[Page 359]

HALIFAX, TUESDAY, APRIL 15, 2003

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

1:55 P.M.

CHAIRMAN

Mr. David Hendsbee

MR. CHAIRMAN: I would like to call the Subcommittee on Supply to order for Tuesday, April 15, 2003. It is day six in the debate for estimates. We have 20 hours in. We are here to continue the debate on Resolution E5 of the Department of Energy. At the time of adjournment, yesterday, we still had 26 minutes remaining in the NDP time. The time is now 1:56 p.m. Mr. Holm, you can continue on with your questioning please.

The honourable member for Sackville-Cobequid.

MR. JOHN HOLM: Mr. Chairman, maybe we could wait for a moment while the minister gets adjusted.

Mr. Chairman, I want to compliment you on your efficiency in getting this Chamber running in a split second. There are a few things I want to touch on, if I can, first. I want to just finish off with the issue that I raised with the minister yesterday when I was leaving. I'm talking about the back-in provisions on the pipeline. I certainly heard the minister's predecessor, who is now his predecessor in Agriculture and Fisheries, Mr. Balser, saying on the floor of the House on a number of occasions, that they certainly will not do what the Liberals had done, that they wouldn't be giving away to EnCana the back-in provision rights on the pipeline for nothing, the way the former Liberal Government had done.

So my question is, if the government is stating that they gave away something for nothing, has the government ever done any kind of an evaluation, I don't mean a detailed evaluation to come up with an exact kind of figure, but has the government done any kind of evaluation to determine what lost opportunity, in the way of revenues to the province, was given away by the former government?

359

[Page 360]

MR. CHAIRMAN: The honourable Minister of Energy.

HON. ERNEST FAGE: I thank the honourable member for his question. Certainly there has been a number of political discussions on the significance of the back-in right when it was given up by the previous government on SOEP. The SOEP deal was signed before this administration took office. Since that time, we have spent the majority of our efforts encouraging future projects. The terms of that project, as in SOEP, were clearly defined in the agreement that we inherited. In that regard, we have not spent significant time or effort over evaluating what numbers may or may not be associated with the back-in that was not exercised on SOEP, but I would say, as a government and a department, we certainly see future projects having a definite value in the back-in rights owned by the Province of Nova Scotia, and our efforts would be associated with discussions and negotiations in that regard on future projects.

MR. HOLM: The minister said they haven't spent significant time and I wasn't looking for a significant report, I wasn't looking for a detailed final analysis, but if you're saying that the back-in provisions actually have value on future projects, you must have had done at least some kind of preliminary evaluation about what was done before. Of course, the Conservative Government wouldn't stand up and be extremely critical for political reasons only, of the former government. You don't have to come up with political reasons, there are all kinds of reasons that just fell out, obviously every way you turn around as to good reason to be critical of the former government, but if you're making these criticisms and you say that they gave it away, you must have some kind of an idea that it would have had some value. So if you didn't spend a significant amount of time, in the amount of time that was spent on it, what did you discover?

MR. FAGE: Again, the SOEP project was complete and signed off before our administration took office. Where we have centred our time and effort, it will require more information supplied, obviously, in the negotiation. On a project such as Deep Panuke, once a project like that is signed off then I think it would become clearly apparent what the value of the back-in right is on a new project.

[2:00 p.m.]

MR. HOLM: So what you're saying is that you were making these criticisms of the former government even after you took office without doing any kind of evaluation and finding if your criticisms were valid?

MR. FAGE: I think our Party and, certainly, the NDP, in the time when the previous administration was negotiating the SOEP deal, were both strongly of the belief and the opinion that the back-in rights had value. Until we have the opportunity to conclude a negotiation on our own and another project comes ashore, identifying what that true value is would be very difficult.

[Page 361]

MR. HOLM: I certainly have no hesitation in saying that, indeed, our caucus and myself were very critical about what the former government did, and your Leader, now the Premier, was extremely critical as well. When you're thinking about assessing future projects and trying to determine values, one of the ways you do that is to look at past projects, you can then more easily determine what the lost opportunities were. I'm just a little bit surprised that a so-called business-oriented government would not have been looking at what were concrete examples to evaluate so that you could have moved forward without making the same mistakes again, but I see that the minister is not prepared to either tell us what he knows or, having done your work in this area, so there's not much sense in pursuing it any more because I'm not going to get anything from it anyway.

I'm going to move briefly then to another item and maybe come back to a few other things. I just want to talk about gas distribution in Nova Scotia for a bit. Of course we know, it's no news, everybody knows that Americans are burning our natural gas. People in New Brunswick are burning our natural gas and yet again we're being told that we will be having limited access to natural gas, consumers will in Nova Scotia, in the fullness of time. Now, I know that the URB has awarded the licence to Heritage and that the government has approved that. My first question to the minister is, has Heritage officially, formally accepted that licence? If so, when did they do it?

MR. FAGE: As you properly stated, URB approved a franchise to Heritage Gas as well as Strait Area Gas, a conditional limited franchise. The government has also approved a franchise issuing to both of those concerns. In regard to Heritage Gas, Heritage Gas has not formally applied or properly accepted that franchise.

MR. HOLM: Why not?

MR. FAGE: They're in discussions, obviously, with suppliers as well as partners and going through the normal process of putting their proposal together. When they have it together, they will bring it to the department.

MR. HOLM: Are you having any discussions or is your department still having discussions with Heritage?

MR. FAGE: Yes, we're in discussions at the present time with Heritage.

MR. HOLM: When did Heritage tell you that they expect to either formally accept or reject the offer as put forward to them?

MR. FAGE: When they have their proposal finalized, they have advised us they will bring it forward.

[Page 362]

MR. HOLM: When is that supposed to be? Surely to heavens, the minister isn't just saying we're just going to leave it up to you, come back whenever you deem you have everything, all the T's crossed and the I's dotted. You must have some kind of time frame in mind. I certainly had expected this would have been announced before now.

MR. FAGE: My understanding in my discussions with Heritage is that they're very close to finalizing their proposal as a commercial operation with suppliers and the business plan in their department and I expect them to come forward very shortly.

MR. HOLM: Shortly, like within a week?

MR. FAGE: I really can't tell you if it's tomorrow afternoon or next week, or a week, or which day they're coming on, but I do expect it in the very near time frame.

MR. HOLM: I expected it by now.

MR. FAGE: I can't give any definite date.

MR. HOLM: I'm sure the minister will get an invitation to the formal announcement, probably the Premier will as well.

MR. FAGE: That would be appropriate.

MR. HOLM: I'm sure even if they're announced, when the Premier is there, if he can he will even have a nice backdrop there ahead of him when the announcement is being made. Can I ask you this question, it's very simple. I anticipate that the announcement will be made soon too, but the question is how long will the government wait?

MR. FAGE: As soon as they conclude their discussions and the business plan comes forward, I would think it would be very soon after we receive that.

MR. HOLM: So in other words, you haven't given any kind of deadline as to when they must conclude everything and decide and announce publicly whether they're going or not?

MR. FAGE: Again, I would caution and always remind everyone and the honourable member that these are commercial interests dealing in the real business world and it's up to them to bring forward and negotiate their own business plan, not government.

MR. HOLM: Yes, the Tory way. Next, if I could on that one, could you tell me, Mr. Minister, certainly there was some confusion around Christmastime about whether or not Heritage had secured its supply, and one of the things that the minister didn't know, of course, that the original agreements had expired, but the minister, when he was questioned

[Page 363]

about it at the time didn't know that there was actually a letter of understanding at that time that they were going to continue the agreement with the suppliers until a final agreement was worked out. Could you tell me if Heritage - and I'm sure the minister would be very anxious to have had the answers to these questions - has now obtained agreements with suppliers to ensure that they will actually have long-term supplies of gas to deliver? Have those agreements been finalized?

MR. FAGE: There are a number of issues surrounding it. First of all, in regard to your first question, I believe if you examine the reports, it was I, the minister who understood properly that those agreements were in place with the extension. Secondly, again, there are a number of avenues that supply a number of commercial companies that they can achieve it well beyond the circumstances that you queried earlier that are all commercial interests. It is the responsibility, and I believe we will see it in their business plan, of these private companies, Heritage being one of them, one party, that will make the announcement themselves.

MR. HOLM: Yes, indeed, I anticipate that they will be making the announcements themselves. They may be courteous and invite the minister and I am sure that they would like to invite some members of the minister's staff who have been, I am sure, very co-operative in trying to be helpful in working with them. They might even invite some other people too, but you know, Mr. Chairman, not only does the company have a responsibility to be making announcements, the minister also is responsible to know what's going on. Nova Scotians were promised they were going to be getting natural gas delivered to them.

Could the minister tell us, is the issue of road shoulders still on the table? Has that been resolved?

MR. FAGE: In their current business model, it's not an issue to them.

MR. HOLM: So they are not planning to use the road shoulders, or has the government given approval?

MR. FAGE: In the current business proposal, they're not planning to use road shoulders.

MR. HOLM: That was my understanding, but I wanted to get it confirmed. So I guess the next question is, because the minister's staff certainly have some knowledge on this, could we be told when actually additional pipes will be laid this year according to the business plan because, obviously, you have access to the proposed business plan if you're able to tell us the road shoulders aren't included in the business plan, can you tell us when Nova Scotians, somewhere, will be able to flick the switch and actually have natural gas?

[Page 364]

MR. FAGE: Again, they have to bring forward the proposal and their business plan. Their roll-out for that will contain those projected time frames.

MR. HOLM: Have you had any discussions, or has your staff had any discussions with them on what their anticipated timelines are?

MR. FAGE: In a yearly time cycle, obviously all along their intention has been to flow gas this Fall. The exact date, again, I can't give it to you.

MR. HOLM: I wasn't asking if it's going to be August 1^st or August 20^th, I'm just wondering when. There are already pipes in the ground in a lot of places in Burnside, et cetera, and in a few subdivision streets in the Clayton Park area. The proposal that is put forward is totally unambitious. We're being promised that we're going to get 4,000 households hooked up within 10 years. I mean, that's very little. The minister was bragging about the fact, I think, that the amount of carbon that's going to be reduced by the wind generation, yesterday, was the equivalent of about some 500 vehicles. What have we got, about 500,000 . . .

MR. FAGE: 454.

MR. HOLM: 454 vehicles?

MR. FAGE: Yes.

MR. HOLM: That's less than one-tenth of 1 per cent of the vehicles in the province. That's great advances.

MR. FAGE: That was two turbines that actually was based on . . .

MR. HOLM: Yes, I know.

MR. FAGE: . . . which is, obviously, as the member opposite questioning would realize, shows the potential of renewable energy through wind power, which is significant.

MR. HOLM: I appreciate the potential is there, I just don't think that we're moving ahead very quickly, but I will leave that to my colleague to discuss it. My point, and I'm dealing here with the natural gas, I don't think that Nova Scotians are going to be overly impressed by the length of time they're going to have to wait to get access to natural gas, our natural gas, which has the potential of giving this province a competitive advantage over other areas. The minister seems to be really quite unconcerned. I'm sure as the election gets a little bit closer and the backdrops become even more common, then the government may wish to be seen at least a little bit more proactive in pushing the availability of natural gas. In the fund that was set up by the producers, the negotiation that was supposed to grow to

[Page 365]

approximately $20 million, what's that now, about $12 million, $14 million? How much is in that kitty now?

MR. FAGE: Approximately $12 million.

MR. HOLM: Approximately $12 million. What have you agreed to do with that money?

MR. FAGE: The total fund, as you know, is pegged to top out at approximately $20 million. There is $14 million of that committed to various support that would allow commercial, institutional and residential residents of Nova Scotia to have various support mechanisms.

[2:15 p.m.]

MR. HOLM: What do you mean by support mechanisms? Are you talking about educating, advertising, subsidies to assist the cost of installation, purchasing furnaces, what are we talking about?

MR. FAGE: We're talking about a number of methods which are being discussed with Heritage Gas on how those funds can be used to support the development and installation of natural gas to that group of residents and commercial businesses in Nova Scotia. That finalization, once it occurs, obviously will be published. It could also include some of the infrastructure pipelining to get to certain residents of areas of Nova Scotia to make it commercially viable. It can take the form of individual support to consumers to allow them to convert or build new homes starting out with gas.

MR. HOLM: Who's going to make the decision, government or Heritage Gas?

MR. FAGE: The guidelines will be certainly supervised by government. The discussion on what is an allowable process or expense will be determined by negotiation between the Province of Nova Scotia, Department of Energy and Heritage Gas.

MR. HOLM: Will be, that sounds as if they haven't been done so far.

MR. FAGE: Those discussions are occurring. They have not been finalized yet.

MR. HOLM: When do you anticipate they'll be finalized?

MR. FAGE: In the very near future.

MR. HOLM: Awful lot of things happening in the very near future. Has anything been finalized yet?

[Page 366]

MR. FAGE: There's a huge amount of work, obviously, in progress. I think it's important to remind all present that the former government entered into an agreement in a situation where gasification, when it came to the point for the company who had been awarded the franchise, they couldn't financially handle it. This one is business-model based, whereas Heritage brings on communities and volume and supply, under their franchise they will continue to expand. Obviously, the roll-out to the entire province has no defined time frame because it's based on business commercial venture.

MR. HOLM: You don't need to lecture me about how the former government fouled up with the Sempra proposal. In fact, if you wish to check back you will find even on the date that it was announced that they had gotten the contract you will see there are news reports where I, even at that time, the very day it was announced, said it's not going to work and they'd be back trying to get changes within the allowable time frame or they wouldn't be doing it. It didn't take a rocket scientist to know that.

What I'm concerned about here is that what's going on seems to be very unambitious. Heritage is promising $120 million worth of expenditures over 10 years.

MR. FAGE: Approximately.

MR. HOLM: Approximately; $12 million, which is peanuts for something this great. Certainly their emphasis is going to be - and they're going to want to get, and rightfully so - the major customers hooked up first and those that are going to be bringing in cash flow. I mean, $12 million and they're going to be getting a rate of return, I don't know if that's been set yet, but they will be able to get 10 per cent to 12 per cent. Did the government go, for example, to municipalities and suggest, why don't we go together and why don't we talk about developing a joint venture, a Crown Corporation, where we will develop it ourselves? That, in terms of investment dollars, you have the ability to go out and hire people who know how to do it. I'm not saying those who are within your department, as capable as they are, have actually been involved in running such a thing, but the government has the ability to hire them. SaskEnergy, that's a Crown Corporation, it's making money.

Given this small amount that is being invested by the partners, wouldn't it have made some sense at least to consider that as an option? Was that considered? If so, what were the results of the study?

MR. FAGE: I think it's important to point out that the $120 million or $12 million, as you've evenly divided it, will not be a realistic roll-out or how it will occur, the minimum they've guaranteed. If the opportunity and demand is there, obviously they would accelerate that, and that's called responsible business. It's not the government that should be in the face of all Nova Scotians and be in the business of supply and subsidization as occurs in other jurisdictions and philosophies, I think you have to bring . . .

[Page 367]

MR. HOLM: Was it mentioned?

MR. FAGE: . . . yourself back to reality. The premise of why it was issued and under the terms it's a business-based proposal that allows gas to be distributed in Nova Scotia if the demand is there, is there a franchise and regulations that support that and the issue and the franchise also supported if the demand is there, they're required to meet it. They're very much prepared and have stated clearly that if demand exceeds that $120 million that they will be there to supply the gas and accelerate those funds.

I think it's important to not get lost in the rabbit tracks but stick clearly and look at it through uncoloured lenses that we've already tried the system in the previous proponent that didn't pan out. Everyone was supposed to have gas in a short time period on an unrealistic business model. This one was clearly - and it's been articulated by the government in the fastest manner possible, but also in the most prudent manner possible - this gas distribution is not to be subsidized by the Nova Scotia taxpayer, that this will be a business model. That's what this proponent brought forward with minimum guarantees in the URB issuance and approval. We, as a government, were very proactive. We were interveners on those regulations, how they should be set up to safeguard Nova Scotian investment. Nova Scotians clearly have said that they want access to their gas in a timely and prudent manner, and making sure those steps are taken in that timely and prudent manner is the responsibility of government and the responsibility of myself as the minister responsible.

Pushing an agenda that is not achievable, we've seen the heartbreak in Nova Scotia with the first franchise opportunity not working out. We intend to take the appropriate time frame, the appropriate regulation and action in the business case to make this one run. Hopefully it will be a viable commercial interest in nature so that it is going to be there long term to supply gas to Nova Scotians. As that demand comes on, clearly in the terms and regulations of the franchise, they have an obligation to supply it under certain conditions and norms and business principle. They've stated clearly that they're prepared to do that. So I think we shouldn't be under any illusion. This is a business model, not a social

MR. HOLM: Thank you. I know my time has expired. I thank the minister for his answers and I'll tell him that I'll try not to get lost in the rabbit tracks. Hopefully he'll stop trying to hide in them, too.

MR. CHAIRMAN: The time for the NDP caucus has expired for questions. Now it is time for the Liberal caucus. Your time is now 2:24 p.m.

