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Proceedings of the Special Committee of the Senate on
the Cape Breton Development Corporation (1997)

Issue 1 - Evidence - March 17 Sitting

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SYDNEY, Monday, March 17, 1997

The Special Senate Committee on the Cape Breton Development Corporation met this day at 9:30 a.m. to continue its study on the annual report, corporate plan and progress reports of the Cape Breton Development Corporation and related matters.

Senator Bill Rompkey (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we are resuming our hearings on the Cape Breton Development Corporation.

We are continuing this exercise of parliamentary scrutiny because of the continuing interest of senators, particularly the senators on this committee, in this topic.

We are not decision-makers; however, we do the power of recommendation; we have the power of public observation; and we have the power of people. The Cape Breton Development Corporation is a Crown corporation. It is owned by the taxpayers. We are here as representatives of the taxpayers.

We have also the power of a Cape Breton all-star cast. As I said at our last hearings, if this were the NHL, this would be the Cape Breton All-Star Game. There is much knowledge around this table, and we have the power of informed questioning.

We are here to assess progress, and to assess that progress against essentially two benchmarks: the benchmark of the corporate plan, and the benchmark of our own report and our own recommendations.

I will not read all of the recommendations, but I will read the ones that I believe are salient. I draw your attention first to recommendation No. 5 which reads:

The Committee recommends that the Government of Canada provide an appropriation of $41.25 million to cover half of the cost of removing the unfunded liability associated with the non-contributory pension plan and half of the cost of payments to older pre-retirement and early retirement plans.

We will focus on recommendation No. 8 this morning because we will be hearing from unions. This recommendation appears under the heading "Labour Management Relations", and it reads:

Much improvement in labour management relations at DEVCO is crucial and perhaps the most important ingredient to the future success of DEVCO. The review of DEVCO'S performance undertaken by a Senate Committee should include careful scrutiny of progress on labour management relations."

I would be remiss, and some people around the table would call me to order, if I did not refer to recommendation No. 9, under the heading "Future Mining Operations". It reads:

The corporation and the Province of Nova Scotia should immediately undertake a study to ascertain the development potential and cost of opening the Donkin Mine.

Our first witnesses today are appearing on behalf of the Canadian Union of Public Employees.

Mr. Kevin MacNeil, National Representative, Canadian Union of Public Employees: First, I wish to thank the committee for inviting us to appear again and to congratulate the committee for the report it has produced to date. It indicates to us that you have been listening. We do not believe that everyone has been listening to what we have been saying, not just within CUPE but within the labour movement generally and within the work force of the corporation, which, as you so correctly point out, is a Crown corporation and the property of the people. As people of this nation, we have an interest in this matter.

We believe you have considered our views seriously. If the corporation and the government had waited the short period of time necessary for you to complete at least your interim examination of their plan before they effectively proclaimed it, the ultimate plan might have been significantly different

I would be less than honest if I were to say that we agree with 100 per cent with all of your recommendations. For example, we would have preferred to have further discussion on the pension liability issue. You obviously understood our point of view since you recommended that the federal government should assume responsibility for at least half of that liability.

At the time of our last appearance, we said that we did not have available to us all the information in that area. The pension liability issue was delegated to CUPE, as part of the overall union group. We believe we now have all the information. Unfortunately, we had to go through the Access to Information Act to obtain that information, even though we maintain that it is public information and always should have been available.

We noted in your report that even the committee had some difficulty getting all the information it wanted. We had concerns about that then, and we still have those concerns.

The additional information that we obtained with regard to the pension issue contained no great revelation, but it would have put us in a better position to present to you a more detailed rationale for our belief that the Government of Canada owns a big portion of that debt, if not all of it. We still maintain that 100 per cent of that debt should be removed from this corporation if the intent is to make a clear determination as to whether the corporation plan is economically practical and viable. We cannot get a true picture of that with this hanging over our heads.

I do not have all the details on this, but I read in the Saturday Cape Breton Post that Mr. Dingwall, the Minister of Health, has said that the federal government wants to transfer $102 million of debt, because of the environmental aspect that this committee was concerned about, and rightly so. He was talking about moving some of that debt from the corporation's books to government books, although the corporation would still be expected to pay it. I do not think that does a whole lot for us.

The reality is that that debt was incurred because moneys due were not paid into the pension funds for unfunded liability purposes.

Mr. Dingwall says that, if anything terrible should happen to the corporation, then people could be assured that the Government of Canada would be responsible for that debt. Maybe he does not really understand and that the Government of Canada currently owns that responsibility, regardless of the success or failure of the Cape Breton Development Corporation. Those were legally-incurred debts that any other business in this country would not have been permitted to defer.

Perhaps I am becoming a bit too intense on that issue. We have been down that road previously.

I understand that you are interested in looking at where we are now, compared to where we were a year ago when this plan was first implemented.

Let me say first that, with the debt load and the potential geological problems, we had great concern and did not believe that the proposed plan could work. At that time, being rather optimistic by nature, I suggested that it would take two years to discover that it was not working. Apparently, I was too optimistic. It is my understanding that at this time, just before the end of the first year, we are approximately $25 million behind where we had anticipated we would be.

I am not here to lay blame or to fault anyone. Having checked the minutes of this committee on the Internet and having read the proceedings of the committee, which I found interesting and informative, I believe you listened and considered all the testimony. As far as I can see, you did not dismiss any issue out of hand.

One of the committee members suggested that perhaps everyone in Cape Breton should pray very, very hard because there was little or no provision in the plan to allow for the forces of nature. Unfortunately, that is true. We could foresee at that time a potential for great difficulties, particularly with regard to the Phalen Mine. We have had two serious roof falls at Phalen, which have not done anything to help us succeed with this plan. I can assure you that we did not make any money from those roof falls.

My concern now -- and this needs to be addressed -- is that, if we are $25 million behind now, even if everything were to go perfectly for the next four years, we would wind up with a $24 million profit at the end of the five-year plan; whereas, we were projecting a $49 million profit. In addition, the loss incurred this year will mean that we will be short by about $25 million to operate the corporation next year. That will snowball or compound, which does not look good for us.

Another concern is that, since year one is now just about over, at this point should we not be looking at what we are going to do in year six? I say that because this is at least the second five-year plan. As I am sure you are aware, it was only after the first five-year plan was over that we even began to consider what we would do in the next five years. I do not believe that is rational in the long term, unless we are saying that we will run for five years and then it will be over. I do not think we are saying that; we hope that will not be the case.

There should be an onus put on the board of Devco not only to tell us what has happened in the last year but also where they intend to go in year six and year seven, at the very least.

We are not out of the woods in Phalen by a long shot. We are extremely very concerned about the future operations there. What do we do in a worst-case scenario? We have no spare tire there. You will be hearing more details on this issue from Brother Drake of the UMW.

One of the committee's recommendations dealt with the relationship between the corporation and the provincial government. I have some concern there because Premier Savage said that the Province of Nova Scotia does not really have the wherewithal to do a whole lot, other than perhaps to offer some input and small scale financial assistance.

Where are we with Donkin? Certainly many studies have been done. I believe at the last set of hearings -- and I think it was referred to in the minutes -- Senator MacEachen and Senator Buchanan said that they recalled having signed the initial deals with regard to the Donkin Mine. A lot of study, a lot of drilling, a lot of money, and a lot of effort have gone into that. There is no necessity for more study. I am not saying that the situation does not have to be reviewed in light of current circumstances, but certainly another year of water has gone over the dam. I would be interested in knowing whether anything has been done in that regard because we do not have a lot of time if we have a worst-case scenario at Devco.

With regard to the labour relations side and the human relations side of the plan, we may have made some errors which could cause problems with downsizing in the future.

As everyone can appreciate, because we waited until the fifth year of one plan before we started working on the next plan, we were going through a stressful time and, therefore, I do not think all the details were adequately considered.

One of the things that we did give not think through well enough was the consequences of the planned severance program and the early retirement incentive program, which would change the demographics and lower the average age of the work force.

It is considered that younger people are more agile, work faster and better, and experience fewer injuries. That is generally true. However, we do not seem to put a lot of stock in the fact that, as we age, we also gain experience -- and I believe honourable senators would understand that. Experience is a commodity which you cannot buy. People have to attain it by living it. When you get rid of an older segment of your work force, as we have done here, you also get rid of a lot of expertise and a lot of practical experience, which are valuable commodities in any company.

While that was going out on, we did other things that I do not think were particularly productive. The corporation indicated its intent to downsize, particularly in the service areas of its operation -- in rail, in the shops, et cetera. The bean counters are very quick to tell us that this goal can be achieved much more efficiently and effectively by contracting out. That is fine, but that premise is based on some assumptions that are not necessarily correct.

We have sent a message to people that those areas will not represent growth areas or even sustained areas of this corporation. Therefore, once people retire, positions will be posted and people who have gained experience in some of these service sectors will say, "It looks like they are going to get out of this. I would like a little more security in my life than that. While it is not much of an upper and I am really not crazy about it, I think I will grab that job opportunity somewhere else because it looks more secure to me."

The vacancy ends up being filled by people who are well qualified technically but who do not have experience in that particular area. The loss of that experience will cost us dearly, I believe.

We are experiencing problems now because of this lack of experience. It is not a pretty thing. It will cause more economic problems with the plan, even if everything else operates at 100 per cent. We have to look at that issue.

I like the historic term that was applied to the old robber barons. When they created industries in Cape Breton and Nova Scotia, there were a lot of things I did not like about them, but they sure were not dumb. They did not put those infrastructures in place to support these industries without a need for them and a recognition that it was in their interest to do so.

You cannot go to Canadian Tire and buy mining equipment off the shelf, despite what all the bean counters might think. It is not that easy. It is a specialized industry; a heavy industry. We have had experience where the private sector could deliver what we needed in three, four, six or eight months, but it meant that we would have to shut down until we could get the equipment. We had to do it ourselves. We had the capacity and capability to do it ourselves. In the end, we have done it more quickly and more cheaply every time we have been given the opportunity, and that has helped us keep that industry running.

To abandon the infrastructure, which is really the support that keeps those mines operating, is not in our best interest. The rumours about downsizing and contracting out have created a situation where people with expertise are moving out of positions. Even if we maintain those positions, we will not be able to deliver as well as we have in the past.

Those are the labour relations and human relations issues that we have to consider. We have to be very careful when we tinker with people. We have to let people know very clearly what our intentions are if we expect them to stay and hang their future and their family's future on a job in the shops, at the rail centre or wherever. It is important that they know that those jobs will be there; otherwise they will accept positions for which they do not necessarily have the expertise but for which they have the seniority. That is a labour relations problem. I realize we are part of the problem, but we do not know any way to protect people other than by seniority.

I will not dwell on labour relations issues, but I will tell you that a majority of the employees has signed long-term collective agreements. I am not aware of the exact situation today, but I believe that one agreement has not been concluded. Perhaps you will hear about that later from other witnesses.

In my opinion, the agreements are good agreements from the corporation's point of view. I am not complaining that we were beaten up in the process. It does not appear that we were, depending on what factors you consider.

The bonus system has been discontinued. From a cooperation point of view, all the unions have gone as far as they should have gone. In the case of CUPE, as I am sure was true for the other unions, we were fairly generous because we were coming out of four years of zero increases and wage freezes. With this work force, we signed into four-year collective agreements to ensure that what we are meeting about here today is practical. We agreed to take the bonus money, to which we had a contractual right, and to convert it into wages. Thus, we did away with the bonus program.

All we did in those negotiations was redivide money that the memberships already owned. That is my view. It may be that not everyone will agree, and I understand that. We made something of a sacrifice, potentially, but no one is whining or crying about it out there. We knew that we needed to do something to save our industry, and we have done it.

I have to say that, since these agreements have been reached, perhaps because we all work best in crises and in emotional situations, we have seen more cooperation. Certainly in Cape Breton we know how to cooperate, but sometimes we have to be pushed pretty hard before we do it.

The atmosphere has been considerably better. There has been a genuine openness and an attempt to discuss issues openly, frankly and honestly, which does not always happen in discussions.

The committee touched on the area of labour relations in its report. I do not know the extent of your knowledge in this area, but from my own knowledge and experience, not only in CUPE but in every union in this country, a lot of stock is put into programs that are usually sold by accounting firms, with TQIs, TQMs, QWLs, and CQIs. They come up with a new acronym about every six months, because every six or eight months these programs fall on their faces and they have to come up with a new acronym to sell it to the next poor soul who is prepared to buy it.

The reality is that, in the longer term, these programs are quite disastrous, as I am sure you will hear from the automobile industry and the marine and shipbuilding industries. The most recent one that I am aware of has to do with Quebec Power. I had our Education Department carry out a program about two years ago, because of regionalization, where they were going to reinvent one day and then they were going to employee-empower the next day. They never did quite get their act together on which direction to go.

When I called the Education Department, they said, "Which one do you want us to deal with, although it doesn't matter because they are all the same." Interestingly enough, historically, they all go back to quality of work life programs, which were proposed by the then federal Minister of Labour, John Munro, in 1968. There is nothing newer about them today in 1997 than there was in 1968, except that we have tried them in various areas of this country and they have not worked, which is not a disaster in itself. A lot of things we try do not work, so we try something else. That is fine.

These programs appear to work for a couple of years, because the employees agree to be friendlier and more cooperative. After about a year and a half or two years, when the company, whichever company it may be, is supposed to begin reciprocating for that generosity, all of a sudden, the programs do not work any more. The wheels fall off, and the animosity is far worse than it was in the first place.

While I endorse 100 per cent the absolute need for good, solid labour relations within this corporation, if it is going to survive -- and we understand the importance of that -- those kinds of programs, I would suggest, are not the way to do it. We run a lot of places all over the world without those programs -- and I am not talking about a fear of the new or of the unknown. What I fear is the known.

I have some difficulty in grasping exactly what we are going to do. I am pleased that this committee has studied the situation and has said that we should keep an eye on it as it progresses. We have tried for years to deal with government and with the corporate officials, but we have not always felt that they listened to us.

As I said at the outset, the committee seems to have wrestled with our issues. Whether you thought it was all a bunch of malarkey or whatever, you addressed our concerns as things worthy of consideration and examination. It is gratifying that the committee seems prepared to keep a watchful eye on the situation.

The committee mentions in its report ongoing auditing of the corporation, either by the Auditor General's Department or by an independent third-party firm. Mr. Shannon made clear to us that he thought someone had been doing some fancy stuff with the books previously. We now are a little concerned that maybe Mr. Shannon's group is doing the same thing -- that is, painting a rosy picture. We are interested in more than just rosy pictures and newspaper columns and headlines. We are interested in the real world here, on the ground where we live.

I strongly suggest that the Auditor General conduct the audit or, if that is not possible, that he determine who the third party should be.

People, including business people, get very comfortable when they obtain a nice contract and they feel they should be nice to the people who granted them the contract. That can be dangerous. I am not knocking accounting firms; I am sure they are very ethical. But I have seen a certain lackadaisical attitude when an accounting firm has held a contract for a long period of time. There is no harm in their having to compete on a regular basis. They are generally inclined, like all of us, to try to please the person who is paying. I would suggest that the auditors should be totally independent from the corporation.

Senator Murray: I do not want to be defensive about this, but, as you know, we had a long discussion in committee on the question of social costs. As with any discussion and negotiation, eventually we compromised and we sawed off at roughly $40 million. We state in the report:

...the Committee believes that a significant proportion of these social costs relate to many workers' voluntary decisions not to participate in the company's contributory pension plan on its introduction in 1982. Obviously, this has added to the cost of Devco's non-contributory pension plan. Consequently, we believe that Devco and its workforce have some responsibility for bearing a portion of this historical social cost.

That was the reasoning that the committee eventually adopted.

Second, you mentioned the province of Nova Scotia. We recommended that the Government of Nova Scotia participate with Devco in a study of the Donkin Mine. It is vital that the Province of Nova Scotia be involved in this. We are talking about a study. It is not going to create a ripple in their fiscal framework; it is not going to break their bank.

What is important is that if a study is going to be held -- how shall I put this without giving offence? It is probably impossible to put it without giving offence. If the federal Department of Finance were to decide on its own who was going to do the study what the terms of reference would be, they would get the answer they were looking for.

This issue was not raised under the present government, but the Department of Finance has its own agenda, and that is to get the government out of the coal business as soon as possible. It is extremely important, in order to keep the whole operation honest, that we have what Mr. Trudeau used to call "that countervailing force" with the Province of Nova Scotia's involvement in such a study.

For the record, you told us last time we met that CUPE represents the supervisors, nurses and security people.

Mr. MacNeil: Yes, that is correct.

Senator Murray: How many members are in the local?

Mr. MacNeil: There are about 160 of us surviving.

Senator Murray: How far up the chain do you go in terms of supervisors? At what point do supervisors become management?

Mr. MacNeil: That matter has been debated many times before the Canada Labour Relations Board and, I believe, even before the Supreme Court of Canada.

Senator Murray: Where is it now?

Mr. MacNeil: The top level supervisor is probably an area supervisor.

Senator Murray: In the mine?

Mr. MacNeil: No, they do not have to be in the mine.

Senator Murray: What do you mean by "an area supervisor"?

Mr. MacNeil: I looked at this some years ago in preparation for a Canada Labour Board hearing. We have some supervisors who supervise six, seven and eight other supervisors and who never actually come into contact with the other unions in the workforce. They supervise supervisors, but they are still not considered managers, according to the Canada Labour Code.

Senator Murray: Do you have members underground?

Mr. MacNeil: Absolutely. The law requires them there.

Senator Murray: A long time ago, when I had more knowledge about these matters than I have now, one had to pass examinations set by the Nova Scotia Department of Mines to become an underground manager. Is that still the case?

Mr. MacNeil: Yes. In fact, many people within our ranks have the qualifications necessary to be underground managers.

Senator Murray: Once they accepted a job at that level, would they no longer be members in the union?

Mr. MacNeil: They would then move into management.

Senator Murray: We are talking 658 layoffs over a five-year period; 400 of which were to have taken place at the end of the current fiscal year. How many of your members will be affected directly by those layoffs?

Mr. MacNeil: Senator Murray, I will defer to either Angus or Fraser, who have been doing the hands-on work. The detailed knowledge they have boggles my mind.

Mr. Angus MacEachern, President, CUPE, Local 2046: Would you repeat the question, please.

Senator Murray: How many of your members will be subject to the layoffs which are forecast to be completed by the end of this fiscal year, at the end of this month? The plan calls for 400 layoffs in the fiscal year ending this month, and then 258 in the succeeding four years.

Mr. MacEachern: Are you talking just layoffs, or are you talking layoffs and pensions?

Senator Murray: I am talking permanent separation from Devco. We are talking about workforce reductions here.

Mr. MacEachern: Right now, our union does not have enough supervisors and security people. We are hiring people from other groups to replace some of our older workers who are going on pension. None of our members is subject to layoff currently, but some of our members are going on pension.

