HALIFAX, TUESDAY, APRIL 22, 2014

 

SUBCOMMITTEE OF THE WHOLE ON SUPPLY

 

1:44 P.M.

 

CHAIRMAN

Ms. Patricia Arab

 

MADAM CHAIRMAN: I'd like to call this committee to order. This is the Subcommittee of the Whole House on Supply and today we will be dealing with the estimates of the Department of Energy.

 

Resolution E6 - Resolved, that a sum not exceeding $32,085,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Energy, pursuant to the Estimate.

 

MADAM CHAIRMAN: The honourable Minister of Energy.

 

HON. ANDREW YOUNGER: I'm very pleased to be here today. With me is Deputy Minister Murray Coolican - to my right, your left - and to my left is Chris Spencer, Acting Executive Director of Business Development and Corporate Services. Behind me is Remi MacDonell, the manager of Financial Services in our department, and Kim Himmelman who is the director of Regulatory and Strategic Policy. There are probably all kinds of other people behind me but I haven't looked, so that's everybody who is here.

 

I'm just going to make a few very brief opening remarks.

 

MADAM CHAIRMAN: Order, please. Just before we get started, if I could remind all committee members that questions are posed to the minister through the Chair, and anyone observing from the audience, if we can just ask that you keep your conversations down. There's also to be no recording during the process of the committee, either through cellphones or video equipment, unless you are members of the media.

 

With that, we'll turn it over to the minister with his opening statement.

 

MR. YOUNGER: Thank you, Madam Chairman. I have a relatively brief opening statement just to walk through a couple of the highlights in the budget and some of the things that quite frankly, if I was in Opposition, are probably the things that I might ask about immediately, so I figured I'd get them out of the way first.

 

The Department of Energy's estimated budget for the coming year is $32 million, and this compares to a forecasted expenditure of just over $30 million last year. It's important to note that almost half of this budget is represented by $14.5 million, which is the Efficiency Nova Scotia funding which maintains the program delivery levels for non-electric funding. That is the exact same amount as last year.

 

There are a couple of items in the budget. You will have noticed or I think the first thing that most people would notice is that administrative costs in the department have increased this year. That's for two main reasons. The first one is the executive assistant position in the department was previously paid by Natural Resources and is now paid in the Department of Energy, as it's the lead department out of the ones that I have. We will also incur some one-time expenses because we'll be moving to a smaller office as our lease is ending in the Bank of Montreal Building. Between the two of those that's actually a cost pressure of $400,000. We were able to absorb $200,000 of that amount through cuts, so basically all of the $200,000 increase in administrative costs ends up being a one-time cost related to the move.

 

Other expenses by division: sustainable and renewable energy will have a $2.234 million budget, business development and corporate services is just over $3 million, and petroleum resources is just over $4 million. The Canada-Nova Scotia Offshore Petroleum Board is $3.9 million. That's largely a legislated requirement and the amounts are agreed with the federal government, and non-electricity efficiency, sustainable transportation, and conservation grants is $16.7 million. That last amount includes the non-electric funding that I mentioned for Efficiency Nova Scotia.

 

If you look in the budget documents you'll notice that that amount appears to have increased, but in fact what has happened is that last year it was still $14.5 million but part of it was paid by the remaining drawdown of the former Conserve Nova Scotia funds, which are now fully exhausted. Now the entire $14.5 million amount is absorbed in the Department of Energy's budget, which is new for this year but is the same amount of funding to Efficiency Nova Scotia.

 

From that the Department of Energy budget increases slightly over the actual spending of last year and it's primarily due to the Efficiency Nova Scotia amount but is also due to the other points that I mentioned.

 

So we had the one-time increase in the administrative costs and then the budget also includes funding of $2.79 million for continued investment in new offshore geological data. This was kick-started by the $15 million Play Fairway Analysis two governments ago, was continued under the previous government, and we made the decision in this budget to not only continue that, but to increase funding to match some of the work being done in the offshore.

 

I mentioned the Canada-Nova Scotia Offshore Petroleum Board; there is an increase there. All the partners are increasing so that's $215,000.

 

There is a $270,000 cost pressure that was provided by Treasury Board to fund the electricity review, which was a key commitment of the government and is now a legislated requirement. The cost of that review exceeds $270,000; however, the remaining portion of that budget has been absorbed through cuts and absorbing some of that within our department. Essentially what the Treasury Board has funded is the studies that are out on RFP - actually, the RFP has been awarded and they're underway at the moment. There are three studies that form part of that and I think most people are aware of them. We can talk about them more if people want.

 

There is $2 million continued this year to fund sustainable transportation projects through Nova Scotia Moves this year, and that's a similar amount to last year. The next call for applications will be in the next few weeks on that program.

 

We were asked to find a 1 per cent reduction in our budget. We actually met that challenge. We had reductions of $172,000 - obviously our department doesn't have a huge budget so 1 per cent isn't a large amount - and that included administrative efficiencies of $119,000. In addition to that we also have the absorbed amounts that I've talked about where we absorbed some of the cost pressures we had. We also met the commitment of reducing the advertising budget. Quite frankly, the Department of Energy's advertising budget wasn't that high anyway, but we reduced advertising by $53,000 which met the commitment to reduce advertising as well.

 

The other areas that we had upward pressure on our budget include the mandatory increases in the NSGEU master agreement, as well as staff management salaries, which ranged from 1.5 to 3 per cent. That increase is fairly significant in a small department because most of our budget is salaries. We went from $5.17 million to $5.44 million in salaries.

 

That always leads to the question about full-time equivalents. We have increased the number of staff in the department by one, and that is the executive assistant position. Other than that it stayed exactly the same.

 

Although the department has taken on additional work in the coming year - so with the offshore, we're all aware of the Shell and BP stuff, and the electricity review. There are a number of other projects where current staff levels are largely absorbing that.

 

Finally, I would just like to say, we see energy as a public resource. One of the things I want to clarify because I get this question all the time is, we are involved on the exploration side. We get right up to being involved in the proposed LNG plants and so forth. We are not involved in the retail side of gasoline or furnace oil or things like that. That's Service Nova Scotia, but it is something that sometimes gets confusing for people because we are, of course, involved in the retail side of the electricity market, but on the oil and gas side we are not.

 

Our goal is to sort of maximize the benefits for Nova Scotians on all of these resources, and that's where we work towards at the same time is assisting the Department of Environment in planning to help them meet the environmental commitments so we work very closely with them, as well as to lower overall energy costs. Sometimes it gets a bit confusing. We do this to ourselves. People interchange energy and electricity. When we speak of energy, we talk about the entire portfolio of energy products, and electricity we're just talking about electricity. You will see documents come out from our department that talk about energy costs, and that's talking about the entire basket, whether it's propane, natural gas, furnace oil, electricity, you name it.

 

With that, that's a very high-level overview, and I think most important is to get to questions. So that's it.

 

MADAM CHAIRMAN: We'll start the questioning with the Progressive Conservative caucus.

 

The honourable member for Argyle-Barrington - you have one hour.

 

HON. CHRISTOPHER D'ENTREMONT: Thank you, Madam Chairman. It's a pleasure to start off with these estimates. Actually, it's my first set of estimates of this session. It's kind of funny because I've been in Health and Wellness for so long that it's kind of nice to be focusing on something different for a while. I thank the minister for his presentation - keeping it very succinct and very to the point.

 

MR. YOUNGER: It's the first time for me.

 

MR. D'ENTREMONT: There's a first time for everything. I've never seen the minister so succinct. I also want to say, in chatting with my esteemed colleague to my - well, he's to my right but normally he's to my left. I don't think we have any questions for CNS so maybe towards the end if you just want to read the statement for CNS . . .

 

MR. YOUNGER: That's fine.

 

MR. D'ENTREMONT: . . . but if the staff want to move on and do something more constructive today, I think we're more than happy to let them go.

 

MR. YOUNGER: Okay. Somebody back there was disappointed because they said they hadn't done estimates in like seven years or something. Murray would like to know if he can go now.

 

MR. D'ENTREMONT: Murray is on the hook for a little bit yet so, deputy, good to see you as well.

 

MADAM CHAIRMAN: So there will be no questions for Communications Nova Scotia at any point? So perhaps let's read the resolution and move it?

 

MR. YOUNGER: We'll leave five minutes at the end just to do the resolution.

 

MR. D'ENTREMONT: If you have a bit of a statement that you want to talk about during that.

 

MR. YOUNGER: I don't need to say anything.

 

MR. D'ENTREMONT: All right, so let's get into some basic Energy stuff and then we'll try to clean that up. If you look under Sustainable and Renewable Energy, we look at a significant difference between the estimate and forecast for 2013-14. Will we see that same jump in 2014-15? I don't have my book so I can't refer you to the book - Page 8.3.

 

MR. YOUNGER: I can answer that; that was the tidal grant and very briefly, what happened there was there was a commitment to award the RFPs for the forest berths but there was no point in awarding them unless the electrical cable was in place, so that's a one-time $4.2 million grant that caused that increase. So no, you wouldn't see that this year.

 

In fairness, we could have put that in the last fiscal year or this fiscal year. It was deemed that because it was being announced in the last fiscal year for the awards of the berths, they needed the commitment to know it was there, so that's why it was done then.

 

MR. D'ENTREMONT: Is the government still on track for its 2020 target of obtaining the 40 per cent of electricity from renewable resources?

 

MR. YOUNGER: Yes, we are.

 

MR. D'ENTREMONT: So how are we going to get there?

 

MR. YOUNGER: Well we believe that we will be at or exceed the initial target. For 2020, quite frankly, some of that will come from Muskrat Falls. It will be very difficult to meet that target without Muskrat Falls or an alternative. I mean there are other hydro projects that could come across the Maritime Link, but at the moment the plan is to meet that using Muskrat Falls.

 

MR. D'ENTREMONT: I'll go off my questioning here a little bit. Since you bring up Muskrat Falls, there have been some reports in the news lately that Nalcor has been saying they're late, and then you have the Government of Newfoundland and Labrador that's saying they're not late. Maybe you could give us a little update on what's going on with Muskrat Falls.

 

MR. YOUNGER: There will probably be a lot of questions about that tomorrow, I suspect. What happened was an engineering report came out that suggested the project could be delayed and could be over budget. The difference between what the Newfoundland and Labrador Government is saying and what Nalcor's report says is basically the difference between - there's a report that said it could happen. When the board made their decision regarding the Maritime Link they said that they had always predicted the possibility that the Maritime Link could come online before Muskrat Falls is available. So if it is late or it is delayed or it is over budget, there's no net impact to Nova Scotia ratepayers.

 

To answer your direct question, why is the Newfoundland and Labrador Government saying it might not be and the other people saying it might be is because an engineering report came out and said it may be but there is no formal deadline. The reason for it is they're trying to avoid overtime costs on labour and they're exploring the possibility that if they lengthen it out a little bit, they could avoid some of the overtime costs and bring the labour on the project down.

 

MR. D'ENTREMONT: And that's the construction of Muskrat Falls?

 

MR. YOUNGER: That's Muskrat Falls. Maritime Link is on budget and on time.

 

MR. D'ENTREMONT: Going back to the budget itself, Business Development and Corporate Services, does that include the organization of trade missions to promote companies in potential export markets around the globe?

 

MR. YOUNGER: Yes, it is.

 

MR. D'ENTREMONT: Okay, and if so . . .

 

MR. YOUNGER: Good thing that it was a yes.

 

MR. D'ENTREMONT: Is there a current number of provincial trade missions that are currently being reviewed?

 

MR. YOUNGER: The short answer is there isn't a list - so we know pretty much all the ones that are possible. Some of the things come up at the last minute. There are obviously ones that we generally go to - for example, NAPE, OTC. For the first time - I didn't go, but we had staff go to OTC Asia in March. It was the first time that was done. Obviously we'll review - see if that was worth it. There are a lot that we choose not to go to, but from year to year, yes, we review them.

 

Now those are actual trade shows, but then there are also trade missions that we look at. We are currently exploring some options. Obviously everybody wants you to go everywhere, and that's just simply not possible.

 

One of the things that I've started is to try to combine them into one trip to try to save costs. For example, when we went to NAPE we also went to Calgary and had meetings on the same trip, which reduced the cost somewhat. We tried to take as few people as possible.

 

MR. D'ENTREMONT: When you do these, is it just departmental staff or government staff, or are you bringing along some of the business community as well?

 

MR. YOUNGER: We don't pay for the business community to come, but the business community does come sometimes. For example, OTC is a good example; there would be a very large contingent coming from the business community.

 

MR. D'ENTREMONT: Looking at petroleum resources for a second, why is there a 215 per cent jump in expenses for that fiscal year?

 

MR. YOUNGER: That is related to the $2.79 million for offshore geoscience. One of the things - and that's in part related to the Laurentian Sub-basin, but also related to future years in terms of where the call for bids were coming. What happened is when - actually, I think you were in the Cabinet that approved the original Play Fairway analysis - that was a $15 million atlas that has proven very valuable, quite frankly.

 

The problem is, that didn't do the entire offshore because there wasn't enough money, so what we're doing is trying to allocate a certain amount of money every year towards doing the geoscience research for where the call for bids will come in a future year. Last year we did work on the Laurentian Sub-basin which will come out in a call for bids later this month or next month. Then next year, I can't remember - we have a map, but next year there's an area and we're doing the geoscience for that area.

 

MR. D'ENTREMONT: So the offshore growth strategy as it's coming along, when do you expect it to finally be released? It has sort of been chunks here and chunks there, so when is it all going to be wrapped up?

 

MR. YOUNGER: To some extent the offshore growth strategy will never be finished, which sounds funny. It's because what you're trying to do is do the geoscience in advance of the call for bids coming out. The science around the Laurentian Sub-basin, for example, is now out there and available to industry free of charge because that's where the call for bids will be for this year. Next year, we will have the science out in advance of that call for bids. It's a continuous process.

 

The other thing that we're doing is - we call it planning for success. Basically we're trying to figure out if - and it is a big if - Shell or BP find oil out there or somebody else, or they find a commercial quantity of gas, how do we deal with that? What resources do we need in place? What industries do we need in place? What kind of staffing and training at the community colleges? So we're also working on that part of it as well. We release it as each part is done.

 

MR. D'ENTREMONT: How many blocks are out there right now and how many blocks are going to be released? Every year it seems like there are a few more blocks that actually come up for lease. How is that process going along right now?

 

MR. YOUNGER: What happens each year is industry nominates some blocks and government nominates some blocks or the board - the Canada-Nova Scotia Petroleum Board - and then those are put out. The ones for this year will be released, we expect, in the next few weeks - hopefully before OTC. We know it's in the Laurentian Sub-basin area because we've been promoting that, but the exact area hasn't been.

 

So 2015 is at the other end of the Scotian Shelf, but I can provide you a map if you want. It's not quite as simple as individual blocks. What they'll do is - at the moment there's a map that basically shows a square around the area they'll release, but they'll fine-tune it between now and then.

 

MR. D'ENTREMONT: I remember going back 15 years now really is that we had a lot of blocks that were spoken for or leased up. Of course a lot of those were dropped and now we're sort of building up again here.

 

MR. YOUNGER: The other thing I'll mention on that is so there are some blocks that are currently held that are SDLs - significant discovery licences - that were where they found gas, but of course the price of gas doesn't make it economic to drill offshore.

 

I don't want to suggest that this will happen overnight because it involves the federal government, and you know what it's like when you've got federal and provincial governments talking. That whole SDL process is being reviewed to see if there's a better way of dealing with things.

 

As well, we've learned that in some other jurisdictions they don't put as large areas out for bids, they put smaller areas out. All of those things are being discussed.

 

MR. D'ENTREMONT: So that sort of draws me into the Shelburne Basin and the work that's going on by Shell there now. I'm just wondering maybe if you have an update on what's going on. There's a lot of questions going on in the community but the community tends to be positive now. They want to know what's going on there, they want to know what the opportunities for the area will be if there are jobs and the possibilities of landing sites and those kinds of things. How is Shell doing in the Shelburne Basin?

 

MR. YOUNGER: A media report came out last year after they did their seismic, saying they were very excited by the results. Now what that actually meant in geological terms was they were excited by the quality of the data. A lot of people took that to mean that they found some massive discovery and they actually said that before they analyzed the data.

 

We had a chance in Houston in February to see the data. It is very impressive, you can see why they are excited about it. What opportunities exist will depend on what they ultimately find. We do know that next year they plan to drill, I believe, seven wells. The first well - there's not a lot going on this year, they're still doing the data, but next year they will drill the first well. They may have drilled more than one but their plan is to drill seven exploratory wells over a period of time and we'll have a better sense when we see if those actually become commercially viable.

 

I think most people feel there's oil out there, the question is whether it's in a form that's commercially extractable or not. We have encouraged Shell, and I know you will be coming to talk to Shell, and the member for Cape Breton Centre as well, that we'll be able to talk to them. One of the things we've been talking to them and BP about is maximizing local benefits and making sure people are aware of them. One of the reasons that Maritimes Energy Association is involved in this OCT trip is so their members can be there one on one with people that know what the opportunities might be. It's hard to know what those are until we know where they find it and what they find.

 

MR. D'ENTREMONT: As we roll down a little further, we have the issue of NoRigs.

 

MR. YOUNGER: Sorry, can I just add one? As I say, in terms of landing sites, though, I mean they might have deployment sites in different areas of course but one of the things is that unlike natural gas where you end up doing a pipeline to shore usually, I mean you can do that with oil but it's not a certainty that they would do that with oil. For example, in Newfoundland and Labrador they bring it ashore by tanker, then it would be a question of where is the tanker site?

 

MR. D'ENTREMONT: And I think some of the questions have been revolving around construction and those kinds of things. Like I continue to explain to them, it's an offshore play, it's not like Alberta where you may need 100 truck drivers and excavator drivers and those kinds of things, it's a completely different skill set.

 

MR. YOUNGER: There are a lot of - this is one of the reasons we're looking at what the industry would need because we'd like to make sure people have the skills in advance. One of the big differences between Alberta and here is it just takes longer, so if you find oil or gas onshore, you could be in production a year or two later.

 

That's not what happens in the offshore because you have to go and build the platform. Quite frankly, I can envision Nova Scotia building sections of it but the whole thing most likely wouldn't get built here for our first one. You might if you had lots of platforms getting built but you try to maximize the benefits and there are opportunities. You do need truck drivers, you need cooks, you need accountants, you need lawyers unfortunately - you need all those things.

 

MR. D'ENTREMONT: I'm just looking around and seeing how many lawyers are sitting in here. There's a few accountants I notice.

 

We move into the next part as we continue to go to the southwest into the NoRigs area, the BP-held products and I think - I forget the other leaseholder there.

 

MR. YOUNGER: Chevron.

 

MR. D'ENTREMONT: How is the NoRigs issue going? There had been an issue with the federal government because this does expire, I think, in 2020.

 

MR. YOUNGER: I wrote a letter to then Minister of Natural Resources Oliver - I think in December, but I can get you a copy of it, in the past few months anyway - asking them what their plan was. If you remember, all Parties supported the previous government's legislation that would have put a moratorium on the Grand Banks.

 

The federal government has refused to pass mirror legislation to that. But what they have responded and said they're willing to do with this is work on a new piece of mirror legislation or a new piece of legislation that would address that issue, so we're in conversations with them now.

 

It's slow. I'd love to know what that's going to look like but it has been very slow. But they have at least agreed to move on the file, which I think is positive.

 

From our perspective, the legislation stands. There's no drilling on Georges Bank. There's a significant discovery licence there that's in abeyance. The federal government's official position is that they have a policy moratorium in place at the moment, so really the issue is trying to deal with it before their policy moratorium expires. In Opposition we supported the then government's legislation, as I know you did. I think the public generally supports the idea of not having drilling on Georges Bank.

 

MR. D'ENTREMONT: The reason I bring it up is that I don't know if the water on the beans has changed over the last number of years but I think if I look at NoRigs 1 and NoRigs 2, I mean there was tremendous opposition to the idea of drilling on Georges.

 

I could say now I'm hearing it more in the communities that people are wondering what they could get out of it, what kind of jobs would it mean if they were to look at a place like Georges. Not to say that they wanted to go whole hog on drilling on such an important piece of the fishery but I think as time goes on, the community is looking at it far differently than it has in the past.

