Mr. Edward Helwer (Gimli): I move, seconded by the member for Pembina (Mr. Dyck), that the composition of the Standing Committee on Public Utilities and Natural Resources be amended as follows: the member for St. Norbert (Mr. Laurendeau) for the member for Charleswood (Mrs. Driedger). This substitution was moved in committee this morning. I am now moving the substitution in the House in order for the official records to be properly reflected.

Hon. David Newman (Deputy Government House Leader): Madam Speaker, would you please canvass the House to ascertain if there is unanimous consent for the following adjustments to the Estimates sequence for today only. First, Sport will be considered in this Chamber. Secondly, the Estimates of Energy and Mines will be considered in Room 254, and if the Estimates of that department are completed, they will be followed by Family Services. Thirdly, the Estimates of Consumer and Corporate Affairs will be considered in Room 255, and if the Estimates of that department are completed, they will be followed by Rural Development.

Madam Speaker: Is there unanimous consent of the House to make a difference to the Estimates sequence for today only: (1) Sport to be considered in the Chamber; (2) the Estimates of Energy and Mines to be considered in Room 254, and if the Estimates of that department are completed, then they will be followed by the Estimates of the Department of Family Services; and (3) the Estimates of Consumer and Corporate Affairs to be considered in Room 255. If Sport Estimates are completed, they will be followed by Rural Development. [agreed]

Mr. Newman: Madam Speaker, I would ask if there is leave of the House to waive private members' hour today, appreciating that we will be using Thursday morning sitting for Private Members' Business.

Madam Speaker: Is there unanimous consent of the House to waive private members' hour for today, appreciating that we would be using Thursday morning for Private Members' Business. [agreed]

Mr. Newman: I move, seconded by the Minister of Urban Affairs (Mr. Reimer), that Madam Speaker do now leave the Chair and the House resolve itself into a committee to consider of the Supply to be granted to Her Majesty.

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Mr. Chairperson (Gerry McAlpine): Will the Committee of Supply please come to order. This afternoon this section of the Committee of Supply meeting in Room 254 will resume the consideration of the Estimates of the Department of Energy and Mines. When the committee last sat it had been considering item 23.2. Energy and Mineral Resources (a) Marketing (1) Salaries and Employee Benefits on page 59 of the Main Estimates book.

Ms. MaryAnn Mihychuk (St. James): Mr. Chairman, I would like to ask the minister to clarify how many of the staff in Marketing are involved in media relations and doing promotional things like brochures and writing other information pieces.

Hon. David Newman (Minister of Energy and Mines): The number of individuals who contribute as part of their job function to that particular task are four individuals: manager, client services; promotions co-ordinator; graphics technician; and desktop publishing assistant.

Ms. Mihychuk: Recently we had an opportunity to educate some of our colleagues in the House on various types of ore that are primarily for metals, base metals. What initiatives has the department taken during Mining Week to enhance awareness or other special projects? Perhaps you can lay out what the initiatives have been this year.

Mr. Newman: Marketing participated in developing history of mining, a mining fact sheet; a proclamation related to Mining Week; a news release relating to it. All were sent to all school divisions in Manitoba and all aboriginal schools. All have been put on the website. They also participated in the mine rescue competition materials in partnership with the Mining Association.

Ms. Mihychuk: What association did the department have in the recent event called Meet the Miners, which the Mining Association sponsors at the Art Gallery?

Mr. Newman: The involvement included the supply of a display unit, the involvement of a business development liaison, and I gave the feature presentation in terms of a speech.

Ms. Mihychuk: In one of the minister's recent comments, he mentioned the fact that the department had sent out information regarding Manitoba's geology to schools. Can the minister tell us where and when Manitoba geological features or history are included in Manitoba's curriculum? At what grade levels is it? First of all, can the minister assure us that Manitoba's geological history is incorporated into the curriculum and at what levels?

Mr. Newman: I would not want to answer for another department. I think the Department of Education and Training would be the most appropriate department to put these questions to.

Ms. Mihychuk: Having been a trustee for many years and fairly involved in the education system, I am not familiar with any geologists on staff in the department. Those types of resources, I would assume, are linked together, so that specialty areas like geology would be fed into the curriculum by a consultation process with the department.

Maybe I can phrase the question: has there been that type of consultation? I know that the department is under a massive rewriting of curriculum. If natural sciences is being rewritten, it is an opportunity for the department to feed in information about Manitoba about our geological past to make it more relevant and more meaningful to our students in Manitoba. I think that that would be a positive thing. If it has been done in the past or if the opportunity is there, when has it been done or would the department be open to that type of consultation?

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Mr. Newman: I have considered your suggestion being so worthy that we are thinking likewise about this particular issue, and we are investing in a needs, strength and gift assessment in relation to aboriginal communities, youth, education institutions and the general public this fiscal year, and will be engaging a contractor to perform that kind of function because we are very interested in enhancing awareness, interest, and positive attitudes towards the history and future of mining in this province. So we are mounting that specific initiative to enhance that process which has already been done, in part, through our aboriginal mining accord process which is designed to build understanding reciprocally, as well, between the industry and the aboriginal community.

One thing that we will undertake to check out and provide you with is that I am advised that several years ago there was an elementary level, I believe, Grade 7, junior high level, curriculum developed by members of Geological Services and will investigate to what extent, if at all, it has been incorporated into curricula in the Department of Education. It was an initiative.

Ms. Mihychuk: One of the major events that the department does is sponsors a mining convention annually and this year, even though commodity prices were so low and our mining industry is suffering, we had a fairly good turnout. I think overall we can say that the convention was a success.

Can the minister indicate the number of staff hours involved to organize the mining convention and the cost of the convention to the department?

Mr. Newman: We do not have that information at our finger tips. Rather than take the time right now, we will undertake to provide that to you.

Ms. Mihychuk: Can the minister indicate the outreach that the Marketing Branch has done in the past year, or what it projects to do? Is it the same as last year? Are we reaching out to others? Is the strategy changing, given that we are in a recession in mining? Are we looking at new initiatives? What is our plan for the up-coming year?

Mr. Newman: The general categories of our outreach would be through our website and the continuing updating of that. Secondly, through our Team Manitoba concept, which is now being expanded to Northern Affairs and First Nations communities. The third category is the Mines and Minerals Convention generally. The fourth category is the aboriginal mining corridor guidelines. When the assessment is done that I described earlier, we will decide what other new initiatives we should proceed with, building on the strengths and gifts of the individuals and communities who can contribute to the development of mining exploration, production, jobs and entrepreneurial opportunities.

Ms. Mihychuk: One of the roles of the Marketing Branch is to monitor global market trends and measure socioeconomic impacts of the mineral industry in Manitoba. Can the minister give us an assessment of global market trends and where we see the next four or five years? We have had numerous meetings with Inco and Hudson Bay and others and the mining association. They have their perspective, and it is probably fairly accurate, but I would be very interested in hearing the government's analysis of global trends and where we see the mineral sector going in the future. I mean fairly recent future. We would like to know what is going to happen in terms of Manitoba's economy.

Mr. Newman: The advice that I have been getting from the department, through the Marketing Branch, is that we cannot control global commodity prices, so we focus our efforts on continuing to create a positive environment to invest. We, on a regular basis, receive the feedback and forecasts of the industry members, and they can deal with the specifics of a particular mineral and their anticipation of what the future might bring.

But we have learned in recent years that they do not have very good foresight either, and Voisey's Bay and the prices of nickel are probably one splendid example of that. The largest nickel producer in the world made some forecasts which turned out to be less than perfect in their acquisition of properties in Voisey's Bay.

On the other hand, you have Hudson Bay Mining and Smelting and what Hudson Bay Mining and Smelting has done in our North with a view to making themselves the lowest-cost producers they possibly can be and to generating a level of profitability which warrants their continued, indeed enhanced investment in this province. They share with us their profitability percentages. They share it with their union, they share it with the general community, and then they work at reducing their unit costs of production by enhanced technology and the best ideas that come from their employees, the community and experts. Then our department staff, based on the best wisdom they have, either validate or not the kinds of information that come out of those companies, and to the extent their shared information is legitimized, we then decide as a government to what extent we might do our share on behalf of taxpayers to ensure that the maximum numbers of jobs and income and capital investment are continued in the province.

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So we work very closely with Hudson Bay Mining and Smelting with respect to their vision toward 2012 which is now extending further into the future as they enhance their knowledge of the quality of their deposits intended to become mines.

We do the same thing with Inco. We do the same thing with our gold producers, and we do similar things with our industrial mineral producers. We do the same thing with Tanco.

So we do not really make a major investment trying to do the research or to try and duplicate what is done by these companies acting in their own self-interest, but we do validate what they come forward with as shared information or question what they come forward with as shared information. So through that relationship, we collectively as a department and me as a minister get a handle as to what the future of producers and also exploration might be in this province. I mean that we track to a certain extent with our geoscience people what is happening with diamond exploration and some of these new exploration efforts which have not yet manifested themselves in any shared information for public dissemination yet.

Ms. Mihychuk: I am reading the Activity Identification in the Estimates book which clearly identifies one of the roles of the Marketing section, which basically would be an economic officer to monitor global market trends and measure socioeconomic impacts for the mineral industry. I know several people who have had that position in the past, including Lyle Skinner and the present executive director of the Mining Association, both who had experience in economics and both with a good grounding in the mineral industry.

Who in the branch is now doing that role, or is this perhaps a carry-over from past days? Are we actively monitoring global trends and doing this kind of work, or are we relying on industry to provide government the information?

Mr. Newman: Lyle Skinner and Rick Halas provide that function. I should have added in my list of minerals, one of the minerals that a considerable amount of research has been done on to validate industry information and to anticipate global market trends is potash. Based on the guidance that we have from the department, a strategy has developed in relation to that, similarly with respect to industrial minerals generally, which is, as you know, one of the new initiatives funded by MEAP.

Ms. Mihychuk: I am very interested to find out what type of data the department collects on the impacts of the mineral industry. That is because we recently had an opportunity to be in Thompson. I was speaking to the owner of a trucking company who was reflecting on how quickly the negative cycle in mining was impacting his company, which is based in St. James, so he was not only a constituent but also in the critic area of mining. He was talking about how the number of trucks that head up north every day is a good signal, a good sign of how healthy our mineral economy is in Manitoba.

