued claim that you are trying to do something for industrial Cape Breton when, in effect, what is happening here is you are going to have 12 people deciding where economic development is going to happen in this province and Cape Breton has 1 voice out of that 12? You explain to me how that 1 voice out of 12 is going to make a difference in terms of getting economic development dollars into Cape Breton.
MR. BALSER: Quite a few points to touch on, in terms of my response. First of all, the creation of Nova Scotia Business Inc., as I indicated in my opening comments, came about as a direct result of extensive consultation with the people of Nova Scotia. There was certainly articulated concern that past practice, while successful, might not continue to be best practice. They talked about the politicization of some decision making; they talked about the need for a more arm's-length, private-sector focus to business decisions, and that is not to cast aspersions on the hard and fine work of the board of the BDC or the people who have given of their time to help with economic development in the province.
It was simply that as a result of the conversations, as a result of the research and analysis that had gone on, there was a view that some models that were currently in place globally were working more effectively than the model that was in place in the Province of Nova Scotia. As a result of that we undertook to look at how we might restructure the department and the approach to economic development in a way that reflected those concerns and reflected best practice, and the model that emerged with Nova Scotia Business Inc. is one that I believe, over time, will prove that we have moved in the right direction.
MR. MANNING MACDONALD: Mr. Minister, why is there only 1 representative out of 12 from Cape Breton is the question I asked you. Surely to heavens, there must be more than one person capable of sitting on that board from the entire Island of Cape Breton.
MR. BALSER: In addition to others, and I will get to the comment on the structure of the board and how it came about, the other thing that you had mentioned was the issue of accountability and whether or not the workings of the board and Nova Scotia Business Inc. would be held to any level of scrutiny, whether it is on the floor of the Legislature or by the taxpayers of Nova Scotia. Certainly there is a part of the strategy that deals specifically with
that. The board will be developed in the five-year strategic plan that must be submitted; there will be annual plans; there is a plan for . . .
MR. MANNING MACDONALD: To who? Who is it submitted to?
MR. BALSER: It will be submitted to the minister, and the minister will be making the information available to the members of the House.
MR. MANNING MACDONALD: Will it be tabled in the House? And will it be up for discussion as are these estimates? Those estimates will be up for discussion?
MR. BALSER: That is the plan, I would think, yes.
MR. MANNING MACDONALD: You think?
MR. BALSER: In the business plan. Yes, the business plan will be tabled in the House.
MR. MANNING MACDONALD: I am not interested in the business plan, Mr. Minister. You know what I am getting at - I want to know whether the decisions made by this board, in spending public money, is going to be accountable to the Legislature. That is the question I asked and I would like to get an answer. Are those decisions on who gets the money, what businesses, where those businesses are located, is that going to be subject to the scrutiny of the Legislature, as was the previous development corporation in this department?
MR. BALSER: Through an annual audit by the Auditor General that will occur. Again, there will be opportunities, as there always is, in terms of . . .
MR. MANNING MACDONALD: You and I know, Mr. Minister, that Nova Scotia Business Inc. is going to cherry-pick throughout the province where it is going to spend its money, and I suggest the people in the Cabinet Room are going to have a great deal of influence in saying where that money is going to be spent, because that is the way you set it up.
MR. BALSER: Again, the structure of Nova Scotia Business Inc., what it will do and how it will accomplish it are a direct reflection of consultations. The model that has been applied to develop Nova Scotia Business Inc. is one that has worked well in other jurisdictions. There is always a level of accountability in terms of the annual reporting. Certainly I hazard a guess that as we move through these kinds of discussions in years to come there will be references to Nova Scotia Business Inc. I think if you look at the NovaKnowledge annual reporting process the report card if you will, on economic performance, that certainly brings a level of accountability and scrutiny. Again, there are mechanisms in place that will ensure that the government of the day and the board of Nova
Scotia Business Inc. and the work that it undertakes on behalf of the province will be the subject of some scrutiny.
MR. MANNING MACDONALD: Isn't it true, Mr. Minister, that the board will reappoint itself, that it doesn't have to go back to Human Resources - number one - and should it be a consideration that you should make some recommendations? If you really believe, Mr. Minister, what you are saying about the Cape Breton economy, if you really believe that you should agree with me that at least a third of those board members should come from the Island of Cape Breton. At least a third of them, not 1 out of 12, but a third of them at least to have some impact and input into monies that are going to be spent, public monies in this province, that some of it finds its way to Cape Breton.
I take offence to the first part, that this board does not have to go through Human Resources again to be reappointed; in effect it reappoints itself. So you are setting up a network here that is going to satisfy the needs of the Cabinet and the government, but not necessarily the needs of the people of this province, throughout this province.
MR. BALSER: In terms of the board itself, the initial appointment of board members was done through Order in Council . . .
MR. MANNING MACDONALD: Yes, I know that.
MR. BALSER: . . . and what will happen in the future is the board will be making recommendations in terms of who they see coming forward to replace members whose terms have expired, that at the end of the day those will be subject to Cabinet approval. In terms of the composition of the current board, the issues about who sits on that board and what particular region they represent, as I said in response to some questions in the House about this, there were a number of levels of concern about ensuring that there was sector representation, ensuring that there was representation reflective of particular organizations in the province . . .
MR. MANNING MACDONALD: But not territory.
MR. BALSER: There is a person sitting on that board who represents the Cape Breton region, and that individual is there because of their involvement in economic development. He may be a dentist by profession, but he brings a representative body with him because he sits in that capacity as a representative of industrial development in Cape Breton.
MR. MANNING MACDONALD: Mr. Minister, you have nobody from Victoria County; nobody from Richmond County; nobody from Inverness County; and one from all of industrial Cape Breton. You are trying to tell me that that is satisfactory, that you agree with that in light of what you are saying about the Cape Breton economy?
MR. BALSER: What I am telling you is that that individual sits specifically to represent the Cape Breton region. If you look at some of the other representatives in terms of the industry sectors they represent, there is a person who sits there on behalf of the IT industry, and that person, in terms of their business involvement, has reached into Cape Breton in terms of Silicon Island and in terms of the IT sector. There are two representatives who sit there on behalf of the . . .
MR. MANNING MACDONALD: This is unbelievable.
MR. BALSER: . . . manufacturers' and exporters' alliance. There is, in fact, someone who sits there on behalf of the aerospace industry, there is someone who sits there on behalf of the . . .
MR. MANNING MACDONALD: Mr. Minister, with all due respect, I am not interested in who sits there representing the space industry, I am interested in trying to get you concerned about the economy of industrial Cape Breton in particular and the Island of Cape Breton also.
We have one person on this board who is going to speak for Cape Breton. Do you honestly think that those 11 people on that board are going to be preoccupied with the economy of Cape Breton? Mr. Minister, you don't give two hoots about the economy of Cape Breton, you haven't since day one in this particular portfolio, you and most of the people in your Cabinet. Why wouldn't you entertain a person like Father Greg MacLeod, for example, to sit on this board, who has been addressing the problems of Cape Breton, trying to get people interested in addressing those problems for a long time? I understand there are people like Father Greg MacLeod and other people in Cape Breton who wanted to get on this board and who submitted their names for this board, and weren't even considered. I ask you again, couldn't you find more than one person in the entire Island of Cape Breton who is qualified to be on this board?
MR. BALSER: Again, in terms of . . .
MR. MANNING MACDONALD: Or did you care?
MR. BALSER: In terms of ensuring that we put together the best representation possible, it is never possible to satisfy everyone and every concern. I believe the people who have been chosen to sit on that board and who have volunteered to sit on that board represent the economic base of the province, they represent geography, they represent gender, and certainly the view, in terms of staggering the appointments, was such that as the board develops and evolves there will be an opportunity for revisiting areas or sectors that may be under-represented with a view to keeping the board structure revitalized.
So, I don't think it is appropriate at this point to prejudge what kinds of decisions the board will take or to determine that they have a preconceived bias or notion about what area of the province needs attention. My view is that if you take for example the IT sector, the opportunities that exist there, certainly Silicon Island in Cape Breton is a growing IT sector, and we have a voice who sits there . . .
MR. MANNING MACDONALD: Greg would have been good for that committee.
MR. BALSER: Again, when you have 12 seats and 114 potential people to consider, there are going to be some areas and some people who are disappointed with the outcome. Every board is a work in progress, and over time I believe that if you look to the board to address some of these concerns as they emerge, it is an opportunity to grow and build on strengths and address weaknesses.
MR. MANNING MACDONALD: With due respect, Mr. Minister, I think you have heard me say this before, Cape Breton is a special case. I believe that special measures are needed in Cape Breton and I am going to get into some of those in a little while, either now or tomorrow or Monday or however long it takes, but I am getting into them all, and I would like to get some answers. I will go away from this for now, but I will come back to this board makeup because it really incenses me that this government has pulled this off with the intent of minimizing the effect of doing something about the Cape Breton economy by minimizing the numbers of people on this board. I will leave that and go to the budget on the growth fund, the $80 million on the growth fund. The $12 million that is committed by the province, where is that in the budget? Can you find it for me?
MR. BALSER: In terms of that, as the member is well aware, we have made a commitment of $12 million in total over four years, with $3 million being contributed annually, and $3 million was allocated in last year's budget to address the contribution to the Cape Breton Growth Fund, and $3 million has been allocated within this year's budget to deal with that.
MR. MANNING MACDONALD: Where is that? I couldn't find last year's, and still haven't found last year's. Is it in this year?
MR. BALSER: It is lumped into the funds for federal-provincial economic co-operation.
MR. MANNING MACDONALD: It is lumped into the federal-provincial, okay, so you didn't have a special category for the Cape Breton Growth Fund. You couldn't even do that in the budget; you lumped it in with something else.
MR. BALSER: But in response to that, everyone is very aware of the commitment that the province has made to that fund. We have, in fact, dedicated significant energies to that. There is a person directly responsible for being the province's participant in that committee. There is no attempt on the part of the province to abandon its financial contribution or its obligation to industrial Cape Breton. The member has repeatedly referenced the fact that Cape Breton is unique, and there is no question that the issues that Cape Breton faces in terms of the lack of the future of the coal industry, although there remains a possibility of something happening there, certainly the closure of Sysco is an issue and we very much view an obligation on the part of the province to work with this community through transition. Again, it is a commitment in terms of resources in dollars and resources in people.
[3:30 p.m.]
MR. MANNING MACDONALD: Do you consider that $3 million a year, plus piggybacking on our previous payroll rebate program, is sufficient for Economic Development in Cape Breton? To me, if you could point to something else that you are doing, I would be willing to acknowledge that, but here is what I think your government is doing. What your government is doing is saying you are putting $3 million, piggybacking on the federal program of $80 million, $3 million a year for four years. Peanuts in terms of addressing the problems in industrial Cape Breton - $3 million a year, that is an insult. When you go above that, you say that you are developing some call centres in Cape Breton, the EDS was one that you made mention of earlier, that was done, not with direct cash from the Province of Nova Scotia, but the payroll rebate program. Most of the cash came from the federal government, but you guys are going around saying what wonderful things you are doing down there. That program was put in by the previous government, the payroll rebate, developed by the previous government.
I am not saying I don't welcome it, I am saying please, if you have a serious problem like we have in Cape Breton, please come up with some other ideas. For example, you could build on the idea that I suggested of moving the Petroleum Directorate offices to Sydney. You wrote that off out of hand; you said that wasn't a good idea. Why isn't it a good idea to do that - and I want to hear this - why isn't it a good idea to do that when the activity that is going to come in the next decade is going to be off the shores of Cape Breton Island? Why wouldn't it make sense to take the entire Petroleum Directorate operation and put it right in Sydney?
MR. BALSER: Just in terms of the province's contribution - just to correct a few comments - the $12 million contribution is part of the $80 million - the federal contribution is something in the neighbourhood of $65 million. So there is a dollar commitment there of some significance addressed to deal specifically with Cape Breton's issues. The member spoke of the payroll rebate. In fact, the province has not accessed any of its $3 million contribution in year one, the payroll rebate is over and above. What we are saying is that we
will continue to deal with economic development opportunities that exist under our current structure and under our future structure and that accessing the Cape Breton Growth Fund is going to be something separate and apart from that.
MR. MANNING MACDONALD: Separate and apart from what?
MR. BALSER: Separate and apart from the ongoing activities in terms of the regular programs that are applied to economic development opportunities in Cape Breton . . .
MR. MANNING MACDONALD: And what are they?
MR. BALSER: Whether it is a loan through the BDC or it is opportunities through the PEP or . . .
MR. MANNING MACDONALD: So the BDC is still giving loans out in Cape Breton, is it?
MR. BALSER: Certainly has been in the past and, in fact, . . .
MR. MANNING MACDONALD: Well, I know it has been in the past . . .
MR. BALSER: . . . it has been over the last year and it will be into the future under the new structure of Nova Scotia Business Inc.
MR. MANNING MACDONALD: It will be? Okay.
MR. BALSER: And certainly the functions of the department are not ending, they are being reconstituted in Nova Scotia Business Inc. There will be a lending function, there will be community economic development functions, and there will be a trade and investment function. If the member's concern is about how much activity has been dedicated to Cape Breton, if you look at the annual general report of the Business Development Corporation, you will see clearly that there are a number of initiatives that have been supported in that.
