2009
Legislative Session: First Session, 39th Parliament
COMMITTEE A BLUES
This is a DRAFT TRANSCRIPT ONLY of debate in one sitting of the Legislative Assembly of British Columbia. This transcript is subject to corrections, and will be replaced by the final, official Hansard report. Use of this transcript, other than in the legislative precinct, is not protected by parliamentary privilege, and public attribution of any of the debate as transcribed here could entail legal liability.
(HANSARD)
PROCEEDINGS IN THE
DOUGLAS FIR ROOM
Committee of Supply
ESTIMATES: MINISTRY OF ENERGY,
MINES AND PETROLEUM RESOURCES
(continued)
The House in Committee of Supply (Section A); H. Bloy in the chair.
The committee met at 10:05 a.m.
On Vote 24: ministry operations, $67,793,000 (continued).
J. Horgan: I just want to pick up where we left off last evening with a few questions for the Minister of State for Mining. I wanted to start off the top, if he could give us — the committee and other members — an analysis of coal prices and how those prices have affected revenue over the past six months. [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: The contract price now for coal is running in the $128-to-$130 range, which is higher than the average over a number of years. In terms of revenues, the Finance Minister will be issuing his quarterly review here in the next little while, and we'll all see what the revenues to government are from coal. [DRAFT TRANSCRIPT ONLY]
J. Horgan: I'll ask the minister, then, if he could provide this information for the Committee A. What were the budget projections for coal for '09-10? As well, when we're getting out our pencils, perhaps we could have what the budget estimate was for the price of copper for '09-10, whether we're on target and what, if any, options or impacts that will have on revenues, if the minister cares to speculate on that. [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: Last year, I think the member knows, copper was running at about $4. In December it fell to about $1.30. It's now trading at around $3 or just over, and our projections are in the mid-$2.50 range. We can provide you with exact details, if that's what you wish, but we don't have them here today. That's pretty approximate, but it'll be not too far out. [DRAFT TRANSCRIPT ONLY]
[1010]
As I said earlier, the contract price right now for coal is $1.28 to $1.30, and that's set for the year. That would be where we would have planned, because it is set a year at a time. The date that the next setting is…. We'll make plans from there. [DRAFT TRANSCRIPT ONLY]
J. Horgan: It's interesting to note that the low point for copper is still twice what it was in 1997-98. I have, with the previous Mines ministers, made the point — ad nauseam, I would suspect, from the government's perspective — that commodity prices have never been so sweet for the copper sector here in British Columbia, and yet we still can't seem to get cement in the ground and mines up and running. [DRAFT TRANSCRIPT ONLY]
But I want to just go back to coal one more time, and perhaps I can get to what I want to know and what I think will inform the committee. Have volumes increased? Decreased? Are they on target? [DRAFT TRANSCRIPT ONLY]
My concern is that we've seen prices that are positive, one would assume, for the treasury, but if we don't have volumes, I assume, then, that the revenues are lower than expected. Are we on target in terms of price and volume, and will that lead to meeting our revenue targets by the end of year? [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: In terms of volumes for coal, we had projected about 25 million tonnes. We are looking at an actual this year of about 22 million, and for the coming year the industry…. We're accepting that as somewhere between 25 million and 27 million. They'd love to see 27 million tonnes. [DRAFT TRANSCRIPT ONLY]
I do want to also speak for a second to the comment about there being…. Given the price of copper and the fact that we haven't got a new copper mine, there are a number of factors at play here. Our staff have worked very hard with the industry to try to get approvals through. [DRAFT TRANSCRIPT ONLY]
In fact, we've worked hard on our permitting process and the environmental assessment process for British Columbia, which is an extremely developed process. It's very thorough. In fact, we believe that that is the best environmental assessment process in the country. [DRAFT TRANSCRIPT ONLY]
We have been working with Canada, as the member I think knows, to try to get to a one-project, one-assessment basis, because Canada takes an awful lot longer. We have a number of mines that we have actually permitted, and we are waiting and waiting for approval from the government of Canada. [DRAFT TRANSCRIPT ONLY]
Now what's disappointing to me, very disappointing, is that, as the member may know, in the Finance Committee, as it travelled the province, this did come up a number of times. I think that the members from the opposition on the Finance Committee voted against supporting a resolution that would call for one-project and one-assessment, so, you know, that's been one of our problems [DRAFT TRANSCRIPT ONLY]
[1015]
I will say that New Afton, as I mentioned yesterday, is about 40 percent built and soon will be ready to go into production, and Copper Mountain is pouring concrete, as we speak, for the footings for their mill. So these are two mines that are extremely close, and there are others that are in the process. Some have even been permitted by us and are awaiting federal approvals. [DRAFT TRANSCRIPT ONLY]
Point of Privilege
(Reservation of Right)
J. Horgan: I want to reserve my right to a motion of privilege with respect to potential in-camera discussions of the Finance Committee being revealed here in committee. I'll review the Blues and take a look at that and come back to it another time. [DRAFT TRANSCRIPT ONLY]
Debate Continued
J. Horgan: I don't disagree with the member on the Canadian process. It has been a challenge for the sector, and I don't disagree with what the minister just said, but I'm concerned how he said it. [DRAFT TRANSCRIPT ONLY]
I want to go back to the question of revenues from coal. If we estimated 25 million in terms of volumes and we're down to 22 million, what impact will that have on revenues to the treasury? [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: The quarterly report from the Finance Minister will be available very soon, and those revenue figures will be included within the quarterly report from the Finance Minister. [DRAFT TRANSCRIPT ONLY]
The Chair: Before I recognize the speaker, so noted, the comment from the member for Juan de Fuca. [DRAFT TRANSCRIPT ONLY]