I am wondering what sectors or what indicators the department measures to see what the impacts of the mineral industry is in Manitoba. I really do not believe that many people understand how important mining is to each and every one of us, whether we are in Killarney or in Winnipeg in a suburb. If we are actually working or living in a mining community, that is a different thing. Those people may be aware of the impacts of mining, but for the majority of Manitobans it is a fairly remote, little understood industry. To perhaps relate it to something that we can understand like the number of semis heading up No. 6 is a good indicator for people. They would be able to understand that there is not as much food being bought, there are not as much supplies, and that impacts the workers here in Winnipeg.

I would be very interested in knowing what types of indicators the department monitors on a regular basis.

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Mr. Newman: In a partnering relationship with the Mining Association and the Manitoba Bureau of Statistics, we have been in the process of developing indicators, measures of the importance of mining and the impacts of mining and exploration. That includes the direct and indirect consequences of mining. When we do an analysis for the purposes of determining impacts now, we look at numbers of employees, we look at the wages paid, we look at the taxes generated, we look at the capital investments and those fundamentally, but we are developing a new set of indicators which would be more readily understood by the general public.

Ms. Mihychuk: Moving up the activities column in the Estimates book, the second item is: "Monitors and lobbies for positive changes to fiscal policy and regulatory regimes." I would just like to ask the minister: is it normal to have a government department or government branch lobby itself? I mean, clearly it is the department that puts forward ideas and policy changes and recommends regulatory regime changes, so I just have to question what the minister means by lobbying for positive changes, and what those positive changes that the department feels need to be made and that government is not listening to.

Mr. Newman: The choice of words might suggest connotations which are not intended by that term, but the kind of advocacy and action which is intended to be captured by that term includes participation, for example, in the tax committee with the Mining Association dealing with the impacts of our fiscal regime on our mining activity here, but also in relation to the federal government. We have, for example, now an ongoing effort to try and get the federal government's regulatory scheme in relation to reserve lands made more user friendly and consistent with the kinds of standards we have in our own area of jurisdictional control in the province, and that kind of activity also falls under that term.

Similarly, in relation to other departments of government or government agencies like Workers Compensation, we deal with them under that rubric. Another example would be in dealing with the energy suppliers, usually Hydro, and there is no question it is an advocacy kind of function that is performed on behalf of members of the industry, sometimes through business liaison people. Under the Marketing Branch there is an issue with the Department of Education in a remote community which is, in the eyes of employees who send their children to school there, not providing proper service or the school bus is not properly accommodative or, in relation to the Department of Highways, there are issues about roads and the quality of safety or efficiency of roads. That falls under that function as well.

It is all part of the lobbying or advocacy function performed by empowered people in the department, and when they need my help, I get involved.

Ms. Mihychuk: One of the things that we hear about in the North a lot is the condition of the roads in the North, and I know that mining companies have approached me to get roads fixed, so I am sure that complaints come through to the department. Has the department made a recommendation to enhance the amount of spending in the North? Perhaps he could indicate how much and which roads and to what degree or what type of plan the department has recommended in terms of our highway infrastructure which is in some need, no doubt, of upgrading.

Mr. Newman: The approach of the department is to think very strategically about this and also to identify what we call client needs and aspirations and then to use the needs and aspirations of those clients to be addressed through a mutual education approach so that they understand the kinds of constraints that the funders have, the priorities they have and we, in turn, understand their constraints and their priorities. Growing out of that mutual understanding, we can sometimes build a case which justifies the strategic expenditure of money in a different priority because the kinds of considerations that resulted in the tentative initial decision or the actual decision did not have a complete understanding of a particular situation that has emerged, so we do that on an ongoing basis where a good sound business case can be made.

I know that these matters come to my level in relation to companies like Continental Lime. We had issues in relation to Tanco, the tantalum mine on the road which carries their product where issues of safety and quality of the road were at issue. We have an emerging issue which is really fairly blue-skying, relating into infrastructure development on the east side of Lake Winnipeg, with the process being more important than anything. It has to be a respectful process to ensure that all relevant wisdom is put on the table and a consensus is arrived at about what might be of mutual advantage for infrastructure changes there, and we know that will be beneficial to mining, so mining is at that table.

So that is how we deal with all of those kinds of issues. It is not a matter of percentages of dollars paid to a geographic area. It has all to do with a specific case properly analyzed and a business case generated out of that, and then with all the cards on the table, trying to determine what is in the best public interest to the province of Manitoba generally.

Ms. Mihychuk: The federal government's, or through CN, the overall rail policy for rail line abandonment has a huge impact on municipalities and, in this case, mining companies. Geologically, or from my perspective, it seems to make very little sense to move from a rail line which requires a certain amount of resource and move what has traditionally been able to carry some very significantly large loads onto our municipal and provincial road structure which is much more, I think, a resource-consuming option.

But we ended up having to shut down a number of rail lines, and some mineral and mining companies were impacted. Can the minister indicate what that has cost us in terms of road maintenance, increased road maintenance, and increased transportation cost to the mining sector?

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Mr. Newman: That would not be within the area of our expertise, but Highways and Transportation might have done that kind of analysis. I do know this, is that it is most unfortunate that the Canadian government did what it did in relation to Canadian National without having a better appreciation for the consequences to the people of the North in the province and to the province generally. Our department was very much involved under the previous minister in fighting to retain a rail line connection to Ruttan, the Bay line, and it was only through the very vigorous efforts of my predecessor in this ministry and the government backing him that CN and the Canadian government finally acquiesced in that situation.

I am not happy with what was done in the past by the federal government or by CN because of the impact on the province. We continue to pay a price for that on our road system, and it is all the more reason why the federal government should be contributing to the maintenance and enhancement of our road system out of the taxes that they take out, the gasoline taxes they take out of the province.

Ms. Mihychuk: Can the minister indicate if mining companies are assuming the costs of the road maintenance in their municipalities, or are municipal governments forced to cover the additional costs?

Mr. Newman: My staff have only shared with me knowledge of one road that the company pays for the maintenance and repair of, and that is one in Thompson.

Ms. Mihychuk: Well, clearly, this is an area where we see again sort of downloading by the federal government those additional costs. By rail line abandonment there are clearly additional costs to the local areas, and municipalities are picking it up. We hear about it in rural areas for agriculture and the increased traffic, and in mining communities, trucking ore over roads can have serious negative wear and tear on roads.

I know that to be true, so this is an area that municipalities are forced to pick up in times when we are looking at closures and downsizing. It is another indicator that municipalities in the North or near mining communities are suffering and maybe are not able to provide as much as they were in the past and are directly impacted by rail line abandonment.

I would like to now move to the first activity identified in the Marketing Branch, which I think is extremely important and have always felt that the Geological Services Branch knew of or had very gifted people who were able to identify and many times discover mineral potential in Manitoba.

These potentials I would say in the past have not been marketed as effectively as they could. I am familiar with a case in Newfoundland, for example, where a deposit was marketed internationally. There was an international auction and the best price was gotten for this property. I think we talked about it last year. I am not familiar that that has ever happened in Manitoba. I would like to know what projects the Marketing Branch and Geological Services have worked on together to develop Manitoba. It is talking about new mineral opportunities. Perhaps the minister can indicate if Manitoba has these potential gifts and what they are and how we are going to move these forward to maximize our potential benefits from these opportunities.

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Mr. Newman: The mineral development opportunities for the various base precious and industrial minerals which have been promoted in co-operation with the Geological Services Branch, of course, are a very extensive list. Depending on how far you want to go with this, let me describe the detailed list.

The description is the Marketing Branch worked closely with Geological Services to release 11 reports, including the report of activities with 30 individual preliminary field reports and 42 maps in '98 and '99. Two open file reports were released as CD-ROMs, providing clients with digital data in several formats for improved interpretation and manipulation of geochemical survey results and stratigraphic data.

The Marketing Branch produced a number of promotional publications including the very well-received Manitoba Exploration News, which highlights current developments in Manitoba's exploration and mining industry. The Exploration News was distributed in the industry and in our mining and aboriginal communities to keep all stakeholders well informed by providing them with industry news, mining community profiles, and information on our government programs, products, and services.

The revelations show or the disclosures show, of course, is the Manitoba Mining and Minerals Convention, where there is a release of some of the most exciting of these kinds of things each year. I can list the reports with the different specific kinds of minerals that are the subject of promotion, but just let me share a few to illustrate the diversity of this, everything from Phanerazoic black shales to carvable soapstone, mineral resource potential, and overburden thickness for the purposes of the Capital Region study. I am prepared to table the entire list and get copies if you wish that information.

Ms. Mihychuk: Can the minister indicate which of those projects has the greatest economic potential for development?

Mr. Newman: For clarification, that is of the total listing, not the ones I expressed orally, but all of them?

Ms. Mihychuk: Well, some of them provide a broad base sort of geological assessment of an area or give a perspective of a potential for a certain geological deposit, like the overburden study would be assessing whether it is a valuable tool. We could not really go and market overburden. We would probably wish we could, but besides the quarry potential and sometimes you can find a few diamonds in it, we have not found it particularly useful as an exporting commodity.

So some of those projects, although highlighted as something valuable, are not necessarily what Manitoba can look forward to in the future as something new or innovative that we are going to be doing a push on. So it is interesting that the department highlights all projects, but I am not really interested in that. I am more interested in what projects we see as being viable in the near future that we are going to focus on.

Mr. Newman: The most significant opportunities growing out of the different surveys that have been done are base metals, gold, and diamonds, pursuant to multimedia surveys; the northern extension of the Thompson nickel belt revealing new nickel, copper opportunities; and the crushed stone enhanced potential in the Capital Region.

Ms. Mihychuk: It is interesting. Can the minister indicate why the Cross Lake deposit was not on that list? Are we looking at developing or marketing? Do we have something in the bag here that we are just sort of waiting for the government to make an announcement? Are we looking for customers for that very significant deposit, which I hope will be developed as quickly as possible?

Knowing the communities of Norway House and Cross Lake very well, the people in those areas deserve to have meaningful jobs. The development of the Cross Lake deposit would provide many, many opportunities for economic development in that region. As we wait and wait and wait, the Cross Lake deposit still remains in the ground, undeveloped. I know that the private sector is doing exploration and various other work, but is that now being put on hold? Will we be seeing the economic development of that project soon?