Senator Murray: It sounds as though you will be net winners out of this operation.

Mr. MacEachern: Basically, the positions that have to be filled are being filled from other groups, be they CAW, IAM, Confidential or UMW.

Mr. MacNeil: We do not want to leave the wrong impression here. Right now, we are being rather expansionary, and we have known for almost the last year that we would be. I told you earlier that our current membership is approximately 160, and then I said "surviving" because there we used to have some 270 members.

Senator Graham: When did you have 270?

Mr. MacNeil: Within the last five years. We took a lot more hits in the earlier years than we have in later years. We have been running short and we have been filling from other places. Even though we appear to be a net gainer, our membership is still down, the same as everyone else.

In this round we were not hit quite as hard as some of the other unions.

Senator Murray: Finally, I would like to ask you about Phalen -- and, if I get the chance, I will ask every witness who knows anything about it.

You know that in the 1995-1996 fiscal year, which ended last March, Phalen was down for ten weeks because of a roof fall. Some 1,200 employees were laid off temporarily. Since that time, we have seen the quarterly reports. The first one is for the period ending June 1996 -- 8 East: bottom level development encountered rock, gas outbursts, prone areas not anticipated in the plan, forcing stoppage of work and an equipment mining method change; slope development was also delayed.

Then, of course, you see that development in the first quarter had proceeded 1.3 thousand metres as against a plan of 2.2 thousand metres. Then for the six-month period ending September 30, 1996 -- 7 East: long wall was scheduled to operate continuously during the second quarter. Retreat rates and production areas were significantly lower than planned because of heavy roof conditions, water flow emanating from sandstone roof and ventilation delays caused by the roof condition; the fall of stone on September 17 has halted production for an estimated four weeks.

Then for the nine months ended in December they say:

Unfortunately in mid-January, since the cut-off for this nine-month report, another roof fall has been encountered on 7 East. Every effort is being made to bring the wall back into production as soon as reasonably possible.

What do your members tell you about conditions at Phalen? Were the circumstances that are referred to here foreseeable? Were they preventable? Could anything have been done about them? What can be done now?

We were told by Mr. White that conditions are going to get better at Phalen. Against that, I saw somewhere a statement to the effect that all the coal that can be mined economically in Phalen has been mined. We have the statement from another union head, who will be appearing before the committee, that Phalen is on a week-to-week basis, that nobody knows what is going to happen next.

What do your members tell you?

Mr. MacNeil: This was the area where we were supposed to pray, and we did. Perhaps we did not pray hard enough.

I can tell you what people are saying to me, but the people who are saying it to me are sitting here. It would be best if they told you what their views are, because they work in the situation and they are the people on the scene.

It is not disastrous, but, again, we will be doing a lot of praying.

Mr. MacEachern: When you say that people do not know what is going to happen next week, that is probably a true statement. At Phalen, it seems that, as soon as things start to roll, something happens, whether it is an influx of water or a waiting on the wall or a problem in the deeps.

I work at Phalen, as does Brian and quite a few people sitting behind me. If I were putting money into a college fund for my youngest daughter right now, I do not know if I would be able to pay for it in four years if I was still working at Phalen. I do not know how much faith I would have that I would be working at Phalen colliery in five years' time.

We can probably figure out what is going to happen next year, but I do not know what will happen the year after that.

As far as the conditions in Phalen, we cannot fault the workforce -- and I mean the entire workforce, not just the supervisors. They have been recovering not only 7 East, but 6 East and 5 East. If you were to see the conditions those people work in, you would not believe it. I have not worked at regaining control of a wall after it falls, in the way most other people have.

After I did go down and see it, I do not know if I could work there every day; the conditions were atrocious in the section where they were trying to recover those walls.

As far as the workforce goes, I do not think you can get better coal mining people than we have in Cape Breton. The best evidence is that people are coming here from out west to try to get us to go out west because they need people who know how to mine coal.

Major things have been accomplished recently, especially at Phalen and at Prince. The production wall at Prince came on line three or four weeks ahead of schedule. They had a major problem with the rotary braker system. It failed. It was repaired by our own people for much less than an outside contractor would have charged and took three to four weeks less time.

The workforce is willing to work. Our biggest problem is that the majority of the people do not know what their future holds. I believe that our future is in Donkin Mine.

We do not know if we have a long-term future at Phalen, and that is no fault of the workers. Someone told me that God put the sandstone there, and that is a major problem. It slows down development and it slows down production.

Because of the sandstone, the rock outcrops and the depth of Phalen Mine, there will be no records broken in a long time as far as developing that mine in the deeps and in the levels. The slower the development will go in Phalen, the less coal we will be able to produce. If someone does not take the bull by the horns soon and look at Donkin Mine or develop some plan for the future, I do not believe there will be much future left with Devco. If we depend only on Phalen Mine, we do not have a future.

The people at Prince believe that they have a better future than we do at Phalen. Prince is an older mine; Phalen is an old mine for a mine that is 10 years old.

Senator Graham: Let me welcome the witnesses, some of whom I have known for a long time.

I visited with a gentleman yesterday who is officially a member of this committee but who is not here today. I bring everyone here greetings from Senator John M. Macdonald, who is 90 years of age.

I was impressed by everything you have said. I want to refer in particular to Mr. Dingwall's statement as quoted in the Cape Breton Post on Saturday last. I wish to read what he said because he has not confided this directly to me, as well as for the edification of my colleagues. The article states:

Health Minister Dave Dingwall says the planned transfer of $207 million in past service pensions and environmental clean-up liabilities, from Devco's books to the federal public accounts, is a first step towards writing them off. Dingwall said, while the Crown corporation will continue to pay the annual cost of the liabilities, the accounting move means that in the event Devco couldn't cover their costs for any reason they would be covered by the Government of Canada.

I presume you consider that to be a step in the right direction?

Mr. MacNeil: Certainly I would, if it ever happens. What I read in that quote is that they are considering making this move, which would then be a first step to doing something really concrete. We are twice removed from anything actually happening, not just once, although even once would not help us a great deal.

Senator Graham: Mr. MacEachern, you said that you would not bet on Phalen being in operation for more than another four or five years. I had hoped we could be more optimistic than that. Do your fellow workers share that pessimism?

Mr. MacEachern: I might be even a bit optimistic in saying four or five years, but many people do feel that way. Actually, the plan for Phalen over the next three to four years includes a contingency wall which is closer to the surface. When you start mining coal above where you are already mining, that tells me that there is not much coal left down below.

The real problem at Phalen is sandstone, which will persist as long as that mine is producing. The sandstone problem, when combined with the types of ladings and the outburst prone sections, makes for very slow development. When development is slow, it takes longer to develop your walls and, therefore, a longer time before you are able to produce coal.

Senator Graham: There is plenty of coal there?

Mr. MacEachern: There is plenty of coal there.

Senator Graham: The problem is the geological structure and getting the coal out in an efficient manner.

Mr. MacEachern: Yes, that is one of our major problems at Phalen right now.

Senator Graham: Mr. MacNeil, I believe you made reference to the fact that you were losing expertise.

Mr. MacNeil: Yes, absolutely; I believe that we are. Maybe it is from my lofty perch now, having becoming a senior, that I feel that, but I do not really think so. I have been involved with and have worked in a lot of different industries over my career, and most of what I have learned I have learned from people who had been there longer than I had.

Mickey Baker, who is here today, has spent some 40 years in the mining industry. When he retires, we will lose a lot of expertise. Fraser Morrison is now in line to retire. He spent many years in the central shops, where he gained a lot of experience on the best and quickest way to get the job done. Certainly he had his book learning, if you will, but I want to tell you that what you learn on the ground with hands-on experience, particularly in industry, is what decides whether an industry operates or does not operate.

Senator Buchanan can perhaps relate back to Sysco where I received some basic training. Had it not been for the skill and the expertise there, the equipment certainly could not have produced. Having the manpower who knew how to manipulate that equipment made it run for one heck of a lot longer than anybody ever expected it could run.

Expertise is not a genetic thing, and it is not an easy thing to hand on. As they say, you have to gain experience.

That is one of the reasons we have the Senate. Whatever honourable senators may have been in their former lives, certainly they gained a lot of expertise among the way. We need people with the expertise to be able to evaluate situations, just as we are doing here now. There is a value in the expertise that you people have gained in your varied careers, and that is the kind of expertise that I am concerned about losing in our situation.

I am not talking about people applying for promotions. We always expect people to do that. We now are in a situation where we have people moving voluntarily and exercising their rights to move horizontally or, in some cases, even downward, because of their fear of what may happen in their particular section. They are then replaced by people who do not have the expertise or the skills to make the section as productive as it could be. As a result, their fears are realized and, ultimately, the demise of the section occurs.

That is one trap I am worried about falling into. This is not a corporate plan; nobody is plotting here. I am just saying that is one of the things we are factoring into the plan. I do not believe that the management of the corporation or the corporation itself is strategizing or plotting to have it fail. All I am saying is that, in the exuberance and the passion of laying out the plan, we were all extremely concerned that they would just pull the plug on us in Ottawa anyway, as you are aware.

There is no question that we and the corporation painted the most positive picture we could. The corporation did some things which I don't think they thought through totally, and they relied, as everyone seems to do today, on bookkeepers and accountants rather than on people with practical and industrial experience.

As I said, one of the factors we did not really consider is that, while we will have a younger workforce, which will probably improve absenteeism rates and costs of benefit programs such as Workers' Compensation benefits -- at least I hope it will -- there is a price to be paid for those costs savings and that price is expertise.

I do not know if I have answered your question.

Senator Graham: I want to assure you that there is no one around this table and no one that I am aware of in Nova Scotia who wants to pull the plug on Devco.

When I was coming home on Friday, we had a terrible storm in Ottawa. We were quite late taking off and somebody said, "I do not know if I want to fly on this plane under these conditions." My response was, "Well, if the pilot thinks it is safe, it is safe enough for me." I do not think that the management of Devco is trying to work themselves out of a job either.

One of the things that the committee emphasized in its report was the improvement of labour-management relations. I was pleased to hear you say that you have signed some long-term contracts. I do not know if they are entirely to your satisfaction, but you did say that the atmosphere is better.

With an improvement in labour-management relations and an improved atmosphere, what is the level of confidence today as opposed to what it was when you appeared before the committee last spring?

Mr. MacNeil: I assume you are referring to the level of confidence of the workforce in the administration and the management?

Senator Graham: Yes, and in the industry and in the future of the industry.

Mr. MacNeil: I think it is better than it has been. I have only been involved with this local and, therefore, the mining industry for about 10 years, but I must say that I think there has been more trust and more openness over the last while. That is not to say that everything is rosy; we do not agree on everything, obviously, but I think the situation is greatly improved.

One thing I do have a concern about is the fact that human relations and interpersonal relations are, to a great degree, affected by impressions that one may leave without even realizing they are doing so. What has been a good relationship for some time now may be diminished because of a decision by the corporate people to go to Ottawa to speak to people there rather than appearing before this committee, as we have. That puts us back into the mode of: "Wait a minute; they will go off to Ottawa and talk about us behind our backs again without allowing us to participate or to hear what they are saying." Perhaps it is just paranoia but, perceptually, we feel it is important. If our members and the rest of the workforce out there are thinking: "Wait a minute; there goes the openness," and "Wait a minute; do you have a hidden agenda; are you giving us the straight goods," we are back into that whole thing again.

Little things like that can do it. I am sure the corporate have a good reason for doing what they are doing; I am giving them the benefit of the doubt. However, not every worker out there is as generous as I am.

Yes, the relationship has been better recently, but simple things like that do not help maintain that good relationship.

Senator Graham: One thing the committee has recommended is a greater emphasis on export markets. I understand that the president of the corporation is out of the country this very week looking at export markets. I understand that is why he will not be able to appear here tomorrow.

Senator Buchanan: I think we have pretty well covered the unfunded liability issue, so I will not touch that.

I am more concerned with the future of the coal industry. From 1977 until today, we have heard that government wants to continue the coal industry in Cape Breton. I do not believe that. I was in an office in Ottawa back in the mid-1980s when people within the Department of Finance and people within the Department of Industry, Trade and Commerce made it clear that the goal of the Government of Canada should be to phase out coal mining in Cape Breton. That bothered me then and it bothers me even more now. People who have that opinion about the Cape Breton coal industry fail to understand the number of people and the number of families involved in that industry.

I am concerned also with the position of the Government of Nova Scotia. I have heard it said over the last few years that the Government of Nova Scotia does not have a responsibility for the coal industry. That is nonsense!

Back in the late 1960s, when the federal government signed the original agreements with the Government of Nova Scotia, certainly the federal government agreed to take over the responsibility for coal mining in Cape Breton, and the province agreed to take responsibility for the existing mines in Inverness County and on the mainland. Those agreements are things of the past now. The coal industry in Cape Breton still exists, a lot of coal is being mined, and the Government of Nova Scotia, those agreements aside, has a responsibility to the people who work in the coal mining industry.

For the provincial government to say it has no responsibility for the coal mining industry in Cape Breton is incredibly naive. It has responsibility to some 2,300 people, plus the 6,000 to 7,000 people who are employed indirectly by the industry. We accepted that responsibility back in the late 1970s and the early 1980s.

Mr. MacNeil, you mentioned that Allan MacEachen, Ron Barkhouse, who was the minister at the time, and I accepted responsibility for the future of the coal industry. We accepted the responsibility on the basis of advice we received from experts that, if a new colliery was not found in Cape Breton, the coal mining industry there would phase down to zero.

In accepting the responsibility which we believed the province had at the time, the provincial government entered into agreements with the federal government. Pursuant to those agreements, the province would not expend money to develop the mines, because that would be the responsibility of Devco. However, the province did spend a lot of money on studies -- cost studies, market studies, feasibility studies, mining studies. It spent a lot of money on drill-ships and on drilling the seams at Donkin and at Sydney's coalfields.

Senator MacEachen, the then Deputy Prime Minister, who has always had a great interest in Cape Breton, as do my colleagues Senator Graham, Senator MacDonald and Senator Murray, indicated very clearly to me that the federal government would not get out of coal mining in Cape Breton. He told me that directly, despite the fact that people within the Department of Finance and Department of Industry, Trade and Commerce wished to get out of coal mining. You know that; that is historic.

I do not have personal knowledge of the situation in the Phalen colliery. I have been in coal mines, but never in the Phalen colliery. I was in 1B and 26 years ago, but I do not know the situation there now. I do not doubt in any way what you are saying. I have spoken to many miners who work in Phalen and, as you just said, they are very concerned that within three, four, or five years there may not be a Phalen. The estimates run anywhere from three years to ten years. Devco has said that it might last for 15 years, but I do not think they are serious about that.

Let us look at what is happening now. One, the provincial government says that it has no responsibility; two, it will not even agree to fund half the cost of a feasibility study to upgrade the study that was conducted in 1979-81, on the basis that such a study is a federal responsibility. That is nonsense. When a province abdicates the responsibility for its people to the federal government, that is nonsense. The provincial government definitely has a responsibility to assist Cape Breton Development Corporation and to the future of the coal industry.

One does not need to be a Philadelphia lawyer or a prophet to see what is happening here. I am a Cape Bretoner; I was born here and grew up here. My father worked in the coal industry all his life, as did my grandfathers. I never thought I would see the day when U.S. coal would be coming into Cape Breton to be burned at our thermal generating plants. It is not that coal has not been brought in here from the U.S. before; it has. It has been brought in over the years to mix with No. 26 coal for the coke ovens, to get a better metallurgical grade of coal. But thermal grade coal being brought into Cape Breton, I believe in the amount of 50,000 tonnes, is the thin edge of the wedge. That indicates to me that the power company is looking toward bringing coal in here, when Devco has enough coal stockpiled to fill their needs.

Over the years I have been a proponent of drilling for natural gas on Sable Island, because I think it will be of tremendous economic benefit to Nova Scotia. However, never once did we project that Sable Island gas would replace coal. Coal is our own indigenous resource and so is natural gas, but natural gas has a market in the Northeast U.S. Can you imagine New Brunswick fighting to get our natural gas? I think that is great news. It is great news that they want it, but the power company has now signed tentative contracts to supply natural gas to Tufts Cove, which is fine, but also to Trenton which now uses Cape Breton coal. Again, I look upon that as the thin edge of the wedge, that someone is looking down the road to the phasing down of the coal industry. We cannot accept that because the coal is here, and the Donkin mine has good coal.

Having spoken to many mining engineers and geologists, there is no question that the Donkin mine has high-sulphur coal at the roof and at the floor. However, I am told that in the centre there is some of the best coal in the Sydney coalfields, low-sulphur coal that can be washed down to much lower than 1 per cent, and that there is plenty of it there. We are not talking about millions of tonnes; we are talking about billions of tonnes of coal in that whole area.

It just seems to me that somewhere along the line the federal government and the provincial government must accept the responsibility and get on with the job of moving forward, first to the feasibility study of the new Donkin Mine, including marketing studies and cost studies. Having spoken with some of the best mining engineers and geologists in this province, I am quite confident that they will come to the conclusion that the Donkin Mine is a go and that it will be a great fall-back when Phalen starts to phase down.

Mr. MacNeil: Senator Buchanan, I do not disagree with anything that you have said. I am of an age that I remember some of the agreements and declarations to which you referred. I do not think it was simply a matter of the Province of Nova Scotia deferring to the federal government and saying, "Here, you can take jurisdiction over the coal industry," but, in any event, it remains in provincial jurisdiction.

Senator Buchanan: That is a good point; it remains provincial.

Mr. MacNeil: Absolutely. We have had some rough sessions with provincial politicians who try to say that it is not their responsibility, but we do not agree. We agree that there was an agreement to cooperate, because the Province of Nova Scotia could not do it alone, and the federal government agreed to work with Nova Scotia and to share a lot of the costs.

As to the costs for further study, as you said, a lot of the study has been done. This is not a matter of bringing in the drill-ships again and doing all the core sampling again. The province did share the cost of that work. All we are talking about now really is some computer work and some putting together information that has already been gathered to see where it fits into today's world marketplace, if you will. I do not see this as being an extraordinarily costly study.

At the time of the oil crisis, the power company was, as I believe Devco still is, an economic tool to be utilized for the benefit of the people in the area. There was a clear determination then to minimize the importation of energy and to maximize the use of our own.

Now we have potential competition from natural gas which is also our own resource. It would appear that our ship is coming in. Well, I do not believe it will, senator. I have looked at the deal that they have made, and it looks like the old gypsum deal, where the corporations have vertically integrated. Any money made from producing gas will be paid to the Province of Nova Scotia. The money the corporations will make will be from transporting the gas, distributing the gas, et cetera, all of which will be done where we do not get a cut of the profit.

The power company is saying, "We would like to buy Nova Scotia gas cheap. Maybe then we could get rid of the coal and the problems that come with that." I do not think they will ever get it because I do not think those American corporations will sell it to Nova Scotia as cheaply as they will probably sell in Boston. I think we will be caught like the Newfoundlanders were with Churchill Falls. That is what I think will happen to us.