G. Gentner: I want to return to mining issues relative to the Flathead. I take note of what the minister was suggesting relative to relationships between the state of Montana and British Columbia, the United States and Canada and, of course, the United Nations. I'm not here necessarily to pursue that, but I am here to pursue some of the details relative to the industrialization within the Flathead Valley. [DRAFT TRANSCRIPT ONLY]
Very quickly, I'd like to know whether the ministry has been in fact involved in a draft plan to establish that that is part of a joint action plan pursuant to the 2003 environment cooperation agreement relative to a plan that puts into perspective the industrial applications within the Flathead Valley. My understanding is that this was supposed to begin in 2006, and my understanding is that the plan is complete. My question, therefore, is: did the ministry involve itself in that plan? [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: To the member: I wonder if you could just elaborate. When you talked about a plan, I'm not quite sure what plan. Do you have a name for the plan? I'm not quite sure which plan you might be referring to. [DRAFT TRANSCRIPT ONLY]
G. Gentner: The plan is a development plan that was put together. I don't have the name of it, but I do know the fact that it's referenced in documentation I have from 2006, a joint action plan pursuant of the 2003 economic cooperation agreement. The plan is complete at the staff level. However, it has not been released. It was to establish water quality objectives for the Flathead River, re-establish long-term monitoring and also increase knowledge of regulatory practices in B.C. relative to mining. [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: I'm, frankly, not familiar with that. If it is with respect to water quality issues, that would be something that would have been led by the Ministry of Environment, and they would be best to be looking at questions such as that. [DRAFT TRANSCRIPT ONLY]
The Chair: Before I recognize the member, I want to remind all members that the questions relate to Vote 24 for this ministry. [DRAFT TRANSCRIPT ONLY]
Member, if you could take your seat for a second. [DRAFT TRANSCRIPT ONLY]
Also, I wanted to remind all people in the committee about guidelines for the use of electronic devices. Ministry officials present to assist a minister on the floor during the Committee of Supply proceedings are permitted to use hand-held electronic devices such as smartphones, BlackBerrys, hand-helds to access textual information only. [DRAFT TRANSCRIPT ONLY]
[1020]
Please note that electronic devices must be programmed to operate silently and that cell phone conversations are not permitted at any time, whether in committee or in recess in this room. Observers in the gallery are not permitted to use electronic devices at all. The same rules apply here as they do in the big House. [DRAFT TRANSCRIPT ONLY]
G. Gentner: Gold mining in the Flathead. Before we were able to pursue this further, we came to a close yesterday. We adjourned yesterday afternoon, and I still want to pursue it, because there are some questions here that have not been answered. [DRAFT TRANSCRIPT ONLY]
I'm intrigued by the fact that there was a group called Ecojustice that asked for documentation relative to Max's permitting. When did the ministry allow exploratory permits for Max Resources Corp.? [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: The first application that Max made was in 2007. They did no work under that permit. They reapplied and were issued a permit in early July 2009. [DRAFT TRANSCRIPT ONLY]
G. Gentner: Moving along, I'd like to know: has the ministry agreed to a non-staking reserve, or are they considering a non-staking reserve this time, for any mining activity in the entire Flathead Valley? [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: There is currently no staking reserve in the Flathead Valley. As the government moves forward with plans, they would be announced, if there were such plans, at the time they were to be implemented. [DRAFT TRANSCRIPT ONLY]
G. Gentner: Can the ministry tell me a little bit about, let's say, coal mining? New projects and mine expansions under 250,000 tonnes per year — are they exempt from the environmental assessment? [DRAFT TRANSCRIPT ONLY]
Hon. R. Hawes: If the member's question was, "Is coal mining exempt from the environmental assessment process?" I would say that there is a threshold. If they are looking at doing something that's under that threshold, then there would be a very extensive environmental program run through the ministry. If it's over the threshold, which is 250,000 tonnes, at that point it would be a referral to the environmental assessment office, and it would be a full environmental assessment. [DRAFT TRANSCRIPT ONLY]
J. Horgan: I'd like to thank the minister of state for his participation in the estimates this year, and now I'd like to, then, direct a series of questions to the Minister of Energy and Mines. We're going to start with some discussions on the Oil and Gas Commission, if staff wanted to make ready. [DRAFT TRANSCRIPT ONLY]
Before we proceed with those, I have a couple of questions that I did ask yesterday to the minister of state that I'd like to also pose to the minister. I'll start with a simple one, which would be: what areas of the ministry have had budget reductions from last year to this year? [DRAFT TRANSCRIPT ONLY]
[1025]
Hon. B. Lekstrom: The '08-09 budget of the ministry was $90.594 million, the February budget was $73.212 million, and the September update runs at $72.693 million. [DRAFT TRANSCRIPT ONLY]
J. Horgan: If it runs at 72, why are we debating a vote at 67? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: There are actually two votes. We will move the second vote at the end of this. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Again, I'm looking at estimates for fiscal year ending March 31, 2010, and on the page for Energy, Mines and Petroleum Resources I have a final number with vote 24 and vote 25 that is $69.668 million, so what happened? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: I will apologize. I gave you the wrong answer on my first answer. The restated numbers for the February budget were $73.023 million, followed by the September update of $69.668 million. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Just so the committee is aware, and in the minister's defence, the budget estimates this year, because of the election, make it very difficult for the public and members of the Legislature to understand what has happened in the past 12 months, because in that time we've had two budgets. [DRAFT TRANSCRIPT ONLY]
[1030]