Mr. Newman: What is happening in the Cross Lake area in relation to the identified titanium deposit is a very frustrating situation from the perspective of any traditional thinkers about developing what appears to be a splendid opportunity. A challenge that is faced here is the challenge of a current leadership which is a unique kind of leadership, I might say, in this community. It is not just the chief and council, there are far more groups involved. There is a youth group; there is an elders' group; the chief and council are one group; and there are the people responsible for the mining joint venture There is a women's group as well. One has to be very patient and very understanding, given our traditional way of trying to build a relationship in connection with development, and the frustration of people that think in the traditional ways for economic development is shared not just by us but by people in the very community, the people that understand the international mining issues, the global marketplace, the nature and dynamics of opportunities that arise like this one for titanium at this particular time.

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A lot of advice going to the people in that community comes from lawyers who purport to be experts or experienced in the whole concept of mining and the necessary consensus to move ahead. They kind of take advantage of an opportunity of ways and sometimes require fairly quick decisions to be made. Decisive and firm decisions to be made which others can rely on are not being made here because of the very complicated process. The kinds of advice they are being given, other priorities than mining, a desire to use this mining opportunity as a lever to gain other kinds of payback make progress in this opportunity very difficult.

The moment you start moving ahead, you think it is a mutual understanding. The next moment that mutual understanding is dashed, because they have changed their mind or they have taken a totally new tact and got another legal opinion that says they have rights that no one ever thought they had. Then we get legal opinions to test out their legal opinion, and then we would come out with more than one legal opinion that says they are on the wrong track, and they come up with another legal opinion.

It is a very frustrating process, but what we are exercising so far is maybe an unprecedented amount of patience and tolerance. The ways they show sometimes their reaction to our positive gestures of good will are to demonstrate and threaten to disrupt the Pan American Games, to protest and prevent my plane from leaving their community when I have been invited to go up there and agreed to go up there. It has been that kind of difficulty which we see as a challenge, which we trust in the people of Cross Lake democratically, ultimately, to decide the future of their community. A grave concern is sometimes that, when the spokespeople who are not either aboriginal or in any way connected to the band other than by a retainer and make money from this perpetuated effort not to achieve anything immediate, those relationships that the band has sometimes prevent them from getting even accurate information. We are concerned about that. We are very concerned that whatever they ultimately decide to do may not be based on the level of informed consent that has been part of every major deal that has been made.

There was the original comprehensive deal that we made with the other four First Nations communities in relation to Northern Affairs, the NFA 1977 comprehensive settlements; there were efforts that we have been making to settle the NFA '77 with Cross Lake when we had a deal, a substantial agreement in 1997, in June. Then, when the new chief and council and this new kind of complex leadership came into being, they started to call the shots and put an end to the conclusion of the comprehensive settlement. We have been trying to work within the auspices, within the parameters of NFA 1977, in creative ways, with working groups, and trying to come up with a comprehensive plan which involves this potential mining opportunity as a way to achieve the goals of eradication of poverty, goals of socioeconomic development of the community.

Hydro and my department and Northern Affairs, Economic Development Board, all have lent their best intelligence and best good will, as has the Mining Association of Manitoba and, to a certain extent, the Government of Canada. For example, the Government of Canada funded attendance of two representatives from the band and a consultant representing Gossan Resources to attend an international titanium oxide conference in Padova, Italy, in mid-April this year. Pursuant to that, a lot of contacts were made, and opportunities for developing relationships with potential serious investors at a world level were made, it was revealed.

We and all the different players who have an interest in socioeconomic development in this community for the benefit of the individuals and the community as a whole continue to work with anyone in that community who wants to move forward, and their working group. We take all the kicks in the head that we get day in and day out and the reverse of what appears to be progress, because it is ultimately they who will decide whether they will take advantage of this opportunity or they will conclude, hopefully in an informed way, that they want to abandon this opportunity or suspend it and take a look at it 10 years or 20 years or 30 years from now or never. We have been very conscientious in trying to make them aware of the realities of the marketplace, the small window this opportunity might have, the world competition for investing. This is not the only deposit in the world. We have, however, been advised that it is probably one of the best, if not the best in the world, that is immediately available for viable development.

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So this is all part of the growth of our aboriginal people as they decide to what extent they want to embrace development. If they are not properly advised and do not do the right thing, they are going to learn a very serious lesson about the consequences of not getting the right kinds of advice from the right kinds of experts, the right kinds of experienced people, the kinds of people who have objective wisdom that they are prepared to share for pay or otherwise. A number of contacts have been made with different companies. Just to show you the level of stature of some of these companies that had, in the Italy meeting, expressed an interest, they include Kronos, Titan AS from Norway, ISCOR heavy minerals from South Africa, Falconbridge out of Toronto, Namakwa Sands Division from South Africa, Kemira Pigments from Finland, Millennium Inorganic Chemicals out of Hunt Valley, U.S.A., Kerr-McGee Chemical LLC out of Oklahoma City, and Tinfos Development out of Norway. In helpful, friendly ways we continue to facilitate these kinds of relationship building.

We also relate to the federal government on the whole issue of what form the land tenure should take. It is an issue which has resulted in all of these different legal opinions that have emerged. What we are hoping is that they will simply make up their minds which way they want to go and what is in their best interests, what is in the best interests of achieving socioeconomic development and personal development of their people. That is our interest as the government of the province of Manitoba.

It is very interesting. One sees the working group function in ways they are trying to get them to come forward with a plan. I mean, you tell us how you want to do personal and socioeconomic development in your community. You give us the plan so we can then as friends, as responsible government in Manitoba and government in Canada and Hydro, give you our best advice, but give us something that you want.

We had not received that after many months of seeking this. There was a meeting in Cross Lake this last Thursday and Friday where they were expected to table that. What took place was positive on the Thursday, and then on the Friday the lawyers got involved and started to, through one of them particularly, make the kinds of threats that I alluded to earlier, which are simply a repeat of the kinds of personal involvement I have had with Mr. Andrew Orkin [phonetic] in particular.

Ms. Mihychuk: The Cross Lake deposit is now talked about as a world-class deposit with potential of creating employment for I have heard estimates of 1,000-2,000 individuals. Not only that, but then there would be spin-offs besides that. Like other deposits, the window is open for a while but then shut if major companies decide to go elsewhere. This has the potential for being the next major economic development in Manitoba. As we wait and wait, the door becomes closer to being shut on this opportunity.

From my experience, and it has been fairly limited, but proud to say that I have been involved in a process with First Nations people in developing the first aboriginal school in the city. That involved a process where the community was able to mobilize and that the local government, in our case it was the school division, was able to move things very rapidly. I think one of the fundamental issues here is a matter of trust. Government has a role in being a facilitator, I think, in this process and carries baggage. Government carries baggage, I think, from years of perhaps neglect, whatever it is. If you lived in a community where unemployment exceeded 80 percent or 90 percent, where almost everybody was desperately poor, where the water was not of good quality, where the hopes for the future looked dim, it is no wonder that the people there have huge issues of trust and do not trust government and maybe do not trust Hydro.

One of the issues that I know is lingering on the table is the Cross Lake bridge. You go to Cross Lake, you have to cross via ferry. The ferry only runs at certain hours. The bridge has been promised and promised, in fact, I understand has gone through arbitration a couple of times, and the band has actually won. Is the government prepared to build the bridge at Cross Lake? Would that not be a symbol of that trust or a gesture that we are willing to move ahead? The bridge will be absolutely essential for the people of Cross Lake even now. Given that we have, hopefully, a major mining production just on the north shore of Pipestone, is it not time to go ahead with the Cross Lake bridge?

Mr. Newman: I will use this to illustrate the complexity of this and the difficulty of this situation. If we said we are going to build a bridge, that would be regarded as paternalistic, unilateralism and they want to make those kinds of decisions. They want to have that as part of their proposals. We have encouraged them to make that part of their proposal. We have indicated indeed that that is something that we will do. We would be very interested in doing it if that is part of their plan for personal and socioeconomic development. It is part of the big picture. I mean the whole goal here and the whole goal they are asserting is under NFA to, by agreement, do something that is going to achieve an improvement in the quality of life of their people.

We share that aspiration with at least as much commitment as they do. It is so easy to come in and say, well, here is what is best for you. Lack of trust probably comes about because that is what Premier Schreyer did in the development of the Lake Winnipeg regulation and this particular project that did the damage to Cross Lake which we are talking about today. So Premier Schreyer and the NDP government of the day did what was best for them, and to this day, as I understand it, Premier Schreyer says they did it right, and he has nothing to apologize for and it was good for them, it is good for them.

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There were, of course, some consequences that are costing us hundreds of millions of dollars every time we make an effort to resolve the consequences in ways that are generally acceptable as being fair and reasonable and healing. We have done that for 80 percent of the bands and Cross Lake is the holdout. The difficulty with them is since June of 1997 we have not been able to deal with them in any, what I would describe, a reasoned, good faith manner. We provide the reason, we provide the good faith, and they would contend that we are not demonstrating that. But we just do not appreciate that interpretation, and everything that is negative that they have done to us we would regard as hurtful to the relationship when it is not reasoned or from the heart or sensitive or in good faith.

So we have got a difficulty, but there are some very wise and reasonable people that are within the community and outside the community who are First Nations people who simply want what is best for their people. Over time, we expect they will emerge and they will prevail as has been the case with aboriginal people over many centuries.

Ms. Mihychuk: Well, I guess just to clarify the record from my perspective, the loss of this deal, this titanium deposit on Pipestone is clearly in the hands of this government. It was found in the late '80s, mid-'80s, and the failure to move on the development of this deposit is not Schreyer's fault, not the NDP's fault. Ten years have gone by and as we sit there and if the door closes on this deposit, that failure will rest on the shoulders of Filmon and this Conservative government. So to put the record straight, the failure of this deposit–and I sincerely hope that is not the case, the door is not closed, and we must make every effort to develop trust and get this deal done. But 10 years have gone by, and the people of Cross Lake are no better for it. We still wait, and words do not feed children. Mistrust and lawyers just take money out of the band and we know that. So I think that we are both aware that this deposit and the economic future would be very bright if we could move things along.

I think the record from my perspective had to be put forward, and I am quite content to move on out of Marketing. Once this deposit is ready to be sold to the world, I am sure that there are a number of interested parties, and I look forward to developing a major mineral deposit on the shores of Pipestone in the near future. I am quite confident it will be an NDP government and look forward to the good days coming.

Mr. Newman: I am going to be even more like that for the honourable member for St. James (Ms. Mihychuk) who is here representing her party as the critic, the official opposition party as the critic on Energy and Mines.