I think somebody should invest in a bunch of copies of Haliburton's writings on Sam Slick and distribute them among the bureaucracy that is supposed to be looking after us in this nation today.

Senator Buchanan: We negotiated an arrangement back in 1982, which was upgraded in 1986, that the people of Nova Scotia would own up to 50 per cent of all pipelines running from the gas fields to the New Brunswick border. That agreement has gone by the board now, but we had done that.

Senator MacDonald: Mr. MacNeil, you referred to "computer work," being required to update the feasibility study, but the cost estimates for developing Donkin run anywhere from $40 million to $400 million. What are you talking about by way of costs of a feasibility study? The cost of the feasibility study was to have been shared as between Devco and the Province of Nova Scotia, which means between the Department of Finance and the Province of Nova Scotia. As Senator Murray has said, we tend to be a bit suspicious of the Department of Finance these days.

Mr. MacNeil: All I am talking about is the cost of the studies to determine the feasibility of the operation. As you said, the projections for the cost of developing are anywhere from $40 million to $400 million, and some study is needed obviously. We are not talking about Nova Scotia putting up half the cost of development at this point.

As to what it will cost, I will not try to pretend that I have any idea. I will tell you that, of all the people that I have heard debate it, my inclination would be to go with the projections of the United Mineworkers of America. They have been in the mining business for a lot of years and have a lot of expertise in their international union as well as locally. I do not think they have ever been the kind of people who said that they would do something for a nickel if they knew it would cost $3.50, and I do not think they are doing that now.

I honestly do not have any assessment of the cost. In fact, I would look with suspicion at any estimate our union would produce because we are not traditionally involved in mining. We are here simply to express our views about the federal government's responsibilities.

Mr. MacFarlane, Recording Secretary, Local 2046, Canadian Union of Public Employees: Mr. Chairman, we have all been talking about a gloom-and-doom scenario. Brother MacEachern spoke about Phalen continuing for three to four years. I have three sons and a daughter. My daughter has left this area. One son has gone away. Another son has gone back to school. He tried to work at a part-time job. He is married, has a family, and he has no future here.

I think everybody who appears before committees like this one is looking for opportunities for their sons and daughters. I think we have made a sacrifice. There is not a miner or an employer in Cape Breton who does not have that ultimate goal. There is not a father, there is not a mother who will not work at two jobs to educate their children so that we can progress and offer to Canada qualified, well-educated people. We would prefer to keep these educated people in Cape Breton so that we could utilize their expertise in our own locality, but we need jobs here to accomplish that.

I work at Prince Mine and I should like the members of this committee to realize that, due to some unfortunate circumstances at Phalen, the Cape Breton Development Corporation asked the coal miners of Cape Breton to dig deep. I sit up in the remote monitoring room and I monitor what is going on, and I see the efforts that the men are putting forward. I am talking about a wall that was not supposed to produce until sometime in April. Through extreme effort -- weekends and Christmas holidays given up -- people worked to get this wall into production earlier.

You must realize that we are not asking for the world; we are asking for a fair chance. These employees have produced more than 100,000 tonnes of coal in just over three weeks from start-up. I am sure qualified people like yourselves realize that there is always an initial start-up period before you reach a full head of steam where you accomplish what you set out to do and where you feel you are productive. Our people, with extreme effort, have done this. All we are asking is that the effort they have put forward be recognized.

All we ask is that this committee make recommendations favourable to our workers. Give us half a chance to prove that we are the best that ever came out of this island.

The Chairman: I will now call the Canadian Auto Workers to the table, please.

Mr. D. Victor Tomiczek, National Representative, Canadian Automobile Workers: We are appearing here today to support our brother and sister unions on this very serious issue.

I will not take up a lot of time. CUPE has dealt with one important issue that deserves attention, and I should like to leave as much time as possible for the United Mineworkers. Because of the study and effort they have put into trying to save their industry, they deserve to be heard.

The Canadian Auto Workers represents a diverse group of people within the mining industry. We represent the people who work in the offices -- payroll people, computer operators, computer programmers, land surveyors, people who work in the coal yards -- as well as a number of people who work underground -- mine examiners and shot-firers, coal samplers and underground surveyors in the various collieries.

Our concern, of course, is whether we have a future in the coal industry in Cape Breton. I am concerned because I hear various comments coming from our elected representatives. In 1995 Mr. David Dingwall said that he was confident in the future of Devco. We cannot have much confidence in the future of Devco unless we can see a concerted effort by all parties concerned to address what is happening.

At the same time that Mr. Dingwall was making that statement in 1995, the president of Devco announced that the corporation would be laying off 1,200 employees. One of the justifications for that decision was that it would ensure a strong future for the corporation. We do not see the benefits of that decision.

I can assure you that the Canadian Auto Workers and our predecessor union, the CBRT&GW, Canadian Brotherhood of Railway, Transport and General Workers, prior to our merger, had approximately 375 to 400 members employed at Devco. Currently we have 148 CAW members at Devco. That is actual bodies on the books. We actually have 110 positions within the corporation, and the number is shrinking.

We are very concerned not only about our future jobs in Devco but also about the fact that unionized positions within the corporation have been shrinking very fast. We think the shortsightedness of Devco is placing our economy in very real danger. It does not make sense that our coal industry should be solely dependent on one customer, that being Nova Scotia Power. Having dealt with Nova Scotia Power as a union representative, I can tell you that Nova Scotia Power has much disdain for the coal industry and for the workers in Cape Breton Development Corporation. They do not hide the fact that they are not supportive of the Cape Breton Development Corporation. In fact, over the last few years, they have gone to extremes not only to embarrass the corporation, but to try to break deals and contracts that have been in place for long periods of time.

I am sure Mr. Drake, who is with the United Mineworkers, will expand on that because he is quite knowledgeable on what has transpired and with the players who, coincidentally, have relationships with both corporations. Distrust is created among the workers when people who seem to be involved with both corporations are making decisions that affect our livelihood.

The very fact that we are depending so much on Nova Scotia Power begs the question: Why would we spend millions and millions of dollars upgrading and improving the international coal piers for shipping when we are not using them? If we want to talk about wasting taxpayers' dollars, why would we do that? We feel the coal piers are an integral part of the future for Devco.

We must develop markets beyond Nova Scotia Power. Because we are not using the coal piers, our coal preparation plants, which wash the coal, are under-utilized. Nova Scotia Power does not require the coal to be washed, which results in the coal preparation plant being idle for half the time. It was always a full-time operation and now it is a seasonal operation at best.

If we do not wash and upgrade the coal, we are undervaluing the product that we are trying to sell. If we are simply taking run-of-the-mine coal and burning it at a Nova Scotia Power plant, I do not think we are doing all we can to enhance the product and to enhance our future with the corporation.

What really brothers me is that Devco does not even have the courtesy to showing up at these hearings or to make some plan to meet with the senators after they have had a chance to digest everything we have said. I think that is reprehensible and I think the committee members should make it clear that they are not pleased with the fact that Devco has avoided dealing with Devco's problem right here in Cape Breton where it counts.

Having said that, if we allow Devco to sneak around after this hearing is over and have their meeting with the committee, then the very least that should happen is that the unions be invited to attend so that we can hear firsthand how the Cape Breton Development Corporation justifies to the committee some of their past decisions and, in particular, what they think the future is for the corporation. If they talk about the future, I think the unions should be represented at those meetings.

Following up on some of the things I heard today, I do not know how many feasibility studies we have to do with regard to Donkin. Senator Buchanan commented on a report on the quality of coal at Donkin. We have not seen that report, but we would like to have a copy if it is available. We would like to have our own people look at that report.

Whether Donkin is feasible or not, we must look at the alternative. If Donkin is not developed, we do not have a future in coal. We were told by the president of Devco, Mr. Shannon, that it would take some $700 million to $900 million to close down Devco, and that means to close down all the operations and to clean up the environmental mess. It would not take that much to open Donkin.

I agree with CUPE as to whom we should believe when it comes to costing the Devco operation. I also support the UMW's position on this. I have listened to Mr. Drake's presentations about the future of Donkin and what is needed to get that mine operating. He is the only person -- and, by the way, we heard it from the corporation -- who seems to be making any sense of it. I guess it is the old axiom that, if it comes from a worker, it is not worth much. If you want to know the real truth about what is happening in the coal mine, you had better ask a coal miner because you will not get the truth from somebody sitting in an office who has no relationship with what is actually going on in the mines.

We hear decisions being bandied about by the corporation that Prince Mine may be reduced to a 10-shift operation. That, ladies and gentlemen, is going in the wrong direction. If Devco is allowed to do that, they will just be putting one more nail in our coffin. The only way to enhance our future is to allow the miners to produce the product; they cannot do that if they are not in the mine. If the shifts are reduced a result of a decision by some bureaucrat who thinks we can save money by not producing coal in certain shifts, then we will not get ahead. We must be in the mine producing coal as much as possible.

Three years ago there was a rock outburst at Phalen Mine. I am not an expert in mining. I worked at 26 Colliery for a while and then I worked in the Devco offices prior to becoming a representative for the unions. However, come from a mining family. My father worked for 46 years in the coal mine, and I have five brothers who work in the coal mine. I think we know a little bit about how precarious it is for miners to have their futures hanging on decisions of the mine managers and the people running Devco. I have lived in this area all my life and at no time do I ever recall that mines were down to a one-wall operation. Phalen mine today is solely dependent on one wall. That just does not make sense.

Phalen mine has a wall developed, 8 East, but they are not doing anything with it. That represents a huge block of coal that would turn into a huge chunk of money when that coal was produced. For some reason, nobody at Devco is pursuing the operation of that wall. They seem to be quite happy to have the whole industry depending on one wall at Phalen. If that wall were to go down tomorrow, it would not take a brain surgeon to figure out that there was no future in mining.

All of this may speak to the fact that the people who are running the corporation do not know what the hell they are doing. Maybe we have the wrong people at the helm here. The management of the Cape Breton Development Corporation always seem to be political appointments, rather than bringing in people who have experience in the mining industry. The point was made earlier that we are losing all our experienced miners and their expertise.

I know many young miners who left the area to go to B.C. or Alberta because they feel that nobody is doing anything to ensure a future for them in Cape Breton. They decide that it is easier for them to make a move when they are in their 20s and 30s than it would be when they are in their 40s. When they are in their 40s and 50s, there is less likelihood of getting jobs.

I believe the average age of workers in Devco now is 40 years. That does not make a whole lot of sense. Who is available to learn the industry from the bottom up and to learn everything one needs to know to ensure that a mine works safely.

A lot of our more experienced miners take their pensions as a result of some negotiations or even some non-negotiations when people come in, for whatever reason, and say that X number of pensions are available. Many of those people who are taking their pensions are highly-skilled miners whose expertise will be sorely missed.

The same applies to our skilled tradespersons. The unions have done everything possible to try to keep industrial stability within the industry by signing long-term collective agreements and by signing collective agreements with no significant wage increases. However, that has not stopped other industries which pay much higher rates for skilled trades from attracting many of our skilled trades people to leave the industry and to go where their trades are highly respected and compensated as they should be.

We are not dealing with a GM here that has lots of money; we are dealing with a corporation which keeps poor-mouthing us all the time. It is also difficult to take the hard line on bargaining when we know that we do not have the support of either the province or the federal government.

Senator Buchanan mentioned that the previous provincial government always supported the miners. Let us not forget that for every tonne of coal that was ever produced out of the coal mines in Cape Breton the province reaped a benefit. I believe the province has an obligation, indeed a moral obligation, to give something back to the miners in return for the money it has reaped over the years. It is absolutely reprehensible that we have a premier in this province now who seems to think that, just because a federal agency has some dealings with the coal industry, all of a sudden the province has no responsibility. That is reprehensible to the utmost, but I guess we can expect nothing more than that from our premier. There does not seem to be anything coming to Cape Breton to alleviate our present situation or any recognition of the fact that we are living in an area of the country that has the highest unemployment rate in the entire nation. That situation must be addressed.

One of the ways to address the situation would be to open Donkin mine. We must pursue that immediately with all the powers we possess.

Donkin mine, as I understand it, has excellent coal. Everyone in the coal industry knows that the day you open a mine is the day you must think about closing it because a mine does not last forever. We also know that, when a new mine is opened, coal can be produced much more cheaply because the coal is closer to the surface, which results in much less transportation cost. I understand the seams of coal in Donkin are six feet or more, so there is a lot of money to be made there immediately.

One thing that does not help Devco in their situation is this pension hanging over our heads. We know that, if Devco closed today, the federal government would be required to assume all those pension costs. Those pensions just do not go away. In order for the federal government to achieve its mandate, which is to privatize the corporation at some point -- and I am not saying that I am for that or against that; I would have to weigh that decision when it is made to see whether it is best for Cape Breton. How could we expect anybody to look seriously at the future of that corporation when it has some $45 million or $50 million coming out of the fund immediately for pensions? The corporation must have a chance to play on a level playing field.

Now is the time for the federal government to step in and assume all the responsibility for the pension fund so that it will not be part of the Devco money, this cash cow that always seems to be debated across the country. The Devco situation is no different from other corporations that the federal government privatizes. I am referring, for example, to CN pensions and other similar situations that have happened in the past. The same thing must happen now. You must give the corporation a chance to prove itself, and it cannot do that if it has a drain on its money right from day one. You cannot start the operation when the first thing you must do is take $45 million out of it. That is no way to run a business. We hope that somewhere down the line someone will assume those liabilities, as they should.

The same applies to the automatic assumption. We all know that the automatic assumption is very important to the miners who have contracted lung disease as a result of working in an industry that is hazardous to their health. I could be wrong, but I believe people in our area always attributed automatic assumption to the then Government of Nova Scotia under the leadership of Premier Buchanan, as he then was. Nobody has ever accused Senator Buchanan of not being quick on the draw. He implemented this measure, which was needed, and it was highly touted as being a step in the right direction toward recognizing the illnesses that miners have faced.

Even though automatic assumption was a great idea which seemed to come from the provincial government, Devco was saddled with the costs. If we want to send a bill to Premier Savage, we should send him that one, compliments of Senator Buchanan.

Automatic assumption is for miners who work in or around a coal mine for 20 years and who have suffered a deficiency in their lungs. Unfortunately -- and I do not know if Senator Buchanan is aware of this -- it seems to be getting much more difficult for our people who work in the coal mines to qualify for that benefit. As always, when something is good and people actually use it because they are sick, someone sees that it is costing money and they want to put up barriers for people who qualify for those types of benefit.

What concerns me most as a labour representative here in Cape Breton, particularly as a Cape Bretoner who is raising a family, is that my children are looking at their future as not being in Cape Breton. They are hoping that they can live in a province close enough so that we can visit them. How many of us throughout the years have seen people and their families move away? That is not right. We have to have a future.

That is nothing new in Cape Breton. We have had to struggle before, and we will have to struggle in the future. What bothers me -- and I am sure you have seen it in the media recently -- is the demonstration down on King's Road. This is indicative of the feelings in this area. We have had demonstrations in the past and we will have demonstrations in the future, but I am concerned about the fact that there is an angry side to these demonstrations. This angry side is the result of a feeling of despair, in my view. These angry demonstrations are a result of uncaring governments, of uncaring decisions, of governments that seem to make decisions that support big business, but do not make decisions that support workers.

We saw demonstrations like these 70 years ago in Cape Breton. If there has to be this type of demonstration, it is appropriate to have it in the area that has the highest unemployment in the nation. Hopefully it sends a message.

As much as I do not condone violence -- and I hope we will never see it again -- a demonstration like this does send a message that you can only push people so far. There was an old saying during a miners' strike long ago when the boss of the corporation at that time said that the miners could not stand the gaff, and the miners said, "Yes, we can." They stood the gaff. All workers are prepared to stand the gaff once again.

I would like to thank the committee for allowing the Canadian Auto Workers to make this presentation. I hope and pray that, if these meetings are going to have a clear impact on the future of the corporation and the future of our miners and their families, that decision is made as soon as possible.

Clearly, we do not need a feasibility study on Donkin. We need to open Donkin. We are studied to death at this end of the country. There has to have been 10 feasibility studies done already. Pick one and let us get the place going.

The Chairman: With regard to the meetings in Ottawa and your request that as many people as possible know what is going on, we understand that CPAC will be filming those meetings. They may not be broadcast live, but I am sure they will be shown very soon afterward. While we have not had absolute confirmation of that, it is a good possibility, so everyone in Ottawa should be able eventually to hear what is said.

Senator MacDonald: The Minister of Natural Resources, a very tough-talking lady by the name of Anne McLellan, referred to the five-year study as an opportunity for Devco to prove its ability to be self-sufficient; otherwise -- and I am trying to paraphrase her -- there might not be any further assistance.

Do you think she was trying to scare us?

Mr. Tomiczek: Senator, with all due respect, the easiest thing for people to do when they are sitting in their ivory towers in Ottawa is to try to threaten people.

I think it was a blatant threat. Unfortunately -- or maybe fortunately -- we did not put too much weight on it. If they are going to close it, they are going to close it. Whatever government decides to close the Cape Breton Development Corporation will have to live with the consequences.

The Cape Breton Development Corporation was designed originally, as I think was mentioned earlier, to phase out the coal mining industry in Cape Breton. We all recall that. In fact, that was when my father was unceremoniously placed on pension without the right to say yes or no. It was recognized at that time, because of the precarious situation of the oil industry, that there was a future for coal mining. I still believe there is a future for coal mining. It is just a simple matter of people looking around an area like Cape Breton and recognizing that not only must the resource be developed but that we have to have the tools to sell the product off-shore, where there is a market.

I do not put much faith in idle threats. We have been threatened before.

Senator MacDonald: Kevin MacNeil referred to year six and year seven. He seems to agree with you. If you were to believe Anne McLellan, there would be no year six and there would be no year seven.

The onus has now been imposed upon Devco, with all the things they have on their plate, including the geological conditions of Phalen and bearing the cost of the feasibility of Donkin. All of those things seem to make it almost impossible to break even, let alone to show a profit at the end of five years.

You have answered my question. I want to know whether she was trying to scare us or whether the government means it. If the government means it, they are trying to get rid of the coal industry in Cape Breton.

Mr. Tomiczek: I think they tried to scare us with the Red Book, which they did not follow through. We are used to hearing things coming from Ottawa or from Halifax which do not relate to us because they are all smoke and mirrors. It is my personal view that they want to make statements to cover their backside for the press and to look like they are attempting to do something.

I was angry and concerned when I met with ministers, particularly Minister Dingwall who, when miners challenged him on his promise to open Donkin, basically called every coal miner in Cape Breton a liar, saying that he did not make that promise. We have to have faith in our elected officials. When someone tells us something, they should not turn around in two months' time and tell us that they did not say it. As harsh as it may sound, that is lying.

Senator MacDonald: I do not think Mr. Dingwall needs me to defend him.

Senator Murray: He would love to have you defend him.