The honourable member for Cape Breton South.

MR. MANNING MACDONALD: It's a pleasure to finally be here to be able to address the estimates of the Department of Energy because, as Nova Scotians are well aware, the Department of Energy took a long time getting up to speed as a full-time department in

[Page 368]

this province. I'd rather the current government were paying a little more than lip service to this important development for the future. I'm going to get into that in a few minutes.

I want to make a few remarks about what my friend in the NDP has been talking about here. What we've heard in the last hour is lots of NDP rhetoric about what should happen, what could happen, what didn't happen, and one thing I can assure you is that if the NDP were in power in this province the gas wouldn't go anywhere from the ocean shore because they would be still debating with every interest group from here to the sky and back about whether or not it's a good thing for Nova Scotia. So I think we can dismiss a lot of the NDP rhetoric.

What I will say is that Sable is the first kid on the block in a number of years. Along with Sable came the gas supply that was developed here in Nova Scotia and I think the birth of the current industry in this province came with Sable. Jobs were created and the economy grew and I think the member for Guysborough-Port Hawkesbury would agree with that, and other members of course, because one of the important things that happened was Sable brought a lot of new money into the province, a lot of new jobs into the province.

Mr. Chairman, with all its warts, and Sable had lots of warts, with all its warts Sable, I think, turned the attention of the world to Nova Scotia as a potential supplier of natural gas and related products in the future. What happened? There are a lot of things, all the way from world prices - you can blame the government, or you can blame the previous government, one thing you could never do is blame the socialists because they were never in a position to effect any policies on it, so it's kind of hard to blame them, but I will say that no matter where you want to put the blame, Mr. Minister, the fact is that I believe that a step in the right direction was the formation of the Energy Department of this province.

I think a lot of the misconceptions abounding in Nova Scotia regarding this industry is that the industry is moving ahead. I have a series of questions that I would like answered to satisfy our caucus, and anybody who's interested in hearing the answers, that, at least, it is indeed moving ahead. We get a mixed message. Today in the House, I asked the Premier a question during Question Period regarding where we were heading with our economic solutions regarding energy in the future, and the Premier was very vague in his answers and you, Mr. Minister, I believe tried your best to put a good spin on it, but there's a contradiction there because what the Premier is saying and what he said to the Greater Halifax Partnership was the economy will grow in Nova Scotia without the oil and gas industry. Now, that's a very ominous statement for a Premier to make. It almost sends a suggestion out there that we're going to fail in developing the oil and gas industry in this province in the future. So, because we're going to fail in it, plan B is coming into effect.

In other words, we're going to grow the economy in Nova Scotia with plan B. Unfortunately, for Nova Scotians, we have no idea what plan B is - a short-term measure maybe to keep people guessing until after the next election perhaps. I'm more interested in

[Page 369]

plan A. I'm more interested in where this whole industry is going and why we seem to be having so much difficulty getting the players to the table and getting the interests of Nova Scotia placed first.

Now, Mr. Chairman, we have here a nice brochure, a nice blue brochure, appropriate colours for this government, and it outlines a lot of projects, a lot of ambitions, many statements, some of which of course are contradictory, but others that have some merit and they're worth exploring. I would maybe ask my first questions preceded by a comment. Energy has been much touted by the government but it seems to be spinning its wheels. I want to refer to the year 2003-04, the first year we've had a full-time Energy Department, and in that period of time one would be very hard-pressed to point to any accomplished policies of this government in that period of time.

Mr. Chairman, the example I will give, 1990 to 2001, the total direct private sector oil and gas investment in Nova Scotia for offshore oil and gas was $5 billion in the year 1990 to the year 2001; the majority of that investment took place from 1996 on. My first question to the minister is, how much activity has occurred since the end of 2000, and can you give us a dollar amount?

MR. FAGE: If the honourable member is looking for a number for the exploration and dollars spent between 2000 and 2002, we don't have that number here, we will have to acquire it for you. If the member is looking to see what type of commitment is out there which is very significant, currently there is $1.56 billion worth of exploration work committed in regard to the licences in the offshore, which is a huge amount of investment on this coast. The honourable member raised a number of issues in his statement in question and certainly there is no question that it was hugely significant that when the SOEP project came ashore, being the first project actually to deliver gas to market, it was the beginning, or a huge boost to our offshore. I don't think we can overemphasize, as an industry, how significant that project was, because it's the beginning of the realization of an industry.

What we have right now is a great deal of optimism with all the major players in the world looking to be involved in the play and partnerships, single ownerships, and have committed a huge amount of money for exploration, $1.56 billion. To make sure the momentum continues and we grow into our rightful place as an energy supplier in an industry, exploration activity in finding and substantiating more reserves is a crucial part. The next eight to 12 months where we have eight to 10 deepwater wells committed is going to be very significant in how rapidly resources are found and commitments are made on development projects such as SOEP, and turning that corner from a single project to a number of projects to an industry with its benefits upstream and downstream.

I've just received a number for your request. Since 2000, on exploration wells alone, there have been eight drilled in those two years and the approximate expenditure value was $400 million.

[Page 370]

[2:30 p.m.]

MR. MANNING MACDONALD: So $400 million since the end of 2000 versus $5 billion since 1996 to the year 2000, would that be a fair statement?

MR. FAGE: In relationship to the expenditure associated with eight wells, $400 million, obviously there are other groups of expenditures that would increase that total, but there's no question that until another project comes ashore, it highlights that significant investment of SOEP of approximately some $3 billion to bring that project to market and that's why it's critical that more reserves are identified so that more projects can come ashore and be developed.

MR. MANNING MACDONALD: Mr. Minister, therein lies the problem. You hear these massive figures thrown around about $1.5 billion in the past two years in regard to exploration but it's like trying to grab smoke to put an economic spin on that. The people of Nova Scotia, the people who are trained to work in the offshore, are still wondering when they're going to get jobs. The economy in Nova Scotia is still wondering when it's going to take off because of the industry. The big oils of the world are saying we're spending all kinds of money in exploration down in Nova Scotia, but we have other companies that are sort of taking a rest from this and backing up a little bit and reviewing their options, other people are leaving and you have to wonder just where we're heading and whether these figures really mean anything. What I equate these figures, the previous SOEP, for example, we knew that there were jobs, we knew where the people were working, we knew there were Nova Scotians working on the project, we knew there were office complexes filled with people in downtown Halifax, we knew there were attempts to establish offshore supply industries in Nova Scotia and all of that kind of thing. Until you get past the exploration stage, then it's very difficult to grab a tangible asset out of the dollar figure you're talking about.

On production, Mr. Minister, Nova Scotia is currently producing approximately 500 million cubic feet per day of sales gas, all of it from the Sable Offshore Energy Project, which began production on December 31, 1999, and we all remember that day. The creation of a transportation system to deliver natural gas to markets in the Maritimes and New England has been a major factor in the drive to discover and develop other sources. Mr. Minister, I would ask you, how much of that production was a result of the Energy policy?

MR. FAGE: The production that is occurring at the present time were proven reserves and that's why the SOEP project went ahead. Future production is where opportunity lies. This SOE project is already ashore. The benefits to Nova Scotia certainly are in line in the royalty regime, but as far as expertise, jobs in running the pipeline itself, the pipeline is built. Tier II of SOEP, which goes along with our energy strategy, will be coming later on, there is a significant amount of work and design associated with Tier II which will come on later this year.

[Page 371]

I think when we talk workforce, it's very important that we all realize that no workforce is instant or they're not indigenous, and the SOEP certainly was a catalyst and important milestone. What has been achieved since that time is also even as important and is essential for a long-term industry here that employs Nova Scotians. When we look at design work, technical work, engineering, with the awarding of Irving Oil receiving the tender for the platform, all these things are extremely important milestones to Nova Scotia. None of that expertise existed in any great form provided by Nova Scotians pre-SOEP, or during that build-up phase. Since that time, the energy strategy speaks strongly to it of technical training, support, partnership agreements with offshore supply, design, all those critical infrastructures, employment opportunities and the numbers certainly in the project design have bulked up significantly in the last several years.

Currently, there's approximately 2,000 people employed in the workforce and 80 per cent of them are Nova Scotians. Several years before that, that expertise had to come from offshore. The energy strategy speaks to it. Nova Scotians are training themselves and aligning themselves not only in smaller business, the large oil patch players, design, engineering, law firms are all integrally involved in this business here in Nova Scotia and that workforce continues to grow. We partner with educational institutions, we partner with private industry, we partner with local industry to ensure that Nova Scotians have the training to be part of that workforce and there's a great opportunity as we move forward. In meeting with one of the executives, as you refer to, big oil, they're very confident and want to be involved in Nova Scotia. That's why every major in the world is here, and they see the economic opportunity. As you have pointed out, there is a huge population base and the strongest natural gas market in the world just south of us, which is a great driver for them to develop and find more gas and oil.

When we look at that opportunity, there are real messages we need to find more oil; exploration is where it's at and those types of commitments that we see on the books there that have developed in the last several years of $1.56 billion and, as you well know, the penalties if you don't honour those agreements are significant. They're serious, they're committed and they're ready to move forward on exploration, but the drill bit is where it's at right now. There has got to be more reserves proven and found.

MR. MANNING MACDONALD: Mr. Minister, what you've been saying is all very great and it's kind of glassy and it paints kind of a good picture but it's a contradiction because, as we speak today, jobs are leaving Nova Scotia and companies are leaving Nova Scotia. Offices within a driver of this place, or a three wood, at least, are leaving and closing down. So that's somewhat contradictory. But the business plan also, on Page 7, goes on to say that utilization - natural gas will have created a more competitive energy sector to the advantage of all Nova Scotians, increased production of natural gas and the associated liquids also increases the possibility of the development of a viable petrochemical industry.

[Page 372]

We all know the importance of a petrochemical industry, your business plan states all of these things. As we sit here today, New Brunswick is using Nova Scotia's gas. The United States is using Nova Scotia's gas, but Nova Scotians aren't using Nova Scotia's gas. I would like, Mr. Minister, for you to explain how you're going to develop a petrochemical industry, how is there going to be increased production of natural gas and associated liquids for the benefit of Nova Scotians when there's no new gas, because that's in your business plan?

MR. FAGE: The honourable member points out a number of things I think important to address. First of all, it is a misconception that Nova Scotians are not using Nova Scotia natural gas - 70 million cubic feet a day is used by Nova Scotians through one company providing electric power generation, and that certainly is a lot more natural gas used by Nova Scotians than New Brunswick. I think it's important to point out that distinction.

I think it's also important to note the energy strategy had broad-base participation from industry, broad-base participation and consultation with Nova Scotians, and the energy strategy is a blueprint into the future of what we want to achieve. It's not a single-year document or next week, or the last couple of months, or what's going to happen in the next six months, the energy strategy is a long-term objective of providing a blueprint of how this province and Nova Scotians want to see the energy industry developed to the benefit of Nova Scotians. Nova Scotians and the government view it in that term. This is a blueprint, a strategy, it's multi-year, decades out of what we want to achieve.

When we look at that distribution of natural gas we have Nova Scotia Power using - Nova Scotians using Nova Scotia's natural gas. We have Heritage and Strait Area Gas, with franchises being awarded. They're coming in with their business plans so that more businesses, more residents, or the first ones can be hooked up to natural gas, and we move forward in a business area. The one other thing, I think it's important that I should point out the numbers have been tabulated on an earlier question, so instead of a partial which I supplied to you on the wells only, $400 million in expenditure, eight wells in the last two years, approximate total expenditure or commitments has been $0.5 billion since January of 2000.

MR. MANNING MACDONALD: On the same page of the business plan, it states that revenue from the offshore, such as royalties and corporate taxes, are expected to rise as projects recover their investments and operating costs. Revenues are expected to double in 2003-04 and exceed $100 million per year as early as 2007. Mr. Minister, how many staff are responsible for making sure the royalties are being calculated properly?

[2:45 p.m.]

MR. FAGE: How many staff members?

[Page 373]

MR. MANNING MACDONALD: How many staff?

MR. FAGE: Staff have advised me that we have two auditors, full-time, monitoring those numbers.

MR. MANNING MACDONALD: Could you tell me who they are?

MR. FAGE: Chris Spencer and Libby Blatch.

MR. MANNING MACDONALD: Who do they actually work for? Do they work for the Department of Energy or are they contracted?

MR. FAGE: They work for the Department of Energy.

MR. MANNING MACDONALD: So they work in-house, your own department. Mr. Minister, in the United States some companies cheated the U.S. federal government out of royalties, so if they can do that, as Nova Scotians, how can we be sure that you have the people who can watch this royalty regime? Tell me something about their backgrounds and their experience in the industry?

MR. FAGE: It's a great temptation to give a flippant answer, but I will resist that.

MR. MANNING MACDONALD: Well, I'm not saying something has, but this has happened in the past and I would like to know how sure we can be that it won't happen here? I'm not even sure it certainly will happen, Mr. Minister, but I'm just asking the question.

MR. FAGE: To be very honest, it's a very good question because I have asked the same question myself of senior staff. Certainly the two individuals are chartered accountants with a background in audit. They work with the companies doing various audit tests, not only on production numbers, auditing sales figures on the opposite end of the operation and, to date, I think we have absolutely no reason to question the integrity of the energy companies involved. I certainly would express very openly in public that our staff work diligently and we certainly believe that the companies involved here and the various partners, obviously, it's an honourable business arrangement all the way around.

MR. MANNING MACDONALD: Just to make an observation, Mr. Minister, I do know the majority of the people at your senior level who you have working for you and they're very proficient professionals, I don't have any problem with that. I know they have the best interests of Nova Scotians at heart when they're doing their job, and I know some of these gentlemen personally. However, I didn't know until today who specifically was in charge of that part of your operation, you've told me and I'm satisfied with that answer. So thank you very much on that.

[Page 374]

MR. FAGE: Thank you.

MR. MANNING MACDONALD: Did you want to comment again?

MR. FAGE: No, I was just thanking you for your comments on the compliments of staff.

MR. MANNING MACDONALD: You do have a fine professional staff, I don't want anybody to get the idea that I don't think that's the case, but I had no idea and our caucus didn't have any idea whether you had people dedicated to watching that royalty regime, and you've satisfied me that you have and they're chartered accountants, so great.

Mr. Minister, while in Opposition, the current Premier urged that gas distribution be made available throughout Nova Scotia and he also attacked the generic royalty regime of the day. Four years later, we have a change of heart and there's still no gas distribution. Can you explain that after four years of the Premier's statements that we still are sort of spinning our wheels on gas distribution in this province, what do you attribute that to? Keeping in mind you haven't been there for four years?

MR. FAGE: On gas distribution, I would say the parameters of distribution were very ambitious. A proponent came forward, looked at those conditions and for whatever reason decided they could even exceed them by quite a large percentage. At the end of the day, if those expectations could have been met, there would have been an unbelievable deal in the business world. At the end of the day, the business plan could not achieve their objective and that particular company withdrew. That, unfortunately, caused the whole search process, hearing process, the call for proposals under a strictly business proposal option to be re-engaged.

The hearing process through the regulatory authority to arrive at another proponent that was prepared to go forward under those regulations and in terms that they were issued the licence, all that process takes time. As quickly as I know, every political Party and every member in this House would like to see gas distribution go forward, there is a process that has to be followed, and under the direction of our government, that proposal is a business-orientated proposal where the industry will be financed from their sales and business opportunities in this province. It does not contain specific time frames in the franchise awarded, but it does contain regulation where there is sufficient volume to require them to gasify a particular business or community or area. They are currently finishing up their business plan and we look forward to receiving that shortly. The time frame proposed by Heritage Gas is that we would see gas distribution in the ground and work commenced by this Fall.

[Page 375]

MR. MANNING MACDONALD: Thank you, Mr. Minister. I believe, in this business, I guess it depends on where you are at a particular point in time. I can recall being minister of the former Petroleum Directorate at the time in a minority government, and I can recall the Premier giving tremendous political pressure at the time, political pressure on us, telling people that he was urging our government, the minority government, to ensure that we make gas available to all Nova Scotians, and that he, as Premier, would accept no less. Well, we're four years into his majority government and we don't have natural gas available to all Nova Scotians. We have natural gas available to very few Nova Scotians four years later, despite what you said earlier, Mr. Minister, about gas being used in this province, but it's not an alternative energy source for residential consumers in this province or, in a lot of cases, commercial consumers in this province; and, in some cases, industrial.

Also, the Premier very strongly - and I can recall his words advocating that we must have a petrochemical industry in this province in order to go forward in the future with a vibrant economy, and we have an opportunity to have new industry in the province, a petrochemical industry, and that we can't do without that. The economy of Nova Scotia will be severely impaired in the future if we don't maximize our benefits from the offshore industry, including a petrochemical industry in this province. Recently, the Premier said the economy of Nova Scotia will go ahead and grow without oil and gas. So there's a mixed message there as to exactly where the government stands today. In its initiatives regarding oil and gas in the future, does the government consider that particular go-forward position that the Premier talked about before is still as important today? Do you feel, as minister, that we can grow this economy in the future without oil and gas and, if so, would you give me your opinion as to what will take its place, in other words plan B?

