Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 17 - Evidence

The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C-11, to authorize the divestiture of the assets of, and to dissolve, the Cape Breton Development Corporation, to amend the Cape Breton Corporation Act and to make consequential amendments to other acts, met this day at 5:15 p.m. to give consideration to the bill.

Senator Mira Spivak (Chairman) in the Chair.

[English]

The Chairman: We have appearing before us on Bill C-11, the Honourable Ralph E. Goodale, P.C., M.P., Minister responsible for the Canadian Wheat Board and Minister of Natural Resources.

Hon. Ralph E. Goodale, Minister of Natural Resources and Minister responsible for the Canadian Wheat Board: Honourable senators, thank you for inviting me to appear before this committee at the beginning of your consideration of Bill C-11.

With me today is Mr. Robert Lomas, senior commodity specialist in the Department of Natural Resources, and Mr. Norman Bayne, departmental legal adviser.

As you know, Bill C-11 will permit the sale to the private sector of the assets of Cape Breton Development Corporation, or Devco, as it is known. Private-sector ownership will be a major turning point for the Cape Breton coal industry, which has operated now for almost 33 years through a federal Crown corporation, namely Devco.

My goal is to accomplish that objective of a sale to the private sector in a constructive manner that will address, as much as reasonably possible, the social and economic concerns surrounding the closure of the Phalen mine and the sale of Devco's other operations. Before addressing Bill C-11, I would first like to provide a little background on the corporation.

Since its creation in 1967, Devco has, as you know, been rather heavily dependent upon government funding to maintain its operations. I have circulated a document by way of background information. If honourable senators turn to page 1, they will see the pattern of government appropriations over time since the creation of Devco in 1967.

As you can see, Devco's coal operations have received approximately $1.7 billion in federal subsidies to the end of the 1999-2000 fiscal year, with another $86 million set aside for the current fiscal year. In addition, the industrial development division of Devco received another $157 million prior to 1989, at which time the Enterprise Cape Breton Corporation was established to assume the developmental role previously played by that division.

Since the creation of ECBC and ACOA, the Atlantic Canada Opportunities Agency, almost $350 million has been invested in various efforts to support the Cape Breton economy beyond coal. In the fall of 1998, I asked the Devco board of directors to re-examine the future direction of the corporation following a determination that it could not achieve commercial viability as a Crown corporation, and would require additional funding to operate through to March 1999. That extra-funding requirement stemmed in large part from geological problems encountered at that time at the Phalen mine.

Following consideration of a number of options, the board made a series of recommendations. After discussion of these recommendations with my cabinet colleagues, the decision was made to do a major restructuring of Devco. The decision was difficult to make, and came only after a long and thorough analysis of all of the available options, both by the Devco board of directors and by the Government of Canada.

I announced the following five measures in January 1999: First, the closure of the Phalen mine sometime in the latter part of the year 2000; second, a $111 million human resources adjustment program for affected workers, including early retirement incentives for about 340 employees, and severance and training packages for another 350.

The provisions of that human resources adjustment program were completely consistent with all of the terms and conditions of the existing collective agreements between Devco and its unions, and in some respects went beyond what would be required by those agreements.

Third, an economic adjustment fund of $68 million was announced, to which the Province of Nova Scotia subsequently added an additional $12 million. That fund is to be invested, after community-based consultations, in diversifying the economy of Cape Breton. Fourth, an outstanding loan of $69 million was forgiven; and fifth, the privatization of Devco's assets with a view to creating a sustainable commercial operation over the long term.

Since those announcements were first made in January 1999, the following events took place in approximately chronological order. The sale process was formally initiated in June 1999. Then, due to geological and safety considerations, the Phalen mine had to be closed earlier than anticipated, in September 1999. That triggered a re-examination of the adequacy of the original human resources package in light of the fact that Phalen could not remain in operation for the full time originally expected.

Subsequent to that, a seven-person economic development consultation panel was appointed in October 1999. The panel held nine days of hearings across Cape Breton, receiving 214 presentations. Those making presentations included individuals, municipal governments, business representatives, community groups, labour representatives, First Nations communities, academics, and youth, among others. This was obviously directed toward what should be done with the economic development funding -- $68 million from the Government of Canada and $12 million from the Government of Nova Scotia.

The panel submitted its final report to ministers this May. Further detailed work is now going on, with program delivery expected to be in place later this summer or in the early part of this fall. Finally, in January of this year, Devco and its four unions agreed to a joint planning committee process, as specified under the Canada Labour Code, to settle the terms of the Devco human resources adjustment program. Unfortunately, both the JPC and subsequent mediation proved unsuccessful. Therefore, on April 27, the Minister of Labour appointed Mr. Bruce Outhouse, Q.C., as arbitrator to finally resolve all of the human resources issues.

Mr. Outhouse rendered his decision, which is binding on both sides, on June 2. A summary of that decision can be found in your briefing books. The arbitration award resulted in an early retirement incentive for all employees, regardless of age, who will have completed at least 25 years of service as of December 31, 2000. Devco indicates that this incentive will be available to approximately 249 employees, in addition to the 340 employees who were covered by the original package.

The arbitration decision also increased severance benefits and provided for medical benefits for the period of the severance entitlement. The total incremental cost of the human resources package is in the range of $50 million, which is over and above the $111 million that was first announced in January 1999.

I wish to briefly outline now, Madam Chairman, the sale process for Devco's assets. Mr. Shannon, the chairman, who will be appearing shortly, can address this in greater detail.

To begin by way of summary, in June 1999, Devco hired BMO Nesbitt Burns as its financial adviser and manager of the sale process. Nesbitt Burns' first task was to review the sale process last August at public meetings in Cape Breton, with community and stakeholder groups, to obtain their input. It was made clear at those meetings that the sale would be a competitive commercial process, and that future decisions would be based upon sound business principles.

Some of the objectives outlined last August were: first of all, to attract a buyer willing to buy the assets at a price acceptable to Devco and the government; second, to find a buyer whose objectives and financial strength would provide for the long-term viability of Devco's business; and third, to find a buyer who demonstrated a sensitivity to community and employee interests, and positive environmental stewardship.

Beginning in October 1999, Nesbitt Burns contacted 60 prospective purchasers, including local and other Canadian companies. In December, on the advice of Nesbitt Burns, Devco identified a short list of prospective purchasers who were invited to submit definitive proposals. Those were received by the Devco board, which is now at the stage of clarifying whether one of those proposals would meet all of the objectives that I mentioned a few moments ago. That is where the process stands at the moment. Finally, negotiations concerning a detailed asset purchase agreement would follow. At that stage, the prospective buyer would then have discussions with the unions, and with Nova Scotia Power, to negotiate appropriate agreements.

Honourable senators, a final deal is clearly subject to both Devco board and Government of Canada approval. I realize that some would like more information on the sale process and have some concerns about the eventual arrangements with a private-sector owner. Mr. Shannon may be able to address some of these issues with you, but I would note that the negotiating process is ongoing between the parties, and therefore subject to the usual commercial confidentiality provisions.

I can tell this committee that the Government of Canada will not approve a sale until we are satisfied that a fair and reasonable deal has been reached for the transferred employees, for the community, and for the shareholder -- the best one available in the marketplace. The best prospect for successfully transferring Devco's assets to the private sector, and for maintaining coal-mining jobs, is a viable commercial operation. Those prospects are real, and it is important to move forward.

Progress depends on the passage and enactment of Bill C-11. No deal can be concluded until Parliament's work on this bill is done. In addition to providing the authority to sell substantially all of Devco's assets, as required under section 90(2) of the Financial Administration Act, Bill C-11 will provide for the eventual winding-up of the affairs of Devco and its dissolution. That will probably be several years into the future, given the ongoing liabilities that need to be addressed by the Government of Canada. Second, the bill would provide for any legal proceedings against Devco to be brought instead against the Crown. That is a standard provision. Finally, it will maintain the "General Advantage of Canada" clause of the existing Cape Breton Development Corporation Act, thereby ensuring that the Canada Labour Code will apply to any private-sector purchaser.

I would note, as Senator Graham in particular would know, that this was an important aspect from the point of view of the unions, who wanted to ensure that they fell under the appropriate federal jurisdiction, the Canada Labour Code. The "General Advantage of Canada" clause provides for that.

Bill C-11 is really quite straightforward. It creates no new ministerial powers. It delegates no authorities. The first five clauses of the bill are the divestiture and dissolution authorization. These clauses are standard in legislation of this type. Next are a series of housekeeping amendments to the current Devco that provide for a future reduction in the number of directors on the board and changes that deal with gender-neutral issues.

Finally, there are consequential amendments to other acts, and your briefing book explains the bill clause by clause. I am sure Mr. Lomas and Mr. Bayne will be able to assist you with any specific questions concerning wording.

Honourable senators, now that the arbitration process has settled the previously outstanding human resources issues, our goal is to conclude the sale process as soon as possible to eliminate one more element of uncertainty facing Devco's employees and the Cape Breton community.

Everyone knows the enormity of the challenges facing the people of Cape Breton. The Government of Canada is committed to assisting in every reasonable way to help build a more secure and durable future.

To recap, there are three elements in our approach. The first is a successful sale, which Bill C-11 will facilitate, to maintain coal operations and jobs on a sound economic footing in the private sector. The second is a fair and reasonable human resources adjustment package to assist those who cannot remain in the coal sector. That was the point of all of the work undertaken by the arbitrator, Mr. Outhouse. The third is new economic development initiatives to open new horizons, such as the recently announced EDS customer service centre that, through modern communications technology, will be creating up to 900 local Cape Breton jobs over the next five years.

As the first project to be funded from our $68 million economic development envelope, I am pleased that the centre met the criteria recommended by our community consultation panel. The announcement was also well received by a broad cross-section of spokespersons in Cape Breton, as well as the provincial government and all political parties.

I want to make special note here that the inclusion of an economic development initiative in this package was very important, in my judgment. It is a particular tribute to Senator Graham, who worked very hard on that issue.

It is the hope and the intention of the government that many more success stories can be recorded in and for Cape Breton as we try very hard to turn the page and move forward to a better future.

I am anxious to try to respond to your questions.

Senator Taylor: Mr. Minister, I noticed in the bill that it is automatically assumed that profits will triple as soon as this operation is privatized, which is a modern trend.

Are you putting a provision into the bidding process that states that whoever acquires it cannot be in a conflict of interest? I am thinking, for example, of company A buying the operation while it has coal reserves somewhere else in North America that it would rather use. Could Cape Breton coal be shut out for strategic rather than competitive reasons?

Mr. Goodale: Senator, the objective of the government is to find a buyer who will make a long-term commitment to Cape Breton and maintain the most viable coal mining operation on a solid economic footing, with the maximum number of possible jobs. That is the kind of buyer that we are looking for. The safeguard here is that any transaction needs to be approved in the first instance by the board of Devco. Second, as required by the law, it would have to be approved by the Government of Canada. We will be looking for a buyer who brings to the table in all of the circumstances the best possible arrangement for the long-term future of Cape Breton.

Senator Taylor: My second question concerns the timing of the sale. You and I, sir, are both familiar with the gas and oil industry. Gas is most often the competitor with coal for space heating or power generation. Gas has almost doubled in price in the last year or so. Under normal conditions, there should be a tracking of coal prices following natural gas prices. Has the government done any long-range forecasts as to what coal prices will do, while keeping an eye on the price of natural gas and what OPEC will do? Or did you decide that it was so hopeless that you said, "To hell with it"?

Mr. Goodale: Senator Taylor, the timing here is not driven by changing factors in the energy markets for other power sources. Obviously, the timing here is determined in part by the financial situation confronting Devco. It is also partly determined by the very difficult geological and safety considerations in the case of the Phalen mine. Those are the factors that bore on the government's decision to move forward on this file at this time.

In broader terms, any coal producer would certainly be hoping for higher prices in the future. I am sure you will find consumers on the other side of the equation who take the opposite view. However, coal prices in international markets these days are not particularly attractive from the seller's perspective, but that pricing issue has no relationship to the timing of this transaction. It is driven by the other factors that I mentioned earlier, that is, the need to restructure Devco; the need to find other means by which to broaden the economy of Cape Breton; and the need to move forward in a more positive manner for the future.

Senator Buchanan: Minister, those of us who have a certain position here should make it known from the outset that we are not involved in an adversarial system like the practice of law. I do not think that we should be in any way adversaries here. We are here hoping that by working together, we can come up with something fair and equitable for the miners of Cape Breton and Cape Bretoners generally.

Many people are involved here. The coal industry, along with the steel industry, has been the lifeblood of Cape Breton Island for a long, long time. Some of us around this table grew up with both industries. As I have said so many times in the past, for better or for worse, we might not be in the position we are in today were it not for the coal and steel industries.

My family, on both my mother's and father's side, relied on the coal industry. My father worked with the Dominion Coal Company until his death.

There is a lot of nostalgia at work in Cape Breton over what appears to be the demise of the coal industry. We hope that will not happen. I have talked to a lot of people over the years, going back to the beginning of my time in politics in the late 1960s. There is no question that there is a lot of coal in Cape Breton.

There are people around this table who have been in coal mines. I have been in many coal mines going back to the late 1940s. There is no question that everyone around this table knows that our coal mines were many miles out under the Atlantic Ocean. There is no question that, over the years, mines had to be closed and new ones opened. I refer to Lingan, Phalen, Prince, and other mines, going back into the old days of 1A, 1B, the present Phalen colliery, the Lingan colliery, and old number 11. Those collieries were closed for many reasons.

However, anyone around this table who thinks that we do not still have literally millions of tonnes of coal in Cape Breton is wrong.

The Chairman: Senator Buchanan, do you have a question?

Senator Buchanan: Yes, and I am leading to it now. What I am getting at is that we went through this whole exercise about coal reserves in Cape Breton back in the late 1970s and early 1980s.

I have basically two observations here. First, I want to tell you I am not opposed to the privatization. The time has come for privatization of the steel industry, and the coal industry. Some people say it should have happened years ago. I think Senator Boudreau and I would agree with that, particularly with respect to the steel industry.

However, when we looked at the coal industry back in the late 1970s and early 1980s, the drill ships delineated the harbour seam at Donkin. There is no question that there are millions of tonnes of coal readily available for mining. The tunnels are there at the coal face already, and the mine is ready to go.

The second observation involves the words "fairness" and "equity."

I understand that, over the years, about 7,800 miners have received very fair and equitable pensions and benefits from Devco through the federal government. That is a lot.

We have two concerns here. One is with the 900 miners. Bruce Outhouse, whom I know very well, is an excellent arbitrator and labour lawyer. Under the circumstances, and following the law, he came up with an excellent report. However, minister, there are 900-some miners in Cape Breton who are facing what they consider to be a very uncertain future, with 400 of them going out on severance payments that are subject to tax for the most part, and probably will be gone within a year or year and a half. Then they will be on Employment Insurance and their situation is uncertain.

The other 500 have not really been guaranteed that they will have jobs in the Prince colliery, but it appears, depending on the operator, that they may get employment there. The question is, for how long?

I ask you very bluntly about the 404 and the 500. Is there anything else that the Government of Canada, in the name of fairness and equity, is prepared to do to ensure that the Devco act is followed? If another Cape Bretoner, the former senator and minister Allan MacEachen, were present at this table now, I know he would agree that there should be more fairness and equity. Is there anything more that the federal government is prepared to do to take this cloud of uncertainty away from the 900 miners? Many of them were told they would have jobs in the Prince, and yet they still rushed to the company office to get in on the severance package because of the uncertainty.