The documents that I have before me, and I assume the ministry as well, show me the estimates for '08-09 and the estimates for '09-10, but we have the February numbers. Now could the minister advise why we went from $73 million in February to $69 million in September, and what areas of the ministry were affected by that reduction? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: The adjustments were…. There was a reduction of $600,000, centralization and administrative functions within the ministry. Moving on, there was a reduction in the hydrogen fuel cell work of $2.2 million roughly, and in the oil and gas roughly $600,000 — $577,000. [DRAFT TRANSCRIPT ONLY]
J. Horgan: I'll pick up on the hydrogen fuel cell reduction. I recall, throne speech after throne speech, that the hydrogen highway was going to be here. We were going to be riding the new Sea to Sky Highway to the Olympic Games on hydrogen buses. I'm wondering. I know that's not within the purview — before the Chair corrects me — of this set of estimates, but the reduction of $2.2 million in the hydrogen cell section…. We had so much success that the reduction is appropriate, or is it such a disaster that we were wasting the money? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: The hydrogen highway is still active and going. These adjustments were additional program funding. In the reality of today's economic environment, the money just wasn't there to continue on with those programs. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Well, in light of the economic environment, does that mean that the hydrogen highway and the technology are delayed, or are we proceeding but we're proceeding with less money? Have targets changed as a result of this reduction, or are the benchmarks that have been set by the Premier and the government still in place? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: The hydrogen highway is going ahead still, and the commitments that we have made — the Premier and the government have made — will be going ahead, as I stated earlier. There were some additional programs that were outside of that that would have been beneficial had the availability of revenue been there. As our economic recovery takes place, they may still be able to go ahead, but the commitments made by the Premier and the government are going ahead. The hydrogen highway goes ahead as well. [DRAFT TRANSCRIPT ONLY]
[1035]
J. Horgan: Again, with this year's estimates, FTE counts are more difficult to find. I know that the minister and his staff will have those numbers at their fingertips, and I'm wondering if they could provide for the committee FTE numbers for '08-09, the February interregnum and then the '09-10 budget for the ministry. [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: The '08-09 FTE count was 337 employees. The February budget had 341 FTEs, and the September update 339. [DRAFT TRANSCRIPT ONLY]
J. Horgan: That's good news for staff and the ministry. That makes me happy. [DRAFT TRANSCRIPT ONLY]
I asked some questions yesterday of the minister of mines about the ministry's climate change initiatives. I'm wondering, for the benefit of the committee…. The minister quite rightly confined to just the minerals and titles area of mining and didn't have those numbers at his disposal. [DRAFT TRANSCRIPT ONLY]
You've had the full night to find those figures. So could the minister provide for the committee the benchmark, where we're starting, with respect to the baseline for GHG emissions resulting from ministry activity, and how we're going to proceed from there to reduce them — I believe it's this year — to become neutral? [DRAFT TRANSCRIPT ONLY]
[1040]
Hon. B. Lekstrom: Our baseline from '07-08 was the 1,146.4 tonnes. For this current fiscal year, our plan as outlined is to reduce by 300 tonnes, and we are on target to be carbon-neutral within the 2010 year coming up. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Can the minister explain to the committee what steps they're going to take and what the costs, if any, will be to reach those targets and what service delivery may suffer as a result? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: We have taken on a number of initiatives. I will list a number here. [DRAFT TRANSCRIPT ONLY]
We have taken a lighting retrofit pilot project at the Jack Davis Building. I know that the member is aware of that building. As well, an energy monitoring system has been installed at the Jack Davis Building to help us. [DRAFT TRANSCRIPT ONLY]
More than 63 percent of staff has participated in what we would consider workstation tune-ups, coordinating and making them more efficient. [DRAFT TRANSCRIPT ONLY]
We have reduced emissions from business travel by 50 percent. We are still accomplishing our goal through live meetings and video conferencing. [DRAFT TRANSCRIPT ONLY]
A number of good initiatives are taking place. The costs that you associate…. These are non-cost items, at the same time maintaining our ability to provide service and do it in a more environmentally responsible manner. [DRAFT TRANSCRIPT ONLY]
J. Horgan: The Minister of Mines made a reference to hybrid vehicles at various regional offices with respect to mining. Has the ministry directed that hybrid vehicles be purchased by other regional offices? What's the differential cost between those hybrids and a normal lease arrangement with a traditional gasoline- or diesel-fired engine? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: We have no vehicle purchases in this year's budget or in the years out. A couple of innovative things that the ministry has done…. I'll pass this on to the member. [DRAFT TRANSCRIPT ONLY]
The ministry has four bicycles in Victoria here for in-town work. The actual staff are utilizing those when they can to go to their meetings. It is the small things that are going to make the difference that each and every one of us can do. [DRAFT TRANSCRIPT ONLY]
[1045]
The use of mountain bikes in place of trucks and, in some cases, helicopters for our field work with the geological survey branch is another effort we're doing. As well, the ministry provides the bus tickets for public transportation, something that I think is on everybody's mind — how do we better utilize that? So we're very progressive, and we're seeing some good results. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Well, I'm delighted that I have the minister on side for advancing commuter rail service here in the south Island for his staff to get to and fro from my constituency into town in a carbon-sensitive way. You know, I smirked — the camera doesn't pick that stuff up, as you know, Chair — at the four bicycles. I urge you to get 40 bicycles and pass them around. It's a great idea in a city like Victoria that's very, very bike-friendly, and something that we should see more of. [DRAFT TRANSCRIPT ONLY]
But, again, my question…. [DRAFT TRANSCRIPT ONLY]
Interjection.