MR. FAGE: Those are very important questions to the future prosperity of the province, communities and individual Nova Scotians. First of all, the energy strategy, again, speaks very strongly to the opportunities provided in downstream production such as petrochemical. Again, the energy strategy is a multi-year strategy that takes into account sufficient volumes of liquids and gas that have to come ashore so that those minimum volumes are achieved so the industry can cost-effectively get off the ground and, as more projects come ashore, I'm very confident that those downstream opportunities such as the petrochemical industry, will become a reality in this province.

As well, on the upstream supply side, we see growth and opportunity occurring and expanding there at the present as we move forward. Those are clearly spoken to both those situations in the energy strategy. On the issue of the economy with or without natural gas and oil production, certainly my understanding of what the Premier was alluding to is that the natural gas industry is a huge opportunity for Nova Scotia, but the economic objectives of this government is opportunity for all Nova Scotians, that there is opportunity and growth in the oil and gas industry and there's opportunity and growth in all other industries in Nova Scotia, and our platform, our achievements, speak very strongly to that occurring.

[Page 376]

Mr. Chairman, I think what has been pointed out and it's hugely significant, since this government came to office we have had employment milestones that have never been achieved before and that's because of that balance of aggressive economic policy and regulation, red tape reduction and growth strategies. Economic Development has a number of people strongly committed to growing Nova Scotia, and anyone who cares to pick up their literature can clearly see the blueprint and the plan and how active the government is.

Mr. Chairman, there's proof in those statements. If the Premier was here today in this committee meeting he would assure, and as you have said to all Nova Scotians, it's irrefutable, the second fastest growing economy in Canada last year, and that's oil and gas and that's growth in other sectors of the economy; 27,000 more Nova Scotians working today than when this government took office three and a half years ago. Those are numbers that we've never achieved in this province. They happened because of a balanced economic policy that encourages business.

Mr. Chairman, even in this budget we honoured our commitment, a commitment of the last election, to lower personal income taxes. That grows and stimulates economy and it keeps working families right here in Nova Scotia so they put that money back into the economy and they grow this economy, and those are the things Nova Scotians want. They want fiscal controls put in place and balanced budgets. We've achieved that, but beyond that, they realize that growing the economy is lowering the overhead burden and putting people to work, and that pays for the essentials of Nova Scotia, and that has occurred in a very large magnitude over the last three and a half years.

MR. MANNING MACDONALD: There are sort of some broad statements there, Mr. Minister, of the achievements of your government. What you neglected to mention is that you're still borrowing money at a rapid rate in this province. The debt is still going up dramatically in this province and is expected to go up all the way I believe to 2011. The government has clearly said to Nova Scotians, look, we're going to balance our books here but we're going to borrow on your future to do it, we're going to give you a tax break here but we're going to take the taxes from you first.

User fees have never been put into place so fast in Nova Scotia as they have in the last couple of years, literally ripping money out of people's pockets in almost every facet of the lives of Nova Scotians on a daily basis. Then for the Premier to turn around and tell Nova Scotians prior to the last election that he wasn't going to increase any taxes other than cigarette tax, and before the sun went down he put a 2 cent a litre tax on gasoline, then to add insult to injury, he said that he was not going to increase the debt in this province. Yet the debt is going up yearly. We have a situation here where we have insecurity in the oil and gas industry as to what examples we can point to that are going to relieve us of some financial burdens that are going to be coming in the future. We have a Premier who's saying we don't need this, we have a growing economy.

[Page 377]

[3:00 p.m.]

Well, it's not hard to grow the economy if you borrow the money to do it, but we're leaving a legacy to our children, we're doing it with a chequebook-style of politics here in this province and Nova Scotians are going to catch onto this, that your government is trying to spend its way back to re-election on the backs of the future of the children of this province, and Nova Scotians are going to know that before this election is over. So, Mr. Minister, while I respect you, please don't try to tell me that the economy is booming in this province when you're out there borrowing money each and every year since you guys have been in office, and if you're going to continue to borrow it and don't mind telling Nova Scotians you're borrowing it, you know, when the Premier said he wouldn't borrow it. You said you weren't going to raise taxes and you've raised just about every form of user fee in this province that could go up, you jacked it up, and then you're going to turn around and say you're going to give a 10 per cent tax reduction to Nova Scotians on January 1^st.

Well, Nova Scotians are going to be told, Mr. Minister, not all Nova Scotians are going to get that because some Nova Scotians don't pay provincial income tax and they're not going to get it. So that's the lower income people in this province. Also, the tax debt withheld by this province from the federal government's tax breaks of some two or three years ago, you're going to get some of it back when it should have flowed through to Nova Scotians at that time. When you talk about economic development, Mr. Minister, well, I could get off on that for a long period of time, but down in my area of the province the only initiatives that are going on down there are federal-driven, in what's happening in the economy and the province has been successfully, at least to date, piggybacking on top of those initiatives.

I want to talk for a moment, Mr. Minister, about the Strait area and the need, or what I thought was a possibility of a viable petrochemical industry at the Strait area. Here we are in the year 2003 and it's becoming less and less of a reality and more and more of a pipe dream all the time. I felt by now that somebody would have got a hold of somebody in this world and made a proposal to them to put a petrochemical industry at the Strait area, and it hasn't happened. I'm wondering why, if this government is so proactive in its economic development initiatives in the future why somebody hasn't interested somebody else in this world about setting up in the Strait area a petrochemical industry.

Now, some people would say, Mr. MacDonald, why don't you talk about a petrochemical industry in the industrial area of Cape Breton. Well, I can tell you why, because the only chance the people have in industrial Cape Breton of ever getting natural gas, we're resigned to that now, is the fact that it's going to come east to west because it's never going to come west to east, down through Cape Breton, and to make it happen, there have to be initiatives to ensure that Hunt Oil and Corridor Resource - there is one on the western side and one off Glace Bay - are going forward in partnership with the government in order to ensure that gas is landed. I would hope that if that becomes a reality, if that particular

[Page 378]

company proceeds to production, that this government will sit down and discuss the necessity of that gas coming ashore in that area of Nova Scotia to promote the benefits of the gas itself, including a petrochemical industry and using the feedstock off that line for other ventures in industrial Cape Breton rather than having it mainlined from the ocean floor right to the United States.

I believe, Mr. Minister, that your government, your ministry, has a role to play there early on in negotiations with Hunt, in that particular one. Corridor Resources is at the other end of the Island and is not as critical, I don't think, to the development of any kind of industry in industrial Cape Breton. We don't have that yet, we haven't gone that far yet, but what we do have at the Strait is gas; what we don't have at the Strait is a petrochemical industry. I guess my question, after all of that long preamble, has the government been actively pursing, with somebody, to set up a petrochemical industry in the Strait of Canso?

MR. FAGE: I think there are a number of things in your question that bear comments on. First, the Strait area was the first area to burn natural gas, even before Halifax. I think that's important. Secondly, the volume of liquids coming ashore is not sufficient for a petrochemical industry. We work closely with a number of companies and proponents for the day when there are sufficient volumes coming ashore to achieve a petrochemical industry. There's certainly no question, the Strait area is perfectly positioned for that. We have to have more volume of gas and then we can derive the liquids to make it economically commercial.

There are many discussions occurring, many proposals, plans, once that liquid has arrived by various proponents, and those things are extremely important. I need to remind the honourable member, building infrastructure before the sufficient liquid is there would be an extremely vulnerable investment for private enterprise. I am of the greatest confidence that when the liquids are there, the proponents, the people involved, the companies will have the money and the investment to put the infrastructure to achieve it. Again, it boils right down to the drill bit. We need more gas discovered, we need more projects coming ashore. Once that's achieved then the liquids are there for a downstream petrochemical industry. With the discussions and the number of companies and proponents willing to invest at that stage, I have the utmost confidence that industry would be achieved.

I think it's critically important when we look at those prospects and opportunities that are so fully addressed in the energy strategy, like the petrochemical industry, these are all contingent on exploration, discovery and more gas, oil and liquids coming ashore in Nova Scotia. The ingredients are all there. The proponents are there. We need the liquids. Until the liquids arrive I really don't see commercial ventures or companies investing money. They will do their planning, they will get ready, but they have to have the actual product to process.

MR. MANNING MACDONALD: Right now, Mr. Minister, you're saying it's not viable?

[Page 379]

MR. FAGE: On the volumes coming ashore, there has not been a proponent come forward that would be viable. There certainly are proponents that are looking at other forms of supplementation with other petrochemical . . .

MR. MANNING MACDONALD: So we won't hear any government rhetoric leading up to this election that the petrochemical industry is imminent for the Strait area will we?

MR. FAGE: I could never guarantee that. There are three political Parties running. (Interruptions) I would remind the member that there are three political Parties running.

MR. MANNING MACDONALD: Mr. Minister, I don't know if you will recall, but certainly your predecessor would, last year I inquired about whether or not the government was pursuing the option to take 50 per cent interest in the transmission of the line at Deep Panuke. I was informed by your predecessor that it would be used to leverage benefits from EnCana at the time. What benefits were being asked for and why the delay? Did this impact on the delay? Did this have a detrimental impact?

MR. FAGE: I apologize, I didn't hear your last question.

MR. MANNING MACDONALD: The question was, the 50 per cent interest in the transmission line at Deep Panuke - I assume you are familiar with that?

MR. FAGE: Yes.

MR. MANNING MACDONALD: I was informed that it was going to be used to leverage benefits from EnCana. I would like you to comment on that. What happened? What benefits were being asked for, and why the delay?

MR. FAGE: Basically, it's the 50 per cent back-in right, exercising that option that you were expressing there. As I am sure you are aware, the Department of Energy called for proposals on that right several months ago. A number of proposals came forward from a number of companies on how that 50 per cent back-in right could be used. Certainly, one of the companies that we were in discussion with and have been on those terms would be EnCana.

MR. MANNING MACDONALD: Mr. Minister, following along with that, there's a lot of speculation that Deep Panuke will be an add-on to the Sable infrastructure, so there will be no transmission line. Can you comment on that?

MR. FAGE: The situation with Encana taking a time-out until December when they are required to file again with the Canada-Nova Scotia Offshore Petroleum Board, they have been granted until December, those discussions, at this point, are on hold until they reconfigure their business proposal. It's still one of the options.

[Page 380]

MR. MANNING MACDONALD: Mr. Minister, you heard me earlier today talking in the House during Question Period about the frustration of the oil and gas companies that are working with the Government of Nova Scotia, and the regulatory regime that's presently in place, and you've obviously read the comments of Gillian Wood in respect to the frustrations that the industry is expressing publicly, and the fact that they've been very frustrated in trying to move forward in Nova Scotia. Now I know there's a need for the public to be protected here, there's a need for a regulatory regime, there's a need for a position to be taken by government that we have to also protect the environment of this province, that's very important. I think the industry realizes that. I don't mistrust the industry in that regard, nor do I suggest that we should be giving them the carte blanche to do whatever they want. What I do know is that this industry wants some certainty. They want to be able to know where they're going and what the rules of the game are going to be when the puck is dropped.

I'm wondering whether or not we're sitting down at the table enough and discussing what will be sufficient for their needs and what would be in the best interests of the people of Nova Scotia. I'm just wondering if we're going to take a new tack on that, whether or not we're going to make a determined effort to sit down with the industry and hammer out agreements of certainty in the future that this industry can say, hey, Nova Scotia is a good place to work, Nova Scotia is a good place to develop our product because we have certainty. They know what they want from us and we know what they want - first of all, I think you would identify there has been a problem. Secondly, I would just like to know whether or not you are addressing that problem and perhaps how?

MR. FAGE: That's an extremely good point you've brought up. It is certainly my view we're in close contact in discussions and in agreement with the players in the industry. Certainly, it's not my view the bottleneck problem lies with industry or it lies with the provincial government or the Department of Energy. We have sole jurisdiction to conclude that process to the mutual satisfaction of industry and the province onshore. Offshore is a jointly shared jurisdiction. In that regard, there's a number of concerns with federal agencies putting a number of very difficult time frames, requirements, instead of in conjunction certifications, they're sequential, it stretches out the time frames so it's very hard, difficult to track investment, hold interest and move projects forward. It is certainly a concern of the industry and a concern of the province because the industry and the province in no way are looking to lessen the environmental protection, burden and the obligation of the industry.

[3:15 p.m.]

What we are both seeking in our work with the federal government is a process that is timely, effective and efficient. That's where we need co-operation and compliance from a number of federal departments who have jurisdiction involved in the offshore. To that end, the federal government, four ministers were here last Fall for the Round Table, as well as Nova Scotia and the Province of Newfoundland and Labrador. There is a working group

[Page 381]

established on regulatory burden and it is hopeful - there has been a number of meetings already - that a process and a product can be achieved that's satisfactory and workable, that achieves both the regulatory protection but the expediency and efficiency and the timely manner to get approvals done.

I'm also pleased to point out, and I'm sure you know that the co-chairman of that committee is the Deputy Minister of Energy here in Nova Scotia, Dan McFadyen. We're doing everything we can, and we coordinate very closely with industry to try to relieve some of the burden the federal government has through procedural inefficiencies in place.

MR. MANNING MACDONALD: Just in closing - I'm going to be winding up - I just want to tell you, Mr. Minister, I think despite what the Premier said, that the economy in this province can grow without oil and gas in the future, I'm not convinced of that. I don't agree with that. I think that if this province is going to grow to the point where we become a "have" status instead of a "have not" status in this great confederation, I think we need to maximize the benefits of this resource. We need to pay particular attention to the needs of your department, I think.

I would be perhaps telling you that I consider your department to be one of the most important economic departments in government, even more so than the Department of Economic Development, because we've seen that go the other way. I would hope that your Energy Department could pick up the slack there. I think it's vitally important that we reach agreements with these players in the next few years, that we consolidate the regulatory regime to where everybody is comfortable - the people who are concerned about the environment, the people who are concerned about the industry, the key players and, of course, the government.

I know you have put together a team there, that I said earlier I'm comfortable with. You will notice that we haven't been too critical of your new deputy, because we've checked him out and we find that he has impeccable credentials, so we welcome him to Nova Scotia. I haven't had the opportunity to do it before, but we've certainly checked you out and we certainly are comfortable that you can do the job if you're given the tools to do the job. Certainly the people who you have with you, Mr. Minister, who are over there, that are employed in that industry, I have great faith in. Having said that, I want you to consider the fact that I consider your department to be vital in the future growth of Nova Scotia. Mr. Chairman, I'll leave it at that. Thank you.

MR. FAGE: I'd just like to acknowledge with regard to the opportunity combining the offshore and the need to move that regulatory process, we're certainly of one mind on that. Also, Mr. Chairman, I was negligent when we began today not to introduce to the committee the new Deputy Minister of Energy - he began approximately six months ago - Dan McFadyen on my left. We had done introductions yesterday, and he's here today. I thank the honourable member for jogging my memory.

[Page 382]

I'd also like to add that we see the Energy Department, as the Premier does, as a vital part of the growth strategy for this province, as well as all other business and entrepreneurs. With that solid endorsement of the staff of the honourable member, I couldn't agree more. As well, I think I'll ask you to come to budget deliberations with me next year to help me with a budget for our department. Thank you.

MR. MANNING MACDONALD: I'll either be there in one aspect or another.

MR. CHAIRMAN: Thank you. You still have two minutes left of your time.

MR. MANNING MACDONALD: No, it's okay.

MR. CHAIRMAN: Any further questions from the government caucus? Hearing none, we'll go back to the NDP caucus.

The honourable member for Halifax Chebucto, your time is 3:22 p.m.

MR. HOWARD EPSTEIN: Thank you, very much, Mr. Chairman. Mr. Minister, very interesting to read your remarks and to listen to your exchange with the other members who have had the chance to ask you some questions.

MR. CHAIRMAN: Excuse me, honourable member, could you pull that microphone a little bit closer to you? I'm having a little bit of trouble hearing you and probably Hansard is too.

MR. EPSTEIN: Thank you, I will do that. Mr. Minister, I was struck by one thing in the questions of the previous member, the member for Cape Breton South. He rightly observed that in point of fact, in hard point of fact, there is only one producing field that we actually have in Nova Scotia, that's the Sable Offshore Energy Project, and there's been no change in that. Although, as you correctly observed, there's been a lot of exploration activity over the last decade and, at least, the anticipated continuation of exploration activity, yet the hard fact is that there is still only the one producing field. No matter how beneficial to the economy dollars associated with exploration might be, if gas is not actually found in commercially extractable quantities, then we're left, in terms of cash flow, really only relying on the one field. I want to hasten to point out that this is not your fault. This is not something that you can either claim credit for or have to be blamed for. Whatever gas is out there is out there.

MR. FAGE: That was determined a few million . . .