MR. MANNING MACDONALD: Why are your people saying in Cape Breton they might as well close the doors in Economic Development down there because they don't have any money to do anything?
MR. BALSER: I would certainly hope that they were not doing that because we have been a very significant presence . . .
MR. MANNING MACDONALD: Where is the money to do something in Cape Breton, for economic development in your budget? Other than the $3 million a year for the growth fund and the payroll rebate for incoming businesses from outside, what other money
have you identified or earmarked for economic development in Cape Breton out of the Sydney office?
MR. BALSER: The money that is available in the investment funds in the same way that there is no money allocated specifically to economic development in the Town of Shelburne or the Town of Glace Bay . . .
MR. MANNING MACDONALD: I am interested specifically in Cape Breton.
MR. BALSER: . . . or the Town of Digby or the Town of Yarmouth. The Department of Economic Development deals with proposals as they are presented to them in terms of . . .
MR. MANNING MACDONALD: How much money there?
MR. BALSER: . . . the viability of a particular program. That is why when the EDS call centre opportunity presented itself in industrial Cape Breton, we made available funds over and above the $3 million that was committed to the growth fund to make that happen. The same way that we did a similar arrangement with the . . .
MR. MANNING MACDONALD: How much money is there, Mr. Minister?
MR. BALSER: . . . EDS call centre in the Port Hawkesbury area, the same way that we are going to be helping some other companies in industrial Cape Breton.
MR. MANNING MACDONALD: How much money is there, Mr. Minister, over and above that, to do economic development?
MR. BALSER: The government has allocated $24 million for strategic investment purposes in this budget; that is $24 million for the provincial initiative.
MR. MANNING MACDONALD: How much in Cape Breton?
MR. BALSER: Again, it is not broken down in that manner, nor do I think it should be because we, as a department of the Government of Nova Scotia, are responsible for weighing business opportunities regardless of jurisdiction. In fact, the $3 million that we are contributing to the growth fund is a special - if you will - consideration to the unique situations facing industrial Cape Breton at this particular point in time.
MR. MANNING MACDONALD: Can you answer my question as to my desirability of seeing the entire Petroleum Directorate move to Sydney?
MR. BALSER: Again, there have - on a number of occasions - been discussions about decentralization as a strategy for economic development, whether it is a federal strategy or a provincial strategy. There were discussions about that at various times and I have had discussions with the various Economic Development agencies in industrial Cape Breton about dismantling government departments and relocating them wholesale to areas of the province that may have economic development issues.
If you look at situations where that has occurred positively, and I can think of the Summerside, P.E.I. experience when the federal government closed the Summerside base and then relocated the HST facility, or in St. John's, Newfoundland - it is extremely difficult to dismantle existing government departments and relocate them wholesale to areas - if you look at Newfoundland, the government in Newfoundland is attempting to do that and they are running into difficulties with collective agreements, the ability to communicate and transfer information. I don't believe that the dismantling of existing government departments and relocating them to areas of the province is necessarily a viable solution. If there were opportunities to look at new departments or working with the federal government for allocations of some of their new structures to areas with economic difficulties, it might be a . . .
MR. MANNING MACDONALD: So you reject that out of hand?
MR. BALSER: I am saying to you that it hasn't seemed to work very effectively in Newfoundland at this point . . .
MR. MANNING MACDONALD: It hasn't been tried. How can you say it hasn't worked? It hasn't been tried here in Nova Scotia.
MR. BALSER: Again, if you look at the difficulty that the Government of Newfoundland is facing in light of having undertaken that strategy. I would say that there may be an opportunity because of the new technologies that are available for conference calling and transferring real time information and so on. It may not be something whose time will not come, but I think in light of the interdependence of government agencies to carry communications and deal with day-to-day workings of government, it is a bit problematic to simply dismantle a department, let's say for the sake of argument Community Services, and relocate those people. There are . . .
MR. MANNING MACDONALD: Mr. Minister, where I am coming from is that on the Sable project, the decision making was very close to this building on where service contracts and everything else went, because the bureaucracy was here in that particular department and those departments that were involved. What I am saying to you is that with the Laurentian Sub-basin, with the interest offshore in Cape Breton, and seismic tests and eventually drilling and hopefully production, that we, in industrial Cape Breton in this particular case, have to be there as a player at the table and the decision making has to be
done locally in terms of service contracts in the future and as well as the input that a Petroleum Directorate office would have economically in the Sydney area. We don't want to miss the boat twice on this.
You and the Premier keep talking about the need to change direction in Cape Breton, to change direction in the economy. Everyone is talking natural gas and oil finds off the coast. Here is a chance for this government to put its money where its collective mouths are and put something like a Petroleum Directorate with some decision-making authority attached to it in the very area that is looking, in the next decade, to reap the benefits of the offshore industry. If it is not down there, if the infrastructure is not on the ground to do it, Cape Breton will lose out again.
MR. BALSER: Again, I believe the potential for offshore development in the Laurentian Sub-basin, and certainly at the end of the day with the transport of natural gas from Newfoundland into the New England market there is a tremendous opportunity for Cape Breton, and over time there will be an opportunity to have in place people, whether they are Government of Nova Scotia representatives or people in the RDAs, because there is a model in place where the Guysborough RDA has retained a person specifically to deal with oil and gas related issues.
So are we saying there will never be a Petroleum Directorate presence in industrial Cape Breton? I am not saying that at all. What I am saying is that if the idea is to dismantle the existing Petroleum Directorate with a view to relocating it in industrial Cape Breton as an economic engine, I don't believe it will accomplish that, that as the Laurentian Sub-basin dispute is resolved and as the seismic work and the supply work occurs . . .
MR. MANNING MACDONALD: Can't wait until its resolved, because if we are not in the position to take advantage of it we won't be able to.
I want to switch gears here a little bit, Mr. Minister, and talk about the marine equipment that is on the docks at Sydney Steel. Will you assure the people of Sydney that that marine equipment won't leave the area?
MR. BALSER: The liquidation process has called for proposals. They closed a week ago or so and there are some 27 proposals that have to be analyzed. Certainly the view is to balance the revenue stream to the province against economic development issues related to industrial Cape Breton. One of the proposals . . .
MR. MANNING MACDONALD: What do you mean by that, balance the revenue stream to the province?
MR. BALSER: Again, there is an issue of what is viable in the long term. There are issues to be weighed. If one simply looks at the proposals on the face of how much money, that may not, when you look at the detail, be the final solution. Certainly one of the proposals that has been discussed to some level in the media is the CBRM proposal to acquire the port assets for a bid of $250,000. Now whether that is the highest . . .
MR. MANNING MACDONALD: They should get it for $1.00, by the way.
MR. BALSER: If that is a high bid or a low bid remains to be determined, but there is the issue of what that particular piece of infrastructure means to the community. There is also the issue of are there other proposals that address the continued existence of that piece of infrastructure in the community with a view towards helping to grow the economy. I am not dismissing out of hand any proposals, what I am saying is that we have to . . .
MR. MANNING MACDONALD: I want to know if you are going to permit it to leave the area. That is what I want to know.
MR. BALSER: What I am saying to you is that the proposals remain in the hands of Ernst & Young, they are analyzing those proposals. I have a certain level of empathy for a proposal that would see those facilities remain in place in their existing structure. That final decision hasn't been taken, but as I said in response to your earlier comment, it is a factor that will have to be weighed in terms of the dollar amount, the incremental value, what is in the best interest of the community. I, like the member opposite, see the Port of Sydney as an economic engine. The question is how do you ensure that the plan that emerges is viable in the long run?
MR. MANNING MACDONALD: I will tell you, Mr. Minister, the people are anxiously waiting to see what this government is going to do about that equipment on the docks down there, the cranes. They don't want to see that equipment leave the area. Mr. Minister, I think it is fair to say that you are certainly going down in history as the minister who closed Sydney Steel, and your Premier likewise. That won't be forgotten, but will be a further condemnation of your policies. You keep talking about economic development in Sydney, the need to change, yet every time we suggest something that would give us a leg up, there is always an if, a wherefore, or whether it is going to be economically feasible, or whether the government is going to get its money out of this.
You know, if you are going to change the direction of the economy of Sydney, we need a leg up. Harbour port development is important in Sydney. Now if they can get a kick-start by having this equipment made available to them, it is going to make the Port Authority and the municipality - or the Laurentian Group or whoever in the area wants to take that equipment and develop it in Sydney Harbour - I am concerned that Ernst & Young are going to get a bid that is higher from somebody else somewhere and that equipment is going off the island. I want assurances from you that that is not going to happen.
MR. BALSER: Again, the proposals, in terms of their detail, have not been finalized in terms of the recommendation that Ernst & Young will be making to government. Government does have an obligation to Cape Breton and to all parts of Nova Scotia in terms of helping them with their economic development strategies. So are you asking me, do I see a value in keeping that piece of infrastructure in place to grow the port? There is. But have I made a final determination, or has Ernst & Young made a final recommendation for our government to consider? No, they have not. But, obviously, I have had submissions from the mayor and councillors who are concerned about economic development.
I have heard the port development proposal. I see that they have acquired the federal wharf and that they have indicated a desire to acquire the Devco wharf if that presents itself. So you are right, a growing and vibrant port would be a big part of the economic future, whether it is related to handling cargo or it is related to supply bases for offshore development. I am not going to commit one way or the other at this juncture as to what will be the final outcome. I will tell you that I do see the port as an economic engine for Cape Breton and I stand on our record.
I know the member opposite will say that we have not done enough for industrial Cape Breton, but I would counter that by saying we have done significant things in terms of creating real employment in Cape Breton, and the record of this government in a year and a half stands well against the previous government's attempts to do economic development. The other thing is that we have clearly set forward on a course. Unfortunately, it is going to require the liquidation of the Sysco facility, but I believe that it was no longer possible to maintain that facility under the mandate that it had previously been operating, and that is that it was constantly reliant on taxpayers' dollars to continue at a subsistence level. It is unfortunate, but it is simply a reflection of the world market for steel.
MR. MANNING MACDONALD: Mr. Minister, you know and I know that a rail mill with the business they have back in Sydney operating with 400 people would have a black line at the end of the day, but that wasn't the policy of your government. Your government set out to close Sydney Steel and you accomplished that. Apparently it met with the favour of a great number of people because the conditioning process was there to allow that to happen. I want to return to Sydney Steel for a few moments but, before I do that, I want to know, have you given any consideration to a full-time deputy minister in the Petroleum Directorate?
MR. BALSER: What we have in place is a full-time chief executive officer, that prior to the restructure that occurred the deputy minister who was responsible to Cabinet was also responsible for the Petroleum Directorate. It meant that that individual was away from the office for periods of time. There was a person retained by government to act as that individual's, the deputy minister's, assistant. It was viewed that with the restructure we could move that person to the capacity of Chief Executive Officer of the Petroleum Directorate.
The Petroleum Directorate is in a state of change, and certainly as the industry grows there will be revisions and changes to that structure, as well.
MR. MANNING MACDONALD: Perhaps it is unfair to ask you that. I just wanted to get your opinion on it because that is the purview of the Premier, obviously, but my considered opinion is that that is fast going to become one of the most important departmental operations in the future and I think, again, we should be preparing for that by setting the structure in place now, whether it be moving offices to Sydney, as I suggested before to give us a leg up down there in the Laurentian Sub-basin and the other activity that is going to go on there, or appointing a deputy minister.
But I want to return to Sysco. I noticed that in this year's budget there is no reference to the Sysco budget at all, it is just a flat line, there is nothing there, but there are still expenses going on. Where are those expenses coming out of now, what department in government?
MR. BALSER: The costs incurred through the liquidation process of Sysco have been paid through the Sysco accounts themselves. When Ernest & Young came in . . .
MR. MANNING MACDONALD: Excuse me, it is going to be paid through what?
MR. BALSER: The day-to-day revenues or the operating revenues.
MR. MANNING MACDONALD: Day-to-day revenues?
MR. BALSER: The operating revenues of Sysco through the liquidation process covered . . .
MR. MANNING MACDONALD: Mr. Minister, the place is closed.
MR. BALSER: That's correct, but there were accounts receivable, there was scrap to sell and so on.
MR. MANNING MACDONALD: Oh, day-to-day revenues.
MR. BALSER: That's correct and as you liquidate, there will be monies accruing. The costs of Ernst & Young have been covered off through the operating cash flows of Sysco. The province did, however, book money to deal with the pension related issues. The mandate, or at least the commitment on the part of the Government of Nova Scotia, was that we would remove the province, as taxpayers, from the steel industry. That has been possible because Ernest & Young were able to, through the windup, recover receivables to pay down the accounts payable and to meet their commitments with the operating cash flows. At this
point, because Sysco is moving to liquidation, there are not going to be ongoing expenses associated with . . .
MR. MANNING MACDONALD: Well, there are certainly a lot of them right now, you know, to date we've spent over $2 million on Ernst & Young and that's ongoing. They're now going to evaluate, I believe, 27 bids. I want to ask you how much more money are we going to pay Ernst & Young as liquidators and if you understand, and I am sure you do, the liquidator is sent in to put a bunch of assets in the paper, sell them, and take the money, give it to you, take their cut and go, but in this case the liquidator has been down there over a year trying to sell the plant. They are not steel people. They never professed to be experts in selling steel plants, but you people got the feeling that, oh, we might be able to sell this. So instead of going out and getting proper people in the industry, you let Ernst & Young handle it.