J. Horgan: Except, if you live in Langford, you'd rather get on the train than ride your bike. [DRAFT TRANSCRIPT ONLY]
But my question was really directed…. Everyone understands that there's a cost to adaptation in a carbon-constrained environment, but this ministry is perceived by the public, rightly or wrongly, as the genesis of dirty economic activity, whether it be mining or whether it be oil and gas development. [DRAFT TRANSCRIPT ONLY]
We're going to have some suggestions about how we feel about the offshore oil and gas development moratorium and the tankers along our coast. These are all huge environmental issues, and when the public thinks about those challenges, they think of this ministry. As much as I do genuinely appreciate the small steps that are being taken internally to reduce the impact of staff, the sector which the ministry and the minister are responsible for is perceived to be among the dirtiest in B.C. [DRAFT TRANSCRIPT ONLY]
I am wondering if, with these small steps, the minister can give us a price on what the impact is if we're not buying vehicles this year or looking outward, if we're reducing our reliance on helicopters and so on to do field work. What is the increase in budget pressures as a result of moving to carbon neutrality? Has the ministry been able to quantify that, or are we just proceeding to get the GHG number down and worrying about the cost at another time? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: I'll first start by…. I know you talked about how the public perceives this as the genesis of the dirty…. [DRAFT TRANSCRIPT ONLY]
Interjection.
Hon. B. Lekstrom: Of evil, as he says. [DRAFT TRANSCRIPT ONLY]
I mean, when we talk about natural gas, I think that most British Columbians, particularly those in the northeast where this is centred, recognize that natural gas is the cleanest burning of fossil fuels. I do want to point that out. We think it has a great future, and mining as well. Both of these industries have come a long way over the last decade in how they do business, their environmental footprint — just like all of us all. We all pay more attention because we learn each and every day that what we do leave a footprint on the land base and that by working together we can actually make a better future for our children. [DRAFT TRANSCRIPT ONLY]
[1050]
I want to point out that, although being in front of the mining and the oil and gas sector, the alternative energy sector falls under our ministry as well. We have some incredible stories there. With the clean technology industry that's here in British Columbia growing at a pace that is significant, the opportunities are just tremendous. I know the rest of the world — and I think the member would agree — will look to British Columbia with envy for the opportunities we have in that sector. [DRAFT TRANSCRIPT ONLY]
You did ask on the detailed costs. We will commit to get you that. It is back at the ministry. We will get that breakdown to you as quickly as possible. [DRAFT TRANSCRIPT ONLY]
J. Horgan: I thank the minister for that. I do agree with him that British Columbia has an embarrassment of riches when it comes to alternative fuels. I would also suggest that natural gas does have a great future, just not at Burrard generation station. That's, of course, something we'll get into in the afternoon. It's that sort of contradiction, and I'm not catching the minister out on this. [DRAFT TRANSCRIPT ONLY]
It's obvious to all British Columbians that we generate enormous revenue through oil and gas exploration in the northeast, which is the area we're going to be moving to in a few minutes. Yet we're piping it past Burrard Thermal on its way to provide energy and electricity for air conditioners and heated swimming pools in Los Angeles, which I'm certain is important. But it does seem to be a bit of a contradiction, and we'll touch on that later. [DRAFT TRANSCRIPT ONLY]
I just have a few questions about order-in-council appointments within the ministry. Could the minister give me an inventory of the number of order-in-council appointments in his ministerial office as well as any that are in the deputy minister's office or within the ministry? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: Within my office we have my ministerial assistant, one MA, and one EA, executive assistant, and we have two administrative assistants. Within the ministry we have my deputy minister, four assistant deputy ministers, and then we also share one assistant deputy minister with STED on that. [DRAFT TRANSCRIPT ONLY]
J. Horgan: When we get to the Oil and Gas Commission, of course, there are order-in-councils there. There are order-in-councils at some of the other agencies and commissions that the minister is responsible for. I'll leave that, and perhaps the minister can provide that information at a later date. [DRAFT TRANSCRIPT ONLY]
[1055]
I do want to go back, though, to the ministry for a moment. There are no OICs beyond the deputy, the four ADMs and the shared ADM for administrative services, or whatever the title is now for joint financial activity? That's it? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: Yes, that is it. [DRAFT TRANSCRIPT ONLY]
J. Horgan: We'll go to consulting contracts, then, just for a moment. There are two mechanisms to circumvent the Merit Commissioner. I've been an order-in-council appointment in the past, so I don't say that in a derogatory way. One of those ways is consultancy and contracts. [DRAFT TRANSCRIPT ONLY]
Could the minister provide for me the number of individuals making over $100,000 a year on contracts to the ministry, working on various special projects or other activities? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: We actually provide that information annually through the public accounts. It's an ongoing basis. I know that information is readily available when those accounts are published. [DRAFT TRANSCRIPT ONLY]
J. Horgan: The minister is quite correct, technically, that those numbers and those individuals are inventoried in the public accounts, but there is no way for the public or this committee to connect the dollar figure and the individual to the ministry. [DRAFT TRANSCRIPT ONLY]