Senator MacDonald: I am not a member of his political persuasion. I cannot, for the life of me, see how Dingwall, being the constituency representative that he is, can try to take on the mantle of the famous Allan J. and do a lot for the constituency.

Mr. Tomiczek: We always said that the "J" stood for "Jesus". Mr. Dingwall is not Allan J. MacEachen; he never will be Allan J. MacEachen -- not that I am a fan of Allan J. MacEachen. As Cape Bretoners, we have to recognize that a lot of effort was put into Cape Breton by Allan J. MacEachen.

It makes a whole world of difference to me when someone promises something and then delivers as opposed to someone promising something and then not delivering. That does not mean that everybody can come back and say, "I promise you this, and you are not going to get it." We can understand that decisions are made by consensus and that not one person has the authority to make a decision. However, we have to make everybody accountable when they say something and then deny it down the road. That bothers me, senator, and it should bother everybody. If it bothers anybody that I am saying this, so be it.

Senator MacDonald: I was trying to say that being a constituency representative is different from fighting a national policy.

Mr. Tomiczek: Most definitely. My suggestion is this: If you do not have the authority, keep your mouth shut and do not say anything.

Senator Graham: I would like to welcome Mr. Tomiczek. We come from the same town of Dominion.

I would like to make a comment with respect to the present situation and the future. I was the first employee on the ground of Devco. I remember the original mandate which was to phase down and to phase out the coal industry. Since that time, we have had Lingan, Phalen, Prince and, perhaps in the future, we will have Donkin. I say that with the usual caveat: let us prove that it is a feasible project. That will require a lot of cooperation.

Mr. Tomiczek, you said, "Let us go and open it." There is a little more updating that has to be done first.

Mr. Tomiczek: You have to pump it out first.

Senator Graham: Yes, I understand that.

You are the successor of CBRT&GW. You said that you have 148 members on your books and 110 members currently.

Mr. Tomiczek: We have 100 actual jobs which Devco has budgeted our union to have. We are one of the unions that has people on layoff status. We are struggling every day. With the cooperation of CUPE, we are able to keep some of our members at work.

In our recent round of negotiations, we reached an agreement with the corporation that our people would at least qualify for UI in the future during the life of that agreement.

Senator Graham: How does that compare to, say, five years ago?

Mr. Tomiczek: I would say probably longer than five years.

Senator Graham: Ten years ago.

Mr. Tomiczek: When I was at the corporation, and that was 13 years ago, we had three locals at Devco. We had what we call the clerical local, which at that time had about 300 members. We had a surveyor local, which I believe had about 148 members. We had a mining shot-shot-firers and mine examiners local, which had about 160-172 members. As you can see, CAW, previously CBRT, has lost a lot of members as a result of the downsizing and we also lost a lot of members in the clerical sector as a result of technological change. We knew what was happening with the onslaught of the personal computers and the access to the global type of networking that we are doing at Devco. That did result in a significant number of jobs being lost.

Senator Graham: You mentioned that the average age was 40 years?

Mr. Tomiczek: Yes.

Senator Graham: How does that compare with five years ago or ten years ago?

Mr. Tomiczek: Ten years ago, when they were hiring, most of those people who were being hired were 20 to 30 years old.

I do not recall the last time there were hirings at Devco. It has been a long time since there were hirings in our union.

Someone mentioned the industrial relations end of it. There have been significant changes there also. I have to agree, to a point, that human relations between the unions and the corporation has probably levelled off to a certain degree. I attribute that to two things: one, the corporation appears to have ceased using outside legal firms to handle every grievance matter. I refer to the firm of MacInnes Cooper which basically handled every simple grievance and challenged each union to arbitration, at great cost to both parties.

The corporation, because they are not using those lawyers, has a tendency now to look more seriously at the demands from workers who grieve particular situations and realizes that it has to deal with those things in a more progressive manner rather than in the old style of just denying things.

I do feel there is an improvement in industrial relations.

Senator Buchanan: You mentioned feasibility studies. We have to have an update; there is no question about that. The feasibility study that I have here was done in 1980-81. There was another study conducted in 1985. We have to update those studies, but not about the coal itself. The coal is there; we all know that. We have to look at the markets and the present day cost. I have an idea of what that cost is from people I have spoken to, but that is not the amount that Devco claims it will cost.

I think you will agree that we have to update those studies to get present-day cost figures.

You asked about the 1-per-cent sulphur. The UMW has some statistics on that, but I recall that we asked our Department of Mines back in 1984-85 to work with Devco to determine the quality of coal in the seams of Cape Persé at Donkin. It is interesting that you can get the analysis from the UMW, but that you can also get an analysis from Cape Breton Development Corporation. An analysis of the 2,700 tonnes of coal mined at the Donkin-Morien project was particularly encouraging. This sampling indicated that by selective mining, by leaving part of the coal seam as floor and roof -- as I mentioned, the floor and the roof have a high-sulphur content -- and mining 70 per cent of the 3.4 metre seam, the sulphur level could be reduced to about 1 per cent. That is in the Cape Breton Development Corporation Annual Report of 1985.

Mr. Tomiczek: Senator Buchanan, on May 28, 1996 our union -- as a matter of fact, Bobby Gillis, who was representing our union at the time -- submitted a report on selective mining. My understanding is that there was some $300,000 forwarded to do something with selective mining. We would like to know what the heck happened to it. Was there anything done with regard to the selective mining process? If the money was allocated, was it spent in the right place?

Senator Buchanan: You should ask Devco that, because in the 1985 Annual Report they recommended it.

Mr. Tomiczek: That is like asking me to ask the Liberal government in the province what happened to the $52 million they spent on the tar ponds? We do not get the answer for that either.

Senator Murray: What do your people tell you about Phalen, your shot-firers and mine examiners and members of your union? Are they any more optimistic about Phalen than the other people we have heard today and those we have heard in the past?

Mr. Tomiczek: I have an advantage because my own brothers work in Phalen. There is an old saying that, when we sit down at the table, we load more coal in the tavern than we ever load in the pit.

They do see that Phalen is in very serious trouble with regard to the things you cannot control, like rock outbursts and sandstone. However, we have worked through those problems before and we can work through them again. We think the technology is there to do that.

We do know the miners are capable of facing and handling any problem that they encounter underground. I have worked in mines in Ontario and I have worked in mines in Cape Breton. The Cape Breton coal miners are second to none in their expertise.

The concern coming from our members is whether or not there is a management team in charge of ensuring our future. We feel that, if the mines go down, it will not be because of things beyond our control; it will be because someone makes a decision that will affect us. Our main concern is a lack of confidence in the management team of the Cape Breton Development Corporation.

Senator Murray: You seem to think that the geological problems referred to there are temporary, that you will work through them. What do you make of what a previous witness said about mining coal closer to the surface rather than moving ahead?

Mr. Tomiczek: One of the things that we have always had confidence in is our ability to handle any problem that we face.

My understanding about the prognosis of the geological problems in the mine is that they are temporary and that we will just get through them. We all know that a geological fault in a seam does not last forever. Unfortunately, this one is lasting a lot longer than we thought. If they are moving in a certain direction, it may be because the Occupational Health and Safety Committees in our industry would not allow anyone to work in unsafe conditions.

I know our people on the committee are monitored very closely. The United Mine Workers have very strong, vocal people on their Occupational Health and Safety Committees, as does CUPE and the other unions. I have no fear of anybody making a decision that will make our work unsafe. I do have a fear that someone will make a decision that will effectively close an operation down because of some column in a book sitting on someone's desk.

Senator Murray: You mentioned the International Pier. Do your people work there?

Mr. Tomiczek: No.

Senator Murray: There are no CAW people there?

Mr. Tomiczek: We used to have people there but, like everything else, we have nobody there now.

Senator Murray: Which union has people there?

Mr. Tomiczek: United Mine Workers have the people who do the stevedoring, I believe, at the piers. I do not think there is anything going on at the piers now.

The International Piers is an area that has always fascinated me. It is ideally suited for shipping out large quantities of product. Just as a footnote, one of the most progressive and expanding businesses at the Port of Halifax is container and bulk material business going out of that wharf. Container business is doing very well in Halifax. However, it is cheaper to ship things from Cape Breton than from Halifax. We are closer to the markets of Europe and Newfoundland. But, again, nobody seems to do anything to develop the Port of Sydney.

At one time the CBRT&GW had 250 stevedores working in Sydney. Today we have 45 people on the books who are lucky to get 10 to 12 weeks of work a year.

There was a decision made somewhere along the line not to develop the Port of Sydney, even though it is cheaper and even though the routes to Europe are shorter. All the freight and cargo business went to Halifax. You wonder why we feel that we have been disenfranchised in this part of the province.

Senator Murray: This is another footnote. I will ask the people from the UMW about this and, if I get the opportunity, I will certainly ask the management of Devco when they appear before the committee.

In the fall of 1995, there was a plan which involved the company effectively getting out of the export business. We discussed that earlier.

Consistent with that plan, there was a write-down of capital assets, a restructuring and, of course, much more drastic layoffs than was eventually agreed upon last spring. According to the new plan, they are getting back into the export business. There is some inconsistency in the numbers we have seen in the annual report and those we have seen in the financial statements.

I want to know firsthand what is happening at the International Pier and whether the circumstances exist for them to get back into the export business when they start producing enough coal to do so.

Mr. Tomiczek: At the International Pier, not only should they be producing for the international markets, but there should be more products than just coal. Coal could actually be a growth industry for the economy of Cape Breton, and it is just not being developed. The reports have been thoroughly ignored. Although money was spent fixing them up and money was spent dredging harbours and money was spent painting the buildings to make them look nice, the fact of the matter is that nothing ever was done to develop that kind of market for Cape Breton.

We are an island. We are surrounded by water. Should we not be capitalizing on the fact that we have a good harbour, that we have the people to work there, and that we need the work desperately?

Senator MacDonald: You do not have any coal.

Mr. Tomiczek: We have lots of coal. They just do not want to mine it.

Senator Buchanan: We built the road from Highway 125 to Sydport to open Sydport to the markets of the world, but nothing has happened.

Mr. Tomiczek: Absolutely.

The Chairman: I now call upon the International Association of Machinists.

Mr. Rick Wiseman, General Chairman, International Association of Machinists: Thank you for the opportunity to speak to this committee and to address some of the problems.

We will not spend a lot of time discussing the mines or Donkin because the other three groups obviously have a greater knowledge as to what should be taking place. We would like to be on record as wholly supporting the UMW's position and the plan that they have put forth.

I made two trips to Ottawa to speak to two ministers responsible for Devco -- John Manley initially and then Anne McLellan -- at the time the UMW put forth a feasibility study on the cost of opening Donkin. The plan was taken to Ottawa. We do not feel that it received any respect or any interest from the two ministers. In essence, we were told to go home and behave ourselves and to get our house in order.

Our collective bargaining over the last couple of years shows that each union involved in the corporation has bent over backward to create some sort of harmony between management and the unions.

We would like to deal specifically with the under-utilization or misuse of the assets of the railroad. The IAM is a service union for the pit. We are involved in transportation and maintenance of railroad.

I will list some of the assets that we presently enjoy. We have 10 GM 2,000-horsepower, 16-cylinder locomotives, four of which are mobile generating units. In cases of emergency, such as power outages or whatever, these locomotives can be hooked directly to the pit to evacuating manpower.

The oldest of these locomotives was purchased in 1979. They are state-of-the-art equipment. Current, they are under-utilized presently. We had some GM people come in to inspect them, and we were told that they are not being used to their full capacity.

Currently, we have 490 railway cars, the majority of which are rapid discharge cars. They automatically discharge the coal through bottom chutes over a trestle at the International Pier. These cars were purchased for the sole purpose of shipping out of the International Piers. They, too, are not being used to their full extent.

We also have approximately 40 kilometres of track which is fully maintained by Devco employees, being UMW workers and IAM workers. We have all the equipment necessary to maintain or to construct rail lines as required. I will list some of the equipment that we currently have on site.

We have what is known as a tie tamper, which is capable of lifting, levelling and aligning track. We have a ballast equaliser, which distributes ballast equally for roadbeds. I am not sure if everyone is familiar with ballast, but it is gravel for roadbeds to minimize washouts and such things.

We have a tie inserter. This is self-explanatory. It inserts ties for roadbeds. It does so quickly, thus minimizing the amount of down time in case of washouts or whatever else.

We have a 60-foot boom and crane, which assists in lifting and moving rails for construction. We have state-of-the-art re-railing equipment to deal with derailments, washouts and whatever.

The terminal that we built is called the Rail Centre. It was built in 1983 at a cost of $11 million. It is a state-of-the-art building. The employees at the centre are capable of doing everything from changing an air hose to completely overhauling or rebuilding an engine.

We have cranes ranging from a one-tonne capability to a 30-tonne capability. There are 30-tonne jacks out there that are capable of lifting locomotives, removing trucks, changing traction motors, repairing wheels, and other such things.

There is no equipment between here and Moncton that compares to the equipment that we have at the centre. There is no one in Moncton currently, due to the downsizing there, who is capable of performing the work that we do. For example, we currently do work for RailTex, the firm that bought the Sydney-to-Truro line. We also do work for VIA, such as cutting wheels, realigning wheels and whatnot. The skills are there to do anything that needs to be done, and outside firms are seeking us out to have work done.

I would like to talk about the locomotives for a minute. When we purchased them, GM suggested that the life expectancy of each locomotive was nine years, that after nine years they should be completely rebuilt. Due to our regular maintenance schedules, the earliest that we had to do anything to one of the locomotives was 12 years. We got three extra years out of the locomotives. When we did rebuild them, it was done completely internally. We did not have to have anybody come in to do the work.

Victor Tomiczek touched on the aspect of the International Pier. That is a really sore point with the railroad. For an investment of $15 million they dredged the harbour and put in what they call a mobile boom. This mobile boom is for loading vessels. We used to be able to handle only 25,000-tonne to 30,000-tonne vessels. With the dredging of the harbour and the installation of this mobile boom, we had the capabilities of handling 50,000-tonne Panamax vessels. In our opinion, the investment that the corporation made in the pier was either the worst waste or the best use of taxpayers' money. If, indeed, it was foresight on the corporation's behalf, then we as a railroad union applaud them for it. However, to utilize this investment fully, we have to return to the export market.

The five-year plan, as I saw it, projected that the corporation would remove itself entirely from the export market. The latest revamping of the five-year plan said that we would get back in as a minor player. It seems to us that, in order to fully utilize the investment that they made in the piers, it is imperative that we get back into the offshore market.

The fact that we tied ourselves to one customer and also negotiated an 18-per-cent reduction in the cost per tonne puts Devco between a rock and a hard place. To be tied to only one customer does not make good business sense. We reiterate that it is imperative that we get back into the offshore market.

When the corporation initially invested the $15 million in the pier, our union was told that, in order to fully utilize this investment, we would have to meet certain standards regarding servicing and loading of the vessels. Before the installation of that mobile boom and the dredging was done, we were realizing load rates, meaning the amount of coal that we could put on a boat, of 16,000 tonnes per day. In order to be competitive in the world market you have to load somewhere in the vicinity of 25,000 to 26,000 tonnes per day.

With the last shipments that we did over the pier we averaged between 26,000 and 30,000 tonnes a day as a load rate, which is equal to or above world standards. Although the loading of vessels has been minimal over the last few years, when we loaded the last few vessels, there were press releases in Minds and Matters, an internal paper at Devco, or notices sent to our work site telling us of records that we had set in load rates.

The capabilities are there; the manpower is there; all the equipment is there to handle any kind of vessel at market targets. There is nothing that we cannot handle at the International Pier. We want to emphasize that we think that is the future for Devco. Being tied to one customer is a pretty iffy situation.

Over the last eight to ten years, the cost per tonne by rail has continually decreased due to better equipment that we are using, better utilization of the equipment, increased productivity by employees and reduction in manpower requirements. During the last five years, a train crew has consisted of four men. In recent negotiations, which we concluded in January of this year, we ratified an agreement whereby the crew consist, meaning the number of people employed on each running crew, would be decreased from four to three or, in some instances at certain sites, to two men. That will realize a further decrease in costs per tonne of between 25 per cent and 40 per cent.

To get back to Ms. McLellan's and Mr. Manley's opinions that we should go home and get our house in order and get along with each other, our new collective agreement is in effect until March of 2000, which pretty much ensures labour peace between Devco and the IAM. I cannot speak for the other unions, but I believe everybody has ratified their agreements at least until the year 1999. The unions have made every effort and have bent over backwards, as a matter of fact, at great cost to our members. We have taken steps to ensure a harmonious relationship.

The IAM came about as the result of a forced merger between what used to be known as United Transportation Union E, which would be locomotive drivers, United Transportation Union T, which would be brakemen on the crews, and the International Association of Machinists. Just prior to the merger we had approximately 400 employees. We currently have 90 members on the books, of which 58 are guaranteed full-time positions, and the balance are to be, as Victor mentioned, requalified for the life of the collective agreement.

Devco is paying 58 full-time salaries, which is a reduction in our workforce from December of 1996 to January of 1998 of approximately 40 per cent. It has been at great cost and great hardship to our union that we have come to this point.

We have a problem with the present practice of operating a two-mine system. Everything hinges on Phalen, and they are running on one wall down there. A couple of years ago, somebody in upper management, in their infinite wisdom, suspended development at Phalen. As everyone is aware, Phalen Mine is in a precarious situation. It is no secret that from day to day we do not know what is going to happen. We feel that development should be the utmost priority, and that there should always be some sort of backup.

Mr. Drake can address the aspect of the Donkin Mine much better than I possibly could. The land and the roadbed are now in place for a rail line to the Donkin site. We used to have a rail line that went to Morien and possibly to Donkin, although I am not sure of that, but it has been torn up. In any event, the bed, the line and the land are all in place to run a line to service Donkin. We have the machinery, the people and the know-how to put that line in place.

From a safety point of view, to preach the merits of railroad as opposed to trucking, all one needs to do is to travel the roads of Cape Breton. One can see the condition of the road due to the constant pounding of truck after truck hauling coal from Prince Mine. Not only that, if you drive by car and you have these things whizzing past you at all hours of the day, 24 hours a day, that in itself speaks for railroading.

The bottom line, we feel, is that, if production is there, then the costs of trucking versus railroading are not comparable. Trucking cannot compare. I will give you an example. We haul, generally, 21-car units of coal. You would need 63 trucks to handle those 21 carloads of coal that the railway carries at one time.

Again, it is constant pounding. It is a safety hazard. Railroading is the only solution if and when Donkin Mine is opened, from a safety point of view and from an economic point of view.

Senator Graham: How many members does your union have?

Mr. Wiseman: We currently have 90 members on the books. We have made an agreement that the corporation will be obligated to pay 58 salaries.

Our number one option would be to have people voluntarily laid off for the year. Failing that, our number two option would be that the corporation, at its discretion, decide which 58 people it will employ.