MR. EPSTEIN: About 300 million years ago, at least, I think, and it's not something you have any control over. As I think I've observed before, gas molecules don't cuddle up on cold winter nights and reproduce. There's a limited number of them, and the basic starting

[Page 383]

fact is that it's a non-renewable resource. Furthermore, not only is it non-renewable, the way it mixes with the underlying sands on the ocean floor is not something that's within your control either, nor is the world price of gas according to which the commercial attraction of our deposits, whatever they may be, will vary. That isn't your fault, there's nothing you can do about that. I think we have to accept that this is a starting point.

I think, in fairness, we all have to be realistic about what it is that goes on with the offshore. If there is anything that I think is within your control, at least partially, it does have to do with the perceptions that Nova Scotians have about the extent to which there might be a robust future for us in the offshore. I'm concerned when I see some statements like this. On your very first page in your introductory remarks the other day it says that your department is working towards "building a strong, vibrant energy sector here in Nova Scotia . . ." Further on in your remarks it actually says that "This government is committed to creating a world-class energy industry here in Nova Scotia." In fact, you also say ". . . we have remained consistent in our message to Nova Scotians - if we keep the exploration momentum going, then development and production will follow." I have to say that last statement, given when I started out observing about the nature of what's out there or not, I don't think really can be the case. We can explore for quite a long time and it's far from guaranteed that development and production will follow. I think that statement just goes a bit too far.

I'm concerned about talking about creating a world-class energy industry here in Nova Scotia. I'm of the view, and I want to go on record with you again - as I think I have with you before and with other ministers - as saying that all too often the statements that we've heard, either from industry or from government, have been of the nature that can only be characterized as having stars in our eyes. I worry about this. I worry that we're not taking a good, hard look at what it is that we actually have here and that there's a tendency to be unrealistic.

I understand that this is the early stages for Nova Scotia as a province. If, indeed, there is a future that's robust, I think we just don't know. I think it's a learning experience for all of us. I think, collectively, we started out with zero knowledge of oil and gas, and we're all lurching forward, perhaps awkwardly, but bit by bit we are learning. The hard reality is that we probably have to plan for our economy to be successful on other bases, and there's only so much we can rely upon with the offshore and other oil and gas, some of it might be onshore as well, simply because it's an unknown. It worries me, I think, when I hear what seem to be overly optimistic views.

I was heartened today to hear you speak in quite modified terms, for example, about the prospects for a petrochemical industry. I'm wondering if we could just nail that one down at the moment, because I thought I heard you speaking what sounded to be very good sense, not overly optimistic and fairly realistic. I just want to see if I understand correctly what the parameters are in terms of the prospects. My understanding is that in terms of the volumes that might be needed, unless we generate in Nova Scotia about 10 times the amount of gas

[Page 384]

that we now generate through SOEP, we're not in the running for developing a petrochemical industry and, furthermore, my understanding is that the estimate is that even if a number of the exploratory wells that have been dug were to have come through and other fields developed that it would probably be 2030 before we could realistically expect any kind of petrochemical industry here. I'm wondering if these are the kinds of dates and numbers that you're working with, and, if not, whether you have other expectations about dates and numbers?

MR. FAGE: Thank you very much for your observations and your question. I think one thing I would like to comment on is the exploration. When I speak to the board of directors or the CEOs of all the major players, that exploration and finding gas and oil reserves at the end of the drill bit is the only way we're going to go forward. I would make that statement taking the premise that if there's no exploration, we know there won't be any production.

MR. EPSTEIN: Absolutely, everyone agrees with that.

MR. FAGE: Those statements that you refer to in the three different spots in my introductory remarks were intended to refer to, in my view, that if that total industry opportunity is there that it won't occur via that avenue; it doesn't guarantee the avenue. Conversely, if you go down the road in the opposite direction - no exploration, no gas, no petrochemical. So if it's to be there, that is the lane you have to proceed down.

On the issue of stars in the eyes, when a new industry comes to a given area of Canada or the continent, I think there's a huge amount of education that has to occur for the general population and people to get their mind around what the industry is like. The gas and oil industry is an industry that has a lot of risk, a lot of up and down, and that's normal in that industry. Anybody who has been around Calgary or Alberta for the last 50 years quickly says to you - as former Premier Peter Lougheed said to me in a conversation, his comments were that Nova Scotia is doing remarkably well on the objectives they hope to achieve with gas and oil, and his remarks referring to gas distribution was that it took 50 years to make gas distribution a reality for most of Alberta, it doesn't happen overnight. He said to me that it's a reality that a petrochemical industry in Alberta occurred 35 years after the first well. He said, if those reserves are there, if they're found, you have an opportunity on a much shorter time frame to achieve that. He also relayed that as an industry that requires high risk, large investment, the good times can be extremely high and the tougher times can be extremely low on the graph. Most industries tend to do this, the emotional level in this industry can be somewhat more severe.

[Page 385]

[3:30 p.m.]

I thought those were useful observations to say to me as an Energy Minister and local politician in regard to expectations. It was good common sense advice, that in an industry that each project usually has a working life from 25 years to 40 years that there's a lot of long-range planning and, the short term, and the stars in the eyes are difficult. I'm sure, honourable member, you and I have heard politicians of many stripes in the last 30 years look at streets paved with different objects and other things falling from the sky and many people are wondering how long before they hit the ground in Nova Scotia. That's why, from my point of view, it's important to interject some stability and reality and context around decisions and time outs and what this means in the bigger context of this industry.

Your last question in regard to the petrochemical industry, the numbers we've been working with, when you look at offshore gas and you look at the numbers or the volume of liquids that are associated with SOEP and then the samples that were taken from the EnCana field, Deep Panuke, it is a dryer gas, so each well will be different in all probability. So the number of wells, projects that need to come ashore will vary according to that volume of liquid in those wells. Once you get onshore, and if we use the SOEP as the example, as the standard for the liquids, what we're looking at is approximately that three-time range for a viable petrochemical industry, that the project people in industry we're working with are using a number in that range. If there was approximately three times - and that's the daily volume of gas coming ashore from SOEP and the amount of liquid taken out, three more of those projects would put them in the realm of enough liquid to start production and building for structure and doing those things that we're talking about.

MR. EPSTEIN: That's an interesting way of stating it. I'm a little concerned about this. As I understand it, one of the factors is not just the volume, but the life expectancy of new fields, because there's a question of the capital cost of infrastructure; building of any kind of petrochemical industry there would have to be a feeling on the part of industry that their investment could last a good long time. As I understand it, they'd have to feel that the volume, whatever it is - I'm saying 10, you're saying 3 times multiple - whatever the volume that's necessary would have to be there for probably 20 to 30 years. Again, is that the kind of time frame that you're looking at?

MR. FAGE: Yes, you're absolutely correct. Those volumes are traditional world-class volume needed for a petrochemical industry, not a smaller modified project. There are some proposals out there like that, but I'm talking the standard world-class industry. The comparison I was giving you is, any given afternoon, the flow coming through the pipe of volume needed that afternoon - and you need it the next afternoon.

There is also a whole other host of issues, and one of the key issues you've just raised there is, then the company would have to have, to get a return on their investment - like the gas operators themselves, those projects normally have a life of 20 to 30 years of producing

[Page 386]

wells or fields. They would have to have the confidence that that field, or new ones coming on, is going to be able to have to have the volume to give you the continuous supply over those 20 years as well. For the comparison of what you needed if you could get it every day, I like to speak to it in those terms because they're easier, in my mind, to manage.

MR. EPSTEIN: Very good point. Although it's a small excursion away from the main focus of what I was asking about at the moment, as long as we're dealing with this question of the life expectancy of a project, can I just ask about the life expectancy now of SOEP? My recollection is that originally, at the maximum daily flow that the pipeline was able to accommodate, it was projected to be in the range of 21 to 23 years. It was also said at the time that if the line were to be pressurized, thereby increasing the daily flow to almost double, that the life expectancy of the project would probably be more in the range of 12 to 14 years.

I'm not sure I heard you correctly a little earlier, I had thought that permission had been granted to pressurize the line. Are you telling me that hasn't occurred yet? I heard you use a figure for the daily production that seemed to be the earlier, unpressurized daily production.

MR. FAGE: That's correct. It wasn't me who supplied the numbers, it was one of the honourable member's interveners who supplied the number of approximately 0.5 million a day. That's unpressurized. Pressurized could get into a max of probably 750,000 or 780,000 or slightly more than that. It has not been pressurized.

MR. EPSTEIN: Even though permission was granted? I'm right on that, I think, is that right?

MR. FAGE: Your observation is correct, the National Energy Board has granted permission for compression but it's not being exercised.

MR. EPSTEIN: Do we know when that might occur?

MR. FAGE: That's a conditional compressurization if Deep Panuke came ashore. It could come ashore over top of the SOEP gas, so it's a conditional pressurization. At this point, if it's just SOEP, they're allowed 500,000. If Deep Panuke came ashore on top of that, they have approval to go to 750,000, 780,000, and that would be Deep Panuke on top.

MR. EPSTEIN: So your understanding is that unless it goes to Tier II, there won't be pressurization? Is that right?

MR. FAGE: My understanding is that Tier II maintains production at 500,000 or slightly above. Tier II will be supplementary gas to ensure the SOEP project keeps moving.

[Page 387]

MR. EPSTEIN: Bottom line then, Mr. Minister, really is, what's the life expectancy of SOEP?

MR. FAGE: There's a number of various companies that have their own data, what they read. Any well, the majority of industry standards, it takes approximately six months to metre to know your flow drop; they allow the amount of gas that is going to continue to seep out of the porous structure and those types of things so they can establish rate of flow, how much is decreasing or fluctuating, plus the volume they're drawing on. Once they have those numbers they make their projections.

In SOEP, Shell has downgraded what they feel on their portion, after doing those numbers, what the possible reserve or time frame is there. SOEP, on top of that, Tier II will provide the additional volume to meet the original - those were together - projections of 21, 22, 23 years. The main partner and operator has not changed their projections, to my understanding. We use, not the optimistic numbers that maybe Shell was using, we use much more conservative numbers in our calculations on royalties, and we're comfortable at this point that our projections still hold, that 20-plus is there and $1.6 to $2.3 billion will be the total royalty life of that well.

MR. EPSTEIN: This is a question - that's gross royalties before the offset for equalization. Is that right?

MR. FAGE: Yes.

MR. EPSTEIN: Okay, so about 30 per cent of that number flowing to Nova Scotia?

MR. FAGE: Yes.

MR. EPSTEIN: Right, okay. So, you're working with a slightly modified total royalty figure than we originally saw. I think when it was first spoken of that the gross figure that was spoken of was around $2.5 billion, but now you're thinking about $2.3 billion or less?

MR. FAGE: All I'm aware of is the numbers that I've reviewed. That was, I believe if my memory serves me right, is $1.6 to $2.3 billion.

MR. EPSTEIN: So, in fact, that's quite a large modification. Okay, I'll think about that. I'm going to repeat my main point because as I think I heard you say a moment ago with respect to educating the public, repetition is important, and so I believe in repetition as the basic teaching tool. I don't think Nova Scotians are going to be rich from offshore oil and gas; it would be nice, but the problems, as you pointed out, are that we are carrying almost $12 billion in debt. It's going to be a while before we have a heritage fund, and a lot of unemployment and a whole variety of other things.

[Page 388]

Can I move to a couple of other aspects of this? I'm curious about Nova Scotia Resources Ltd. You do say in your remarks that the public do not want their government in the oil and gas business. I think I've heard the Minister of Finance say that a number of times. The sale of Nova Scotia Resources Ltd. has always been missing a piece of public information, or information that I think should have been made public, which was the background study to justify the price of the sale.

Unless I've missed it, I don't think this study has ever been made public, although the Minister of Finance promised it would be made public. I think he tied the release to the completion of the sale. As I understand it, most, if not all, of the sale has gone through. Is there any reason that this document continues not to be made public? I guess my point is that the reason everyone wants to see it is that even if they don't agree as to whether the government ought to be in the oil and gas business, I think everyone does agree that if the government is going to sell off its oil and gas interests that they should get a reasonable price for it; and they want to be satisfied that a reasonable price was secured. Are you prepared to release this document? Or, have I missed it, has it been released?

MR. FAGE: NSRL is the responsibility of the Minister of Finance, under his portfolio. Those questions would be much more properly directed to him. I'm not in a position to give an opinion, or approval, or disapproval. Our involvement to evaluate the value of the remaining assets is the only function that we would be involved within NSRL. So I can respectfully request that when the Minister of Finance is up, if you would direct those questions, he could give you better answers.

[3:45 p.m.]

MR. EPSTEIN: Are you aware of any reason that the background study ought not to be made public?

MR. FAGE: Again, I think you would be much better served to address that to the Minister of Finance.

MR. EPSTEIN: I would like to ask about another aspect of the business of marketing oil and gas, or our rights, and this is the back-in rights that the member for Cape Breton South also asked you about. This, of course, comes with an unfortunate history which is that the previous government failed to identify the back-in rights as having commercial value, but your government has been prepared to try to deal with them as having some potential commercial value. So I just want to make sure I understood what was going on. You said there was essentially a trolling of the marketplace, a call for proposals to see if anyone was interested in the possibility of purchasing or otherwise dealing commercially with the back-in rights. Then that's the state of play at the moment?

MR. FAGE: That's correct.

[Page 389]

MR. EPSTEIN: No deals have been done so far?

MR. FAGE: No deals have been done so far.

MR. EPSTEIN: And it is your objective to attempt to actually see some commercial return for the taxpayers of Nova Scotia on the back-in rights this time, is it?

MR. FAGE: There's no question. We, unlike the NDP, and I believe, I'm not trying to speak for yourself, but we do believe that they have commercial value and there is a value to them and we are determined we will achieve a value for them to the best advantage of Nova Scotians.

MR. EPSTEIN: I'm not sure I understood the exact nature. Was it a request for proposals that went out? Was it actually the government expressing an intention to complete some kind of a commercial arrangement fairly soon or was it a very open-ended, essentially an invitation to participate in discussions?

MR. FAGE: We issued a request for proposals in that regard surrounding the Deep Panuke proposal. Obviously, there may be, if the industry grows and exploration is successful, a number of transmission projects in the future that would possibly apply to that provision. So the call for proposal was associated with Deep Panuke.

MR. EPSTEIN: And given the pause at the moment, is there anyone who's actually talking with you at the moment?

MR. FAGE: There are a number of ongoing discussions with a number of groups and the transmission, as you're well aware, is dependent on Deep Panuke coming ashore. So with those various proposals and with EnCana being the sole operator of Deep Panuke, they will be on hold until the time out is completed.

MR. EPSTEIN: May I ask what your thinking is on this, Minister, in terms of timing of some commercial arrangement around the back-in rights, that is are you planning on waiting until a definite proposal for another offshore pipeline is on the table or are you interested in the possibility of a sale or some other form of commercial arrangements while it's still speculative?

MR. FAGE: I don't think there's much room until something becomes a reality in this circumstance to make hypothetical agreements or deals. Remember EnCana has to bring Deep Panuke ashore and it's a stand-alone project, for the need of a transmission line at this time. There may be ones in the future, but that's why its project specific because there's no need to build a transmission line unless you have gas to bring ashore.

[Page 390]

MR. EPSTEIN: But I assume that there are other potential purchasers of the back-in rights besides EnCana itself. There must be other potential commercial partners?

MR. FAGE: Yes, there are certainly other parties very much interested, but it comes back to that equation that there has to be something in the pipeline and that's why they, as well as EnCana, as well as we, the government, need to know there are projects proceeding. Then you're not shipping hypothetical gas. Some people in Nova Scotia have various terms for that when we do that.

MR. EPSTEIN: That's right. May I move to another aspect of your energy mandate. It has to do with the Electricity Marketplace Governance Committee. This is Bob Fournier's committee that has been hard at work and so busily posting things to its Web site. You haven't really said a huge amount in your introductory remarks about this and yet there's, in fact, enormous potential for change in the electricity segment of energy in Nova Scotia. This is something that is a reality. We do have electricity and we use it every day and we're wired up already and we don't have to worry about someone hooking us up to a grid, we're hooked up to a grid.

So I'm curious about the question of, well, as you say it in your remarks, how competition can be gradually introduced into Nova Scotia's electricity marketplace. As I understand it, the position of Nova Scotia Power has been that they're extremely cautious about what percentage of the marketplace they would like to see opened up to competition. They are suggesting, I think the figure here is 1.6 per cent of the marketplace, something in that order of magnitude, and yet as I read the interim report of EMGC, they're suggesting a possibility of as much as 25 per cent of the marketplace being opened up and they're suggesting the way to do this would be to look at the larger customers, the larger industrial customers and some of the municipal groupings. So I'm wondering how things stand with respect to your department's thinking about this issue at the moment. Have you turned your mind to this issue? Have you any thoughts about this question? It seemed to be quite a significant difference of opinion, at least at the moment.