A year later it is $2 million in taxpayers' money. It is also $700,000, close to it, in legal fees in one year only compared to about $80,000 in the last two years prior to that and that's still ongoing. How long is it going to take to evaluate the 27 bids, how much more money is it going to cost to do that, how much more legal costs are we going to incur and where is the money coming from because if you're trying to tell me that you're going to continue to take it out of revenue, if you have so much revenue coming out of Sydney Steel, why is the place closed?
MR. BALSER: Again, the cost recovery process is through the liquidation. Those assets will be sold off and the costs recovered. I would remind the member opposite that his government was spending something in the neighbourhood of $800,000 a month to have Hoogovens manage that plant. They were not able to turn a profit and I would remind the member opposite also that he oversaw, . . .
MR. MANNING MACDONALD: With all due respect, . . .
MR. CHAIRMAN: Order, please.
MR. BALSER: . . . as minister responsible, two failed attempts as well.
MR. MANNING MACDONALD: With all due respect, I take exception to that.
MR. CHAIRMAN: Order, please. Order, please. I would love to have some civility in these proceedings, please. I would like to have a dialogue back and forth and not to each other.
MR. MANNING MACDONALD: Well, Mr. Chairman, I take exception to those comments because Hoogovens were sent in there to manage an operating plant. Hoogovens were the managers of the plant and contracted by the government to manage an ongoing
operation with 800 people working. They were not sent in there as liquidators only as was the case with Ernst & Young. So to mix the two up is a misrepresentation of the facts with all due respect, Mr. Minister.
The Hoogovens people were managing Sydney Steel. It was an ongoing operation and, by the way, I might also say that they were the ones successful in getting the rail business back from CN and the other customers that we had that were well on the way to making it a profitable rail operation when you people decided to go down another road and that's your political decision. You people did that and you people will live with that, but I am saying that Hoogovens were the managers of Sydney Steel, the only managers. We weren't duplicating managers. They were managing the Sydney Steel plant and that was their management contract, much different. Now, I want to ask the minister how many people are presently working at Sydney Steel and how many people from Ernst & Young are at the plant on a daily basis as we speak?
MR. BALSER: Again, they are basically people associated with continuing to monitor the water supply. There are, I think, 200 homes that use the Sysco water system to provide water to their homes. So there are very few. I don't have the exact number of people at my fingertips, but I certainly will take that information under advisement and provide it to the member.
MR. MANNING MACDONALD: Can you get that for me, please?
MR. BALSER: Yes.
MR. MANNING MACDONALD: And can we also get the estimated cost of the rest of the contract with Ernst & Young and how much more in legal fees is going to be spent on Sydney Steel. Is this deal ever going to come to a conclusion? You know, we're still in the steel business whether you like it or not, Mr. Minister.
MR. BALSER: Make no mistake, the deal will come to a conclusion. We have certainly in the last year and a bit moved significantly on the road to a final destination, if you will, and certainly from the view of trying to find a private sector operator, that was part of Ernst & Young's mandate. That failed to happen. The world steel market is such that there is very little likelihood that that can run as a viable operation and in light of that, we have moved to deal with workforce transition, that we have offered an enhanced severance pension package to the workforce, and the proposals that Ernst & Young are reviewing at this point in time will be towards liquidation.
The estimates of how long it would take to dismantle that facility are something in the neighbourhood of 18 months to two years. It is a very large undertaking. So the corner has been turned, if you will, in terms of where we are going with regard to Sydney Steel and
once Ernst & Young have made their recommendations, we will be moving forward to complete that decommissioning and liquidation.
MR. MANNING MACDONALD: Now, the last question on Sydney Steel for now, would you also provide me with a schedule of work that is going to be done on the remediation project considering the fact that your government has allocated in excess of $230-odd million to that process last year, how much of that money is going to be spent, if it ever is going to be spent, and what kind of timetable you're going to put on the remediation project?
MR. BALSER: Certainly in terms of the timetable for remediation, the first steps would be to deal with the liquidation proposals and then to do an environmental assessment of what the current situations are. There are some issues that have to be undertaken immediately in terms of asbestos removal. In fact, some work was completed under the auspices of SERL not too long ago. At this point it would be too early to say that by 2000, and pick a date, we will be doing remediation. The first steps along the way are to dismantle, decommission the site, and then prepare for the remediation work that will have to flow out from changing the site from a steel plant to what it will become.
MR. MANNING MACDONALD: Could you tell me, Mr. Minister, then if the money was never intended to be spent that quickly, why was it booked last year?
MR. BALSER: It was an obligation that was realized and recognized and is reflective of the fact that the province had made a decision to get out of the steel business. If it had been transferred to a private sector operator, the province would have had an obligation to deal with remediation at some point. Regardless of how the Sysco story ultimately unfolds, there is an obligation on the part of the province to deal with remediation. So that is reflective of . . .
MR. MANNING MACDONALD: But we could have put a lot of people to work with that money in the past year. Why didn't we do it?
MR. BALSER: Again, the issue was that there had been a 30-year history of non-profitability in that particular facility. The view that we could use steel rails, that there was a growing opportunity in the steel rail market, if you will, never materialized. We were always subject to the issue of countervails which made it impossible for Sydney Steel to sell rails into that market.
MR. MANNING MACDONALD: I am talking about cleaning up the plant. I am not talking about selling anything. I am talking about continuing the program of the cleanup of Sydney Steel.
MR. BALSER: And, again, before you can deal with remediation, the plant has to be decommissioned and there have been people employed through . . .
MR. MANNING MACDONALD: Oh, no, we were doing it before with all due respect, Mr. Minister. We were doing it while the plant was operating and you know that, but I will leave that for now because I am not going to get anywhere there, I know that. All I know is you booked the money. You never spent it. I want to know if you're ever going to spend it down there and perhaps you could give me a schedule as to when that money is going to be spent on providing jobs in Sydney to clean up that property, the former Sysco property that's there, and the present non-working operations that are still owned by the Sysco Corporation.
I want to turn for a moment to the film industry. Again, Mr. Minister, you and the Premier have said time and time again that the direction in industrial Cape Breton has to change. Well, in the few minutes that are left to me today, I want to suggest to you that another way that your government could have effected that was to promote the film industry, to keep promoting the film industry in Cape Breton and specifically at Filmscape in Point Edward. The Department of Economic Development took great pains in the past few years to develop the film industry in Sydney, particularly in Point Edward, to the extent that we had a successful production called Black Harbour there. Andy Cochran and his people were very excited about the future potential of the film industry in industrial Cape Breton. It trained over 250 to 300 people, who are now expert in doing work in the film industry. It had the potential to do some television production; it had the potential to do some stage and music production.
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What happened? We needed a leg up and we had a leg up on film tax credit, which the government promoted at the time. What happened was the government levelled the playing field - we thought that would give us a level playing field to develop the film and television industry in the Sydney area, with sitcoms and the other stuff that would come our way. What happened was the government decided they weren't going to give any tax credit advantage to Cape Breton, whether it was going to be the same tax credit or a very similar tax credit to the rest of the province. In other words, what difference there is - and it is a small difference - is not enough to encourage filmmakers or television people, production people, such as Andy Cochran, to go to Sydney where there is a trained workforce, where there is a facility.
The end result is the facility is lying empty, the 250 people who are trained in the film and television industry, the production industry and the music industry are down there with no work. There hasn't been a production there since. Yet, movies are still coming to Nova Scotia, film industry is still operating in Nova Scotia, productions are still going on in Nova Scotia, none of them are going on in Cape Breton.
We have the workforce, we have the facility, what we don't have is the government incentive to encourage these groups to go to Cape Breton. Can you explain that to me, why that is not the case?
MR. BALSER: I will certainly attempt, but I don't know if that will satisfy you. In terms of the Sydney sound stage, it was developed primarily around the production of Pit Pony. The unfortunate thing is that that program was ultimately cancelled by CBC. It was a very good production. We do have a number of sound stages in the province that are under-utilized. There was a sound stage constructed in Shelburne to take advantage of the enthusiasm generated by the Scarlet Letter production. In the province, I would say we have an overcapacity in terms of production facilities.
We do have a tax structure in place that encourages film production in rural Nova Scotia. At this point in time, as the member is aware, we have a number of come-from-away producers who are doing productions here, but they come for specific site location advantages. K-19: The Widow Maker is here because the Irving Shipyard is able to be revitalized as a circa 1960 Russian shipbuilding facility.
It is very difficult to predetermine where productions will locate. The film development tax credit has been very successful in growing the industry, and certainly the fact that there is a 35 per cent tax credit available to companies that do production in rural Nova Scotia is a positive. One might possibly say that when sound stages are developed, it probably would be appropriate to look at where the revenue streams will reside, that a sound stage developed for a particular production, particularly a series production, probably will have a limited lifespan. The object then is to ensure that there are additional productions brought into play.
There is no easy solution. I believe the 35 per cent tax credit works. The Film Development Corporation is certainly out there promoting Nova Scotia as a destination and an industry, and we do have the people, as the member has said, in terms of Cape Breton.
MR. MANNING MACDONALD: Well, I will tell you what the solution would be, it is to give an enhanced tax credit, a substantial enhanced tax credit for the development of the music and film industry in areas outside the HRM in Nova Scotia, specifically in Cape Breton and, in some cases, I believe that would apply in Shelburne as well. If you are going to come to Nova Scotia with a film or you are going to come to Nova Scotia with the development of a musical or something in terms of television productions - half-hour productions, sitcoms, whatever - and the playing field is level right across the province, you are going to Halifax.
What I am saying is Halifax is not a bad place to go, but we also have a trained workforce in Cape Breton to do that work, and unless there are enhancements there, they are all going to come here. Thank heavens they are coming to Nova Scotia, but I would like to
see just a little bit of that business go somewhere other than the HRM. We have the trained people down there, that is why it was set up, Mr. Minister. It was set up to do that. Now it is sitting idle down there because the rules of the game have been changed.
MR. BALSER: It is unfortunate . . .
MR. MANNING MACDONALD: We lost the advantage.
MR. BALSER: It is unfortunate that is the case. I would say that 50 per cent of the film industry now is taking place outside of HRM. The argument that you are making for Cape Breton can be made, as you mentioned and as I mentioned, for Shelburne, a situation that is very similar in nature. To some degree, I think it was a problem of putting too much production capacity in place before the industry had grown to the point where it could deal with it. There is no simple solution, it is an issue.
MR. MANNING MACDONALD: One of the things that I am being hit with back in Sydney is the fact that we set out to develop a workforce to do work in the production of films, the production of musicals, and surely to heavens we have enough musical expertise in industrial Cape Breton to carry the mail in that regard, but we need the facility to be given a tax enhancement to get people to invest money in industrial Cape Breton in that industry. We have a number of people in rural Cape Breton who would be interested in doing something as well.
I am just saying that we have the people who are trained down there to do the job now, and we need to be able to convince people that there is an enhanced tax credit program available for areas of the province that have high unemployment, but also have people who can do the job. In this case we trained the people, Andy Cochran did that, and the people who were involved with some other musicals, some productions on the Island, trained people. We have some great musical studios down there, but they can't go into Filmscape with any major productions because the incentive is not there to do it. They can come up here and do it just as cheaply. We are saying that we have people who can do the work down in Cape Breton, but they are getting the work. I will leave that for a moment.
Mr. Minister, you probably are thinking now that I will be back again, because there are some other things I haven't even touched on. I do want to thank you for your patience here this afternoon. I also would like to receive that information that I asked for as soon as I possibly can get it, because that will determine what I am going to do the next time I get the mike here.
In the case of your department, Mr. Minister, I just want to say that, again, I am distressed at the fact that the department is taking a non-public direction, in terms that - it appears to me - most of the operations of this department are going to be in the hands of a powerful few in Nova Scotia, with very little representation from my part of the province,
Cape Breton, 1 to be exact out of the 12. I am somewhat distressed about that, because I am afraid that we are not going to be in a position to get our views to the table in regard to monies that should be spent in Cape Breton to develop the Island over the next few years.
Again, I am distressed, Mr. Minister, that the Film Development Corporation is not going to be responsible to the Legislature for each and every decision, as was the case in the past. They are not going to be subject to ministerial questioning in Question Period about the decisions they make. I find that offensive when it is dealing with the taxpayers' dollars of this province. Having said that, I will defer now to the next speaker. Thank you.
MR. CHAIRMAN: The honourable member for Dartmouth-Cole Harbour.
MR. DARRELL DEXTER: Mr. Chairman, I always like to have the opportunity to talk to the minister in these forums. I think it is a way not only to examine all of the items that make up the estimates, but also to allow the minister to know something about what is going on and what the results, kind of the end product, of his department's work in other parts of the province are.
I want to begin with something that is kind of a very local issue for me, something that I hope will educate as much as question, and that is an explanation for the minister of a particular undertaking that goes on in my riding, the Cole Harbour Heritage Farm. Immediately people might not think that is a matter of economic development, but let me tell you that each year the Cole Harbour Heritage Farm, which is operated by the Cole Harbour Rural Heritage Society, generates in the order of 15,000 visits. It is a wonderful asset for the people of Cole Harbour, certainly for the people of my riding. I am going to explain a little bit about it so that you know how the thing operates.