Senator Graham: I sense some improvement in the relationship between labour and management. You talked about the contract that runs to the year 2000. What about the level of confidence in the future?

Mr. Wiseman: I would not say that it is great.

Senator Graham: Is it better than it was a year ago?

Mr. Wiseman: With our present collective agreement, our members are more comfortable regarding the future, but only to the year 2000.

Senator Graham: How large a ship can you handle at the pier?

Mr. Wiseman: The largest we have dealt with was approximately 55,000 tonnes, being the Panamax vessels, which are the vessels of choice.

Senator Graham: How big a draught does the harbour allow?

Mr. Wiseman: I am not familiar with that. They used to bring these vessels into Port Hawkesbury. We would ship by barge because we could not handle them at the pier. We would load onto barges, and the barges would go to Port Hawkesbury and top off these vessels. It might have taken three or four trips between Sydney Harbour and Port Hawkesbury.

With the dredging and the investment in this mobile boom, we can handle any coal vessel that they want to bring to the pier.

Senator Graham: Mr. Chairman, I am going to use a little bit of licence and digress from the subject of coal for just one minute. I have a question for Mr. Wiseman, which is germane to the whole area and has to do with his reference to servicing RailTex.

A number of years ago, Senator MacDonald and I debated about the Truro/Sydney rail line. My position at the time was that CN was not doing its job in selling the railway. They had gone from seven sales people to one sales person.

Senator MacDonald's position was that by privatization to RailTex they could do a better job. Indeed, they are proving that they can do a better job and they are making a profit.

That leads me to dream in the future, as we all should, of rail passenger service and rail liners. We lost the rail liner service between Truro and Sydney a long time ago. There are a lot of old rail liners lying dormant, probably 35 or 40 of them in the VIA rail system some place. There are those who have speculated and even discussed the possibility of restoring some kind of rail liner service. Like Donkin, you would have to look at the feasibility to see if it would be possible and if there could be something restored there.

Suppose someone did have the imagination and the courage and the wherewithal to take this on. Would you be able to refurbish rail liners and to service them?

Mr. Wiseman: I do not think there is anything on wheels that our facility cannot handle -- upkeep, maintain, refurbish, anything.

With every problem that RailTex has had, they have contracted us to do their work. Whether the problem was with their locomotives or any other problem, we were contracted to do their work. In fact, they have hired on contract one of our laid off employees to do their work for them. There is nobody this side of Moncton; and I do not believe that Moncton does any work at all now as far as maintaining rolling stock or locomotives. Everything comes to us.

Senator Graham: Obviously this is being done through the corporation, and the corporation is making a profit on that kind of work?

Mr. Wiseman: Exactly.

Senator Murray: Are the employees of RailTex unionized?

Mr. Wiseman: No, they are not.

Senator MacDonald: Are you referring to some shortline in the area, some abandoned rail line?

Senator Graham: I am talking about the possibility of restoring rail liner service between Sydney and Truro, using the RailTex line.

Senator Murray: Passenger service.

Senator Graham: Yes, passenger service.

The Chairman: I now call our next witnesses, the United Mine Workers of America.

Mr. Steve Drake, President, District 26, United Mine Workers of America: I should like to thank the committee for coming to Cape Breton, so that we do not have to travel to Ottawa. It is nice to have you on our home turf.

I should like to call your attention to a gentleman in the audience whose name is Dan Currie. He is a former mine manager of the Donkin colliery, and he will be answering some questions later with regard to Donkin.

The Chairman: I understand that we will be hearing from him later.

Mr. Drake: Before I start my presentation, I should like to address a few things that have already been raised.

With regard to the export market, I should like to see the plane ticket that George White has right now, because I do not know if George White is exploring export markets. For two and a half years, we have been pushing for an expansion of the export market, to get away from relying on a single customer, Nova Scotia Power. It is convenient that Devco management would pick this particular week to start looking into the export market. I do not buy that for a second. I would have to chew that really hard and long before I could swallow it.

The union people have been very critical of Devco management for 28 years. We have seen approximately 15 different mission statements for Devco. We have seen 35 or 40 different types of restructuring with Devco. None has never worked. Every time they tell us that we have to do something to make this industry work, to make this industry more competitive, we do it because they find a way to say that they lost money that particular year.

We feel that Devco management not appearing here today is a slight on the Senate committee. We support the other unions who have said this. We feel that Devco is getting their ducks in order right now and that, no matter what we say here today, they will have an answer to dispute every single thing we say.

Management particularly in the Cape Breton Development Corporation does not like to be criticized. I am going to read something here for the record. It is from a book called Votaine's Bastards. It is written by John Ralston Saul. Mr. Saul states:

This absence of intellectual mechanisms for questioning our own actions becomes clear when the expression of any unstructured doubt, for example, over the export of arms to potential enemies or the loss of shareholder power to managers or the loss of parliamentary power to the executive is automatically categorized as naive or idealistic or bad for the economy or simply bad for jobs, and should we attempt to use sensible words to deal with these problems, they will be caught up immediately in the structures of the official arguments which accompany the official modern ideologies. Arguments as sterile as the ideologies are irrelevant.

Our society contains no method of serious self-criticism for the simple reason that it is now a self-justifying system which generates its own logic.

Devco does it every week. Every time something happens, it becomes an act of God, whether we predict it, whether the employees predict it, whether Devco projects it or whether Devco schedules it. If it goes wrong, it is never the fault of management because they justify their own system. We say that is wrong, and that that is a major problem with the Cape Breton Development Corporation.

Now I will begin my presentation. I want to speak about Donkin mine, the export market, and management of the Cape Breton Development Corporation. Most important, I want to speak about the biggest asset the corporation has, which is the employees of the Cape Breton Development Corporation. I do not mean the UMWA employees; I mean every unionized and non-unionized employee in this corporation, with the exception of a few management people.

I mentioned the fact that we probably had 15 different mission statements. We have probably been restructured more than any organization in Canada, except the government. It never seems to work. Every time we get an annual report, they tell us we are losing money. One year it is an act of God; the next year it is amortization; the next year it is a $207 million write down. According to Devco's annual report, we lost $207 million. Revenues were reduced in 1996 by $188 million, which is the lowest level in the past 12 years. I believe that is an accurate number.

We have been told that we need to cooperate. We have been told that we need to accept change to be competitive. We have been told that same thing for 27 years.

Let me go through a few things that the employees of this corporation have done. In 1970 productivity, which is measured in tonnes of output per man shift, was 2.48 tonnes per man. In 1992, the level was 11.6 tonnes per man, a dramatic improvement in productivity. Devco said, "We are still losing money."

They told us that we needed more production, we needed more tonnage so that we could use the economies of scale to make this industry more competitive. In 1992 our production was 4.2 million tonnes; 1.8 million tonnes of that went to the export market. Devco said we were still losing money.

The number of employees since Devco was founded have dropped by more than 4,000 jobs, to the last reported level of 1,811 employees in 1996. They said they had to do this, that they had to restructure. They said that it would make them more competitive. But, once again, they tell us they are losing money.

They said we had to change our technology so that we would be more competitive.

They said we had to change our technology so that we would be more competitive. We changed our technology. We are using retreat mining now; we utilize roof bolting now; some of our sections have remote-control equipment now. Guess what. We are still not making money according to Devco.

They told us that we must have a wash plant to have a proper product for our main customer, Nova Scotia Power, and because the federal government had approved a plan for Devco to get into the export market in a big way and to reduce its dependence on a sole customer. That was Devco's mandate for the last 20 years. They told us to build a new export facility. We did that. Guess what. Devco says we are still not making money and that now we must get out of the export market.

None of this is making any sense to the employees of this corporation. The only people it makes sense to are the people who-justify it by saying, "We can do it because we can." That is the attitude. People in this industry are tired of that attitude from government and from management.

They said long-term contracts were necessary for labour stability and customer reassurance, that that would fix up the industry and everything would be fine. Every one of our unions just signed a long-term collective agreement -- all of us. According to Devco's latest report for the nine months ending December 31, 1996, they were over budget by $24.9 million. Still not working; they still want more.

Last year Mr. Shannon reported to the Senate committee that the corporation needed more flexibility in work scheduling, that that would make us more competitive and give us a brighter future. The coal miners right now are working very flexible shift schedules. Some miners are producing coal on the weekends; some are working ten-hour shifts; some are working 12-hour shifts. They are still working a three-shift schedule -- day shift, night shift and back shift. Guess what. The corporation is still losing money.

The Cape Breton Development Corporation said that one of the key things to make this industry more competitive and to have a brighter future was to produce more coal and that, therefore, we must produce during miners' vacations. The UMWA, in 1996, set a precedent. We signed a collective agreement to mine coal during miners' vacations. We gave Devco the right to schedule people during the vacation period to make this industry more competitive, to save our jobs, to save this industry, to save what is left of the economic base of Cape Breton Island. Guess what. Still not enough. Devco is still losing money.

They asked us to cut back. In the past 15 years one of the biggest bones of contention at the Cape Breton Development Corporation has been absenteeism and accident rates. In the past 12 months those rates have been reduced dramatically -- and you will see the numbers on the sheets that I have handed out. Devco's quarterly report is included in those sheets, and it shows that absenteeism and accident rates have been reduced dramatically. We are still losing money.

Cape Breton's coal miners have broken every Devco corporate record -- in production of coal, the washing of coal and the shipping of coal -- over the past five years, with single-day production records exceeding 22,000 tonnes and single-week production records exceeding 80,000 tonnes at Phalen Mine; with the largest vessel ever loaded at the coal piers, being 54,000 tonnes. We have done everything this corporation has asked and more. We have done everything the federal government has asked and more. But it seems that, when we ask for an investigation into Devco management, we are told that it is not a management problem, that we have a problem with the employees or we have a problem with the mine or we have a problem with the markets. I say that that is a load of baloney.

Cooperation, gentlemen, is exactly what we have given this corporation in spades. Cooperation has its limits. Right now Devco is asking us to cooperate like lambs going to the slaughter, and we will not do it. We will fight this issue on the public record, if we can. If we must ride in the streets, it may come down to that; we do not know. The Cape Breton Development Corporation on this issue is dead wrong, and the direction set for Devco by the federal government and approved by Anne McLellan is dead wrong.

I have received letters from Ms McLellan over the past several months in which she states that she has complete confidence in the direction of this corporation, that she has complete confidence in Mr. Shannon's capability to lead this corporation, that she has complete confidence in George White. This industry is headed for a brick wall, and Joe Shannon and Joe Shannon's plan put it on that road. That is the way the employees of this industry see it, and they are a bit nervous.

Ms McLellan has refused to visit Cape Breton to see firsthand the problems in the Cape Breton Development Corporation. She has left the ball in Mr. Shannon's capable hands, as she puts it.

It would seem that Ms McLellan has an unprecedented disinterest in the Cape Breton Development Corporation as compared to past ministers who were responsible for this corporation. I do not know whether she is in a conflict-of-interest position, and I will not make that accusation. However, Ms McLellan's home riding in Alberta contains several coal mines that are in direct competition with the Cape Breton Development Corporation in the export market.

The second thing I want to talk about is Mr. Shannon's statements on the record.

In 1985 Mr. Shannon answered conflict-of-interest questions regarding a trucking issue. Incidentally, our union supports the IAM's proposal to have a rail line right over to the Donkin colliery, if Donkin is ever opened, because that is the only viable way to ship the coal.

Mr. Shannon made a statement in 1985 that his company, Seaboard Trucking, was not contracted to Devco, when he set up the corporation, to truck coal from Prince Mine to the Lingan Generating Station. Mr. Shannon was right; he did not have a contract at the time. However, several years later Mr. Shannon's company, Seaboard, did carry most of the Cape Breton Development Corporation coal from Prince colliery to the Lingan generating station. That was recorded in the Cape Breton Post of November 15, 1984. Today, in 1997, Mr. Shannon, as the chairman of the board and former acting president of the Cape Breton Development Corporation, still owns that company which is still bidding on contracts, and I understand that Seaboard Trucking still holds the major share of Devco's coal trucking contracts.

In the Halifax Herald of April 2, 1985, Mr. Shannon was reported as stating:

Devco's coal division will endeavour to become a credible business through improved financial performance, increased production, the establishment of management accountability and the restoration of confidence with government employees, the community and the general public.

Mr. Shannon told us in 1985 that we were going in the right direction. He is saying the same things now. He said the same thing in 1995. He said the same thing in 1996. When Mr. Shannon appeared before the committee in 1985, he called it the right direction. In the 1985 Annual report of the Cape Breton Development Corporation, Mr. Shannon called it a new direction.

The year before Mr. Shannon joined the corporation, Devco recorded a loss of $49 million. In the brief period Mr. Shannon was here that $49 million loss was turned into a $9.7-million profit in 1985. Local politicians, Mr. Dingwall and Mr. Russell MacLellan, questioned on the public record the reality of those numbers. The employees of the corporation also questioned them. Six days after Mr. Shannon announced the $9.7-million profit, he quit, and the Cape Breton Post reported that Devco was projecting a $21-million loss for the next year.

In one year Devco went from a $49-million loss to a $9.7-million profit and back to a $21-million loss and that, once again, is on the public record. Anne McLellan is asking us to have confidence in this kind of bookkeeping. I am afraid that we cannot.

In 1995 Joe Shannon dismissed Devco's profit-making performance by past management and its budget for the current year as -- and, excuse my language, I will quote Mr. Shannon -- "bullshit." He said there was a complete loss of confidence in the budgeting process and that the $13 million profit was achieved by under-spending the development budget. Remember that when we are talking about development later on. That was reported in the Halifax Chronicle-Herald and in the Cape Breton Post on October 13, 1995.

At a meeting in the same week with the District 26 executive, Mr. Shannon told us in very clear and certain terms that he was not concerned if people went to jail over these issues. I believe someone mentioned that during the last committee hearings. A subsequent announcement by the Auditor General's Office said that Mr. Shannon may have been exaggerating with regard to Devco management's past performance.

I just have a few over-heads, and then I will get to the Donkin mine and the export market and the importance of both those issues.

We have a very simple philosophy here. We have heard mission statements from everybody who was anybody in the Cape Breton Development Corporation, so we have put together a mission statement of our own. We want to put Cape Breton back to work and we think that this Crown corporation, Devco, has an important role in doing that, as well as the Donkin mine. We want to strive for honesty and accountability in this industry. We have never had it -- never. We also want to strive to open the Donkin mine. That is a simple mission statement, and we think it is fully achievable.

Last year at the committee hearings Mr. Shannon put a chart on the board, which had a red line and a black line. The black line represented the budget, and the red line represented the actual performance. Mr. Shannon said -- and this is quoted directly from the committee proceedings:

When they were talking about metres, they were under budget, and when they were talking about spending money, they were over budget -- just the opposite to what it should have been.

Devco right now is under budget on development, under budget on production, and 30 per cent over budget on their operating costs. Operating costs, according to the Devco quarterly statement, are $24.9 million over budget. That does not make sense to me. If you are under budget on development and you are under budget on production, how can you be over budget on your operating costs at the same time? It flies in the face of what Mr. Shannon said the last time.

Mr. Shannon said that the $960,000 override in overtime paid to miners in the past year, which would have been 1995, I believe, was a key issue that must be addressed and that it was a management problem. He said it was a management problem which had to be brought under control -- and that was recorded in the Cape Breton Post and in the Halifax Chronicle-Herald on September 1, 1995.

The most recent quarterly report for the nine months ended December 31, 1996 shows an increase of 3.1 per cent in overtime at Prince Mine and a 3.6 per cent increase at Phalen Mine over Mr. Shannon's forecasted budget. We feel that Mr. Shannon laid too many people off.

With regard to production and development, in 1985 Mr. Shannon stated that mine managers had been so concerned with production that development work had fallen behind over the years, which resulted in delays because there had been no advance wall preparation. This was reported in the Halifax Chronicle-Herald, on April 4, 1985.

Mr. Shannon has been well aware for the last 11 or 12 years that the development is the key to keeping mine activity going and to keeping your production numbers up.

In 1996, Mr. Shannon was reported in the Halifax Chronicle-Herald of August 16 as stating:

We're a little behind in production and substantially behind in development at Phalen Mine, but that will be corrected in the next few months.

Mr. Shannon, as well as local federal politicians, were informed that to shut down all development sections in both collieries would cause coal shortages in January and February of 1997. What happened when Phalen colliery had no coal production and Prince colliery had no coal production had been projected by the United Mineworkers and many other unionized people in the Cape Breton Development Corporation in both 1996 and 1997. The problems at Phalen colliery with roof control, which led to one of the shutdowns at Phalen colliery, were announced by Devco spokesperson Sandra Richardson. Sandra must say what she is told to say; she must put these things in the paper and release it to the media. It was said that the situation was predicted. If it was predicted, it must have been budgeted for, and we should have had something in the way of a contingency plan.

Russell MacLellan, the MP for this area, was at a meeting last year with UMW executives and with Devco mine management, and the mine managers at Prince colliery were informed that we would work day and night, that we needed extra people in development sections; otherwise, come January and February, when the coal reserves at Prince colliery, in No. 14 West, were depleted, No. 15 West would not be ready to produce coal. We predicted it last year for Prince; Devco projected it last year for Phalen. The company called it a scheduled shutdown at Prince colliery. It was not a scheduled shutdown.

We told them last year to get development up in Prince, to put extra shifts and extra men there, and the company refused. The bottom line is that that was a management decision, a planning mistake, and we paid for it this year with imported coal into Cape Breton Island. We lost $12 million because of management's mistake last year. The situation was predicted.

The next graphs show the shortfalls in development at Phalen and Prince. These numbers are directly from Devco's quarterly report, or almost annual report now. This one is for the nine months ended December 31, 1996, their most recent one. Devco production tonnages were 23 per cent less than planned; they were approximately 530,000 tonnes off target for the nine months ended December 31, 1996.

Mr. Shannon stressed in 1985 and in 1996 the importance of development and the importance of planning. Phalen mine development was 36 per cent less than planned. Last year, when they laid off 1,200 people, we told them once again, "You are behind on development. Do not lay off 1,200 people. We do not want to see anybody get laid off, but we especially do not need to see the development sections shut down." We fought with them; we argued with them. Mr. Shannon said, "No, we need to find $10 million somewhere."

Well, his plan just lost us $12 million, and I do not see that as being a gain. We lost $12 million because of those management decisions which resulted in imported coal and lost revenues, and those revenues are gone forever. That money is gone to the United States; it will not help Cape Breton and it will not help Canada.

Senator Murray: They say they are at 75 per cent of target in Phalen development, Mr. Drake.

Mr. Drake: These numbers are exact; I checked them 20 times. They are exact. They are at 36 per cent less metres than planned.

Senator Murray: Total development. Are we talking Phalen?

Mr. Drake: We are talking Phalen colliery.

Senator Murray: Total development advance, while still behind plan, improved in the last three months to 75 per cent of target. That is what they say.

Mr. Drake: With all due respect, Senator Murray, someone once said the earth was flat, too.