The Schreyer government, the NDP government of the '70s, having created the lack of trust and the consequences of a development that was not done sensitively or appropriately, have in the period since June of 1997 done nothing, nothing which would indicate to the public at large that they really do have an interest in the community of Cross Lake making an informed nonpolitical decision in the best interests of their own people.

The participation and the actions of the honourable member for The Pas, Oscar Lathlin, the participation and comments of the Leader of the official opposition, Gary Doer, and you, yourself, in relating to Cross Lake have, I would assert, taken a partisan position which is trying to turn what is happening there into an election issue. I think it is no accident that Oscar Lathlin and Gary Doer were in Cross Lake just before this working group began its meeting, nor do I think it is any accident that you are raising this issue in the way you are in trying to suggest that there should be an accountability of the Filmon government.

I believe you are doing nothing but playing politics on this issue, and it is most unfortunate because what they need is responsible, reasoned, good faith and understanding government. The NDP, in its past performance and in its current performance through its members trying to regain office as MLAs of the North, and you trying to get some sort of justification for you becoming a Minister of Energy and Mines, are playing with fire here. You are doing a disservice, I believe, to the people in that community, and you are encouraging, through your politics, the kinds of politics which are not going to support the advancement of the individuals and the community of Cross Lake.

This is a very complex issue, and it is most unfortunate that it is being thrown into the mix of an election campaign to come. We will continue to treat the community members and their leaders with respect and good faith and hope that they will come to some sort of consensus that does not lose this opportunity, or if they decide to lose the opportunity, they do it with open eyes and open hearts and open minds. It would be more helpful if the official opposition, rather than making this a political issue and postponing something positive happening until the election, would contribute to a reasoned, good-faith approach by the leaders of that community.

So, to the contrary, I do not think you have put anything on the record but pure effort to put responsibility for this issue outside the community itself, and that is where it lies. You should be empowering community members, I would submit. You should be showing respect and good faith to leaders. You should not be playing politics with them. You should be encouraging them to do what you espouse to want to do here, and that is to have them as quickly as possible make an informed decision about whether they want this opportunity to go ahead or to be suspended.

Mr. Chairperson: Before I recognize the honourable member for St. James, I would just remind the committee that when they are making remarks, the committee should make their remarks through the Chair and not directly at individuals.

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Ms. Mihychuk: I am ready to move off of Marketing and hope that future discussions can stay away from laying blame. I feel that the minister provoked that type of politics with his comments and do sincerely hope that Cross Lake moves on as quickly as possible and gets developed and sincerely hope that we have other additional significant mining opportunities coming forward where the Marketing Branch can be successful in promoting opportunities for Manitobans.

Mr. Chairperson: Under 23.2. Energy and Mineral Resources (a) Marketing (1) Salaries and Employee Benefits $850,500–pass; (2) Other Expenditures $475,400–pass.

23.2.(b) Petroleum and Energy (1) Salaries and Employee Benefits $1,537,500.

Ms. Mihychuk: The petroleum industry in Manitoba is small but very sweet, since we like to be just like our big western brothers and sisters, and I understand that it is under water. Can the minister update us as to the impact of the flood in southwestern Manitoba?

Mr. Newman: Mr. Chair, there has been minimal impact, I am advised, on the oil operations there, but if you do plan to go down there on a tour wear your rubber boots.

Ms. Mihychuk: The minister hints around my desire to go down actually on Friday and take a tour of the field and see what oil and gas is all about besides it floating and being put into my vehicle. I have some knowledge of the petroleum industry, but I have to say very limited, so I am looking forward to going out and staying on dry land and learning a lot more about the oil and gas industry in Manitoba.

Can the minister update us as to the overall status of our petroleum industry in Manitoba? We have changed some of the tax regimes. The grant has now gone. What impact does that have on Manitoba's petroleum industry, and what does the future look like?

Mr. Newman: Effective April 1, 1999, my department introduced royalty and tax changes for the petroleum industry. The new third-tier royalty and tax rates are being implemented as a replacement for the Petroleum Exploration Assistance Program. Third-tier rates will reduce royalties collected on oil production from Crown-owned oil and gas rights by an average of 14.5 percent. Freehold production taxes collected on oil production from freehold oil and gas rights will drop to 44 percent. Royalty and tax reductions will apply to vertical wells drilled after April 1 of this year and inactive wells that are reactivated in enhanced recovery projects that begin after April 1. The new third-tier rates are an important financial incentive to stimulate investment and employment in our oil and gas industry. Saskatchewan and B.C. also announced third-tier royalty and tax rates in 1998. With our new third-tier rates, we have restored the competitive advantage so critical to Manitoba's oil patch.

We have also extended for another two years, until January 1, 2004, the Manitoba Drilling Incentive Program. This program provides a royalty or tax holiday on production from new wells and qualifying wells where a major workover has been completed. Extending this long-running program maintains our competitive and stable fiscal regime which is the most effective way for government to encourage oil and gas investment.

I get weekly well activity reports and watch with interest as the oil prices have moved upward, compared to last year at the same time, and also do note the challenging times reflected in things like number of metres drilled, compared to even last year; the wells licensed, but not spudded, way down; the wells completed as potential oil wells, way down, compared to last year; and new wells on production, way down. I notice the negative picture when we have our lease sales. The amount we get as a premium for lease sales is way down. The amount of interest is down. So we are going through a challenging time in relation to our oil patch.

Just as with mining, we try and make sure that we are as a province well positioned in terms of the regulatory regime and the fiscal regime that Manitoba has, so that when there is a desire to invest that Manitoba will be given a favoured consideration as well as other jurisdictions. So we are doing the right things, but we are going through a challenging time with the prices going upwards giving us every expectation that we will see more favourable results in the foreseeable future.

Ms. Mihychuk: Can the minister indicate reserve potential? This is a sector that I cannot seem to quite understand. It is a finite pool, if I understand correctly, and we had a very limited resource, as projected by some of the numbers that I saw. Yet annually we seem to always have the same number of years remaining. So is it that we are exploring new pools? Is the field actually bigger? What is the life expectancy of the oil and gas reserves in Manitoba as presented now?

Mr. Newman: At the end of 1997, Manitoba had 4.7 million cubic metres of remaining recoverable oil reserves. Petroleum and Energy Branch is currently in the process of completely completing the 1998 reserve estimates. Last year, oil production totalled 634,000 cubic metres, a decrease of less than half a percent from 1997. Based on historical production, decline rates and reserve additions from new discoveries, Manitoba's oil production will continue for many years to come and provide jobs and income for those living in southwestern Manitoba. The branch conducts these reserve estimates annually, and so far exploratory drilling each year has added new reserves.

Ms. Mihychuk: Does the department do any active exploration?

Mr. Newman: No.

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Ms. Mihychuk: Is there a requirement to keep some drill core that companies retrieve when they do a well so that we have a record of the geological formations that are being passed through?

Mr. Newman: Yes.

Ms. Mihychuk: Can the minister elaborate? Do we get specimens from each well that is drilled, and is it stored at the Brady–no, we have moved that. I think it has moved to a downtown site. But those drill cores are available to interested parties, or how are they catalogued?

Mr. Newman: Yes, each well provides samples that are stored at the Midland storage site, and access to them is available on request.

Ms. Mihychuk: How long have we been keeping samples of those cores, and how many wells do we have represented?

Mr. Newman: I am informed that the companies provided samples which were not under the auspices of the department going back to the beginning of drilling in the province in the '50s, but that the department then took responsibility for storage of those in the '70s and have been involved in that storage responsibility since the early '70s.

Ms. Mihychuk: That is very interesting because it is a huge wealth of information available on the stratigraphy for geologists, universities, others. It is a very positive thing to do. Does the minister receive samples from the metallic mineral industry and store those samples for the department, for the public?

Mr. Newman: Yes.

Ms. Mihychuk: So am I to understand that the diamond drilling that exploration companies do are logged by the department?

Mr. Newman: Not all cores are stored, but those that are provided and are of interest are stored.

Ms. Mihychuk: Can the minister elaborate what he means by those provided? Is that an option for industry to provide the core? If so, why? Since apparently the petroleum industry or the Petroleum Branch recovers these cores as a matter of course, why would the mineral industry not also have the same expectations?

Mr. Newman: The answer is that the provision is voluntary in the mineral industry. The rationale for that is that the volume would be so extensive that it would be an unmanageable kind of exercise.

Ms. Mihychuk: Would the minister consider making a requirement where the department has an ability to request certain core? There are certain geological structures that are particularly interesting. I know that diamond drilling goes on that there are numbers, hundreds of drills, core done in a particular deposit. However, there seems to be a great deal of benefit that would be achieved if the department had the ability to retrieve some of those cores which it deemed in the public interest rather than making it voluntary. Because there may be, I am sure, instances where industry would like to keep these core as confidential as they can.

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Mr. Newman: As I say, the magnitude of the core that is drilled is so great, the practicality of doing it does not make much sense. If there were just a requirement for certain samples or something to come forward, my information is that no one has ever requested that. I should not say no one, but I am not aware of any demand for that from the industry that had ever come to my attention.

The implications of making it mandatory in the industry, given the circumstances relating to confidentiality and competitiveness, all of the security issues, the supervision issues, the enforcement issues, it would be a very complex undertaking which would require an enormous amount of, I would think, consultation and consideration. It is the kind of thing that if it were an idea it should be brought forward by explorationists or producers or other people interested in the industry. But so far, that has not happened.

Would I proactively take a look at something like this? If there were any opinion, any informed opinion expressed to me that this would be in the public interest of Manitoba and mining exploration and development in Manitoba, I would take a look at it, but I have not had any such advice. If you are urging that as something that you would do if you were the minister, I suppose I would analyze it. If you are just throwing it out as a question to me, it is just not on my agenda at this time.

Ms. Mihychuk: Is there an effort to collect core from the exploration projects that receive MEAP grants? These are projects that receive between 25 to 35 percent government funding. In this case, the public of Manitoba has a vested interest in those projects. It may be valuable to get selected core from those projects. The request would seem to me to come from academics and others who may be interested in the geological history more so–or even government itself who is interested in doing more comprehensive exploration–than industry itself. They, I am sure, would argue that it is more costly and it is whatever to have samples of core, but it would seem to me that the request would actually come for the public good from the academic or nonindustrial sector where such a library of information would be for the public good, as I say, rather than for economic interest.

Mr. Newman: You have offered some opinions, and the opinions simply do not coincide with what my staff would advise me makes sense or is desirable from the point of view of people involved in the industry or from the point of view of trying to attract investment and to avail themselves of the MEAP program.