Is there anything further that the Government of Canada is prepared to do, or can do, to erase this uncertainty and this cloud that hangs over these 900 people and their families?

Mr. Goodale: Senator, on your original comments about the common search in which we all need to be engaged for the very best possible results for Cape Breton in difficult circumstances, let me begin by thanking you for those sentiments. I do believe that we all should have, and we all do have, the best interests of the people of Cape Breton at heart. I am sure everyone here is engaged in an honest and best-efforts search for the best solutions we can find.

On your second point about coal reserves, there are indeed significant, known geological deposits. There are issues related to quality, to geological structures and risks and dangers, and to the cost of extraction and so forth. All of those issues, of course, bear upon the commercial ability to extract the reserves, but reserves indeed there are. I take it that was part of the underpinning to Senator Taylor's question.

The issue is, how you get at those reserves in a commercial way that makes sense?

The numbers of employees affected by this has clearly been the most difficult and sensitive part of this entire file. Devco's board of directors recognized that in the early going in its recommendations to the Government of Canada back in the latter part of 1998. The board recommended, and the government agreed, that in any human resources package for affected employees, we would need to be certain that we were not just satisfying the letter of what the collective agreement required, but in fact doing our best to go beyond that. That was incorporated into the original package.

However, between the time the original package was announced and when it would have come into effect, there was a material change in circumstances, and that was the early closure of the Phalen mine.

The human resources package announced in January 1999 was predicated on a number of assumptions, including that Phalen would be in operation through all of 1999 and most of 2000. As it turned out, for geological and very serious safety reasons, that could not come to pass, so Phalen closed in September 1999, about a year earlier than expected.

On the very day that the closure was announced, I indicated that the Government of Canada would obviously need to revisit a number of the human resources issues in light of this change in circumstances, and that re-analysis began.

The union leadership had made and re-made the point that they would prefer to see the human resources issues resolved by a joint planning committee process as provided for under the Canada Labour Code. This January, Devco agreed to that process and it got underway.

The understanding was that there would be a best-efforts attempt by both parties to resolve the outstanding issues. If that failed through normal negotiation, then the other provisions of the Canada Labour Code would click into place, including recourse to an arbitrator if necessary. The arbitrator would resolve all issues, and at the end of the day, the report of the arbitrator would be binding upon all parties.

The joint planning committee process under the Canada Labour Code ran its full course, from initial negotiation to mediation, to arbitration, under the watchful eye of Mr. Outhouse, of whom you have spoken favourably. By all reports, Mr. Outhouse has a very high reputation for fairness, common sense, and proper management of these sorts of issues.

At the end of the day, having worked with the parties over a number of weeks, Mr. Outhouse filed his recommendations, and under the law, they are binding on all concerned. We all need to meticulously respect what Mr. Outhouse has proposed.

In order to relieve some of the uncertainties that have been mentioned, it is important to move forward with Bill C-11 and allow the sales process to be successfully concluded, in order that people may become acquainted with the new private sector operation, who the new owner will be, and how many employees they will actually engage. We have indicated something in the range of up to 500; obviously that is a target number. It would be very useful to have a deal inked that specifies the number of employees. Again, that uncertainty could be alleviated. In the final stages of the bargaining process, that prospective buyer will need to sit down with the unions for the appropriate discussion and negotiations.

The important thing for the future is to maintain the greatest number of jobs and conclude a good, solid sales transaction. We are attempting to accomplish that in part through this proposed legislation, and in larger part through the negotiations with a prospective buyer. It really is important to conclude the transaction at this stage.

I suspect that in putting the final touches on the transaction, the directors of Devco will wish to ensure that their employees are treated properly, as they have in the past, in any transition from one owner to the next. That needs to be part of what they work out with the new buyer. However, that is a commercial negotiation and they are only part way through the process at this time.

Senator Buchanan: First of all, I have no difficulty with Bruce Outhouse. I had better not -- I have appointed him to look after many labour problems and conduct arbitrations over the years.

In view of the fact that he has filed a report that is binding on both parties, are you saying that as far as the present 900 are concerned, there is nothing further that the Government of Canada is prepared to do? Mr. Outhouse could have arrived at various numbers, and he chose 25.

At present then, there is uncertainty for the 900, but if I read you properly, you are hopeful that that uncertainty will be cleared up after the negotiations are complete?

Mr. Goodale: Honourable senator, I wish there was a way to wave a magic wand and answer all questions instantaneously. However, that is not possible in these circumstances. Things must happen sequentially. There is obviously an ongoing commercial negotiation.

I hope that we can all work together constructively in the weeks and months ahead to answer these questions in the most favourable way possible, and at the earliest possible date, to bring certainty to this situation.

Mr. Outhouse's report has been very helpful. He extended the early retirement incentives to more people. He recommended the increase in the value of the severance arrangements. He made certain recommendations about the continuation of medical benefits and so forth. A summary of the details of his recommendations is included in the briefing material that has been circulated.

All things being equal, and taking into account the circumstances here, he has increased the value of the human resources package from about $111 million to over $160 million. That represents, based not just on the government's view of the world, but a totally independent third party, what is fair and sensible in the circumstances.

We now need to move beyond the human resources package and concentrate on the other elements to close as favourable a transaction as we possibly can. One that will maintain the coal business and the maximum number of jobs on the one hand, and on the other, working with the $80-million economic development fund -- minus the $7 million that has gone to the EDS project -- to develop other, better economic diversification alternatives for the future of Cape Bretoners.

Senator Graham: Madam Chair, I should say that I am here temporarily replacing Senator Banks. Thus I am a legitimate member of the committee, in case honourable senators wonder if I am overstepping my bounds.

Welcome, Mr. Minister, and thank you for your assiduous attention to this important file, particularly on behalf of those of us who come from Cape Breton.

Some of the bill's opponents believe that a collective agreement under new ownership will not provide the same level of workforce adjustment protection to laid-off workers if sections 17(4) and 18(2) of the act are repealed. Section 17 is particularly contentious.

With your permission, Madam Chair, I should like to read that section from this original act creating the Cape Breton Development Corporation.

17(4) Before closing or substantially reducing the production of coal from any coal mine operated by it, the Corporation shall ensure that

(a) the closing or substantial reduction in production is in accordance with and at a time provided for in the overall plan or any modification thereof submitted pursuant to this section; and

(b) all reasonable measures have been adopted by the Corporation, either alone or in conjunction with the Government of Canada or of Nova Scotia or any agency of either of those governments, to reduce as far as possible any unemployment or economic hardship that can be expected to result...

Section 18(2) reads:

A by-law made pursuant to subsection (1) shall provide for the payment of an immediate lump sum or other benefit to a person described in that subsection who is or was laid off or retired at an age that is earlier than the normal retirement age provided for by the by-law if the lay-off or retirement resulted from the reorganization and rehabilitation by the Corporation of the coal mining and related works and undertakings referred to in section 15 or from the conduct of coal mining and related operations by the Corporation on a basis that is consistent with the overall plan, or any modification thereof, submitted by the Corporation pursuant to section 17.

Mr. Minister, can you comment on this and indicate if there is currently a link between the existing workforce adjustment provision in Devco's collective agreements and subsections 17(4) and 18(2) of the act?

Mr. Goodale: Senator Graham, questions about linkages to the collective agreement might be more appropriately asked of either Devco's management or the unions, who would have participated in the collective bargaining that led to those agreements.

Through the way in which this matter has been handled over the last number of months, the Government of Canada has indicated a very clear determination to do the very best it can to deal with a group of Canadians who were in a very difficult situation. Frankly, that responsibility did not fall on the Government of Canada because of any legislative provision. It simply flows from the fact that we are trying very hard to do the right thing. We are not driven to it by legislative fiat. We see Canadians in very difficult circumstances, which we are trying to alleviate, partially through a human resources package, partially through an economic development package, and partially through a privatization process, all of which we hope will lay the foundation for a better future. Our approach has been driven not by a legislative mandate, but by our desire to achieve the best possible result for this group of Canadians.

Second, the legislative history of Devco and the Devco act illustrates that there was a major turning point in 1988-89. Changes were made to focus Devco exclusively on its coal business and to assign the mandate for broader economic issues to Enterprise Cape Breton Corporation.

In the flow of government appropriations, you will notice that appropriations for the coal operations and the industrial corporations all flowed to Devco until 1988-89. After that, ECBC was established with a mandate to deal with the economic development issues. After that change, money for the coal operations alone flowed to Devco, with the appropriations for economic development flowing through ECBC and ACOA.

There was a combination of responsibilities in the mandate of Devco until 1988-89. Then it was divided, with Devco focusing on coal and ECBC and ACOA assuming the economic development role.

Senator Graham: You have indicated that the objective of the sale of Devco is to find a buyer who can best maintain operations and provide the opportunity for continued employment in the coal industry in Cape Breton.

What assurances will you seek in this regard before a deal is concluded?

Mr. Goodale: Senator Graham, obviously the major assurance would be the greatest possible number of continuing jobs. We are dealing with a fluid situation. A commercial transaction is being discussed and there are confidences that must be applied and respected. Therefore, it is difficult to be precise at this stage. However, it has been stated in the public domain that we are hopeful of securing up to 500 jobs.

We have also indicated that at the appropriate stage in the commercial process, there must be the usual discussions between any prospective buyer and the unions. Obviously, a number of human resources issues would be discussed between those two parties.

At the end of the day, as is normal, the government would have to approve any transaction. The government will obviously be guided by how much we can maximize the advantages for Cape Breton and future employment. My hope is that the number will be very significant. As I have indicated, that is one of my criteria when I review any contract to determine whether it is acceptable.

Senator Graham: Has the Superintendent of Financial Institutions deemed both of Devco's pension plans, and particularly the non-contributory plan, to be fully funded? Will the federal government continue to be financially liable for both of these plans in the event that Devco is sold?

Mr. Goodale: I will ask Mr. Lomas to comment on your first point, Senator Graham.

On your second point, the Government of Canada will clearly have a series of ongoing liabilities, as we have always made abundantly clear. Some of those liabilities relate to such things as environmental issues. However, one of the most fundamental and largest liabilities would be the ongoing obligations with respect to pensions.

Mr. Robert Lomas, Senior Commodity Officer, Minerals and Metals Sector, Natural Resources Canada: Both Devco's contributory and non-contributory plans are in a fully funded position. That determination is based on the analysis of those plans by Devco's actuary. Those analyses are later audited by its auditors.

Senator Graham: Again, Mr. Minister, I thank you for your attention to this file.

Senator Murray: Mr. Minister, is the Minister of Natural Resources also responsible for Atomic Energy of Canada Limited?

Mr. Goodale: AECL reports to Parliament through me, yes.

Senator Murray: Is it a candidate for privatization?

Mr. Goodale: We have never indicated that. I know there was a news story recently speculating on that matter, but I have never speculated publicly at all about AECL's privatization. That subject is not under consideration.

Senator Murray: Thank you. As the minister who reports to Parliament for the corporation, you would be only too aware of the amount of the annual federal subsidy. The last year for which I have figures was fiscal 1998, and I believe the subsidy was in the vicinity of $150 million.

Mr. Goodale: The results of the program review process will reduce the government's contribution to AECL over time from $170 million at one point to $100 million.

Senator Murray: During most of the 1990s, it was between $160 million and $170 million. In the years prior to that it was over $100 million. My point is that annual subsidies to Devco were fairly small by comparison.

There is also the Canada Account, as you know. When the Crown is flogging the CANDU reactors to China, Turkey, or whomever, we lend money to those countries on good terms to buy the reactors. In the case of China, I think we lent $1.5 billion.

I make those statements to put the discussion here in some kind of perspective.

I do not think the following is an unfair question -- in fact it is the one question that is always fair to ask a minister: Could you describe the policy considerations that led the government to a decision to privatize Devco and to exit, as the explanatory note says, the coal-mining business in Cape Breton?

Mr. Goodale: Senator Murray, the consideration was long and detailed. Previous ministers and previous governments had set an objective for Devco of achieving commercial viability. That objective, if my memory serves correctly, predates our arrival in office. Very great efforts were made by Devco's management, past and present, by Devco's workforce, past and present, by its board of directors, and by the Government of Canada, past and present, to try to achieve that goal.

It became obvious in the period from late 1997 through 1998 and into 1999 that that goal was elusive and would not be achieved.

It was in that context that I asked Devco's board to consider the future direction of the corporation. Their recommendations included a number of things, but specifically a certain course of action with respect to Phalen that would see it continue in a certain type of mining activity that would be basically completed by the latter part of the year 2000, and then closed.

Senator Murray: I do not wish to cut you off. I believe those of us who are interested remember the details only too well.

It was then not so much a problem of the drain on federal fiscal arrangements, but it was the government's view that the goal of commercial self-sufficiency could only be achieved through privatization. Is that fair?

Mr. Goodale: Senator Murray, there was obviously no corner to be turned successfully in the form of a Crown corporation.

The expectation is that, as a private-sector operation, it has the best possible chance of achieving commercial success, with the ongoing operation of a coal business in Cape Breton with the maximum number of possible jobs.

Senator Murray: Nobody told you that the last time the coalfields of Cape Breton were under private operation, it had been a golden era?

Mr. Goodale: I studied the history of Cape Breton.

Senator Murray: What about the subsidies? You are not old enough to remember this, but the rest of us are --

Some Hon. Senators: Speak for yourself!

Senator Murray: -- that for quite a few years while the coalfields were under private operations, there were regular annual federal subsidies going to the private operators.

Senator Graham: That was through the Dominion Coal Board.

Senator Murray: Yes. It was a creature of the government.

Minister, could you describe the process being followed now with regard to privatization? You have already told us that Nesbitt Burns was appointed last fall.

Mr. Goodale: Last summer.

Senator Murray: They sent out feelers to 60 potential purchasers. Somehow or other, it has been whittled down to one. I do not want to get into how that happened or who was whittled out. It is not of any interest to us at the moment.

It has been whittled down to one. You have told us that negotiations are going forward. Who is negotiating for whom? Who is negotiating for the federal Crown?

Mr. Goodale: Nesbitt Burns has been engaged by Devco as both its financial adviser and sale process manager.

Nesbitt Burns has identified what it considers to be the best prospect.

Senator Murray: Yes.

Mr. Goodale: They have brought that party to the table.

Senator Murray: Right.

Mr. Goodale: Devco is responsible as management for the relationship, with Nesbitt Burns serving as the consultant and financial adviser.

Ultimately, whatever they might arrive at as the best available transaction will be referred to the Government of Canada.

Senator Murray: Of course. I would like to get at that. The negotiations are being conducted by Nesbitt Burns with the putative private sector owner. Nesbitt Burns is the agent of Devco and of the federal Crown. Someone has given a mandate to Nesbitt Burns as to the parameters within which they are to negotiate this. Who has done that?

Mr. Goodale: The engagement arrangement is between Nesbitt Burns and Devco's management.

Senator Murray: However, minister, what I am trying to get at here is the role of the political authority, the Honourable Ralph Goodale sitting at the end of this table, and obviously your colleagues in the government.

The Devco board is given a mandate. They would not have a mandate on a matter of this importance that has not been approved by the government, to put it as generally as I can.

That was a question.

Mr. Goodale: I was waiting for the second part of it.