The Cole Harbour Heritage Farm, the curator is Terry Eyland. He and the very limited staff that he has do a yeoman's service in keeping that operation ticking along. In addition to the farm site itself, there is also a meeting house which they operate. It is rented out for things like weddings, and there are various services that are held there from time to time. I believe, if I am not mistaken, that the meeting house is now 178 years old. It has been part of the landscape in Cole Harbour for a considerable period of time. In addition to that there is also the Cole Harbour Heritage Park, which was formerly known as the Bissett Road Park, which was taken over provincially.
All of these operate together to attract people to Cole Harbour, to generate visitors and to sustain some of our heritage in the Cole Harbour area. We have been the set for movie productions, for This Hour Has 22 Minutes. It attracts many different kinds or avenues of income. The farm itself operates a small facility known as the Rose and Kettle Tearoom, which has various functions during the summer. I would recommend it to the minister, if he is in the area, to drop by. They do many wonderful preparations there, everything from
strawberry shortcake to corn boils, to you name it. It is really quite an asset for our community.
The people involved with the Cole Harbour Rural Heritage Society - and this is a dedicated group of volunteers, the President or the Chairperson this year was Joyce MacAskill, the past Chair is Sid Gosley - all of these people have been involved and spend countless hours promoting the Cole Harbour Rural Heritage Farm, and seeing to it that it is maintained and used to the best advantage of the area.
Every year the Cole Harbour Rural Heritage Society applies for grants for students. Last year, for the first time, I think, in 25 years, the Cole Harbour Rural Heritage Society, in applying for grants, did not receive any from the province. Needless to say, they were very disappointed in what they saw as, I guess, just a lack of commitment to their facility. This is not to say that they don't receive provincial money, because they do, they are treated as a museum, they receive a grant from the province.
Mr. Minister, I have here with me the Cole Harbour Rural Heritage Society annual review. I am going to pass this along to you at the conclusion of my comments, so you might have an opportunity just to have a look at it. I think you will be impressed, there is a new newsletter committee, Bill and Jill McKee, who do this. Again, they do it on a volunteer basis, and they do a heck of a job with it.
Last year, the farm would have received something in the order of $43,000 through the Nova Scotia Museum funding organization, I guess that is the best way to put it. Again, nothing through the Provincial Employment Program. These summer students - when you are operating something like a rural heritage farm - are absolutely essential to the operation of the farm over the year. A lot of what the students do, assist in maintaining the farm, assist in helping with the demands that are put on the farm. The summer, obviously, is the most active part of the year.
I know that the farm will again, this year, be applying to the minister for his favourable consideration in these grants. I thought it was necessary for me to come here today and to try to impress upon you what I consider an important asset to my community, that really gets a very low amount of funding, but that is just absolutely essential to that organization and to their very worthwhile endeavour.
I want to just pass this along, if I can, and I wonder if the minister could just indicate to me where the Summer Employment Program is, and what the expectations are for the coming summer.
MR. BALSER: The Provincial Employment Program is a very important program. Last year, because of the nature of the budget discussions, it was necessary to reduce funding to that program. As a direct result of that, there were people who had received funding for
the hiring of students who did not. It is unfortunate. In the best of all possible worlds, we would have limitless amounts of money to allocate, because the Summer Employment Program is, I believe, a program that provides students with an opportunity to earn income, but at the same time, also, to get skills that will help them as they move to the workforce.
What happened last year, because we had reduced the funding, we put in place a committee. Certainly all of the proposals are weighed on the basis of a number of factors, and then the committee makes a recommendation. What happened last year and will happen again this year is that we engage our federal partners, so that if there is an opportunity to access a federal program and free up more money at the provincial level to support student employment, we do that. I know in my own riding there were a number of people who had put forward proposals that were unsuccessful.
Certainly what we conveyed to people who were wondering about the possibility of accessing the program successfully, the message we conveyed was make sure that your business proposal or your plan to hire a student focuses heavily on the kinds of skill sets that they would gather as a result of this. One of the other issues that occurred this year - there will be less students hired this year by a minimal number from last year, simply because the minimum wage increased - the programs are going to be focused toward enhanced skill development, if you will. The actual end result will be there - and this is from memory - and I think the number will be something like 70 fewer jobs.
We create almost 2,000 jobs. It is a small amount, but every one of those is important. The other thing, in terms of where the funding is for the coming year, we did maintain funding. A big part of the Summer Employment Program is tied specifically to provide students to the Visitor Information Centres, which are a big part of the Tourism program. What we did this year, because there was a bit of a problem last year in terms of timing, we ensured that the VICs would know that they would be eligible early enough on so they could have those people in place to ensure that the Visitor Information Centres would open in a timely manner.
Certainly the Cole Harbour Rural Heritage Society, from the document you gave me and what you have told me, is a wonderful undertaking. There are any number of those in the province, and not all will be successful in getting a PEP summer student. It is unfortunate, but that is the reality. My advice to people who are attempting to access that program is spend the time to build the very best proposal that you can possibly build, that the ultimate end decision is not one that is made by an individual but rather by a committee. I wish this group well, as I do any other group.
MR. DEXTER: I thank the minister. I understood when the government received its mandate and decided that it was going to follow the path that it is on, one of restraint, I knew that was going to cut across many departments, not the least of which was going to be the Economic Development Department. I expected that there would be some fallout on this. I
guess from the Cole Harbour Heritage Farm, I don't want to speak out of turn for them, but I am assuming they would understand that they would also receive less. I guess receiving nothing was something that they didn't expect. You talked about Visitor Information Centres, and a lot of what is done at the farm accommodates people in the tourism industry. They are meeting tourists as they are coming through. A lot of the business that comes to the farm are people from other parts of the province and from other provinces and states. They have an important function.
The other thing that immediately comes to mind is the decision of the government to have Nova Scotia Business Inc. on one side, but they retained this other fund of money that was going to be used, not just on the business case, as I remember the minister saying, but because there are initiatives that have an inherent value to our province, to our communities, that go beyond just the question of what the business case is. I realize that this fund is not applicable to this situation, but the theory behind it is one - this is an organization that has an inherent value of its own that goes beyond just being able to build a business case for the employment of the students over the course of summer. I will leave it at that, because I am not here to lecture the minister on Nova Scotia Business Inc., I will leave that to my learned colleague and the others who are here.
I just wanted to cover one other thing that is of great interest to me, and has been for a long time, that is if the minister could indicate to me - it has two parts to it - what is in the works, if anything, for the promotion of the Port of Halifax? What is going on with it? My view of this, having been the Economic Development Critic in the not too distant past, I think it was around the same time the minister was for his Party, the ultimate development of the super-port and the infrastructure in the port is a very important thing, not just to Halifax and the people in my riding but, indeed, to the province. I am wondering if you could just provide me with a little update on that.
The second part of my question deals with a specific aspect of those who work in the facilities on the harbour, which is Local No. 13, and the steelworkers and marine workers there. I know they have been engaged with the department in conversations, and there is an initiative underway. I think, both for Local No. 13 and for the department, that it would be useful to get that on the record today, so that we know where we are at.
MR. BALSER: In response to your first item, I would like to commend you on your participation in the Maersk Sealand group, if you will, the group that was put together to try to promote the proposal to see Halifax as the East Coast post-Panamax facility. It was a true testament to non-partisan involvement in what was and will be a truly tremendous economic opportunity for the Port of Halifax. The port development is very much a part of this government's economic growth strategy. Historically, there has always been some parochialism, but I believe that, again, focusing back to Maersk Sealand, everybody in Nova Scotia, in fact everybody in Canada, was rooting for Halifax, because it was us against some very large players in the American market.
We wanted to capture that momentum. There is a person directly responsible in the Department of Economic Development for shepherding that through. We have had a number of conversations with the current operators of the port facility, Halterm and also Cerescorp are very interested in what happens next. What I really thought was a positive was there was common consensus around the fact that there needs to be a common-user facility, a new facility if you will, to capture future potential growth. I guess the collective wisdom leans toward the Rockingham area as the most suitable site. Certainly, from the fact that CN is the rail link, they are interested in growing that.
A lot of what happened through Maersk Sealand was sort of marshalling of energies. I can tell you that that continues to be very much an issue that the province wants to push aggressively forward on. We have a committee struck that is dealing with that. I have personally had a number of conversations with Paul Tellier, with principals at the port, and at Cerescorp. Oftentimes, one of the problems for government is moving the wheel, and while it may appear that momentum has been lost, there has been a fair bit going on behind the scenes. While it is not possible to say that on this date things will come to pass, I believe that certainly over the next few years, you are going to see a movement in terms of growing the port.
For us, too, the other big piece of the puzzle is that there are any number of ports in the province who feel that there is tremendous opportunity on the horizon. What I would like to see occur is the model that emerges for the Halifax Port Development Commission as one that could be replicated in, for example, the Strait area or in Sydney or in Sheet Harbour. We are working towards that. I don't think it is practical, in light of the potential cost of doing the Rockingham development, that the province be the major financial contributor. I don't think it is healthy to have this kind of development occur on the backs of the provincial taxpayers' ability to pay.
The federal government has indicated a willingness, and when you have private sector enterprises that see an advantage, if everyone comes forward with a little bit, then you can accomplish a lot. Rest assured that that issue is being worked on, and we do have people in the department devoted specifically to that, not just in our department but in co-operation with the Department of Transportation and Public Works.
With regard to your second item, Local No. 13, marine workers and their concerns, it is one that I am aware of. We have had a number of meetings with that group to determine how we go forward, that the industry that emerges is going to be vastly different than the one that was. There seems to be, certainly in light of the announcement today, Mr. Tobin's announcement about where he sees the country going with regard to shipbuilding, that there is opportunity, but it won't necessarily be the same as what has historically been in place.
We have struck a committee to help the workforce to work through retraining issues. While that is not completely consolidated, there have been ongoing discussions. I think they are appreciative of what we have been attempting to do. There are some issues that remain to be resolved, that the province really can't insert itself in. But in terms of working with the Department of Education, with HRDC, about training opportunities, there are tremendous possibilities around metal fabrication or supply ship fabrication, so we work with them and we will continue to work with them.
MR. DEXTER: Mr. Chairman, if I may I would like to turn over the rest of our hour to my colleague, Mr. Corbett.
MR. CHAIRMAN: The time is 4:29 p.m., and you have 40 minutes remaining in the allotment.
The honourable member for Cape Breton Centre.
MR. FRANK CORBETT: Mr. Chairman, I want to open my questioning with some remarks. I think, when dealing with, whether it is, government officials or whoever, it is important, Mr. Minister, that we have a line of communication, and in that line of communication that we are forthright and honest with people. I say that because there were some attempts by people, I believe, during the Sysco sale to mislead people. You and I, whether it was on the record of Hansard or whether it was just trying to find a resolve to what was going on at Sydney Steel, there were assurances made at different times. The minister will remember remarks such as pass this bill and the next day they will be hiring at Sysco.
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We were told things going up close to Christmas when there were questions about the sale and its viability. I was assured that it was just a matter of dotting the i's and crossing the t's and even to the point where it became apparent to everybody that that deal was going down the drain, I was then assured by yourself that all the affected workers would be looked after and that the monies that would have gone to Duferco would have been reinvested in some arrangement in the pension fund.
You and I have a bit of a history, Mr. Minister, and somewhere along the line, and I don't know if it was you or your department, but there was a lot of stuff that was not very forthright about because just about every detail I brought forward, there has been a severe retreat from it. I want to start with when we found out the sale was done and that the other steelworkers would be helped and the monies that were to go to Duferco were to be reinvested and they weren't. We want to step back to late December and dotting the i's and crossing the t's, obviously there was more to it than that. The other side, pass this legislation and we will start hiring tomorrow, was inaccurate.
So one has to take those things in mind and I think it is the old saying, fool me once, shame on you, fool me twice, shame on me. I think there comes a point in dealing, Mr. Minister, with you or your department and one wonders, am I getting the goods, is this an honest and transparent bit of information I am getting? It gives me no great pleasure to say these things, but I think they have to be said and I think the minister would agree that every one of those things was accurately portrayed by myself.
So we are stuck today with the loss of an industry in an area that can't afford to lose that industry. It is glossed over many times as, we have seen the end of the coal and steel era in industrial Cape Breton, as if we are just supposed to accept those facts. We also realized, too, Mr. Minister, out of your own department, that you had a communications strategy in early December about what happens if we fail and should we talk or should we let Duferco do the bidding and how will we be perceived and what will be the action of the Opposition Parties. The people in the media, what will they say? What will the workers say?
So it seemed, at that point, it was apparent that there was more than just dotting of i's and crossing of t's. At that point, there were some serious problems with that deal. So I wanted to get that on the record. I am going to go in and ask some questions about Sysco, especially now in the light of you are into the liquidation phase, if you will. Ernst & Young are still doing that. Who is heading up the Ernst & Young team?