 

MR. YOUNGER: And the communities - certainly you always want to listen to the communities on this. From my perspective the federal government seems interested in extending the moratorium on Georges, we're interested in that. We're certainly not hearing a lot of industry clamouring and asking because there seemed to be - there's a lot of interest in deep-water exploration at the moment, which is why the two Shell and BP bids came along, quite frankly; they're deep-water acreages. The one last year got no bids and it was shallow-water acreage. So I think there's enough other stuff off Nova Scotia at the moment that we're able to focus on that.

 

You're right, the water on the beans can change in time but in the foreseeable future I don't see anything changing. We're moving forward with the federal government in addressing it in a legislative way.

 

MR. D'ENTREMONT: Transportation and conservation grants, why are we seeing a 19 per cent increase in those grants? I know I'm moving around quite a bit.

 

MR. YOUNGER: I have to look to see this one, I don't know by memory. You had to pick something that I didn't know by memory. All right, so you're asking about . . .

 

MR. D'ENTREMONT: Transportation and conservation grants - I think it's probably just the general number.

 

MR. YOUNGER: It has gone down by $421,000. Maybe I'm looking at a different number.

 

MR. D'ENTREMONT: Yes, maybe I'm looking at a different number here.

 

MR. YOUNGER: No, no, it's okay, I could be looking at - which . . .

 

MR. D'ENTREMONT: Unfortunately, the data I have here doesn't have a page number.

 

MR. YOUNGER: Basically we have - okay, the difference is Efficiency Nova Scotia.

 

MR. D'ENTREMONT: Okay, taking that out.

 

MR. YOUNGER: Last year it was $11.9 million that was funded by the department and the rest came from the remainder of the Conserve Nova Scotia funds, so this year it is $14.5 million - so Efficiency Nova Scotia is getting the same amount, it's just that now it's fully funded by the Department of Energy. Three of us agree that that's the answer so it's probably right.

 

MR. D'ENTREMONT: So we must be in the right place. What other grants are showing there for us? Give us a little rundown.

MR. YOUNGER: Obviously the $16.75 million, $14.5 million is Efficiency Nova Scotia; $2 million is sustainable transportation, which is really Nova Scotia Moves. That's things like bike trails - active transportation trails, I guess, because there aren't a lot of trails funded by that; active infrastructure, there was some with public transit in rural communities, there were 37 grants last year and we'll be announcing the new program which is very similar in the next couple of weeks. But it's active transportation - it's one of those programs that it's not really clear which department it should be housed in. We've left it in Energy because it's as good there as it is anywhere else, really. It does fit in our mandate as much as it fits anywhere else. Then there's $250,000 for solar energy, which is basically the Solar City project - the contributions we make to that.

 

MR. D'ENTREMONT: Looking back at those projects though, are we qualifying them as being successful or not successful - how are we identifying that?

 

MR. YOUNGER: I can get you a list of all the projects if you want. We are making - not significant changes, but we are making a - I mean, it was a good program. There was one in Dartmouth where they were able to buy an accessible van, for example, to help people get around. There was an active transportation trail built by the Shubenacadie Canal Commission, but before I was minister - I just wanted to say that - although I admit to lobbying the previous minister for it.

 

Almost every community - or every county anyway - in the province saw some investment. Yarmouth did a study on active transportation, for example. Looking back on them I would say out of the 37 that were funded, a good chunk of them were studies. So we're trying to move from studies to action. I mean, the studies were important because there were a lot of rural communities in particular that didn't have the capacity to actually do an active transportation plan. Now that they have those we want to see them put into place. I'd be happy to get you a list of the projects. Most of them would have been announced at different times.

 

MR. D'ENTREMONT: I'd appreciate a comprehensive list on that.

 

MR. YOUNGER: Yes, it's no problem. They're required to file a report at the end of the fiscal year to say how they used the money and whether it was successful. Success will be judged by different people in different ways. If they built the trail, does that make it successful or is it successful if it was used by the number of people they thought? My personal opinion is some were more successful than others, but overall the program had merit.

 

MR. D'ENTREMONT: Switching quickly to operating costs, it tells me here - and I don't know whether your numbers show it - a 58 per cent increase in the fiscal year on operating costs themselves.

 

MR. YOUNGER: For administration?

 

MR. D'ENTREMONT: I'm not sure.

 

MR. YOUNGER: If it's administration . . .

 

MR. D'ENTREMONT: Okay, we'll say it is.

 

MR. YOUNGER: Across all branches?

 

MR. D'ENTREMONT: Well, it's a big number so I'm going to guess it's going to add up across all branches.

 

MR. YOUNGER: I think it's probably across all branches, so just for everybody's benefit, it has gone from $2.7 million to $5 million. Included in that is the offshore money of $2.7 million - like the biggest chunk of that is the offshore money.

 

MR. D'ENTREMONT: So it continues to roll around in the same amount.

 

MR. YOUNGER: Yes, we call that operating costs because it's not a capital cost.

 

MR. D'ENTREMONT: Those are my little quick general questions so let me ask some bigger questions. Still on this though, government was mandated a 1 per cent reduction. How did you guys accomplish the 1 per cent reduction?

 

MR. YOUNGER: For us, our 1 per cent reduction was - I can give you the exact amount. Treasury Board sent us a letter, as they sent all departments saying, this is how it goes. What they took out of that was a couple pressures that we had no control over. The Efficiency Nova Scotia amount, because that's just a direct transfer, was taken out; the NSGEU mandated salaries was taken out; and then it was a 1 per cent on the rest.

 

It was $119,000, and in addition to that we also had the advertising reduction that was committed to, so that's straightforward. We cut $53,000 from advertising and that met our advertising amount; we didn't spend that much, so that's why it's that small.

 

In terms of the savings, most of that was actually administrative. We cut it right from administrative costs, so it's everything from buying paper to efficiencies in travel. Quite frankly, our budget is small enough in our department that $119,000 - we were able to pick a little bit here and a little bit there. We also did it by - although we took on some new tasks this year, we haven't increased the number of staff to do that, other than the EA. Now that obviously didn't result in a reduction but what it meant was it avoided a pressure to increase in other areas. Does that answer your question? It's not a huge amount of money.

 

MR. D'ENTREMONT: That explains it. It's not a huge amount of money but when you look at it overall it looks like Energy did get an increase, but I know that somewhere in there had to have been factored a 1 per cent.

MR. YOUNGER: You're right. Last year, although it was budgeted $26 million, the spending was $30 million-and-change and we're at $32 million-and-change this year. Quite frankly, where we went from $11 million to $14.5 million just on efficiency, if you took the efficiency grant out, our budget would actually be lower this year. We obviously committed to maintaining their level of funding. Quite frankly, it almost could be a separate line item in the budget outside of the Department of Energy because we never even really see the money - it's in and then it's out. It just flows through our department.

 

MR. D'ENTREMONT: Since we're talking a little bit about efficiency charges, let's talk about the general issue that we've been talking about in the House of Assembly over the last couple of weeks, which was the promise to take the efficiency charge off the bills. What we've been saying for a while now is that all right, you took it off the bills here but eventually it's going to get put back on the bill here. So maybe I'll just give you an opportunity to explain the program once again - take as much time as you want on this one.

 

MR. YOUNGER: All right, so there are a number of elements to it. Importantly, this is solely on the electricity side and I think you understand that. So there are three costs that ratepayers currently pay that they will never, ever pay in any way, shape or form. One of those is HST because the company has been restructured. Last year that was $4.7 million; with their budget projected to increase every year it would be a percentage of it, so it would increase every year.

 

A second amount is the low-income program which was being funded by ratepayers. The program was a little bit different but similar. That is now being paid by Nova Scotia Power shareholders, at an increased level. That amounts to $37 million over a 10-year period. Now there has been a lot of talk about - well, they said up to 10 years and so forth, and that's true, because Nova Scotia Power has the ability to do that faster than 10 years, if they're able to do that.

 

There are a number of reasons why it's split over that period and one of them is, quite frankly, capacity in the construction industry to do the work. If you threw $37 million at it this year, the industry just wouldn't be able to do it. And it's also about identifying people, and there are some people who will be reluctant until they see others get it done.

 

The next part is we went in and worked with Efficiency Nova Scotia to try to find some administrative savings, so they've reduced the amount of advertising. I mean they can speak better to the administrative savings they found, but they are maintaining their staffing levels and their program levels.

 

By contrast, had they stayed with the same program going to the board to look for an increased budget and an increased rate for next year, there would have been a rate increase for them - that's one part of it. That adds up to roughly $10 million this year and every year because that HST amount would grow. It would be a bit more but let's just make that $10 million, simple and straightforward, over the $46 million last year. That takes you down to basically $36 million.

We have fixed their budget at $35 million for next year just because we're in a timing issue, and as you noted in Question Period, there's the IRP and that sort of thing. Under the current program, and this is really where the differences are, what happens at the moment - or was happening - is Efficiency Nova Scotia goes in and they apply for a program, they get it funded. They estimate the amount of savings, they say we think we can achieve these, but they're not held to those savings so it isn't an offset of fuel. Nova Scotia Power would still have to have that fuel ready, they would still have to have the generation capacity, all that because there's no real guarantee at the end of the day.

 

As we saw in the past year, if they over-expend, they come back and ask for a rate increase, which is what happened this year: there was too much uptake on their program, and that was the way the process was designed. You can argue about whether that was the right way to set it up in the first place but it was the way it was set up. Quite frankly, there weren't a lot of examples, as many examples as there are today, to look at how to do it.

 

Under the new model for that amount, they will go to the board and they will sell efficiency like fuel. They will only get approved if it's cheaper than fuel that Nova Scotia Power was going to buy. It could be wind, it could be coal - there are a lot of different ones, but the one they're going to be, quite frankly, competing with the most is coal because coal is the cheapest. Nova Scotia Power isn't going to sit there and have them compete with the most expensive fuel because that gives an advantage to efficiency and that's going to be that competition factor happening. People talk about the Vermont model. That's how the Vermont model works: the back and forth.

 

You get reluctant to use numbers, but I will because nobody can ever - the board ultimately is the arbiter on what the costs are, but if you can do efficiency for $30 a megawatt and you were otherwise going to buy coal for $40 a megawatt, then efficiency wins out and ratepayers see a savings of $10 a megawatt over what they would have spent. We can get you real numbers from Efficiency Nova Scotia and real numbers from Nova Scotia Power and they'll be slightly different, but they're in that range. They argue a bit about what the numbers are, but they both agree that efficiency ends up being a bit cheaper. But there's a natural limit to that: we still have to turn the lights on in this room.

 

MR. D'ENTREMONT: That's where I was going to go. There's only so much you can do.

 

MR. YOUNGER: Yes, there is only so much you can do. Even if they were the cheapest all the way along, you still need to generate electricity and turn the lights on.

 

The other question that comes up is what happens in the future, because efficiency will get more and more expensive over time? I think everybody understands that.

 

MR. D'ENTREMONT: Because all the low-hanging fruit is taken - you've already done what you can.

 

MR. YOUNGER: Right. Well the light bulb - and that's an example of something that Efficiency Nova Scotia is getting out of is light bulb rebates because the federal government has banned the light bulb so why would you give a rebate to something that you're not supposed to be able to buy anymore? It made sense; it may not make sense in the future.

 

So as the low-hanging fruit disappears it gets more expensive, but the other fuel costs also get more expensive. Dealing with the environmental issues on coal and so forth gets more expensive so the price of coal continues to increase - they burn less of that coal. So in terms of - that spread will probably continue to exist for the foreseeable future. Those are the two areas where you get savings.

 

This does a couple of things. We didn't know about the HST issue in fairness when we came in. That's fine - it is what it is. We didn't come in knowing we were going to have to restructure the company to deal with that. We believe that's solved now. I'm not blaming anybody for it. It is what it is. In fairness to Efficiency Nova Scotia, they actually thought they were going to win on the HST issue anyway.

 

We've created a program that now will have long-term savings - allows Efficiency Nova Scotia to exist really in perpetuity. Because we've introduced the legislation on renewable to retail - and it looks like there might be some companies that may engage in that or municipalities - Nova Scotia Power will probably be the dominant player in our lifetimes in the market in Nova Scotia unless something big changes, but as other players come on board, whether it's municipalities or other generators, they become a smaller player. It ensures that the long-term survivability of Efficiency Nova Scotia is there as well. That's basically it in a nutshell.

 

MR. D'ENTREMONT: You were talking about coal there for a minute so I would be remiss if I didn't ask the question around Donkin coal for the member for Sydney River-Mira-Louisbourg - have you had discussions with Nova Scotia Power, maybe with the purveyors of Donkin coal at this point?

 

MR. YOUNGER: As you may know with Donkin - the government is interested in seeing Donkin happen. I think there's enough public information out there that people know there are a number of parties that are kicking the tires and it's really a matter of whether a commercial agreement can be reached. The Xstrata licence ends this year or next year - that would be under Natural Resources - but they own the surface rights. That is in the lease; they actually own that outright as far as I'm aware.

 

There's only so much I can say about it publicly, but Nova Scotia Power is interested in the use of Donkin coal if the price is right. They believe that there are ways to make it work and we believe that could be beneficial to ratepayers. The question is somebody has to have the capital to make that mine work and that's the wild card.

 

MR. D'ENTREMONT: And that's out of our hands.

MR. YOUNGER: Yes, that is the wild card. I will say that - and the Minister of Natural Resources can speak to this better than I can - the government has directly engaged parties to try to get them to the table.

 

MR. D'ENTREMONT: I appreciate those comments. The COMFIT program - there's a nice windmill, possibly two, in the Little River Harbour area in my constituency. I'm just wondering how COMFIT is going. We should be getting - I don't know, I can't say we're getting close to our roof on the COMFIT projects. How are those rolling out and when do we get maxed out on those projects?

 

MR. YOUNGER: Well that's a good question. We recently made changes, or I guess I did on the advice of staff, we made changes to the COMFIT program that took out large wind, large biomass - I think that's all we took out - and we changed the community consultation rules to clarify them because there have been some complaints.

 

One of the reasons we did that is there are a whole lot of COMFIT approvals out there. Very, very few of them have actually been built and very, very few of them have actually raised the money to get built, so we need to have a sense - if they were all built today, yes, we would be at that cap. But we don't believe they're all going to get built and I don't think anybody - I don't think the previous government did either. I think you issue the approvals and that then allows them to go out and try to get their CEDIF funding or however they're funded. The goal is that a certain amount of them will happen.

 

We need to get a better sense over the next year of how many of them are actually going to happen before we can really open doors again to much more. We're still accepting applications and so forth for small wind, small combined-heat biomass, run-of-river hydro, small tidal, things like that. The biggest problem is not knowing how many are going to come along. A lot of them are coming up to a point where their approvals expire and we'll be sending a letter out to the ones that are coming up, just to let them know that they are coming up, if they have issues they should get in contact with us and they shouldn't assume that you're just going to get automatically renewed, that they'll probably have to show they've met the new community consultation process. Most of them, quite frankly, have because a lot of them are municipal projects or First Nations projects so they meet that.

 

MR. D'ENTREMONT: Well I just noticed my colleague, the member for Colchester-Musquodoboit Valley here as well. I know, we met with a group of individuals from the Lower Onslow and . . .

 

MR. YOUNGER: Greenfield?

 

MR. D'ENTREMONT: No - I apologize, Madam Chairman.

 

MR. YOUNGER: Greenfield, the SPCA project.

 

MR. D'ENTREMONT: Yes. You have a number of unhappy residents in that area. Are you aware of the project and what's going to be happening there?

 

MR. YOUNGER: Well I am aware of the project. They made a request to me and they made a request to Environment, as well, to rescind the COMFIT approval, which we legally can't do, it has been approved. The project was approved - I don't remember the exact date, I could look it up if you want but it was approved months before we were even in government, so we don't have the ability to rescind that.

 

That project was one of three or four that we looked at that we felt that while it met the community consultation requirement under the way the program was worded - it was one of the ones that made us look and say do you know what? We should really clarify what is meant by "community consultation." Those rules have now been changed.

 

To be honest with you, I'm sympathetic to the folks, whether I think the project is good or not is sort of irrelevant in the scheme of things but I am sympathetic to the people who feel that it wasn't clear and I'm sympathetic to the people who are writing me letters saying I should rescind the COMFIT approval, but I don't have the authority to do that.

 

MR. D'ENTREMONT: I can feel for them to the point that Little River Harbour - again, going to Comeau's Hill/Little River Harbour, a company was interested in putting a 25-windmill site - quite a large farm - with very little public consultation. If you looked at what the qualifications were of public consultation, well, they were meeting it.

 

MR. YOUNGER: They were and, quite frankly, there are almost as many - or at the time there were, I don't know that there are now - there were almost as many letters in favour of it as there were against. There were complaints on that one on both sides that they were saying that people were against it who really weren't against it, in favour of it that weren't really in favour - it was a really messy project.

 

One of the things we've done as a result of that and some others, too, is we've actually limited the number of wind turbines that can be put together in a single application. The reason we've done that is because COMFIT is a much higher rate. It was never intended to be for commercial scale production. Nobody ever envisioned this kind of situation happening, I don't think, where you'd have like - I don't remember how many are in that one but as you say, ones where there are 15 turbines. We've changed that because there should be a difference between distribution scale projects and community projects. The future of the distribution projects will be determined through the electricity review.

 

MR. D'ENTREMONT: All right. Talking about something completely different, let's talk about fracking for a few minutes. What's the update on that? Apparently there was - moratorium is the wrong word but it was put on hold until the study was done. When is the study going to be done and where are we moving on with that?

 

MR. YOUNGER: People are scared of the word "moratorium" for some reason but it's effectively what it is, it's a moratorium.

 

MR. D'ENTREMONT: The previous government didn't want to call it a moratorium.

 

MR. YOUNGER: Nobody ever does, but it is what it is. The review is on schedule, it's going to come out this summer and what I - so there are two elements to this. I have spoken to David Wheeler because he met with the Premier, Annette Verschuren, and me recently, but we didn't discuss fracking because I've told them that I don't want to discuss fracking with them because otherwise somebody is going to say that I . . .

 

MR. D'ENTREMONT: Influenced it somehow.

 

MR. YOUNGER: . . . told them what to write the report on. He advised me that July 30^th was the date that he said it would be done. What we've committed to is the day we receive it, it will be made public - I mean maybe the next morning if I get it on a Saturday or something, but it's not going to sit there. We will not have seen it, so we will not be responding to it the day that it comes out because we've got to review it ourselves.

 

All indications are at this point it's on schedule. I have stated publicly that if he and his committee feel they need a bit of extra time, I'm happy to do that because there's no point in having something come out and then everybody say well, you know you rushed him - there's just no point.

 

I've spoken to people in the industry who have leaseholds in the province and listen, some of them would love to know that they could go and do what they could do right now. Every one of them has said to me that they have no problem with the process, they're okay with it, they've gone through it in other jurisdictions and they'll just wait and bide their time, so we'll see what happens.

 

We are obviously not approving any applications. The last one that was approved was in 2007-08, I think.

 

MR. D'ENTREMONT: And of course right now there's an extra amount of pressure on it, as they're talking about the fracking waters or the fracking liquids from Debert. As we continue to get inundated with information about fracking from all over the world and what's going on in New Brunswick, this will still continue to plug along, I think.

 

MR. YOUNGER: It's likely to get heated because it will probably be partially the subject of the provincial election in New Brunswick this Fall, which will make it a bit more challenging here just in terms of having a real good debate. I don't mind saying on the record, because I've said it a number of times, there are people on both sides of this issue in favour and against who are out there with inaccurate information, trying to press their case, and that isn't helping the debate.

That's on both sides - that's the people on the against-it side and the people in favour, and it's really not helping it because they're almost at war with one another in some cases. You saw that in the meeting that Dr. Wheeler had in Halifax the other week where at one point people were yelling at one another.

 

MR. D'ENTREMONT: I'm pretty much going to the end of my list here so I'm just wondering - you talked about providing me with a list of the programs . . .

 

MR. YOUNGER: Yes, somebody behind me is writing that down.

 

MR. D'ENTREMONT: I was really just thinking about CNS there quickly but we'll worry about that at another time. It's kind of interesting how much those other guys spent on advertising but that's a whole other . . .