I might sound a little cynical here, and I guess I am. We have been saying the same thing for the past three and a half or four years, and it seems that this committee is the only avenue that we have. You are the only people who have actually listened and have made some decent recommendations. Most of those recommendations have not been followed up, and that is frustrating because we do not have much time left. If we keep losing 20 million or $25 million that government loan will be gone. We are up against a brick wall right now and we need someone to take this message back to Ottawa. There are some people in this industry who should not be in this industry.

Prince mine development is at 10 per cent less metres than planned. If you look at Devco's numbers in their statement there, Senator Murray, the total metres for development in their plan for Prince and Phalen colliery, they are 2,893 metres off target.

Senator Murray: Mr. Drake, that is not what their nine-month report shows, if I am reading it correctly -- and you can correct me. Development plan was 4,200 and the actual was 3,800 up to the end of December.

Mr. Drake: Does anyone have a calculator we can use really quickly?

Senator Murray: Well, 3,800 out of 4,200.

Mr. Drake: You have both copies. Look at the summary where it says "Summary of Phalen Colliery Operations." It says "Development in Metres, 6,922."

Senator Murray: Yes.

Mr. Drake: The plan was 6,922; the actual was 4,441. Now flip over to Prince colliery: development meters planned, 4,213; actual, 3,801. The total is 2893 metres. That is a 36-per-cent loss at Phalen and a 10-per-cent loss at Prince colliery, in total. They did not hit their targets on development.

As to industry performance, run-of-mine production is 530,000 tonnes lower than their target; development advancement is 2,893 metres lower than target; operating costs are 30 per cent higher than target, $24,000,907. All those numbers are taken right from their report.

At the bottom where it states "Corporate Production and Sales," you can see that the plan was to put 539,000 tonnes into inventory which, they said, would keep us in good stead in case we had a problem.

After the first six months, Devco's plan was falling apart. They had some inventory on the ground, and Joe Shannon and George White told us that inventories were very important, that we needed inventories. During the last quarter they took every pound of coal they had to make the quarter look as good, financially, as possible. They sold 221,000 tonnes of inventory to Nova Scotia Power to boost up their numbers for the last quarter. As a result, their nine-month projections with regard to inventory were off target by 760,000 tonnes.

Everything I say here today on those issues you can verify simply by checking the report and getting a calculator out. It is not magic; the numbers are there. They are all Devco's numbers. Not one of those numbers I just mentioned are a Steve Drake number or a UMWA number.

Senator Murray: Perhaps I will disgrace the New Waterford school system with my arithmetic, but my number says that they are 412 metres short at Prince. That is the difference between 4,213 and 3,801 metres.

Mr. Drake: You are just basing it on Prince; you must base it on the overall picture. In the whole corporation they are off target by almost 2,900 metres. Look at Phalen.

Senator Murray: They say they are at 75 per cent.

Mr. Drake: It is 36 per cent. My brother is a math teacher. He teaches at Glace Bay, so I got him to do this; I did not do it.

We have a management problem. We have always had a management problem. I do not know how to fix it. I am not suggesting that we fire a whole bunch of people, but there are some people in this industry who have never been held accountable. That is a major problem. Part of our mission statement is to make people accountable in this industry. If we must be held accountable, we will do it.

I will touch just briefly on the export market and then on the Donkin mine, and then we will be open for questions.

As to the export market, in its annual reports in 1989 and in 1992 Devco made the following statements:

Devco's marketing strategy --

And that strategy was approved by the federal government.

-- resulted in an expanded customer base as we --

Devco <#0107>-

-- shipped coal to 16 countries.

This is the important part.

We plan to vigorously serve this market and grow within it so as to reduce dependence on the Nova Scotia Power Corporation as our primary domestic customer.

Another statement found in a Cape Breton Development Corporation Annual Report is as follows:

Cape Breton coal is well received offshore and continues to find new customers. The problem of high sulphur coal has been addressed by off shore customers through continued installation of new thermal scrubbers, desulphurization technologies and the blending of various quality coals.

That is what we do at the Victoria Junction wash plant. Eric Funari will be speaking in a few minutes about the importance of the wash plant in maintaining an extra supply of coal and how vital the wash plant and the export facility, the coal piers, are to this industry.

The 1991 and 1992 Devco annual reports stated:

The need to be competitive in the export market requires the Corporation to modify its Pier facilities to allow the loading of Panamax-size vessels. The project, when completed in 1993, will result in reduced shipping expenses, allow retention of present markets and open new market opportunities.

For the life of me I cannot figure out why, after 20 years of cultivating the export markets, we are moving away from them.

The Corporation's new shiploader became operational in September 1993, and was a key factor in achieving export thermal coal contracts and enhancing our position in the marketplace. In June 1994, a record 54,995 mt of product was loaded on the MV Summerrain for customers in Brazil.

Our customers have been very satisfied. Coal sales have been realized in Sweden, Denmark, Germany, Holland, Japan, Brazil, Argentina, South Africa, France, Greece, Italy, United Kingdom, Korea, Mexico, and others.

That statement appeared in the 1994 annual report for the Cape Breton Development Corporation. Just one year later Mr. Shannon reported, at the committee hearings last year, that we were losing $20 million in the export market. I have never had that number qualified, but I guess I should believe it because he is rich and famous. I do not know. I have grave reservations about that number, just like a lot of the numbers that we see around the corporation.

We have one customer now, and they might say that they will schedule 10 boats for this year. They might say that they are getting into the export market with 700,000 tonnes of coal. They said it last year, but it has not materialized. What we see is a head-long rush to eliminate the export market, to get rid of our surface facilities and to tie us to one customer, Nova Scotia Power. We think that is a huge mistake for any corporation. We question how Anne McLellan, the federal representative for the Cape Breton Development Corporation, can justify that, but she has.

Nova Scotia Power has taken steps to utilize alternative fuels. They are drilling for methane gas right now in the Cumberland County gas fields. They are using a company called REI which is connected to an American company called Amvest. That is one alternative source of fuel. They have imported coal into Cape Breton from the United States of America; a horrifying experience for anyone who lives on Cape Breton Island. I am sure Mr. Buchanan feels the same way about that. They have stated publicly that they are interested in buying 90,000 million BTUs of natural gas for their generating stations.

Now Tufts Cove is on oil. That will take approximately the equivalent of 400,000 tonnes of coal. They have two other power plants besides Lingan generating station and the one at Point Aconi. Ninety thousand million BTUs of natural gas is the equivalent of 1.2 million tonnes of coal. Displace 400,000 tonnes of that at the plant at Tufts Cove because it is using oil. If Nova Scotia Power fulfils its promise to buy 17 per cent of Sable Island's natural gas, 800,000 tonnes of coal will be displaced. They are moving away from the Cape Breton Development Corporation as a primary supplier.

Is it sensible? Is it logical? Is it defensible for the Cape Breton Development Corporation to be moving toward Nova Scotia Power as its sole customer? We say no. We say that is suicidal for this industry. In 1995 Nova Scotia Power, being as aggressive as it is, arbitrarily cut the contractual price for our coal and told us they were breaking the contract. Incidentally, Mr. Shannon said that in three years the full 18-per-cent cut would have taken effect. I obtained a copy of Nova Scotia Power's annual report which indicated that as of January 1996 that full 18-per-cent cut was in. That represents $30 million a year that we lost.

We have so much evidence here that points to the necessity of moving toward the export market and to diversifying our customer base, and probably two, three, maybe four people are saying "no." We do not buy that. A gentleman, who is about 70 years old, was in my office about five weeks ago, and he was talking about the importance of having more than one customer. He is a coal miner. He said the only reason he could see that Mr. Shannon is so adamant about getting out of the export market is that you cannot ship coal overseas by truck. I thought that was a pretty observant statement by that gentleman.

With regard to the Donkin mine, the report entitled "Energy, a Plan for Nova Scotia." contains the following statement:

The coal mining industry will have a significant positive impact on employment in Cape Breton and on the Nova Scotia economy in general.

Statements by Devco in 1995 suggested that the coal mining industry was responsible, through both direct and indirect jobs and through spin-offs, for pumping approximately a billion dollars into the Nova Scotia economy.

The report goes on to say that the most important development would be the Donkin Mine. That was in 1979. On the energy planning board was a very well-respected engineer, Mr. William S. Shaw, Ph.D., P. Engineering. Also on the energy planning board, praising the future of the Donkin Mine, was the president of Novaco, Mr. Joseph P. Shannon.

In the same year, 1979, Montreal Engineering in its report on the first study, which was probably the $400 million study, stated:

The Donkin resource block is free from major disturbances. Risks at Donkin are no different than any other typical project. Benefits of selective mining are self-evident.

Kilborn Engineering did another study 1981 said that the geology was free of significant faulting.

There are 1.4 billion tonnes of marketable coal there, and Donkin is economically feasible.

In 1984 Alan Craven of Associated Mining Consultants, who is a respected engineer from Alberta, did a study for the Cape Breton Development Corporation on a small scale project using old technology. It was viable technology in 1985. The engineering part of the report is still valid. That project contemplated using room-and-pillar mining, with an option to go into a full-scale, long-wall operation in the future. The conclusions of that study were that we could get into such an operation very inexpensively, make some money with the coal we produced, and then we could spend that money to get back into a large-scale operation. It makes common sense to me and it is exactly what we said last year and the year before that in the UMW plan for the Donkin mine: Go ahead on a small scale and then spend some of the money that you can make with a small workforce to open up a potentially larger operation of maybe 2 million tonnes per year.

I am pleased that Senator Buchanan read that statement from the annual report. The analysis of the 2,700 tonnes of coal mined at the Donkin-Morien Project was particularly encouraging. That sampling indicated that by selective mining -- there it is again -- by leaving part of the coal seam as floor and roof and mining 70 per cent of the 3.4-metre seam, the sulphur level could be reduced to about one per cent. That statement appeared in the Cape Breton Development Corporation Annual Report of 1985, and the chairman and acting president speaking then about the quality of the Donkin coal was, once again, Joseph P. Shannon.

I am a coal miner. My father, who is here today, has been a coal miner for more than 40 years. We sit around the kitchen table and talk about common sense. Common sense says that we have been mining coal in Cape Breton since 1685, for more than 300 years. None of that coal is sitting around. We have sold every bit of it, and we have mined all the same seams that are on the Donkin block. We are in the same coalfields, the Sydney Coalfield, and it makes common sense to us that the Donkin mine is just as viable as the other 110 coal mines we have opened in Cape Breton.

Anyone who tells us that Donkin mine is not viable is stretching the limits of credibility. Donkin mine is a viable project, just as viable as the Phalen mine was. Many times we have heard that the coal at Caledonia is of poor quality or the coal at a potential Phalen mine is of poor quality but, when the government finally gets the political will to open the mine, miraculously that coal is of high quality and very marketable.

I think the Donkin Mine should be pursued. Just last week I called Alan Craven in Alberta, who is the originator of this report. He was also involved in the original operation in 1984. He said that we have a surface operation, that the surface preparation has been done. He pointed out that we have the two tunnels right down to the coal face and the two portals, which represent a huge capital expenditure; that we have a good-quality block of coal there, but that it must be mined selectively; and that we must find markets for it. He also said that Donkin mine should be opened.

If we equate Donkin mine to a glass of water, the few people who are saying "no" to Donkin Mine see that glass as being half empty; we see it as being half full. We are saying: We know what we have. Let us take what we have and make the most of it. We say we can do it.

We are tired of fighting and we are tired of arguing with people who have no substantive evidence and no empirical facts to back up anything they say about Donkin Mine not being viable.

We are asking this committee to take our message back to Ottawa. We have cooperated to the maximum. We will continue to cooperate if management and government will cooperate with us. We do not have problems with middle management. We get along quite well.

We have signed long-term collective agreements. We have dropped our grievances down the lowest level ever in the corporation. We have dropped our arbitrations to almost nil. We get along well most of the time. There are problems, but they are things that we must deal with on a regular basis.

When someone gives us an ultimatum and that ultimatum heads this industry in the wrong direction, we must stand up. We are Cape Bretoners; we are coal miners; we are the United Mineworkers of America and we will not back down.

Senator Murray: In a couple of weeks from now we will have finished the first year of the five-year plan. We will have an opportunity later in the week, I think, to speak to the management of Devco to see exactly how far short they have fallen on the plan for the year. We are almost at the end of the fiscal year. The plan called for production of, I believe, 2.5-million tonnes of coal in the year ending March 31, 1997. In the first nine months they produced something like 1.7-million tonnes. If I read these numbers right, that would have been 688,000 tonnes at Prince and 1.1-million tonnes at Phalen. To reach its production targets, the corporation would have needed to produce 800,000 tonnes in January-February-March. They will fall short on production and on development and in various other ways.

Next year the objective is to produce, I believe, 3.2 million tonnes and, as you mentioned, the plan is to export between 700,000 tonnes and a million tonnes a year.

I will not try to address every point you made here this afternoon. There is a lot of material here, and it will be helpful in terms of our questioning management when they come before us later in the week. Do not worry about the fact that you have appeared here first. Members of the committee will press management on a good many of your points, and we will do so as hard as we can

The question that occurred to me in listening to your entire presentation is this: We are finishing the first year of a five-year plan. Are you still opposed to the plan or are you arguing that, due to mismanagement or for whatever reason, the objectives of the plan in the first year have not been achieved?

Mr. Drake: We are not fighting the plan. We have been fighting the planners since the plan was initiated. The plan was a bad plan from day one.

Senator Murray: There are two plans.

Mr. Drake: I understand that.

Senator Murray: The plan which was eventually approved, in terms of outcomes, sales, employment levels and so on, is overall a better plan than the first one.

Mr. Drake: It is a better plan; there is no doubt about it.

Senator Murray: Is it your argument that it is not achievable?

Mr. Drake: We are not saying it is not achievable. We feel that, given the proper tools, Cape Breton coal miners can do just about anything in a coal mine. Unfortunately, Devco does not give us the proper tools. You cannot build a house with a broken hammer and a bent nail. That is what Devco has been giving us for a long time, and they are still giving it to us.

The key to this industry is development, Senator Murray. For the past three years, we have pressed management, both previous and current management, to keep these development sections up. We know we need a certain level of coal production. There was a fear, when the bonus system was restructured by the unions, that productivity would decrease. I believe that Mr. MacLean can verify that we got 50,000 tonnes in one week already this month.

Mr. Allie MacLean, President, Phalen, Local 2501, United Mineworkers of America: Two weeks ago, on a Thursday night shift and a Friday night shift, we cut over a mile of coal per shift in an eight-hour shift.

Mr. Drake: Prince colliery is basically the same thing on a smaller scale, because it is a smaller mine. We are doing what we must do to make this plan work.

Senator Graham: Relatively speaking, what does that mean?

Mr. Drake: That we are doing what we can?

Senator Graham: Yes.You say that last week you did a mile of coal. Compared to what?

Mr. MacLean: As Steve said a few minutes ago, people were worried, when the bonus structure was taken away, that maybe we would not get as much productivity as we did before. The men gave them more productivity.

Mr. Drake: I am not sure that the question has been answered. There are certain targets in this plan. I do not know whether the targets were off or whether management just neglected to listen to listen to the coal miners to make this plan work. If it is viable, we can make it work. If it is not viable, management should back up and say that they made a mistake.

Senator Murray: What targets are you talking about? They are falling short on development. What is your argument?

Mr. Drake: I thought I made my argument clear on the loss of production. You need development to get a new block of coal. Last year, when they made their preparations with Steve Farrell, the Cape Breton Regional Municipal Government had a target set for Phalen colliery to have 3 Centre wall up and running, I believe by January 1, 2 or 3 of 1997, due to the fact that 7 East could break down at any time and we would have no coal production.

In late 1995 and early 1996, we met with management people at Prince colliery and said that, if we kept producing the way we were producing in 14 West at Prince colliery, we would deplete the coal block sometime in January or February of 1997. That meant that we needed to put some extra workers in the development sections at Prince, to get 15 West prepared so that so that next year, in January or February, we would have 15 West ready and we would not have any production losses. We projected that both operations could have production shortages in January or February of 1997. Management ignored those recommendations by the unions and, lo and behold, we imported coal in January and February of 1997.

We are saying that, if they do not give us the right tools to make their plan work, we cannot make it work; it is impossible. We are saying that they are not meeting their targets. You can see in their report that they are $24.9 million over budget.

If everything goes as planned for this quarter, from January 1 to March 31, they will be producing a record amount of coal. That record amount of coal for this quarter will be plugged into the whole year to make it look as good as possible. They are pushing our guys at both mines, at Prince and at Phalen, as hard as possible to get as much coal as possible. We must make that picture look a lot better because, if we go to Ottawa with a $24.9 million overrun in our budget, we are in big trouble. That is what is going on right now. We know this industry must survive, but the nine-month picture looks terrible.

Senator Graham: Of course the question is: If it happens in this quarter, why can it not happen in four quarters?

Mr. Drake: That is the $60,000 question. We need a development period. We have heard too many times that Devco management is doing a good job now. Devco management is not doing a good job -- and I am not talking about middle management; I am talking about upper management.

Senator Murray: To come back to the development once again, in the nine-month period at Prince, the plan was to do 4,200 metres, and actual is 3,800. That is 400 metres short. At Phalen, the plan was to do 6,922 metres in the nine-month period and the actual was 4,441. Is the plan deficient? Are you saying that they should have planned for more development?

Mr. MacLean: Yes.

Mr. Brendon McIntyre, Sub-District Board Member, United Mineworkers of America: We have a problem with the plan itself. We had a five-year plan, and we were mortified when we saw U.S. coal coming in here. That is why we are skeptical of this second five-year plan. Is it a plan for window dressing, just to take $80 million and throw it out the window and then, at the end of five-year plan, Minister McLellan will be able to say, "Well, at least we tried?"

That is why we are making presentations here today. It is to stop the money being squandered in the wrong ways. It is stop the projections that we feel are always under target.

A coal mine should always go with two walls. We always used to carry a million tonnes of coal for export, plus for our customer, NSPC. Today NSPC is the only customer we are relying on, and that is what makes me leery of the plan. If it is only a window dressing and we squander the money with Mr. Shannon and his entourage, and then at the end of the day Minister McLellan and her people will say, "Well, at least we tried." That is the reason we are here today.

Senator MacDonald: What was the nature of the meeting last November or October when you predicted that the lack of development would eventually cause failure of the east wall?

Mr. McIntyre: In January, when the company approached all the unions, all the employees, we met at the GMB Building, on the fifth floor, and they were coming out with the numbers they needed to hit. They forecast a 1,200 employee layoff and asked all of us to cooperate so that they could hit the 10 million mark.

I do not think there was one employee at Cape Breton Development Corporation who would have minded taking a cut to survive, but we recommended that the development areas of those two collieries continue. That would mean that I, as a union person, would say, "Okay, instead of ten weeks I will take 15. I will take the extra five, so that X number of guys can go and carry on the ball to get the development back." Management did not want to hear that.