MR. FAGE: The Electricity Marketplace Governance Committee provides extremely broad-based input to the department and myself on energy, a number of electrical energy issues, and I think it's important to note that, yes, it does look at market access, it looks at efficiency, it looks at renewable energies, and they have reported to me the first interim report. I expect very shortly to be able to make public their second report which also deals with a number of those issues. In their interim report, as you properly said, they pointed out several things on marketplace access and although their initial recommendations are more statements, or possibilities, or things to consider for consultation of the public and for the department, the 1.6 per cent represents the minimum probably required to be in compliance with FERC in the United States for export. The 25 per cent represents your wholesale market which is 1.6 per cent, or your municipal corporations, and the 25 per cent expands it to the large industrials.

[Page 391]

I guess as the minister responsible, I think those are two important benchmarks for Nova Scotians to have input and debate the issue of what is the proper number and maybe they will require some additional work before we move quickly in any major direction and I say that because it's extremely important that the market does open up, but we have to do it in a careful staged situation. We've had numerous examples of opening too quickly or wide open when we look at . . .

MR. EPSTEIN: You mean in other jurisdictions?

MR. FAGE: In other jurisdictions, I mean, when we look at . . .

MR. EPSTEIN: California and Alberta.

MR. FAGE: California, Ontario right now.

MR. EPSTEIN: Ontario, sure.

MR. FAGE: Nova Scotia consumers want access choice. They want renewables and they want efficiency, but on the critical question of access, I think that particular one is one where, as minister, I would want to be careful and prudent because Nova Scotia consumers of electricity certainly wouldn't want to have Ontario's experience by opening too aggressively and see a 100 per cent increase in your power bill. I don't think we would be responsible and we certainly wouldn't serve the interests, or the needs, or particularly the desires of Nova Scotia if you see a trade-off where access means a large increase in your power bill. In some people's theory, access should give you lower power rates because you can shop around. There are a number of complications with transmission and moving those electrons and the dissipation coming off the lines and a whole group of issues. We want to make sure they are well in hand so they don't increase prices, but offer an opportunity, at least stable. So you asked me my opinion as minister and I really feel we have to be cautious.

MR. EPSTEIN: Well, you're the person who should be the best informed about this. Can I ask, if I correctly understand, that with respect to electricity, that your general vision of the future is that the grid, the transmission and distribution system will be available to generators apart from Nova Scotia Power itself? I'm not asking you to commit to how many generators there would be, or what share of the marketplace they would have, or whether you would have wholesale or retail - or what the rates would be, I'm just asking is it part of your vision that there would be access by generators to that transmission and distribution grid?

MR. FAGE: Absolutely. The energy strategy speaks strongly to that. If we're going to have a viable renewable energy, that has to be one of the hallmarks or cornerstones of allowing people to produce renewable energy, have it at the same cost as Nova Scotia Power incurs to wheel it or move it through the transmission services so that they are not at any structural disadvantage in marketing renewable energy, if you take that as an example. It

[Page 392]

would be extremely important. When we look at co-gen opportunities, the same principle applies and that's the principle and the strategy. When you look at certainly, you know, market access, it's the future and what's the appropriate number, I think there's an opportunity in place for those two situations to probably be involved there as well and be to the benefit of the consumer and entrepreneurs in Nova Scotia.

MR. EPSTEIN: And if I can ask about a parallel between electricity and oil and gas, is it your view, is it your government's view that there's no segment of the electricity industry that it would itself wish to be involved with as an owner?

[4:00 p.m.]

MR. FAGE: I guess if you're asking me if the province is looking to be co-owner in a project or something, proposals that would come forward on generation, an alternative, certainly we will be involved in accessing federal money on demonstration experiment. As a department we will promote making contributions or investments toward those things to make them happen, but certainly at this point I'm not aware of any projects on the horizon where we would be a shareholder.

MR. EPSTEIN: What about the transmission and distribution grid? If Nova Scotia Power decides it wants to sell that, the government's not interested in buying it, is that right?

MR. FAGE: Currently I've heard no proposals where they were looking to drop their transmission inventory or grid. I think those issues again come to the structural business climate where that rolling stock is now owned by the shareholders of Nova Scotia Power and those shareholders can make appropriate investments and realignments without taxpayers' dollars being involved.

MR. EPSTEIN: I'm not sure if it's parliamentary to ask if you want to make a bet but, do you know what, I think it will be for sale. Anyway, moving right along, I'm interested, and very strongly interested, in the issue of climate change which is another part of your mandate. As I understand it, you, in your department, have the prime responsibility really for moving ahead with this. When I spoke about climate change with the Minister of Environment and Labour the other day, he allowed as how I think you were the lead minister and he was attempting to follow along and claimed he would do his bit. So if you're the lead, I guess I would like to ask you a couple of things.

MR. FAGE: I can only follow such a senior minister as the Honourable Ron Russell. He leads everywhere he goes.

MR. EPSTEIN: I suspect that he would probably have his hand in it somewhere, but let me ask you this. I wonder if you can help me understand exactly where we stand vis-a-vis Kyoto. Now that the convention has been ratified and it has now moved into a phase of

[Page 393]

discussions back and forth between the provinces and the federal government as to actually how the objective will be achieved - so I'm assuming that we're involved in negotiations in common with the other provinces with the federal government about how exactly we're going to get there - and the place we're trying to get to is 6 per cent below the 1990 levels, just to be clear. This is accepted as a goal for Nova Scotia, is it, or is it your view that this is purely a national goal and that individual provinces could be above or below that?

MR. FAGE: It's our view that it's a national target. Our view is also that we are committed as a province to honouring our obligations under Kyoto. At the technical level you have a number of categories to satisfy that and from a provincial standpoint at that level, ours is that we're not disadvantaged, we want fair burden sharing across . . .

MR. EPSTEIN: And I've heard that formula a lot. It first showed up I think in the energy strategy.

MR. FAGE: I guess it's always a little dangerous to use an example, but you have issues where you have large populations and large number of automobiles, you have issues where you have large jurisdictions that may be using a form of renewable power versus the small jurisdiction that may be using a carbon-based solid form of generation. Fair burden sharing is not a percentage. That's why we hold that view.

MR. EPSTEIN: Okay. I have heard of these things, but I want to go back to the 6 per cent. Is there a provincial policy with respect to 6 per cent below 1990? Is that a provincial target or is it not? Or is it even a . . .

MR. FAGE: No, it's not a provincial target. Our target is, we're in agreement, we're part of that target nationally. Our position on the fair burden sharing is as long as we achieve that, then we'll all meet the national goal. It will be very difficult if one province, one area, receives a disproportion because of their energy lineup with regard to how it's achieved, as in what their source is to produce their energy. If it's not that fair burden sharing in a straight percentage with those industry complications, you could end up being disproportionally affected in a big way. Those ground rules have to be sorted out and that's what's taking place right now.

MR. EPSTEIN: Okay, but "fair" is a word that means different things to different people.

MR. FAGE: Fair to the federal government, and even our fair burden sharing may not be on the same definition level between provinces and the federal government.

MR. EPSTEIN: I take it that's what you're trying to sort out right now in the talks, is that right?

[Page 394]

MR. FAGE: Yes.

MR. EPSTEIN: Okay. Now, what I wonder is just how far along are we in these talks; that is, how far along are the provinces and the federal government in these talks. My concern, just to be absolutely clear of course, is that it was five years from the time Kyoto was signed to the time it was ratified by the federal government, which was an enormous delay. Now it has been ratified, now we're flapping our gums some more and talking about how to actually achieve it, and yet the first target time period is fast approaching. It just seems obvious that Canada is not going to achieve 6 per cent below 1990 levels unless something very serious occurs. To achieve 6 per cent below 1990 essentially means on the order of 25 to 30 per cent reductions on what the current levels are right now. This is big. It's achievable; it's not impossible. I don't mean it's impossible, but it's big.

MR. FAGE: For us, it's out there 18 per cent, and then the national average is significantly higher than that. That certainly puts impetus to what you're saying there. One thing I think that's important to remember is Kyoto is not in force now, will not come in force unless Russia approves it.

MR. EPSTEIN: Until the total number of states do it.

MR. FAGE: Right. Russia will sometime in the next year.

MR. EPSTEIN: Isn't June the critical target?

MR. FAGE: What I can share with you on those discussions - first of all, the provincial governments have working groups in place to make sure that those technical issues can be worked out, then we can continue to engage the federal government. I also want to say at the deputy minister's level we're pleased because we're one of the leaders on this file in the country. Other provinces, at the deputy's level, have chosen the deputy minister here, Dan McFadyen, to chair the deputy file; as well, the technical working groups, very respected member of the Energy Department who has had the climate change file for Nova Scotia for many years chairs the technical groups for the provinces and the feds and that's Allan Parker.

We see this province trying to be the reasonable voice to get agreement to continue this file moving forward. I think we're positioned pretty strongly to help achieve those things and we have some responsibility here.

MR. EPSTEIN: Mr. Minister, I take it that there are broadly three sectors at which we can look for for greenhouse gas emissions reductions: One is transportation, the other is electricity, and the other is really home and building heating and industrial uses. I'm wondering if transportation is going to play any part at all in Nova Scotia's strategy to reduce greenhouse gasses and, if so, what do you have in mind for that?

[Page 395]

MR. FAGE: Probably the easiest thing I can do is give you the 2000 breakdown and give you the size of Nova Scotia's percentages of how large those sectors are for us. Electricity is 41.1, that's obviously our biggest; transportation is in there at number two at 27.6; industrial manufacturing and construction is 10.1; residential is down there at 8.4; commercial institutional is 4.3; landfill gas waste is 3.2; and agriculture is in there at 2.9.

I guess in relationship to 1990 it puts in percentage how much they've gone up or down, those various ones - since 1990 until 2000 the percentage change on electrical generation is up 21 per cent to achieve that number of 41.1; transportation is more modest, it's up 13.5; residential is up 18.2; industrial manufacturing is up 18 per cent; commercial and institutional is up 6.8. The interesting one which has changed a lot is fugitive mine gas emissions down 79.2, and that's indicative of no longer underground mining operations in Nova Scotia; the last one is landfill gas and waste up 18.6 per cent.

There are obviously some conditions on those. Those are extrapolated by using national averages. They work for some figures, others they obviously don't. I'm sure you've picked up on landfill, where there are old landfills emitting gas, but the new regulations for the last number of years allow no more organics in landfills so that number is extrapolated nationally, whereas when you reflect Nova Scotia it's a huge decline.

MR. EPSTEIN: If it's at all possible, I wouldn't mind having a copy of that when you have the chance. Thank you.

I was concerned about the transportation sector and whether there was going to be any component that would actually target the transportation sector - if there is, I have to say it's not obvious to me. The government speaks, and frequently correctly, about the necessity of repairing our road infrastructure, but of course what this does is it encourages the use of automobiles and trucks and we don't have any real mass transit that's really being encouraged or invested in by the province, and we don't have a big switch from trucks for moving goods around over to rail, and of course our rail infrastructure is threatened and we've got all kinds of problems along these lines. I'm hoping that one of the things your department will do will move in that direction of doing something about transportation because it's certainly missing, as I see it, so far from anything effective that's being thought of. Given that people now treat Truro and Lunenburg as bedroom communities to HRM, this is increasingly problematic and there's an opportunity for some regional land use planning that could take place.

I'm going to yield to my colleague from Sackville who, I think, has a point he wants to make with you.

MR. FAGE: Just a couple of comments on the transportation one that you were discussing. I think there are a number of areas there that I think are bright spots and show some promise and progress. First of all, obviously the transportation one - and that's why it's

[Page 396]

so important to have the technical committees between all provinces as well as the deputies' committees between all provinces, they will be standards we hope to develop that all provinces can agree to, so that you're measuring apples and apples and oranges and oranges as an opportunity, but when you mention truck traffic and opportunities, certainly the rail line, the use of double-stacking and the employment of CN of the large module cars that they've picked up all over North America to use on the line here, it does affect that and helps that in a positive manner.

[4:15 p.m.]

The efficiency that CN and a number of other companies have moved toward, I think bodes well for increasing in volumes and handling systems, and with our ports with double-tracking and the opportunity there, and obviously a number of the negotiations and suggestions put forward from our perspective involves that very closely because when we're seeing a time of 48 hours in New Jersey out of Nova Scotia, it opens up whole avenues of perishable or time-sensitive delivery to occur and becomes a very attractive economic driver at that point, and we have many of our primary industries now using that system almost exclusively to access the American market. So I think you're right on on that one. It's a good opportunity and that will be part of it.

MR. EPSTEIN: Thank you.

MR. CHAIRMAN: Are there no further questions? Are there any questions?

The honourable member for Cape Breton West, starting at 4:18 p.m. Please go ahead.

MR. RUSSELL MACKINNON: Mr. Minister, with regard to the leases off the eastern coast of Cape Breton Island, in particular off the Donkin-Port Morien district - I believe they're held by Husky Oil - what's the status of those particular leases in terms of the sounding surveys and possible exploration dates and so on?

MR. FAGE: My understanding is they were given approval by the Canada-Nova Scotia Offshore Petroleum Board to do seismic, and the earliest date that they can do that is I believe in November, late November of this year, and that approval came with a large number of conditions that we can supply to you. I can give you a copy of it, but it would involve - if it was for instance whales, they have to be quite a distance away from the area, and if one strays into the area, then it's an automatic shutdown. A number of other species are dealt with in the same way and the reason they were given that time frame of the year, there is the least number of fish in the areas, spawning is curtailed at that time of the year, but I can certainly supply you with the list of restrictions; it's fairly extensive.

MR. MACKINNON: Yes, thank you. Is there any indication of what the reserves hold in those particular blocks?

[Page 397]

MR. FAGE: Well, the reason that they are doing seismic is to establish if there are any reserves at all. The 2D seismic and then after that if it shows some structures and they're interested, they possibly would then do 3D before they would even move into test wells, but seismic, my understanding is, provides the first look at what's under the seabed to determine if they would even be interested in expending the large volumes of money to do a test well.

MR. MACKINNON: What happened to the seismic survey tests that were carried out in 1972 and 1974 respectively? What were the results of those?

MR. FAGE: I was just conferring with staff and the material or seismic data that was gathered in the 1970s, certainly the department is doing some analysis of it currently. The company involved is Hunt Oil . . .

MR. MACKINNON: Yes, I believe I said Husky, I'm sorry.

MR. FAGE: Yes, down in the bight and that area. They have availability, obviously, of that data, but what they need is more concise current data, so that's why they want to look with some seismic at some very specific areas to get more definition and clearer images of what may or may not be there.

MR. MACKINNON: Has the department not even analyzed any of that data prior to issuing those leases? You say the department is in the process of analyzing it now - well, with all respect, it was carried out in 1972 and 1974, and I would think after 30 years you would have a chance to analyze it.

MR. FAGE: I think there are two points there always to keep in mind. The issuer of the permit is the Joint Regulatory Board . . .

MR. MACKINNON: Yes, I understand that.

MR. FAGE: . . . and the data from the 1970s, with the improvement in technology, that data was analyzed at that time . . .

MR. MACKINNON: What are the results of it?

MR. FAGE: With new techniques and better technology, more features can be gleaned from that material and it's under those conditions, with modern technology, that the department is looking at that. I'm not aware that they have made any determinations that they see or don't see something, but I can check for you.

MR. MACKINNON: Well, based on the technology they had at that time, what was the department able to determine as to what the finds were from those two wells?

[Page 398]

MR. FAGE: The information supplied to me on what was observed or noted from the seismic in the late 1970s was that it was unclear and inconclusive. What the new technology and new procedures has allowed us to do is have a second look at that to define areas that may possibly be of higher interest and worth that second look, but as far as X marks the spot, the old data didn't have that.

MR. MACKINNON: Well, that seems to contrast a bit with the presentation that was made by the owner of Hunt Oil at a public meeting at the Donkin Fire Hall, and I'm a little surprised that the department wouldn't be on the same song sheet in terms of knowing what the information from those seismic tests were. But that having been said, I guess that's my concern, that the department doesn't seem to have the expertise within the department to be able to do this type of analysis and stay on top of industry so that industry is not taking advantage of the province on a number of issues, particularly when you go through the whole process, the bottom line is money and revenue streams.

MR. FAGE: Certainly the department is having a second look at the data to see if they concur with the expertise employed by Hunt Oil, or any other company, but remember exploration development is high risk, a huge amount of investment. Those companies will make their determination with their own experts on whether they want to invest that money in exploration and development. The government's and Energy's role I think is important in direct terms, we're involved in promotion and regulation.

MR. MACKINNON: And that's it?

MR. FAGE: We don't invest. We aren't the investors in the oil and gas industry. It's private firms that, at the end of the day, make the determination of whether they're going to take an option on a block and invest up to $1 billion in it, or more. The province doesn't have those sums of money, or would not risk that kind of taxpayer money. Although we would comment on what they think they see there, they are responsible for their shareholders' money and they would make the decision based on the data when they look at it, if they're going to invest money.

MR. MACKINNON: But that wasn't my question. I understand the government . . .

MR. FAGE: Your question was if we were going to be taken advantage of . . .