 

MR. YOUNGER: I can send that to you. The only problem is you can't ask them questions anymore in Question Period.

 

MR. D'ENTREMONT: There you go. But I think the relationship that you and I have is a good one and if there's more information that I need, I will definitely call on you for that. That concludes the questioning from our caucus for the time being.

 

MR. CHAIRMAN: Thank you very much. The NDP caucus is next.

 

The honourable member for Cape Breton Centre.

 

HON. FRANK CORBETT: Minister, your staff - it's good to see you here. Look, I'm going to tell you right up front that many things that we do in this House are a phenomenal waste of time for many of our senior workers and ministers, and I think this may be one of the worst. (Interruption) It's not a matter of seeing the deputy or your staff. I just think that there has to be a better way to do this.

 

MR. YOUNGER: It's a very expensive room at the moment.

 

MR. CORBETT: It is, so I don't plan on wasting your staff's valuable time too much. I basically have some general questions. I'm going to try to not go over the same ground that the preceding questioner had. Some of them will obviously be related, and maybe just by way of some of the things - maybe I'll work backwards on some of the stuff. Fracking is one of them. I said you weren't probably as consistent - or you were consistent in Opposition, where you were with fracking, than you are today.

 

I do agree with you - it's a very emotional issue, and it's one fraught, as you said very rightfully, misinformation on all sides. What I find particularly disturbing is that many of the people who talk about fracking realize that - at least where I come from - a large part of the economy lives off of where fracking is done because of Alberta work. So it seems kind of, just stop and think for a minute here - that's why you have to bring a balance to those situations.

 

Before you answer the question, if you could just tell me who else is on Mr. Wheeler's committee. You can put that in part of your answer. If tomorrow Mr. Wheeler was to say, all the way, no fracking, no problem, or just stop it because it ruins the environment completely, how much of our - and this is probably not a fair question to ask, and if it's not, that's fine, you don't have to answer it - what kind of harm would it do up or down to the economy of this province?

 

MR. YOUNGER: That's a good question. Because there is not a lot of onshore oil and gas - I mean, I think there have been 169 wells drilled in Nova Scotia onshore since 1869 and not one of them yet has been commercially viable. That being said, Forent Energy who recently announced they're going to surrender their licence and Triangle obviously felt - they both felt they found something and they just didn't know if it was commercial or not.

 

It's hard to say because we've never had that kind of industry here and we do know that there is a geological line that runs roughly from Peggy's Cove down towards somewhere in the Annapolis Valley, and everything southwest of that is solid bedrock. You will never have onshore oil or gas there. So really what you're doing is you're talking about an area from that line up to the tip of Cape Breton.

 

For example, there was a coal-bed methane well drilled in Stellarton in December as a test well. That may very well be able to be extracted without fracking and so some of those coal resources - like the coal-bed methane resources, which might be an opportunity even in Cape Breton - may be able to be extracted without that.

 

I don't think we really have a good idea of what the impact would be. I mean, we can make estimates on the up-side based on other jurisdictions, but even if you look at New Brunswick where they've suddenly allowed it, there hasn't been an immediate boom because they're still out there looking to see whether there's a commercial project, so I don't think we actually have that.

 

To be perfectly honest - and I wouldn't want to guess that - there are estimates, and we can get them for you, but we've met with some of the companies to say, well listen, we put one well in and that means this much to the local community. The problem is we don't know how many commercially viable wells there might be to really make an estimate. We've only just started looking at doing that Play Fairway Analysis type of thing onshore so we don't even know what might be there. There might be nothing.

 

You wanted the list of people. I can get you that list.

 

MR. CORBETT: On coal-bed methane - that's an issue that's not new to Nova Scotia. It's also probably one of the greatest dangers about mining coal: methane. I know we talked about the Stellarton area and you touched on the Cape Breton area. Where I'm from there are probably two of the largest seams, which would be referred to as the Harbour seam and the Phalen seam. The Harbour seam runs more inland and geologists would tell you that the Phalen seam runs like a horseshoe. If you looked at it geographically in Cape Breton, that would make up part of the Donkin seam and it would go out, turn, come back in, and maybe make its way - it's a substantive way inland, say 7, 8, or 10 miles, in that area.

 

Of those two, it was always thought that the Harbour seam was - some people would say - the dirtiest coal. Have there been any approaches to your department about trying to tap that seam?

 

MR. YOUNGER: Not recently. They haven't approached us, but you hear people floating things.

 

MR. CORBETT: Muse.

 

MR. YOUNGER: Yes, that's a good word: muse. You hear people muse about everything from coal-bed gasification up that way . . .

 

MR. CORBETT: Do you know what? Rather than me mumble through another question, I'm going to ask you about - so if you want to tie the two of them together about coal gasification, please feel free.

 

MR. YOUNGER: All right. Nobody has made a formal ask to our department that I'm aware of or I think Murray is aware of. So coal-bed gasification comes up a lot. That one is an easier one because, quite frankly, coal-bed gasification is probably not in my view going anywhere in North America because there's some debate over the environmental costs of what that would involve and whether it is practical - whether the energy you need to use to actually do it makes a lot of sense.

 

Obviously if somebody came in with a proposal we would look at it. It would probably be looked at with the Department of Natural Resources, too, on that one because it's a bit funny.

 

People are talking about coal-bed methane and geothermal up in some of those Cape Breton seams. More of the talk around the methane has been in the Stellarton area. We all know with Westray - everybody knows those were very methane-intensive coal seams through the Westray area. In Springhill they're primarily talking about some surface mining now, too, but they're also talking about the geothermal. The main focus in Cape Breton and the one that people mainly talk about there is the Donkin mine and actually just getting the existing workings open again. They had obviously dewatered them and now they've let them flood again so it's a matter of getting the water back out of that mine.

 

Other than hearing people say it in a community newspaper or mentioning it on the radio sometimes, I can't think of the last time we got a letter from anybody asking us to look at a project for any of those things in Cape Breton - whether coal-bed gasification or methane, or whatnot.

 

MR. CORBETT: I'm going back to our time in government - and, again, I don't mean this derogatory to anybody, but I'll use the word "muse" again because really there was nothing ever put on paper. The then-president of CBU was a big proponent of coal-bed gasification and they would have used comparisons to, I think, probably Russia and South Africa. I don't know if those have been commercialized yet or not.

 

MR. YOUNGER: I'm not aware of any that have been. I don't know a lot about - I'm not going to pretend to be an expert on coal-bed gasification because I'm certainly not. I know there has been a lot of debate. It's kind of like the carbon sequestration debate; it's very similar in that people go - you get the gas out from coal-bed gasification and that's good, but if you end up using more energy or you end up having leakage, all these other sorts of things, you can actually be into worse than just using the coal itself.

 

I don't know the answer to that but there hasn't been a lot of - there's no proposal before us to look at it, that's for sure.

 

MR. CORBETT: Nor in the lifetime of our government. I'm saying that and the man sitting next to you would probably know - not probably, I know he knows more about it than I do. You know it was interesting, it was one of those things that really made a blip and they just fell completely off the table.

 

Coal-bed methane, too, is something that I don't think we should run headlong into, saying it's a saviour; it's not without its perils. I guess that kind of brings us down to straight-up coal mining in Donkin. You realize like when Xstrata was given the rights to the resource and then they had junior players with them at the time, are the junior players, I would call them - it might have been Morien Resources - and if you have had confidential meetings with them, that's fine, I respect that. I'm not looking for a witch hunt here, so to speak, I'm just looking for information. I would completely understand if you said look, there is information here that I can't or shouldn't release at this point, but anyway, with that said, is Morien still interested in that play, as far as you know? That's more of a DNR question, I appreciate that.

 

MR. YOUNGER: I would say Morien is interested in it. They've said that publicly so I don't think I'm speaking out of turn by saying that. I think the question is, as it is with - there are a number of companies that would be potentially interested and I think it's whichever one has the financial resources to make it happen.

 

Certainly I know that - I mean most of it would be DNR but I know - I'm pretty sure we can get DNR to get you a more in-depth briefing of some of the more confidential stuff too.

MR. CORBETT: It may come up in their estimates.

 

MR. YOUNGER: I don't mind saying that they've said publicly, as a number of other companies have said publicly, that they're interested and the question is, it's an economics issue, it's an expensive project.

 

MR. CORBETT: Absolutely. I always like to stay positive in anything that's good for the economy but what you see of coal mining, especially subsea, is that the leaseholders make money in their ability to have multiple leases, so let's just for the sake of argument here say we have five leases - you have Donkin 1, 2, 3, 4, 5, as the old collieries used to be numbered. So as Donkin 1 is starting to expire, they then start to explore Donkin 2.

 

Is that becoming an issue, I wonder, that energy companies really don't come in and do a one-off on a coal mine with like a roughly 20-year life expectancy? Has anybody ever really said, look, for a major player in coal mining, would it make sense to look and say there are multiple leases available?

 

MR. YOUNGER: I don't know the answer to that question, to be perfectly honest. It would be something that Natural Resources would be looking at. I think one of the attractions to the Donkin project is that the mine is there, the tunnel is there - I think right to the coal face, isn't it?

 

MR. CORBETT: Yes.

 

MR. YOUNGER: It was that one that closed . . .

 

MR. CORBETT: Two tunnels.

 

MR. YOUNGER: Yes, there you go. So a lot of the up-front cost has been taken out for somebody conceivably. They also had a market - I would gather they probably still have a very similar market in terms of the coking coal in China - I think it was China. As I was saying earlier, Nova Scotia Power's interest - for the period of time that they would be burning coal - would be in trying to displace some of the imported coal that they have, because you're getting to a point where the shipping costs from Colombia, Pennsylvania, and some of their other sources - and Venezuela as well - those are places that you like to avoid buying if you can because of some of the political uncertainty too.

 

I don't know the answer to your question as to whether they're looking at it in terms of five potential collieries or not.

 

MR. CORBETT: Is pet coke one of the sources that NSP would still look at as an energy source?

 

MR. YOUNGER: I think Nova Scotia Power would look at anything as an energy source, quite frankly. As you know, there are different burners that can burn different things. Point Aconi allows them to burn the widest range of fuels. They've had one unit down at Lingan, which I think they would like to keep down. They had two down in the summer. I assume - have you heard if they'll have two down next summer? (Interruption) They haven't decided if they're going to keep two down next summer, but it depends on the energy needs. They're looking at what burners they're still running and where they can displace, so they look at anything that they can burn that meets their environmental regulations.

 

They're also looking at - there are a couple of companies that are doing test-growing this year of some grasses. They're not really grasses, but basically plants that can work as a coal substitute. There are supposed to be some tests on that this summer - growing it in Amherst and using it in the plants.

 

MR. CORBETT: That kind of brings me into another question. I think you had said that you had met with Dr. Wheeler. I'm going to take a leap here and say you met him as president of CBU, not as Chair Wheeler, and Ms. Verschuren. Were those issues around - issues like that throughout the energy sector?

 

MR. YOUNGER: Yes, they are. Annette Verschuren is the Chancellor - she was on the board when I was up there. The two of them came in to talk about some work she's doing in energy storage primarily - primarily in Ontario, but they're trying to promote that here as well. It's something we're interested in because in order to bring more renewables on, we're at the point where you're probably going to need some kind of storage. I think she said they have 80 different technologies that they're involved in for storage options, so everything from compressed air to flywheel storage, which actually only stores it for something like 60 seconds, but it actually allows a balancing load across the system.

 

That's what we met with the two of them about and what the opportunities here would be for improving the grid using that, bringing on more renewables, but also what the opportunities might be around research and development, and technology transfer here. For example, at the Verschuren Centre at CBU obviously they have a particular interest there.

 

MR. CORBETT: No interest like self-interest.

 

MR. YOUNGER: Well, you know, it works, but if we did something like that - I mean, part of that will be dictated by the review and the IRP, because we need to see where storage would make sense. The example where it could save - because there is a cost because ratepayers have to pay for it - but there could be a savings. If you look at the Annapolis and Digby areas, they have a grid constraint issue that you either upgrade the grid or maybe you could put storage in, which might mitigate that. I don't know what the relative costs would be, but that's something you would look at.

 

MR. CORBETT: I'm going to admit this is a very self-serving question . . .

 

MR. YOUNGER: Wait until you get to TIR if you want self-serving questions. (Laughter)

 

MR. CORBETT: Well this is something we could probably talk to TIR about too. It's funny, when you talk about NSP having a burner down at Lingan - I've been fortunate enough to live on Lingan Road, which leads right to Lingan generating station - there may be one down, but there is no lack of trucks on that road from time to time.

 

Have you had any better luck dealing with them than we had, sending more than they do - they have their own tracks and then their own system to transport - about having that coal shipped by rail instead of by truck?

 

MR. YOUNGER: I have to be honest; I haven't discussed that issue with them at all. I will say there are a couple of things I'm trying to resolve with them that would relate to that and would relate to a couple of other plants. One, I want to get a sense - and I guess they're going to try to do this through the IRP as well - and figure out as they phase out coal plants, which they're mandated to do, the order these will be phased out because that dictates part of it.

 

I often guess, but it's sometimes often wrong too, that in some ways it is a similar issue to what we're dealing with at Trenton, where people are having coal dust land on their homes - from a different reason: they're getting it from the stack, and you're getting the trucks going by and so forth.

 

MR. CORBETT: I should clarify that the trucking companies and that are pretty vigilant; they're tarped and so on.

 

MR. YOUNGER: Is it a noise issue?

 

MR. CORBETT: It's a noise issue and a traffic issue more than - but I will say in defence of whoever the truckers are, after a few little incidents they're very vigilant on being tarped, both when they're fully loaded and when they're empty.

 

MR. YOUNGER: It's good to know. I haven't actually discussed that issue with them on bringing it more in by rail but it's certainly one I'll ask and I'll let you know, especially since you live on the Lingan Road - I didn't know that.

 

MR. CORBETT: You know I've always guessed the fact that any time you're using commodities like that, the fewer times you handle it, the more cost efficient it is.

 

MR. YOUNGER: I always would have thought - I'm always amazed when they don't use rail for things.

 

MR. CORBETT: I know the largest was when they were kind of "cleaning up" the Point Aconi site and there was coal still on the ground, so it was easier for them at that point or they would ship all of it by truck traffic and none by rail. I guess that really rolls into where you will see, I believe, if there's to be an increase in trucking of coal, will be with surface mining.

 

This is very worrisome and again it was probably more to the predecessor department that was here in some ways than yours and to maybe the one to follow: Natural Resources. Certainly I would have to say that Nova Scotia Power by themselves have not been offensive in surface mining, but it has not exactly been a rosy picture either. So at some point that's when those things have like when we get into the cost of energy and we talk about your bill before the House, that's where there is a residual cost, if you will, other than if they're selling it on the international market at $60 a ton, we'll say, but there are other issues that would raise that cost - do you see that being factored in?

 

MR. YOUNGER: Not as much as it should. I don't mind saying that, it's something we're - I talked to a lot of people when the Point Aconi strip mine was still operating, the Pioneer one there, I think, and the Stellarton one now is winding down, but I've talked to people who live next to that and I know there's a couple of others that have been floated in the province.

 

There is no question that strip mining is popular at the moment - not just here but everywhere - because it's cheaper if you're closer to the ground than it is to get into building tunnels and all that. But there's no question that you have to look at the total cost of that and that's something that when those are approved - and it really is outside of our department as you mentioned - it's something that needs to be captured in the environmental assessment process for those mines to look at the amount of the truck traffic, the impact on local communities and so forth, because people don't necessarily always see the benefit either.

 

Now, most of the - well, actually all of the strip-mined coal in the province has been used domestically so none of it has been exported. Stellarton was burned, as it happens, at Trenton - just very close. Some of that went up to Cape Breton. Oddly enough, as far as I'm aware, the Point Aconi coal wasn't actually burned at Point Aconi but was taken down to Lingan, which is a bit strange because everybody - I mean, it had to do with the type of coal and everything, but people had expected you'd use it at the plant that you're right next to.

 

There's no question it's an issue. I can tell you that I met with a lot of homeowners around the Point Aconi one when that was operating and they were unhappy campers. I don't think it's any different for a coal mine than it is for any other type of open-pit mine though, in fairness.

 

Now, the National Gypsum one, which is huge, doesn't have that because it's so big and has been there so long that there really aren't many homes right around it. We look at some of the other - when they were proposing the tin mine and all that sort of stuff, it's the same issues.

 

MR. CORBETT: I agree with you there and I think maybe your deputy might recall - or he can have amnesia if he wants on this - that I am not someone who is averse to mining if done in a certain way. I make no bones about it. I grew up probably from here to the Westin away from a pit. I know it put the baloney between my two slices of bread, but it's a different world - I think you would agree with that - but I think we have to be aware.

 

I realize it's a chain like as I talked before about two other departments besides yours. You don't get there without the approval of Natural Resources and Environment. I guess what I'm sticking my oar in the water on with you today is just as it relates to coal mining. It's just not $60 a ton to get out of the ground; there are other factors that when we're looking at the "cheapest fuel" that those other factors would hopefully be costed in.

 

MR. YOUNGER: There was an article in Corporate Knights magazine last month that claimed - and I have every reason to believe it's accurate - that Shell, for example, prices in $40 a barrel for their oil projects for environmental costs and other social costs. They call it a carbon cost, but they just make an estimate of - when they do their economics they now price that in. I mean, that's obviously oil - it's not coal, but I think you're going to see that more often and it's one of the reasons why in the review that we're doing on the electricity system, we're looking at different technologies and what the technologies might be in the future.

 

I don't get it as much now, but when I was on city council I used to get calls from people complaining about solar panels and what they look like. Well, then I get the guy down in Trenton saying I've got coal dust raining down on my head, and then the person who lives next to the strip mine is saying, well, when they put the blast off my basement cracks.

 

I think we need to have a broader discussion instead of just having a one-off and saying, well, I don't like this kind of mining or I don't like this kind of energy production. We're going to have to get it from somewhere - whether it's mining, forestry, all those sorts of things. Energy production is ultimately a big one - I agree with you, there is a cost other than just the cost of the commodity, but that's the discussion we need to have with people.

 

If you have sweat shops making your Smartphone in Asia somewhere, is that a good thing? It's probably not, but that's part of the social cost of the whole product too.

 

MR. CORBETT: So you're not going to buy coal from Walmart.

 

MR. YOUNGER: Probably not - I avoid Walmart when I can.

 

MR. CORBETT: Just to pick up on the energy issue and then I'll go on to something else. There was a thought one time that's exactly it, something similar, that all energy would be bought like in terms of BTUs. Is that still an issue out there, as opposed to buying a ton of coal you would see coal that would be rated for its BTUs as opposed to its . . .

MR. YOUNGER: It's factored in now. In the Maritime Link hearings one of the things that they had to file the comparisons of, that originally were filed confidentially but then were made public, were the heat rates for different types of natural gas burners and so forth. So it is factored in. It's certainly factored into a bigger extent now because it's a matter of how much energy you're getting out of a unit of natural gas or certain types of coal - to that extent, even a wind turbine. Put the wind turbine up and it's rated to a certain amount but it doesn't blow all the time.

 

That's actually one of the issues with Muskrat Falls right now: it's supposed to be rated to 824 megawatts - there's a size it's rated to so the question will be, will it meet that rated size? I have every reason to believe it will be but I don't want to suggest that's not the case but that's one of the questions that will come along the way.

 

MR. CORBETT: With the link, has Emera said where it's going to make land at yet?

 

MR. YOUNGER: Yes, we have a map actually that we can get you but I think it's Woodbine.

 

MR. CORBETT: It's going to make land or it will be retooled at Woodbine?

 

MR. YOUNGER: I can get that for you. They have . . .

 

MR. CORBETT: It flows DC and it has to be transferred to AC. I thought Woodbine would be where they would reconvert it to DC.

 

MR. YOUNGER: They reconvert it almost as soon as it comes ashore, I think - don't they? (Interruption)

 

MR. CORBETT: There's space - I guess here's the reason for my question. My thought was that it was to arrive at Point Aconi but stay in the direct current format and then over at Woodbine be converted to AC. I may be wrong on that. Has the Department of Energy - the reason I'm saying that is because that would take it across a considerable amount of land. Now I think the conventional wisdom at the time was you had two operation sites: you could land at Lingan or you could land at Point Aconi. Point Aconi has the newer infrastructure, but even with that new infrastructure there's more infrastructure that has to be built. Have you had discussions with Emera about purchasing land, any land they may be looking to expropriate?