Senator Murray, I mentioned in my original remarks -- and I just wanted to go back to those -- the objectives that were outlined in August by Nesbitt Burns when they held public meetings and stakeholder consultations in Cape Breton. They are to attract a buyer willing to buy the assets at a price acceptable to the government and to Devco; to find a buyer whose objectives and financial strengths would provide for the long-term viability of Devco's business; find a buyer who demonstrates a sensitivity to community and employee interests, and positive environmental stewardship.

Senator Murray: Are those the only guidelines that are before Nesbitt Burns as they go forth to negotiate with this private-sector purchaser?

Mr. Goodale: They are obviously the principal ones, Senator Murray.

Quite frankly, I would have to consult the legal officials.

Senator Murray: I will not interfere with commercial confidentiality.

Mr. Goodale: Let me say that I would be happy to provide anything we can provide without transgressing the confidentiality provisions.

Senator Murray: I appreciate that. I want to know from you, as the responsible political authority, that you know what that mandate is and that you have signed off on it in detail. I appreciate the three things you have mentioned, but people would like to have assurance -- I would like to have assurance -- that a political authority, namely you, has signed off on the mandate that the Nesbitt Burns people are carrying into those negotiations on behalf of the Crown and Devco.

Mr. Goodale: Senator, Nesbitt Burns obviously and appropriately operates at arm's-length, but I have been following this process very closely.

Senator Murray: What do you mean by "arm's-length"? They are your agents.

Mr. Goodale: They act as the agent of Devco.

Senator Murray: There is a real problem here. Do you understand what I am getting at?

Mr. Goodale: I understand what you are getting at and I want to make two points. A commercial negotiation of this kind is obviously complex. The government's "safety valve," if you will, is that at the end of the day, whatever Nesbitt Burns may recommend, and whatever Devco's board may approve, the Government of Canada has the final say. That is where you get into the nitty-gritty and the fine print.

I have made it very clear through this whole process that I would be looking at two things in particular: Number one, a buyer who will be able to maintain the maximum possible coal-mining operation in the private sector; and number two, a buyer who will maximize the employment potential.

At the end of the day, those will be judgment calls, but those were the things that I indicated I would be particularly interested in and particularly sensitive about. I want an operation that will last, and I want the largest number of jobs I can get.

Senator Murray: Is there anyone else at that table besides Nesbitt Burns? Is there anyone from Devco itself or from any department of the federal government present during those negotiations?

Mr. Goodale: Senator, the best information on that could be provided by Devco and Mr. Shannon, who will be familiar with the process.

Senator Murray: I will get it from them.

I think we are getting somewhere in this and I will not be long. I wrote down some of the things that you said in answer to questions from Senator Buchanan and others. You said there would a need for the usual discussions between any prospective buyer and the unions.

That suggests to me that those discussions would need to take place before a deal is sealed or approved by the government. I presume those discussions between what you call the "prospective buyer" and the unions would need to be reasonably satisfactory. Is my understanding correct?

Mr. Goodale: Yes, Senator Murray. At the appropriate stage, any prospective buyer will obviously satisfy itself with respect to union and human resources issues as part of due diligence.There will no doubt be some others. For example, there would be discussions at some stage with a party like Nova Scotia Power.

Senator Murray: The testimony heard by the House of Commons committee indicated that those discussions have taken place already. Nova Scotia Power sent a vice-president to appear before a committee in your House, and he said that discussions had taken place. I do not think such discussions have taken place between the prospective buyer and the unions.

What I want to get at here is that those discussions would take place before you, the Governor in Council, the cabinet, or whoever, finally approved a deal, correct? The union would have a chance to sit down with the putative buyer before you, as the government, approved anything finally?

Mr. Goodale: That is correct. The government's say on this is the last say, not the penultimate say.

Senator Murray: The union will have a chance to meet with the potential buyer?

Mr. Goodale: Yes.

Senator Murray: You are looking for a deal where the private-sector buyer specifies a number of jobs. You talked about a range of up to 500 jobs and then you called this a very significant number.

I think we are getting somewhere here -- a fair and reasonable deal for the transferred employees. I did not want to interfere with commercial confidentiality. You are so close, as you told the House of Commons, as Senator Boudreau told the Senate, that you hope to have this thing finalized this month. Why would you get it finalized before you asked the Senate, without seeing the bill, to send it to the Governor General for Royal Assent?

Mr. Goodale: Senator Murray, the course of negotiation is such that the outcome is obviously something for which the government is responsible, and no deal can be concluded without it. Indeed, the discussion will essentially go nowhere if the legislative process has not been completed. The approval of the transaction is the responsibility, one way or the other, of the government. The parliamentary requirement, in satisfying the Financial Administration Act, is the subject matter of Bill C-11.

Senator Murray: I just wonder whether we have any moral right to pass what is essentially an enabling bill without having seen the deal that is arrived at between the government and the purchaser. I will leave it at that for now.

Senator Christensen: My questions are not as in-depth as some. I am not familiar with the specific area. I am certainly familiar with mine closures in the Yukon. I have seen this happening all my life. Government involvement, which is rare in our part of the country, seems much more intense than private industry involvement. Private companies announce they are closing, they leave, and people must fend for themselves.

As you say, this is a mechanical type of bill for the devolution of a Crown corporation. That is what we are looking at here. What is important and what concerns everyone around this table is the people and families involved.

I wish to follow up on Senator Graham's question about clause 22, where the Public Service Superannuation Act is amended to strike out the Cape Breton Development Corporation. I presume the conditions of that superannuation plan were similar to other plans, where after so many years the pension is locked in and then a person will receive the pension at a certain age. If it is not locked in, a refund would be made. Do I understand correctly from your evidence that those pensions that are locked in are in fact protected?

Mr. Goodale: All existing pension obligations are obviously secured. This is one of the technical consequential amendments. Perhaps I could ask Mr. Bayne to comment specifically on why this one other act needs to be amended.

Mr. Norman Bayne, Senior Counsel, Natural Resources Canada: The acts referred to in the consequential amendments, which are 18 to 22, will remain in force as long as Devco remains as a corporation. It will remain as a non-coal-producing shell corporation for a number of years until the pension obligations are satisfied, the environmental remediation is provided for, and the remaining assets -- the other land holdings and the scrub land -- have been either divested or transferred to Public Works Canada.

The provisions in clause 22 will be in place while there are ongoing pension obligations. If there is a decision in the future to transfer this fully funded pension to a private pension operator, then that will no longer be Devco's function. At that point, and if that is the only thing left, then the corporation will be dissolved and this clause will then come into force.

Senator Christensen: I would assume that reciprocal agreements with a potential buyer will be part of the negotiations for pension plans; or would that be a responsibility of the union?

Mr. Bayne: That would be up to the terms of the collective agreements.

Senator Christensen: How many people in the Cape Breton Development Corporation were covered by the superannuation provisions?

Mr. Goodale: I will ask Mr. Lomas to talk about the pension history. It is a little complex.

Mr. Lomas: Briefly, the majority of Devco's employees participate in what is called a "non-contributory" pension plan.

Senator Christensen: That is not superannuation.

Mr. Lomas: No, that is different. The corporation also has what is called a "contributory" plan. A small number of employees belong to the Public Service Superannuation Plan.

Senator Christensen: Would those be administrative-office people as opposed to miners?

Mr. Lomas: There would be very few, if any, union employees who belong to that plan.

Senator Christensen: What will happen to the pensions of those not contributing to the non-contributory plan?

Mr. Lomas: As Senator Graham mentioned, the Office of the Superintendent of Financial Institutions regulates Devco's pension plans. Once Devco got into the situation where it is reducing its workforce, that office started to follow Devco fairly closely. It starts to look out for the interests of the employees, to ensure that their future pension plans and their pensions themselves are protected.

I understand that the corporation is in what is considered to be a partial wind-up situation. That means that the employees' interests in their pension plan become vested at that time. As Mr. Bayne mentioned, the corporation will have to deal with those plans. They would either continue until the obligations are met, or they would have to be transferred into some other locked-in vehicle, for example, RRSPs or annuities. The benefits available to employees will be protected throughout the process.

Senator Christensen: What about medical plans? Were there different ones or did the company have just one?

Mr. Lomas: You would have to ask the corporation that question.

Senator Christensen: I understand that the severance package for those who are eligible amounts to something in the order of $85,000; is that correct? Is that sum taxable in that one year? What is the situation there? It seems to me that the government is taking back quite a chunk.

Mr. Lomas: There are provisions under the Income Tax Act for rolling some of that money into RRSPs and protecting it from be being taxed up front.

Senator Christensen: Would it be spread out over several years, or would it all be taxable in that one year?

Mr. Bayne: The current provisions of the Income Tax Act allow for a rollover of $2,000 per year of service, up to the year 1995. Thus, for the number of years of service prior to 1995, they would be entitled to rollover $2,000 into their RRSP.

Senator Christensen: It is being sheltered as opposed to being spread out.

Mr. Lomas: In addition, because many of the employees belong to a non-contributory plan, they would also have carry-forward provisions that would allow them to further shelter their severance payments.

Senator Christensen: Mr. Goodale, you mentioned a company that was attracted to the area that would perhaps provide 900 new jobs over the next five years. Is that new jobs for people living in the area, or jobs for people transferring in from somewhere else?

Mr. Goodale: The company is EDS, which stands for Electronic Data Systems. The company has particular expertise in customer service centres. In fact, my understanding is that they already have a small one in Cape Breton. They are particularly happy with their experience there in terms of the quality of the employees and the workmanship.

Their existing centre is in the Southern United States, where they are not particularly happy with their experience of workforce arrangements. They are looking forward to a good, solid relationship with Cape Bretoners, based on what they already know of that workforce, which has been very positive. They anticipate the employment potential over five years is indeed 900 new jobs. However, they would be looking to the local workforce, not an imported one.

Senator Christensen: It just seems that perhaps persons who have been working in the mining industry for a long time, who sort of fall between the cracks, may have difficulty fitting into that sort of high-tech job. I am quite familiar with miners. For the older ones, the high tech industry is not an easy place in which to make an adjustment.

Mr. Goodale: Not every type of employment is suitable for every individual. However, as I have spoken with miners, their families, their representatives, and others in and from Cape Breton, one of the things they frequently make reference to is opportunity for the next generation. They are anxious to build those economic opportunities.

Senator Christensen: You do have a gap there.

Mr. Goodale: Yes.

Senator Christensen: There is probably offshore oil and gas coming, but you do have a 5-year to 10-year gap that needs to be filled.

Mr. Goodale: The community consultation panel recognized that dilemma when they talked in their report about opportunities for Cape Breton in the innovative, knowledge-based economy of the future. They also talked about shorter-term opportunities in more traditional sectors that need to be pursued as well. In other words, they were saying, "Do not put all your eggs in one basket. You will need a combination of things that reflect the so-called `old' economy and the new economy, new technologies; more conventional ways of doing things and initiatives that click into place, both in the short term, the medium term and the long term."

The consultation panel did a fine job of balancing off all the things that need to be taken into account when we go about investing that $68 million. The EDS centre is one arrow in that quiver. There obviously need to be many others.

Senator Finnerty: I too am from a mining community and have watched some of the damage done when the mines close and so forth. My question, however, is an environmental one. Could you indicate how Bill C-11 will deal with Devco's environmental liability as far as waste and water treatment in terms of abandoned mines is concerned?

Mr. Goodale: Environmental liabilities have obviously been incurred because of Devco's operations over the years.

Senator Murray: And before that.

Mr. Goodale: It will continue to be the responsibility of Devco to deal with those liabilities. They might persuade a purchaser to assume those liabilities.

However, if you look at the history of commercial transactions, it is more likely that a purchaser would say, "Thank you very much, I will take care of this from this point forward, but what has accrued to this time is your obligation."

The obligation exists and is in the hands of Devco. It may or may not be affected by the commercial obligations that are assumed, but in any event, that obligation will need to be discharged.

One of the things that has been mentioned by some of the union representatives, as well as the community consultation panel, is that there may be a remediation opportunity here that can be pursued for the future. There is a job to be done. There is a problem to be fixed and a clean-up to be accomplished.

The community consultation panel invited us all to think of ways in which we could turn an obvious environmental problem into an economic opportunity. I am sure that those who will be administering that investment fund will have that notion in mind.

I am speculating, but if properly done, one could see both an environmental and an economic gain to be achieved.

Senator Finnerty: I hope you are right, because I have not seen it happen so far in Timmins. Hopefully it will be successful in Cape Breton.

Mr. Goodale: This is a big challenge across the country and you are right to raise it. It has a particular resonance and history in Cape Breton, but mine remediation is a national issue.

The Chairman: Ongoing funds are necessary for treatment of acid leachate from the coal waste pile, and also the water, which the Boyd Report estimated might cost about $106.8 million. These are not small costs.

Mr. Goodale: You are right, they are not small costs. This is a significant liability.

Senator Buchanan: First, I wish to ask about mine remediation. What is your position on the subject of miners who are not eligible for pensions being employed in mine remediation in Cape Breton and having that time added to give them full pensions?

Mr. Goodale: Senator, the corporation has undertaken mine remediation work over time. You may wish to ask for more detail on this from Mr. Shannon, but as I understand it, they have found that it is more capital-intensive than employee-intensive work. The number of jobs may be less significant than one might anticipate. It is more the capital cost than the worker cost.

No one denies that the problem exists. However, to the extent that it presents an economic development opportunity, I am certain that, as recommended by the community consultation panel, it will be given due consideration for potential investment in the future.

Senator Buchanan: Both the federal and provincial governments put money into the call-centre and I am told that the organization that will be moving into Cape Breton is a very good one.

The problem is the age gap. I do not think you will find too many men who have been employed for 15, 20, 24 years in a coal mine, being able to put on a headset and sit in front of a computer.

I think you would agree that there is a gap here. The history of call centres is that most employees are between the ages of 19 and 30, maybe a little older. The gap is with those miners who face an uncertain future at present. Call centres prefer to employ younger people who have the necessary understanding of technology to operate these computer systems.

There is a gap. What bothers me, in following up on Senator Murray's comments and questions, is that you continue to say that you will be looking for a private operator who will be able to arrange employment of up to 500 men.

That tells me that you, as a representative of the Government of Canada, have closed your mind to any new coal operations in Cape Breton. If you had not closed your mind to that, you would not continue to say that you want this new private operator to arrange for up to 500 new jobs. Obviously, 500 men would be employed at Prince colliery. Even 200 or 300 could be employed in a brand-new coal mine. We have gone through this over the years.

I know people around this table get tired of hearing people like Senator Murray and Senator Graham and myself talking about the Donkin mine.

Senator Kenny: Not at all, that is why we are here.

Senator Buchanan: I have a significant amount of information here. The Nesbitt Burns report indicates clearly that due to its high volatile rank, the harbour seam will produce a high-grade thermal coal and a good blending metallurgical coal. The report also addresses collective mining, leaving inferior, high sulphur roof and bench coal during mining and upgrading the coal by chemical washing at the wash plant in Victoria.

The various feasibility reports refer to 130 to 200 million recoverable tonnes. That is enough for 90 years at 1.5 million tonnes per year.

You have said that you want to ensure that the company that takes over the Prince mine and the other assets of Devco is an efficient organization that can maintain the jobs and do an excellent job of mining in Cape Breton.

If that is the case, I would hope that the company that is finally chosen has many years of expertise in operating coal mines. It must have mining engineers, geologists, miners, and an efficient track record of operating coal mines. It must not be a coal broker, who only finds available coal, buys it for the best possible price, and ships it to Sydney.