They are published, as I understand it. I know the deputy has experience in this area. As I understand it, when I go to the public accounts I can get an inventory of dollars spent to individuals, to companies and so on, but there is no link from that to the activity. [DRAFT TRANSCRIPT ONLY]
That's why I'm taking the opportunity during these estimates to ask the minister what the quantum is for public dollars expended on professional services to consultants over $100,000. I'm hopeful that that's a small number and that it would be readily available. [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: I certainly understand the question. I will take that under advisement. I will endeavour to get you the information as you've asked for it there, with the breakdown. [DRAFT TRANSCRIPT ONLY]
J. Horgan: This is an example of the new standard that the minister and I are setting: ask a question and get an answer. I appreciate that. Thank you very much, Minister. [DRAFT TRANSCRIPT ONLY]
I want to then just briefly ask another question where you'll have to get back to me later. I did seek from the minister's office an organization chart for the ministry with names attached. I don't know if there's a privacy issue there. They undertook to get me that information. They may well have got it for me, and it's in my in-box. But I'll ask again to the minister for an organization chart for the ministry with individuals attached to activities and functions. [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: I will commit to find out where that's at within the ministry and if it is out. It may be in your in-box, and if not, I'll find out where that is at. [DRAFT TRANSCRIPT ONLY]
J. Horgan: I thank the minister for that. [DRAFT TRANSCRIPT ONLY]
I'd like to ask just a brief question before we get to the Oil and Gas Commission. Are there any audits completed or underway of ministry activities? [DRAFT TRANSCRIPT ONLY]
[1100]
Hon. B. Lekstrom: There are two. There is a completed financial audit that is done, the annual financial audit. As well, the Auditor General has started an audit looking at the royalty credit programs. [DRAFT TRANSCRIPT ONLY]
[C. Trevena in the chair.]
J. Horgan: Can the minister advise the timing, from the Auditor's perspective, on when we would see a completed audit in terms of the royalty permit? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: It's very early. It's at the beginning stages of this. There is no time frame set yet, but if those become available to us, we can certainly share those. [DRAFT TRANSCRIPT ONLY]
J. Horgan: I thank the minister for that. [DRAFT TRANSCRIPT ONLY]
Just one last question before we get to the Oil and Gas Commission — a series of questions, potentially. Can the minister give me a figure on advertising contracts or advertising expenditures anticipated in this fiscal year? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: We have zero budget for advertising in our ministry. [DRAFT TRANSCRIPT ONLY]
J. Horgan: A trend that should be emulated by other ministries. I applaud Energy, Mines for resisting the temptation to blow its own horn. [DRAFT TRANSCRIPT ONLY]
I'd like to now move to a series of questions around the Oil and Gas Commission. I have the orders-in-council for the appointment of an Alex Ferguson and the appointment of a John Jacobsen. [DRAFT TRANSCRIPT ONLY]
[1105]
I'm wondering if the minister could advise me what Mr. Ferguson's and Mr. Jacobsen's expertise is in the area of oil and gas? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: For our commissioner, who you asked about. Prior to his appointment as commissioner he served approximately two years as the deputy commissioner of the Oil and Gas Commission. [DRAFT TRANSCRIPT ONLY]
Mr. Jacobsen, his background. He is the retired CEO of Precision Drilling. That's a mouthful, but one of the largest drilling companies in western Canada. [DRAFT TRANSCRIPT ONLY]
As well, I will point out that the expertise that the member looks at…. The Oil and Gas Commission is really focused on a regulatory environment. That is, they are regulators of the oil and gas industry. Their expertise truly falls in that, as well as the knowledge of the oil and gas industry as a whole. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Could the minister advise the committee how the Oil and Gas Commission is funded? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: The Oil and Gas Commission is funded through a transfer of money from the CRF, or consolidated revenue fund, of government. That money that the CRF receives is through permit fees and production levies that were established, I believe, while the member was part of government during the 1990s, late '90s. [DRAFT TRANSCRIPT ONLY]
[1110]
J. Horgan: I was around at the time and had a little bit to do with it. As I understand it, there's an operating loss in '08-09, and I'm wondering how, with all of the activity we've had…. I understand that there will be reference to the downturn, but as I understand it, there's an operating loss of about $3.7 million in '08-09. I'm wondering: is that being paid for out of CRF? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: No, it doesn't come from the consolidated revenue fund. Over the years the Oil and Gas Commission has accumulated a surplus, and for that $3.7 million in '08-09, they drew down on that fund to bring their budget to a balanced position. [DRAFT TRANSCRIPT ONLY]
J. Horgan: How many staff were working for the Oil and Gas Commission in Victoria in '08-09 as opposed to those working in Victoria in '09-10? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: In '08-09, Victoria office, there were 39 employees. In '09-10 that number rose to 44. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Well, can the minister explain: are all of these staff housed at the Jack Davis Building, first of all? And can the minister explain why we would have an increase in staff in Victoria when virtually all of the activity that they're responsible for takes place in the minister's region? [DRAFT TRANSCRIPT ONLY]