 

MR. YOUNGER: I guess there are two parts to this, but for the record Murray says he thinks it is Point Aconi that it comes ashore and then goes to Woodbine but we can get you the map. It was approved the first week of June. They laid out where it will come ashore and where it goes undersea and it was approved by the provincial Department of Environment in June of last year, so the routing and the environmental assessment for that.

 

Obviously the bill that we did in the Fall that gave Nova Scotia Maritime Link Inc. the same rights as Nova Scotia Power, under certain circumstances one of those was expropriation for the purposes of that grounding cable and the cable that comes across land.

 

We did ask them at the time how many parcels there were in total, how many they felt they would have to expropriate. A whole bunch of them were just "owner unknown" but for the most part, that cable was going in the same corridor that the existing cable already exists. Now they have to widen it but there's already a - I think there's a high voltage cable there now and they're putting this next to it.

 

MR. CORBETT: I'm asking these questions not to - because obviously I would know the geography a little better than you - I'm not trying to ask these questions to trick you. The purpose of it is that there are some thoughts out there that some people are - well, any time you expropriate property people aren't happy so there are some issues around that. I'm just wondering if you heard anything back from any of the residents or any of that.

 

One of the ones I heard - and I think a few of the MLAs across Cape Breton, because that's not even close to my constituency - their issue seemed to be that Emera was looking for a larger chunk of land than they would really conceivably need and would have kind of restricted access to a large portion of their useable lands.

 

MR. YOUNGER: We haven't gotten involved in any of the individual land cases. I understand there's only a very small number of cases where they might expropriate and almost all of those were ones where they couldn't identify the owner. The only one that I've heard about where there was an issue actually hasn't contacted us. I can tell you on the record I read every letter that comes into the department. Sometimes it takes a long time, but I read every one of them. (Interruption) Well, you've got to do something in Question Period, right? You guys aren't asking questions.

 

I haven't received a letter, but I'm aware of one because I saw it on CBC. CBC did a story with somebody who was upset about it so that's the only way - I'm just familiar with it second-hand, but Emera hasn't been contacting us and we haven't been contacting them about individual cases because they will be arbitrated if there's an issue by the review board who could then determine it.

 

So I don't know what their request would be. What I do know is the intent for the most part - and I'm sure that somebody will pull out something that's an exception to this. It should be just a widening of the existing corridor and that widening would meet whatever the setback requirements are, so if they put a pole up, that easement has to be a certainty for safety and access reasons, but about the specific case I don't know.

 

MR. CORBETT: I had the pleasure of dealing with NSP when they went through the back of my property with the lines from Lingan, so it's nothing new. I have some more questions and they're basically going to be kind of scattered so bear with me. Again, there's nothing here in the world tripping anybody up; I'm just looking for some straight-up information.

 

I'll start this question in one of the very worst ways you can ask a question: I can't remember much about this. The support for a co-gen operation at the old Sysco site on Nova Scotia lands - I think our government made the announcement probably about a year or so ago. I'm looking at Murray for a nod here. The co-gen - Luciano Lisi was one of the ones involved and I think CBU was involved. You're shaking - I'll stop being bad. (Laughter) There was to be a co-gen - do you recall that?

 

MR. YOUNGER: We'll have to check on that. We don't think that's active anymore.

 

MR. CORBETT: It's not active?

 

MR. YOUNGER: We don't think so, but we'll double-check.

 

MR. CORBETT: Okay, would you because the whole question was the state of play of it.

 

MR. YOUNGER: We'll double-check.

 

MR. CORBETT: Do we have leases expiring this year on the offshore?

 

MR. YOUNGER: No, there's nothing expiring this year.

 

MR. CORBETT: I know you answered some questions from my colleague earlier on both BP and Shell here in the province. Could you give a two- or three-minute capsule of where it's all at?

 

MR. YOUNGER: Shell did their seismic last year. They're reviewing it and the exploration wells will start next year. It's hard to know how many they'll put in in the first year, but there will be at least one. We know they're talking about seven at the moment. That could change - these things do.

 

We anticipate that BP will be starting their seismic in May this year. We expect the ships will be here late April, early May, and then they'll head out to do that seismic work. With both BP and Shell, we've met with them and asked them - and they have been doing this - to meet with First Nations fishing groups. Shell actually did a really good job and we suggested that BP follow that model, where they met with fishing groups and said okay, where should we start the seismic so that we're not in the same place as you at the same time? That seemed to work pretty good so they're going to do that this year.

 

BP will almost always, at least until we hit the exploration stage, be about a year behind Shell and what they're doing. Their parcels are basically side-by-side. BP's seismic is a little bit bigger area and a bit more - it covers more ground than Shell's did. At the moment everybody seems very excited about it. I think it was BP that announced they are using - it was either BP or Shell that announced the supply base basically in Woodside.

 

MR. CORBETT: Okay, you were talking before about costs and the good thing Shell did. In talking to people in industry, Shell also has probably one of the best bid situations when they're doing estimates on construction that the folks - if you're looking to save money over at Muskrat Falls, they have a different system. Most big projects still use what's referred to as a cost-plus system. They have a whole different set where they send out, instead of doing the - I'm tamping it down a bit too much than I should, but anyway - as opposed to sending out the bid and then you win the tender and then you sub it out, they actually tender the subs all out so they control the costs a bit more in that way. They're hugely successful and you may see it at OTC this year, because I know people who worked with them in Houston said it was a great model. I kind of in my time in government tried to get government to look at that as a model for our own procurement.

 

MR. YOUNGER: It would make sense for them, too, because they need to report their Nova Scotia content to the CNSOPB and it would make it a lot easier for them to do that.

 

MR. CORBETT: And that, I guess, goes to what we talked about maximizing benefits because it falls into just a buzz phrase, it seems. Everyone wants to maximize our benefits, and who is against that no matter what side of the House you sit on? Now that you're sitting in your chair, like when you do sit down with these folks and with your staff, what are you doing to derive maximum benefits?

 

MR. YOUNGER: The stage we're in at the moment, what we're trying to do is - the ships, WesternGeco did the seismic work and WesternGeco will do the seismic work for BP. We're never going to have companies here - they go all over the world because they're the company that does seismic work, so that part of the work is never going to be done here.

 

However, what they do - and Shell did this, they made a few mistakes, if you will, or could have done a few things better that BP has learned from - is crew those ships with some Nova Scotians. Last year Shell had cadets on board from our programs here, which is a great opportunity for them. That's an example where when we met with BP - and we met with WesternGeco, actually - we said hey, this is what happened last year; this is what worked and this is what didn't really work.

 

The thing we're really trying to work with them hard on is identifying what are the skill sets they're going to need on the exploration side when they get the exploration wells, and if they're successful in the production side, because as you would know, as you were the Labour Minister, NSCC can't churn somebody out tomorrow if you need them. We're trying to figure out if there are gaps in the program offerings, either universities or community college, so we can start making sure we have people trained.

 

We're also actively working with them to try to engage First Nations communities. Our view is that we actually have a very large labour pool here. What we have is a lot of people, as you noted earlier, going out West and then coming home on the weekend, or they're one week in Alberta and then a week home, things like that. We think that labour pool is here that could crew some of the vessels, can do some of the fabrication, can work on the rigs, like when we're on the exploration side of things.

 

We also have a group of people who are currently working on the Exxon platforms. We don't know what the close dates of those will be, but they're winding down and we're going to want a home for some of these people. Again, these rigs provide that opportunity for that.

 

A lot of it is on the labour side and working with the supply chain. The supply chain is a big part of it, because one of the things that happened that worked really well for Nova Scotia was when we had Exxon start offshore but when we also had some oil projects offshore, a lot of fabricators and suppliers ended up appearing in Burnside and other places in the province, too, but particularly Burnside. If you drive through Burnside there's a whole lot of companies that if you visit, they supply the offshore oil and gas industry and supply Newfoundland and Labrador primarily. They fly stuff up to Hibernia and all that sort of stuff. Now they will be back at supplying Nova Scotia but they need to be big enough to do it, so we want to make sure they're big enough to compete competitively.

 

Obviously we want them to have Nova Scotia content but we also want the Nova Scotia companies to be able to compete competitively in an international market, so when you have the ups and downs of the oil and gas they can go elsewhere as well.

 

MR. CORBETT: Since you opened the door a little bit, if you could impress upon your other Cabinet colleagues that when training for the offshore - and I've always said that one of our greatest attributes that has largely been left totally unutilized, not underutilized, is the Canadian Coast Guard College in Point Edward. When people are talking about training, and I know that's largely a federal facility but I think there's a great opportunity there that could - you know, you don't have to reinvent the wheel when looking at this.

 

I know in earlier questioning you talked about getting involved with the feds in some issues. They sometimes try to turn around a tanker instead of a pickup truck. That would be a suggestion, and take it from whence it came. I think it's a great idea in training because - and I'm sure Mr. MacLeod here would agree with me - it's a world-class facility when it comes to training.

 

MR. YOUNGER: That's why we need to identify what skill sets they feel they're going to need and I think what you're saying makes a lot of sense because when we were at the BP headquarters, the BP headquarters has a training facility that they bring people down to run their rigs. They've got this mock-up rig inside and you sit there and you move all the stuff, which is great. So we know that they prefer to train their own people for one portion of it and bring them down; we need to figure out what is the training that we can provide that's useful and would actually get people jobs.

 

MR. CORBETT: I guess that's what I'm saying. I know there are simulating machines there that would do similar type work and I appreciate that Shell would want to do their own - I appreciate that. I guess what I'm saying is that if there was ever a discussion at some point that here is something kind of in the backyard we could use - and it may very well be cheaper anyway.

 

Something that tends to leave us at the altar a lot of times with promises is LNG plants. We've lived through a few of them that would tell you they are that close and so on. I had a chance to visit, I think it was Lake Charles in Louisiana, at an OTC, and saw like really up close how the plant works and so on. I also saw an issue for them, and as I think we talked before, about when we're dealing with commodities, whether it's handling or the length of time it takes you to handle a commodity, it has inevitable costs to it. Because of what they were handling, if you would say they would come up that harbour - it's actually a river, I think - that when you come up, because of its cargo, they would have to shut down certain sections of the port and then they'd unload. It was like just to do that section to get back out to the Gulf again was a 24-hour turnaround.

 

At that time, when there was talk of Bear Head, if you took that into consideration, the steaming time was actually less because you would get there; you didn't have to shut down ports. When we're talking to people nowadays about the possibility of an LNG plant, are we cost competitive now?

 

MR. YOUNGER: Yes, we are. Quite frankly, I guess there are two primary proposals out there at the moment. One is Pieridae and the other is H-Energy. Pieridae is the furthest advanced because they've gone through their environmental assessment now. Their issue in both cases is - they have customers - their issue is supply and there are a couple of things that might allow that to happen now. One of them is Spectra announced their Atlantic Bridge project, which would allow increased access of natural gas from the Marcellus shale into Nova Scotia because it would increase the capacity on the Maritimes & Northeast line.

 

If that happens - and I think we'll have a sense in the next few months, perhaps, whether that will happen because they had open season recently. That might help some of the supply issues. My sense is there are two wild cards in it: financing and supply, because they have - Pieridae, anyway, has a customer or has announced they have a customer, but we appear to be cost competitive.

 

The other thing is that we learned on our trip to Houston in February that it's very hard to build an LNG plant in the U.S. at the moment. There's a lot of opposition. If you talk to that member, he'll tell you that people - and we do get calls about this - are wondering when it's going to happen so it's the opposite response that they've had there. Another wild card is what happens with the State Department and do they allow exports of gas for the purpose of exporting out of Canada. So there are still some wild cards in this, but I think they see us as cost competitive. I think the bigger question is what's going to happen with LNG generally, because everybody at one time thought we were going to be importing and now everybody is talking about exporting.

 

MR. CORBETT: I forget which area in Maine that had the - they would make NoRigs like a bunch of sissies when it came to that. I think they even came out to protest the Saint John Irving one, if my memory serves me.

 

MR. YOUNGER: That's the other wild card - the one in Saint John. They keep talking about turning that around to become an export facility, but nobody has actually done it yet. So there are a whole lot of pieces in the puzzle.

 

MR. CORBETT: Kind of brings it around to a pipeline coming a little further east. What's going on there?

 

MR. YOUNGER: Energy East - NuStar would like to have it extended - their facility, obviously. Their feeling is that they have the infrastructure in place now, and they do. If you had the pipeline there it could happen. One of the challenges in this is that the Energy East proponents have an interest in the terminal that they would build in Saint John, so that creates a bit of an issue.

 

My understanding is that proposal is being made before the NEB by NuStar. We're supportive of it. There is an environmental concern that has been raised as to whether it actually makes sense to have those ships coming in through the Bay of Fundy. That should be of interest to Nova Scotians, as well, because one side of the Bay of Fundy with whales and the possibility of accident - whether it's safer going into that Guysborough/Canso area or whether it's actually better to come into Saint John.

 

We're supportive of it. It's before the NEB at the moment. I will say though that the proponents - I think it's fair to say that they had the capacity pretty well spoken for going into Saint John and that's one of the challenges. It isn't always what's the best public policy - it's what the private companies want to do.

 

MR. CORBETT: Oh, you'll find out more. You're only six months into it.

 

About the state of play, I guess, and I mention this in a very broad term, the tidal power issues, where are we at the state of play?

 

MR. YOUNGER: We're in really good shape. With the new berths for the RFPs, they were actually required to have a plan saying when they'll be in the water and when they will be generating. We know these things slip sometimes and things change but there's a commitment to actually be in the water and be generating. We expect one or two of the turbines to actually be in the water and connected to the grid next year. We'll see if that slips or plays out. It's hard to put these things in but it's looking very good.

We've met with a number of companies that are looking at this. They're looking forward towards full-scale commercial development, as opposed to just saying oh, we're going to test it and then make a decision. That's exciting.

 

The deputy and I met with a company, with the Premier recently, that feel they can bring the price down to be cost competitive with other fuels in the province, once they get the commercial production. That would obviously be very good and would put us in an export potential as well.

 

MR. CORBETT: How does that affect - I know the U.S. State Department doesn't look fondly on hydroelectric power because for some reason they don't see it as green. Would they attach that same caveat to tidal energy as they would, say, to Muskrat Falls maybe?

 

MR. YOUNGER: I don't know what they would do. I think they would be more inclined to be okay with it because the reason they didn't support large-scale hydro was because it was about damming off rivers and creating basins and that sort of thing; that was the primary concern. The other thing is they have an interest in tidal being green because they're looking at putting it in Oregon and some in Maine, so if they suddenly say that it's not green, there's a lot of investment in Oregon and Maine that becomes problematic for them.

 

MR. CORBETT: They have no problem saying it about damming but they certainly take enough as they can from Hydro-Québec's.

 

MR. YOUNGER: There was a report that came out last year that they based a lot of their green stuff with dams on which talked about the carbon emissions from all the concrete poured to build the hydro dams. That was what they based a lot of that on so we don't have that problem with tidal.

 

MR. CORBETT: The Hoover Dam would never have gotten built then. I would hate to see where California is at today if they think they're in a bad situation. I'm just about - I have five minutes?

 

I appreciate that much exploration as far as like BP and Shell, but one of the issues we often hear about is the availability of rigs. Is there still a shortage of rigs?

 

MR. YOUNGER: Yes. So there's a difference between exploration rigs and production rigs. The production rig you'd build for the project, but there are - as a matter of fact, we just recently went through trying to determine with the feds what type of environmental assessment Shell would have for their project. They really needed an answer because they needed to book their rig a year and a half in advance, in order to ensure that it was here. So it is a problem worldwide, there's no question. That's why they cost a lot of money.

 

MR. CORBETT: So have they been successful in securing the infrastructure?

 

MR. YOUNGER: They knew what one they wanted. They haven't mentioned any problem. Actually when we're done with OTC we'll probably know, because they only recently had a sense of the timeline they were on. I think that's one reason we don't know how many wells they'll drill next year, because it's when the rig is available.

 

MR. CORBETT: This is probably one of my last questions because we're running short of time here. Again about Georges Bank and the issue with the feds, our federal government; are we having issues, too, with the U.S. State Department or Maine regarding . . .

 

MR. YOUNGER: No, we haven't heard anything from them on that, not at all - nothing.

 

MR. CORBETT: I recall a time being that the State of Maine Government by itself was not in agreement with this House on the moratorium or the ban but the State Department was, whoa, not so quick, for the same reasons, I guess, maybe our federal - because they see it maybe through a different lens than we do. So neither level of government in the U.S. has made mention of it?

 

MR. YOUNGER: Nobody has contacted us. When I was in Houston in February it came up and I was told basically exactly what you just said: the State of Maine remains very much opposed to it and the State Department is sort of on the fence. We haven't heard from them directly saying should you or shouldn't you.

 

I think quite frankly the State of Maine is getting a lot of feedback from their lobster fishermen and the scallop fishermen, as we were too, so they have a different interest than the State Department would.

 

MR. CORBETT: I guess that's why I asked the question because you know the issues are kind of all politics or local, I guess, and I haven't heard anything on that. The previous questioner was just asking us and our federal government, I was just wondering if there had been any shift in the dynamic of the State of Maine and . . .

 

MR. YOUNGER: There doesn't seem to be.

 

MADAM CHAIRMAN: That's time, minister.

 

MR. YOUNGER: If it's okay with the chairman, I'll quickly answer the question.

 

MADAM CHAIRMAN: Sure.

 

MR. YOUNGER: I'll just say that the feds here seem interested in having a dialogue on creating matching or mirror legislation on this now so that would suggest to me that they haven't had a lot of pressure from the State Department, especially since we probably have one of the most oil and gas-friendly federal governments in Canadian memory. So if they're talking about doing some sort of ban on exploration there, that's got to say something.

 

MADAM CHAIRMAN: We'll now pass it over to the Progressive Conservative caucus.

 

The honourable member for Sydney River-Mira-Louisbourg. You have one hour.

 

MR. ALFIE MACLEOD: Thank you very much, Madam Chairman, and thank you for some time, minister, to ask you a few questions. I know you'll find it hard to believe but I want to ask you what the Department of Energy's position is on using coal for electrical generation in the Province of Nova Scotia.

 

MR. YOUNGER: Coal will form part of the electrical market in this province for a long time to come. I think we're at 56 per cent or something like that at the moment. It will take a long time to go from 56 to zero.

 

MR. MACLEOD: That's quite correct; I just wanted to get you on record.

 

MR. YOUNGER: I think I'm already on record saying that.

 

MR. MACLEOD: Minister, could you supply us with what it costs to generate electricity in Trenton, with local coal?

 

MR. YOUNGER: We can probably get that number, I wouldn't have that offhand.

 

MR. MACLEOD: My understanding is it is about $35 a megawatt hour.

 

MR. YOUNGER: It would depend on whether you include the capital costs or just the fuel costs. That's probably just fuel costs.

 

MR. MACLEOD: And in Lingan, the cost using coal from offshore, roughly $50 a megawatt.

 

MR. YOUNGER: Yes, we can certainly get the numbers for you.

 

MR. MACLEOD: These are numbers I am fairly confident of because they came from Nova Scotia Power at a meeting they held with some employees. The interesting thing is that wind costs $130 a megawatt hour and then, of course, needs backup.

 

The reason I'm asking these questions, of course, and I think you've already been asked about the Donkin mine . . .

 

MR. YOUNGER: Yes.

 

MR. MACLEOD: . . . is the Donkin mine has a huge supply of coal. If that mine were to go forward, I'm interested in where you might think this fits in but there are some real advantages. First, of course, it creates jobs in Nova Scotia, which we dearly need in our economy; secondly, Nova Scotia Power would be dealing with a company in Canadian dollars rather than American dollars; thirdly, it provides coal that's anywhere from 15 per cent to 25 per cent higher in BTU content than what we're bringing in from offshore; and fourthly, it would provide a stimulus for Sydney Harbour to create more jobs and also see the rail line being used more and, therefore, take the subsidy off that rail line so that the province wouldn't have to be putting money in there. I'm just wondering if you can give us some insight as to where you and your government sit on the future of the Donkin mine. I know we've had some conversations before and I'm curious as to where things are today.