One of the best assets that is spoken of in these reports by your expert, Nesbitt Burns, is the modern, deep-water port facility that will permit the importation and delivery of all the incremental coal requirements of Nova Scotia Power Inc. That will be the amount of coal required by NSPC after they have taken delivery of the coal from Prince colliery and the various smaller strip mines, which is about 1.4 million tonnes.

If the government is looking to retain up to 500 jobs, that will cover only Prince mine and there will be no opportunity for a new coal mine. Some people outside of Cape Breton might say that it may be just as well, that we should not mine coal for which there is no market.

We all know that there is a market in Cape Breton. I have the proof right here. Most of the requirements of the Nova Scotia Power Corporation, approximately 3 million tonnes a year, can be supplied from the Prince colliery and a new mine in the harbour seam at Donkin.

Mr. Goodale: I will make two comments on the process. When I refer to objectives with respect to the sale, I am obviously speaking of minimum objectives. I will be very happy if the negotiating process yields something better than that. However, it is important to exercise caution when dealing with commercial negotiations and very sensitive community relations. If the results exceed minimum objectives, so much the better.

With regard to Donkin Resources Limited, there are a number of outstanding legal proceedings that must be resolved. Therefore I do not want to comment directly on that.

Senator Buchanan: Minister, you can resolve those very easily. In my opinion, the major assets available for interested parties are Prince colliery; the Donkin mine site and resource block; the railway remaintenance centre; the coal contract with the NSPC, which is an investment highlight for a new purchaser; the lifting and banking centre; the central maintenance facility; the coal preparation plant; and the deep-water port.

With all of that together, the successful buyer will be able to negotiate with Nova Scotia Power as if they were in Devco's shoes. They will own the big port facility in Sydney.

There is no mention in here of a new mine. Yet the Nesbitt Burns report talks about the resource block of coal at Donkin in the harbour seam, which contains excellent thermal coal mixed with some metallurgical coal. There is enough there to employ at least a couple of hundred miners, and perhaps more, depending on the volumes of coal, for 90 years.

The Cape Breton Miners Development Co-operative issued this document. I am very bothered by the fact that your consultants, Nesbitt Burns, turned this group down because, they said, the co-op did not have management experience. That is absolutely incorrect. I personally know the people who are involved in this. They include Aubrey Rogers, a chartered accountant; Doug Burns, a very successful contractor in Cape Breton; Steve Farrell, a mining engineer; and Dr. William Shaw, a consultant who knows as much about the geology of the coalfields from Cape Breton to Sydney as anyone. Yet they were not even included on the short list because they lacked management experience. We do not know about the management expertise of the group from Florida with whom you are negotiating.

Mr. Goodale: Senator, I am not here to pass judgment on the Nesbitt Burns process. At the end of that process, the government will have to make a decision on whether its output is satisfactory. At some stage, you may want to ask Nesbitt Burns directly what their opinion is and why.

Going back to the fundamentals, there are assets to be sold. The government does not have particular expertise in managing a sales process. That expertise is found in firms like Nesbitt Burns. They know that it is important to achieve a long-term, viable, economic undertaking in the private sector that includes the largest possible number of jobs. Whether they are successful in bringing such a proposition to the table that is acceptable to the board of directors remains to be seen. It will be before the government for a decision in due course. We are pursuing the best possible deal.

Mr. Buchanan: If you were to check out what I just said about the Cape Breton Miners Development Co-operative and the people who are involved in it, you would find out that these people are not johnny-come-latelies. These people have been involved in Cape Breton and Nova Scotia. You cannot say the president and CEO of the Sobeys empire does not have good management skills.

Is it not better for a company with the necessary expertise to take over the assets of Devco, operate the Prince mine, and open new mines without asking you for money? It can employ Cape Breton miners and the money will remain in Cape Breton for Cape Breton businesses. You are getting out of the coal mining industry because that is what the government wants. I have known that for years.

If these people were involved, you would be out of it. It would be up to this private group in Cape Breton and Nova Scotia to do the job, and they say they can do it.

The Nova Scotia market is 3 million tonnes. I have all the names of the consultants here. They have talked to SNC Lavelin, Kilbourn Engineering, CBCL, and Grant Thornton. They all say it can be done by this group.

Mr. Goodale: There were 60 persons invited to submit proposals. I am sure we could individually go around the table and review 60 different submissions and pass our individual, subjective judgments as to the strengths and the weaknesses of all the various proposals and propositions.

The corporation has commissioned the professional advice of Nesbitt Burns. That is their professional expertise. That is the strength that they bring to the table.

They are paid to assess where the best opportunity lies for the very best possible transaction that will have the longest-term benefit.

Senator Buchanan: In the interest of Cape Breton and of Nova Scotia?

Mr. Goodale: Yes indeed, senator, in those interests.

Let me go back to my original answer. My objective here is the best deal that gets the best results for Cape Breton with the maximum amount of employment and the financial resources to sustain it over the long term.

The Chairman: Minister, rather than prolong this, I wonder if I can send you my questions in writing?

Mr. Goodale: Absolutely.

The Chairman: Hopefully, you can commit to returning the answers very quickly.

Mr. Goodale: Absolutely, senator.

Senator Taylor: I have a question about creating jobs. In Alberta many years ago, when the coal shut down and gas was coming on, a huge number of jobs were created in the petrochemical industry. Alberta is 2,000 miles away from tidewater. Nova Scotia is right on tidewater. Nova Scotia has a great deal of oil and gas offshore. Have you talked to the Nova Scotia government about creating alternative jobs in the petrochemical area?

Mr. Goodale: This is an area related to new energy resources that the community consultation panel touched upon. I have heard from others, including members of the House of Commons, that they have a great deal of hope for the potential in that area.

We have all seen what Sable offshore has the potential to do. We have seen what Hibernia has the potential to do.

Senator Graham: And the Laurentian sub-basin.

Mr. Goodale: Indeed. I think you are bootlegging an issue.

Senator Graham: I am bootlegging the Laurentian sub-basin.

Mr. Goodale: You are referring to the arbitration procedure?

Senator Graham: I am hoping that you will press for an early settlement of the arbitration with Newfoundland and Labrador so that there will be jobs for not only Cape Bretoners, but for Newfoundlanders.

The Chairman: Thank you, minister, for being here.

Our next witnesses are from Devco.

Joseph P. Shannon, Chairman of the Board, Cape Breton Development Corporation: People have told me that if you do something often enough, you will get used to it. I have appeared before Senate committees quite often and I am not used to it. Please bear with me as I try to get through this evening.

Let me start off by reviewing some of the comments that were made here earlier. I would like to go back to 1990, when Tom Hockin was the minister responsible for the Cape Breton Development Corporation. Senator Murray was a member of the government at that time.

They put a plan in place for Devco -- using their term -- to make it "commercially viable," with the intent, I expect, of privatizing it, or at least of the government exiting the business.

It was a good plan at the time. They wanted to export coal as part of that plan.

They exported and the company was successful. It mined a lot of coal and exported a lot of coal.

Unfortunately, the export of that coal ended up costing the company about $20 million per year because the market prices were much lower than our operating costs for extracting the product.

Around the same time, Senator Buchanan's company, the Nova Scotia Power Corporation, which was a provincial Crown corporation at the time, negotiated a deal with the Cape Breton Development Corporation that led to Nova Scotia Power paying Devco approximately 35 per cent above the market price.

Unfortunately, after Senator Buchanan was called to the Senate to look after the business of the nation, the government that followed him privatized the Nova Scotia Power Corporation. Naturally, their objective was to buy coal at market prices, because the 35 per cent subsidy that the power corporation was paying Devco over and above the market price led to consumers in Nova Scotia having probably the highest power rates in the country.

They wanted to get back to competitive power rates very quickly, not only for the households of the province, but particularly for industry, because we have a lot of industry in Nova Scotia in the export business. We have a lot of high power users in the pulp industry and in other export industries.

It was therefore important to them to have the lowest power rates they could get.

Something else happened around the same time. Senator Buchanan raised the issue of the dock a few minutes ago. In the late 1980s, the corporation developed a plan to try to reduce the costs of exporting coal, and spent a lot of money on the dock and the loading facilities for the boats. Senator Buchanan will remember that. Senator Murray was a member of the government at the time. Unfortunately, when Senator Buchanan was premier, his government issued a ministerial directive to the corporation limiting the amount of coal that could be handled at the pier, and as a result, our costs increased.

Senator Taylor: Why did he do that?

Mr. Shannon: I do not know.

Senator Buchanan: Rollie did it.

Mr. Shannon: As a result of that, the efficiencies that had been built into the plan for exporting coal at the dock were all but lost.

Another fallout of that ministerial directive from the provincial government was that Derek Rance lost his job as president. We have also lost jobs in our company because our present costs, as a result of that ministerial directive, are higher than other unloading and loading facilities in the community.

If Senator Buchanan is seriously interested in preserving the jobs of the corporation, I would ask him to approach the provincial government, indicate to Premier Hamm that it might have been a mistake to issue that ministerial directive, and ask him to rescind it, so that we may become competitive again by using our dock and our employees at the international pier.

The pension issue was raised, and I want to give you a little insight into that because it is an important issue. Senator Murray and Senator Buchanan know I have raised it every time I have been here.

I have been involved with the corporation since, I think, the spring of 1995. One of the priorities was getting as many people to participate in the contributory pension plan as we possibly could.

We have two pension plans, as was indicated earlier. One is a contributory plan of 5 per cent, where the company matches the 5 per cent that is contributed by the employees. The other is a non-contributory plan that is obviously funded 100 per cent by the Government of Canada.

We did everything we could. We asked the senators to help us with that effort. We went to the clergy and asked them to talk to their parishioners in churches and parish and try to convince the families to join the contributory pension plan. We also formed a group of management people, along with financial advisers from outside the company, to go around to church basements and to homes to talk to our employees and their families, trying to get them to join the contributory pension plan.

You can talk to Steve Drake about this tomorrow if you like. Unfortunately, we did not have the support of the United Mineworkers leadership for that program. As a result, less than 25 per cent of our UMW employees participate in the contributory pension plan.

The difference when you are age 65, and all other things being equal, is that the non-contributory plan will pay you about $400 per month, while the contributory plan will pay about $1,800 a month. That is why it was so important for us to get our employees to join that plan.

The Cape Breton Development Corporation, through the ownership of the Government of Canada, has contributed approximately $1.4 billion to the pension programs of the employees of the Cape Breton Development Corporation. That money has been spent, distributed, and committed.

Our downsizing program has been compared to many others, in both government and private corporations across the country, with respect to its fairness. Every company to which we have been compared has a fully integrated, contributory pension plan.

As you know, when there was downsizing at CN Marine, or any other company to which we have been compared, the corporation's only responsibility was to top up that existing pension plan. You just top it up because you want the employee to retire a little early. Our responsibility is to pay 100 per cent of all of the downsizing costs, all of the pension costs, because we do not have participation by a broad enough employee base to use our pension plan for that. That is the problem we have faced.

The minister said earlier that we have drawn down about $1.7 billion from the Government of Canada. As I indicated to you, we have put $1.4 billion into pensions.

One of the things that annoys me a little about some of the right-wing academic community from the mainland of Nova Scotia, and from Upper Canada, when they talk about our industry down home, about the Cape Breton Development Corporation and about Sydney Steel, is that they have a pretty simplistic solution. They say we should give them a bunch of money and let them go away and close the company down. That is in fact what we have done, and so far we have paid $1.7 billion to the corporation and we have distributed, or have commitments for, $1.4 billion to our employees.

Just to put to rest some other questions that were raised, let me deal first with the ongoing obligations of the corporation. We will be accepting all of those. All the environmental liabilities will belong to the Government of Canada through the corporation, and when and if the corporation is wound up prior to all those things being taken care of, they will be the responsibility of the federal government.

I expect that, by the time this thing is done, we will probably be facing $2.3 billion to $2.5 billion in total costs, so there is still a fair amount of support for the corporation and the community in which it is active required. We still have to depend a great deal on the goodwill and the support of the Government of Canada and the Senate and the taxpayers of the country, in order to get this situation cleaned up so that we do not end up with "tar ponds" at Devco. It is very important to us that we do not end up that way.

I have tried to clear up some issues raised earlier in discussion. I have a plane at seven o'clock in the morning, but I am prepared to stay here until then to deal with any issue on any subject with which I can help you.

Senator Taylor: If you are willing to work at 7 o'clock in the morning, you would make a good senator. That is how we run our committees.

Mr. Shannon: I am an old truck driver, senator.

Senator Taylor: How safe is that vested pension fund now? Conrad Black and a few people around this world have made a penchant of buying out companies. Once they get hold of the company, they liquidate the pension fund to pay off the bank. Your company is for sale now. I just wonder how safe that plan is if this goes through and a buyer get their hands on it.

Mr. Shannon: The assets of the pension plan are not part of the sale process. The pension plan is as secure as the federal government. For more detail on that, Mr. Buchanan can comment on the pension plan.

Mr. Merrill D. Buchanan, Acting President, Cape Breton Development Corporation: The two pension plans of the corporation are registered. We have to report to the regulatory body, the Office of the Superintendent of Financial Institutions, or OSFI. They oversee the administration of those plans.

Funds are administered by professional fund managers. A committee of the board of directors oversees the investment function of those plans. As Mr. Lomas reported earlier, both the non-contributory plan and the contributory plan are in a surplus situation.

Senator Taylor: That was a very good explanation. In effect, the government subsidy flowed through, so it was almost equivalent to what you are spending in pensions; it has not been the load that some people would like to say it has been.

As a fellow engineer and having worked in open-pit coal mining in Alberta, I have a technical question. The coal you have coming in now is competitive with the electricity generator. How does it get there? Does comes over water? Does it come through your facility?

Mr. Shannon: Some of the coal comes in over water on a boat. Some of it is off-loaded at the international pier. Some of it is on-loaded at other piers in the area.

Senator Taylor: When you were trying to ship coal, was it steam or metallurgical or a combination? I notice you do have both types.

Mr. Buchanan: We had markets in both metallurgical and steam.

Senator Taylor: I have another technical question. Do you sell the same coal for both purposes, or are different parts of your seams producing different coals, steam or metallurgical?

Mr. Buchanan: The coal that was of a metallurgical grade was coming mainly from the Phalen colliery and, prior to that, the Lingan colliery. The only colliery operating today, the Prince colliery, produces only thermal-grade coal.

Senator Taylor: Can you reveal why the provincial government of the day stopped you from exporting more coal? Was it because they thought power prices would increase because of offshore competitive pricing?

Mr. Shannon: The directive from the provincial government did not have anything to do with the number of tonnes of coal that we could ship. It was the number of tonnes of coal that we could store on the ground to make the operation more efficient. That was the issue.

Senator Taylor: Did they think they were getting another Sydney tar pond? Why would you not store coal on the ground? It moves pretty fast.

Mr. Shannon: That was according to the plan, but it was clearly the plan of the provincial government of the day to do something else.

Senator Taylor: Could you compare the amount of coal that you would stack on the ground there with the amount of coal that we stack on the ground at Roberts Bank, British Columbia?

Mr. Shannon: I do not know anything about British Columbia, but we would like to be able to stockpile more coal because we would be more efficient if we could stockpile more coal.

Senator Taylor: You could always ski on it in the winter, too.

Mr. Shannon: We have plenty of ski hills in Cape Breton; we do not need one more. It is a problem of demurrage for the boat and the additional cost. It had nothing to do with the amount of coal that we could ship, if we could find the coal to ship.

Senator Buchanan: As far as shipping coal, we had no problem with you shipping as much as you possibly could.