MR. BALSER: If I may, in direct response to the last question, but I would also like an opportunity to respond to some of the other comments you made. Ernst & Young is headed by Matt Harris, who is their Vice-President, I believe, here in Halifax. But to go back to the events leading up to the collapse of the Duferco deal and the subsequent issue of resolving the severance and pension arrangements, from the outset, I think anyone who has followed the Sysco file for any length of time realizes that it has never been an easy history. There have been any number, I think six in total, failed attempts to sell that facility as an ongoing operation two times by this government and a number of times by preceding governments.
So it has never been an easy process and with the collapse of the Rail Associates deal and then the move to retain Ernst & Young to try to find one more time a private sector operator, they acted in good faith and they scoured the globe, if you will, and came back with a number of proposals, the only viable one of which would have seen the operation transferred to Duferco to do slab casting and we began to work. Once we had gone through the process and determined that that was the best possible proposal, we went forward. There were four items of some substance that had to be resolved before the deal could be finalized.
There was, as the member is aware, the issue of negotiating the sales agreement, there was the issue of restructuring the workforce. There was the issue of passage of legislation and the issue, ultimately, of severing workers and the negotiation of a power agreement with Nova Scotia Power, all of which were fraught with difficulty. Initially, we did reach a sales
agreement that had a number of provisos and we embarked on a process that would see the passage of legislation. Again, the encouragement to try and get that legislation through the House was done with the view that the sooner it was passed through and enacted as legislation, the sooner we could deal with those other issues.
That did occur and could it have occurred in a more timely manner and would that have impacted on our ability to close the deal? That is subject to conjecture. We dealt with the other issues that were within the province's ability to deal with. The negotiation of a collective agreement with the unionized workforce took some time, in fact, and that was a cause of delay. Is there blame or guilt to be cast? If everyone had worked more positively and reached a resolution sooner, would the ending have been different? Possibly, possibly not. In any event, the final factor to be determined was the issue of power rates and there were two private sector companies who sat down to negotiate an arrangement that would allow for them to make their business model work.
The difficulty that Duferco had was that during this timeline, the global steel market was changing dramatically, in fact, impacting on their business model that they had used to generate the economics for purchasing and acquiring the asset. I know the member has alluded to the fact that perhaps the province, the government knew that things weren't progressing as well as they might. I can tell you that we were committed to this deal with Duferco right up until they, by form of letter, indicated to us that it was not going to be possible to close this deal. It was Duferco who walked away from the deal, not the Province of Nova Scotia. We were set to close. They withdrew their proposal or indicated they would not be proceeding. I believe and am firmly committed, that it was a direct result of the change in the global steel market that the economics just no longer worked, that, as we speak today, the steel market is still is disarray.
If one could look out past the rim for five or eight years, who knows what the landscape would look like. You play that scenario against a backdrop where, globally, there were a number of companies that went into Chapter 11 protection at the same time that Duferco were making their business determination. It was just not to be. What we then indicated we would do, almost immediately to the deal being withdrawn, we analyzed the commitment we had made to the workforce and we had said that part of the go forward would have seen the restructuring of the workforce and the offering of an enhanced pension package to workers.
We said we had booked $30 million to deal with that. We immediately said that we would be honouring that, but that there would be a number of workers who had been expecting to have employment and that would no longer be possible. So the balance of the monies that would be used to assist Duferco in their retrofit of the plant would be reallocated to steelworkers and by steelworkers, I mean all those people who work in the plant, that includes the members of the United Steel Workers of America. There are also CUPE people there. There are a number of non-unionized employees. All of the people who were involved
with Sysco were affected by the announcement that we would be closing or liquidating that operation.
I went to Cape Breton and talked to the executive of the steelworkers' union because that is the largest body and we came to some understanding about the commitment. I believe that what we did was fair. Would it ever be enough to adequately satisfy everyone? I doubt that that would be the case. We certainly honoured our commitment to the steelworkers in terms of the fact that we had reached the negotiated agreement ratified by, I think, 85 per cent of the workforce. So in the parameters that we had available to us, we reallocated and honoured our commitment to the best of our ability. I would take exception, to some degree, to your comments that we abandoned either Sysco or the workforce or we are using sleight of hand to move the deal.
The other thing you commented on was the development of a communication strategy. I can tell you that within government, any one of a number of communication strategies are developed around any particular issue. We knew that the sales process, as I said earlier, five or six times, to that point, to try to sell it, we knew it was a program fraught with difficulty. Certainly, the issue of how you communicate a successful closure was discussed in the same way that how you communicate a collapse of a deal was strategized.
MR. CORBETT: Mr. Minister, well, you may very well be right in what you say, you talk in terms of a strategy or a communications plan, but I think you also have to go back and look. It was not only a communication plan, we are not talking about what would happen here, it is clearly pointed in the direction of how can we best get away from this? Who can we point the finger at? That's what that strategy was about.
I know, even back when we were negotiating or when we were debating in the House about the legislation on the sale of Sydney Steel, you continuously came back to this 85 per cent. Now, I don't know, Mr. Minister, how many collective agreements you have been around and how many you have negotiated, but unless you are just trying to play silly bugger with numbers, the reality is they were forced into this. You and I both know that. You know that it was if you don't take this deal, you are going to be blamed with not wanting to help it sell; one group, if you didn't accept the collective agreement, you couldn't get access to pensions. What you did, you had a bunch of people in there voting on the collective agreement that there was no community of interest with because they were leaving. But you told them unless this collective agreement is ratified, you ain't getting your pension. So they had to vote for it - they had a gun to their head, minister. I really find it annoying when you come back and talk about that 85 per cent. We both know why that was such a high number. Because everybody would be insane, that if they were getting a pension would have voted against that collective agreement. You and I both know that. So, please, don't insult me and say that. We have had it out in the House over this, so don't do it.
When we get back to world prices for steel - I would like to say I am happy when you answered my question about who is heading up Ernst & Young, you said Matt Harris. If there is a common thread here, it is Matt Harris. He is the guy who gave you the sage advice of accepting Duferco. What was the crucial point of why you should accept Duferco on Matt Harris' say-so? You know what his big thing was, because they have the ability to hedge against world steel markets, if they drop we can hedge against it. Their own appraisal, Mr. Minister, and you know that as well as I do, that is what that appraisal said. In a briefing with Mr. Harris, Mr. Harris' scenario was, these guys are going to go out in the market and sell slabs to themselves. What they will be able to do is hedge against that. So, what they are going to do, if the world price of slabs is $50, we are going to lay it there and the fluctuation may be from $50 to $25, or maybe $50 to $75, but they will be right in the middle. So they will be able to ride out the good days and the bad days.
That's what the intuitive Mr. Harris put forward. Whether on the record or privately, you know my feeling about Mr. Harris, and I have told you that, Mr. Minister, that I thought he was incompetent around this file and that they have made - I think it was just yesterday that we tabled $1.4 million. That is not a bad piece of change to pick up. Yet, you go back to the same group that just took that deal and drove it in the ground.
Another question I have to respond to is when you allude to, what would happen if the collective agreement had been signed sooner and there were tough negotiations. The reality is, you guys played pretty much hardball with those steelworkers. They were losing their jobs, you sent your counsel in there and it was a pretty tough set of negotiations. It was touch and go because they weren't being very forthright at the table. For you to say what could have happened, I don't know, it is almost like, Mr. Minister, that you have said what could happen with Duferco, what could happen with Nova Scotia Power, what could happen with steelworkers, yet, you have never taken the responsibility, you or your department have never ever taken the responsibility for any of the failures. Not once have you ever said, you know, maybe we have handled this file wrong, maybe we shouldn't have shoved a deal down the steelworkers' throats, maybe we should have done the deal as it should have been done and get this company to sign on and then we will get all these other things to fall in place; but you did it backwards.
You are the same guy - you like to use the term of $3 billion in Sysco; this province invested $3 billion in Sysco. What has always enraged me about that is you use it in the form of - you let it hang out there as if steelworkers got the bulk of that money. Whether it was past Liberal Governments or past Tory Governments, ask Tippins Inc. down in Pennsylvania how much money they got with the electric arc furnace and so on. They did much better than just about any steelworker. Talk about when you put in an electric arc furnace and its ability to work at 100 per cent capacity because the infamous John Buchanan Government didn't put in the right transmission lines. How did that affect the ability of that mill to compete?
So, Mr. Minister, it would be unfair of me to lay the fiasco of Sydney Steel at your feet, but I also think it is quite unfair for you not to share in some of the blame. I am not saying the vast majority of it, but you seem to find a scapegoat everywhere along the line, but you haven't looked at, when Mr. Spurr was in your office, some of the comments he made to inflame people. He has been around this file a long time with various governments. What I am trying to get here, Mr. Minister, is that whether it was the Minister of Education and her election platform with the infamous postcard, your Party and then your government have put that out there as a whipping boy, that mill. It's a shame that you never ever really acknowledged the hard work that the workers put into that mill. How they tried to make a go of it and how they were fooled time and time again by these so-called Christmas announcements; two from your department and at least two or three from the previous Liberal Government.
All these workers wanted to do was have a job and feed a family. Yet, you want to talk about whether they were late and weren't as timely as you would have liked when it comes to negotiating a collective agreement. It was your timeline they were dealing with. You imposed the timelines, they didn't. I find it rather insulting that you would say these things.
You guys did what you did. What are we going to do about pensions for those affected, the ones you said you would help? What is going on?
MR. BALSER: A few things, in light of the comments you have made. In terms of direct reference of the abilities and attributes with regard to the workforce, I, on a number of occasions, and certainly on the floor of the Legislature, when an opportunity presented itself, said that the workforce at Sysco was one of the things that the potential purchasers always pointed to as being an asset and an attribute. In terms of the valuable contribution they have made over time to that plant, that is certainly the case. In terms of prescribing blame, I think in light of the checkered history of 30 years, you can point to successive governments, successive ministers and successive problems. I think at the end of the day there is blame enough for all to share.
No one will minimize the tragedy of not being able to have that facility continue to operate in private hands. That would be the happy ending to this story, if you will. I believe, and I certainly will say in this Chamber that I made every effort, as the minister responsible, to ensure that if we could find a buyer that that happened. It didn't, and we felt that it was time to move on. It is unfortunate that the world market - and we touched on this earlier on - changed the degree where it wasn't possible.
In terms of the endorsement Matt Harris brought forward to recommend, first of all, Duferco and the fact that they continue to handle the file through liquidation, Ernst & Young is a company global in scope and abilities. They did bring forward the expertise to deal with the process, either to find a buyer - in fact I attended meetings where expertise was brought
in to assist with the analysis of the proposals. When those kinds of people were needed, they were brought in.
I believe that Ernst & Young's proposal, the one that was ultimately accepted in terms of the province asking them to carry forward, was reviewed by a number of people who recommended that as the best proposal, their remuneration reflective of a competitive bid process. I make no apologies for the fact that they were retained and the fact that they have been paid commensurate with their activities and abilities.
At the end of the day, it's necessary to move on to what will happen, post, the liquidation process, and that's what we are attempting to do. As you say, where there are scapegoats and so on, it's not about looking for scapegoats, it is looking for what happened, what could have happened, it is all conjecture and hindsight. We are where we are today. We did make, as I said, the offer. In answer to a previous question, there were 575 people who were going to be offered an enhanced pension package to incite them, to induce them to take retirement, if you will, and that was with the view that there would be a number of people employed in the operation with Duferco.
Every one of the proposals that has come forward over the last 30 years has said that the workforce at Sysco had to be significantly downsized. You talked a bit about the fact that the electric arc furnace retrofit failed to turn the plant around because of power lines. That was a contributing factor, but another contributing factor was at the point in time where they went to a mini-mill, they did not deal with the restructuring of the workforce to the level that would have ensured it could be viable. Any plant operation that was of the tonnage capacity of Sysco had a workforce in the range of approximately 350 employees, give or take. The existing rolls made it very difficult, economically, to make those plans work. That is why the Duferco arrangement saw a reduction in the workforce, and that's what we attempted to accomplish.
In terms of the severance proposal that was put forward to deal with the workers who would not be finding employment, that was part of the existing agreement, and if you look at specifics - again, it comes back to will you ever do enough to satisfy everyone, it is extremely unlikely - if you look at the average, I think the people who are being severed, on average, are in the age range of approximately 48 years of age with about 6.5 years in terms of pensionable service on the plant floor.
Part of the difficulty with the workforce is that people who are members in the union continue to develop seniority with, in some instances, no actual time on the plant floor. So you have a real divergence of someone potentially having 20 years of seniority and 6.5 or 7 or 9 years of pension points. That was one of the issues that had to be resolved through the enhanced pension package process. That was, how do you deal with people who may have 26, 27 years of seniority in the union, but perhaps significantly less than that in terms of pension points?
What we did, when the deal collapsed, was simply apply the negotiated agreement to capture all of those people. From the outset we said that it was a pension severance proposal related to the negotiated agreement. In fact, when the deal collapsed, as a province we were under no obligation to honour the negotiated agreement subject to the Duferco deal. We made a conscious decision as a government to make that $30 million available, and then to use the money that would have been available for the retrofit to deal with all the workforce at Sysco through the liquidation.
MR. CORBETT: Again, you try to make yourselves look like Robin Hood, and I think you are on the other side of the street when it comes to looking after those employees, Mr. Minister. I don't think you dealt with them in a fair way, and you are not going to change my mind about it because as I said in my opening remarks, there has to be some skepticism when you talk about how you earnestly wanted to look after them. As I laid out to you, there was time after time when you said things would happen and they didn't, and they certainly didn't happen that way.