 

MR. YOUNGER: Some of it is commercially sensitive so I can only give it at a higher level, so I apologize for that. I'm not trying to dodge the question. We have had active discussions with the partners starting within 24 hours of the election, before we were even sworn in, with parties involved in the Donkin mine.

 

We are interested in seeing the Donkin mine happen for many of the reasons that you're talking about, but primarily to displace the imported coal side of things. As well, you would know the Point Aconi strip mine has closed and the Stellarton one is winding down, so the availability of domestic coal is - there are a couple of other projects being talked about, but really at the moment we'd be switching to all imported, or mostly imported otherwise.

 

If we can switch that, we're interested. We've had discussions with Nova Scotia Power; they're interested. I just say that because there was at one time reports that they were not interested, but they are - but they obviously can't make it happen. I think the member would agree with me - we don't necessarily want to see ratepayers paying to run a coal mine so that would be the only way Nova Scotia Power could make that project happen is to suddenly take it and run it themselves, and they're not in the coal mining business.

 

Media reports recently have suggested there are a number of parties interested in negotiating with Xstrata - or are negotiating with Xstrata - on the possibilities. We've been engaged in the process. We're not negotiating it, obviously, because they're between private companies, but we have brought parties to the table to talk and we've made sure people are aware. There are actions that the Department of Natural Resources has taken to ensure that at least negotiations and discussions are happening.

 

Obviously in our ideal world, we would like to see things moving more quickly and there is a lot of speculation on why they aren't. Most of that is speculation though.

 

MR. MACLEOD: Thank you for that. I appreciate that very much. I'm just going to shift gears for a second because I know you've been answering questions for a while. Just on the fixed link and the activities and the work that it has the potential of creating - recently we saw some contracts let on Cape Breton Island for clearing of rights-of-way where people and equipment from New Brunswick came in to do the job.

 

My question to you is, has the Department of Energy made any overviews to the developer to make sure that Nova Scotians have a better shot at getting the work? I mean, part of the sales pitch that was given to the community was it's going to create jobs in your community, and then you find people coming in from another province and doing the work. That was very disturbing to the people who had actually been equipped to do the job, who had attended the meetings and were told that they still didn't qualify. They even went to Newfoundland and Labrador to attend the bidders meeting, and the people who got the contract apparently didn't.

 

MR. YOUNGER: It was a Nova Scotia company that won at least one of the clearing contracts in Cape Breton. There may have been multiple contracts and it is possible that one of them was one by a New Brunswick company.

 

MR. MACLEOD: No, it was a Nova Scotia company that brought in gear and people from New Brunswick where they do a lot of their own work.

 

MR. YOUNGER: I'd have to check into that.

 

MR. MACLEOD: There's just a lot of Cape Bretoners who aren't working and I don't understand why you would have to bring in people and equipment after the downturn . . .

 

MR. YOUNGER: We'd have to find out why they did that. I do know that there was some discussion with some of the First Nations because there were some Cape Breton First Nations working on some of those clearing projects as well, but there was also a question as to why there weren't more. I'd have to check into it because, as I say, we knew it was awarded to a Nova Scotia company, but then sometimes what happens in these is in the subcontracting, you don't know where it ends up.

 

MR. MACLEOD: I'd really appreciate it if you could find out that information.

 

MR. YOUNGER: Absolutely, I can ask, yes.

 

MR. MACLEOD: Just to go back for a year and a half ago or two years ago, as you know, we were struggling to keep the mill in Port Hawkesbury open and we were struggling to keep people with their equipment working. Then the work comes up that potentially they could have done. I know that's not your department but I also know how you feel about keeping Nova Scotians working.

 

MR. YOUNGER: No, absolutely, I'd be happy to look into it. It's the first time I'm hearing about it.

 

MR. MACLEOD: I appreciate that and with that, Madam Chairman, I would like to thank the minister for his time and I have no more questions.

 

MADAM CHAIRMAN: Shall Resolution E6 stand?

 

Resolution E6 stands.

 

Resolution E19 - Resolved, that a sum not exceeding $7,492,000 be granted to the Lieutenant Governor to defray expenses in respect of Communications Nova Scotia, pursuant to the Estimate.

 

Resolution E46 - Resolved, that the business plan of the Nova Scotia Provincial Lotteries and Casino Corporation be approved.

 

MADAM CHAIRMAN: Shall the resolutions carry?

 

The resolutions are carried.

 

MR. YOUNGER: Thank you for your time, Madam Chairman.

 

MADAM CHAIRMAN: Thank you very much, minister. We appreciate you being here and we will recess very briefly so that Finance can get prepared.

 

[3:52 p.m. The subcommittee recessed.]

 

[4:01 p.m. The subcommittee reconvened.]

 

MADAM CHAIRMAN: Order, please. This is the Subcommittee of the Whole on Supply, the estimates of the Department of Finance and Treasury Board.

 

Resolution E8 - Resolved, that a sum not exceeding $13,529,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Finance and Treasury Board, pursuant to the Estimate, and the business plan of the Nova Scotia Power Finance Corporation be approved.

 

MADAM CHAIRMAN: We will start with opening remarks from the minister.

 

The honourable Minister of Finance and Treasury Board.

 

HON. DIANA WHALEN: Good afternoon, thank you for the opportunity to speak about the Department of Finance and Treasury Board's budget for the 2014-15 fiscal work, and the work of my department and our agencies.

I'd first like to introduce for the committee members a few of the people who are here with me today. Joining me on my right is Margaret MacDonald, who is the Deputy Minister of the Department of Finance and Treasury Board. We also have with us Rob Woods, who is the Acting Manager of Financial Services. We've had a little changeup because we weren't expecting, at the very beginning, who was going to be here; anyway, we're well served.

 

It is my honour to serve as the Minister of Finance and Treasury Board for Nova Scotia. As you are aware, these two departments had previously been separate entities within the government until our Executive Council was sworn in. We felt it was important to have these two departments together as one, as so much of their work was already tied closely together. This merger will provide better coordination of policy, financial advice, and the services required of a central agency like ours. I think we've seen over the past several months that bringing together these two departments was the right choice.

 

It has been my pleasure to get to know and work with the many talented professional and dedicated public servants of the Department of Finance and Treasury Board. These individuals work to the highest standards of their respective fields and take a lot of pride in all they do on behalf of the people of Nova Scotia. I've seen this first-hand over the past six months as we worked to put together and introduce the 2014-15 budget, and I was glad to be able to acknowledge some of the people with me today.

 

The Department of Finance and Treasury Board supports government by establishing a sound fiscal plan and financial framework to support the priorities of the province. We provide financial leadership, administration of the fiscal framework, development and monitoring of the province's expenses, overseeing financial controls, and providing transparent financial reporting to Nova Scotians. Since taking over as Finance and Treasury Board Minister, that has been a top priority of mine. When I presented the first fiscal update in December, I pledged to Nova Scotians that everything we presented would be frank, open and transparent. We followed through with that during our first budget a few weeks ago.

 

Before I move on to highlighting more of the important work of our department, I'd be remiss if I didn't make note of another structural change that has affected our department. With the creation of the new Internal Services Department, Finance and Treasury Board will be seeing over half of our staff transferred; five divisions within Finance - payment transaction services, operational accounting, payroll-client relations, internal audit, and the Nova Scotia SAP service management group - will now be reporting to Deputy Minister Conrad and supporting Minister Kousoulis. I know it will be a change for those people and their work, but I also know they're looking forward to the opportunities ahead in better aligning their work with other parts of government.

 

My department plays an important role in supporting the entire government. Some of this work includes providing support in all aspects of financial management to other government departments and agencies; ensuring effective money management; maximizing returns on investments and minimizing debt servicing costs; managing the debt portfolio, Treasury functions, and investor relations; ensuring timely payment of interest and principal on debt issues; timely receipt of investment income and debt proceeds; and accurate forecasting of provincial debt servicing costs and investment income; and regulating the operations of credit unions and trust and loan companies through the Office of the Superintendent of Credit Unions.

 

We also oversee the Credit Union Deposit Insurance Corporation, which provides deposit insurance for our credit unions and caisses populaires. One hundred and fifty-four thousand Nova Scotians have assets in excess of $2 billion in our 29 credit unions, and CUDIC provides up to $250,000 in coverage, the highest in Nova Scotia, providing peace of mind to depositors.

 

Also, regulating the business of insurance in the province and enforcing the Insurance Act through the Office of the Superintendent of Insurance; forecasting tax revenues; conducting analysis of current and potential tax measures; developing implementation and legislative vehicles; providing technical advice and consultation to other departments and agencies; overseeing government expenditures; expenditure planning and expenditure management initiatives; providing financial assessments and advice on government policy and spending initiatives; coordinating capital planning for government as a whole.

 

As well, coordinating public sector labour relations; supplying core demographic and economic forecasts for the government's budgets and long-range planning; delivering regular reports and analyses about economic and social conditions in Nova Scotia; maintaining a set of data and models that apprise the impacts of major economic events; investments in policy changes for the provincial economy; preparing the province's Public Accounts containing the annual consolidated financial statements for government departments, as well as over 100 government-controlled entities; and ensuring the province's financial community is aware of accounting principles and reporting requirements. That's the end of the long list.

 

Certainly our most public work is in delivering the provincial budget, forecast estimates and updates, and the province's year-end Public Accounts. Putting a budget together is a rigorous process that is done to extremely high standards and Nova Scotia has a very transparent budget reporting process. The work of our department receives a great deal of scrutiny. It is vetted by outside experts and poured over by the media and Opposition.

 

Our staff work with experts from the banks, universities, and other economic bodies to review and validate economic forecasts, and our revenue estimates are reviewed by the Auditor General. The people who put our budget together are highly committed to exercising due diligence and ensuring that everything they produce follows the strict guidelines of their professions.

 

One of the key portions of the public's exposure to the provincial budget has been the Finance and Treasury Board Minister's annual pre-budget tour. I see great value in the tour and was happy to continue it this year, but I've also committed to some changes that I hope will help give Nova Scotians a stronger say in the budget. Going forward, I will be meeting with people in groups year-round to discuss - as opposed to just the six to eight weeks before the budget. While timely, the few months before budget day do not provide us nearly enough time to incorporate what we hear into the budget. Work starts months in advance and I want to hear from Nova Scotians to know what good ideas they bring forward and to get them seriously considered and discussed.

 

During my tour this year, I was able to visit Sydney, Port Hawkesbury, Antigonish, Pictou County, Truro, Amherst, the Valley, Yarmouth, the South Shore, and of course metro Halifax. I met with everyday Nova Scotians, academics, politicians, business people, and students of all ages. I also held targeted meetings with key stakeholder groups.

 

I kicked off the public portion of my pre-budget tour at Sydney Academy. It was my pleasure to meet with those students in Grades 11 and 12, and present to them some of our challenges and opportunities, and more importantly, hear their very real concerns about the future. After hearing that they fear they won't have a job in Cape Breton or even in Nova Scotia, I know we made the right investments in the budget through things like the Graduate to Opportunities and improvements to apprenticeship programs.

 

With the previously mentioned structural changes to our department, departmental expenses will be going down considerably. The 2013-14 estimate of expenses for the Department of Finance and Treasury Board is $41.4 million, but the estimate for 2014-15 is down to $13.5 million. The majority of this 67 per cent decrease is related to five of our divisions and almost half of our staff moving to the new Department of Internal Services. We're happy to cover the variances amongst divisions later, if the members in the Opposition wish.

 

There is, of course, a corresponding reduction in my department's FTEs from an estimate of 213.5 in 2013-14 to 110.4 this year, in 2014-15. The bulk of this change can be explained by the addition of 19 FTEs with the merger of Finance and Treasury Board when they came together, and the transfer of 120 FTEs through the relocation of payment transaction services, operational accounting, payroll-client relations, internal audit, and the Nova Scotia SAP service management to Internal Services.

 

One of the key undertakings of my department this year will be conducting a tax review. This was a commitment of our government and we acted quickly to get it underway. In the past I have been critical of our tax system. It's a system that has been added to and subtracted from in piecemeal fashion by successive governments. When you have that kind of a system it's difficult to know whether the tweaks have helped or hindered. In fact, a review like this has never taken place and its time had come.

 

This review allows us to step back and look at what's working and what isn't within taxes, fees, and regulations. Through this review we will chart a path that considers simplicity, fairness, competitiveness, and sustainability. We know in the short term that we will not be able to afford tax reductions but we do know there are big impacts we can make through regulations. We will make adjustments and lay out a plan to get where we need to be in the long term.

 

Everyone knows our region is facing some daunting challenges, and economic and population trends are alarming. Premier McNeil and Ray Ivany have said that the status quo is no longer an option. To halt the slide we have to do things differently. A big part of a future for Nova Scotia is one in which our economy is far stronger. The private sector drives economic growth. Government is a partner and we have an important role to play, but we need help to create conditions that attract companies and investment that will allow businesses that are already here to grow and prosper.

 

Our tax, fee, and regulatory system is a big part of what creates a fair and competitive environment for business. We have brought Laurel Broten on board to lead the review, supported by a team within our department and several others. Laurel is a former long-standing senior member of the Ontario Government who recently relocated with her family - her husband and two young children - to Nova Scotia. She has held numerous ministerial posts, including Intergovernmental Affairs, Education, Children and Youth Services, and vice-chair of Treasury and Management Board. She has developed a variety of strategies in areas including domestic and sexual violence, air quality and climate change, and child care and child welfare services.

 

Laurel has jumped in right away and has been meeting with people all over the province. I know from our own tour that a meeting with Laurel has become a hot ticket in the business community. They want the opportunity to participate and have their say. As recently as today I attended a chamber lunch and met people who have already participated in these round tables.

 

I mentioned earlier that we expect that regulatory changes can have a big impact on Nova Scotia business, without having a big impact on the revenues we need. I'd like to provide two simple examples that were brought forward to me during pre-budget meetings. I had a meeting with one of the province's biggest trucking companies and a major employer. I was so pleased when I walked into the meeting and their senior management team had a list of things they wanted to discuss with me. They were keen and prepared to bring issues forward to the Finance and Treasury Board Minister.

 

In that meeting they presented a few very specific regulations that they feel don't make sense: they were either outdated or only found in Nova Scotia. They also told me that with a few small regulatory changes, they expect they could save almost $2 million a year and that's $2 million for just one company. We know that if they could actually have those savings they could deliver the products cheaper within Nova Scotia and make a lot of other savings that would perhaps trickle down.

I also met a woman who is the curator of a small museum in rural Cumberland County. That museum, which is open for five months a year, has a small café. The revenues from this café are vital in keeping the museum open. While the museum is open five months a year, they can only operate the café for four months a year. Why? Their options were an operating permit for four months or a permit for the full year. This small museum cannot afford to pay for a full-year permit so they chose the four months and they have one month that they operate without the café open, which cuts into their visitor-ship and their profits.

 

We know we'll get input like this from across the province. I very much look forward to the recommendations that Ms. Broten will bring forward this Fall to create a tax, fee, and regulatory structure that positions Nova Scotia to deal with its demographic, fiscal, and economic challenges.

 

Another initiative that I'm proud to be bringing forward after fighting for many years in Opposition is the introduction of the u-vint legislation; actually, first reading was on Thursday. As you likely know, I introduced legislation six times while in Opposition, seeking to make u-vint facilities legal. After a long and storied history over successive governments, we moved ahead with consultation. This consultation which we launched in January received a great response.

 

As a starting point for the consultation, we asked stakeholders to review Prince Edward Island's legislation. P.E.I. was the most recent province to put legislation in place and, therefore, had the most modern laws and, as well, had conferred with other provinces before bringing theirs in. One thing we heard early from the industry was that they were very opposed to an additional levy. I actually agreed and was pleased to provide clarification in February that we would not be putting a levy on u-vint operations as P.E.I. does. In total, we had 21 submissions through the consultation. We heard from industry, consumers, health promotion organizations, and the general public. I appreciate the time that each one of them took to give us their thoughts.

 

Something else that came back loud and clear, however, was that P.E.I.'s regulations wouldn't work in their entirety here. As I said in my bill briefing, we will embark on establishing our own regulations and I hope to go back to stakeholders as soon as possible with these regulations for their review. We've definitely committed to involving them at every stage.

 

The legislation we put forward earlier this week will allow for the introduction of regulations. It also did a number of other things. It defined a ferment-on-premises facility and amended the definition of a licence to include a licence for these facilities. It repealed the section of the Act that allows the NSLC to seek injunctions - without licensing in place, this is no longer required. It established the authority for the Alcohol and Gaming Division of Service Nova Scotia to supervise and regulate u-vint facilities. It established regulation- making powers, including the authority around licensing, a licensing fee, reporting to government and so on. It clarified a section of the Act that will not apply to u-vints. This section provides for advertising and notification by a municipality and voting by residents for an establishment where alcohol is consumed; alcohol will not be consumed at u-vint facilities, so that was not necessary.

 

I look forward to hearing from stakeholders again in bringing forth regulations that will finally provide some clarity and a regulatory framework for the industry.

 

As Minister of Finance and Treasury Board, I am responsible for three government agencies: the Nova Scotia Securities Commission, the Nova Scotia Liquor Corporation, and the Halifax-Dartmouth Bridge Commission. I'd like to briefly give an overview of the important work of these agencies.

 

The Nova Scotia Securities Commission administers the Securities Act and Regulations. The commission's mandate is to provide investors with protection from practices and activities that tend to undermine investor confidence in the fairness and efficiency of capital markets to foster the process of capital formation. The commission's mandate is achieved through the commission's core functions: regulatory, administrative, and adjudicative activities; policy development; registration and compliance; investor education; and offering document review and continuous disclosure review, and investigation and enforcement.

 

The commission is led by Chair Sarah Bradley and six commission members, and Executive Director William Slattery. In order to protect investors and carry out its mandate, the commission oversees the registration of investment and mutual fund dealers and companies and the review of offering documents, and carries out compliance reviews to ensure that regulatory requirements are being met. If they detect a breach of the legislation, their enforcement branch investigates and brings administrative proceedings against the parties involved.

 

This work may result in the commission's staff working with other law enforcement agencies. The commission has the power to make rules that have the force of law and to publish statements that serve as guidelines for various sectors of the regulated community. The commission also works hard to advance investor education through programs that inform investors about responsible investing, fraud alert, and the structure of the Nova Scotia capital market system.

 

The investor education coordinator outreaches to local businesses to provide information on how to raise capital in Nova Scotia through initiatives such as the CEDIF program, and most recently the commission's proposed crowdfunding exemptions.

 

The use of social media and public engagement events helps the commission to reach as many Nova Scotian investors as possible. Another key focus of the commission is the maintenance of a stable, secure regulatory environment in Nova Scotia for investors and for those seeking to access our capital markets to finance their business initiatives. Market confidence and stability are enhanced by the compliance and enforcement activities I previously mentioned.

 

Securities markets have evolved greatly as a result of information technology development. These markets are increasingly subject to economic forces that are making borders less effective as barriers to outside forces and events. To serve Nova Scotians most effectively, the commission is a member of the Canadian Securities Administrators, which is a voluntary umbrella organization of Canada's provincial and territorial securities regulators. This group works to improve, coordinate, and harmonize regulation of the Canadian capital markets. As a member, Nova Scotia is committed to making necessary changes to our securities regulations, and over the past number of years we've put forward changes to our securities law that brings Nova Scotia in line with other provinces.

 

Not long after becoming Minister responsible for the Securities Act, I joined my fellow ministers in Ottawa for a day of meetings. There remains much debate on the national level about how best to harmonize securities regulations. Ontario and British Columbia have joined with the federal government to create a regulatory body. Some provinces favour the work that has been ongoing, which we believe has been working quite well. I know the commission will continue to work with our fellow provinces in the coming year.

 

Total revenues at the commission are estimated to be $15.8 million in 2014-15: $11.6 million from document filing fees and $4.2 million from annual registration fees. The total expenses for the commission are estimated at $2.7 million. So you can see the Nova Scotia Securities Commission does contribute revenue to the Province of Nova Scotia to the tune of about $13 million a year. As I said, its primary function really is investor protection and ensuring that we are in sync with the other provinces.