[1115]
Hon. B. Lekstrom: The employees here and the increase are primarily dealing with the engineering side of the oil and gas reservoir management, as well as regulatory development. That is why those staff are located in Victoria. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Are they housed at the Jack Davis Building? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: No, they are not located in the Jack Davis Building at this time or anymore. They have moved to a facility at Dockside Green. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Was there a savings to the Crown by moving staff from the consolidated location of the Jack Davis Building to a different location at Dockside Green? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: Yeah, there is a realized savings under that. The staff were located not just in the Jack Davis building; they were located in two separate buildings. There was a consolidation when we went to Dockside Green, which makes things far more efficient, as well as the operating costs, because of the green nature of that facility, as I know that the member is very well aware. The operating costs have gone down as well. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Well, I'd like to go back to the Oil and Gas Commission service plan update. On page 29 we have revenues of $28 million in '06 and $28 million and change in '08-09 — an increase from '07-08— but we have a massive increase in expenditures from $26 million and change to $31 million and then a further increase in actuals in '08-09. [DRAFT TRANSCRIPT ONLY]
Can the minister explain how we have an agency that's supposed to be run by the benefits or the advantages we have in terms of the royalty and the commodity…? We've got revenues that are not keeping pace with expenditures. What steps is the minister going to take to rectify that situation? [DRAFT TRANSCRIPT ONLY]
[1120]
Hon. B. Lekstrom: The increase that the member refers to…. We were getting ready… I say we, but the commission, obviously, was getting ready for the unconventional gas development. I think the member is well aware of the opportunity there, as well as that the increase would reflect bringing in of the new and preparing for the Oil and Gas Activities Act. [DRAFT TRANSCRIPT ONLY]
I think it's fair to say that as we watched the global economic situation take place, things levelled off, so we had to really harness some of the discretionary funding, as well, to help offset that. But the increase he refers to definitely is looking at the preparation for the unconventional gas. Certainly, as we look to the future, we're well positioned, but it did put the brakes on a number of the investments for a short time, and that's the number reflected there. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Well, it's difficult to reconcile an increase in revenue, a reduction in well applications and a fairly significant hole in what is a modest budget for an organization that is designed to generate revenue. So again, can the minister explain in more detail than just "anticipating activity" how we ended up with a $4˝ million hole in a budget when work was down and revenues were up? I don't know how you do that. [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: There are a couple of issues here. First, the OGC doesn't generate revenue for the consolidated revenue fund of government. We'll make that very clear. Actually, the revenue it generates is utilized to drive the Oil and Gas Commission. But the difference would be…. [DRAFT TRANSCRIPT ONLY]
When you look at that, we did ramp up. The Oil and Gas Commission did ramp up in preparation for the unconventional gas, but certainly, as the economic challenge faced the world, that activity didn't materialize to the amount that we thought it would in that year. So the activity was less. [DRAFT TRANSCRIPT ONLY]
Also, we haven't had a fee increase in two years on this, and this is a fee-based revenue source. So they drew down on the surplus revenues that we talked about in earlier questions to meet that difference in the budget versus revenue and expenditures. [DRAFT TRANSCRIPT ONLY]
[1125]
J. Horgan: It just seems to me…. I know that the chair of the organization is a certified chartered accountant. I would think that if you have a fee-based activity, you would match your expenditures to your revenues. I can understand that there was an expectation. That expectation wasn't realized. [DRAFT TRANSCRIPT ONLY]
We can all speculate on what will happen with the commodity price, whether the Horn River basin is going to go at the rate we would want it to go in the years ahead. But we have a pretty big hole. [DRAFT TRANSCRIPT ONLY]
We have an increase in staff, as you say. The commission ramped up for activity. The activity didn't come in the door, so what are those people doing? Is there a plan to try and deal with these expenditures to bring it into line with the fee-based activity? What plan does the commission have to match revenues with expenditures, which they had been doing a pretty good job of up until the past couple of years? [DRAFT TRANSCRIPT ONLY]
[1130]
Hon. B. Lekstrom: Well, as we said earlier in a couple of the points we talked about, these were some…. Definitely, we had to look at sound fiscal management within the Oil and Gas Commission. The determination…. When we look back, there were no fee increases, so the surplus was drawn upon to do that. [DRAFT TRANSCRIPT ONLY]
Going forward, we're certainly looking at what's taking place with our…. We're managing employee turnover, which in the northeast is fairly significant. I think the member is aware of that. As well, part of the challenge was we ramped up for activity within the Oil and Gas Commission to meet what — we looked forward to and had the outlook — was going to be an increase in that activity and then reflected on what took place with the economic global downturn. The best economists in the world didn't predict what was going to happen. [DRAFT TRANSCRIPT ONLY]