Mr. Shannon: You could ship the coal, but the problem was at what cost.

Senator Buchanan: That was not the reason why the province did what it did. As you recall, back at that time we were having a serious problem all through the Whitney Pier area with coal being stockpiled outside the international pier. There were many problems.

Mr. Shannon: That is too far back for me to remember, senator, but I do not think we had stockpiles outside the international pier.

Senator Buchanan: I think Senator Boudreau will recall the problems all through the Whitney Pier area with the amount of coal that was stockpiled down there. It cost money to cover the coal to make sure that the coal dust was not breezing all over the pier. Anyway, I am just justifying it.

Senator Taylor: It still does not sound very good to me as an engineer.

Senator Graham: For purposes of clarification, when Senator Buchanan continually refers to "the Pier," it should be understood, for the record, that he is talking about an area of Sydney called Whitney Pier. That is for historical purposes for those who might review these documents in the future.

Senator Buchanan: It was named after a man who was involved in the original Sidney Steel Plant. His name was Mr. Whitney.

I should like to address my questions to Joe the truck driver. What he says there is absolutely right. This man started off as a truck driver in Sydney River. I knew his father very well, Bert Shannon. A long time ago, he cut my hair.

Senator Taylor: It has not come back yet.

Senator Taylor: I had lots of it then.

I will not get involved in the pension business, except to say that it is my understanding, which may be faulty, that, prior to a certain time in the 1980s, Devco's policy was that there was no mandatory contributory pension plan, and that changed back in the early 1980s. Is that not correct?

Mr. Shannon: That is correct. Anybody hired after 1982 was required to join the pension plan. Prior to that, it was a choice.

Senator Buchanan: After that period, did not most of those employees who were not in the contributory plan become involved in the contributory plan, in 1982 or 1983?

Mr. Shannon: Everyone who joined the company after 1982 became a member of the contributory plan.

Senator Buchanan: If there had been a mandatory contributory plan prior to that, the employees would have been part of it?

Mr. Shannon: Of course.

Senator Buchanan: So it was Devco's policy that --

Mr. Shannon: Now, come on, senator, that is really stretching it. There was a choice to be made by every employee in the company. Everyone made a choice. It was 5 per cent or 3 per cent. You could have contributed any percentage of your pay, and it would have been matched by the corporation, just like every other pension plan.

Senator Buchanan: That was after 1982 or before 1982?

Mr. Buchanan: Even after 1982, the mandatory aspect only applied to new hires or people changing from one bargaining unit to the other. Everyone who was in before 1982 still had the choice to opt out of the contributory plan. That is why the number did not come up. Most of the hiring was before 1982.

Mr. Shannon: If you look back, senator, that was probably one of the saddest things. There was an opportunity for all of the employees of the corporation to participate in a good pension plan. Some of these fellows are out on early retirement, and the early retirement benefits are generous. They are $23,000 a year. When they reach age 65, if they are members of the non-contributory plan, their pension is reduced to $400 a month. It is a real shame that it happened.

Senator Buchanan: You have heard the minister tonight. It is troubling to hear his comments about the future. I have all the statistics here from the power corporation. I have talked to representatives from the power corporation whom I have come to know very well over the years. There is no question that the power corporation, for X number of years into the future, will continue to burn coal in Lingan 1, 2, 3, 4, in Point Aconi, but not in Halifax or Dartmouth, since they will probably go to natural gas, but probably Trenton still for quite a while, although I do not know what will happen with Trenton.

The coal requirements of the power corporation will not change for a long time. They will use coal. People in the power corporation have told me that, as far as they are concerned, the best economical fuel into the future is still coal. That is what these plants were built to burn. I know -- we opened five of them, and they are all coal-burning plants. You, as a businessman, know that a locked-in market is worth a great deal of money.

Mr. Shannon: Yes.

Senator Buchanan: If you have the commodity to sell into that locked-in market, that is good, too. If the market is in the area and the commodity is in the area, would it not be much better to have local people in Nova Scotia and Cape Breton being involved in fulfilling the contractual obligations of Devco with the Nova Scotia Power Corporation rather than an offshore company, or some company where the monies will not remain in the community but will just go to the brokerage commission?

Mr. Shannon: That would be the perfect answer in a perfect world, senator. The power corporation is like every other corporation that must buy energy or anything else. They will buy energy that will be competitively priced and environmentally acceptable. If that is coal or gas or petroleum coke, or whatever it is, that is what they will end up doing.

I believe you when you say that there is a reasonable chance that coal can continue to be competitive and a fuel for the power corporation well into the future. The problem is that you must be competitive with the quality, and you must be competitive with the price.

In 1978 or 1979 I was appointed by you, when you were premier of Nova Scotia, to be the chairman of Novaco, which was a provincial Crown corporation. Irving Schwartz, who is here now, was the chairman prior to my appointment for a number of months. Our responsibility at that time was to do near-surface mining in the province to help the power corporation with the high price of oil and to help them get converted to burning more coal, et cetera. That was the objective. You will remember that when I became chairman we borrowed a couple of hundred thousand dollars from the Department of Mines, with your approval and that of the minister.

We started a mine at Point Aconi, and we made a large amount of money for the province of Nova Scotia. We sold the coal for 10 per cent less to the power corporation than did Devco. Then we went up to Springhill and we opened another mine. Then I wanted to open another mine in Gardiner, and you did not allow that mine to go forward because there were too many people who were angry with you for doing that.

We had discussions about how much coal was in Cape Breton, including Inverness County. There was a large amount of coal in Cumberland-Colchester County. There were many coal reserves, but there gets to be an economic coal reserve. That is a discussion that you and I had many times during the five years I served as chairman. There is a great distinction between coal reserves and economic coal reserves and environmentally acceptable coal reserves. Therein lies the difficulty, senator.

Senator Buchanan: I do not disagree with anything you have just said. I was privy to it all.

Mr. Shannon: Yes, you were.

Senator Buchanan: I have no problem with what you said about those surface mines. They worked well, but there came a time when there were enough of them, and I am sure you recall what the problems were there in Gardiner.

Let us get back to the present. Perhaps some of the people I talked to do not know what they are talking about, but I always think that someone like Bill Shaw knows what he is talking about. I appointed him Deputy Minister of Mines, and I think you will agree with me that Bill Shaw knows the Sydney coal fields as well, if not better, than anyone else. Steve Farrell is an excellent mining engineer and a former Devco mining engineer. The business people I have mentioned before -- all Cape Bretoners like yourself -- are very successful business people.

If you, as a businessman, had feasibility reports from some of the top engineering groups in this country, such as SNC-Lavalin, Kilborn Engineering and CBCL Limited, and from financial people, such as Grant Thornton, who are reputable and know what they are talking about, if you had financial institutions willing to put up a large amount of money to begin a new coal operation in Cape Breton, if you were satisfied about the people I have mentioned being involved, if experienced miners were available and ready to go to work in Cape Breton, and if the financial institutions were satisfied with the feasibility of the project, would you not agree that it would be better to have that kind of project in Cape Breton, in Nova Scotia, developed by Nova Scotians where the money remains in Cape Breton for all of the businesses rather than developed by some group in the United States who have probably never operated a coal mine in their lives?

The minister said that he would like to see the new operator have the expertise to maintain certain levels of employment. How could you do that if the company you are dealing with may have one coal mine in the world and the rest is just brokerages of coal in Hampton Roads or Columbia or wherever?

Mr. Shannon: Is your question why we did not select Donkin as the short-listed one to go forward? Is that really your question?

Mr. Buchanan: That is my question.

Mr. Shannon: It would have been really easy if you had said that.

Michelle Dockrill, the member of Parliament for Bras D'or, made a speech months and months ago -- maybe it was a year ago. I do not know exactly when it was. She said that the Cape Breton Development Corporation and the Canadian government should support local people and that it was time for an employee buyout of the corporation. I wrote a letter to Michelle Dockrill within hours of reading about her speech in the newspaper. I told her that I supported her position and asked her to send me the plan that she had been talking about so that we could work together to see if, in fact, we could get some local interest in the corporation.

Months and months went by and we never heard anything. I spoke about it publicly several times. As a matter of fact, Father Neville and I had some discussions about that. The position I always took was that we would be pleased to get a proposal from a local group. I also maintained that the thing could not be based on emotion or politics; it had been to be based on sound business principles, and we would evaluate it that way.

About two weeks before the request for proposals closed, I got a call from Father Neville asking if we could postpone the day so that he could get a group of miners together to put in a proposal. At that point, it was difficult. I assured him that if he put in an application -- and it would not have to be very detailed -- we would take a look at it. Unfortunately, it really did not meet the test. There were other proposals from various companies that were much stronger and had a better chance of surviving.

One of the big issues in and around the miners' co-op is that these guys mean well. They want to buy a part of the company because they believe that would give them a job. There is a problem with that inasmuch as there will be succession rights and seniority clauses and that kind of system will not work. There was a bit of a brouhaha in the community over that particular issue. However, there is a seniority clause that would exclude those fellows, unless they had the seniority. Just because they were equity participants in the project did not mean they would be guaranteed a job.

With respect to Donkin Resources, they submitted a proposal. As you said, senator, those are good guys. They stayed home in Cape Breton. They make a living and support the church, the grocery store and the service station. They did not leave Cape Breton like some people around the table who moved to the big cities and became successful and famous. We stayed home.

There were two issues that were important to the corporation, to our employees and to the Government of Canada in the transfer of the assets. One was succession rights and the other was that federal law had to prevail over the operation of the coal mines. I do not want to break any confidences but I can tell you, senators, that there were proposals that came in -- and you can figure out what I am talking about -- whose applicants stated that they wanted to participate under the provincial law and they wanted to hire their own people. Those two issues were not acceptable to the corporation or to the government. That excluded certain friends of yours, senator, from participating in the program.

Senator Murray: This is getting more interesting all the time.

Senator Graham: Thank you for being here, Mr. Shannon, and for the work that you have done. You may have started out as a truck driver, but you have become a darn successful truck driver. It might be interesting to colleagues around the table to know about Mr. Shannon's commitment to Cape Breton. I do not know if it could be described as a labour of love or not. I say that because at one time Mr. Shannon was being paid $1 per year. I do not know if you are still getting $1 a year, Mr. Shannon, or if they have reduced that.

Mr. Shannon, you mentioned that over the 33 years that Devco has been in existence $1.7 billion has been put into the corporation from the federal government. You also mentioned that $1.4 billion is committed for pensions, ongoing. I do not know if you mentioned a figure in this regard, but you talked about environmental liabilities. What is that estimate at the present time? Do you have any idea?

Mr. Shannon: Yes.

Senator Graham: Can you tell us?

Mr. Shannon: Yes. The estimate on our books is $110 million.

Senator Graham: I want to make a point about potential buyers before I get to another question, Madam Chair. While $1.7 billion of federal money has gone into the corporation over 33 years, I wonder where Cape Breton would have been without Devco. I wonder what the standard of living would have been for the people of that area over three decades. I wonder how much money was generated over and above that $1.7 billion into the communities that depend upon Devco. That is a very important point for our colleagues around the table to understand.

I have a question concerning the potential buyers. The minister mentioned that 60 potential buyers were invited to make submissions. Can you tell us how many made the short list? Can you indicate why the board selected the company that is currently negotiating with Devco over other potential buyers? I know you will probably say it was for sound business principles. In addition to the highest price, is the board looking for a company that intends to make a long-term commitment to Cape Breton? Can you tell us if the potential buyer with whom you are currently negotiating intends to invest in the mining industry in Cape Breton? In your opinion, is there any realistic chance that the Donkin coal reserve can be developed?

Mr. Shannon: There were four to start with. One outfit wanted government assistance. One outfit wanted exclusivity.

Senator Murray: What is exclusivity?

Mr. Shannon: They wanted us to negotiate with them only and no one else. They were quickly set aside. We then got down to two. We interviewed them and talked to them. We looked at their proposals and did an evaluation with regard to the experience, the financial depth of the company and their initial investment. I am trying to figure out how far I can go without getting myself into more trouble here. Those are some of the things we looked at.

Senator Graham: What about coal mining expertise?

Mr. Shannon: Yes, experience. We continued to have to have discussions with both those companies. We then zeroed in on one company to negotiate with. What was your next question, senator?

Senator Graham: It had to do with Donkin.

Mr. Shannon: My view is that of a truck driver. When Senator Murray was in the government in the late 1980s and the 1990s and my good friend Sinclair Stevens was the minister responsible for Devco, we spent a significant amount of time dealing on the Donkin issue, to the point where he gave us some extra money to finish the second tunnel.

After that, I got out of the corporation and the federal government at the time did not invest in Donkin, even though the tunnels were there and Sinclair Sevens had given us I think $11 million or $12 million to finish the second tunnel. The second tunnel was stopped. The previous government obviously did not see fit to invest in Donkin the $400 million that we were looking for to do that.

The present government has said repeatedly that it would not invest money in Donkin. The federal government commissioned the Boyd study in 1995, and that study recommended not going near Donkin because it was not feasible.

As part of our negotiations with Donkin Resources, they had to establish a value of the asset. They selected John T. Boyd to give them a value of the asset and a method of payment for that asset if and when the project ever got going. Even Donkin Resources hired John T. Boyd for that information. In that report, they indicated that they did not think it was feasible to open Donkin mine.

Senator Graham: When was that?

Mr. Shannon: That was a couple of years ago.

Mr. Buchanan: In 1998 or late 1997.

Senator Murray: I do not wish to be bogged down on the Donkin issue any longer than I have to, but in view of what you said, I presume it is irrelevant whether Donkin is part of the package that is sold to the private purchaser.

Mr. Shannon: Not everyone would agree with my opinion on Donkin.

Senator Murray: Are you listing Donkin as one of the assets you have for sale?

Mr. Shannon: Donkin was listed.

Senator Murray: Are you putting a positive gloss on Donkin when you speak to the buyer?

Mr. Shannon: No, the buyers are the buyers. The Donkin mine is an asset that is available for sale. If someone wants to buy it, they may, just as we are negotiating right now with Donkin Resources.

Senator Murray: Oh, you are?

Mr. Shannon: They believe they can get it going. We have a meeting on Thursday with Donkin Resources. If they can get it going, so be it.

Senator Murray: There are parallel negotiations going on. You are negotiating with the putative private sector buyer of the Devco assets, and at the same time you have specific negotiations going on with Donkin Resources with regard to the Donkin mine?

Mr. Shannon: Not really.

Senator Murray: Is that not what you just told us?

Mr. Shannon: Not really, we are negotiating with Donkin Resources for the sale of the Donkin mine at the present time.

Senator Murray: Sure, and at the same time you are negotiating the sale of the other Devco assets with whomever.

Mr. Shannon: That is correct.

Senator Murray: I wanted that clear. The Donkin mine is not necessarily part of the package that you are offering to the unknown, unmentionable.

Mr. Shannon: No.

Senator Murray: The minister suggested I should ask you about the process.

Senator Taylor: I wish to ask a supplemental question. Is there any kind of legal action as to who actually owns Donkin?

Mr. Shannon: Yes, sir. There is a legal action, but it is not in regard to the ownership. The owner is the Cape Breton Development Corporation, which is owned by the Government of Canada. The legal action involves a long answer.

The Chairman: Make it short.

Mr. Shannon: It will be like one of Senator Buchanan's questions.

Senator Taylor: I am interested in the resource that would be sold subject to this action.

Senator Murray: Donkin Resources are plaintiffs, are they not? They are suing the government, are they not?