I want to go on to a few things. The member for Cape Breton South asked some questions before about Nova Scotia Business Inc., particularly the representation or probably the lack of representation from Cape Breton. Can you tell me if Mr. MacLeod's application was sought, or did he voluntarily apply for that position?
MR. BALSER: His application came forward through the regular process, and that is that he made application to the board. I personally don't remember if I had a conversation directly with him. I will indicate that I talked to as many people as possible about encouraging them to apply; if I was at a function where there were representatives of the business community, or oft times, if I met them I would say, are you aware of this initiative, and we would certainly encourage you to apply. Every one of the people whose name came forward was one who had applied as per the advertised process.
MR. CORBETT: Well, I will tell you this, in a radio interview - well, it certainly says in your documents that he was solicited to . . .
MR. BALSER: As I said, I don't remember . . .
MR. CORBETT: In setting up that body, you should know these things. Mr. Minister, this goes back to my statements earlier of what can we expect, when you are saying in earnest. This is causing a real problem. This person was sought out. We know there were other people from Cape Breton who applied to be on that board. Does that thing smell? Don't you realize that if you go out and you are putting your people in there, that that is going to be self-perpetuating, that the public process is not going to be open again. It is bad enough there is only one person from Cape Breton, the three outlying counties have nobody on them. You explained away before about people and expertise "you thought". I guess this must be "The World According to Garp". What you are saying is, here is how I saw it. Because what
you are doing is you are going out and soliciting people. You are saying, I think I need an expert in IT, I am picking you.
The whole process is flawed from the beginning. Why wouldn't you have left those people who applied to be the ones to pick from? If you are really, truly worried about representation, especially economic development, wouldn't you go to somebody - let's be crazy - get someone from the trade union movement. They may give you a perspective. You certainly have Mr. Gogan there, who is there from the Empire Group and if you talk to anybody who had any business dealings with him, he could be easily characterized as anti-union; his ideas are allowed to permeate through that group. So, why wouldn't you accept the people, especially from Cape Breton, who put their names forward? You are telling me today that these people were not qualified to sit on Nova Scotia Business Inc.?
MR. BALSER: No, that is not what I am telling you. What I said to you was there was an advertisement done as per the requirement, and that people applied; in a number of instances I contacted them. As I said in response to your first comment, I couldn't remember directly and if he was solicited, I did have conversations with 60 or 70 people asking them to consider participation. There was a screening panel in place that I have no involvement with, and through the screening process they then determine who comes forward and, based on that, weighing sector, gender, geography-related issues, the recommendations are made. In many instances, the calibre of the people who have ultimately been appointed to the board is such that their reach extends beyond geography.
[5:00 p.m.]
If you talk about - again, in response to an earlier question - someone of John Risley's stature is, and certainly business involvement beyond stature, he has dealings in both the nutraceutical industry and also in the fishing industry, both tradition and in terms of using technology to add value. Those kinds of people, I don't think are limited by geography. They bring a view that transcends whether they reside in southwestern Nova Scotia or northern Cape Breton or Antigonish County, it is a function of what they bring to the table in terms of their expertise.
Since the appointments are staggered, I believe that there is going to be an opportunity for that board to address issues of whether it be gender, geography or sector expertise over time; the appointments are for 2, 3, 4 years so there is obviously an evolutionary process that can occur.
MR. CORBETT: You know, a Tory Premier and predecessor, Donnie Cameron, took away the toll booths at the causeway. I think you and your department will be responsible for taking away the causeway, because to try to think that we are going to swallow that hogwash that you are saying, that these people are going to be reflective of all Nova Scotia - they are not; don't insult us.
You talked about a screening panel. Can you table with us who this screening panel was for Nova Scotia Business Inc.?
MR. BALSER: We can do that.
MR. CORBETT: Do you have it here today or when could we have them?
MR. BALSER: Steve Parker, Lonnie Holland and Darrell Hiltz.
MR. CORBETT: Steve Parker?
MR. BALSER: Lonnie Holland and Darrell Hiltz. I can tell you that one of the applicants to the board was, in fact, involved in previous screening panels and declared a conflict and withdrew from that process prior to any of this transpiring.
MR. CORBETT: What is the background of these three individuals?
MR. BALSER: Steve Parker, he is the principle of CCL Communications; Lonnie Holland is a principal of Beacon Security, and Darrell Hiltz is a retired business person.
MR. CORBETT: So these are the people that have given us the new Industrial Estates Limited?
Can you tell me how many applicants you had for Nova Scotia Business Inc.?
MR. BALSER: I believe it was in excess of 100. I know that in response to a question in the House, I think it was 114, but I don't have that number directly - it is from memory. We can get that for you, but it was a significant number of applicants.
MR. CORBETT: I think, if memory serves me, it was 140.
MR. BALSER: Okay, 140.
MR. CORBETT: Out of 140 applicants there was nobody deemed, by these three people and yourself to sit on the board, to represent the interests of industrial Cape Breton, so you had to go out and solicit somebody? Is that accurate?
MR. BALSER: As I said earlier, in response to the solicitations I requested a number of people, I think I talked to, this is an arbitrary number, something like 50 or 60 people who in the course of conversation would say are you aware of this? Have you thought about it? Would you be interested in participating? Would you be willing to put an application forward? It is not a question of deeming some people inappropriate or appropriate, it is a question of trying to ensure that we had the largest possible group of applicants to choose
from. I believe the significance of this restructuring and the types of things that we will be doing and attempting to do with the board is such that we wanted the participation of as many people as possible.
MR. CORBETT: Is this board going to be centred out of Cape Breton?
MR. BALSER: In terms of where they will meet?
MR. CORBETT: Yes.
MR. BALSER: We have not made a determination. That is actually a good suggestion to consider perhaps having the meetings of the board convened in various geographical locations. I can tell you that historically - if we look at the Business Development Corporation model - that board has met here in Halifax, partly because it is central, but I can see some value in looking to the possibility of having the board meet in various locations, in the same way that this government has had Cabinet meetings in various parts of the province. It is important to be a presence outside of metro and get a feel for what is going on in various geographical regions, so I take that as a very positive suggestion.
MR. CORBETT: My suggestion was not shopping around, but keeping it in Cape Breton.
You have admitted to soliciting people. Did you solicit anybody from the trade union movement?
MR. BALSER: I don't know specifically, was that, did I specifically say I wanted someone from the trade union movement and make that particular phone call? No, I did not that I am aware of, but then again, as you say, the times that I was involved in discussions may well have been at a Rotary Club function or a Chamber of Commerce function here or there.
MR. CORBETT: There aren't a whole lot of trade unionists at Rotary Club functions. This really ranks up with talk is cheap. You and your Premier tell people we are doing things in a new way, but it is the same old Tory way. You are going, as you just said, to Rotary Clubs and Kiwanis . . .
MR. CHAIRMAN: Your time has now expired. Any questions from the PC caucus before I pass it to the Liberal caucus? None?
The honourable member for Cape Breton South.
MR. MANNING MACDONALD: I just want to pick up on that theme about the Nova Scotia Business Inc. I have talked about it in my previous remarks and the member for Cape Breton Centre, Mr. Corbett, has talked about it, and I am going to start with that again. If you would say it like it is, it is nothing more than political patronage here. It is setting up a bureaucracy in Nova Scotia that is going to do the bidding of the government; it is setting up a bureaucracy that is not going to be accountable to the Legislature at any point in time; it is setting up a bureaucracy that is going to reappoint itself; it is setting up a bureaucracy to dole out public money that only has 1 Cape Bretoner out of 12 representatives on it; and it is setting up a bureaucracy that can literally cherry-pick throughout the province where they are going to spend the public's money.
Now, having said all of that, there are specific questions that I would like to have the answers to, either now or in written form before we finish the estimates, as I would hope that the other answers that I have asked for would come back before the estimates are over as well.
These 12 people who are going to determine where we are going with the bulk of the money in Economic Development, I want to know, how much are they being paid; how much are their expenses going to be; and how much public money are they going to have at their disposal? If you can't answer those right now, I will take it as notice and you can give it to me at any point.
MR. BALSER: I will get the detail for you, but generally speaking it is the same rate structure that applies to the board for the BDC, which is roughly $100 per meeting and the expenses that are incurred to travel as is standard practice with these boards and commissions that meet on a regular basis. There has been no structure created for the board of Nova Scotia Business Inc. which gives them some preferential status or treatment. In fact, back to the issue of - and I realize it was a previous questioner - solicitation, I think in many instances these people who are serving on the board will probably be out of pocket in terms of the fact that in their private sector lives they are much more attractively remunerated than $100 per day. I believe it is reflective of the commitment on the part of these people to put something back into Nova Scotia.
MR. MANNING MACDONALD: How many people will be working for the board - Nova Scotia Business Inc. - and what is their budget? I would like the budget broken down in two parts: administration, and the monies available for them to distribute to friends of the government around the province.
MR. BALSER: I believe in response - and again this number is from memory - I think it was something in the neighbourhood of 59 people would be transferred to Nova Scotia Business Inc. I believe that is the number and we will verify that.
MR. MANNING MACDONALD: Fifty-nine people. Okay.
MR. BALSER: You have to remember that those people will be responsible for many of the - 56, excuse me. I just got the verified number now and it is 56 - they will be doing the functions of, for example the lending function currently housed with BDC, they will be doing the trade investment function, and they will be doing in part the business retention function. What is happening is the staff currently housed in Economic Development will be following the business lines to Nova Scotia Business Inc. For example, we have a person in the policy and strategy section who deals specifically with international trade issues, and because policy direction will reside with the agency it would be my view that that individual would remain with the agency. What we are doing is redistributing the workforce that currently exists within Economic Development to follow the functions that will be rolled out.
You asked a question about the allocation of funds specifically, and $29.4 million of the budget will be allocated to Nova Scotia Business Inc.; $5.9 million of that budget allocation will be allocated toward the operations including salaries, travel and costs; $1.5 million of the allocation will be towards the provision for bad debts and the $22 million, as I responded earlier on, will be allocated to investment funds specifically for business attraction, retention, promotion.
MR. MANNING MACDONALD: So what you are telling me is you have 56 people going to work for this Nova Scotia Business Inc. that is going to distribute $22 million - 56 people are going to be employed in this part of your department to administer $22 million?
MR. BALSER: The issue is not entirely about distributing money. One of the big functions of that department is that as it is currently structured, and certainly as Nova Scotia Business Inc. will be structured, is to promote and enhance export markets, trade missions, those kinds of initiatives that grow the economy because of existing opportunities. The $22 million will be allocated to support proposals that would either see perhaps the attraction of a call centre or a manufacturing facility or perhaps a loan to build infrastructure.
MR. MANNING MACDONALD: Well, it appears to me that since you are separating that you have the cart pulling the horse. You now have a situation where the Department of Economic Development doesn't have as big a budget as Nova Scotia Business Inc., yet you have a full bureaucracy there and this one has 56 people. Is there going to be an equivalent deputy minister here for this part of it? How are you going to work that?
MR. BALSER: The deputy minister will be responsible for both the operation of Nova Scotia Business Inc. and the agency in terms of the day to day. He will be reporting to the minister responsible for Economic Development. For example, in terms of the board of NSBI, the deputy minister will sit on that board so there will be a direct link from Nova Scotia Business Inc. back to the agency. The agency will be working to develop policy and strategy and those kinds of issues. We see a separation of the two functions. The government will be setting the course and direction, and they will then be using Nova Scotia Business Inc. to put that policy discussion and those senses of direction into practice.
MR. MANNING MACDONALD: Could you tell me, or could you again table the number of people from Cape Breton who applied for that particular board? At that time you could maybe suggest why none of them were suitable for the board, save one who was solicited to be on the board. I find it extremely offensive that a number of Cape Bretoners would take the time to apply for a board and be written off out of hand and the one Cape Bretoner who is on the board was solicited. I find that very strange that in an open and democratic process that is supposed to be taking place here, not one single Cape Bretoner was qualified to sit on this board, and you have one appointed to the board who was solicited from industrial Cape Breton. You have none from Victoria County, none from Richmond County and you have none from Inverness County. So there couldn't have been anybody in those three counties in Cape Breton who was eligible to sit on this board by virtue of their qualifications, yet you saw fit to go out and solicit one Cape Bretoner for the board.
That says to me that you and your government put exactly who you wanted on this board, and if you couldn't get somebody who was going to fit your criteria or your future political agenda regarding this slush fund that is now going to be distributed throughout the province, you couldn't come up with anybody there, so you went and solicited a person who would suit your needs in Cape Breton.
I think it is offensive that you don't have at least one-third of those members from the area of this province that has the most severe unemployment - not in the province, but anywhere in Canada - and you saw fit to only put one person on that board and that person was solicited by yourselves. I find that offensive and I want to know why that happened and I would like to get a list of those from Cape Breton who applied. I know a couple of people who applied who are very, very disappointed that they were not considered for this board. If the Premier comes to Sydney once more and says I can't protect the steel plant, I can protect the steelworkers. I can't save the steel plant, but I am going to save the economy down here. I am going to change the direction of this economy.