MR. MACKINNON: No, no. A little more complex than that, and it does come down to the issue of finance and money and revenues. You indicated that what the department was doing was taking a second look at the findings that Hunt Oil has from those previous studies, those test results, and they're doing more. The purpose of getting the go-ahead through the regulatory process was to go in with modern technology and get more up-to-date and perhaps better-quality information. But indicating that you're reviewing the findings of Hunt Oil

[Page 399]

indicates to me that they know at this point, through the old data, what's there. Is there any indication - I see your staff is shaking their heads no, so . . .

MR. FAGE: We review that data. They've expressed an interest in it. The majority of any older data is available to any gas and oil company and their expertise. They would review that type of seismic, and if they feel, through their analysis, there's something there and they would like to do more exploration or investigation, they invest their money and apply for a drilling licence, an exploration licence first, and make commitments to get the block.

We would have our senior geologist, when they apply for that, use the best modern technology at our disposal to have a look at a similar block, but it's because they're willing to invest money that we would be looking at it in that narrower sense. Although we provide expertise, recommendation and information to those companies on a regular basis, as well they would gain that from other companies that would have that information to offer to those companies.

This one really is in the stage where you're not doing the audit on this one, you're doing the analysis and promotion and they've already made their bid on the block, so we're seeing if we concur with their analysis.

MR. MACKINNON: Would you say, at this point, that our offshore oil and gas project would be considered a full-scale industry, or how would you define it?

MR. FAGE: That's a good question. It's my belief that we have one project ashore. We wish to build an industry, but we have one project. Everyone can have a different definition of an industry, but from my particular point of view, I would not consider that we have an industry until we have a number of producing projects come ashore, and downstream and upstream industries (a) supplying, and (b) processing that natural gas or liquids or oil, distilling it, refining it, refracturing it and producing other products - then I would consider we have an industry. Our goal is to get to that point where we have an industry. We have one project right now in my view.

[4:30 p.m.]

MR. MACKINNON: Essentially you would conclude that at this point we do not have a gas and oil industry.

MR. FAGE: We are on our way because we have a single project, but if we're going to achieve multiple projects that we would string together and call an industry, because it would have enough liquids to support a petrochemical industry, discovering . . .

MR. MACKINNON: At this point the answer is no.

[Page 400]

MR. FAGE: . . . more gas and oil is absolutely essential. When I speak to company executives, the terms they use is just beginning in this basin, in its infancy. We believe strongly that there's certainly more than 40 tcf there. We have to find it, and if we can find it in commercially viable quantities there will be an industry there instead of a SOEP.

MR. MACKINNON: So the answer is no at this point, we do not have an industry.

MR. FAGE: We haven't achieved industry status.

MR. MACKINNON: Okay. I'm a little interested in the broad scope of your energy policy for Nova Scotia. You may or may not have heard my speech in the House going into Supply about the proposal by the Eskasoni First Nation for wind turbines, to become self-sustaining in power generation. The total cost of that project would be about $5.74 million for three turbines, three wind vanes or whatever the term is. The federal government has agreed to put two-thirds of the funding into that project. Has your department had an opportunity to review that particular proposal that is before the provincial government?

MR. FAGE: I have not reviewed it; I will check with staff to see if they've reviewed it.

MR. MACKINNON: Is anybody from your staff here who would be familiar with that project?

MR. FAGE: Not to department staff's knowledge has any proposal come forward to the department yet.

MR. MACKINNON: Pardon?

MR. FAGE: Not to their knowledge. No proposal has come forward from the Eskasoni group to the department yet.

MR. MACKINNON: As I understand, it was submitted a month ago. In my conversations with the chief and the chief development officer for the community, the federal government has responded favourably, but the provincial government has not. Would that type of project have to go through your department?

MR. FAGE: It would more likely, on the financing level, go to NSBI or . . .

MR. MACKINNON: Why would it have to go to NSPI if it's an application to the provincial government?

MR. FAGE: For funding?

[Page 401]

MR. MACKINNON: Yes.

MR. FAGE: Because that's the funding agency.

MR. MACKINNON: Oh, NSBI. Perhaps if the minister would be kind enough to give us, on a future day - probably in the next couple of days - a status report on that particular project . . .

MR. FAGE: I will check into that proposal.

MR. MACKINNON: . . . because my understanding is that would save the community $600,000 a year in electrical costs. I understand there's some resistance from Nova Scotia Power because they don't want to lose the revenue. Given the importance of that project, not only from a revenue-saving point of view but also from the fact that it meets many of the objectives of Nova Scotia's energy strategy, as well as working very neatly into the Kyoto protocol, I would ask that favourable consideration be given to that. From what I've read of the particular report, the submission, the payback period - excluding the federal dollars because that's a direct contribution - if there were a joint stakeholders' investment from the provincial government and the First Nation, depending upon how it would work, anywhere from 6 to 10 years which would give them at least 15 years of free service. At a saving of about $600,000 a year, that's $9 million that they could put into other programs and services and reduce their dependency on government - and they're very keen on that.

MR. FAGE: I will certainly check into the status of that proposal and get back to you. As you're well aware, Nova Scotia Power has a call for a proposal for green energy production in that 25- to 50-megawatt area. This may well be a project submitted to satisfy that. I will get clarification on that for you as well. It may be involved in that call for proposals or project.

MR. MACKINNON: Now switching from NSBI to Nova Scotia Power Inc., or NSPI, the Premier on a previous day indicated that power rates in this province would increase by as much as 29 per cent if the Kyoto Protocol was adopted, and for whatever reason he seemed to become very silent on that after he was challenged on that figure, because they were the figures that were put out by Nova Scotia Power, ironically, or they ironically were the same. What data does your department have that would support this 29 per cent increase in energy rates?

MR. FAGE: Under those various numbers and scenarios, the numbers were coming forward a number of months ago in each province, those numbers were based on modelling in other provinces. If it's not implemented properly and with fair burden sharing, those could be the possible outcomes. Right now, since the accord has been signed at the federal level, we're in the process of modelling for Nova Scotia various scenarios of the implication, under different conditions - how it would affect Kyoto, or how a climate change agreement would

[Page 402]

affect Nova Scotia. Obviously, the fair burden sharing is critical to us. With Nova Scotia Power's main generating facilities still using coal, obviously they have assets that are stranded for in many cases over 20 years out, so conversions to natural gas or other forms on a very quick basis puts some severe strains on their investments and how much money it would cost.

In the coming months we will have some very clear numbers for you on various scenarios, but there's no question the 29 per cent increase is something that could happen if it's not handled properly; that's why it's critical. The deputy, Dan McFadyen, is chair of the deputy ministers for the province, Kyoto and the climate change file, and coming up with those modelling numbers, as well as at the technical level I believe you probably know Allan Parker, who's technical level and also the chair for all the provinces and the federal government on this file. Those are the actual scenarios they're working out now, so that we have fair burden sharing and we don't end up with that 29 per cent or 25 per cent or 31 per cent or those types of huge increases.

MR. MACKINNON: Are you saying, Mr. Minister, that figure of a 29 per cent power rate increase, that figure came from modelling from other provinces?

MR. FAGE: Yes.

MR. MACKINNON: So it had nothing to do with the fact that Nova Scotia Power was advocating that that's how much their power rates would go up?

MR. FAGE: My understanding is they probably got their numbers from modelling, from climate change . . .

MR. MACKINNON: But it had nothing to do with their modelling? It was just coincidental that the figure of 29 per cent came from other provinces' modelling and not from Nova Scotia Power's figure?

MR. FAGE: I'm not aware of the statement, so it's pretty hard to validate or not validate . . .

MR. MACKINNON: You haven't seen the presentation that Nova Scotia Power made to your caucus, as well as ours and the NDP caucus?

MR. FAGE: I've seen a huge number of scenarios from a lot of provinces, companies . . .

MR. MACKINNON: No, I'm talking about Nova Scotia Power. I'm not talking about other provinces.

[Page 403]

MR. FAGE: That particular one, 29 per cent, what I'm saying is that can be a possibility if this file is not handled properly.

MR. MACKINNON: But do you have the data that shows that that was the possibility? I'm a little perplexed here. You're saying that you received that information from other provinces' modelling, ironically it's the same as Nova Scotia Power's, but a representative from your department appeared before the Resources Committee of the Legislature and indicated that the maximum that he could possibly foresee would be 12 per cent, the worst-case scenario. That's a significant difference.

We have a senior staff member, it may have been Mr. Parker, and I'm not sure, but I can pull Hansard on that, but there's something wrong when you have a senior staff member coming before one committee saying 12 per cent. and we have the minister saying that it was based on modelling from other provinces and 29 per cent could be the scenario. You haven't shown me anything, any data, any report, anything on paper, that would give us any comfort level. Do you have anything in writing that shows that, anything at all?

MR. FAGE: What I can say to you is that modelling is now occurring with some consistency and we're trying to achieve agreements so that all the provinces play by the same rules. There were numbers out there from various modelling - you pick a number - they were developed on various scenarios, they were developed in various jurisdictions, with no consistency across the country. You could apply a . . .

MR. MACKINNON: . . . Nova Scotia do it's own model?

MR. FAGE: We used those same numbers. Remember that everybody is applying national averages in different ways. That's one scenario. Unless you could put the set of data in front of me, it's very hard for me to verify or comment on it. All I know is, as Minister of Energy and, previously, with Natural Resources for three years, I have seen enough models on Kyoto that it would fill a fair-sized magazine, and they all come up with different numbers, and I don't know how I can validate or verify a number or where it came from or who had input into it unless I've seen it. All I'm saying is you can pick a number, because there were that many out there over the last couple of years.

MR. MACKINNON: But you're saying you based your information on modelling from other provinces, and now you're saying that the Province of Nova Scotia has its own modelling, so which is it?

MR. FAGE: There was a national model done from all provinces, and provinces then modified them for themselves. Other jurisdictions came up with their scenarios, different types of industries came up with their scenarios. Those were all out there. What is extremely important now that Kyoto is signed and that there is one accepted model with consistent rules we all use and we generate numbers from them, that's the process we're involved in now.

[Page 404]

[4:45 p.m.]

MR. MACKINNON: Have the other provinces generated their numbers yet?

MR. FAGE: The other provinces are sitting down at the meeting that the deputy is chairing, nationally, at the technical level, Allan is chairing nationally, and they're developing that consistent model that they will all agree to, without modifying it. Then you could have consistent numbers.

MR. MACKINNON: Is it possible for you to table the models that were designed on the initial stages, both by the other provinces and by Nova Scotia?

MR. FAGE: Yes.

MR. MACKINNON: So you can table that information for me? So that's a yes?

MR. FAGE: If you pick a specific time frame, then we can give you one model . . .

MR. MACKINNON: The latest one before you get into this final scenario.

MR. FAGE: The latest model before Kyoto was ratified in December, is that the one?

MR. MACKINNON: Yes.

MR. FAGE: Okay. We will supply that one.

MR. MACKINNON: That's the one that says, possibly 29 per cent?

MR. FAGE: I can't verify that, but it's the range . . .

MR. MACKINNON: Is anybody on staff able to verify that? Anybody from the energy sector?

MR. FAGE: There are no definitive numbers. I remember when referring to . . .

MR. MACKINNON: Wait now, you told me - I know these are not definitive.

MR. FAGE: . . . staff members. I was doing some modelling and asked the question. The number I think you referred to was 12 per cent. The qualifier is under that scenario. Under another scenario, it was 20 per cent or 29 per cent or 32 per cent.

[Page 405]

MR. MACKINNON: I will pick out Hansard. I think I asked for the worst case scenario from the representative from the department. I believe the answer was 12 per cent, not 29 per cent. Obviously the minister . . .

MR. FAGE: We can supply you with that later.

MR. MACKINNON: . . . must have another report that the staff member didn't have, that it came before the committee.

MR. FAGE: This is one where there's no rules yet, and that's why we're establishing the rules.

MR. MACKINNON: Yes, I understand that.

MR. FAGE: We will supply you with the latest one that was used before Kyoto was ratified then.

MR. MACKINNON: When do you expect this final agreement or the final protocol to be concluded? Maybe a better question would be, do you have any sense - based on the last model that was put forth - of what it would cost Nova Scotia in jobs, what it would cost Nova Scotia in tax revenue? Do you have information that would show it would create jobs, how much revenue would be generated under that latest model?

MR. FAGE: I think it's important, you have to remember and establish Kyoto is signed in Canada, Kyoto does not take effect unless Russia approves it, If Russia approves it then we have a Kyoto national agreement we have to honour, and we're prepared to do that. Until you have a model established that every province signs off on, and the federal government, the model doesn't mean anything because rules can be changed.

MR. MACKINNON: So what you're saying is Russia is the deciding factor on what type of model you have?

MR. FAGE: No, Russia will decide whether we have Kyoto or not. If Russia does not sign off, it doesn't have enough support, globally, it goes by the wayside.

MR. MACKINNON: Okay. That's fair. I appreciate that.

MR. FAGE: But internally, I think it's important to acknowledge that no model is any good to do your analysis on until you have national agreement on the model, because if we develop a model at this stage, made in Nova Scotia, and no other province accepted, then the numbers are no good. We're at the stage of establishing that model with our provincial and federal counterparts right now.

[Page 406]

MR. MACKINNON: Mr. Minister, I don't disagree with you on that, and that's a fair statement. I think it would be patently unfair for the Chief Magistrate of this province, being the Premier, to go out and scaremonger the people of Nova Scotia into believing the power rates would go up 29 per cent, when you can't give us an economic model, you can't confirm if it was 29 per cent, you have stated publicly that there isn't a final model and that all that changed when the final protocol was there. Why was the government out telling the people of Nova Scotia that their power rates would go up 29 per cent when what we've heard here today is that could be the furthest thing from the truth?

MR. FAGE: We can have an academic argument for hours and hours. Everybody will do their own modelling for their particular scenario, when there is no agreement, and 29 per cent is a perfect number under that scenario, the number will be different once you negotiate the rules of the game. Previous to having that one model that everybody agrees with, we indeed could have a 29 per cent increase if we're ganged up on by other provinces or we don't get fair burden-sharing on the industry makeup. That is definitely a possibility and could very easily happen. Those are singularly-generated numbers that each province came up with.

What we're talking about now is we're entering the process where once we agree to a set of rules with every one of those provinces, it might be 29 per cent, it might be 5 per cent, it might be something else, sort of pick the number. At least it will be consistent with everybody else's using the same measuring stick.

MR. MACKINNON: I appreciate that. I think you know I do, from a technical point of view. I just want to see that report, that model that refers to the power rates going up 29 per cent. That's all I want to see.

MR. FAGE: We will get you that one. Just before Christmas when Kyoto was signed, that was the latest one, that's what you're looking for.

MR. MACKINNON: Oh, I thought you were going to say I would get it by Christmas.

MR. FAGE: If you want it in that time frame . . .

MR. MACKINNON: No. I would like it tomorrow, if possible.

MR. FAGE: We could gift-wrap it.

MR. MACKINNON: We would like it a little quicker than that.

MR. FAGE: Do you mean that snail mail is really true?

[Page 407]

MR. MACKINNON: Snail mail, so much for information technology.

I understand that if you look at the entire offshore development project, which was approximately, all told, somewhere in the vicinity of what, $4 billion to date?

MR. FAGE: As in how much money has been spent on the offshore?

MR. MACKINNON: Yes. The value of the whole project.

MR. FAGE: Our analysis shows that in that period from 1990-2001, it was approximately $5 billion.

MR. MACKINNON: Now, out of that, what percentage of that derived benefits go directly to Cape Breton?

MR. FAGE: It would be an extremely difficult number to come up with.

MR. MACKINNON: Approximate, I would be happy with that.

MR. FAGE: I mean you have population migration, you have the . . .

MR. MACKINNON: Let's never mind all that. I'm just talking about the dollars, direct and spin-off benefits to Cape Breton Island. Would 2 per cent be an accurate figure?

MR. FAGE: The staff tells me we don't break it down regionally. I can get them to attempt to do something. It's not broken down regionally.

MR. MACKINNON: So, no one within the department has any knowledge of what that percentage figure is, or approximately is? Is that what they're telling me today?

MR. FAGE: It's not broken down by county, region, it's purely a provincial number that's tabulated and kept track of, benefits to Nova Scotians.

MR. MACKINNON: Could you give me an undertaking that you will provide that?

MR. FAGE: I guess it's very difficult to do that, because in conferring with staff, we don't have the data and the detail to do that, to break it down . . .

MR. MACKINNON: So you can't tell, you don't have an information system where you can tell me what region of the province has x amount of dollars being expended, and certain companies that get contracts, the value of those contracts, and then measure all that against the total value of the project? You don't have that type of information?

[Page 408]

MR. FAGE: OTANS . . .

MR. MACKINNON: No, no, I'm not asking OTANS, I'm asking the Department of Energy.

MR. FAGE: Remember, these are private companies doing business with other private companies. There is no reason to do audits on them. It doesn't involve government dollars. It would take a huge amount of resources to try to track something like that, Nova Scotians, regardless of where they live. I think RDAs and OTANS and private business might do those surveys from time to time. I know, in the Strait area, they keep very close track of those kinds of numbers for those areas. As the Department of Energy, as a regulator and a promoter, recording transactions between private companies isn't the business we're in.