Mr. Shannon: Yes. Donkin Resources is under the impression that they had an exclusive right to negotiate for the sale of the Donkin assets. The corporation included the Donkin assets in the package that was called for proposals. They issued an injunction. The injunction has been stayed while we have some negotiations to see if we can resolve the issue. That is what is going on. There is a legal action, but we are trying to negotiate a settlement before everyone gets carried away with too many lawyers.

Senator Murray: I am interested to know who was involved in discussions with the prospective buyer. Obviously, Nesbitt Burns is your agent. When you were giving the narrative to Senator Graham a few minutes ago you used the word "we." I therefore take it that this is very much a hands-on operation. As chairman of Devco, you along with members of your management team are involved in these discussions with the prospective buyer. Are members from the federal public service from one department or another involved in those discussions also?

Mr. Shannon: First, there is Nesbitt Burns, who is the advisor to the corporation. A project working group was also established.

Mr. Buchanan: The project working group has representatives on it. Nesbitt Burns obviously has people involved in it. The corporation has management people involved as well as legal counsel, and the Department of Natural Resources and the Department of Finance have representatives as well.

Senator Murray: Do they monitor, oversee and give direction to the negotiators?

Mr. Buchanan: They are involved in various aspects of the process, I would say.

Senator Murray: Is the Province of Nova Scotia involved at all, Mr. Shannon?

Mr. Shannon: No, sir.

Senator Murray: They are out of it completely.

There have been discussions, so the House of Commons committee was told, between Nova Scotia Power and the prospective purchaser.

Mr. Shannon: Senator, we have taken a three-pronged approach to the negotiations. The acquiring company has a responsibility to negotiate a contract with the Nova Scotia Power Corporation. Some people continue to believe that the acquiring companies are only after the largest asset, which is the contract between the Nova Scotia Power Corporation and the Cape Breton Development Corporation. That is not a valuable asset.

Senator Murray: Must it be renegotiated by the acquiring company?

Mr. Shannon: No, the acquiring company must negotiate their own contract with Nova Scotia Power. That is between them and the Nova Scotia Power Corporation.

Senator Murray: Just a minute now. Would you follow through on that? The contract that you have now with Nova Scotia Power will cease to exist, you are telling me, when the new company takes over?

Mr. Shannon: Yes. There is not agreement on that, yet.

Senator Murray: There is no agreement with whom?

Mr. Shannon: There is no agreement between Devco and the Nova Scotia Power Corporation on whether that contract will stay in place. We will not be assigning, selling or transferring our agreement with Nova Scotia Power to any purchaser. They have to negotiate their own contract. That is one phase of the negotiations. The second phase of the negotiations is between the corporation, Nesbitt Burns and the potential buyer, and that is to negotiate the commercial issues. The third part of the negotiations will be with the unions and the employees of the company through the collective bargaining process. Those three things will have to come together before there will be a deal.

Senator Murray: Those last words are important: "before there will be a deal." I heard the minister say that discussions between the unions and the prospective buyer will take place before any deal is sealed. This is some hedge for us.

Mr. Shannon: I do not think any purchaser will buy the assets and close the deal without a collective agreement with the employees. That will not happen.

Senator Murray: You said that one company that you eliminated from the running was looking for government assistance. I take it that there is no interest, on the part of the one prospective purchaser with whom you are dealing, in government incentive programs, tax arrangements or anything of the kind?

Mr. Shannon: No, sir.

Senator Murray: What do commercial aspects include, in a general way? To be more specific, the minister began by talking about a significant number of jobs, a range of up to 500, which later, in discussion with Senator Buchanan, became a minimum of 500. He said that he wants a deal where the private sector buyer specifies a number of jobs, a fair and reasonable deal for the transferred employees, and so on. Are those part of the commercial considerations that are under negotiation?

Mr. Shannon: One of the objectives is to get as many jobs as possible in the coal mining industry.

Senator Murray: Is that part of the commercial aspects that are being negotiated?

Mr. Shannon: Yes. We cannot extract from the acquiring company guarantees on numbers of jobs. They have to be commercially viable in order to make the project work and maintain a coal mining industry in Cape Breton.

Senator Murray: It is not in the nature of negotiations to dictate to the other party, but, in terms of extracting a guarantee from them, the minister has made clear that the deal he wants is one in which the private sector buyer will specify the number of jobs. The minister's view is that that number should be a minimum of 500. Is that a deal breaker in the negotiations?

Mr. Shannon: Our business plan calls for 500 jobs to make the project work. We now have 630 to 650 jobs on the books. A revised business plan would call for about 500 employees.

Senator Murray: What will happen if you cannot make a deal with a prospective buyer that you can recommend to cabinet or that cabinet will accept?

Mr. Shannon: We would have to deal with that. However, we are confident that we will be able to make a deal. The other company has not gone away.

Senator Murray: Is the other party in a position to impose a deal on you? Who has the advantage in this negotiation? Are you so anxious for a deal that you will have to deal on their terms?

Mr. Shannon: No. We want a deal that will ensure that the industry will survive in a safe and prudent manner, that will employ Cape Bretoners, that will be well financed, that will be there for the long haul, and that will not be coming back to the government in six months looking for a subsidy.

I should like to clarify something I said a moment ago in response to Senator Buchanan. I made reference to a company owned by friends of his, or something to that effect. I did not mean to imply that he was representing them here or lobbying on their behalf.

Senator Christensen: Our mandate is to study Bill C-11. Would you care to comment on the bill as it impacts on the negotiations that you are engaged in?

Mr. Shannon: I cannot comment in any meaningful way on the proposed legislation itself, other than to say that in order for us to continue negotiations with the acquiring company we must be able to demonstrate to the potential buyer that we have the authority to sell the assets. We currently do not have that authority. The company is investing a lot of money in due diligence. When they learned that it was contingent on passage of a bill through the Senate, they became somewhat cautious. They are familiar with the Senate process in the United States, which is much more complicated and gruesome than the process here.

It is very important to us to be able to continue the negotiations, and in order to do that we must demonstrate that we have the authority to sell the assets, and in order to be able to sell the assets we need Bill C-11.

Senator Banks: It is my understanding that, in most cases in the past when the Government of Canada has divested itself of a business enterprise, it has not been the assets that have been sold but the company. Since in this case we are talking about continuance of agreements, succession agreements, continuing obligation and continuing exposure of one kind or another that will go along with the package, whenever that package is sold, stepping back, why was the decision made to sell the assets rather than to sell the corporation?

Second, deriving out of that, you are talking about the Donkin reserves, to the face of which two tunnels have been driven. I am assuming that they were driven there because there is some coal there and those tunnels are now at a coal face.

Mr. Shannon: Yes.

Senator Banks: If Donkin Resources were to succeed and end up buying that resource or that access to that resource, which would remove that resource from the package being offered to the American company, would that clear the deal?

Mr. Shannon: No.

Senator Banks: So the American company does not care whether they get the Donkin mine?

Mr. Shannon: I cannot fully honestly answer that question, but I can say that we could probably arrange an accommodation, if I could put it that way. It would not kill the deal, but it is important to the acquiring company and it is also important for Donkin Resources. There would be in the negotiations some accommodation. That is about as far as I can go now.

Senator Banks: In some sense, then, the Americans are considering access to that Donkin coal face as being valuable?

Mr. Shannon: Sure.

Senator Banks: Why do you not sell the company? If I were a buyer, I would rather buy the company.

Mr. Shannon: I can assure you that if you knew the liabilities that exist in the Cape Breton Development Corporation you would not want to buy the shares of the company.

Senator Banks: If the seller is going to take the loss anyway, the seller can take the loss and then sell the company, including its assets. It can do it either way. It can take it in front or take it afterwards. We are going to eat those losses anyway; am I right?

Mr. Shannon: Yes, but it is hard to qualify environmental, mining and pension liabilities. The risks would be pretty high.

Senator Banks: I agree, but we will eat those anyway. One way or another we will indemnify the new buyer against those costs, because no buyer will buy a pig in the poke. Some things do succeed the new operators. The new operators will acquire, assuming they negotiate a supply deal with Nova Scotia Power, an ongoing responsibility as far as the ecological cost is concerned. Somehow or another, the Canadian government will end up with an indemnification here, writing it off or whatever it is called. Why do we not sell the company?

Mr. Shannon: I could never figure out or understand why anyone would want to buy the company when they can just buy the assets and take them at market value and start a depreciating point at that level rather than buy the shares.

There are no tax advantages to buying the company. You cannot take any of the loss. If we could sell the losses, it would be great. We would have millions and millions of dollars' worth of value to sell the losses. However, we cannot sell the losses.

Senator Banks: Would it make it attractive if you were to do that?

Mr. Shannon: No. I think the cleanest, easiest way to deal with the issue is just to sell the assets. The government can keep the corporation with all its liabilities and try to manage those liabilities to get the Canadian taxpayers out from under them as quickly as we can.

Senator Boudreau: As I am not a member of this committee, I hesitated to take up the time of the minister, but since this witness says he will stay here until seven in the morning, I feel a little more comfortable to do that.

I think I know the answer to my question, but since we have the right people here, I will ask it. The situation with respect to workers' compensation is unique in the Cape Breton Development Corporation because that liability is taken on directly by the corporation. It is not an insurance fund into which you pay. These are liabilities that you, over the years, have taken on directly. Could you give me an idea of what those liabilities currently are annually? Will the federal government continue to carry that liability forward and in fact guarantee that, as long as those liabilities are there, people on workers' compensation from Cape Breton Development Corporation will get their cheques?

Mr. Shannon: At the corporation we are self-funded with respect to workers' compensation. When there is a claim, the claimant would go to the Workers' Compensation Board of Nova Scotia, which is operated at the provincial level. They would be assessed and assigned and taken care of. We would pay the bill plus an administration fee of 15 per cent of the cost of that work. That is the way it works.

We have a liability on our books now of $148 million that we identified on our financial statement last year. There is absolutely no question but that it is a liability and a responsibility and a commitment made by Devco. The shareholder, the Government of Canada, has the responsibility to honour that commitment for as long as it lasts. Anyone who has a pension claim through workers' compensation will get their money as long as the Government of Canada is in business.

Senator Kenny: I should like to return to Senator Christensen's question. Could you explain to the committee again why it is important to have this bill?

Mr. Shannon: From my point of view, in order for us to continue to negotiate with the potential buyer we must be able to convince them that we have the authority to sell the company. They are investing a substantial amount of money for the due diligence process and they have spent a lot of money already. They want to make sure that we have the authority to sell the company. In order for us to get the authority to sell the company, we need this bill passed.

Senator Kenny: Will delays in the bill cost you money?

Mr. Shannon: Delays in the bill would cost us money, yes, sir.

Senator Kenny: Starting today?

Mr. Shannon: Yes, sir.

Senator Kenny: What impact would an amendment to the bill have?

Mr. Shannon: I have no idea.

Senator Kenny: But you want the bill unamended?

Mr. Shannon: Like I said, I do not understand all the issues in the bill. I do not know which amendments you are referring to. From our point of view, we need this legislation passed in order to have the authority to continue to sell the assets of the corporation.

The Chairman: I have a question that I wanted to address to the minister, but since he had no time, I will ask you.

The book Frederick Street, with which I am sure you are familiar -- it concerns the tar ponds -- says that the Sydney Steel Corporation sold Devco the coke ovens in the late 1960s for so much money and the commitment was to furnish Sysco with bargain basement coke prices for five years. Devco went back to using 75 per cent Cape Breton coal. The poorer quality coal produced a tarry sludge that routinely ran from the ovens to the ground and was drained by surface water into creeks that flowed to the estuary that became the tar ponds. Devco did not attempt to use the by-products as its predecessor had. It turned away U.S. investors who wanted to make commercial by-products from the coke oven waste. The Devco ovens also exceeded air pollution standards. I should like your opinion as to the accuracy of this.

My question is what will Devco's current liability be for the rail bed cleanup, because the rail bed was left and that is where the orange ooze came from, for the resident relocation and for the health problems related to the contamination of private property. What will become of its legal obligations under Bill C-11, because subclause 3(1) provides for suing the Crown for an obligation or a liability incurred by the corporation in closing out it affairs. If you do not have the answers, we will write to the minister as well, but I wanted to put it on the record.

Mr. Shannon: Is that out of a novel?

The Chairman: It is not a novel. It is an attempt to portray the history of the tar ponds.

Mr. Shannon: It is an attempt to write the history of the tar ponds?

The Chairman: Right, and to examine the whole issue around the tar ponds.

Mr. Shannon: I have difficulty accounting for the period that I have been involved in Devco, and I cannot go back that far and tell you the story. I do not know. I do not know what the Frederick Street story is, or the tar pond story or the coke oven story or the steel plant story, and all that stuff. I do not know anything about all that. However, I can tell you that if there are liabilities that are associated with the responsibilities of the Cape Breton Development Corporation, they will be met by the corporation and then, if it goes away, they will be met by the federal government. That is all I can tell you. With respect to the history or the book that you are quoting from there, I cannot tell you whether it is true or false.

The Chairman: Yes, but you do know of the existence of the tar ponds.

Mr. Shannon: Oh, yes.

The Chairman: And what it means to people, so it is not a novel. I want to point out to you that what the tar ponds have done to some of the people on Frederick Street is not a novel. I am sure you agree with that.

Mr. Shannon: Everyone has a different opinion on the tar ponds. Your opinion might not be the same as Senator Buchanan's, and his opinion might not be the same as mine.

The Chairman: Quite right, but there might be an objective, factual account.

Mr. Shannon: There has been so much confusion around the tar ponds and a great deal of government money spent with very little done. Everyone in Cape Breton has a view on the tar ponds with the "right" solution to cleaning it up.

Senator Murray: On the issue of environmental liabilities, let me say I have read through -- quickly, I must admit -- the assessment that John T. Boyd made of your environmental liabilities. I also saw a document from the Department of Natural Resources. These are all public documents. My recollection is that they set the figure for liabilities or to clean it up at $167 million. I do not know whether that figure is comparable to the $110 million on the books that Mr. Merrill Buchanan was talking about. Perhaps that is not an important point. However, they did say that the $167 million dollar figure was very conservative and on the basis of limited information. They were talking about 100 abandoned pits. Senator Graham could probably take you around and maybe not find another 100, but there are a lot of them, and you know that.

Mr. Shannon: We filled a lot of them in when we were strip mining.

Senator Murray: It is a big number by anyone's reckoning of what it will take. This is a liability that the federal Crown has on its hands now. Subject to correction, I do not think that the Sydney tar ponds were included in that inventory of your liabilities. I presume it is assumed that they are the liability of someone else, but I do not know whom, perhaps the Nova Scotia government?

Mr. Shannon: They are a taxpayers' liability.

Senator Murray: I have not asked the question -- and I certainly would not press it now -- but why can you not identify the prospective purchaser? It seems to be an open secret. There is a name of a company being talked about everywhere, perhaps even in the media.What is the reason for not wanting to identify it?

Mr. Shannon: Senator, you are experienced enough on commercial issues to understand, and this is a commercial deal. This is a company that has shareholders, and they have signed a confidentiality agreement with Nesbitt Burns. People take that kind of signature very seriously.

Senator Murray: It is not a publicly traded company, is it? You do not have to identify it if you do not want to, but are these people in the mining business?

The Chairman: This is like playing 20 questions. The subject is minerals.

Senator Murray: You do not think you can tell us if they have any experience in coal mining?