Well, this was a golden opportunity to put somebody at the table that is distributing money to do something about the economy down there and what do we get? We get 1 out of 12. What kind of say is that person going to have at a round table discussion of where the public money is going to go in this province when we have one representative from industrial Cape Breton and none from the other three counties on Cape Breton Island? I would like to get that list and I would like for you to comment on the rationale again, because you haven't really gotten through to me or my colleague, the member for Cape Breton Centre, as to why this government saw fit to put 1 person out of 12 from Cape Breton on this very important economic tool for the future development of the economy in Nova Scotia. I want to hear that explanation as to why there is only one from Cape Breton.
MR. BALSER: Again, in response to a number of questions around this issue, there were in excess of 100 applications, and they were vetted through a screening panel process. At the end of the day, with 12 seats to deal with all of the diverse geographic regions of Nova
Scotia, to deal with issues related to sector representation, to gender representation, there are undoubtedly disappointed people in every corner of the province. That is unfortunate, but the reality is we have brought people, I believe, to the table who transcend geography. Some of these people are sitting there in part because of the sector and the organizations that they represent.
I talked earlier on about the exporters' and manufacturers' association. They have a voice and they are a big part of the economy. The IT sector is a big part of the economy. We have representation from the oil and gas industry, and certainly I believe it is important to have someone who can speak to oil and gas initiatives with a provincial perspective. There was no intention to slight any particular region. It is a question of how do you balance with a limited number of opportunities on all those issues.
MR. MANNING MACDONALD: With all due respect, Mr. Minister, you have slighted one region of this province. For example, can you sit there and tell me there was nobody eligible or qualified to be on this board from UCCB or from the labour or small business community on Cape Breton Island, that it is to the extent that you had to go and solicit one person to represent the island? Come on, tell it like it is. It is a political board set up to do the will of the government and, with due respect, I would say probably had trouble finding good friends of the government down around industrial Cape Breton to go on the board, but to sit there and try to rationalize it the way you are doing is not sitting well with me. Just tell it like it is, it is a political board that is set up and you didn't want Cape Breton to get a leg up here, and we need a leg up and you know that.
MR. BALSER: Again, back to the types of people who are sitting at the board table, the president of the university association sits there, and I believe when she sits as president of that association she speaks for the University College of Cape Breton and so on. So it is quite possible that people who represent a larger organization if you will, in addition to what they bring to the table, they are going to speak specifically towards issues related to whether it is Cape Breton or it is the Eastern Shore that has specific economic issues. I believe the board brings forward a tremendous array of skills and abilities and attributes and, at the same time, does justice to some of the potential positives in terms of economic renewal.
We have the aerospace industry there; we have exporters' associations there . . .
MR. MANNING MACDONALD: How many of them are in Cape Breton?
MR. BALSER: . . . we have the oil industry there; we have the university millieu, the academic world represented. We have, again, traditional industry represented, and over time, as I said, the board is designed to be renewing itself and I am confident that they will be able to address issues as they move forward. The board appointments will allow for, in two years, some redistribution of seats if you will, to reflect maybe those concerns that are being voiced
here. But I do believe this is a significant step forward in terms of changing the direction for economic development.
It was not, as I said earlier, a view to slight anyone and in terms of solicitation, as I commented earlier on, I made any number of calls to people encouraging them to consider putting their name forward. So the fact that someone was solicited is merely a reflection of the desire on my part to have as large a pool to draw from as was possible.
MR. MANNING MACDONALD: If that statement wasn't so sad, it would be funny. You felt you had to go out and solicit somebody when there was a bunch of Cape Bretoners who applied to the board. None of them, obviously, met your criteria. Now I would like, when I do receive the list - and I expect that I will get a list from you of the numbers who applied - to be able to tell them and give them the transcript of this as to why they weren't put on the board, because you just told me that you had to go out and solicit somebody who met your requirements in Cape Breton; nobody else would meet your requirements in Cape Breton who applied.
Now I can't believe that we have such a watered-down pool of expertise in Cape Breton and people who obviously don't know anything about development, because you never saw fit to entertain any of them who wanted to go on the board. So I can only assume that none of them had the qualifications and I want to be able to tell them that. Thanks for applying for this board, but I am sorry, none of you had the qualifications, including people like Dr. Greg MacLeod who would have been a tremendous asset to this board. If you wanted to solicit somebody, you should have solicited him.
He would have made a tremendous contribution, but there is one problem that Father Greg MacLeod has. He is not a Tory. He is not political; as a matter of fact I don't know what he is, but I can tell you that he is not a Tory or a Liberal or anything else. I don't know what he is, but I can tell you he knows Cape Breton and he knows what is needed down there and he would have been of invaluable assistance to you on that board. That is one gentleman, and I can give you names of men and women in Cape Breton who would have made a valuable contribution, but no, you had to go out and solicit one person - the president of the Industrial Board of Trade down there. That is the guy you have on the board. I have no problem with him personally, but I can tell you when he gets around that table with the other 11 who are going to be there, I can assure you that unless we have some kind of an additional funnel to get our needs and wants into that committee, we are going to have a difficult time.
But I want to leave that for a moment . . .
MR. CHAIRMAN: We have a half-hour remaining in our time today.
MR. MANNING MACDONALD: . . . and I want to go to the issue of natural gas as it affects Cape Breton. Again, we have heard this government, Mr. Minister, talk about the need to do something about natural gas in Cape Breton. We hear that the economy is changing, it is going to change and that Cape Breton is going to be the beneficiary of natural gas and all that that brings with it, yet we have a problem here in Nova Scotia with the distribution of the gas already and it hasn't even come near Cape Breton. I don't know whether we are ever going to see it in our lifetime, the way you people are handling that file right now.
I want to know why the Minister of Economic Development, who is so interested in developing the economy of this province, is not talking to his friend, the Minister of Transportation and Public Works, his fellow colleague, to get on with this business of this impasse with Sempra and what is happening with the distribution. I want to know what your opinion is as to why, now, the gas people are saying that Pictou County may not receive anything this year and the South Shore may not receive anything this year because of an impasse with the government.
On an issue this important, I would think the Minister of Economic Development would sit next to his counterpart there and say look, tell those guys in your office over there to get off their collective butts and do something about this issue. These people with Sempra and the other people involved with the gas industry are not going to sit around too long and have bureaucrats procrastinate and hold them up and delay the process to the point of frustration to those people that they can't get anywhere with their proposals here. I suggest that the longer this takes to get straightened out - and I also want to know whether or not you people are encouraging the people charged with that responsibility in this province to get down into Cape Breton with those lines sooner than later, is anybody talking to them about that or are they just going to let them flow along on their own timetable? I know there are a few questions there, so I will let you pick it up from there.
MR. BALSER: Okay, in terms of the issue of road shoulder . . .
MR. MANNING MACDONALD: The trenches, I am talking about.
MR. BALSER: I understand. That was an item of concern. The Department of Transportation and Public Works were concerned that in Canada road shoulder installation is done not as a matter of course, but as a matter of exception. There is road shoulder installation through a mountain pass in Whistler, B.C., and there is road shoulder installation in the Province of Quebec and, generally speaking, it is done as a matter of exception. Again, this is a very new industry in this province and there are obvious concerns not even totally related to the safety factor, because that is a consideration, but also to what kind of impact road shoulder installation would have on future maintenance and repairs to the roads.
Because of the lack of knowledge, the agreed strategy was to have a third-party analysis done. That was done, and the report is in the hands of . . .
MR. MANNING MACDONALD: Excuse me, lack of knowledge?
MR. BALSER: About all of the implications of road shoulder installation in terms of where it is done, what impact it has on, as they say, being able to maintain roads after the fact, whether safety was a factor, whether it could be accommodated in a way that would be . . .
MR. MANNING MACDONALD: You don't have people in-house who could tell you that?
[5:30 p.m.]
MR. BALSER: There are engineers in-house, but they felt that it was an issue of enough - and this is speaking from my knowledge of what went on with Transportation, and perhaps the best place to address that particular question would be with them - the view was to retain a third-party analysis of road shoulder installation to get the kinds of information that would be needed to make a decision, and that was retained. The information has been reviewed by Transportation and the information is being reviewed by Sempra. There are a lot of issues around how quickly pipelines will be installed. We talked earlier on about the current price of natural gas making marketing difficult. In residential communities there is not a whole lot of interest in having gas piped to their doorstep because there is no price incentive. There is that issue. We will be listening to Sempra about their problems and concerns in terms of the road shoulder issue. It is an issue that resides, in a large manner, with the Department of Transportation and Public Works. We are working through that piece.
The area of concern about how quickly gas will be available to Cape Breton. You are well aware of the fact that the NEB had concerns about the pipe integrity and they gave a marginal license to proceed at reduced pressure. Part of the delay has been around the need to construct a pressure-reducing station; that has been approved and is moving forward. Gas will be available within the year, I believe. It will be in service by July. There will be gas available. Even at the reduced pressure there is sufficient gas to meet the commitments that have already been made. I believe as opportunity develops, the gas pipeline will become . . .
MR. MANNING MACDONALD: July of this year?
MR. BALSER: Yes, July of this year. Again, the issue is how quickly they can move forward and how much demand there exists for the pipe. One of the reasons why the Halifax lateral was doable in the near term was the fact that Nova Scotia Power had need of that energy. Again, one of the reasons why Sempra was talking about putting gas into metro and
into the Pictou and Antigonish regions was because they viewed it that those were the areas where there was enough population to . . .
MR. MANNING MACDONALD: They are doing it for their pockets. They are doing it for their benefit not for the benefit of anybody else, that is for sure, and we know that.
MR. BALSER: Again, the point being that the gas will be available. There is a timeline in place. Even at reduced capacity, the pipe can handle the demands that are there now.
MR. MANNING MACDONALD: Let me go away from that for a few moments and go back to Sydney Steel. There are just a couple of pieces of information I would like you to table, if you would, before we finish these estimates. A question first and then I will ask you to table some estimates for me on revenue and expenses. The question is, do we still have a President of Sydney Steel?
MR. BALSER: Mr. Rudderham is acting in that capacity.
MR. MANNING MACDONALD: Is the corporation still an entity of the Government of Nova Scotia?
MR. BALSER: Yes, it will be, and it will be until such time as it is no longer appropriate . . .
MR. MANNING MACDONALD: So the government still owns the steel plant?
MR. BALSER: At this juncture, Sydney Steel, as a corporate entity, continues to exist.
MR. MANNING MACDONALD: Could I have tabled - and it shouldn't be too hard for you to get this since Jim Rudderham is very competent - a list of the Sysco revenues and expenses for the last six months, and the projections for the next six months?
MR. BALSER: I think we could probably accommodate that. It is not something I have readily at hand, but we can take that under advisement.
MR. MANNING MACDONALD: I would like to have that, if I could, before we finish.
You mentioned revenues earlier, and I am amazed that there are still revenues, but that is fine, I would like to see them, and what the expenses are attached. All of the expenses you are talking about here, with Ernst & Young, Stewart McKelvey Stirling Scales and other
people, obviously, who are getting paid to do business there. None of it shows up in the provincial estimates, so it is all on the Sysco books.
I just want to know - I think it is a fair question, and I think most Nova Scotians would want to know - how much money is left in Sysco? We have a ton of money there that you people are dishing out all over the place here, you have $2 million to Ernst & Young; you have $700,000 to Stewart McKelvey Stirling Scales; you have other expenses to other people who are doing some work for you. I just want to know the total of those, and where the money is coming from if it is not in the budget. Is there that much revenue being generated at Sydney Steel?
If that is the case, once you show it to me, I will be somewhat satisfied that at least I will know where it is coming from. I am not satisfied with the amount of money that is being paid out; I have never heard of liquidators getting $2 million to sell something. I have heard of people managing places and getting that kind of money - and apparently this is what is going on here - but I want to know any projections. The reason I am asking for projections for the next six months is that now Ernst & Young are evaluating, I believe, 27 proposals. Everybody who can write a letter has a proposal in there now, I suppose, to get some of the assets down there. I know there is no sense in my asking you who they are right now, because that process is probably guarded until Ernst & Young go over them.
What I want to know though is have you budgeted any more money for Ernst & Young, and how long is it going to take Ernst and Young? If I was operating Ernst & Young, I would take the next year, at those rates, to decide which one of the 27 people are going to get the bid. There is another question I would ask you, and perhaps you are not going to be able to answer this one either, but certainly I would like to get your opinion. The rail-making equipment at Sydney Steel is state of the art, it is new and its technology is proven, especially in the area of head-hardened rails. I am not sure if this has happened, but I would suggest it is happening, that somebody is interested in the rail business and will probably make a bid for the rail-making equipment at Sysco.
I would venture a guess that within two years that rail-making equipment will be making rails somewhere else for somebody else probably; I would be very interested to see where that rail-making equipment ends up. I just want to get some opinion from you. Has there been anybody interested specifically in the rail-making equipment, to set up a rail-making operation somewhere else in Nova Scotia, or somewhere else in Canada?
MR. BALSER: Again it is a . . .
MR. MANNING MACDONALD: Pictou County, to be particular.