MR. MACKINNON: Mr. Minister, I didn't suggest that in any way, shape or form.

MR. FAGE: But that's the kind of information you need in detail to supply you with your request. That's why I'm a little reluctant to make a commitment that may not be achievable.

MR. MACKINNON: Well, if you look at the Goldboro plant and we look at all the activity that took place down through Guysborough County, and then we go over into the Port Hawkesbury area, I think it wouldn't be very difficult to put a dollar value on the amount of money that went into those particular projects and measure that against the total dollar value of the project. Would it?

MR. FAGE: Again, we don't run any of that sort of audit process.

MR. MACKINNON: Here's where I'm coming from, Mr. Minister.

MR. FAGE: We would ask for the information from OTANS, they would supply us with information in analyzing the total procedure, those types of things. Even if you had a company that's just registered in Nova Scotia and you have an address for them, it doesn't mean they spent the money where that address is, whether it was Sydney or Ecum Secum. It's a huge amount of tracking that we're just not involved in. I think OTANS could give you a better number. Ours would be a guess, because we don't keep that information, have that information. We would have to hire somebody to go run it down.

MR. MACKINNON: If someone from within government suggested to me it was 2 per cent, then you wouldn't be able to take issue with that would you?

MR. FAGE: I guess I could probably find somebody else within government who could suggest another number.

[Page 409]

MR. MACKINNON: Okay, would you do that?

MR. FAGE: But that's the con of your question, you said you thought you could find somebody within government . . .

[5:00 p.m.]

MR. MACKINNON: No, all I'm looking for is some clarity. If it's good enough for you to go find somebody else who would take issue with it, it must be good enough for you to be able to confirm whether it's correct or not. Why the cat and mouse thing? We have the southwestern part of the province where there is some potential for the American company they're talking about whether they will come onshore or bypass this out to the western part of the province, and then you have up in the Guysborough area. Now if the development is split in such a way in terms of the way it's allowed to proceed, it would make it very difficult to warrant having a fractionation plant, depending upon the licensing and the permits and so on. That's what I'm getting at. How can rural Nova Scotia have a chance to be able to stand up and fend for itself if government is not able to provide it the information and the regulatory framework that would help it? I know there is a series of issues all married into that statement.

To start, my understanding from a senior government official - and I will get into names a little later - is that it has been less than 2 per cent of the benefits of the Sable Project that has gone to Cape Breton. Now, when you're talking 20 per cent of the population there, if you want to get into that, there's something unbalanced. Then you have, down in Goldboro, the fuel coming in there, and then if you allow the licensing to bypass the southwestern part of the province . . .

MR. CHAIRMAN: Excuse me, honourable member. For the purposes of Hansard, they would like you to keep close to the microphone. As you get away, it's hard to pick you up.

MR. MACKINNON: Mr. Chairman, I haven't heard any complaints from Hansard yet, but I will certainly take note. (Interruptions)

MR. CHAIRMAN: They also asked for members not to be clicking pens or banging their pens and pencils on the microphone. I am getting messages sent from above, in the recording room, about those nuisances they're picking up.

MR. MACKINNON: Mr. Chairman, I think the evidence will show that I don't have a pen in my hand either.

MR. CHAIRMAN: Other people are.

[Page 410]

MR. MACKINNON: Maybe you should chastise other people.

MR. FAGE: I will get you one.

MR. MACKINNON: You can appreciate my concern, trying to ensure that rural Nova Scotia gets a fair shot at some of the economic development from this project and future projects. I'm really concerned about the fact that if they're allowed to bypass the southwestern part or allowed to develop down there onshore, then you have two projects so far apart that it doesn't warrant the value-added industries that the government is saying it would like to have. It's a lose-lose situation.

MR. FAGE: I tend to deal with non-hypothetical what-ifs and try to deal with . . .

MR. MACKINNON: Well, that's not hypothetical, if it does go that way.

MR. FAGE: . . . industry and projects as they come on board. Certainly there has to be the realization and the understanding that when the SOEP partners chose Goldboro, they chose it not because it wasn't in Cape Breton or it wasn't in Cumberland County, they chose it because it was the economical spot to bring it ashore. That's not to say that a discovery off the coast of Cape Breton isn't going to come ashore in Goldboro or it's not going to come ashore in Cumberland County, in all probability, because of the economics and the right position, it will come ashore, make landfall in Cape Breton.

We deal with municipalities, work closely with RDAs to promote all the benefits and opportunities regardless of where they are in Nova Scotia. At the present time, we see individuals from around Nova Scotia, virtually every community working and employed in the offshore or onshore in design, engineering, architecture, and those are all very positive things for the province. Physical locations of sites related to supply or upstream of the industry, proponents will come forward, private industry that make the investments that decide on where they would do fabrication or engineering, they make those investments in infrastructure, in offices and where they're going to employ people regardless of where they are in Nova Scotia, we're there to support those activities.

The practicality of the gas coming ashore, itself, is a function of the best economics that the company can make landfall in an economic and environmental time frame and situation that makes sense. Downstream production from the gas or oil, when it comes ashore, petrochemical industries or other downstream industries, hydro-generation, a whole host of things and products that could take all afternoon to list will be based, again, by private companies, not governments at municipal or provincial or federal levels. That's not to say that they won't encourage and support the endeavours of those companies to locate in their community.

[Page 411]

We work closely with the industry participants to try to help them with technical support and knowledge and expertise to make those projects become a reality. They, on everything from economics to physical proximity, will choose where that industry or that plant or that welding shop or that lawyer's office will be located. Those are kind of the terms of how any industry develops. We work directly with those industries to promote this province and Nova Scotians, and that is Nova Scotians in every region, every community. When we look at projects or opportunities, you tend to talk to the community involved. If they've attracted someone and you work with them, and you tend to talk to the businesses involved, and analyzing or doing an audit on each region, we don't currently do those sort of things, honourable member.

MR. MACKINNON: Mr. Minister, I understand there has been a considerable number of engineers laid off in recent weeks in the offshore industry. Do you have any numbers as to exactly how many were laid off?

MR. FAGE: I'm always reluctant to speak for a number of private companies but our best estimate at this point is probably somewhere between 120 and 140 individuals.

MR. MACKINNON: So it would be safe at averaging it out at 130. That's engineers, right?

MR. FAGE: Engineers off of that project. A number of companies we've met with reassigned engineers to other projects and other divisions so those are the ones that . . .

MR. MACKINNON: That you were able to identify?

MR. FAGE: . . . were taken off of EnCana work.

MR. MACKINNON: What about other staff, like secretaries, technicians and so on, how many people all together?

MR. FAGE: That 120 or 140 is the total of engineer support staff, anybody taxed on the EnCana project.

MR. MACKINNON: That's EnCana?

MR. FAGE: Yes.

MR. MACKINNON: Any other parts of the offshore where there were layoffs in recent weeks?

[Page 412]

MR. FAGE: The only other company that was in extreme preliminary planning was El Paso. El Paso was the Blue Sea project, and they put their project on hold, but it was a project that was only conceptual with no approvals, no go forwards without depending on a large volume of gas coming ashore.

MR. MACKINNON: How many employees were affected there?

MR. FAGE: Their estimate was five, I believe.

MR. MACKINNON: One final question is with regard to the offshore, the regulations, the Occupational Health and Safety regulations. I realize, as you can appreciate, having served as Minister of Labour I have a pretty good idea of what it would take to amend those regulations. It's a co-operative effort between Nova Scotia, Newfoundland and Ottawa. What's the status of that, and are you, as minister, able to give us any sense of a time frame when you expect that to be approved?

MR. FAGE: There certainly has been a lot of discussions with this province obviously in the forefront trying to get consensus; consensus from the Province of Newfoundland and Labrador, and the federal department. What I can report to you is that there's a draft of consistent legislation between the three jurisdictions. It's out there to public consultation at this point.

MR. MACKINNON: So, you're not able to give me a time frame?

MR. FAGE: The public consultations will occur for a month, I believe, or even shorter than that, without major revisions, and if there are major revisions, then that pushes the time frame out.

MR. MACKINNON: They have draft legislation in Newfoundland, the feds as well?

MR. FAGE: Yes, they do. That's what I meant by consistent legislation, that's where it's out to public consultation as well. If all goes well - and that's a term you have to be cognizant of - the federal government may possibly get it through toward the end of the session they're currently in.

MR. MACKINNON: This session?

MR. FAGE: That's consistent that there is no major revision in the draft legislation.

MR. MACKINNON: This session?

MR. FAGE: Session of Parliament.

[Page 413]

MR. MACKINNON: Oh, federal Parliament.

MR. FAGE: Obviously, we would introduce mirror legislation to make . . .

MR. MACKINNON: But wouldn't all three have to be done almost simultaneously?

MR. FAGE: All three . . .

MR. MACKINNON: Jurisdictions.

MR. FAGE: . . . can meet that objective of mirror legislation. That's the most important point. The time frame would be most desirable that they came in force at the exact same time. Different parliamentary agendas may not achieve that. If it does well in public consultations, the federal minister is looking at introducing that later in the parliamentary session that's on right now. Our intention would be to do the same here.

MR. MACKINNON: Perhaps if you'd be kind enough to forward that . . .

MR. FAGE: Draft legislation?

MR. MACKINNON: No, no, I'm familiar with the wording of it pretty well. I think we were in the throes of trying to articulate a draft of it when I was minister. That's four years it's been kicking around. The other issue with regard to the 29 per cent on the Kyoto issue, perhaps whatever data you could secure from OTANS on the breakdown on regional benefits.

MR. FAGE: Regional, county breakdown?

MR. MACKINNON: Yes.

MR. FAGE: Yes, whatever we can find there.

MR. MACKINNON: I thank the minister.

MR. FAGE: Thank you, very much.

MR. CHAIRMAN: I understand that concludes the time for the Liberal caucus for questions with this minister. Any questions from the NDP at this time?

The honourable member for Sackville-Cobequid.

[Page 414]

MR. JOHN HOLM: I'll be very brief, if the minister is. The first question, in terms of actually committed projects that are going to be drilled this year, how many firm commitments are there for wells to be drilled? You hear that some are and then a change of mind.

MR. FAGE: What has been indicated to us by the various gas companies, we're looking at between eight and 10 wells in the next 12 to 18 months.

MR. HOLM: Okay, but for the rest of this calendar year? You see the rigs out in the harbour, some are there to be repaired and so on, how many have said, definitely, they will be going ahead and drilling this drilling season?

MR. FAGE: I can't give you that number because a number of those companies it depends on their schedule. If they have the work, if they can secure a rig, they'll be drilling this season. If they can't drill a rig this summer, it'll be later in the Fall, past the New Year, into next year. The best time frame I can give you is that 12 to 18 months, because the company's decision, once they make it that they're going to do an exploratory well, and then it's finding a rig to do that with, and then the various phases of that.

[5:15 p.m.]

MR. HOLM: I'm not going to get anywhere on that one in terms of any more concrete answers. Obviously, in other words, you might say a crap shoot, we have no idea. You have companies who say that they probably will over a period of time, but we've heard others that were going to be drilling and then postponed them for various reasons. I appreciate that there are sometimes difficulties for the various partners to come together, who's going to do what. For example, Marathon, given the fact that they hit a significant find out there even though it may not even have been registered as such, they might be a little bit anxious to see how much more they have out there, but I'll just leave it at that.

MR. FAGE: That would be my understanding as well.

MR. HOLM: I just have to make the point, and you talked about El Paso briefly in the previous question. Certainly it would appear as if El Paso is - although it's just officially now announced as being delayed until 2006, it looks like it may be well on its way to being dead, especially given some of the difficulties that the company is having. I'm just really stating my own personal view here, given that I'd also heard, and it's been reported in the press, even by a member of another caucus, that supposedly I was in support of that. For the record, I just wanted to indicate to the people in that area that I never, ever once indicated nor the NDP caucus, had been in support of the El Paso project; in fact, had very serious reservations.

[Page 415]

MR. FAGE: I think it's important to give a little clarity there. The El Paso project - this will keep it in context - the company proposed that they would like to build this pipeline to New York. They sought no regulatory approval. They received no endorsement from regulatory bodies or institutions, and this is a project dependent on gas that has yet to be found. It was a long way out there in the future and there was a huge amount of hurdles, regulatory process, to cross. Whether this proposal moves forward, I would say the presence of their offices here, people majorly still in place, would signal, and the desire for gas, in New York and the cost of L&G, if there's sufficient gas found here and that's why they put it on the shelf, don't be surprised if the proposal is there again. I would put that caution there.

MR. HOLM: Certainly that proposal, either from them or somebody else, may well be there again. I just have to say that they didn't wow me with the approach they took with the communities. So I'll just drop that one.

One of the other things that I want to raise with you. Concern has been brought to my attention by some skilled workers in Nova Scotia, actually, about the Irving yard which is doing work on the platforms, the concern that it's not Nova Scotian workers who are working on those projects, but in fact an awful lot of the workers are people being brought in from, for example, Newfoundland, and Nova Scotians are on layoffs, whereas people from out of province are getting the jobs. Does your department track the employees who are working on projects such as this?

MR. FAGE: I've just been discussing it with staff, and the understanding of the department, although we're not a labour department, but are certainly concerned about those issues of employment and opportunity for Nova Scotians, that Irving has an agreement with the local unionized labour force that they, on a project, are accessed first. Then they would look other places if that labour cannot be supplied.

MR. HOLM: Well, I'm not going to get into a squabble here with the minister today on this. I'm just really going to leave a request with you on this one if I can. My information is that there are tradespeople who have worked there in the yard, are currently out of work, and I don't think that there's anybody in this room or around this table, for sure, or in the House who has anything against Newfoundland or any other part of the country. I also don't think that there's anybody in this room on any side of the House that would not prefer first to see the jobs going to Nova Scotians and supporting Nova Scotian families. So, what my request is to the minister is to please investigate. I've received several messages from people who are complaining about that and other employment related to the offshore.

I'm not going to single out a name of the companies, the Irvings are big enough to pick on publicly right here now, I'm not trying to pick on companies here but if Nova Scotia is to be a primary benefactor - and the reality is, we're not getting much in royalties, certainly not now, maybe someday down the road we will with a project, the key is to get the benefits. That means jobs for Nova Scotians and it also means a transfer of technology to Nova Scotia,

[Page 416]

to Nova Scotia businesses so that we can compete not only for the work here, but elsewhere. So, I leave that with the minister. Please do the kinds of inquiries that are necessary and find out what's going on in that area.

The other area that I want to talk about, which is really related to that in terms of benefits, you know the discussion with EnCana when they're planning to go ahead, what percentage of the benefits are going to come to Nova Scotia, whether it's 18 per cent, this, that or the other thing. I know the energy strategy says that government wants to have 100 per cent of what is obtainable in Nova Scotia obtained in Nova Scotia. It's the industry that determines what is obtainable in Nova Scotia and what meets their set standards. So if they say that all we can get is 18 per cent - and I appreciate that we don't have any rigs in Nova Scotia that we own that we can't be renting to them, so right away there would be a huge cost for rent and so on is going out of the province.

What I'm asking this government to do again, as I did the last government, it's not unheard of that in terms of awarding of major contracts, when contracts are given out, whether it be for aircraft done by the federal government or this, that, or the other thing, that companies get the contracts, but in return for it they have to guarantee that certain benefits come back to that home province or home country. If you cannot obtain that full amount there, then they agree, for example, to purchase a certain amount in kind. For example, on a project here in Nova Scotia, the company legitimately could only get 18 per cent of the goods and services in this province to service that development or that project. The government said we want 30 per cent. Well, we can provide 18 per cent, since those companies are involved in projects around the world they could then be required to say, okay, we'll purchase an equivalent 12 per cent to provide services to our projects maybe in the North Sea or the Gulf or somewhere else. In so doing, you're still creating the jobs here, you're still developing the skill sets here and hopefully, expanding it and forcing those companies, really forcing them to look at ways that they can get the goods and services here and to partner with Nova Scotia businesses to help grow those businesses.

I leave that out there as one of those tools that I very genuinely believe the government should be employing to try to be amassing benefits to the province.

MR. FAGE: I certainly take the undertaking with regard to Irving and the tradespeople and will investigate that and get back to you. The second one, your statements are ones that I don't have any problem agreeing with. That has got to be the objective in part of our negotiations. How far we get up the bar will always be determined in the end of the deal, but I think when you look at opportunities in deepwater expertise, technology and us becoming a world player, that has got to be part of the situation with our training and education in the Nova Scotia workforce so that we do get those primary and secondary benefits.

[Page 417]

The development of offshore operating agreements so that we can negotiate an agreement with those companies, I feel that strategy has to be a large part, if not a significant part, of how you achieve that. Honourable member, I think those are wise words.

MR. HOLM: The other reality is there's really only one time that you, or whoever is occupying that seat, can ever say no to an offshore development - that's when they apply for the development agreement. You've only got a narrow window, it's about 30 days, but it can be extended to 60 days, so you've got a very narrow window.