Senator MacDonald: Their main objection was related to hiring the extra people that were required?

Mr. McIntyre: They wanted to maintain a minimal operation, just to hit their 10 million mark for window dressing, and then nine months later we are double that in the hole again. That is not good mathematics as far as I am concerned.

Mr. Eric Funari, United Mineworkers of America: If you have a business that has a lot of taxpayers' money invested in it, and you are producing a lot of coal and you have a market for that coal, and you are relying totally on one wall to produce enough to pay back your investment and you are having trouble with that wall, would it not make good business sense to have a back-up source of production, especially in a multi-million dollar corporation?

Mr. Shannon and Mr. White forecast that we would have trouble with this wall. To say they are responsible for taxpayers' money and not have another wall to go into production, if they have another fall like they had a few months ago, just puts this industry totally down.

Senator MacDonald: I understood the labour-management relations had improved to the point where at least two meetings a year were scheduled. Why are they so lacking in prescience, in understanding the point that you are getting at when you say, "Mr. White, unless you do such and such, you will lose the wall and we will end up probably importing over 100,000 tonnes of American coal?"

Mr. Drake: We have said that on many occasions.

First, senator, you asked about the tone of the meeting in November. It was a good meeting. We met with Russell MacLellan, the MP for this area. We went to Prince colliery and travelled underground and then we went upstairs and met with management. The meeting went well. Russell wanted some questions answered, and they were answered.

Everything that we have said here today about the necessity of development at Prince colliery was mentioned at that meeting, and Freddie Howard agreed that we needed development; otherwise, we would not have a mine. Where it went from there I have no idea.

Russell MacLellan at the time was quite concerned with the development of Prince colliery. At that meeting -- and I wish Tommy Gillis, the president of our local at Prince, were here right now because he could vouch for this -- we told him that in January or February of 1997 we would not have coal coming out of Prince mine because, due to lack of interest by the corporation in development, we would not have an operational wall ready.

A few weeks ago the Cape Breton Development Corporation put a statement in the Cape Breton Post that the shutdown at Prince colliery was a scheduled shutdown. When you have a $150-million asset like Prince colliery, you do not schedule it to be shut down for ten weeks. What kind of scheduling is that? You do not do those things.

The overall tone of the meeting was great. However, after the meeting, Devco just laid off 1,200 people and that was the end of it.

Senator Murray: Coming back to Phalen, let me quote a statement which you made when you appeared before the committee last May. You stated:

Any miner who works at Phalen colliery will tell you that Phalen colliery right now has an operating basis that goes from week to week. We have had too many problems with geotechnical concerns. We have three flooded mines above Phalen colliery. We have rock outbursts at Phalen colliery. We have more problems at Phalen colliery than you can shake a stick at. Our people are willing to work at it. However, it you put all your mining eggs in Phalen's basket and something happens next week or next month or next year, we will be in major trouble in this industry. We will not be able to supply our main customer, Nova Scotia Power, or the export markets.

So something has happened. You said a number of things happened. Could these geotechnical problems, the flooding and so on, have been prevented in any way?

Mr. MacLean: As far as the flooding is concerned, water is coming in at 7 East Wall. When we have a roof fall, we get the water. We are saying that the roof fall should never have happened. Our men are good miners. They have proven it on a daily basis. They are producing per shift miles of coal. As long as they leave our men alone to do what they know best, to cut coal, and that is what they will do.

They have been listening to the men for the last month and a half, and they are getting excellent results. The coal tonnage is high.

Senator Murray: What can be done to prevent the roof fall?

Mr. MacLean: Listen to the men. Cut coal on weekends; do not stop the wall. Our management people stopped the wall. If you keep the wall straight, you will not get the fall.

We went through hard times in the last week and a half -- and we have surveyors here to back us up. We went through the same conditions again but, because the wall was straight, because the profile was dead on, the men got through that without a fall and without water. They should listen to the men. They have been listening to the men for the because they are coming to the end of their fiscal year.

Mr. Drake: The profile of the wall is very important. You must keep the wall as straight as possible. When you start operating a wall that is a little bit crooked, you start to have roof control problems. Any miner will tell you that. You must have a straight profile.

On many occasions, at Phalen Colliery especially, that was not done. In the past several months they started listening to the miners, and now they have surveyors down there on a regular basis keeping the profile straight. That is one positive thing that could be fixed on a regular program.

Second, we have a mine that was designed originally for wall face lengths of between 600 feet and 700 feet. That was the original design of the mine. Someone in his wisdom decided that, since they have 1,000-foot walls in the United States, maybe we should have an 860-foot wall here. The logic was that, if you develop a 10,000 foot tunnel on the right and a 10,000 foot tunnel on the left and it costs you $8 million per tunnel, or $16 million in total, you must retrieve that money by extracting that block of coal in the middle; that, if you make the block of coal bigger with the same two tunnels, you get more money back.

It sounds logical, but in the United States they do not have the same kinds of mining conditions that we have here. We argued with Devco. We argued with Reggie MacIntyre, vice-president of operations at the time, that the problems in Phalen colliery, with roof control conditions in No. 6 East, were an indicator of the sandstone deposits that we knew were there. Our geologists are very good; they do their job. We knew we had huge sandstone deposits, and we knew they would get worse as we went deeper. As you go deeper, you have more cover and, therefore, more weight. We argued black and blue.

We have a 650-foot wall face now. We cannot go to an 860-foot wall face, but Devco put it in the plan anyway. The plan was to get more money back for your investment. 7 East is a prime example. It is an 860-foot wall face, and it is too long. We went through roof falls in 7 East.

Common sense tells you that, when you have a weight problem, you must go that way as quickly as possible so that, when your weight breaks, it breaks behind you, in the old workings behind your wall face. There is no problem if it happens there. With an 860-foot face, it makes perfect sense that you are going that way at a slower pace than if you were going this way on a 650-foot wall face. You must go that way quickly. The shorter the wall, the quicker you will go in the direction you are supposed to be going and the more weight you will have behind you where it is supposed to be.

The problems that we have in No. 7 right now will be worse in No. 8. Devco in its wisdom -- and George White wrote me a letter verifying this two weeks ago -- has decided that No. 8 will remain at 860 feet and that No. 9 will be cut and developed at 860 feet. We do not make any sense out of that.

We will break records again if they give us the proper tools. Listen to the coal miners. Mr. MacLean is dead right. When I first started in the mine, my father told me, "Stevie, you will do well if you listen to the old coal miners." He was right and Mr. MacLean is right. Devco does not listen; they just make arbitrary decisions.

Senator MacDonald: Mr. MacIntyre, the gentlemen to whom you just referred is a bit more than middle management.

Mr. Drake: He was vice-president of operations.

Senator MacDonald: Are you saying that he agreed with you?

Mr. Drake: No, no, he disagreed. He never agreed with us.

Mr. McIntyre: When Mr. MacIntyre was vice-president of operations, we had that rock outburst that we spoke about earlier, three years ago. A group of people from our safety committee, from management and from the unions went abroad to try to get an understanding of how we could deal with what we called the "crispy crunch" stone.

When they came back from that trip, they had many meetings to try to come up with safety criteria to operate the development areas. It was not something that we were unfamiliar with because we did have similar conditions in 26 colliery. They set up a criteria that everybody agreed on, on how many metres they could go safely to develop it.

Reggie MacIntyre's statement over at the Phalen colliery was, "If I cannot turn the machine on, development is not going ahead." Development sat still at that colliery for two years because Reggie MacIntyre wanted us to go and start up a machine and jeopardize our safety. We told him, "You get on the machine and cut it, Reggie, and we will stay out of the pit." "Oh, no."

That is what you are dealing with when you deal with Reggie MacIntyre.

Senator Graham: Many years ago, Allan Foley used to preach to me about retreat mining and room-and-pillar. Allie, when you talk about "listen to the men", one of the emphasis -- and I have said this before -- that we have put in our report was hoping for better cooperation between union and the management.

Mr. Drake, listening to the earlier part of your presentation, you would get the impression that relations between union and management has, indeed, deteriorated since last year. I hope that is not the case.

Mr. Drake: I said we get along very well in most cases with middle management. We have a problem with upper management.

Senator Graham: Since you appeared before this committee in Ottawa last spring, would you say that relations have improved?

Mr. Drake: I would say yes, with middle management. From a certain level down, I would say that they have, especially in the past several months. We still have problems, but they are things we have to work through. It is an industry. You have union; you have management, and there are things we have to deal with on a regular basis, and we know that.

Senator Graham: Why are we losing on the export market?

Mr. Drake: I would say we are losing on the export market because of decisions that are being made that should not be made. We cannot buy $6 million machines. We bought one, an ABM 20. It was $3 million. It did not perform. Reggie McIntyre bought it, as a matter of fact. The one in the mine was not performing. We went out and bought another one for $3 million, and it has been stripped for parts for the one in the mine. My brother-in-law is stripping the one in the mine. We have no idea where that one is going to be shipped to.

We spent $6 million on a machine. You cannot keep making decisions like that.

You cannot make decisions such as arbitrarily shutting down development sections for two-year periods, and then running out of coal. Those situations were predicted by the employees who work at that mine face on a regular daily basis. You cannot make decisions like that. You cannot keep doing that and expect to be profitable.

We can make money on the export market if decisions are made to tighten up the belt of this corporation and if they are made with the proper aspects in mind, which is the survival of Devco, not someone's personal agenda.

Mr. MacLean: Senator Graham, I would like to add to that. We had never lost money in the export markets. The Cape Breton Development Corporation always had long-term stable customers on the export market.

We lost money on the export market when they quit supplying to their long-term customers and got out of the export market. Then when they needed to make some quick cash, Devco would go into the world spot market and dump a bunch of coal. They were losing money on that coal, but it was quick cash for them for other purposes. That is when they lost on the export market.

If they had maintained their long-term customers and provided the stable service that they were noted for, they would never have lost money in the export market.

Mr. Drake: Perhaps Eric Funari could address that. Eric is the President of the local at the Victoria Junction Wash Plant. That is part of the key to our export market.

Mr. Funari: Up to five years ago, I used to be able to look down from the back of where I am working and see somewhere in the vicinity of 1.5-million to 2-million tonnes of coal sitting on the ground ready for export. Now where I am working all I see is pavement, no coal able to be shipped.

If you want to want to have more coal to ship, you do not take a stand as Devco is doing as of April 1 and cut production of Prince Mine coal. Prince Mine coal is a type of coal that you cannot wash too much of it. It is a good, cheap product to produce, and we can blend it. We can make a tonne of Phalen Mine coal into two to three times the amount of coal. In simple words, we are churning a tonne of coal into three tonnes of coal. If you are in the business of coal, if you can do something to sometimes double and triple your inventory, you should be doing it. But instead of doing that, Devco sees fit to let Nova Scotia Power dictate to them what they want in coal.

We have no problem reaching Nova Scotia Power specs. That is in the contract. I would like to see what is in the contract as far as specs and quality. But we have been told -- and I have questioned it enough times -- that the important thing with coal is that we reach a spec. A spec is sulphur emissions and sometimes some ash restrictions. We take care of that at the wash plant. We wash it, we blend it, it is sampled and we sell it.

Nova Scotia Power and the Cape Breton Development Corporation, through some means, have got together and said, "We want all your raw coal." We do not have the opportunity to sit down and take a tonne of coal and do the best we can with it by blending it and having a supply of coal for the overseas market.

I spent eight months on the road last year on layoff because Devco, in their wisdom, has allowed Nova Scotia Power to take raw coal, instead of letting us blend it with Prince Mine coal and, thus, have three tonnes sitting on the ground instead of one tonne. That is not good business sense. We are not making money. If we are not able to produce as much as we can and we are not able to sell as much as we can produce, it does not look like the powers of control have the best interest of the Cape Breton Development Corporation being successful in their mind.

Senator Graham: I cannot let this moment pass, Mr. Chairman and colleagues, without remembering the name of Lloyd Cresore, who passed away the other day and is being buried today.

When I was Vice-President of Devco, one of my line responsibilities was marketing. Lloyd Cresore travelled the world, very successfully in those days, and sold coal on behalf of Devco. I sadly observe the fact that he has passed away and will be missed.

I want to come to the domestic situation, because I recall when I came to Devco in the very beginning from the old Dominion Coal Company, we were faced with a contract where they were selling coal to Nova Scotia Power. If I remember correctly -- and I am sure I can be proven wrong -- it was something in the order of $8.05 per tonne. At the time, there was great talk of converting to oil.

I remember getting a call from Nova Scotia Power saying that they wanted to extend the contract for another five years at the same price. I said that I had been watching the market as well, because the price of oil had gone up to something like $43. There used to be some kind of a formula that they used, and it was the laid down cost of residual oil. The price at Hampton Road was a factor as well.

You have mentioned the advent of Sable gas and the fact that Nova Scotia Power is now talking about purchasing something like 17 per cent of its requirement. I am going to ask you the $64 question here: Can we compete? Are we prepared to compete? My challenge to you is yes, we should be competing. I hope to God we are not going to give up on Cape Breton coal because of Sable gas.

Mr. Drake: Thank you for that vote of confidence. My answer would have to be for the coal miners. We can compete with any coal miners in the world. We need a management team that can compete with management teams worldwide, and we need a marketing person. Devco fired the Vice-President of Marketing, Adrien White. That was the first order of business for Mr. Shannon in 1995. Figure that one out.

We can be competitive with any mining industry in the world if we are given the proper tools. As I said, and I will stress again, we have never been given the proper tools.

We know that Sable Island gas is almost a definite. It is difficult to force a multi-national corporation to back away from something once they have started a process, and we are accepting that fact. I said this same thing last year when I appeared before the Senate committee, and that is that we have to keep our cost per tonne at a competitive number.

We can mine as much coal as Devco requires. We can do 4.2 million tonnes a year, especially if the Donkin Mine is opened. But if we are not doing that at a competitive price, we cannot be competitive on the export market. We need a management team to give us a proper budget and stick to it and make it work. So far we do not have that.

We mine the coal. That is our job. We do it better than anyone on the globe. I will put Cape Breton coal miners up against anyone.

Senator Graham: We have been prodding the corporation publicly and privately to go after export markets, and I have to express some degree of faith in what I reported earlier, that these people are serious about looking at export markets. I hope that you will take that on faith as well. Harry Truman used to say that he was from Missouri and he will wait to see the proof in the pudding.

I have some confidence that there is some high level activity at the present time going on with respect to export markets.

When was the last update on Donkin made?

Mr. Drake: The United Mineworkers made one a year and a half ago. We acquired the services of a few engineers and some people in the United States that are in the UMW. We produced what we think is a pretty decent report. It is a layperson's engineering report on Donkin Mine. We suggested that Donkin Mine could be open between somewhere in the vicinity of $100 million to $125 million.

That is a coal miner's perspective of it, but we have 50,000 years of experience all told in this industry. We can have our say in at least that. That was the last one that was done.

It is interesting that you should ask that question. We spent six months working on that report. It was quite comprehensive and used common sense. When we made it public, the previous management of the Cape Breton Development Corporation went on the public record and said that Donkin Mine was a dream, that they were not looking at Donkin, and it would cost $400 million, and this and that and everything else. However, we made a public push politically and with Cape Betoners. Devco agreed to work with the UMW to develop our Donkin plan into a viable option that we could take to the federal government and show them that we do not need another study; we have been studied to death. We have about eight studies at the moment. We need to open Donkin Mine.

One of these studies says that the only way to do Donkin properly is by a trial mining period underground. We have the bore holes. We are at the coal seam. We know what we have. Let's get out there and do it now.

I have a letter here signed by Bob Cooper, who was the Vice-President of Engineering at the time. It is dated July 21, 1995. Mr. Cooper was put in a compromised position where he had to work with us, and he did. We gave them the whole plan. They took our underground diagram. We blocked out the coal seams and we made pillars and whatever we were supposed to do.

The letter went to Gordon MacLean, Vice-President of Human Resources from Robert Cooper, Engineering and Safety. It says, in part:

Attached please find our latest mine plan based on the UMW Donkin option. This mine plan has been modified from discussions during the meeting with UMW Executive members. This plan represents a layout with selective mining, pillar sizes to match the depth of working and wall location to be within previous sea floor subsidence calculation standards. Bob MacDonald...

who was an engineer for Devco --

...will be talking to the U.S. Bureau of Mines personnel to review pillar design. If they confirm our thoughts, this will be the layout we will do our cost projections on.

Then they had a brief review of the Donkin concept.

Devco management was working with us. They developed the blueprints for an underground operation. Somewhere in the mix, after Joe Shannon became Acting President and Chairman of the board of the Cape Breton Development Corporation, that cooperation disappeared. I do not understand why. Basically I suppose Mr. Shannon said, "We are not looking at Donkin. It is not part of our operation. It is not part of the plan."

If you look in Devco's Annual Report of 1995, just before Mr. Shannon got here, you will see that Mr. Boutilier made a statement that there was a study being done on the Donkin Mine. That is in the President's Message to the shareholders of the 1995 Annual Report.

That is where we are right now with the Donkin operation. We know it can be opened; we know it is viable. The naysayers say that Donkin is going to cost $400 million. In 1979, when Montreal Engineering did the study, Donkin was going to cost $400 million. I have a picture of it here. It is a beautiful operation. There is a wash plant; there are methane extraction facilities. It was a four-tunnel operation, which is a huge expenditure and a huge mine. The drivages underground, they were talking about perhaps four working wall faces at the same time. They were talking about advanced wall faces. That is old technology and it is very capital intensive. It costs a huge amount of money to do that.

I went through some of the documentation. In the original estimate for Donkin they had drivage for four tunnels, main tunnel entrance structures which are there right now, the underground drivage and equipment, methane extraction facilities, wash plant, and an expansion of the wash plant when the tonnages went up to 3.8 million or 4 million per year, surface facilities, and surface site preparations.

Then I went through Devco's books for the past ten years. In 1986, 1987 and 1988 in the Annual Reports it says:

The new Phalen Colliery is on stream and on budget. Fixed assets are stated at cost.

To get Phalen started, that is what it stated.

The Phalen Colliery is stated at $185,928,000 total cost to date. On a corporate basis, the addition of a third colliery will bring economies of scale to the costs of surface operations and administration.

That is from the Cape Breton Development Corporation Annual Report, 1986-1988.

To put Phalen colliery on stream from scratch with no tunnels -- remember that we have the tunnels at Donkin -- is a huge capital cost. It would cost $186 million to put Phalen colliery on stream.

In Devco's 1995 Annual Report it says:

Acquisition cost of Prince Colliery...

From my understanding that means what we have spent on Prince since we started with it up to 1995. I am not sure if that is exactly what it means. We could ask an accountant, I suppose.

Acquisition cost of Prince Colliery over the life time of the project is $150,318,000.