So we're going to manage through this. We are going to do it through sound operational management, deal with our employees and manage that properly, and move forward. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Can the minister advise if there is an audit committee on the board of the Oil and Gas Commission? If there is an audit committee, why haven't they taken steps to manage the discrepancy between revenues and expenditures? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: Yes, there is an audit committee. That audit committee, through the board, has given direction to manage this discrepancy through employee attrition, as well as their discretionary spending, to get a handle on that and deal with the difference that we're talking about here through this line of questioning. [DRAFT TRANSCRIPT ONLY]
J. Horgan: So has the audit committee provided the minister with a three-year plan to bring the discrepancy between revenues and expenditures into line? I mean, all I have to go by is we in the opposition get the paper that's published. The service plan, as I have gone through it, gives me no assistance in coming to a conclusion that things are in hand. [DRAFT TRANSCRIPT ONLY]
I understand that some of the employee satisfaction issues, which are important…. Just for the record, I use that as a benchmark that is appropriately put in a service plan and one that we would want to see achieved. But when we have what is perceived by many as the goldmine of government not mining enough gold to pay for their expenses, it leads people to ask questions as to how the management is going and what the plan is three years out to balance the imbalance. I don't find that in the service plan. [DRAFT TRANSCRIPT ONLY]
Perhaps the minister would provide the committee, either today or at some future point, with some details. I don't want to spend a whole lot more time on this. We've got a lot of staff here. We've got a lot of questions to deal with. But it's a problem. I don't see a solution in the service plan, and I haven't heard a solution from the minister yet. [DRAFT TRANSCRIPT ONLY]
I'm certain there is one, and perhaps he can either stand today and wrap this section up, this section about revenues and expenditures, by giving me the answer to how we close that gap with sound financial management and what the plan is to do that, rather than just hoping that activity meets our expenditures. We ramped up, and attrition might not be the best solution to meet that balance in the short term. [DRAFT TRANSCRIPT ONLY]
[1135]
Hon. B. Lekstrom: I think that in the essence of time, as you've indicated, we will take you up on your offer, Member, to sit down and get you the information that you've requested. [DRAFT TRANSCRIPT ONLY]
J. Horgan: I thank the minister for making the right call. We were saying it was fourth and ten there — either punt or pass. The pass is a good idea. [DRAFT TRANSCRIPT ONLY]
I want to talk just briefly. For the benefit of members and those who may be watching, as a southerner…. I think that most British Columbians have a vision of the oil and gas sector as a Beverly Hillbillies sort of scenario where "up from the ground comes a bubblin' crude." Everybody's getting rich. Well, if you own your subsurface rights, that's a good thing. [DRAFT TRANSCRIPT ONLY]
But a small, small fraction of the people who live in the Peace do own their subsurface rights. The minister knows this very, very well, as a lifetime resident. In my trips to the Peace I've become increasingly aware of the challenges that agriculturally-based individuals have when someone strikes it rich on their property. I know. [DRAFT TRANSCRIPT ONLY]
I have before me a delegation agreement between the Agricultural Land Commission and the Oil and Gas Commission. It's comprehensive. I've read it. The minister knows it very well. [DRAFT TRANSCRIPT ONLY]
I'd like to take this opportunity, hon. Chair, to have the minister rise. These are his constituents, as well as his ministerial responsibility. He knows better than I the enormous challenges of having industrial activity on agricultural land, and those who own the land being compensated at agricultural levels rather than industrial levels. [DRAFT TRANSCRIPT ONLY]
This is not the Clampetts, for those paying attention and the members of the committee. If you have the misfortune of having a large oil and gas company discovering enormous wealth underneath your property, it can be an enormous headache. The minister knows this very well. [DRAFT TRANSCRIPT ONLY]
I have a two-part question. The one is: does he believe that the delegation agreement between the OCG and the Agricultural Land Commission is working for his constituents and the people in the region? Then beyond that, what steps has he taken to try and address this imbalance of agricultural land being used for industrial purposes and the individuals being compensated as if it was wheat they were growing, not cubic feet of natural gas? [DRAFT TRANSCRIPT ONLY]
[1140]
Hon. B. Lekstrom: The delegation agreement — is it working? There was an audit just recently completed by the Forest Practices Board. That audit provided favourable information on how the delegation agreement was working. I think we have made a number of steps towards finding the balance. As the member rightfully said in his question, this is about a balance. This is about the people who live on the land base. This is about the companies that come to extract that resource. [DRAFT TRANSCRIPT ONLY]
We have initiated issues that build that balance. We have a flaring reduction strategy that is in place today. We have an independent farmers advocate. We are just in the process of hiring that position. That is taking place. That is something that has been on the minds of many of our farmers and ranchers in the Peace country for a long time. [DRAFT TRANSCRIPT ONLY]