Mr. Shannon: We have had a good discussion about the potential buyer and the terms of reference under which the short list was made and how we are moving forward. I think we have given you a fair amount of information. This is a commercial transaction, and there are guidelines that must be followed. We will try to stay within those guidelines.

Senator Murray: That is fine. I encourage you to go right ahead and make as good a deal as you can, as quickly as you can, and then Parliament will decide whether or not it wants to pass the bill. That is how I would leave it.

Senator Buchanan: I have a supplementary on the comment about the old mines around Glace Bay, in particular. We drilled 25 drill holes before we found a site suitable for the new Glace Bay General Hospital. Under every one of the sites we drilled, there was an abandoned coal mine.

Senator Kenny: I am confused. I heard Senator Murray say he is encouraging Mr. Shannon to go ahead and complete the deal and then Parliament would decide after that. Is that an oxymoron? Can you go ahead with that deal without the legislation?

Mr. Shannon: No.

Senator Kenny: So that what has just been suggested is a non-starter; is that correct?

Senator Murray: No. Why is it a non-starter?

Senator Kenny: Will you allow the witness to testify?

Senator Murray: Of course, but I do not want you to misinterpret my position.

Senator Kenny: Wait your turn.

The Chairman: Excuse me. Hang on. Order.

Senator Murray: My position is that the company should not dispose of these assets without parliamentary approval.

Senator Kenny: Who has the floor, Chair?

Senator Murray: That is my position.

Senator Kenny: Will you call him to order, please?

The Chairman: Senator Murray, Senator Kenny has the floor and Mr. Shannon is answering him. If you wish to have further questions, we may have five minutes, but we have other witnesses to hear from. Go ahead, quickly.

Senator Kenny: Thank you. Mr. Shannon, Senator Murray just suggested to you that you go ahead and proceed to close the deal and then Parliament will decide. Is that a possibility? Can you do that?

Mr. Shannon: Without the legislation, we cannot do that.

The Chairman: Thank you. Senator Murray, do you have a further question?

Senator Murray: I simply wish to say that Parliament should not allow the minister and the Crown corporation to dispose of these important assets as they see fit. Let us see what the terms and conditions are and then we will pass the bill.

The Chairman: That point has been made.

Mr. Shannon: The bench marks are that the sale proposal has to be approved by the board of directors of the corporation and by the Government of Canada.

Senator Murray: They are one and the same, Mr. Shannon. You are a creature and an agent of the government. It is not conceivable that one would --

The Chairman: Excuse me. We have had a full discussion. Thank you very much. We will now ask our next witness to come forward.

Welcome, Ms Budden. Thank you for coming here tonight to testify. Please proceed.

Ms Edna Budden, President, United Families: Before I proceed, I understand Mayor Muise was scheduled to appear this evening. Will the mayor be a witness later on today or tomorrow? Will he make his appearance here?

The Chairman: The mayor cannot appear but he will submit a written brief.

Ms Budden: Thank you, honourable senators, for allowing me the opportunity to speak to you this evening. I have been involved with this Devco situation for the past 17 months. It has been quite an experience, dealing with government officials and trying to come up with a plea on behalf of families who are suffering and who will suffer tremendously in the future with the devolution of Devco as it now stands and as a result of the package that has been offered to the workers.

I have provided two packets to the committee. I will skim through one of them; the other is an information package to support my comments.

The Chairman: That has been received and distributed.

Ms Budden: As you open up the package, you will see that I tried to use an Allan Rock strategy here and I have shown pictures of black lung disease and pictures of healthy lungs that are nice and clear. Many miners suffer from that condition already or will suffer from it in the future. It can take up to 10 years before a miner realizes the health repercussions, even after finishing a term of working in the mine.

Once passed, Bill C-11 will take away the government's responsibility for the Devco workers and also for Cape Breton. We all know that Cape Breton has a severely depressed economy from which we will not recover in the near future. It is of critical importance that the Senate of Canada look at the passage of this bill and the serious repercussions that will be suffered by the families and the communities once the government rids itself of its responsibilities.

I did have in here an item on the public service plan. I asked the government to evaluate possibly putting Devco workers into that plan. I was given a commitment that actuaries would be provided and that that work would be done by the offices of Deputy Prime Minister Herb Gray, Minister Paul Martin and Minister Goodale.

Subsequently, after going through the arbitration briefing, I realized that that option had not been put forward by the joint planning committee. I notified Minister Goodale and received a letter back from him on June 19. He said that, because this matter was subject to an arbitrator's decision, which is final and binding, the government would not interfere and, consequently, the analysis of any other proposals had been overtaken by subsequent events.

I will move on but I wanted to let the committee know where that matter stands.

On Friday past, I started a task that took me a day and a half. I took the Devco workforce list and I went through it employee by employee. I scratched off each worker who would have qualified for early retirement in the previous package of January 28 and also those with 25 years' service as per the most recent arbitration decision by Mr. Outhouse. That plan provides a prorated pension, so a minor of, say, 43 years will get $230 a week and there certainly are no spousal benefits until age 65.

I did an age breakdown. I could not account for anyone who may have died or taken compassionate leave or severance, but I came up with a figure of 916. That is close to what they are saying of 900 people.

I noticed that 492 of those employees are between the ages of 45 and 57. That is what is left out of the 900. I zero in on that because, if I go through the arbitration briefing, in item number 38 on page 22, Mr. Outhouse states that in fashioning the adjustment program the bleak economic situation in Cape Breton must be considered because displaced miners will have difficulty finding suitable alternate employment. He says the great majority of Devco employees are over 45 years of age and many of them do not have readily transferable job skills.

That is an important thing to note. Obviously, I have great respect for Mr. Outhouse. I have heard some good things about him tonight. I am thankful that he did come forward at least with a 25-year ERIP, but I could almost compare the plan to an onion. Mr. Outhouse addressed the top layer. We still have 492 employees over 45 years of age who, as Mr. Outhouse indicates, will have a hard time finding work.

We are still left with most of the onion and we all know what onions do -- they make you cry. We have shed many tears in Cape Breton since the government announced that it will withdraw from the coal industry and many tears over the manner in which it is being done.

Many more tears will be shed in the future. People are suffering. People are stressed. There has been a tremendous amount of stress over the past 17 months. There is no clarity. We have no clear indication on the privatization aspects. Who is the buyer? What guarantees will they give toward a long-term coal industry? What will be their policy toward older workers? Will they want these broken-down coal miners who are over 45 years of age? Mr. Outhouse seems to think there is a problem for these workers to find work in Cape Breton. Those are important questions for us.

I also did a job search analysis through the HRDC job bank on the Internet. I did a general search first to see how many jobs were available. I found there were 13 jobs in the Sydney area, 5 in Port Hawkesbury and 115 jobs in Halifax-Dartmouth. I did a more detailed search across Canada, particularly in the mining area. I found there were six jobs posted, two of which were in Saskatoon and paid $6.50 an hour.

I sat here this evening and listened to Mr. Shannon and Minister Goodale. I could not help but feel the uncertainty. There are no answers. No one, at this point in time, can guarantee 500 jobs in the coal industry in Cape Breton.

The last 17 months have been very difficult. We have been trying to get government to realize the seriousness of the situation, to know what this is doing to the people and the families who are the ultimate victims here.

I am amazed at the figures that Mr. Outhouse mentions. Providing ERIP for 20 to 25 years of service would cost approximately $79 million. I reflect that $80 million was put into Donkin mine and then the tunnels were flooded. Here we are, talking about families and children and their security, and we are not worth the amount paid to flood Donkin mine. That is a very sad thing.

Throughout the arbitration, the issue to pay seemed to be a contention with Mr. Outhouse. I wondered, if he had not had to contend with that, would he have made a much more generous ruling in his arbitration decision? If you take what was given to Devco workers and compare it to other Crown-owned corporations like CN and Marine Atlantic, you will see that we certainly come up on the short end of the stick.

Mr. Outhouse indicates that it is worth emphasizing the context that most of the employees with between 20 and 25 years of service are not facing the prospect of becoming unemployed, at least not in the near term. That does not give me any comfort, nor does it give any comfort to the Devco families. There is plenty of room to question if these people could be facing unemployment under private industry in the future.

In reality, we are talking about miners who have worked and have given the best part of their lives to the coal industry in Canada, and who have health problems. Many of them have low education levels. The people who do have trades are not readily transferable because they have trades geared specifically to the mining industry.

We are left with many older workers who are headed to the welfare line. If you look at the severance and the enhanced severance, you must remember that it is geared to the number of years of service. The amount received depends on how long a person has worked. Last year, $70,000 was a figure that was used. At that time I did a breakdown on that figure. I came up immediately with a figure of over $24,000 going back to the government in taxes.

It must also be remembered that the employees lose their unemployment benefits. Therefore, if you were paid over an 80-week time span, employment insurance will only extend your benefits for 104 weeks. You must wait 80 weeks before you can collect employment insurance. At the end of that 80 weeks, you have 24 weeks of employment benefits, a two-week waiting period, and you are left with 22 weeks of employment benefits.

How will those people live? I am talking about average people here who struggle pay-day to pay-day, week to week, who cannot afford to say, "I am taking that severance and I will invest it." They must survive, and in a year or a year and a half they will be on the welfare line, or maybe before then. We just had a case where a man had a sit-in for four hours because his severance money was gone and his family was hungry.

I take great objection to the fact that throughout that arbitration -- and I feel that I have a right to speak on this because I am affected as well as so many other women and children -- it was mentioned that Devco should not be considered like other Crown corporations because their business was not the same; their business should be compared to other mining companies. My answer to that is this: In the 1980s when the wage freezes came in, we suffered the wage freezes. We were government employees then. We suffered and we cut corners. Why are we being looked at differently now? I take exception to that.

The big problem is that we have no clear picture. We have a 404-enhanced severance list. We have had miners sleeping in sleeping bags, in cars, trying to get in and scramble to get their name on the list because they know there are no guarantees in privatization. We have had miners break down crying in the parking lot at Devco because they did not make the 404 number. That is very sad to see happening. I believe it could have been done much better.

I have submitted a letter as evidence. On March 24, 1997, when Mr. David Dingwall was Minister of Health, Devco recorded a loss for 1995-96 of $207 million in liabilities and environmental clean-up projects. Mr. Dingwall had that liability recorded on the public accounts of Canada. The letter goes on to say that the recording of the liabilities on the government's books does certify that pensions for Devco workers are secure. I should like to ask where that money is and what happened to the certifications about pensions for Devco workers being secure?

All Devco employees deserve to be treated equally and they should not be divided up into 404-enhanced severance and be told that they own jobs so they do not deserve that. Look at private industry. This is what is happening. According to what I see, people are told to take their chances and at the end of that time they will probably get a 26-week severance. Many wrongs are being done there.

There were many questions in reference to Donkin mine. You will find a full report that was done on that mine in 1983. It was prior to the opening of the Phalen mine. You will also see the 1996 Boyd report, which refers to possible geological problems with Prince. Miners certainly question whether Prince will last any more than two years.

The Boyd report said that there is little likelihood that Donkin could be developed. However, the report that was done by the Cape Breton Development Corporation in 1993 was a plan that held great expectation for a profitable and viable coal industry at Donkin. It is worth taking time to go through that and realize there is a potential of 1.5 billion tonnes of coal in Donkin mine, with seams of coal as long as 10 to 12 feet. Whoever buys the assets and gets Donkin mine will have a gold mine because two tunnels are already driven and, as they are driving their levels and whatnot, they will be taking coal out and immediately receiving almost 100 per cent profit.

There is another matter that I am concerned about, particularly since the mayor will not appear. I had hoped that he would be here to speak on the bill. What guarantees are contained in Bill C-11 for the residents in the municipality for subsidence? Subsidence is from the ground not being completely mined; when a pit is abandoned and fills with water, the ground sinks. We have had big holes created. In fact, we have had holes right in the middle of a highway. Will the government of Canada be responsible for fixing that? Who will repair that problem? That is something that should be reviewed by this committee.

Basically, I am not happy with the way things have gone. I am not happy that there are so many older workers still left hanging out there. I do not know whether this bill will be passed. I wish it would not be passed, but, at the same time, I can understand the sale process.

I am asking this committee to consider the following: There are 492 Devco workers between the ages of 45 and 57. I ask this committee to recognize that fact and what Mr. Outhouse had to say about the difficulty of their finding employment and to look beyond the legal arbitration decision at the moral and social aspects. Do something to support a revision to grant ERIPs to the workers that fall into this category. Compassionate disabilities were used in the past. That was used as a downsizing tool and possibly could be looked at if the policy were not so strict.

I am here before the Senate as my last hope after a tremendous battle of 17 months -- a battle that was done for the right reasons. It was done from the heart, it was done for families, and it was done to prevent suffering. I am not happy with the way the Devco workers and their families are being treated. I am giving you my last plea, in the hope that this Senate committee will do what is right morally and socially by the Devco workers and their families and by Cape Breton. The Cape Breton economy is severely depressed. We will suffer tremendously. Hundreds of thousands of people will suffer with the dissolution of Devco. We need more answers and a clearer indication on this situation.

Senator Graham: I wish to begin by commenting on the tenacity and determination of Mrs. Budden. She has been involved in this file from the very beginning. I do not know how many trips she has made to Ottawa. She has knocked on every door, I am sure, of everyone sitting around this table. She has met with the Prime Minister and various other members of cabinet, including my colleague, Senator Boudreau, the Leader of the Government in the Senate. Through all of this, she has been the conscience of Cape Breton through a difficult period. As she said, she is fighting right to the end. She is a very determined individual and a credit to the community. I congratulate her for all her hard work.

Ms Budden: Thank you, senator.

Senator Graham: Hardly a week goes by in which I have not talked with Mrs. Budden three or four times.

You talked about coming up short with respect to the arrangements for Devco workers compared with CN and Marine Atlantic, and you demonstrated some exhaustive research in the material that you passed out. Did your research reveal, for a comparative purpose, whether CN and Marine Atlantic workers were operating under a collective agreement that provided for that eventuality? Second, were the employees of CN and Marine Atlantic involved in a contributory pension plan?

Ms Budden: I believe those in Marine Atlantic had a special agreement. From what I know, employees of both companies were involved in paying into a pension plan and were bridged. I recognize that we are in a different situation in that respect. They talked about the pensions before -- and I will look every senator in the face here as I say this. They talked about the promotion of this contributory pension. I found out about it approximately three years ago. Do you know where I found out about it? From my uncle at his kitchen table. I went home and told my husband and explained it all to him and he went down and signed up for it. I think there should have been a mandatory pension plan.

Senator Graham: That was three years ago, Mrs. Budden, was it?

Ms Budden: Yes, approximately. I think there should have been a mandatory pension plan. Obviously, it was not done. It is a bit too late now. I believe it should have been made mandatory for everyone in 1982. That was not done. The ones that did come on after 1982 are in a little better position than we are.

Today we are paying the price because we did not have a mandatory pension plan. I do not think there is any one person at whom you can point a finger in that respect. It may be a lack of communication, vision, or whatever. I would not point a finger at anyone in particular with regard to that. I did include in my evidence copies of both the CN contract and the Marine Atlantic contract. Perhaps you could have your researchers go through it in more detail.

Senator Buchanan: I wish to repeat more or less what Senator Graham said. You are probably one of the most tenacious people I have ever met in my life.

Ms Budden: My husband knows it, too.

Senator Buchanan: Being a Glace Bay Cape Bretoner no one would expect anything less than that.