 

The Nova Scotia Liquor Corporation is probably the one that I spend more time on than many other things, to be honest. It manages the receipt, the distribution and the sale of beverage alcohol in Nova Scotia. They do so responsibly - ensuring the product is sold only to Nova Scotians of legal age.

 

The NSLC is the largest single-banner retail business in Nova Scotia and the fourth largest retail of beverage alcohol in Canada. It operates 106 corporate stores and 50 agency stores. The NSLC is often the subject of public debate, and this government has said very clearly it has no plans to privatize the sale of beverage alcohol. Past governments have looked down that road and studied various scenarios, but found that the NSLC should remain as is.

 

The Liquor Control Act describes four key responsibilities for NSLC: promotion of social objectives regarding responsible drinking; promotion of industrial or economic objectives regarding the beverage alcohol industry in the province; attainment of suitable financial revenues to the government; and attainment of acceptable levels of customer services.

The NSLC has adapted with changing demographics and societal attitudes towards drinking. They are an invaluable partner in the work of the government and society to address issues like drinking and driving, and the need to enjoy beverage alcohol responsibly. Corporate social responsibility is at the heart of the organization and it's a responsibility the NSLC takes very seriously.

 

The NSLC also acts as a regulator - a role it has carried since its inception in the early 1930s. The NSLC regulates manufacturers and distributors of alcohol while the Alcohol and Gaming Division of Service Nova Scotia regulates licensed premises. This is a regulatory model found in many provinces.

 

I have said many times whenever asked that the NSLC is an important source of revenue for our province - a source of revenue that helps pay for health care, education, and other vital public services. In the face of a changing retail environment where people's preferences are shifting from beer to spirits to wines, the NSLC will provide an estimated $223.5 million to the province this year.

 

Before I conclude I'd like to briefly discuss the important role the NSLC plays in promoting local products. Everyone knows that Nova Scotia has an impressive wine industry and a growing micro-brew and cider industry. Whether it is well-known brands like Propeller and Garrison or up-and-comers like Boxing Rock from Shelburne, the NSLC is at the forefront of supporting and promoting these local brands. Compared to last year, sales of Nova Scotia wines grew by 7.7 per cent; sales of Nova Scotia cider were up 199 per cent; and sales of Nova Scotia craft beer grew by 25.5 per cent. This is great news and something for the NSLC and all of us to be proud of.

 

The Halifax-Dartmouth Bridge Commission ensures safe, efficient, reliable harbour transportation infrastructure at an appropriate cost. They operate and maintain the Angus L. Macdonald and the A. Murray MacKay Bridges, which are valuable pieces of transportation infrastructure in this province. Essentially the people who work at the Halifax-Dartmouth Bridge Commission are the people who ensure you get across the harbour safe and sound. When the Macdonald Bridge first opened in 1955, the commission's focus was mainly tolling, plowing, and salting, but running the bridges today is very different than that time. For one thing, there are two bridges across the harbour; for another, there are almost 34 million crossings a year, compared to about three million in their first full year of operation.

 

The Bridge Commission and its operation has changed a lot in the last 58 years; they have gone from tokens to transponders, from hand-painted signs to electronic message boards, and from weather vanes to weather stations. It is this progress and the use of leading-edge technology that prompts one employee of the Bridge Commission to say that these are two of the safest miles of highway in the province. There's nothing that the staff of the Bridge Commission takes more seriously and personally than the safety of bridge users.

 

Unlike some other provincial commissions, the Bridge Commission doesn't receive any monies from the government. The operations, maintenance, capital costs, and debt repayment are done with money generated from the tolls. Although the cost of building the two bridges has been fully paid off, the Bridge Commission maintains a debt. The bridges require a great deal of upkeep and maintenance, some of which is paid for through this financial debt.

 

Heading into 2014-15, Harbour Bridges will continue to focus on providing safe, efficient, reliable harbour transportation infrastructure at an appropriate cost. This will be accomplished through the following priorities. They conduct maintenance and capital projects to ensure long-term safety of the bridges. These projects are determined based on detailed annual inspections. They minimize incidents from occurring and clearing them quickly when they do. They continue to use traffic management systems to manage demand and promote electronic tolling; and they operate with strong, prudent fiscal management.

 

The Bridge Commission is also continuing along with planning for the re-decking of the suspended spans of the Macdonald Bridge. This is an amazingly complex and large project that will ensure the long-term safety of the bridge for the commuting public. The onsite work will begin with the first panel being replaced in mid-2015. The project includes replacing the road deck, floor beams, and stiffening trusses and suspender ropes on the suspended spans of the Macdonald Bridge. Once complete, the only original components of the suspended portion of the bridge will be the two lower towers, the main cables and the anchors.

 

The Halifax Harbour Bridges recognizes the important role the Macdonald Bridge plays in HRM's transportation network and intends to carry out this project with a minimum disruption to the travelling public. Therefore, this project will be completed with overnight and some weekend closures. It will open to vehicular traffic during the day. This is only the second time the suspended span of the suspension bridge has been replaced at night and opened during the day in the world. The first time was in the late 1990s on the Lions Gate Bridge in Vancouver which, incidentally, is a sister bridge to the Macdonald Bridge.

 

The Bridge Commission is working with the same bridge engineering firm. The Bridge Commission is estimated to have revenue of $32.8 million and expenses of $20.7 million, so its net operating income is $12.1 million. All revenue generated from the tolls remains with the bridges, and net operating income is invested in the operation and maintenance of the two bridges.

 

Before I wrap up I'd like to further address the elimination of the Graduate Retention Rebate. I expect it will come up today so I wanted to address it as part of my opening remarks. I understand some people are disappointed that the Graduate Retention Rebate will not be going forward. There is no doubt that some people have benefited from it, but this is a question of whether or not this program was helping the people it set out to help and achieving the goals that it was set up to achieve. The previous government, and the Tory Government before that, first put a tax credit into place for young people and then further introduced the rebate. The cost of that credit has grown as more people graduated. This year it was expected to cost almost $50 million.

 

A program that size, after being in place for seven years, needed to be looked at. We took the time to review the program and the data just wasn't there to support it. We reviewed who was receiving the credit and who wasn't able to claim the credit and whether it was doing what it was intended to do - the retention of young people in our province. That process highlighted many issues; first of all, more than one-third of the GRR recipients are over the age of 30. That would suggest that a significant portion of the recipients were well outside the age range that we are trying to target to keep young grads in our province. I congratulate those who return to university later in life to upgrade their education by getting a master's degree, but again, it's not what the program was intended to support.

 

We also know that many young grads aren't able to claim the credit at all because they pay so little in income tax. This is a result of the lower-than-average incomes many graduates earn in the years immediately after university. In the case of young grads who were able to claim the credit, many were not able to receive the full rebate, again because of lower salaries or lower income tax paid. So while the full credit that they could receive was $2,500 for university students and $1,750 for college students, many new grads, again the ones we're trying to target, weren't claiming anywhere near that, if any at all.

 

Our analysis also showed that older graduates who have higher incomes were able to take greater advantage of the rebate, disproportionately so, and the older the claimant, the more they were able to claim. Most importantly, our young graduate retention numbers clearly show that there had been no improvement in retention of our people.

 

I know this credit was brought in with the very best of intentions but after seven years with graduate tax credits, we now have the evidence. Unfortunately, graduates are continuing to leave at the same pace that they were seven years ago. Since the program began in 2009, the numbers of new graduates aged 20 to 29 who are leaving has steadily increased, peaking last year at a net loss of 2,600 people. Every one of us knows or knows of a young person who has left for a job out west; in fact, some of us have children who have gone out west - I have spoken to many of my colleagues.

 

Our internal analysis of the effectiveness of this program is well-supported by what student groups and others told us. I have been saying for some time that this is absolutely critical that we keep our young people right here, where they can become a driving force in our economy and in our province's future.

 

Demographics are the key issue of our time. Without a healthy and well-educated workforce we will not be able to capitalize on and benefit from the important opportunities in front of us. I completely agree with Ray Ivany when he says people, especially younger and more skilled people, will pursue opportunities to improve their situations and realize their aspirations. We know this is true; just last year Nova Scotia saw record out-migration. We can't continue to keep losing our young, bright graduates and tradespeople to the west. We must turn this around, or our lives and living standard will continue to decline or possibly decline.

 

I know that some graduates in Nova Scotia benefited from this rebate. I completely understand that they are unhappy to see it end, but it is clear not only to us but to many groups that the GRR is not keeping our young people here. That is the central reason we have discontinued the Graduate Retention Rebate. Wages and the availability of jobs are the most important factors for young graduates when deciding where to live. I've travelled now from one end of the province to another, speaking with high school and university students as well as employers. In several months on the road I heard story after story from parents and young people about the challenges our youth face in finding a job and how this has forced them to look elsewhere. It was hard to hear from students at Sydney Academy when they told me that they thought they would have to leave their homes and go to another province to start their working lives.

Young people also told me that too many employers are looking for two to five years of experience for an entry-level job. These young people need to get their foot in the door and they need opportunities in order to be able to stay in Nova Scotia. At the same time, employers told me that they would be more willing to hire new graduates if some of the costs were offset. Understandably it takes time to get young people up to speed and working to full productivity.

 

The number-one concern of new graduates and the biggest deciding factor in where to live is finding a job. We have tried the GRR and it was not working, and as a government we have a responsibility to Nova Scotians to spend their tax dollars on programs that do work. We have too many economic and demographic challenges to do otherwise. We must look for new and better ways to keep our young people here, so we are going in a new direction: one that supports students while they're in school and helps new graduates get what they need most here - a job.

 

We're refocusing on helping them find the opportunities they need to stay. This year we'll spend over $625 million on support for post-secondary students and new graduates. This is an increase of $13.9 million from last year and an increase of $168.1 million from 2007-08.

 

Over the past three years, the province has invested more than $123 million in student assistance, making it easier for students to access post-secondary assistance and graduate with less debt. This includes the Nova Scotia bursary program, which puts $1,300 directly in the hands of each Nova Scotia post-secondary student studying in Nova Scotia.

 

Many of these initiatives date back to the previous Tory Government and just the past NDP Government. One of the things the Ivany report said was that we should look at things that have been working well and work beyond a mandate of one government but continue to pursue things that are working well for the Province of Nova Scotia, and I think this is a good example.

 

Nova Scotia graduates no longer have to pay interest on their provincial student loans, saving them money as they start their careers. This was a commitment we made early on and we're keeping our promise. The average Nova Scotia student loan is about $5,600. Eliminating the interest will save graduates about $800 over the lifetime of the loan. We hope this provides some relief to graduates as they leave campus and enter the workforce. Students have said this was going to make a difference to them and to their friends and classmates.

 

The 2014-15 budget also contains many other investments that will help young people and graduates get their first job and attach themselves to the workforce. These are strategic foundational investments to build our workforce and our future. There are opportunities here, but to capitalize on them we need a workforce that is healthy and well-educated, and we need to connect that workforce with jobs or they will leave. With that, I would be very happy to take questions.

 

MADAM CHAIRMAN: We're going to start with the NDP caucus.

 

The honourable member for Halifax Needham.

 

HON. MAUREEN MACDONALD: I want to first welcome the staff and the minister, of course, as well. It's nice to see you again, deputy, and nice to have you here. I don't have an enormous amount of questions. The minister did cover quite a significant piece of the landscape as she talked about her department and the various other responsibilities, but I do have a few questions that tend to be more policy-oriented than they are around the actual numbers.

 

I want to start by talking about the reorganization of the department. In particular, one of the things that I'm puzzled about is the move of the Internal Audit Centre as part of all the various components that have been moved. The reason I ask about this is that it's just my kind of layperson's understanding that this audit centre in particular - I mean, the role of this audit centre is to ensure that we have the best practices throughout government, not only in the Department of Finance but finance very broadly, and that we have the checks and balances in place to ensure that there aren't any problems in the system that are deliberate or otherwise with respect to the large amounts of public money that we're dealing with.

 

I know over the years the Auditor General from time to time in annual reports has made comments and recommendations around the importance of a strong internal audit centre and the function of that centre, and the building of the capacity in that centre to accommodate such a large public enterprise with such a large budget. My question really is about why this particular entity has been moved out of Finance and Treasury Board into the new department. It seems to me it's kind of like putting the chickens and the foxes together, in some ways. I don't know if that's just, as I said, a layperson's - I don't quite get why that function should be there rather than where it was in the Department of Finance. It just seems to me that a more appropriate - so I'm wondering, is there a policy reason for that? What is the rationale for moving that particular centre into the new department?

 

MS. WHALEN: Thank you very much for the question. What I'm led to believe in how this came about is that all of the services that are strictly internal, that are serving internal agencies if you like, have gone together into this new Internal Services. Certainly internal audit did exactly that, it isn't outward-focusing, it offers no programs for anybody outside of government, it's very much generating internally. That was really it, that we aligned any of the functions that were strictly serving within government into one department and that's how it came to be.

 

MS. MACDONALD: I can see that distinction but it doesn't capture, I think, the concern about the kind of role that an internal audit division would play, in terms of just what its role is, that it would be part of that same package of other services. It seems to me it is kind of an elevated look, in an objective, arm's-length way, from any other department, rather than being imbedded in a department that actually is engaged in doing purchasing and payroll and contracts and all of those kinds of things. That's really where I'm coming from.

 

As I said, I'm a layperson, I'm not an accountant and I'm not a tax lawyer or whatever, but when I saw that it was one of the things it struck me as just kind of the odd piece out. Everything else in terms of the reorganization made sense to me but that didn't make sense to me.

 

MS. WHALEN: I might just add to that, it still is going to be reporting to the Internal Audit Committee which is made up of deputy ministers. I think that's important because it still has that function and that control, if you like. Definitely they're a great group. I know when I was in Opposition myself at one time they were very small and they've been built up and strengthened and they do an important job.

 

I had been critical in the past that we didn't have much internal audit function and I think they're doing a good job now.

 

MS. MACDONALD: I agree with you, they have very good capacity and that capacity has built over the last number of years. But again, it's just where it's located, it raises some questions. I would assume that at some point down the road the Auditor General's Office will revisit, which they have a tendency to do, come back and look at some of those reorganizations and functions that they're concerned about.

 

That brings me to a question about the expenditure management initiatives that have been underway in the past. I think that it's an ongoing concern with respect to the capacity of the province to deliver the public services that we currently have. So with the merging of the Treasury Board and Finance and the kind of reorganization that has gone on, I'm wondering if the minister could tell us about the expenditure management initiative and what the status of that initiative is.

 

MS. WHALEN: It's certainly one that has been brought to our attention and is continuing. The efforts that were begun are continuing. I know with the procurement changes that were brought into place more than a year ago now, I believe those contracts were five years in duration, so certainly that covered office products and automobiles - there were a couple of others involved in that - and they're all set. I guess to be fair, we're looking at the results of that and we'll be monitoring it, but there will be no change in it at this point because there's a five-year length for the companies that are currently engaged.

 

There were, as you know, some companies that felt left out and some local companies that would have raised the issue that perhaps we might be losing on the local economy by not choosing them rather than choosing companies that had less of a retail or less of a presence here - fewer employees and so on. It's something we definitely want to look at and monitor over a period of time, but the Treasury Board staff are quite adamant that there are savings being made, and that's important.

 

As you know, with all of the demands on spending, we want to try to make those savings wherever we can. Other suggestions continue to come forward of how another stage of that can be brought forward and we can extend it further.

 

MS. MACDONALD: I do want to talk about - and I don't know what it is, but I have a mental block about this woman's name. I can never get it out right - Laura . . .

 

MS. WHALEN: Laurel Broten.

 

MS. MACDONALD: I'm very interested in knowing more about her contract. Can you tell us about how she came to be in this position - whether there was a competition; whether anybody else was considered for the position; whether there was a fair hiring process as there would be in other parts of the Public Service?

 

MS. WHALEN: That's a very good question and I was there when some questions were asked of the Premier on this, as well. I know he had invited you to wait for the Minister of Finance . . .

 

MS. MACDONALD: It's his fault - we'll blame it on him.

 

MS. WHALEN: That's all right, I don't mind at all. I'd first of all like to say I really think that she has been an excellent choice. I was at a chamber lunch today and attended a round table with the federal Minister of Finance. The new federal minister was there. A number of the people who were there at that round table have already participated in some of her sessions and they were very complimentary in how bright she is - and just the questions that she asked and the challenges that she placed before them.

Just to give you a little bit of an idea, this was one of my assignments as a new Minister of Finance. It was given to me in my mandate letter to say that this was a commitment of our election and we were to get this underway. It began with basically a discussion of how it should look. It's very broad, as you know. The commitment was a comprehensive tax review, and that's taxes, fees, and regulations, so we knew we had a very broad spectrum we needed to cover and we needed somebody who would be able to tackle that task, really.

 

I don't think it's unusual within government to look for individuals with certain skill sets. This wasn't one that we looked at as much as a consulting contract. I used to be a consultant in the 1990s here in Halifax and certainly had applied for a lot of government jobs, but this was one where we felt we needed a project lead more than a consultant per se. She's working with a team from within government. She has cross-departmental government people for the regulatory side and people that you would know well as experts in the economy and tax that are working with her from the Finance Department.

 

We looked at a number of people. We looked at some past deputy ministers, which as you know, we can list a whole series of studies that have been done by former deputy ministers. We did consider some people who had that type of experience and we thought of people in other provinces that might be good - people who lived in Ontario or elsewhere. We were basically brain-storming and thinking who might be able to do this who has done it before. We looked at what other provinces may have done a recent tax review. We didn't find any that were quite to this extent. Alberta has done several. Probably their biggest was around 2000 and lead to their flat tax of 10 per cent across the board, which I doubt very much we could afford to do here, but we did look at their report.

 

We tried to sort of look at what was involved and I personally had been introduced to Laurel on one occasion. I knew she had moved here last July or in the summer, I believe, and her experience would be very useful. She certainly understood government. She has been a vice-chair of Treasury Board in Ontario. She would understand the need for revenue, which was really important to me that we would be looking at - I know we will hear from those who just want tax cuts, and that will be an important voice, but we have to also understand government and what's required to maintain the services we have and the revenue streams we have.

 

Anyway, we looked at a number of people and the decision among a group of us was that this was the best choice.

 

MS. MACDONALD: There was no competition - is that what you're saying?

 

MS. WHALEN: There was no competition.

 

MS. MACDONALD: It was kind of a selection process, an informal selection process?

 

MS. WHALEN: Under our procurement rules it would be considered a sole-source contract.

 

MS. MACDONALD: I did have the occasion to meet with her and I very much appreciated having the opportunity to meet with her. She certainly comes with a good resumé from government in terms of having had, as you say, government experience. I know that one of my former colleagues in education had travelled with her, as education ministers, and had very positive things to say about her in that context but I'm still trying to determine what her credentials or qualifications are for a tax review, to do a tax review. That really is where I'm coming from, it's not about - you know, I think she is a very engaging, experienced and bright person, but it's what those kinds of credentials are around the taxation system.

 

As you say, we've had quite a piecemeal kind of system over a number of years in Nova Scotia so even knowledge about our own tax system and what some of the features are of that system - I guess this is the concern I would have. So what are her credentials in terms of those kinds of expert credentials or qualifications that aren't just grounded in politics and political practice?

 

MS. WHALEN: Well I would guess again that being a minister for her entire time that she was in government in Ontario means that she was running departments. As you know, it isn't just political when you're in that role. It's not really a political role; it's a management role and an understanding of the operations of your department. It think that was a tremendous experience in itself.

 

She also has a degree in law and she worked as a corporate lawyer before she ever ran for office. I think that that again is a strong background, understanding the corporate world and their concerns, so she would bring that element as well. On the personal side, she's a mother, and she's a family person as well. I think she brings a lot of dimensions, is what I really want to say. The fact that she lived in Ontario and in fact, when I spoke to her, she has lived in five provinces, growing up and studying at different stages of her life, so it gives her an appreciation and I think maybe fresh eyes for our own provincial tax system. I think anybody with a good, solid background can come in and sit down and look at our tax rates and look at what brackets we have and look at who we are taxing and what tax credits we give and kind of get an overview of that pretty quickly.

 

What she brings, as well, is the advantage of being able to compare it to other places and to have a fresh set of eyes that I don't think we would have gotten if we had somebody who was completely immersed in Nova Scotia's taxes.