All I'm trying to get at here is I truly do believe that there's a lot of natural gas product offshore. Companies aren't necessarily in their timetable in any great rush, but it's there, it's just a matter of finding it and they know it's there. We also know that it's going to become more valuable. We do know that the Americans - right now, of course, Canada provides more gas and so on to the U.S. than anybody else does - they're looking for new suppliers. We've got the proximity, we've got so much going for us. They are going to do it. It may not be this year, the way that we would like, but it's going to happen, and I'm just saying that we should be setting the ground rules and the bar high enough that we can be guaranteed that we will generally get those benefits. I'm not looking for any big debate or argument - hopefully you agree with me on that kind of thing, but whoever is in, that's something I personally think we have to set those ground rules down up front. That's the only clout we have - we say, when it comes to the development agreement, if you're not prepared to ensure that we really are going to have those kind of benefits, it's going to be a no-go, and they'll do it.

MR. FAGE: It's interesting, if I can just comment on that, when EnCana asked for a time out, the gist of the questions posed to me by the media and supply industry was that you're asking too much. That's an interesting question to be posed when a time out or a project's put on hold, that the question would be asked that the government must be expecting too much. I think what it demonstrates to me is one of the principles that you have to weigh against the principles you have. I agree with the principles wholeheartedly you put forward though, is investment and development in the industry Nova Scotia benefits, there's a balance there and that's the one that making sure you get the best opportunity, the trade-offs in other projects and those benefits and you maximize them that they come into play.

The other observation I would make - and I'm certainly not an expert in gas pricing or those issues - it would appear to me there's not a long-term open-ended price what the gas is worth. I just offer it as an observation. There are pools around the world of stranded gas of such immense size in comparison to a number of bases. I'm talking, as you know, South Africa, Australia, the Middle East, those ones. I believe the relationship between crude oil, or light oil and natural gas doesn't exist anymore. There's too much capacity and need for natural gas, especially here in the North American market that it establishes its own price, somewhat independent of oil.

[Page 418]

MR. HOLM: I agree with you on that one.

MR. FAGE: But I do think when we look at the limiting factor or the ceiling price on gas in the long term, that it's based on L&G. What can be brought from those large stranded pools of gas, the cost of getting it in the container, transporting it and then refractionating when it gets here, probably ups the upper end floor price for a basin such as ours here. That's probably the competition, the real competition in the long term in relationship to price. That would be the only two things I would offer on top of what you said. I think your remarks are bang-on on how we achieve benefits and the process and the tools we use.

[5:30 p.m.]

MR. HOLM: Most of the other things - and I know my colleague had asked a lot of questions which really covered areas that I wanted to get into - the last question I'll ask in terms of the onshore exploration that's going on, once you start to get an infrastructure, you get geographic on drilling and hopefully offshore there will be a collection system being built. I know that there are those who are looking for collection systems right now and that could be to collect the gas from where, Marathon or some of the other - whether it's 22 or 33 discovery licences, once you have a method to collect it, wells that may not right now be economically viable and stand alone instantly become because they have the collection system. I don't buy that all these wells out there that aren't producing are duds, they're just waiting for a collection system to tap into.

That having been said, in terms of the onshore exploration which, again, as we start to get a distribution system going will become more viable to explore, has there been a royalty rate suggested to those companies as to what would be paid to the province? That would be good money, that's not equalization, that's not 70/30 bucks.

MR. FAGE: Those are 100 per cent bucks.

MR. HOLM: Yes, the good dollars.

MR. FAGE: There's no question, you're absolutely right. There are a number of leases, as you are well aware, issued and there will be a significant amount of activity in seismic and the number of wells drilled this year. There is an onshore royalty regime in place now. I don't have a copy of it with me today, but we can supply that. The royalty aspect, at its well head, 10 per cent gross royalty would be the royalty on onshore production.

MR. HOLM: That's just for the first couple, once they discover the big finds, then we'll do what Alberta did . . .

MR. FAGE: We have a much stronger bargaining position, you're right.

[Page 419]

MR. HOLM: Even though Alberta has had a terrible blue history, people like Peter Lougheed made some pretty important decisions way back when that helped in the development of that industry, that a lot of us can learn from.

MR. FAGE: Agreed.

MR. CHAIRMAN: Does that conclude the time for the NDP caucus? Hearing no more and there's no further questions from the Liberal caucus, I now invite time for the Independent member for Cape Breton The Lakes, Mr. Brian Boudreau. Your time is now 5:36 p.m., and we're here until 5:56 p.m. We have about 20 minutes to our time. Just to advise you that if you wish to have more time than that, we can bring the minister back on the following day, on Thursday, for any further questions you may have. You have up to one hour if you wish. The time is 5:36 p.m. You may start your questioning.

MR. BRIAN BOUDREAU: Good afternoon, Mr. Minister.

MR. FAGE: Good afternoon.

MR. BOUDREAU: The first question I have is with regard to Cape Breton coal of course, being a Cape Breton MLA. I'd like to know if you have any plans for potential energy supply for Cape Breton coal?

MR. FAGE: Obviously, the licensing falls under Natural Resources. Certainly as an energy source I see that coal is going to be a significant supply of energy for a long time to come, worldwide. Obviously, there are a couple of things that need to happen. In Cape Breton there are some selective areas of low sulphur coal that can meet current standards for Nova Scotia Power and the environment on sulphur, NO_x and mercury. Those offer some opportunities for blending and surface mining and those type of situations.

The coal industry, long-term, to comply with Kyoto and climate change, obviously - and there's work being conducted now and when I was at Natural Resources, Nova Scotia Power was part of the industry group looking at new technology that would deal with greenhouse gas emissions, lowering the carbon going into the air as well as sulphur, NO_x and mercury. I think when that technology achieves those benchmarks it offers a large opportunity for coal production in Cape Breton and in other areas of Nova Scotia because when you look at North America, or the global situation, coal per BTU looking past CO₂ is still probably the cheapest energy source on the globe.

MR. BOUDREAU: Are you aware of the Point Aconi power plant?

MR. FAGE: Yes, I am.

[Page 420]

MR. BOUDREAU: That's pretty modern technology that can burn high sulphur coal, so why are they searching for technology?

MR. FAGE: When you get into scrubbers which is trying to remove after it's been burned is what many people would refer to the old technology, many of the applied applications would look to use technology and methods that remove that before combustion occurs. Obviously, the initial development of those types of technologies will initially be expensive, but if you can address a number of those concerns, and remember the caps for sulphur are going to decrease in the next time frame.

The biggest concern, however, in the long term, is the Kyoto agreement and that one calls for major reductions in the amount of CO₂ going into the air. That's on the long term. Because of the way coal burns, it produces much larger amounts of CO₂ than natural gas or even oil, and that's the challenge in the long term.

MR. BOUDREAU: Are you familiar with the Point Aconi plant?

MR. FAGE: Yes.

MR. BOUDREAU: Did you visit the site?

MR. FAGE: I've never been at the site.

MR. BOUDREAU: The technology that you're speaking of, this is supposed to be state-of-the-art Japanese technology that was built by the former Progressive Conservative Government prior to 1993. It was constructed to burn high sulphur coal. So it doesn't jibe with me, what you're indicating, the technology is available and they already have it.

MR. FAGE: But remember the plant's technology is designed to handle sulphur. The new technology has to deal with CO₂ as well. It might be a fluid bed plant, but it doesn't address greenhouse gas emissions. The new technologies that industry is experimenting with now deals with the reduction of CO₂ as well. To meet our national commitments under Kyoto, we have to be able to employ in new investment - whether it's opening mines or power plants, we have to first address the amount of greenhouse gas, which is carbon dioxide, going into the air. There's no question the plant does very well on sulphur reduction, NO_x and mercury, but CO₂ is the one that we have to have achieve lower levels of emission in the future, and that's the one where the commercial technology has not been developed yet to allow that to happen. That's what I mean when it's CO₂ that we have to be concerned about. Short term it's sulphur and that plant does that fine. If you're going to see industries, whether it's production of coal or power plants, continue to use it in the long term, it has to address CO₂ is what I'm trying to say.

[Page 421]

MR. BOUDREAU: Thank you, Mr. Minister. I would suggest that you educate yourself on that particular plant because that plant does deal with CO₂ as well as sulphur content of coal.

I'll move on. It's not fair to ask you questions if you're not really familiar with it because I know you're a new minister and you probably didn't have an opportunity to visit that file yet. That's fair. Could I ask about open-pit mining? Does your government have a plan to develop open-pit mining in Cape Breton throughout various communities?

MR. FAGE: That question would be more properly put to the Minister of Natural Resources; that would be under the purview of his estimates.

MR. BOUDREAU: So as the Energy Minister you're not consulting with the other ministers, is the minister aware of this plan that you have?

MR. FAGE: I think it's important to remember that estimates deal with the expenditures of money and therefore whose obligation and responsibility it falls under. Mining clearly falls under Natural Resources, so I'm not in a position to answer questions for the minister who is responsible.

MR. BOUDREAU: That's fine, thank you. What about exploration wells off Cape Breton, how many will be drilled this year?

MR. FAGE: To my knowledge, there will be no wells drilled this year off Cape Breton. What's taking place is seismic has been permitted more closely to find if there's opportunities off Cape Breton. It has been recently approved by the Canada-Nova Scotia Offshore Petroleum Board and under a number of close restrictions they're allowed to do seismic. A few of them would be late November after the majority of migration and reproduction of fish would occur. There's restrictions dealing with mammals, i.e., whales, where the whole seismic would have to shut down if they move within a certain area. Those types of restrictions are on, but I'm not aware that they would be drilling a well this year. They're shooting modern seismic to see if they can identify a structure that would be worth them drilling an exploratory well.

MR. BOUDREAU: Are the fishermen being consulted on a regular basis?

[5:45 p.m.]

MR. FAGE: Certainly it's a topic that many fishermen have been involved in and have an opinion on. Under the Cape Breton ad hoc committee there was extensive consultation with many stakeholders, certainly fishing being one of the primary ones, over the last year or a little better to develop recommendations to go forward to the Canada-Nova Scotia Offshore Petroleum Board, which is the regulatory body that issues seismic approvals,

[Page 422]

or test wells, or production wells. I've met, in my former position as Minister of Fisheries, with many fishing groups and at the Ministers' Conference we would have Energy people in and have some very good sessions, information sessions and discussions and question periods on seismic. If they did see a structure that they wanted to do an exploratory well, that would be thoroughly discussed. So there has been a large degree, I think, of awareness in the fishing industry in the input.

Interestingly enough, after becoming Energy Minister, I've met with a number of representatives of the various fishing organizations involved and certainly they're very good at conveying their concerns, or their opinion or position on seismic off Cape Breton. So they're engaged very closely through a number of departments and stay involved in the process, and I'm more than pleased to hear what their concerns are and to see if we can address them.

MR. BOUDREAU: So you don't have any committee - you didn't form a committee as the Energy Minister, or a liaison? I know during the Point Aconi power plant construction, it was a liaison committee that was communicating with officials, communicating all the time and taking suggestions, and the committee worked well.

MR. FAGE: Yes, I think it's important to remember the structure of the approval and who gives approval and responsibilities and those types of things. The Canada-Nova Scotia Offshore Petroleum Board, the ad hoc committee, they would make the determination of granting approval or not granting approval for exploration and the conditions associated. The Department of Energy can have input, but we're not responsible for that. It's a joint authority between jurisdictions, between provincial and federal. So the group that makes the recommendations, the Canada-Nova Scotia Offshore Petroleum Board would make the decision.

As a government and an industry, I work closely with my colleague, the Minister of Fisheries. One of the major discussions in that industry - and it's an industry that has a very close liaison with government - is the structure they develop through the ministers meeting and so all fisheries organizations are invited and the majority participate with their representatives twice a year, in the Ministers Conference, and beyond that there are meetings on a required basis with this department, or Fisheries or other related departments, meeting individual fishing groups, or representatives or fishermen, as they request or require it.

MR. BOUDREAU: So I want to understand what you're telling me, is that the fishermen basically provide information to a federal department?

MR. FAGE: They provide information to the joint regulatory authority, which is the Canada-Nova Scotia Offshore Petroleum Board. It's equal membership.

MR. BOUDREAU: Do you have access to that information, Mr. Minister?

[Page 423]

MR. FAGE: We would receive the information on a regular basis, as would the federal minister.

MR. BOUDREAU: So you do have access to the information?

MR. FAGE: We would have access to the information supplied to them on a regular basis, yes.

MR. BOUDREAU: I would assume as a minister with a liaison committee of fishermen, that could be an advantage, when you get this information, you could use a committee of fishermen to get an understanding of what their meaning or their submission, the information that is provided. I can't for the life of me understand why your government hasn't already taken the initiative into - you know - I'm not suggesting that you need to protect the fisheries in Cape Breton, but it's very obvious that many of the people who work in this profession are concerned and, Mr. Minister, you know I'm concerned because they're concerned and I have many of them who live in my riding and they feel neglected, they don't feel like they have an avenue to address their concerns.

MR. FAGE: When there's an issue such as exploration, that's why we formed the ad hoc working group and that's why for close to 18 months there was public consultation and they met with the fishing community. It is also why this government supports and works closely with the ministers' council on fisheries so that the fishing industry can bring forward their views or raise concerns on subjects like this.Those meetings are structured and avenues are there. Replicating them in every department, it's very difficult for hard-working fishermen to attend meetings if it's not necessary. There are two structures in place, one that we're responsible for with the federal government through the ad hoc working committee, meeting in communities with fishermen, and the other one through the Department of Fisheries in the province.

MR. BOUDREAU: Have you discussed this file with local fishermen in Cape Breton personally?

MR. FAGE: Yes.

MR. BOUDREAU: Is it one or several groups?

MR. FAGE: I have discussed it with the representatives. They would come to my office when they have a concern and we would sit down and have a discussion to see if we could address those concerns.

MR. BOUDREAU: Would you be willing to meet with any fisherman who had a request to meet with you regarding concerns that would arise in regard to this issue?

[Page 424]

MR. FAGE: As long as time permits, I try to make myself available to all Nova Scotians.

MR. BOUDREAU: Do you have any type of plan to train workers for the offshore market? I know I've been asking ministers for two years now about training opportunities for Nova Scotians and I still see none. I know that one of my colleagues from one of the other caucuses addressed the issue with out-of-province workers and I have a concern about that because many Nova Scotians of course travel throughout Canada to obtain employment - through no fault of their own, I might add - and many of those individuals are Cape Bretoners and they have to travel to Ontario and, yes, the odd one is in Newfoundland. So I get concerned when I hear this, there are no opportunities for Nova Scotians and exactly what are you doing about it, Mr. Minister?

MR. FAGE: Certainly if you're not aware - I know many constituents throughout Nova Scotia are very pleased with the opportunities that this government has offered in training and opportunities in the offshore, and it distresses me that you as a member of the Legislature are not aware of them, and the number of times they've been raised by myself and the former minister, but I can list a number of the training opportunities that we have worked with industry, supplied funds to and put forward, and certainly from Cape Breton, I assumed you would be aware of the large number of programs we've run in conjunction with the University College of Cape Breton and community colleges, as well as Port Hawkesbury, and 13 other . . .

MR. CHAIRMAN: Mr. Minister, I must bring to your attention that we had some disturbance, some noise outside with a large truck and it obstructed your audio and we could hardly hear you at the front here.

MR. FAGE: I was attempting to bring to the attention of the honourable member the number of courses that are offered in his own locale - and I'm surprised he's not aware of them - through the University College of Cape Breton and the community college in Sydney as well as the Strait area and all other community colleges in Nova Scotia and the university plus the various industries that do partnership.

So I will list a number of them for him. First of all, a number of these training projects that have been funded by the province in the last several years are: the downhand welding training of 160 welders here in Nova Scotia for the pipeline; heavy equipment operators, training of 76 operators, the centre for petroleum engineering at DalTech; development of petroleum technology programs at the UCCB; development of an instrumentational engineering program at the Marconi Campus in Sydney, offering job opportunities in training to Nova Scotians; gas technology training at the Nova Scotia Community College in Dartmouth; specialized labour techniques training, Atlantic Canada Centre for Electrical Technologies related to the offshore, NSTC in Halifax; career awards co-op program for universities and community colleges; training and hiring of 20 Nova

[Page 425]

Scotians by Santa Fe Drilling company; engineering training for the east coast offshore alliance in the U.K., instrument training . . .

MR. CHAIRMAN: Attention, Mr. Minister, the time is . . .

MR. FAGE: . . . thirty that I haven't had a chance to list . . .

MR. CHAIRMAN: The time has been reached for expiry today. We will be back here again on Thursday, April 17^th. The honourable member for Cape Breton The Lakes still has 40 minutes of his time allotted, so he can come back on Thursday. He will be the first person up to continue questioning of the minister for another 40 minutes on Thursday following Question Period. I anticipate Question Period will be rather early in the day, so we will probably be here by 1:30 p.m., I would hope.

We stand adjourned until Thursday, April 17^th.

[5:57 p.m. The subcommittee rose.]