Over the years, I have spoken to you on many occasions. As Senator Graham said, you have probably spoken to just about everyone around this table. You have a viewpoint that you have put forward consistently. The senator and I were talking about you a while ago. You are probably one of the best researchers I have ever heard of. When you get hold of a problem, you have it researched. You have done exceptionally good research on this.

Ms Budden: Thank you.

Senator Buchanan: Senator Murray and I were saying earlier tonight that you have done a superb job of putting forward not your viewpoint but the viewpoint of all the families affected by the Devco closures, in particular the last ones who are left of 900 or some. There is no doubt that you are right when you talked about many of these men not being eligible for the severance but being eligible for the job. It is that uncertainty that has driven them to the Devco office to look for the severance.

Ms Budden: That is right.

Senator Buchanan: There have been criticisms of that. People have said to me, "They are eligible for severance or eligible for jobs. Why are they looking for severance?" You pointed that out. The reason is the uncertainty of future, whether there will be a job for them, and if there is no job they will be out severance anyway because it will be gone.

Ms Budden: That is right.

Senator Buchanan: I am certainly interested in your CN and Marine Atlantic comparisons. I do not know the details of all of that, but you are probably quite correct in many of the comparisons you make. What you are simply saying is that the Devco workers who are left should be treated with the same kind of fairness and equity as the workers of CN and Marine Atlantic.

Ms Budden: That is right.

Senator Buchanan: Let me ask you one question. If a new coal mine were opened in Cape Breton, are the men you are speaking about ready, willing and able to go to work in that new coal mine?

Ms Budden: I would say the ones under age 45 would be. They certainly want to work. After reviewing that report on the Donkin mine, I cannot help but think that somewhere down the road you will see that mine being operated. I do not know by whom, but it will not take the numbers that we have with Devco. Mr. Farrell cited 120. We all know that private industry is profit driven. They want to get out as much coal for the least amount of manpower and pay out the least amount of money. That is why they have a profitable coal industry. What they will have is multi-tasking, and so on, that we do not have within Devco. If you are an electrician, you are an electrician. If you are a mechanic, you are a mechanic. Yes, there are a lot of men, particularly under age 45, who would be anxious to work.

I will give you an example. My husband is 47. He has been off sick since last August. Actually, he is out of medical benefits now. He has no medical benefits left. He has exhausted his employment insurance. I will be quite honest with you, he is in a severe depression over this whole thing. It has been very tough to cope with that. He did not apply for compassionate disability. Nor did he apply for anything else. I kept hoping in my heart that they would cop up with a bridge program because he is 47. That was before Mr. Outhouse came up with the 25 years of service.

Senator Graham: And he is 47.

Ms Budden: He is 47 and has 22 years. I kept hoping they would come up with some sort of a program. At that time, it was age 50 plus 75 points. I thought that perhaps, in spite of the stress caused by the uncertainty, he could force himself to get through that time period and come out with a full ERIP. Even with compassionate disability, if you do not have 75 points you do not get the full pension. You are looking at about $1,200 per month. If you get the Canada pension, it is deducted off that amount. So Devco ends up paying you only $400. After taxes, that is not a lot of money. Even with the full ERIP you would clear about $300 a week, but it is better than starving. Right now, I am in that situation.

Senator Buchanan: You are not the only family in that situation.

Ms Budden: No, we have had people who have run out of benefits. I will have to eat Kraft dinner and do whatever I have to do, because he is not ready.

These men have physical illnesses -- their lungs, their accidents, arthritis from dampness, coal dust and gases -- and mentally many of them are suffering tremendous mental stress. Stress-related illnesses are being treated by psychiatrists. What is worse than a physical illness is the emotional one. Your dignity is taken away. It would be safe to say that many of these men, even tomorrow when they are given an ERIP, after what they have been through they will be ready to collect their old age pension before they recover mentally from what they have gone through in the past 17 months. I do not think there was any need for that. I do not think it was fair.

I must speak up and say that. I have been fair and constructive. Despite being very personally and severely affected by this, I have maintained my composure. The Senate is my last resort, to step in here and do something, because I have been through them all and I have had promises that did not come through.

We sat with Minister Goodale. He specifically said he could not justify giving the 20-year service to people below the age of 40. He spoke about the $140 million HRDC money and said that he had already met with Minister Jane Stewart and would meet with her again and that he wanted this situation resolved quickly. We left that meeting with hope, and what do you do? You give it to people when you come home. You are scared to raise people's hopes, but I felt there was a will at that time. I shared it with my husband, though, because that is part of the husband-wife relationship. That was a bad thing to do because it was even harder on him because his expectation was that this would happen, and none of it materialized.

Senator Buchanan: I just want to congratulate Ms Budden and tell her that whatever happens here, you fought the good fight. There is no question about that. I congratulate you on that.

Ms Budden: Thank you, senator.

Senator Finnerty: My heart goes out to you. Again, I have lived in a mining community and I have seen this happen. I was also married to CN management. I remember in the early days he begged the men to join the pension plan. The women, in most cases, did not know about the pension plans. Many of them chose not to.

Some of the fights that happened in our company were between the ones who paid into it all the years and the ones who did not but wanted the same benefits at the end. It was very controversial and split friendships. It was a terrible thing to witness. I suspect this is what has gone on here. I do not know for sure, but many of the Crown corporations offered the pension plans and encouraged the men to join them.

Do you know if the unions have helped in any way? Unions often encourage the men and say, "We will take care of you," and they do not in the end. I am wondering if the union has done anything for you.

Ms Budden: Perhaps when Mr. Drake speaks he will answer that question better. I was not involved with the union or with Devco as such. I was a wife who was at home and happy to get a paycheque.

Looking over the history of Devco, one of the big problems with miners is that they are easygoing. Sometimes it is not good to let someone else look after all your best interests. That has happened.

When it comes to money, women are the people who pay the bills. If the money is not there, we are the people who take the phone calls, right? We would tend to look at that more seriously and worry about that aspect. It is just like when my uncle told me about the pension plan. I went home and said, "Go do this." Husbands are used to taking orders from wives, but not from union leaders. It is really sad.

When we had the 50 plus years of service plan, we could have someone with 12 years service go out with an ERIP and someone with 24 would get nothing. Then Mr. Outhouse put in the 20-year prorated back, regardless of age. In that situation, we had problems. We had men working side-by-side where one worked 12 years, the other worked 24. One got a pension, the other did not but had the years of service.

As far as the pension plans, when you sign up for the contributory plan, your service automatically stops in that non-contributory plan. You do not gain any more service. That is a separate thing that those people own. That is their pension plan. Someone who is not in the contributory plan could not take claim to it.

It is a sad thing. Mistakes are made. The unfortunate thing with this is that it is the women and the children who will suffer. Certainly, it will be a whole lot more than just Devco; there will be the spin-off effect in other families. We do not have the economic base to withstand this.

I never said to the government, "Stay in the coal industry." We recognized and respected the fact that they were getting out. However, we did ask that they do it in a morally and socially conscious way. I do not believe that has been done to date.

We have been fair and I do not think that is much to ask, in particular when you look at the economy of Cape Breton and the fact that the unemployment rate is 20 per cent officially. It is more like 40 per cent, unofficially, because there is only a 50 per cent participation rate in the labour force. We look at the fact that we have 1,000 of our young people who leave every year between the ages of 22 and 30 because they cannot find work. We know what these men will be facing, because the work is not there. I have a son who is 21 and cannot find a job. He has put out resumés everywhere.

This is critical, senators. I cannot stress enough to you how critical it is to our families and also to industrial Cape Breton and the economy. I hope that you will keep everything that I have said in mind and, in particular, that you will focus in on the matter of age 45 and over. Mr. Outhouse recognized the problem that these men will have. There is an opening there with the arbitration. Perhaps something can be done in that respect.

Senator Taylor: I can only repeat what some of the other senators have said and congratulate you for the good fight.

The unions of Cape Breton are famous for being fairly strong and tough. They went into arbitration here and have come up with a deal, apparently, that you do not like. Did you give them the same thoughts that you are giving to us?

Ms Budden: I had no contact at all with the arbitrator or the unions. Once it became a legal issue, I stayed clear of that and hoped, like everyone else, that the arbitration process would bring about justice, which it did for 246 people. However, with no disrespect to Mr. Outhouse, there are still 492 people who cannot get employment.

Senator Taylor: In my experience, unions are very militant. I cannot understand why they agreed to a settlement that excluded so many people.

Ms Budden: I do not know what went on in the proceedings. The unions had a good and respectable lawyer. To tell you the truth, I was shocked with this arbitration decision. I thought that they would look back at least 20 years. However, arbitration is binding.

The women and the children are affected by this. If, God forbid, my husband and I ever divorced, I would be responsible for 50 per cent of our debt. I would lose 50 per cent of the value of our home. We are facing the possibility of homes being lost and marriages breaking up. Governments will ultimately incur the costs one way or another, be it through welfare, increased health care costs, or in other ways.

I cannot answer your question because I do not know what went on in the proceedings.

Senator Taylor: Thank you for appearing before us. We will be talking to the unions tomorrow and we will find out what their thinking was at that time.

Senator Murray: Honourable senators, every other day we see people massing on Parliament Hill protesting to make their point, whatever it may be. They mass here and in front of other legislatures. Sometimes it is not very pleasant or productive. I will not comment on why they find it necessary to do that.

Every other day, at various Senate committees, we hear from reasonably well financed lobby groups, advocacy groups and public policy institutes with research departments at their beck and call. We have before us tonight not a big public policy group, public lobby group or advocacy group, but only two women.

Who is your with you, Ms Budden?

Ms Budden: Bev Brown.

Senator Murray: They have to pass the hat for the air fare to come to Ottawa, as they have done many time in the last year and a half. Look at the documentation they have provided and listen to the very substantive and moving presentation that they have to make.

This is the way the system is supposed to work, is it not?

Ms Budden, you are making two recommendations, the first being that we amend the bill in two particulars. First, you want us to amend the bill to retain paragraph 17(4)(b) of the original Devco act of 33 years ago that imposed a requirement on the corporation that, before they closed down any part of it, every reasonable effort would be made to find alternative employment, and so on.

If that section were retained, how can you be sure that the 492 who are unemployed would be looked after?

Ms Budden: That is what I am asking for. I am asking for some sort of guarantee.

Senator Murray: There is no guarantee in that section. You are asking for best efforts?

Ms Budden: I am asking this Senate committee to put pressure on the Government of Canada and the Minister of Natural Resources to do something about the 492 who are left. I am asking that this bill not be passed until we are looked after.

I have just told you about the suffering that we are going through and will continue to go through. It is very serious. I am not talking about only a few people. I am talking about thousands of lives, with the spinoffs. Paragraph 17(4)(b) is about the economy of Cape Breton. We are losing our coal mines and our steel mills.

We are in a transition period that will take about 10 years. We are already severely depressed. A hole is being created in our economy that will not be filled over the short term. A coal mine with 500 jobs would improve the situation somewhat, but severance money will not do it.

Senator Murray: As I indicated when the minister and management of Devco were here, I have some problems with the process involved in this bill and the very idea of simply handing the corporation over to cabinet, Devco, and others to dispose of without coming back for parliamentary approval. However, that is another issue.

I have nothing against amending the bill. I am an opposition senator and, therefore, by definition, have a bias in favour of amending bills. Having said that, I wonder whether there might be better and more productive ways of achieving your objective, particularly with regard to the 492.

What is the significance of clause 22? I see that the government is proposing that we simply take Devco off the list of Crown corporations in the Public Service Superannuation Act. Some Devco employees are already in the Public Service Superannuation Plan. Who are they?

Ms Budden: As was indicated earlier, there are some administrative people in the union. I believe the railway workers are in that plan. You may hear more on that tomorrow from the railway union, because there is a problem with that.

I included that because I believe that when you are asking for something you must have something constructive to say. You just do not come crying, "Can you do this? Can you do that?" This public service plan I thought had tremendous potential because Devco was an eligible corporation.

Senator Murray: If you put them back into the Public Service Superannuation Plan and put Devco back on the list, that still would not automatically solve anything.

Ms Budden: No, it would not.

Senator Murray: A further decision would have to be made to include them all.

Ms Budden: But this would have done, had they put all the Devco workers into it and created a program to bridge them to the required age. It would have given miners a lifetime ERIP with spousal and medical benefits. Right now, when a miner dies, his income dies with him. The widow is left with nothing. It would have corrected many problems. That is not to say that it was the answer, but it was an option that I was given a promise would be done.

Senator Murray: Yes. They did not promise you they would do it; they promised they would study it, right?

Ms Budden: They promised they would have the actuaries cost it out.

Senator Murray: Are you saying that they did not do it or that they did do it and did not tell you?

Ms Budden: I do not know. I did not get an answer on the cost, and it was not brought forward, so the arbitration overrules it. I still did not get an answer as to whether or not this was costed.

Senator Murray: I am wondering if there is a more direct way of solving the problem. Amending the bill in the way you have suggested would provide some encouragement, but there would be a whole series of further decisions that would be required after that, assuming we were successful in amending it. I am raising the question of whether or not there is not some more direct way of dealing with it. It is something to which we can give some thought over the next couple of days.

Ms Budden: I would appreciate that. In particular, I have a great concern for the older workers. I would appreciate anything that this Senate could do. I am worried about the bill going through as it is.

Senator Murray: What if we were to focus on the 492?

Ms Budden: I am worried about them all, but if it is true that there will be a coal industry, it will be a much more downsized industry. The younger ones are healthier.

Senator Murray: The minister said tonight he is talking about 500 and up at a minimum.

Ms Budden: At Prince mine, you are looking at, maybe, 250, in a privatized industry.

Senator Murray: Miners, yes.

Ms Budden: The binding arbitration came out with the 25 years. That is something you can go on, because Mr. Outhouse came up with it. There is something substantial there with which you can fight and say, "There are still 492 in this bracket."

Senator Murray: They are the most vulnerable or unprotected?

Ms Budden: They are.

Senator Murray: The 492?

Ms Budden: Yes, because they have been in the mines a long time. They are older. They have health problems. They are at a time in their lives when they need medical benefits and that is something they are looking at not having, which they would get.

That is all I have to go on. I have researched it. That is something that the Senate could look at and, perhaps, try to work something out in that respect.

Senator Christensen: If the company is able to sell to another company and create jobs, I presume it would be critical to get those new jobs in your area?

Ms Budden: Definitely, yes.

Senator Christensen: We heard that the passing of this bill was a necessity. We still have to look into that -- namely, that this bill is critical for the sale going through.

If amendments were to take place and it was delayed, say, until September when the House comes back to deal with the amendments, that would delay the possibility of a sale and might kill the deal. Someone else would have to come in. Is that a concern?

Ms Budden: It is. When I look at things, I try to look at them fairly. I look at that and I can understand that. Certainly, that is a concern because if there is to be an ongoing coal industry, whether it is privatized or what not, we certainly want it and need it in Cape Breton. We need the work.

At the same time, something has to be done. I do not know how you can go about it. The Senate has to put pressure on the Government of Canada, in particular, to bring forth better than what came through the arbitration and use that even for those aged 45 and older. That is 492 people.

Yes, I can understand that. It puts me in an awful position because I know the dire consequences that this bill will have, but I can also look and say, "If the sale fell through, what would we have?"

Senator Christensen: You are saying perhaps to use this bill to put pressure on government to try to do the other things?

Ms Budden: Yes, to do something. Use this bill.

The Chairman: Thank you very much.

If there are no further questions, I wish to thank Mrs. Budden for coming here tonight. Thank you for your testimony.

The committee adjourned.