 

MS. MACDONALD: Does she have a personal services contract for this work?

 

MS. WHALEN: Yes.

 

MS. MACDONALD: How much is she being paid then for the work and can we have a copy of the contract?

 

MS. WHALEN: We announced it, I think, when she was engaged - it's $100,000 and $15,000 for expenses during the time that she's travelling and so on.

 

MS. MACDONALD: And that covers what period of time?

 

MS. WHALEN: It was from the end of February. I'm not exactly sure when it was signed but she began work at the end of February and, as I say, it will be until we get the final report, which I would hope to see - we sit in the Fall, I'd like it earlier in the Fall because I would really like it to help guide us in terms of decisions we would like to put in play for next year's budget. (Interruption) The contract officially is the end of October.

 

MS. MACDONALD: So now with respect to the tax review itself, can you give us a bit more information about specifically what is being reviewed and how it is being reviewed? Are there pieces of research being done? Are there numbers being crunched, for example, around let's say the film tax credit or the various corporate tax floors? I'm thinking of the small business tax that the floor was changed from $400,000 to $350,000. Is there hard analytical data being crunched as part of this process? I'm trying to get a sense of - I know you said it's quite a broad review in some ways, but what is the work that's supporting that review?

 

MS. WHALEN: You can appreciate that I haven't been sitting in any of the planning meetings and work that has been going on, but I know that it began with a big literature review of other tax reviews that have been done - any other studies that we'd ever done. In our own provincial Department of Finance there had been an undertaking under Minister Baker to begin to look at our tax system and to try to make sense of it. I guess it was an ambitious review. It had gotten bogged down in a lot of detail and really, probably because he was ill, didn't proceed and had never been completed. The work was available so that's a background to begin with. We were aware - I know that Ms. Broten asked for anything that had been done previously in the department.

 

The other important part is, as I mentioned, there is a team - they are all within our government - so we have people like Paul Davies who is the tax expert. I don't know if you knew, but Mike DeCoste has retired, unfortunately - very bad timing for a tax review.

 

MS. MACDONALD: Oh, I'm shocked.

 

MS. WHALEN: He was the one who knew a lot about this as well, but Paul and Tom Storring who does the economic forecasting and knows that side, they're certainly key in our department. Byron Rafuse is part of the team and is managing. As well, as I mentioned, there is interdepartmental because we're looking at regulations and we need advice and help from other departments. Priorities and Planning is helping with that and there is staff from Priorities and Planning that is part of the team that will be coordinating interdepartmentally, Service Nova Scotia - and you had mentioned in particular the film tax credit. We have people from Economic and Rural Development and Tourism who would be helping there to look at the impact and see how it's structured.

 

Again, we left all tax credits in and really with the exception of the Graduate Retention Rebate everything else is in there for them to review. I think it's important that it all get a look to see whether it is the right basket of things that we're doing and if we're getting benefit and if it's working.

 

MS. MACDONALD: Do fees get captured in this? You know how there are 1,100 fees or something like that.

 

MS. WHALEN: I think 1,400. We are including fees. You'll notice again this year that we didn't raise fees in this tax year so we did include fees. Again, that will be to see - we're trying to engage a lot with the business community and I would say that even in the announcement that we were doing this, we said there is an emphasis on trying to get the economy going.

 

Although we were including personal taxes and taxes that affect individuals, looking at where we can have the biggest impact, if we can find things that the business community are finding are obstacles or difficulties, that can be part of the package of making our province more attractive to do business in, so I would say we put a little bit of an extra benefit or emphasis - that would be the right word - on taxes and fees that relate to business. With that in mind, certainly fees are included, and in a lot of the round tables the business community is being asked not only about their direct tax levels, but also about fees and regulations, which we think we may be able to have more of an impact on.

 

MS. MACDONALD: How many round tables are being done and where are they being done? What is the methodology, I guess, for consulting and gathering information?

 

MS. WHALEN: To give you more of an actual list of where they've been, I think I have to get that because I have not been directly involved. I'm really trying to give them arm's length to go and do their work. I know the deputy has a little bit of an idea.

 

What we were saying is that people are invited in. I know just in my discussion today at the chamber, they were a mixture so there were some of the more social service groups. Maybe they represent more the non-profit or the think-tanks, as well as business groups. They have been mixed together at least in some of the meetings. I know the intent was to touch base with all of the tax experts and so on at universities. As you know, they're in a number of different communities.

 

I do know that she travelled to Sydney just very recently. I was aware that they were on the road, but I can't tell you until we get a list. If you'd like, we can get a list of where she has been to date. I knew that the intent was that the first few months of this, before the summer hits, were going to be information gathering. A lot of the intent was to get out and talk to a lot of the experts between now and the summer.

 

MS. MACDONALD: So the objective is to have a report in September sometime.

 

MS. WHALEN: Or October.

 

MS. MACDONALD: And then you'll be able to incorporate some of the insights or learnings. Some decisions will be able to be made and you could incorporate that into budgetary planning for the subsequent budget. So this time next year, theoretically, we should be here talking about - or somewhere - the changes that are being made and the impact and that kind of thing.

 

MS. WHALEN: That's right. You asked, as well, about whether these things are being - I think sort of number crunching was what you said, but there's definitely going to be modelling of whatever changes are suggested because something may be recommended as being really great for business or something that they would love to see changed, but we have to look at the impact in the total picture of our revenues and if that's something that could be done.

 

It's possible you might see one that goes up and one that goes down. It might have a beneficial impact in creating jobs or improving the business climate, as they like to say. That would be a good thing to do, but the decision would have to be made if that was a good thing to do or not. I'm not saying all taxes would stay the same - we have to be open-minded about what it would look like. It's just I'm fairly concerned about the overall revenue impact so everything would be modelled to see how things will affect our revenue.

 

MS. MACDONALD: Of course that has to be a large concern given the sluggishness in the economy. It's a hard balance sometimes, isn't it? It always strikes me as being interesting - that's probably not the right word - but a lot of people will argue for what happened in New Brunswick: a real reduction in taxation. I think it hasn't allowed that province to realize the kind of economic development growth - there hasn't been growth as a result.

 

MS. WHALEN: That's what I've heard as well, and I heard they reversed some of their cuts in the most recent budget that they brought in. I think it's because they had several years of really - their revenues were hit quite hard by their lower taxes, and they didn't get the balance that they expected.

 

MS. MACDONALD: So sometimes there's no magic bullet in these changes.

 

MS. WHALEN: I think we have to be cautious in what we do for that very reason.

 

MS. MACDONALD: I have a few other issues that I want to touch on, and of course I do want to talk to you about the Graduate Retention Rebate program. Before I do that, I have a very short question. I think it probably is a very short question, but as my father used to say: curiosity killed the cat.

 

I was in the department, as the deputy would know, just before Christmas on a Friday afternoon - late in the afternoon - looking for a scarf that I had lost, which I have recovered, thanks to the great commissionaires downstairs in your building. When I was there, Senator Jim Cowan was in the department meeting with staff and it piqued my curiosity, I must say.

 

I was wondering if you could tell me about the senator's visit to your department. What involvement does the senator have in your department? What business was he conducting there on that day, and subsequently, what is his involvement in the department?

 

MS. WHALEN: That is a pretty short question. You've solved a mystery though. There was a FOIPOP on his arrival. I don't know why that was, but anyway, maybe not from you. I was contacted by the senator because he was giving a speech in, I believe, Vancouver - anyway, somewhere not in Nova Scotia - and he wanted to speak about equalization, and as you know, it's really complex. He really wanted a briefing and a primer on that so he met with - I believe you were there, deputy, and Paul Davies. He just said, could you get somebody who can just explain it to me, and then he had given his speech. I think he may be doing more about it, but he's on a bit of a mission, I think, about equalization and perhaps how we're being impacted and so on.

 

It wasn't even a speech given here - it was elsewhere - and it wasn't in Ottawa. So he had one session and that was it. I don't expect you to ask about his ongoing - really, any Nova Scotian that was going to give a speech, we'd be happy to explain it to them.

 

MS. MACDONALD: Good luck if they could figure out equalization after . . .

 

MS. WHALEN: I didn't attend - I probably should have.

 

MS. MACDONALD: After a short briefing - but I wish him luck if he's on a mission to improve the climate for equalization in the country, because as I understand, the further you get west there's not much of an appetite for equalization anymore.

 

I do want to talk to you about this whole question of the Graduate Retention Rebate. I know that you said it's - and I totally agree with the importance of reviewing these things. I think it is very important, but I am disappointed with the results of the review.

 

These are my questions. You say that a third of those who received the rebate were 30 or more, but that means two-thirds of those who received the rebate were 29 or younger. So I'm not convinced by those statistics.

 

MS. WHALEN: Perhaps I could add something to that. I know you've got more than one question, but the group that was - actually, it was roughly 35 per cent over 30, but that group received 77 per cent of the dollars that were allocated. That's tax forgiveness, I might mention for those who think it's a tax increase. It was tax forgiveness that was at hand and they received 77 per cent of that so that's when I mention disproportionate.

 

MS. MACDONALD: Well, I guess I'm of the view that when you do a review and you find anomalies or you find problems, or you have some concerns about the impact, that rather than taking the program away from everyone, you close loopholes as a preference. I am genuinely concerned about the fact that, for example, the Province of New Brunswick has a tax - graduate retention rebate program - that will offer up to $20,000 to their students over a period of time right next door to us.

 

From everything that we're hearing and I'm hearing - I've had probably more emails on this than any other issue that I've ever had correspondence on in my 16 years here at the Legislature. I'm hearing from people on this. It's a really interesting - it's almost like a case study of the different kinds of situations people are in. I'm hearing from graduates, young people who came to Nova Scotia to do a degree from a western province and just fell in love with the province and were really challenged by where they were going to live, and were able to get employment here but employment elsewhere as well. This was a defining issue for them for staying here. People who have planned out the next five years of their lives but predicated on the assumption that they were going to have some debt relief from this and they were going to be able to start a small business where they were self-employed.

 

Actually we're hearing from a fair number of people who were able to start and generate self-employment and use the tax credit as a means to help them pay down debt and become more financially secure. Of course we're hearing from parents, as well, of young people who don't pay much attention to what they're eligible for necessarily, but a lot of pretty upset parents who, on behalf of their young graduate or even a student who is in a program now, are looking ahead and wanting very much to retain that young family member in the province and are feeling that we're saying one thing as a province but we're doing something quite different. I think that is as much the problem here as anything.

 

If there were problems with this program in terms of people who are going to be here anyway and finishing a second degree, I think - initially I heard some comments around this, that members of the teaching profession were using this to take a second degree, but whether or not that's how representative that is of the great diversity of people who are using this program, there are many people for whom this was a deciding factor in whether or not they were going to actually locate and stay in this province.

 

We all know that at this stage, given what's happening with the demographics, we need to be finding ways to retain every single, solitary person who we have the hope of retaining, especially in that age group. So as I said, given that two-thirds - from your own data - of those who were using this program were people who were between 20 and 29, that's not a bad number.

 

The other thing I have to say is I'm concerned about putting the focus on the fact that people were still leaving the province in basically the same number. We just went through the worst four years imaginable in terms of the economy. The fact that we were kind of able to hold the line, maintain the status quo, to me is not a bad thing. I think you have to ask yourself whether or not it wouldn't have been much worse without a program like this, an incentive like this.

 

The other problem I think is that you're measuring and focusing on the leaving, not focusing on and measuring the retention. To me, that's what we really need to have a better handle on, the retention. I'm not sure precisely how you do that, but a fair evaluation would have to look at that. I don't know that the evaluation - maybe you can help me understand whether the evaluation took any steps to look at that side of the equation, the people who stayed and to what extent this was a defining element in their staying. Was that side of the equation looked at? If so, how was it looked at? What can you show us?

 

MS. WHALEN: I think you said it well in saying it's very difficult to determine what the factors were for the people who do stay. I know from CONSUP, the university presidents, they had given a figure in the past that 20 per cent of graduates from out of our province would choose to stay here. Actually I think the retention rate is around 20 per cent, they have even more that say they would.

 

I, myself, came here to go to Dalhousie University and I know you can name many others - Leo Glavine came from Newfoundland to study at St. F.X. We make our lives here in Nova Scotia, for the same reason you said: young people come, they love it, and they stay. I think it's very important that that happened but the question is, would that have happened anyway or did it require a benefit to make that difference?

 

We have no way of knowing how many of the people receiving the benefit, for example, had student debt because you said, well, it's wonderful that they could receive that and defray their debt but there is no way to say. I know for a fact that people writing me did not have - some say they did not have student debt so it was regardless, I guess, about whether they received it. It was intended to be an incentive or sort of a bonus for staying here, that we appreciate it and we really do. The question was, did it make a difference in the decision to stay or go? When you look at particularly benefits, taxation or salaries in other parts of the country, we know that that $2,500 is small in comparison to what they're looking at.

 

Again, anecdotally, my son is 24; he received that benefit last year. He appreciated it; he didn't get the full benefit of it because he didn't earn enough. My daughter is 27; I think she might have gotten a couple hundred dollars. In the past she didn't earn enough to get the full benefit so there are many who are in other work that they just don't make enough money to get that to the full effect.

 

In terms of measuring, I think your big question was in terms of measuring why people stay. It's very hard. I know from my children's friends and people who live in my neighbourhood and the ones I meet, they are still leaving and they're leaving because the salaries for these professional people are higher as they go. A young engineer on our street just moved this year to go to Alberta; I know another one graduating this Spring is going to Alberta. The salaries are remarkably different - it's a sad thing to say but it's true.

 

What we need to do is help those who want to stay, to get that first job, to make the choice to stay here. I think a lot of the professionals have a choice and they can have employment here or elsewhere. It's a little bit different, I guess, we want to help a lot of the ones who don't have the post-secondary or the post-graduate degrees, we want to make that more open.

 

It mentions here that in New Brunswick there was a net loss of 2,275 people aged 20 to 34 to interprovincial migration in 2012-13, so they're having the same difficulty. I think you would know that as well from the past, I had not measured their numbers. So it's still their biggest out-migration, despite having the same credit or a similar credit in place.

 

MS. MACDONALD: Again my point would be that it's much easier to measure the outward mobility than it is necessarily the retention, the whole idea of who's going to stay anyway and who's going to stay because there are incentives.

 

MS. WHALEN: That's right.

 

MS. MACDONALD: There are ways to do it, you don't have to only do the quantitative research; qualitative research will help people understand that. You can do surveys of people who are receiving a particular benefit and actually talk to people and get a random sample and get some sense of that.

 

I know the department isn't necessarily set up to do that but it is . . .

 

MS. WHALEN: I would mention as well, and I know you'd be aware of this from previous pre-budget consultations, but a number of groups had actually pointed to that credit, saying it wasn't working and it wasn't good. Now that's following their research but we did do our own research. I mentioned them in the House: the Canadian Centre for Policy Alternatives who do good work and both student groups, CFS and the other.

 

I've seen an academic study from St. F.X. which was looking at choices in migration and they actually looked somewhat at the GRR but also at differential in salary and taxes in different provinces to say would that likely make a difference or, as that particular academic study said, in a sense are we rewarding people for what they would do anyway? That is the question, right?

 

It is difficult, other than doing polling or identifying these people and doing surveying and taking on a cost like that, I can't think of another way you'd reach them. I think it's important to say that it isn't losing sight of the fact that what we want to do is help to eliminate some of the barriers that young people have, and going forward - this is the first budget that I've brought in and there's room to bring in other measures and I would like to talk to that age group and see what other things they need, there must be other problems in their lives, whether it's starting a family and daycare, maybe that's where the issue should be, I don't know until I sit down to talk to them.

 

MS. MACDONALD: I think, though, that is the other problem with not only what was done but maybe the way it was done was that the money wasn't redirected anywhere close to what people perceive they're losing - not just perceived what they're losing but what they're losing.

 

I think everybody agrees that the $800 in interest relief on student aid is very good, the $1.6 million investment in that new program that's yet to be kind of developed is also a good thing but those things are kind of a drop in the bucket compared to this program.

 

MS. WHALEN: They are. There's the graduate scholarships as well, which we didn't have in place for post-graduate students to go back and do research and innovation.

 

Oh, there's one other thing, we say $1.6 million or something smaller on the interest relief, but actually $14 million had to be recognized in 2013-14 in order to forgive because we went all the way back to 2008 in doing that. As you know, it's always difficult to find a starting point in that as you go forward, so I think that's important too.

 

The other thing I would mention to the member is that if you have other ways that you think you'll get better results or more impact, I don't think it's a question of dollar for dollar. The other thing is, when you're already in debt and not having a balanced budget, it isn't as though you have money or should have that directly redirected somewhere else, because you haven't done anything to improve your fiscal situation either.

 

That wasn't the driving force but there was also no compelling reason to redirect the full amount but I do think there is an obligation to look for other programs that will have an impact and will make a difference to both the young graduates and to the student groups, who are two different groups. I'll mention that again because there's lots of sort of mixing of the two issues where we're discussing this.

 

Student groups, as I mentioned in my opening comments, have had a lot of support from the provincial government. Under Minister More she introduced this credit - she also introduced many measures to help students and cap their debt and did other things to improve the situation, over $100 million more put in annually for student needs.

 

We're very aware of that but also aware that many things have been addressed, the alleviation of interest on the student loans is an additional piece onto an already big investment in students and their issues.

 

MS. MACDONALD: Well, I guess we'll have to agree to disagree on some aspects of this. I do agree with certain pieces of what you're saying but I don't completely accept - I just think this is kind of drastic and it looks like a big cash grab. It's like taking a machete, perhaps, to something that needed a scalpel.

 

The other thing I would say and I think it's worth thinking about is that it's not necessarily the case that people who get a second degree are not requiring of some incentives around investing in their education and getting a second degree. Quite often there are a lot of people who find, and I think increasingly find, that at that baccalaureate level they have great difficulty finding employment of any prospect, in terms of a longer term career, unless they specialize in some way. Quite often that's what that second degree means for people getting a teaching degree, or getting a master's degree in physiotherapy or social work or whatever.

 

I think that this is a policy change that comes as a bit of a surprise to a lot of people who were participating in a program that they thought was going to continue for a period of time. Decisions were made based on the fact that that program was there and then it wasn't there. It wasn't phased out, there was no warning. People had, in fact, made decisions, are in school right now assuming that they would have this benefit when they leave school and that's not going to be the case.

 

MS. WHALEN: Provided they have a job. It isn't a benefit in the sense that a lot of people who have written me, as well, are really misinformed. I had a letter from somebody who said, I'm unemployed, I need that money. Well you and I know that if you're unemployed, you wouldn't get it; you have to earn a certain amount, you have to owe taxes. So the rhetoric around it has sort of become less real.

 

Again, if you're in a small business - you mentioned starting a small business - I'm not sure that they would be earning the amount that they would be getting out - a rebate. It's almost as though people thought we were giving a cheque to everybody who graduates. That was never done and was never the intention of it.

 

I think that sometimes the people writing have been misinformed about what they would get or what they're missing if they're in school today, thinking that it's something other than what it is. It really is predicated on having a good job, and if you have the good job then you've been successful and I celebrate their success.

 

MS. MACDONALD: I think also a lot of people right now are filing their taxes and they're getting their tax assessments from Revenue Canada. I mean I have one, I've seen one where the CRA are telling them in their tax assessment information for the subsequent year what they are eligible for in this province, in terms of the Graduate Retention Rebate, based on their employment from last year and their filings for last year, except they now know. So they have a document in their hand that says oh, next year you're eligible for $1,700 but they now know that has been cancelled. There are literally several thousand people in the province who will be getting these tax assessments and that's just a reality.

 

MS. WHALEN: And that's a reality and that's them being notified by CRA. I was unaware that they would identify those things. I know I get one that tells you how much RRSP room you've got or something like that. I'm not aware of what they tell others.

 

I would say that this has not been done - I mean the decision has been made back to January 1^st of this year but as they file right now, they're receiving. So in terms of planning, in terms of giving people an opportunity, there's a full year before they file again for next year. My point would simply be that it hasn't been that arbitrary; it doesn't go back and take away what they would have planned for this year in their lives.

 

We would do the same if we were working with the business community. We talk about giving them stability and, I guess, some ability to plan. The same thing holds true, the business community has asked for a year's notice.