The implications of what you are talking about are very significant and the kind of process that any idea, if considered worthy in the public interest, the broad public interest and all the stakeholders, the process for testing that idea out is, as I say, a lot of consultation and feedback. At this time, not enough merit has been shown for this idea to warrant it being subjected to a process, which is not to say that having that information would not be valuable to the department, valuable to beneficiaries of the information that would result from an inspection of those cores, but you have all the issues of the reliability of the samples; you have to have supervision. I mean, there are all kinds of implications, the timing.

It would be an enormous exercise of government intervention which is something that we are not enthusiastic about doing in my government. That is my answer.

Ms. Mihychuk: One day when I have an opportunity, I will put my boots on and come and look at some of that petroleum core. I am fascinated that we have such a long history and such a regional sample. I do not know if that would be horribly inconvenient, but I do not plan to do it next week. Maybe some time in the future I will have an opportunity to look at it. I would be very interested in doing so.

Mr. Newman: Mr. Chair, I extend an invitation to you to have a tour of the core storage facility. You can spend many days and months and even years in there inspecting them, and I will make sure that I will be your pair in the House as a member of government, you and the official opposition, while you engage in that study.

Ms. Mihychuk: Can the minister indicate of the 31 staff in this branch, how many are in petroleum and how many are in energy?

Mr. Newman: Eleven in energy, 18 in petroleum, and two are shared positions.

Ms. Mihychuk: Are the staffing levels in petroleum, have they remained constant over the last 10 years, or has there been any change of staffing ratios, and can the minister indicate whether in his opinion the staffing component is desirable or does there need to be change?

Mr. Newman: The staffing over the last 10 years for petroleum has been constant.

Ms. Mihychuk: My second part of the question was: Is the minister satisfied with that level? Does he see any changes required because of new trends or new challenges?

Mr. Newman: The present situation is adequate from the perspective of my staff and myself.

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Ms. Mihychuk: This is the branch that includes energy, and this is a sector that has seen quite significant staffing changes. Can the minister indicate what the staffing levels were in '88 versus now?

Mr. Newman: To save time, we will have to undertake to provide that information. We do not have that handy.

Ms. Mihychuk: Can the minister indicate, of the 11 people in Energy, how many are in management, how many are professional and how many are support staff?

Mr. Newman: One management, one support staff secretary, nine technical.

Ms. Mihychuk: One of the things that the Energy department does is advise the minister, and it does several projects, or used to do even more projects than it does now, but one of the things that it does do and we get some publicity on is the R-2000 program where houses are insulated to a degree where they are extremely energy efficient, but the number of houses that are involved are quite small. If I remember correctly, it is in the amount of 30 or 40 houses. This is like the Cadillac of insulation. I am looking maybe more to a more populist view of getting Manitobans into an energy conservation mode, and is the department satisfied with its R-2000 program? Are we trying to convince people to go for the Cadillac version rather than maybe a more modest insulation program, or what is our plan on this home insulation program?

Mr. Newman: Because of the way you preambled your question, I think it might be useful to clarify that the R-2000 program is far more than an insulation program. The federal R-2000 program began as a result of government agencies and researchers establishing criteria for high quality, super-energy-efficient houses. It has evolved over the years to include methods to improve indoor air quality and reduce overall environmental impacts. Regional R-2000 committees involving Natural Resources Canada, provincial governments, energy, utilities and home builders associations are in place across Canada. The Manitoba R-2000 home program is operated by a committee composed of Energy and Mines, Natural Resources Canada, Manitoba Hydro, Centra Gas and the Construction Association of Rural Manitoba.

In September '94, the department assumed the management and administration functions of the program. R-2000 houses are designed and built to a specific energy performance standard. They can only be built by a builder who has undertaken R-2000 training. Each house is examined and tested before it can be certified as an R-2000 home. Marketing efforts over the last couple of years have increased consumer awareness of the program.

The 1997-98 fiscal year saw 34 homes enrolled, representing a 20 percent increase over the previous year. In 1998-99, 44 homes were enrolled, a 29 percent increase over the previous year. The 1999-2000 program business plan defines a program mission of increasing penetration of R-2000 in all new home construction activity, which is driven by the following goals: to present all Manitoba new-home buyers with the R-2000 alternative to conventional housing; to increase the number of R-2000 enrollments by 30 percent over '98-99 to 57 enrollments; to provide the Manitoba home building industry with the necessary skills to build quality R-2000 homes; and to be recognized as having the most successful R-2000 program in western Canada.

To continue to raise the level of consumer awareness, the following initiatives will be undertaken: print advertisements, newsletters, open-house events at new R-2000 homes, new-home workshops, public information service.

The Canadian Home Builders' Association is a strong supporter of R-2000 and has, over the last year, committed itself to a revitalization of the program in all provinces across Canada. CHBA has been lobbying the federal government to increase funding for the R-2000 program and has proposed a new national business plan for program delivery. R-2000 builder workshops will continue to be held throughout Manitoba for the certification of new R-2000 builders and updating the existing builders. Just over 80 builders in Manitoba are registered and eligible to enroll and build an R-2000 home. Of the registered builders, about 30 are active in the program and have built R-2000 homes; the remainder just find the program's technical training advantageous.

The department is in the process of evaluating the program through a survey of users and nonusers. The survey will identify potential areas of R-2000 weaknesses and strengths for future marketing purposes.

Ms. Mihychuk: Can the minister tell us, are there any R-2000 homes in northern Manitoba?

Mr. Newman: I am told the answer is yes. We will get specifics of where, if you are interested.

Ms. Mihychuk: Yes, I am very interested. Northern Manitoba has many challenges. One of them is kind of tough winters, and energy conservation programs up there are needed. Particularly, I would say, in First Nations communities, where some of the housing seems to be substandard. Is the department looking at any type of home insulation program for northern residences?

Mr. Newman: The Northern Affairs department and the Energy and Mines department have had a number of discussions about a housing initiative which would involve the serious consideration to expansion of R-2000 units in the North, but I just gratuitously offer that the program is significantly driven by the marketplace. When a builder or a prospective homeowner sees that this will attract purchasers, then the marketplace will determine this is a very attractive option.

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Again, the kind of role that we try and play, and the philosophy of our government, is to make people aware of the facts about the benefits of R-2000 and over time the better economics and health that can be derived from R-2000 construction. So I can say this, that we are looking at ways of nudging the marketplace with some incentives, but we are very respectful of the role of the marketplace in determining who chooses these homes and where they go.

You have probably noticed, as I have, in the local media there have been several articles over the past year that have been a very good dissemination of information about R-2000. In fact, there were two feature articles in the Winnipeg Free Press in the past two months. I give great credit to people in the department responsible for this program because they have attracted enough attention and done enough good public relations and have enough satisfied clients out there that they want to promote the program. So I think we have turned a big corner over the past year.

I know that, if you are going to Brandon next week, when you are down in the south, or this Friday, I urge you to have a look at the condominium development there that is all R-2000 construction and is right on top of the hill there. I handed out certificates to the people there, recognizing their investing in the R-2000 homes. They were just delighted with the opportunity to contribute to a more positive environment and climate change challenge. At the same time, we were of the belief that they were getting over time very good value out of this investment.

Ms. Mihychuk: Moving away from R-2000, which, I think, is again an elitist program in building construction sort of realms, if we looked at the average home in the North, they are probably not going to look to converting it to R-2000. If they were looking at energy conservation, they are going to need other options. I am wondering if the department has looked at the development of new initiatives. That is one of the items identified as the role of the Energy Branch, to develop new initiatives leading to energy efficiency. So for northern Manitobans, I think they in particular would be interested in some new ideas, particularly those that would be affordable and those that deal with the existing housing stock.

Mr. Newman: Through you, Mr. Chair, I must take issue with the use of the word "elite" program. I think you do a disservice to the program by saying that. Now we have to overcome that kind of message that you are sending out to the world with our marketing. You are making our department's initiative and life far more difficult with those sorts of negative descriptions of a very worthy program. But having said that, I am aware, because of my responsibilities, for example, on the Sustainable Development Committee of Cabinet, of a number of initiatives.

We have an Eco-Village concept, which has been funded in part by that, which is in the city at the moment. We have had expressed interest for the proponents of the Eco-Village to try these innovative things in Northern Affairs communities. We are supportive in encouraging these kinds of initiatives.

The role that the department plays very specifically, in less of a total package kind of way, are through education of the public. We had our department involved in two separate series of workshops throughout Manitoba for builders, contractors, suppliers, and individuals planning either to build a new home or retrofitting an existing home. The workshops are three hours in length and are delivered by leading experts on energy efficient, environmentally responsible home designs to promote practical, affordable tips on planning a new home or retrofitting an existing home.

The New Home Workshops are structured around the technical guidelines of the R-2000 program under their design to provide clear, impartial advice on how to find a qualified contractor and avoid common planning and building mistakes. The Home Energy Saver Workshops are designed and presented as an education forum and are typically held in the evening in different communities throughout Manitoba. Three New Home Workshops were offered in Winnipeg, and 11 workshops were offered in rural Manitoba between January 26 and March 10, 1999. One of these workshops was held in a flooded area and three were offered in areas of the province where the workshops had not been offered in previous years.

The Home Energy Saver Workshop material continually reflects current changes in the industry and were held in seven rural and two Winnipeg locations between January 26 and March 4, 1999. A partnership has been formed with the Federated Co-op and McMunn and Yates building centres to sponsor workshops in the communities which they serve. There is no charge to attend either of these workshops. Preregistration is handled by the department, the Federated Co-ops, and McMunn and Yates. Both workshops are advertised in local newspapers in rural areas and in the Winnipeg Free Press Community Review in Winnipeg.

New Home Workshops and Home Energy Saver Workshop posters were redeveloped and displayed in hardware stores and lumber stores in Winnipeg and throughout the community rural locations. New Home Workshops flyers and Home Energy Saver Workshop flyers were distributed to residents through Canada Post and the Continuing Education version of the Home Energy Saver Workshop developed a few years ago was not being offered this year. It will be examined, however, to see if it can be revised to better fit into the program in future years.

Also, Energy and Mines conducted energy audits in preliminary energy savings evaluation at the following buildings: Oak Tree Towers in Portage la Prairie; Villa Heidelberg, 33 Edmonton Street; Kildonan Horizons, 505 Monroe Avenue. An outside engineering firm conducted the energy evaluation at the fourth building in Morden. Retrofit work is nearing completion at Oak Tree Towers and Villa Heidelberg. The building in Morden and retrofit plans at Kildonan Horizons are presently on hold. MHA plans to monitor the pilot projects for the fiscal year '99-2000 and make a decision to proceed on the other buildings based on the results of the monitoring.