Here we are with two mines. One started for $185 million and one started and operated for a total of $150 million. I do not like to talk about Westray too much, but when they started they had a green grassy field. There were no tunnels; there was no surface operation; there was no small wash plant facility. There was nothing. Westray was started with surface facilities, a coal washery, mining equipment and tunnels for $100 million.

We have spent $80 million on Donkin already.

Back in 1985 -- and this press release is in your packet, Mr. Shannon stated that we still needed approval for Donkin funding.

On May 10, 1985, Mr. Shannon stated, among other things, that there were several options for Donkin:

Depending on the option chosen, development costs to put the mine into production have been estimated at between $50 million and $150 million in addition to the cost of the tunnels.

I called UMW representatives on Thursday and asked them to get me some information on mine start-up costs in the United States -- right from scratch, green grassy field, we must do the tunnels, we must do everything. There is one company called Shoal Creek Mining Company, or something like that, they opened a mine during the last four or five years for $165 million U.S. That figure was quoted in the United Mineworkers Journal from the president of that corporation -- and that is from a green grassy field.

We can argue the costs of Donkin mine all day, but the numbers that I have just given you basically suggest that we could open Donkin mine for $200 million. We have already spent $80 million. We have a full surface operation at Lingan colliery, which has been abandoned, which we could utilize at Donkin mine. Mr. Bob Cooper was looking into that for us in 1995, before Mr. Shannon quashed that project.

Devco has a huge inventory of reusable mining machines that we could rebuild and utilize at Donkin mine. We do not want a $450 million coal mine if it is out of reach for this company. We can do it for $125 million or $150 million, or even $175 million, because we think it makes common sense.

Phalen mine was opened for $185 million. $400 million is away out of line for the Donkin operation -- and that is my personal opinion based on what I have read and on what people have told me.

We feel that the mission statement which we have put together -- to put Cape Breton back to work; to strive for honesty and accountability in this industry; to look realistically at opening Donkin Mine based on the information we have and to utilize it to the maximum -- would not be a difficult process.

Senator Graham: This may sound partisan, but I want to tell you that I have been in the room when Dave Dingwall and Russell MacLellan have fought like tigers on these issues with other cabinet ministers and, indeed, with the Prime Minister. I can tell you that they have gone to the wall for this industry and that they will continue to do so.

Senator Buchanan: I have a statement here where David Dingwall charged the former government with not doing enough to develop the Donkin mine in Cape Breton. There is no question that people have been fighting for it. However, I have not seen a definitive study on the cost of opening Donkin mine since 1983 or 1984.

From everything I have read -- and, Mr. Drake, you know that I have read everything that you people have put out; I have read all the studies on the Donkin Mine. From everything I have read, I have not yet seen where Devco has said that it would cost $400 million to develop the Donkin mine, with the two tunnels that are still there.

Mr. Chairman, in our recommendations we asked that the federal and provincial governments get together and do a detailed update, not a new study. It has been studied to death, as someone said a while ago. We all know the coal is there. Some of the leading mining engineers and geologists put this report together back in 1980, and it was updated in 1983 and again in 1985. These people knew what they were talking about.

The Donkin mine is a feasible mine. We have estimates that Phalen will have a life of three years, five years, eight years, ten years. Somewhere in between the truth shall be known about Phalen. What will happen to the coal industry if or when Phalen goes down?

Mr. Drake: That is a million dollar question.

Senator Buchanan: Nova Scotia Power, as you said, has already bought coal from United States, and they are still looking at buying coal from the U.S. Could that have been avoided? I am told it could have been avoided.

Mr. Drake: Yes, it could have been avoided. Remember that last year we told them to get the development sections up because in January-February we would be running out of coal -- and that is documented. Russell MacLellan was at one of the meetings. We mentioned it to Mr. Dingwall; we mentioned it to Devco management and to the board of directors on several occasions. It could have been avoided.

Decisions have been made in the past, and there is nothing we can do about them now, but someone must start listening. We have people in the industry right now in key positions in upper management in whom our people have no faith. If they lead us into the future in the same way they led us in the past, we are in big trouble.

Mr. MacLean: When you visit Phalen mine later today, I suggest that you travel it on the day shift when all the management people are there. We would prefer that you travel it on the day shift.

In closing, let me say that the average age of miners is 46, not 40.

It was the UMW that went and asked management if we could develop that west bleeder wall. We are not saying to cut the wall, but to set the wall up so that, if anything happened down below. then we would have that wall for a back-up wall. Then we would not be in the mess that we are in, where we have to import coal from the United States. We could have sent our crew up there and had those walls ready to go.

They would not listen to us a year ago, but they are finally listening to us now. They will develop those walls up above, but they will not cut them. They will have them as standby walls. They did listened to us in that regard.

We do not want to leave the impression here that Phalen mine is an unsafe place to work. Phalen Mine is a workable mine. It is a slower process, but, with caution, we can work it safely.

The Chairman: Mr. Currie, we would like to hear from you and then we would like to ask you some questions.

Mr. Dan Currie, Manager, Operations, Donkin Mine: Mr. Drake invited me to attend here today to add my limited knowledge on the Donkin project.

In about 1980 Devco started this thing called the Donkin-Morien Project. I am not familiar with the workings of it then, but it seemed to be separate from the main Devco mines that were working. There was even a separate office set up in Sydney for that project. They started to break ground to open the mine and to drive No. 3 tunnel. I believe that Mr. Rankin was president of Devco at that time.

All of a sudden in 1982 they saw fit to stop the project. The place was locked up and they reorganized Devco. There had been an out-of-province contractor hired to do the job of driving two tunnels, possibly two shafts and tunnels. This went by the wayside after about 350 metres of driveage in No. 3 tunnel. Then Devco reorganized, and some people tried to start the project up again.

In hindsight, I was fortunate to go there because a whole new technology was being used to drive these tunnels. A Canadian-built tunnel-boring machine was purchased, and the job was put together. We found out later that, in the beginning, it was costing approximately $18,000 per metre to drive these tunnels. When the project was revamped and the tunnel-boring machine was employed, the cost came down to $3,600 per metre of finished tunnel. We are talking here about a 25-foot tunnel. We went on and drove the tunnels very successfully with this machine.

The first contractor, the out-of-province contractor that I mentioned, was Beaver.

In the driveage of the tunnels, we intercepted probably six seams. There was the emery seam, which is five feet thick; there was the Phalen seam, which is six feet in that area; there was the back pit and the Boutilier, which are just low seams, maybe two and a half to three feet; and then the harbour seam, which was 11 feet thick when we intercepted it. If we had continued the tunnels going, there were two more seams that could have been picked up offshore. There was the hub and, I believe, the Stubbard seam, which would have been economically viable to develop. They were discovered by the drilling ships during offshore drilling.

When we intersected the harbour seam, the tunnels stopped there. We took about a 3,000-tonne sample of coal out of the harbour seam and we selectively mined this 3,000-tonne sample. In the harbour seam we found eight feet of very high-quality coal in the middle of the block. On the top there was what we call a rider seam which was about a foot and a half of high-quality coal. It contained, according to one of the reports that I saw, 2.25 per cent sulphur. There was a rider seam between the stone floor and the main eight-foot coal seam which was high in ash content -- and this figure must be confirmed because I am just taking it from memory. I believe the coal on that bottom rider seam contained 12 per cent ash. We did send at least three samples of coal, and maybe more, to various laboratories to be analyzed. Apart from that one report, I did not see any more reports on the quality of the coal.

Quality of coal is a very ambiguous thing. If you want metallurgical coal for steel production and you are into a body of thermal coal, it will not be any good, but it will be good for thermal coal. What you are looking at can change from week to week and from day to day. I am sure the quality of coal at Phalen and Prince changes week to week. I could compare it to stone dust sampling.

You heard on the television for months about the Westray Inquiry. Nobody knows yet how much stone dust was there or how much was not there, because there are various ways of taking stone dust samples and there are various ways of analyzing it. It is the same with coal sampling. You could pick out some coal that would be terrible.

One thing I can tell you is that there is a lot of coal there. The tunnels were first-class tunnels, comparable to anything anywhere. There are three seams there that could be mined now, the harbour seam being the main one. I am not privy to inside information in Devco now time because I am retired from Devco, but I believe that Donkin right now is the jewel in the crown for Devco or for the coal industry on this island.

Senator Buchanan: What was your position at the Donkin mine?

Mr. Currie: I had two positions. I was Underground Manager and Chief Electrician. I am an electrician by trade.

Senator Buchanan: I would like to read something to you. This is from a mining engineer by the name of Allan Craven, who states:

Donkin is a beautiful block of coal and it has to be mined. It is basically fault free and indicators suggest that within 10 to 15 years of mining, the coal extracted may be lower in sulphur. If done properly there is no reason why the Donkin Mine will not succeed.

Do you agree with that?

Mr. Currie: I fully agree with it.

Senator Buchanan: Montreal Engineering stated:

The Donkin Resource block is free from major disturbances, risks at Donkin are no different than any other typical project. Benefits of selective mining are self-evident.

Do you agree with that?

Mr. Currie: I fully agree with it.

Senator Buchanan: In the 1985 Cape Breton Development Corporation Annual Report, Joseph P. Shannon, Chairman and Acting President, stated:

Analysis of the 2700 tonnes of coal mined at the Donkin-Morien Project were particularly encouraging. This sampling indicated that by selective mining -- leaving part of the coal seam as floor and roof and mining 70% of the 3.4 metre seam -- the sulphur level could be reduced to about 1%.

Do you agree with that?

Mr. Currie: Not totally. I agree with the selectivity aspect of leaving the roof coal, but you could not very well leave coal on the floor with the type of mining machinery that they advocated using in the Kilborn study, because it would create a problem on the floor. You would have to take the bottom one and a half feet of high ash coal, but it could be very easily washed.

Senator Buchanan: Chemical washing would reduce that even further than the centre section to be mined, including the floor.

Mr. Currie: As I mentioned, the report I saw said that the top section had 2.25-per-cent sulphur. It could be washed down to about 1 per cent, which would produce good thermal coal.

Senator Buchanan: I have a note here that the average ash content in the mineable resource at the Donkin Mine was 6.6 per cent, as stated in the studies done by Kilborn Engineering and Montreal Engineering. I am not sure why they said that the geological resource average was 9.4 per cent and that the mineable resource, which I suspect they would do by selective mining, would be less than 9.4 per cent.

Mr. Currie: It could be, but the report that I saw said that it was around 12 per cent. As I say, the ash and sulphur content in coal is ambiguous because it changes.

Senator Buchanan: We have been discussing this morning with the UMW and others the future of the coal industry. Coal has been mined in Cape Breton for more than 200 years.

In 1979, 1980, 1981, and 1982 the rationale for the new Donkin mine, as you have already said, was, one, there is a lot of coal there; two, it is good coal for thermal purposes and some of it even for metallurgical purposes; three, at that time, as I recall, there were five operating mines in Cape Breton: Prince; 16; 26; Lingan; and then Phalen came on. At that time, neither Devco nor the provincial government, or anyone for that matter, disagreed that a new mine would be required in the foreseeable future if coal mining were to be continued in Cape Breton.

Now we are down to a position where we have two operating mines: Phalen and Prince. We have many estimates of the longevity of Phalen, which is the largest producing mine. Those estimates range anywhere from three years, depending on problems, to maybe eight or ten years.

What do you see as the future of coal mining when Phalen closes down?

Mr. Currie: When Phalen closes down, there will be no coal mining.

Senator Buchanan: The Province put out a lot of money to do the studies on the Donkin mine and to bring the drill-ships in. You were around at that time, as was Bill Shaw. We have always looked upon the future of coal mining in Cape Breton as being dependent upon whether the federal government, through Devco, would open a new mine.

There is a lot of other coal in the Sydney coal fields, but we have always been told that the feasible mine would be a new Donkin mine.

Mr. Currie: That is the most feasible one right now. I do not know who is saying there is a lot of coal left in the Sydney coal fields. Donkin is the last major block of coal. I understand that there are three billion tonnes of coal available, 1.3 billion tonnes of which is capable of being mined with the present day technology.

There is another block of coal over at New Victoria that is feasible, although it is not as big as Donkin.

Senator Buchanan: It was determined in the studies that were conducted up to 1985 that the most important development would be the Donkin mine. It has the potential to produce two million tonnes a year from the harbour seam and one million tonnes from the Lloyd Cove or hub seam. Do you agree with those figures?

Mr. Currie: Yes, although the tunnels were not extended out to the Lloyd Cove or hub seam.

Senator Buchanan: That is right. The next move would be to move it out there to the Lloyd Cove or hub seam.

Mr. Chairman, we have heard from experienced people from the unions this morning as well as from Mr. Currie, who was Operations Manager at the Donkin Mine for the drilling of the two tunnels. We have not heard any witness indicate that the Donkin Mine should not proceed.

Therefore, my conclusion is that we must have an update on all of these studies to determine, within X number of dollars, the cost of developing the Donkin mine to bring in two million tonnes of coal. The estimates from the UMW are from $120 million. The original estimate, using the older technology, was approximately $200 million, less the $80 million that has already been spent, bringing it to $120 million. The estimates that we have heard at these hearings, with new technology and new mining methods, is that the new Donkin mine could come into production for anywhere from $150 million to $200 million maximum.

Mr. Currie: There are two types of developments in a coal mine. There are your access tunnels, and then there is the actual development of your working sections underground.

When you are driving the access tunnels, you are going mainly through stone, where there is no return on your dollar, and it is a high cost. That has already been done at Donkin.

Senator Buchanan: That is the $88 million that has been spent.

Mr. Currie: Yes. Then you access the coal seams, the main one being the harbour seam.

When and if development starts at Donkin, we would be developing in seam, so we would be getting some return for the dollars spent.

Senator Buchanan: The development coal can be sold.

Mr. Currie: That is right. At Donkin there was not one cent of return because it was all stone.

Senator Murray: As a practical matter, do you see Donkin as an alternative to, or perhaps a successor to, Phalen or even Prince, after those have ceased production, or do you see it coming on stream as an additional source of output?

Mr. Currie: The resources are so great at Donkin that Donkin could be an entity on its own.

Senator Murray: In addition to what is now in operation?

Mr. Currie: In addition to or, as I say, an entity on its own. I hope I am not insulting anyone, but I do not think that Prince mine coal is of good quality on its own. It has to be blended with coal from Phalen mine, and therein lies your problem. If Phalen goes, you may be able to do something with Prince mine coal.

Donkin could operate as an entity on its own. It could go anywhere from a 50,000 tonne development operation to a 4-million tonne operation.

Senator Murray: Our friends at the UMW sent me a copy of a presentation that was made back in 1983. That would have been after a lot of this exploration had been done by Coady Marsh and a number of other people: K. MacKenzie, J.B. Mercer, J.J. Gilman. This is a presentation they made here in Sydney at a Coal Operators Conference.

The paper states:

Production of 4.5-million tonnes per annum is considered possible and economically feasible.

That is pretty close to the number you have just mentioned. You said this could be an operation producing anywhere from 50,000 tonnes on up. Do you happen to know at what output the operation would become economic? Surely it does not have to be producing 4.5 million tonnes to be economic. Are you saying that 50,000 tonnes could be produced economically, all other things being equal?

Mr. Currie: I am saying that that is the low end. We did make a proposal for 50,000 tonnes at one point after the tunnels were finished. We wanted to get this local domestic market, which is around 45,000 to 50,000 tonnes. Then we could employ approximately 30 people to produce this coal, which we could sell on the local domestic market, and develop the mine at the same time.

Senator Murray: Economically?

Mr. Currie: Economically, yes. The last time I visited the site, vandals had gotten in and had destroyed a lot of the surface buildings. With the facilities that are there right now, the two tunnels, I would say that one million tonnes would be a good production for what we have there now.

Senator MacDonald: Mr. Currie, would you say that the development of Donkin is the main or even the only insurance policy that the Cape Breton coal industry has?

Mr. Currie: As I said, there are two blocks of coal left on the island that are readily accessible, and those are the Donkin block and a smaller block over at New Victoria. Donkin is the crown jewel right now in any coal industry.

Senator MacDonald: It is the main, not the only?

Mr. Currie: That is it, numero uno.

Senator Graham: Mr. Currie, you say that Donkin is the crown jewel?

Mr. Currie: Yes, sir.

Senator Graham: If I could be the devil's advocate just for one second; if it is such a crown jewel and if there are private coal developers all over the world, why have they not made a proposal for Donkin?

Mr. Currie: Did they not?

Senator Graham: I do not know.

Mr. Currie: I am fairly sure, Senator Graham, that Consol made an offer for Donkin. There may have been others as well, but I know Consol did.

Senator Buchanan: They came in and looked at it and they were ready to move.

The Chairman: Who was that?

Mr. Currie: Consolidated Coal from the United States. I think they are the second largest coal producer in the United States right now.

The Chairman: Do you know when they put in their proposal?

Mr. Currie: It was in the mid-1980s or perhaps in the late 1980s. The person from Consolidated who was involved was Mr. Poundstone.

If I may, Mr. Chairman, I think a detailed study of the Donkin project is, to put it bluntly, a crock. I do agree with Senator Buchanan and Senator Graham that the studies should be amalgamated and brought up to date. As far as a detailed study, the Kilborn people did a magnificent study on that block of coal over there.

Senator Graham: It must be feasible, and we must have an analysis as to how much it will cost per tonne to get the coal out, what the market is, and the quality of the coal, and so on. Those sorts of thing must be brought up to date.

When I asked the question about the crown jewel and why developers have not sought it out, I was not being frivolous. Maybe you could put that in the window as an option.

I am wondering about the $88 million that has already been spent. What would that figure be in today's dollars, Senator Buchanan?

Senator Buchanan: Not that much.

Senator Graham: Whatever. The point of my question is: Would that work have to be done today if you started from scratch?

Mr. Currie: Oh, yes.

Senator Graham: If you started with a green piece of land, it would need to be done, but the situation is that you have perhaps $100 million worth of work already done on the Donkin project.

Senator Buchanan: As I understand it, the tunnels that were drilled for the $88 million are still there. They are flooded, but they could be pumped out in three months, I am told.

Mr. Currie: Yes.

Senator Buchanan: The flooding was carried out at the time to preserve those tunnels, which it has done.

Mr. Currie: Yes.

Senator Buchanan: So that money was well spent, because that mine could be brought into production much quicker now than if those tunnels had to be drilled all over again.

Mr. Currie: That is right. You would be looking at two years to drive those tunnels now. If and when somebody decides to go to Donkin, you will be developing coal right from the start. Therefore, you would be getting some return on your dollar.

The Chairman: Could you give us a ballpark figure as to the cost for the consolidation of the studies?

Mr. Currie: No. It would depend on what company did them.

Senator Buchanan: Montreal Engineering and/or Kilborn have a lot of knowledge to do it.

Mr. Currie: I will tell you, sir, that, if all the players would agree -- Reg MacIntyre and Steve Farrell -- we could update the studies for just out-of-pocket costs.

The Chairman: That brings our hearings to an end.

The committee adjourned.

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