 

MS. MACDONALD: I will leave this topic. As I said, we will have to agree to disagree on some aspects of it.

 

I want to ask a quick question around social impact bonds. Last year there was an allocation which I think was kept inside - I can't remember if it was inside the Department of Finance or if it was in the restructuring fund, and I think it was $500,000 for a social impact bond. I want to know if that is still there and if any progress has been made with respect to that program and, if so, what progress. If not, where are we at?

 

MS. WHALEN: Well that's good; I like those kinds of questions too. I understood, in fact, I remembered - I think it was in your Budget Speech or the Throne Speech last year - it was mentioned that social impact bonds would be in place. Certainly there was money allocated this year in the budget, but as you know, the social impact bonds require a proposal from the community or from a group. I'm not sure if other members are aware of what they are but they're pretty exciting. They're quite underway in the U.K., which is a country that has done quite a bit of this social impact bonds.

 

You require a group in the community that sets a goal and says we'll do whatever - improve your graduation rates at school or what have you. Nothing had come forward from the community on that so the short answer was that there was no program in which we would be returning money to a community group for having succeeded in the goals that they set out.

 

We certainly like the idea of it. I've just gotten a note, there were no applicants last year for the idea of using that funding but we actually have a meeting even this week with Joanne Macrae from The Hub who is a proponent of it, and I think Paula Gallagher - not the same meeting but another person interested.

 

There are people in the Department of Finance and Treasury Board who have worked on that team. They're very excited about it and want to continue. There is $250,000 in this year's budget still allocated.

MS. MACDONALD: Is that new money or is that part of the $500,000? Is that in addition to the $500,000 from last year?

 

MS. WHALEN: No, it's $250,000. Again that would determine whether something would even come up this year is a bit unknown. Even if something gets underway, you have to have long enough to measure it, isn't that right? As I understand it, you measure for the results.

 

MS. MACDONALD: Yes.

 

MS. WHALEN: We put it in because we have a commitment to do it.

 

MS. MACDONALD: It's like a dividend that you would pay out to a project that was successful in the measurements, as you say, the outcomes.

 

MS. WHALEN: I thought the important thing was that we have funds allocated towards it this year that shows we have a commitment to it, we're serious about it. What we need to do is make sure that people realize it's an option and start to move on it.

 

Actually this week I had forgotten, as well, that Joanne was going to introduce us to somebody from the U.K. who has been very involved in this program. I believe she's here at the end of this week, and that's another reason we're having the meeting with her. So we are pursuing it, I'm very interested in it.

 

MS. MACDONALD: That's good to hear. As we say in social work, though, if I'm hearing what you're saying, you're telling me that there has been a reduction of $250,000, is that correct?

 

MS. WHALEN: Less is allocated for it. What I'm really telling you is that I don't even expect in this next 12 months that we'll be asked for that money or paying a dividend to anybody, because as we speak right now, there are no programs that have come or become registered or the process to actually be that we're engaged with and that we say yes, should you be successful we'll be there to give you the dividend. There's a lot of prep work that needs to happen for us to get to that point.

 

To be honest, nothing had been done on it when I arrived. I realize it was an election year and that probably only six months had transpired but nothing was in place, nothing had advanced from the announcement in the Throne Speech.

 

We want to pursue it and I want to learn more about it, from speaking to the experts and those who are really very keen that we pursue it. But we then need to make sure the public knows and different groups are aware so they can start to identify projects and actually get something underway so we can have some pilot projects on the go.

 

I'm keen on it; I don't really consider it a reduction though, if you know what I mean, if the money is not going to be called on. We're ready if it should be.

 

MS. MACDONALD: I have one more question around the u-vint issue. There are two things I want to know. I want to know if the Nova Scotia Liquor Corporation has any analysis on the impact of brew-your-own and, if so, if you would provide that to us and what, if any, concerns the corporation might have about the bigger players putting some of the little players out of business. What I mean by that is the large franchisers versus the small mom-and-pop operators, which I understand initially was the concern that perhaps members like you had about the regulations as they existed in the past in the province.

 

MS. WHALEN: I would say that probably they don't have any analysis on that. I did look and, as you can see, Greg is here from the NSLC. I would say that no analysis has been done on it.

 

The concern about whether or not there would be sort of a larger conglomerate or one franchisee chain that would take more control, that hasn't been raised either as a concern. What I can tell you is just in my travels the individual store owners, even under the franchisee system, they're individually owned and there are quite a number of them popping up in Bridgewater. I was there last June, there was one and now there are three in that area. That may be as much as that area could sustain really competitively.

 

They're individually owned, they're individual entrepreneurs that I'm meeting that are starting these businesses and the ones that were there before, selling kits, are now expanding. I've been in a number of them that have spent money to expand the store or change the configuration of it in order to have the brewing on the premises. So there has been a little bit of construction work done and most of them say they've hired one or two new people.

 

It's having a good effect that way and I don't see any real sort of change in the industry, in terms of it being controlled by any one group at all. I think the evidence right now is that a lot of individuals are taking up that opportunity.

 

MS. MACDONALD: The shops in the Bridgewater area, are they the Noble Grape franchises? Is that what it is?

 

MS. WHALEN: I don't know actually if they are. There's a Wine Kitz in that area, I believe. But again, I've met a number of different franchisees that have the Wine Kitz name. Ross Harrington is one but he has only one location.

 

MS. MACDONALD: Okay, thank you very much.

 

MS. WHALEN: I think it's a great news story.

 

MR. CHAIRMAN: Thank you. We're now going to pass it over to the PC caucus.

The honourable member for Pictou East.

 

MR. TIM HOUSTON: Thanks very much, Mr. Chairman, and thank you to the staff and the minister for being here today. I have a question about the accounting for the liability for contaminated sites. I'm looking at the Auditor General's Report from January. On Page 23 the Auditor General notes, "The liability for contaminated sites standard provides guidance on how to account for and report a liability associated with remediation of contaminated sites and is effective for fiscal years beginning on or after April 1, 2014." That's from the Auditor General's Report.

 

So the standard has changed and now requires the liability to be accrued in the accounts is how I understand that change. I'm just wondering what is booked in the budget that you're aware of, for future liabilities for remediation of contaminated sites. Obviously I'm thinking of Boat Harbour but any other possible contaminated environmental sites around the province. Do we have anything in the budget for recognition of remediation of contaminated sites?

 

MS. WHALEN: My understanding is that we haven't got anything in the budget on that but that the Department of Transportation and Infrastructure Renewal are looking at an inventory of the sites, so work is being done I guess to quantify and understand it better.

 

If you like, we can look into it and see what else we can find on that.

 

MR. HOUSTON: Yes, that would be helpful.

 

MS. WHALEN: Just to double-check but my understanding right now is that it's not booked anywhere in the budget.

 

MR. HOUSTON: That's also my understanding but it would be nice just to kind of confirm.

 

MS. WHALEN: We can confirm that for you.

 

MR. HOUSTON: That would be great, thanks very much.

 

Just a question about the SAP system - I know from software implementation there's a lot of money invested in developing and kind of configuring that the systems for the needs of the government. Then once at a certain point you reach "go live" or you reach implementation and your kind of build-out is done, there's an ongoing fee for the maintenance of the system. That's the same with any computer system, let alone certainly big ones like SAP.

 

I'm just wondering, is the buildup, build-out, whatever term you want to use, is that kind of done or is there still a big development plan foreseen for the SAP implementation?

 

MS. WHALEN: The system, as you know, is in place but we certainly have costs every year for upgrades. That's part of the contract that we have with SAP. I'm not sure if we have an exact number there for this year but I do know there were contractual obligations that were part of our costs that are unavoidable, that you have to continue with each year.

 

MR. HOUSTON: I think those might be in the $20 million range?

 

MS. WHALEN: They're high - we're just going to have a look. One figure I have is the new development capital cost, $7.7 million.

 

MR. HOUSTON: Okay, so there's still quite a bit of development foreseen over the next couple of years, I guess. I'm sure there will always be little things that we say, well, we can do this as well.

 

MS. WHALEN: As you know, we still have an internal team of SAP people who are now going to be part of the Internal Services rather than Finance. A large portion of the SAP work, as you know, was given to IBM in a contract under the NDP, which was tied into - I must say one good part of that was the big data centre that was to be created at Dalhousie, which has actually happened, which I was glad to see because I was a bit skeptical. It is working, I guess.

 

MR. HOUSTON: Maybe just in the interest of time - Mr. Chairman, how much time do I have?

 

MR. CHAIRMAN: Eleven minutes.

 

MS. WHALEN: Oh my goodness, we'll be able to resume this, I'm sure.

 

MR. HOUSTON: I don't know that that will be necessary, from my side, though - I don't have too many questions. Thinking about the shipbuilding contract, I'm just wondering if you have any current thoughts on where that is and when that may - I don't know if it has influenced the revenue projections in this budget or not, and then where you kind of see that kicking in, knowing what you know now about that opportunity, maybe how optimistic you might feel about it.

 

MS. WHALEN: Actually, I'm glad you asked that. One of the things we do with the economic projections is we have an expert in our department who looks at all the projects that they believe are going to come to fruition or be actually ongoing during this fiscal year and in coming years, as they look at what the expected growth will be. Then they factor that in.

 

Now for the shipbuilding, right now you can see the structure and their construction work at the shipyard is now visible above Barrington Street. It's rising up; it's an actual sign now that something is really going on there. The construction that's happening there now is reflected. The steel-cutting is still expected later in 2015, so it would be past this fiscal year, but everything is on target for that.

 

We sat in a session where they take our internal economic projections and test them with economists from our local universities - St. F.X. was included, as well, and I think Acadia came in. The local universities sent their economists and we did a session with economists from the banks in Toronto. They're the economists who look at our economy and we compare, to see whether our Department of Finance and Treasury Board numbers are reasonable. Then we do a little bit of amending after that, but we sort of get a consensus view of what everybody thinks.

 

Definitely the shipbuilding project was confirmed with everybody who was involved as being something that we'll see happening by the end of 2015, or later in 2015. So the shipyard work is substantial and it's in now, as are other projects like the Nova Centre that's underway. I have good confidence in the process now that I've actually seen how it's tested.

 

MR. HOUSTON: Just going back and continuing some questions that we had in Question Period, I think maybe last week or the week before, about the 1 per cent decrease in departmental spending. That was something that the actual result didn't kind of meet what my expectation was and I just don't know if it met yours, too, or if that's part of the process.

 

When I was hearing that there would be a 1 per cent decrease in departmental spending, I was actually thinking that departmental spending for the coming year would be 1 per cent less than it was last year, that's what I had in my mind. I don't know if that's what you had in your mind or not.

 

MS. WHALEN: Well, I will say that when it was planned, it was certainly planned to put pressure on each department and each minister to come up with some savings. I do think when you've been in the Opposition bench and not sitting in the minister's seat, you don't realize all those contractual obligations, starting with labour contractual needs. It would really mean that with the labour pressures and just the general increase, which for most of the contracts was around 3 per cent this year - because we were in that 2, 2.5, 3 per cent - that alone would eliminate the savings we would be looking for in those departments.

 

Then, at the same time, there are other contractual obligations; like we mentioned, the SAP and different departments would come in and say we're in this agreement where we're obliged to purchase or renew or do something else. There were a lot of those things that were never considered. I'll just be frank; those just hadn't been factored in.

 

In reality, the departments were challenged to go and find that 1 per cent. Some of them had a hard time because certain departments have a lot of flow-through so they actually receive federal funding, or otherwise, that comes through their departments - I'm thinking of Justice that I think has a lot of money - that comes for their activities. So the question was, where do we find it if a lot of our money is just flowing through and we're obliged to do these things with that block of money? It meant they had less discretionary money but they still were asked to find 1 per cent of their total, to look for that.

 

The exercise was difficult. One thing I really would like to share with you is that having seen how it went this year, we realized that over successive years - and again, it would be a nod to the previous government, they had done a lot to push back on expenditure pressures and demand for more growth and expenditure. In so doing, they pushed back but nothing had been cut, no activities were changed, the same activities were required of each department.

 

I can say pretty honestly they were cut back, there was no fat left in these departments, next to none. I think we should all be aware of that in the Legislature, that it was described to me very much like it was a rubber ball that they pushed and pushed on. What happens is you're still asked to do those functions, you are still asked to deliver those same programs and there wasn't money being allocated to do it with, so the pressure back was definitely there, as well, this year.

 

In a number of departments we found programs where the department was told to continue doing it but you're not getting any more funding, or you may not even get funding to do that but keep doing it. At some point you know you're going to be over budget at the end of the year or you'll be back at the doorstep of Treasury Board saying we don't have money and we're in trouble. We need a new approach.

 

MR. HOUSTON: I'm sure when you look at this size of a budget, I mean no doubt it's complicated, I'm just wondering like how soon after you came into office did you kind of say oh, oh, there's not going to be 1 per cent to kind of save here.

 

MS. WHALEN: Well, as I answered you in the House, we do believe there's 1 per cent that was cut out of those departments. There were programs and items that were trimmed or changed in order to find 1 per cent savings. The trouble was it was more than exceeded by the increases in wages and contractual obligations.

 

I think we could see that pretty quickly. In fact, becoming briefed on just the wage mandate of the government was a real eye-opener because you don't realize that those contracts of course are advancing each year, with each percentage point that we have agreed to with our unions, costing $50 million across the board and 55 per cent of our costs in that entire budget, taking away, I believe after you take out your debt servicing, 55 per cent of the cost is labour-related. It's people who we employ; it's their benefits and their pay.

 

Those are pretty inflexible and when we're going forward, my aim is probably what you'd like to see. My aim is to get to a balanced budget and that's where we're headed. It's going to mean that there have to be things cut and changed, so I hope that you don't complain at every cut and change, if I'm allowed to say that, because there's no way to get the two things reconciled.

 

MR. HOUSTON: I was going to say that maybe I might have helped you a little bit because I did introduce a bill that requires balanced budgets so maybe we can . . .

 

MS. WHALEN: It's easy to put a bill in but it's hard to balance a budget, that's all I'll say. If we didn't do it, we'd do like the previous government and say, well, that didn't work and withdraw the bill. We can still let you know, we have a commitment to it.

 

MR. HOUSTON: I'm happy to hear that and I know it's not easy, but I guess it's not supposed to be easy. Governing is not easy.

 

MS. WHALEN: I'd love to point out that I made one cut in this past budget and you can see how that goes, it's tough.

 

MR. HOUSTON: It is tough but it's about just aligning the priorities of Nova Scotians with the priorities of their government, right? That's the balancing act.

 

MS. WHALEN: We'll have to have coffee some day and talk about it.

 

MR. HOUSTON: We have two minutes. I did ask some questions in Question Period today just about maybe the thoughts around looking at the Nova Scotia Liquor Commission's agency stores and the policies there. I don't know, just quickly, if that's something that you've considered, if you've considered maybe it's worth looking at the policies and maybe - there haven't been any new agency stores added for a few years now, I think it was in 2008. I'm wondering if you had any thoughts on whether it might be time for that.

 

MS. WHALEN: I think the question, if I'm not wrong, during Question Period today had somewhat of a relationship to whether or not we would be looking at selling in convenience stores more broadly; the answer was correct, we're not doing that.

 

The agency store is a method of making more convenience and reaching communities that are fairly far from a liquor store, or one of the NSLC stores, so from that point of view we support that. I understand there will be another list of communities that are being suggested. If we get communities suggested, then there's a call for proposals and businesses in that area can apply.

 

There are rules and I don't know if that came up today, but perhaps you know what they are.

 

MR. HOUSTON: Yes, actually my question kind of morphed into - because I happened to be up against a very clever minister who knew how to twist it around (Laughter)

MS. WHALEN: He's wonderful.

 

MR. HOUSTON: My question was only about agency stores and very specifically I was interested in the fact that the rules require that you can't have two agency stores that are within 10 kilometres of each other and you can't have an agency store that's within 15 kilometres of an actual NSLC store.

 

MS. WHALEN: I think it might be 13.

 

MR. HOUSTON: What my question was is when it's time to look at this again, which I would say it probably is, how rigid should those distance requirements be? I used the example in the House where there are actually liquor stores that are only a couple of kilometres. I was kind of making the point - well, I was trying to make the point but I didn't succeed in making the point - that if the rules don't apply for the Liquor Commission, why should they apply for the agency stores? I think there's more to it, it has to do with distinct communities.

 

MR. CHAIRMAN: That's time.

 

MS. WHALEN: Do you want to give me a second to answer if the members don't mind?

 

MR. CHAIRMAN: Yes, if you want to answer that, go for it.

 

MS. WHALEN: I'll just answer - around the distance between stores, a big part of that is the research that shows again that if you have too many stores in one small area, they won't be successful. Actually becoming an agency store is not a licence to print money, it could in fact pull a store down if they don't earn enough. I think they only make between 5 per cent and 8 per cent on the items. That's the wholesale benefit that they're given so they have to have a fairly large volume in order to be viable and they have to meet certain requirements for the sale of the alcohol, in terms of their shelving and their separation or how it's all laid out. They have to do training and make sure that they adhere to standards.

 

There's a cost involved in being given the right to be an agency store, to meet the standards. Then there's the worry that if you have too many of them near each other, they won't be able to survive; in fact, it might harm the viability of the business.

 

The analysis that I've seen on different communities has shown those kinds of projections about if you were to open one in this or that community, what would the likely revenue be, based on what we know the sales are in those areas, and how much would it hurt? Not only would it take sales from the store 10 kilometres away, but how much would it hurt each other if there were too many close together?

 

We can talk about it afterwards. I know that if a community is interested, they can certainly let us know and the NSLC will do the analysis. Thank you.

MR. CHAIRMAN: Thank you, Mr. Houston, and thank you, Ms. Whalen.

 

MS. WHALEN: Does that count towards my four hours, if I went over it? Maybe we're done - are we done? (Interruptions)

 

MR. CHAIRMAN: In the spirit of fairness we'll go ask them to see if they're done.

 

[5:54 p.m. The subcommittee recessed.]

 

[5:55 p.m. The subcommittee reconvened.]

 

MR. CHAIRMAN: Order, please.

 

Shall Resolution E8 stand?

 

Resolution E8 stands.

 

Resolution E9 - Resolved, that a sum not exceeding $877,983,000 be granted to the Lieutenant Governor to defray expenses in respect of Debt Servicing Costs, Department of Finance and Treasury Board, pursuant to the Estimate.

 

Resolution E23 - Resolved, that a sum not exceeding $9,038,000 be granted to the Lieutenant Governor to defray expenses in respect of Government Contributions to Benefit Plans, pursuant to the Estimate.

 

Resolution E29 - Resolved, that a sum not exceeding $2,744,000 be granted to the Lieutenant Governor to defray expenses in respect of the Nova Scotia Securities Commission, pursuant to the Estimate.

 

Resolution E39 - Resolved, that a sum not exceeding $227,251,000 be granted to the Lieutenant Governor to defray expenses in respect of Restructuring Costs, pursuant to the Estimate.

 

Resolution E40 - Resolved, that a sum not exceeding $115,566,000 be granted to the Lieutenant Governor to defray expenses in respect of the Refundable Tax Credits, pursuant to the Estimate.

 

Resolution E41 - Resolved, that a sum not exceeding $90,505,000 be granted to the Lieutenant Governor to defray expenses in respect of the Pension Valuation Adjustment, pursuant to the Estimate.

 

Resolution E42 - Resolved, that a sum not exceeding $454,695,000 be granted to the Lieutenant Governor to defray expenses in respect of Capital Purchase Requirements, pursuant to the Estimate.

 

Resolution E43 - Resolved, that a sum not exceeding $57,968,000 be granted to the Lieutenant Governor to defray expenses in respect of Sinking Fund Instalments and Serial Retirements, pursuant to the Estimate.

 

Resolution E45 - Resolved, that the business plan of the Halifax-Dartmouth Bridge Commission be approved.

 

Resolution E47 - Resolved, that the business plan of the Nova Scotia Liquor Corporation be approved.

 

MR. CHAIRMAN: Shall the resolutions carry?

 

The resolutions are carried.

 

MS. WHALEN: Thank you very much.

 

MR. CHAIRMAN: The subcommittee is adjourned.

 

[The subcommittee adjourned at 5:58 p.m.]