Ms. Mihychuk: Can the minister indicate how many workshops were conducted in the North and where those workshops were conducted?

Mr. Newman: I will undertake to get the list of workshops held in the North.

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Ms. Mihychuk: Has the department looked at alternative energy sources? I am sure they have. Perhaps the minister could update us as to ethanol or wind generation. I know that projects like these occurred in the past. Has there been any update on those types of alternative energy development?

Mr. Newman: We have a very focused effort and have for a number of years, but growing in towards fruition over the last year particularly towards increasing ethanol production in Manitoba. My hope is that we will have something to announce in that respect within the next few months.

Ms. Mihychuk: Just one final question, in terms of energy, is the minister actively pursuing the sale of Manitoba's hydroelectric resources?

Mr. Newman: If I may complete the answer to the first question, because I dealt with ethanol, but there was another part I wanted to add. That is, Manitoba Energy is developing an energy map outline of potential alternative energy resources throughout the province of Manitoba.

Then in answer to the other question, I can say without any equivocation at all that nothing is being done by me or under my direction or to my knowledge nothing is being done by anyone in the department exploring the potential or theoretical disposition of Manitoba Hydro into private hands or public hands.

Ms. Mihychuk: I am willing to pass this section.

The Acting Chairperson (Mr. Dyck): 23.2. Energy and Mineral Resources (b) Petroleum and Energy (1) Salaries and Employee Benefits $1,537,500–pass; (2) Other Expenditures $612,000–pass.

23.2.(c) Mines (1) Salaries and Employee Benefits $1,444,500.

Mr. Gerard Jennissen (Flin Flon): I am wondering if I could ask a few questions that may not necessarily jibe with what my honourable colleague was just talking about, but they do affect my part of the constituency and they deal with mining and mine waste. Would the minister be prepared to deal with that for some considerable time?

The Acting Chairperson (Mr. Dyck): I see a positive affirmation. Go ahead, please.

Mr. Jennissen: My first question is regarding the community or communities, I guess, of Sherridon-Cold Lake. I see them as one community, but I guess technically they are two communities. There was a mine there a number of years ago, I believe until the early '50s, a copper mine. There is a considerable amount of mine tailings left there. In fact it is visible even by air as sort of a raw, red scar on the landscape. I know this was long before our time, but it does affect the communities, it does affect the drinking water, and it does affect eventually the organisms in the lakes, particularly Kississing Lake as well as Camp Lake and probably other places as well.

I know the department has attempted to control some of that damage. My questions are: exactly how severe is the problem, what has been done to date, and what is the cost associated with that?

Mr. Newman: A civil engineering study was done of the situation you have described and the province contracted with Acres International Limited to provide a Phase 2 engineering report to detail the feasibility and cost of constructing a rock-fill embankment across Camp Lake. The cost of the dam and other associated work was estimated to be $650,000. The department and me as minister are very interested in getting approval for a strategy to deal with identified orphan mine site situations where a rehabilitation program could make a difference and remove the consequences caused by people who abandon sites against which accountability cannot be enforced, so that they pay for the consequences wherever there is liability which could be enforced. My department has instructions to aggressively pursue anyone, any mining operator or entity who has been responsible for contamination and has created a negative good will towards mining when it is practical to do so and the probable outcome is positive.

Mr. Jennissen: The civil engineering study the minister is referring to and the dam that he is referring to, this is future tense, right. We are talking about something that could be done. This has not happened yet obviously.

Mr. Newman: My advice is that several efforts were made to address the problem pursuant to $400,000 of funding approved in August 1996 to divert and restore Sherlett Creek to its original drainage channel. The project was commenced in November 1995 and completed in December 1996, but since that project completion ongoing high levels of acid and mine drainage from the Sherridon tailings area have contaminated Camp Lake and in turn Sherlett Creek. The diversion of Sherlett Creek was subsequently shut down to prevent contaminated water from Camp Lake entering the community.

Mr. Jennissen: So are we saying then that the $400,000 spent on that project was basically wasted money? In other words, it did not solve the problem; it, in fact, worsened the problem.

Mr. Newman: My advice is that it helped, but it was not a complete solution nor an adequate solution.

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Mr. Jennissen: I am not exactly clear what the original intention was I guess, and I am asking for clarification, because all I could see was that where there was a road from Sherridon to Cold Lake, suddenly there was a culvert there. There was a hole dug across the road and now apparently there must have been more than that because this cost $400,000. At any rate, that water is no longer flowing and it has been bulldozed shut, so my question still remains, $400,000 was spent for what.

Mr. Newman: The funding was for the purpose of funding a civil engineering program to divert and restore Sherlett Creek to its original drainage channels.

Mr. Jennissen: Well, I am given to understand, talking to the people who live there, that it has not improved their water quality and it has not solved the problem and that in fact this Phase 1 was a boondoggle. And, if we are now entering on Phase 2, which is a cofferdam or a earthen structure across Camp Lake to contain some of the waste, well, that is another phase, but it still does not solve the first part which is why the engineers did not foresee that problems would ensue with Phase 1. I mean it is a lot of money and it does not seem to have done anything for anybody. It screwed up the creek. It did not improve the drinking water. It spread out the waste even further, as far as my people over there tell me. Now I am no expert on this, I will be the first to admit it, but that is what the local people are saying. So I guess I still come back to whether the engineers did not foresee what would happen when they proceeded with Phase 1 and why they did not foresee the problems.

Mr. Newman: The approach is a phased-in approach, with the next step to be a Phase 2. That is the one I described with Acres International, and it is effectively one step at a time to make sure that it is going to indeed work. The next step will determine what, if any, third step will be necessary.

Mr. Jennissen: So Phase 2, the second step, the building of this dam which would then make part of Camp Lake a holding pond, I guess. When is that supposed to start?

Mr. Newman: We have not secured the funding for this in the recent budget that our respective parties both approved in the House, but we are aggressively pursuing funding to address all our mine sites in the province, this being one of them.

Mr. Jennissen: The funding would come out of the Mining Reserve Fund, I presume. Is that correct?

Mr. Newman: That has not been determined. The funding that was sought was not sought specifically out of the Mining Reserve Fund. It was sought out of general revenue.

Mr. Jennissen: The minister is then saying that in order to even attempt to address that particular pollution problem, we would have spent, or will be spending, in excess of a million dollars with possibly no guarantee that there will be a satisfactory solution to the problem.

Mr. Newman: The amount that we sought in total was $750,000, with this being a $650,000 part of that.

Mr. Jennissen: I guess I need some clarification. The dam itself would cost $650,000. Where does the other $100,000 come in?

Mr. Newman: The $750,000 was thought to be the appropriate figure to cover that particular study. When we got the study, the estimate was $650,000, we sought $750,000 to fund it. I might say towards that study, the Phase 2, Acres has at this time before us a proposal to update the study they had done previously, and it is now being evaluated by the department. All of the Phase 1 work, I am advised, has been completed.

Mr. Jennissen: When this dam construction project does get underway, I presume it could be fairly labour intensive. Is there any way that the local people can get involved because of a high unemployment rate in Sherridon-Cold Lake?

Mr. Newman: The answer is yes. There has always been an effort to maximize the involvement of local people in these initiatives, particularly if it is funded from Mining Reserve, of course.

Mr. Jennissen: When this process started, when the whole project started a number of years ago, I am not privy to the information underlying the beginning of that activity, but is it basically an environmental issue we are dealing with, or is it something as narrow as the drinking water for Sherridon-Cold Lake, and only part of the town is hooked up to water and sewer?

I guess I do not know the extent of the problem. Does the minister have a feel of how big this is and what it is that we are addressing?

Mr. Newman: Maybe I could usefully share the background on the record, so that we can shed some light on this. I commend you for pursuing this because I think it is good to have this information generally available.

My information is that the Sherridon mine operated from 1931 to 1951 as a copper-zinc producer and deposited some 7.4 million tons of acid-generating tailings into nearby designated lakes. Over time these lakes became acidic, aggravating the pH level of nearby Kississing Lake, a large recreation lake from which the community of Cold Lake, that is Sherridon as it was, obtains its potable water, processing this water through a water treatment plant in Cold Lake.

Sherlett Creek, flowing from Sherlett Lake at one time, entered Kississing Lake at the community of Cold Lake, but was diverted for processing purposes by the mining company at Camp Lake. Mayor Cyril Perry of Sherridon requested that Sherlett Creek be diverted back to its original water course, not only to once again provide the Cold Lake community with fresh water from Sherlett Lake, but more importantly to also reduce the flow of contaminated waters from Camp Lake entering Kississing Lake. Mayor Perry further requested that a dam be constructed across Camp Lake to protect the integrity of Sherlett Creek once the diversion has been effected.

Studies conducted on the Canada-Manitoba Mineral Development Agreement between 1981 and 1985 had earlier evaluated the technical feasibility and cost of the two proposals requested by Mayor Perry. The cost at that time to implement the creek diversion/dam construction scenario was $800,000.

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A technical review committee from Energy and Mines, Environment and Northern Affairs determined that the creek's diversion and dam construction scenario still offered the preferred long-term solution. The committee recommended initially that a one-year water quality monitoring program of Kississing Lake be undertaken at a cost of $5,000, together with a review of previous engineering data at an estimate set an additional cost of $20,000. Order-in-Council 46/1995 was subsequently approved on February 8, 1995, authorizing $25,000 from the Mining Community Reserve for the purpose of funding these water quality monitoring and engineering review programs.

Based on the subsequent findings of these two programs, the technical review committee later proposed that only the Sherlett Creek diversion component of the project proceed at a cost of $400,000. The need for dam embankment across Camp Lake would be determined later through water quality surveys in the affected area. OIC 436/1996 in the amount of $400,000 was approved in August 1996 to fund a civil engineering program to divert and restore Sherlett Creek to its original drainage channel. The project was commenced in November 1995 and completed December 1996, as I said earlier.