We are looking and working towards a land agent code of conduct and new licensing requirements as well — again, something that has been on the agenda of many in that area. We have established a standard surface lease agreement, which has been completed, and an enhanced mediation and arbitration board, which is dealing with the ability to find the balance between the company and the landowner. It was always felt by the landowner that there was an imbalance there. We're correcting that. [DRAFT TRANSCRIPT ONLY]
As well, we have initiated the good neighbour program, which is really talking about the social licence of the industry to work in an area and to recognize the issues — whether it be road issues, dust…. Really, respect is what it's about. I think it's working very well. [DRAFT TRANSCRIPT ONLY]
I do want to go back to one of the comments the member made about if a landowner has the misfortune of a company having a find on their land. I do want to point out that many of our farmers and ranchers actually offset their income by working in the oil and gas industry to help keep those farms afloat. I think it's fair to say that agriculture has faced some significant challenges over the last number years. So is there room to improve? Every day. I try and improve what I do. I know the member does as well, and I think we have made tremendous progress in that field. [DRAFT TRANSCRIPT ONLY]
B. Ralston: I want to ask a question about a related topic. As the minister will be familiar, the technique of drilling called hydraulic fracturing, or fracking, has revolutionized the ability of companies to drill in the shale formations of the Montney and Horn River in his part of the world. [DRAFT TRANSCRIPT ONLY]
I'm interested in finding out, though, from the minister: is he or the Oil and Gas Commission aware of…? There are some concerns that have been expressed in the United States, and there has been legislation tabled, I understand, in both the House and the Senate in the United States to regulate hydro-fracking under the Safe Drinking Water Act. [DRAFT TRANSCRIPT ONLY]
Apparently, not only is water used, but there's a combination of sand, water and chemicals. There have been some concerns expressed in some American states about the actual composition of those chemicals and their impact upon drinking water. I'm not taking a position on that. I'm wondering if the minister is aware of that legislation. Has the Oil and Gas Commission received any complaints of that nature? And if so, what is the proposed course of action? [DRAFT TRANSCRIPT ONLY]
[1145]
Hon. B. Lekstrom: You raise a good point. We are aware of the issue and the questions that have been raised around fracking. We are working right now closely with different states and provinces to find a collaborative way to meet any of the challenges. The one thing that I will point out is that in British Columbia the formations we're talking about in our geology are far deeper than many in the U.S., for example, and other areas. The aquifers and so on that people are worried about…. It is a different geological formation, so we do recognize that. [DRAFT TRANSCRIPT ONLY]
But we are aware of this. The Oil and Gas Commission is monitoring the fracks as they take place. As we see more activity, it's going to be an issue that we think we can actually monitor very well and look after. As I said earlier, this is not about extracting a resource at any cost. This is about the balance of maintaining a quality of life and maintaining a strong environmental standard in our province and at the same time having this resource work for British Columbians. [DRAFT TRANSCRIPT ONLY]
D. Donaldson: Hon. Chair, thanks for the opportunity to ask a question here to the minister. It follows along the theme of unconventional gas — in this case, coalbed methane exploration and development. The minister is aware that Shell has a tenure for 412,000 hectares for exploration and development of coalbed methane in the area called the Sacred Headwaters, the birthplace of the Stikine, Skeena and Nass rivers. [DRAFT TRANSCRIPT ONLY]
I have an order-in-council in front of me that was put in place by this government prohibiting Shell from exploration and development in that tenure for a two-year period. We're coming up to the one-year anniversary. December 5 is the one-year anniversary, and the order-in-council was for a minimum of two years. [DRAFT TRANSCRIPT ONLY]
I believe the order-in-council acknowledges that perhaps the government proceeded too quickly when they issued this tenure in 2004. The issue behind the order-in-council, according to the news release issued by the government, was to have a break to have more discussions with first nations and communities about that tenure and about the activities of Shell. [DRAFT TRANSCRIPT ONLY]
My question is…. I've been up in that area recently, hearing from the first nations and communities about the lack of progress around having that discussion. I'm wondering if the minister would advise us. This order-in-council is for a minimum of two years, but it can go up to four years according to the order-in-council. Would he be looking at an extension of this order-in-council to prohibit Shell from exploring and developing coalbed methane in the Sacred Headwaters for a four-year period now? [DRAFT TRANSCRIPT ONLY]
Hon. B. Lekstrom: As the member rightfully pointed out, it is a minimum of two years. The OIC is written in a way that after that two-year period there will be a review. We are presently in discussions with the Tahltan on this very issue, and it's an important issue. So no determination yet. We are, as you said, coming up to the one-year anniversary. We will continue discussions on this issue with the Tahltan. Following the two years, the review, a determination will be made at that time. [DRAFT TRANSCRIPT ONLY]
J. Horgan: Noting the hour, I'd just advise the minister and his staff that we'd like to continue on for a few more moments on oil and gas and then proceed to B.C. Hydro, B.C. Transmission Corporation and Columbia Power Corporation. [DRAFT TRANSCRIPT ONLY]
With that, I move that we rise, report progress and ask leave to sit again. [DRAFT TRANSCRIPT ONLY]
Motion approved.
The committee rose at 11:50 a.m.
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