MR. BALSER: The issue of the nature of the proposals is still somewhat closed in terms of Ernst & Young not having made their final analysis. I can tell you that if you look at the global steel market, particularly in North America, we have had two large North American steel companies apply for Chapter 11 protection. A lot of the steel fabrication that is occurring now is moving to Asia, and is currently in Russia and so on. I think one of the sales attempts that the member, when he was minister, oversaw was to see a Chinese company come in and take that on.
Much of the steel industry is reconstituting itself in areas other than North America. At this point, I would be highly doubtful that a North American company, particularly a company to locate in Nova Scotia to manufacture head-hardened steel rails would be the successful bidder; then again, that is conjecture on my part, and you asked me to talk about that. Back to Ernst & Young and what they are doing. Ernst & Young came in to oversee and assist with the operation of the plant through the process that would find a private sector operator, or ultimately lead to liquidation. They weren't, in fact, primarily tasked with liquidation, they were involved in making decisions about accounts receivable, potential contracts that were undertaken under their tenure. I would tell you that during the time that Ernst & Young . . .
MR. MANNING MACDONALD: Mr. Minister, with due respect, that all evolved after. They were brought in as liquidators and then they went to you and made a proposal for the other stuff. Now, come on.
MR. BALSER: In any event, while Ernst & Young were involved in the process there was a positive cash flow to that facility, which is something that was unheard of in the last number of years so their involvement actually did add to the bottom line. The comment was, what would be the revenue streams? There were accounts payable to be collected, there were issues of restructuring the workforce that stopped some of the expenditure flow, and there were ways in which drawing down the scrap piles and so on all added to a positive cash balance.
There are still accounts receivable to be collected; obviously as we move to liquidation there will be revenues flowing in through that process as well. As to how long Ernst & Young will be involved, no one wants to see this as an open-ended process, there is an obvious view to a conclusion. The conservative estimates to decommission and close down a facility of that magnitude and scope, 18 months is not unreasonable. Would Ernst & Young be involved through that entire process? It is highly unlikely. They are at this point reviewing proposals, and there will come through this piece a time when the services of Ernst & Young are no longer required, in the same way that the services of the legal firm that handled the negotiation of the contract and the negotiation of the sales agreement, their involvement ebbed and flowed depending on the nature of what was transpiring.
I don't think that the expenditures related to our process involved with Sydney Steel is dramatically different from the previous administration who were paying Hoogovens roughly $800,000 a month to manage the plant, as I mentioned earlier. At the end of the day, a $3 million expenditure to eliminate a $40 million annual draw on the provincial coffers is a reasonable investment because it will, at the end of the day, get the Province of Nova Scotia out of the steel industry and deal with those issues.
MR. MANNING MACDONALD: Mr. Minister, to correct you on a couple of issues here, one is that when Hoogovens was operating the steel plant it was an operation that employed 800 people. Hoogovens was sent in there to bring the credibility back to Sydney Steel, the credibility that was lost because of claims of inferior rails that were later proven - you see, at one time, not too long ago, four or five years ago, Sydney Steel had a chance to make it, and they were producing good rails. Somebody saw that and decided they were going to invent something called radial streaking, and let it out that Sysco was putting bad rails on the market. Of course, we got in a big litigation with China - Sydney Steel was starting to make it and somebody in the steel world couldn't stand that so they invented radial streaking. It turned out we were vindicated.
In order to get our rails back in circulation and get our credibility back, we had to hire a world-class steel company, management company to go in there and do that. They went in there and cleaned the place up, they got some of the casters cleaned they were having problems with; they got CN to requalify, and CN did that. That is what Hoogovens was paid for. Hoogovens went in there with a management team and managed the plant, managed a working plant. They didn't go in there to liquidate it, they went in there to manage a working plant and, hopefully, take an equity part in the plant. It is quite a different situation here.
The problem is that they identified two markets. They identified the high-speed rails, they identified a market in Eastern Europe for those high-speed rails. The whole corridor between Moscow and Berlin needs to be upgraded, and they were looking for high-speed rails. They also had a commitment from CN to come back to Sydney Steel. I don't know if it is generally known but there are no domestic rail producers left; CN, right now, are buying their rails from China, bringing them in from other places. Here we have a rail mill operation in Canada that we can't seem to get comfortable with, all we want to do is destroy it.
It could work. It could have worked. With due respect, you didn't give it a chance in the past year or so, I don't think. Your political commitment was to get out of it. Our political commitment was to try to make it work. You keep mentioning the losses. Yes, there were losses there, but you don't talk about the positives of Sydney Steel over the years, what it contributed to the economy over the years, the amount of families who were raised on Sydney Steel's workers' pays over the years, what it did to the economy, what it did to small contractors here in Burnside. Do you know how many contractors have gone under that were supplying Sydney Steel, since that plant closed? Now you have the situation where the
Central and Cape Breton Railway is going to be in jeopardy because it is not hauling rails anymore.
You can't just say it cost the taxpayers of this province $40 million a year. That figure is not even right, and neither is the $2 billion figure they are talking about. Some person in the media said that about five years ago and it caught on. I don't think it has ever been proven that that plant cost that much money. If you take that on one side and put the revenues and the economic generation that steel plant had over the last 30 years - I am not going to listen to that kind of talk, nor am I going to apologize to anybody in Nova Scotia for keeping 800 people working when, at one time when my father was over there for 40 years, 4,000 people were working over there at the Sydney Steel plant making good steel products. To malign that plant and say it is better to get rid of it because it is costing money, the full story has not been told on what that plant has contributed to the economy of Nova Scotia. If you go over to Burnside and talk to some business people over there, they will tell you about the negative impact of Sysco's closing, the supplies they sent down there on a regular basis and the people they have employed over there because of that.
I just reject that argument, that every time I talk about something about Sydney Steel you come out with, it cost the taxpayers x amount of dollars. Well, I am going to tell you that over the years it provided a lot of employment for people, the families of people who are now working up here, some of them in government, and some of them got their start from the Sydney Steel plant or the pay that their father or mother brought home, either in the general office or in the workings of the Sydney Steel plant.
I take great exception to that being a constant political whipping boy in this province. What I would like to see is, at least, the marine equipment stay in Sydney, leave that legacy there so the Port of Sydney can grow, with a heads-up with marine equipment, look after those steelworkers that my colleague, the member for Cape Breton Centre, mentioned to you earlier, the ones who are still out there swinging in the wind who don't know where they are at - that is number two. Number three, make sure that we don't dismantle that equipment so it can't be used again.
If the government is committed to the rail equipment not being operated in Sydney, then I think it should not be allowed to leave this province. I would rather it stay in Sydney in a mini-rail operation and be operated there, but if that's not possible, make sure that equipment is not fire saled to somebody to make a fortune somewhere else.
MR. CHAIRMAN: We have about 9 minutes left in our time tonight.
MR. BALSER: Just in terms of the general comments, no one was happy to see the end of Sysco and the steel industry in Cape Breton. It was something that previous governments attempted to ensure could happen, that the industry could stay there. Again, I don't think that a company that has recorded 30 years of annual losses is economically
viable. In terms of the Hoogovens' proposal and their strategy, the historic strategy to turn Sysco around, if you will, was predicated on producing billetts, blooms and ingots, which are low margin at best, with a view that that would cover off the fixed costs associated with Sysco and that the rail market would then be the value-added that would put Sysco in the black.
Unfortunately, there has always been a heavier reliance on the billetts and ingots side of the industry and less on the rail, for a number of reasons. Always, Sysco has been hampered by countervails related to exporting rails into the U.S. market, that has paralyzed that industry. The management plan and the business plan that was put forward by Hoogovens as the turnaround was, by and large, the same plan that A.B. Little had put forward a number of years before. It hadn't worked then, it didn't work for Hoogovens. They were never able to produce the level of production that would allow them to break even in the time that they were there. In fact, one of the proposals that came forward around the time of the Rail Associates deal was predicated on a product mix very similar to the Hoogovens proposal. The markets just didn't exist and haven't existed.
It is unfortunate, but you have a steel industry that is globally in disarray. It's very similar to the process that has been associated with the Devco situation. Here we have a deal to transfer the coal industry to a private sector operator that hasn't come to a positive conclusion. You are dealing with the issue of how do you transition the workforce that exists in coal. I realize that I am not here to talk about Devco, but I am just talking about the parallels that exist between the coal industry and the steel industry in Cape Breton. In the best of all possible worlds, we would see a private sector coal industry that would allow those people, to some degree, to continue to be employed. There are not going to be the levels of employment the member talked about - the time when there were 3,000 employed at Sysco. Those were great days, indeed.
The fact that what predicated the province's involvement was that Hawker-Siddeley said we can't run this plant and make a profit. That was in the 1960's, so 30-some years ago, they made a decision to walk away. The province felt an obligation to try to find a buyer. When we became engaged with the operation of Sysco, it was to be a one year agreement that we would operate while we found a buyer; and 30 years later, we are still looking. There comes a time when it is no longer possible to do that.
We can talk about the multiplier effect of having people employed in Sysco and, certainly, there is an argument to be made but, at the end of the day, you have to look at how long can a province that is staggering under the debt load that we carry, continue to fund those kinds of operations? I think if you look, and it is said with seriousness, at turning the page on history, if you will, it's never pleasant. Be proud of the history of steelmaking in Cape Breton and what it meant to the economy of Nova Scotia over 100 years, and the same is true with coal. There comes a time when it has to change. The same thing occurred with the fishery, when the groundfishery collapsed. The industry that emerged as a result of that
is a different industry, but it actually puts more into the provincial coffers in terms of revenues than the old industry did. There have been displaced people. It is not easy to deal with that. It requires a commitment on the part of all people to move through it.
I take some of the comments you have made as they were intended, as constructive and helpful criticism, but overall . . .
MR. MANNING MACDONALD: Mr. Minister, we have accepted the fact that you have closed the steel plant, don't get me wrong. I don't think anything I say is going to make you revisit that issue, about closing it down. What I am saying to you is there are three particular related issues. One is the equipment that will benefit Sydney and its port, the second is to make sure, the rest of those steelworkers, that you are not perceived as double-crossing them, that is the perception now, on that other $30 million. There are a couple of hundred steelworkers there, that are out in left field. Of course, the other issue is that we try to put the railmaking equipment to good use. I will add a fourth there, that this whole process doesn't linger on to the point where I will be sitting here next year asking you whether it is $4 million that Ernst & Young are going to get.
Let's try to wrap this process up, so the Port of Sydney will know where it is going and the steelworkers will know where they are going and, perhaps, we might get that rail equipment in the hands of somebody that can make rails domestically. That is all I am saying. I am not asking you to revisit the steel plant and open it up again. I think I would be wasting my time doing that. I think there are other side issues that have to be addressed.
MR. BALSER: Certainly, in terms of dealing with this as expeditiously as possible, I think that is in everyone's best interest, and that is what I would like to see happen, that we move through the liquidation process quickly and expeditiously. In terms of the workers themselves, I believe we honoured the commitments we had made to that workforce, that those who would receive enhanced pensions were given those and that those who would be receiving severance were given that opportunity. There was a negotiated agreement that was contingent on the Duferco deal, which is the obligation that the province has met.
There are a number of people who fall in the severed workers group, who it would be virtually impossible to transition to, and I think what they are looking for, to some degree, is a pension. That is just not possible, because of the discrepancy between pension and . . .
MR. MANNING MACDONALD: Didn't you stand in the steelworkers' hall and tell them there was $30 million in there?
MR. BALSER: What I told them was that there was $20 million that was allocated for working with Duferco; that that money would be made available to honour the negotiated agreement that would have dealt with the workforce that involved some pensions, some receiving severance; that the monies that were available to assist Duferco would be made
available to steelworkers, and by steelworkers, we meant the obligations we have to those who are represented by CUPE, by those who are non-union employees at the steel plant. It is my view that steelworkers captures all of those people who work in Sysco or who worked in Sysco historically. The money that was available has been allocated for that purpose.
MR. MANNING MACDONALD: So that $20 million is off the table?
MR. BALSER: The $20 million has been allocated, based on the collective agreement that was negotiated to offer enhanced pensions, severance to those people, and to deal with, as I said, the CUPE workers who were impacted. They lost their jobs along with the steelworkers . . .
MR. MANNING MACDONALD: Why are those 200 saying they were left out then?
MR. BALSER: Pardon me?
MR. MANNING MACDONALD: Why are those 200 saying they were left out?
MR. CHAIRMAN: One minute.
MR. BALSER: I am sure that in part they were hopeful that there would be more available to them than was available to them through the negotiated agreement. Again, as I said earlier on, some would be entitled to enhanced pensions, some would be receiving severance. Those obligations have been met. There was an agreement that was, in spite of what some people at this table might say, accepted by a majority of the steelworkers, and that is the agreement that we have worked through to provide severance and pensions to those people.
MR. MANNING MACDONALD: Mr. Chairman, that is all I have, except to thank the minister for his answers today. Hopefully some of the stuff I asked for, we will have tomorrow, tabled here.
MR. CHAIRMAN: I trust there will be further questions from the NDP caucus. The time is about to expire for today, so we will pick this up again tomorrow. I believe it will be rather earlier in the day than it was today. The time has now expired for today, the four hours has been met. We will recess for today, and reconvene tomorrow (Interruptions) Shortly after 9:00 a.m. tomorrow.
[5:55 p.m. The committee rose.]