Mr. Jennissen: When I tour the tailing site, it is a fairly large area and highly concentrated, it looks like a red oxide. I am wondering whether there is any chance of it ever going through another process of recovery. I know that when metal prices were higher, particularly gold, some of the old sites that had been worked before, the gold sites, were worked again and proved to be quite profitable. I am not suggesting that this is one of them, but I am just wondering if there has been any kind of study done, whether maybe that site could be used again because the technology that was used there recovering copper was a technology of the '30s and the '40s, so maybe there is still quite a bit out of that material that could be recycled as it were. I do not know; I am just asking the question.

Mr. Newman: We know of no interest shown in doing that, but if the honourable member for Flin Flon has any ideas or knows of expressions of interest, we certainly would pursue them.

Mr. Jennissen: Just one final question, when Phase 1 was attempted to divert Sherlett Creek, whatever it is called, was the attempt then also to flood part of the tailing site, which then would make some of those minerals soluble, I guess, in the water because a lot of that seems to be under water? Was that not under water prior to this?

Mr. Newman: My advice is it was to hold the flow as to contain the water so it would not flow into the lake.

Mr. Jennissen: Mr. Chairman, I thank the minister, and I would like to turn it over to my colleague from Thompson, who, I am sure, has some questions on nickel mining, among others.

Mr. Steve Ashton (Thompson): Most definitely. In fact, I want to start off addressing the current situation with Inco. We are in an interesting situation. The price of nickel has declined significantly down to $1.80 or so a pound. It has sort of been up; it has been down. Actually, the last couple of weeks, it dropped 38 cents in one week. So if there is anything that was certain about the mining industry right now, it is the uncertainty. It is something I know the minister is certainly aware of and everybody in Thompson is definitely aware of it.

I want to focus on a couple of things. One is the obvious fact to my mind that we are dealing with a situation where we have to be competitive on a world basis. When we are dealing with nickel, it is not simply a question of being competitive, say, with Ontario or potentially with Newfoundland, with Voisey's Bay perhaps, being put into place in the next number of years depending on current negotiations. We are dealing with new mines, particularly Australia, where there is new technology, some questions about the ability actually to deliver on that technology and some of the cost figures that have been used, but certainly it is a potential competitive threat there. There is the ongoing threat in Russia, including with scrap nickel from out of it that has been put on the market at various different times.

I am wondering what the minister's strategy is to ensure that we are competitive on a world-wide basis both in terms of mining taxes, other charges and taxes, and I point, for example, to some of the recommendations that the Mining Association made recently. I know they met with the minister. They have certainly met with us. They did come up with some concrete suggestions. So I am concerned generally for the sake of the mining industry but particularly in terms of nickel, and I would appreciate the minister's own thoughts on that too in terms of how we position ourselves in a very competitive market. We have some advantages obviously. We have a significant plant that is in place. It is a fixed cost to Inco. Inco has put a lot of money into Manitoba the last number of years, so we are into an interesting situation but a very difficult situation. I would appreciate the minister's strategy on how we can keep mining in general competitive, particularly, nickel mining which obviously mostly affects the current operation in Thompson.

Mr. Newman: I know you do not want me to repeat at length what I said in my opening statement to the honourable member for St. James (Mr. Mihychuk) as the official critic for the official opposition. Let me just try and sum it up in a way and get right to the nub of, I am sure your primary concern, the future of Inco being a successful corporate citizen and producer in Thompson and in the vicinity.

All of our strategy is designed to make Manitoba the most attractive place in Canada for sure, and if not the world, to invest in mining and that is for exploration purposes, and exploration helps Inco. If they can unearth other deposits that give them economic, in a competitive way, world-wide opportunities to continue their operation and take advantage of the capital investment that they have placed in their current development in Manitoba, they will take advantage of it like anyone else. Maybe with their knowledge of the underground, they will know better than anyone else the risk involved in making those investments. So they benefit greatly from our incentive programs, and they are not disentitled from MEAP. We work with them in very specific collaborative ways together with our department and the academic community and the federal geological survey people to unearth other development opportunities.

All of our strategy, as I say, is to make Manitoba the most attractive place to invest whether it is improving security of land tenure or whether it is improving access to new areas, whether it is the predictability engendered because of our enlightened approach to endangered spaces, whether it is our fiscal regime which we always try and make sure is competitive. That is why in our budget of which we both approved, we reduced mining taxes by a couple of percent and motive fuel tax on vessels coming into Churchill. Exemptions, keeping our Workers Compensation rates down, keeping hydro rates down. All of those are significant contributors to the future of nickel in Manitoba and the operators and the explorationists in connection with nickel and all the industries dependent on the Inco producer.

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The kinds of things that we do are good faith, open door, candid, sharing, forthright relationship with the people entrusted with the management of Inco and Manitoba. The leaders of the union entrusted with leading the union in Manitoba, the people in the community, the mayor and council representing the interests of the community, relating as I say in a positive, supportive, good faith, candid way to try and tackle this challenge together has been a commitment of our department, our government.

The approach that was taken by the management of Inco and the union of Inco was in effect to come to us and say we need in order to be a continuing presence in Manitoba a percentage of return. We want a certain percentage of profitability. We are going to be very candid about it and we will tell you what it is. We have told the union, we tell you, we cannot continue to do business here unless we collaboratively meet this challenge, because that is the kind of return we can get in other places in the world.

The union made its deal, and dealing with the union president, I said you have your relationship with the company where you have your relationship through a collective agreement. It is up to you to carry out your responsibility as the leader of your union to do what is best for your members in the long term, and it is up to the company to deal with you on that. I will not get involved in that, and I fully respect the kind of role that you have and the kind of role the company has in this relationship.

But where we are prepared to look at things is where we have a contractual relationship with Inco or where, through normal fiscal tools, through the kinds of relationships that we have with the mining industry of the province, there are things that we can do specifically to accomplish an objective which will prolong the future, or probably prolong the future of Inco in Manitoba as, again, a successful and productive and important corporate citizen providing jobs, taxes, and income for many other employers and their employees that depend on them.

So we understand what they need and what they want in order to effectively commit to a life beyond 2004 and they, not unlike Hudson Bay Mining and Smelting, were looking at a 20-year mining plan. We listened to that, and we analyzed that. We know what they have, in effect, set out as the conditions for them embarking on that plan, and we have determined to what extent things that we could do, to what degree things we could do, would contribute to them achieving their objective. We have also had shared with us by the union and the company the kinds of things they have collectively done to improve productivity and reduce the unit costs of production without reduction in wages and with a minimal or a controlled minimal amount of job loss.

So we are into that with them right now. We have met with the mayor and council, as well, and we have met with a representative of the school division because everyone is impacted by this that has an elected position. You are now involved in this process by asking these questions, and I am prepared to be very candid with you in relation to the challenge that we have in this situation.

Mr. Ashton: Mr. Chairperson, in fact, we are faced with a significant challenge, because, on the one hand, Inco certainly has legitimate reason to need to be competitive–I think everybody is more than aware of that–and I think the minister gave a good representation of the degree to which that view is accepted in the community at large, whether it be the union or the community. In fact, some of the initiatives were actually undertaken not just by Inco's initiative but by the union itself in terms of trying to get a competitive focus and getting the internal operations operating in a competitive manner.

There is one significant problem, and the minister is aware of that. I know there are ongoing discussions, but there is no public secret of the fact that Inco has announced its intention to significantly reduce its contribution by the grant in lieu of taxes. There is a two-tiered portion of it. One tier is a tier that is not part of the core grant. The problem, of course, is that would have a significant impact on the school district and the City Council in Thompson, a very significant impact, and would lead to either significantly reduced services or major tax increases. So it is something that has created concern in the community.

I know there are ongoing discussions. I do not know if there is anything that could be called negotiations, but so long as there are discussions there is hope I suppose. But the concern I know in the community is that if there is an element of making sure that Inco is competitive, it is not something that the local community can do by losing a significant chunk of grant in lieu of taxes. We have to remember grant in lieu of taxes is basically a system that was set up and set up in many other cases as a substitute for property taxes.

I mean, Inco is not within the ability to assess direct taxation, and this goes back to the 1950s agreement, which in itself was quite unique. It extended the mining rights that Inco has far beyond what had been the practice at the time. No one had even heard of the kind of long-term leases, and part of that partnership was Inco's commitment to the community. Many of the early facilities in Thompson were established by Inco itself.

I guess the question I want to ask is what role the minister sees–and I do not want to get into any sensitive discussions. We have had this discussion, and I am not trying to have those discussions out in the open. But I feel a certain obligation, knowing what is happening, what might happen, of at least raising it in this committee publicly and asking both for the minister's thoughts on this but asking if the minister has looked at ways in which this effort which–and I accept is an effort in good faith. From the reports I have had of discussions the minister has had with various people, I accept his good faith in dealing with the real challenge.

But the reality is we end up with the current situation. The provincial government has far more impact on Inco's direct day-to-day operations than the school board or the City Council in every which way except one, which is the grant in lieu of taxes. It is not just the broader questions we have dealt with but, for example, just in terms of the mining tax structure. I mean, minor changes can make a big difference. I am sure if I mention the words "new mine status," the minister will know what I am referring to, and I know what has been the basis of discussion there. So I am not asking on that.

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But, I mean, simple question, how you deal with a certain mining proposal makes a huge difference in the rate of return of the company, and the rate of return is what is going to determine whether it goes ahead or it does not go ahead. The reality is the more uncertain the price of nickel, the lower the price has been, you know the less likely of it bouncing back, the more that companies, if they are going to finance, are going to have to significantly look at–I mean, you cannot guarantee a rate of return–but have a fairly high rate of return, far greater than perhaps some other industries where you have got more certainty and less insecurity.

So I guess I would appreciate the minister's views in a general sense, because I am not trying to pre-empt any discussions that are ongoing, but what the minister's views are in terms of this very real challenge for not just Inco but for the community of Thompson.

Mr. Newman: If there is anything I would invite you to take back to the constituents you represent in Thompson and the other elected leaders in Thompson, it is that I hope that they get to the table as soon as possible to deal with the issues that are within their jurisdiction and are part of the contractual relationship they have with Inco in terms of the payment in lieu of taxes and come to grips and negotiate something, just like the union. It has very professionally and responsibly, you know, drawn their line in the sand and said we do not want to have lesser wages, we do not want a formula like we did in the past contingent on future prices of nickel. We simply want the same wages and the same benefits, and we do not want layoffs except where absolutely necessary. However, we will work with you co-operatively to reduce costs of production by greater efficiencies, pooling our best creative intelligence. So should the City of Thompson and so should the school board.

They should not wait for the province to do something. I would hope they should get involved and try and engage with the company and the union and try and come up with something that they can live with over this 20-year or 15-year plan which hopefully will emerge out of this. We will do our part, you know, as a province within our relationship just as the union has done and just as we urge the city and the school board to do.

There is no question the kinds of issues that we are faced with are–we have had a request for new mines status; we have had a sharing of, you know, all of their projections over time, and we have done our own analysis of all of these things. We will take into consideration the number of different things besides the immediate impact of that. There are other things that are, have been over a period of time, agreements to disagree that we would like to get clarified in this present situation. So we are coming down, we are coming close to I think an indication of where we are prepared to go.

It would be helpful, I think, if the city and the school board were prepared to indicate where they are prepared to go because Inco has been very good for Thompson. I mean, it has paid high wages, it has provided a good situation in Thompson for many years for people who have chosen to live there. To be a healthy and sustainable mining community in this world requires adjustments from time to time, and weathering low international prices is the history of all mining communities. So, just as the city of Flin Flon did things with HBM&S–the company dealt directly with the city and the school board–well, Inco is doing similar things in its way in relation to Thompson.

As I say, my hope is that in tandem we will be coming up with effectively what will be a win-win-win for everybody, bearing in mind all of the relevant circumstances that no one is hiding. We have to just determine to what extent each of us within our spheres of influence and responsibilities can justify to our constituency of people, in my case the whole province of taxpayers.

Mr. Ashton: I guess my appeal is on a number of fronts here, for example, the new mine status. I had discussions with the minister. I think that is critical to the Birchtree extension, which is critical to maintaining an underground mining operation at Inco.

The real question with Inco is twofold. One is the overall operation generally, but in reality it is underground mining and of course the surface processing. Very different factors go into each part of that equation. The underground aspect is very much driven by continuing new developments. General exploration has been done, by the way. I am sure the minister is aware of this. There are a great deal of reserves in the area. Going from what is a reserve into a productive mine is quite something else, and Birchtree itself has been in operation, was closed for many years, has reopened. What is critical, I believe, is the rate of return that Inco can get.

One of the key elements is the tax treatment of it. That can mean very differing tax treatments. The minister knows that. I appreciate his comments. I think I understand what he is saying. I will leave that aspect at that other than to urge him to give full consideration to I think the joint presentation he has received both from Inco and the union on that. I am not expecting a response beyond that.

In terms of the situation involved in the grant in lieu of taxes, one of the dilemmas there, the real dilemma is that unfortunately it is not like collective bargaining. As the minister knows, in his previous life, where he has been involved in issues related to collective bargaining and he knows the process very well, you have a situation where at some point in time you have to have an agreement. Each side has certain elements which they can control in terms of sanctions and then strike or lockout. There are various things that can be done in terms of processes to move it along, but in the end there is a quid pro quo. It is essentially under collective bargaining. It is withdrawal of labour on the one hand, as a sanction of the union. The company can withdraw the operation of the company through a lockout. You have some requirement, if you do not reach an agreement at some point in time, you end up with a very difficult situation in place. Everybody in Thompson knows that this year. It is a contract year so everybody is anxiously awaiting what will happen there and we all wish everybody well.

But it is quite a different circumstance, what we are dealing with in terms of the grant in lieu of taxes, because in essence the grant in lieu system was an agreement that predated the city of Thompson and predated the school district of Mystery Lake, the original structure. There have been various revisions of it from that point on in, but the provincial government is obviously the key player in terms of the original discussions. I mean, mining is under the jurisdiction of the provincial government, the original development, and various provincial governments have had to deal with sort of this balance. I accept what the minister is saying, by the way. Inco has played an important part in the community.

At the same time, though, Inco has benefited from a community with full services, a good education system. I am somewhat biased. I graduated from high school in Thompson. I think it is one of the best school systems anywhere. That is part of that trade-off.

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I guess the real difficulty as I see it is that there are not the trade-offs available. I do not know the details of all the private discussions, but essentially we are dealing with a situation of loss of a significant amount of the grant in lieu of taxes, period. That would have a devastating impact on the community. I understand the situation Inco is in, but many of my constituents, and I use this analogy, when I spoke to the Chamber of Commerce recently on this, you know, a lot of my constituents have been laid off from Inco. There have been a limited number of layoffs, but people have left town, especially the contractors more directly than Inco. Obviously there are people that have houses that are still up for sale and you still have to pay your property tax to that point in time whether you are laid off or not.

It is difficult because, as long as discussions are ongoing, I do not want to prejudge what may or may not happen, but I guess one thing I would urge the minister to look at is the fact that the provincial government really has far more say over this. The provincial government in the '50s decided not to put Inco in a situation of being part of the assessable tax base. That is why the grant in lieu of taxes was set up. Other mines are, by the way. I am not prejudging or even suggesting that that would be an alternative in this case, but obviously once you make that decision, that is a decision made by the provincial government.

Local self-government came to Thompson in the mid-'60s. In fact, my predecessor, Joe Borowski, the MLA for Thompson, in 1969 first became known for camping on the Legislature here, became quite a regular at it, and one of the issues was the sales tax. The other one was local government for Thompson, because up until that time it was run essentially by an administrator, a very competent administrator–I actually went to school with his son–but very much the original system, very paternalistic system. Actually, at one time, I believe, the administrator used to–just slightly before my time–go to the train station. This is the time that women were only just barely being admitted to the townsite, and it was just to make sure that the women coming in had a reason to be there, some family connection. You will not see any Yukon stories coming out of Thompson. Well, maybe a few but not officially anyway. It was a very structured community.

What we got in the 1960s was self-government, so in essence the agreements that we are talking about here predate the city and predate the school district and were agreements that were made with the provincial government, and there were trade-offs. Inco provided the investment capital quite significantly, also achieved significant benefits in terms of long-term mining leases that were put in place which had never–in fact, I have read the documentation at the time. They were far in excess of what had happened. So it seems to me at some point in time–and maybe I am sort of prejudging what I can see happening–I think the minister may find that if there is no resolution of this given the huge gap that is in place, the amount that we are dealing with here and the huge impact that would have on the school district and the city and obviously the significant amount of money that Inco would save from dealing with that. I would like to hope there would be a negotiated settlement, but the problem is it is not really a classic situation, there is not much to negotiate.

I do know from talking to people who have been part of meetings that there have been discussions. I do not know if anyone would describe them as being negotiations, and that concerns me. It concerns me because at some point in time this year we are either going to end up with a major reduction in the grant in lieu of taxes or we are going to end up with no reduction. If there is a major reduction it is going to have a huge impact on the community, a huge, huge impact.

So I am stating this in a more indirect form than I might be saying down the line. I know I have had various discussions with the minister, and he knows I have been more than aware of the discussions, and people on both sides of this, both with Inco, I think, and with the school district and the city know I have been more than aware of what has been going on now since original meetings back in December. I have talked to people directly about it. I know what is at stake. I have not gotten involved because so long as discussions are ongoing that would not necessarily help, it would hurt. The minister is quite aware of the negotiations process, and I think he has played a similar role up until now, but it seems to me that if something does not develop fairly soon, a number of us may have to be involved in some way, shape or form in trying to get a resolution.

My feeling is–and I will put this on the record, and I put it on the record at the Chamber of Commerce–that in order to make Inco productive and competitive, the clearest way to do it is through the kind of levers that the provincial government holds. I understand the responsibility of the minister to the public as well, but in many cases I think we have to recognize we are not in the '70s, we are not in the '80s anymore. It is a different world economy for mining. I know the minister well enough to know that he would agree with that.

We are not in a position where there are excessive resource rents that can be taxed away through mining royalties and taxation. That model applied perhaps when prices were much higher and costs much lower. It does not exist. I mean, even as late as 1988, the province took in, I think, $110 million; $120 million in royalties from Inco alone. Those days are gone. I think they are gone permanently. I am an optimist, I think there will be some relative recovery, but recovery may be $2.75 a pound for nickel not $4, not $4.50, in which case, if we are going to make the mine competitive, I do not think it can be done at the expense of the tax base in the city of Thompson. There may be some accommodations that could be made that could help. I am not prejudging that, but you cannot just have one community deal with it.

I point out that the new model we are into, I think, is the basic element of benefit that the province will get from mining by and large will be from income taxes, which are considerable, and from other taxes, corporate taxes, indirect taxes, rather than previous decades in which obviously the royalties themselves would have been quite significant. I do not have to lecture the minister on this, he knows quite well what has happened to mining royalties per se; they have evaporated in this province because of the low prices and the structures in place.

So it seems to me that the model that we are going to be looking at is yes, being competitive, but a lot of those decisions are going to be made at the provincial level. I do want to credit, by the way, some of the moves that this minister has made, but a previous minister once, Don Orchard, who as the minister will probably know, we had some disagreements, Don Orchard and I, on a lot of issues. I mean, I think our outlook on politics was about as different as you could get, but not in mining. He brought in some significant changes on the cost of hydro, the sales tax element, a number of other changes made at the mining taxation level, and I think he made a huge difference in making our mines competitive in the '90s, and I agreed with that. I was the Mines critic at the time.

I guess in a way what I am suggesting is I think the minister may have to look at that. With respect, I look at some of the stuff I have seen in some other jurisdictions. I have been getting material from Saskatchewan. I realize we are not dealing with Saskatchewan as a competitor for nickel, but we may have to have a review similar to the review that Mr. Orchard made back, I think it would be '93-94, around that time.

I also think that may have to be done in partnership with the mining companies and perhaps the message sent generally that the way to solve the problem is with the senior level of government that does have some financial flexibility, not with local governments. Local governments, I do not believe, can in this case afford the amount of money that is being talked about through the reduction in grant in lieu of taxes. They cannot do it. You have schools; you have to operate them. You have to put teachers in them. Same thing with garbage collection. What do you do? Do you shut down arenas? Do you not collect garbage? There are real limits to what local governments can do and my view as a provincial member of the Legislature, quite frankly, is that they are efficient. There is always room for more efficiency, but I have always been impressed by the city and the school district in terms of the way they operate. So they do not have huge abilities to reduce their costs, so I do urge the minister to consider that.

I think we may, in a very short period of time, have to look at yet again another– and in a way it is sort of accelerating. It used to be you could perhaps review mining taxes every 10 years on a comprehensive basis. We did it in '94 under Mr. Orchard. There has been some change. I welcome those changes under this minister, but we may have to move again because time is moving very rapidly.

The Acting Chairperson (Mr. Dyck): The hour being 6 p.m., committee rise.