Proceedings of the Special Committee of the Senate on
the Cape Breton
Development Corporation
Issue 2 - Evidence
OTTAWA, Wednesday, November 19, 1997
The Special Senate Committee on the Cape Breton Development Corporation met this day at 3:20 p.m. to study the progress reports of the Cape Breton Development Corporation and related matters.
[English]
Senator John G. Bryden (Chairman) in the Chair.
The Chairman: Honourable senators, with respect to the order of hearing the four organizations appearing this afternoon, there will be one change; the witnesses representing the United Mine Workers wish to come at the end.
Please proceed.
Mr. Angus Grant, President, Local 4504, Canadian Automobile Workers: Senators, I am President of the CAW local employed with Devco representing some shot firers, mine examiners and other employees there. We have a short brief to present to senators and the other groups here today. It is with all sincerity that we are here to try and encourage, through you, the federal government to get involved in the Donkin operation in Cape Breton Island in the production of coal.
I have been employed for 40 years myself in the coal industry. I have been a mine rescue worker, and I am a member of the Coal Mine Safety Commission, which serves at the pleasure of the federal Minister of Labour. We are responsible for approving and accepting the operation underground within Devco. I am also one of the 15 members of the Canadian Auto Workers Board, which represents some 210,000 members across Canada.
I would like at this time to introduce Richard Daigle, who will present our brief to the Senate.
Mr. Richard Daigle, Chairman, Canadian Automobile Workers: The Canadian Auto Workers union represents approximately 140 workers employed at the Cape Breton Development Corporation. Our members include office workers, underground mine examiners, shot firers, surveyors and others. These workers have been unionized since 1960. We have witnessed many changes since that time, including seeing our membership shrink from 500 employees to the present level.
Throughout our history, we have come to rely on the federal government for its much needed input in an effort to sustain our economy in Cape Breton. During the OPEC crisis, it was Devco coal that helped Nova Scotia Power Corporation to escape from near financial ruin, and through the efforts of the miners and other support workers, we proved that coal can be utilized in a cost efficient manner and that the miners could set records for mining coal.
The only constant in coal mining is that, on the day a new mine opens, you must prepare for its inevitable closure. What we desire, however, is for the mine to run its normal course so that we can extract the coal reserves that were anticipated. This unfortunately cannot always be relied upon. The corporation has already seen the early closure of No. 26 Colliery at the Lingan mine in the past few years, and now we are facing the demise of Phalen mine.
It is discouraging for the miners and their families to think that the corporation, even if it denies it, is planning not to remain in the coal industry. We realize that the ultimate goal may be privatization, and that may be attainable; however, it is not the only priority. More important, it cannot be the priority of this time in our history.
For some reason, the reform mentality, that smaller government is better government, seems to be prevailing throughout our present federal government. We are here today to tell you that we disagree with that type of thinking. The "right wing" agenda of getting government out of business may be successful in major cities such as Toronto, Montreal and Vancouver; however, it fails to address the demographics that we face as a nation.
Our economy in Cape Breton consistently leads the nation as the worst. Our employment rate is officially over 20 per cent, and in reality I would venture to say it is closer to 40 per cent. This creates many social problems for our area. We see a rise in suicide, spousal abuse and crime. We see our families break up and we see despair on the faces of our children. We witness the mass exodus of families leaving for other areas of the country. This is shameful. People should not have to leave their homes and families to find work.
The traditional industries in Cape Breton have been fishing, steel and coal mining. The fishing industry has been so mismanaged that we have witnessed the demise of the northern cod stocks. The fact that it was left up to federal and provincial governments to manage this valuable resource has resulted in thousands of people losing their jobs and being forced to relocate.
The steel industry in Sydney has also been a political football for many years. The work force has shrunk from 4,000 to a few hundred, and the steel workers and their families have made concession after concession in an effort to save some of their jobs.
The coal industry is the lone survivor at this time, and our union firmly believes that there is a future for mining in Cape Breton. That future lies in the opening of the Donkin mine. The geological conditions we are facing at Phalen mine demand that we prepare immediately for Donkin mine to come on line. It is more important, we believe, that this endeavour come under the auspices of the Cape Breton Development Corporation. The initial cost of opening a new coal mine can be quickly recouped, and we all know that new mines are profitable mines.
The Cape Breton Development Corporation has a moral obligation to continue as the operator, and we believe the federal government must recognize and accept this obligation to assist Cape Breton in this time of need. Never in the history of our island have we seen our economy in such a precarious state. In the past, we could always fall back on steel and fishing. However, these options have been eliminated.
CAW, along with other unions at Devco, implore you to use your expertise as well as your influence to have the Donkin mine project proceed as soon as possible, and to do so under the directorship of the Cape Breton Development Corporation.
We need your support now. Time is of the essence and any delays will seriously jeopardize our chances of success. We have a willing work force, and what we need now is a willing employer.
In closing, the CAW union wishes to thank the committee for allowing us the opportunity to say a few words, and we beseech you to do all in your powers to give us the chance to live and work in dignity.
Mr. Angus McEachern, President, Canadian Union of Public Employees: I am President of CUPE local 2046, representing supervisors, nurses, security staff and railway dispatchers at Devco. With me is Brother Brian Kanne, Secretary-Treasurer of the local and Sister Bonnie Ferguson, Research Officer from our national office here in Ottawa.
I wish to thank you for this opportunity to speak here on behalf of CUPE local 2046.
Many of our members have lived in Cape Breton and been employees of Devco for most of their working lives. I have been working at Devco for 19 years, first as a miner and then as a supervisor. Both my father and grandfather worked in the mines. My father worked for 27 years underground. My grandfather worked for 52 years underground. My grandfather retired at the age of 65 and did not live to see his first pension cheque come in the mail.
As everyone here knows, the coal industry and the involvement of the federal government in the industry are key features of the history of industrial Cape Breton. Currently, our local members deal daily with the demands and events and uncertainties of coal mining in the 1990s. Yet we believe that coal mining has a future and that securing that future should be the primary goal of Devco. Unfortunately, recent actions, announcements and even discussions here yesterday make me wonder whether that goal is shared by the board of directors of the Cape Breton Development Corporation and the Government of Canada.
Donkin mine is a major asset of Devco and it offers the most significant potential for future development. A letter of intent has been signed by the corporation that could result in the sale of Donkin mine for private sector development. Furthermore, it appears that the initial study by the private company, DRL, Donkin Resources Limited, will be funded in large measure by ACOA. Since the mining operation is now owned by the Government of Canada, and funding appears to be available, why is the proposal to study the development of Donkin mine not part of the business plan of this Crown corporation?
We believe that Devco's business plan should not focus exclusively on "putting their house in order" but should provide for longer term planning, including the opportunity to study the developing of Donkin mine. Even the narrow focus of the revised mission statement, "to become a profitable mining company," will have little meaning for Cape Bretoners if after a few years, when Devco comes in the black, it closes its doors.
Privatization is not the answer for the coal industry in Cape Breton. In points to follow, we will address a number of reasons for continued public ownership of Devco and all of its assets.
I would like to make a few brief comments on issues which CUPE has been involved in, and then I will be glad to answer any questions you have.
In May of 1996, CUPE made a presentation and provided written submissions to this committee. The focus of our presentation at that time was the burden of the pension liability created for future initiatives to be undertaken by Devco. As you have heard, the situation of this pension liability has changed, but the burden of debt to the federal government remains. In the CUPE submission to this committee in May of 1996, we argued that the Government of Canada should assume responsibility for the debt owed to the plan members in the non-contributory pension plan at Devco. The unfunded liability in 1995 was $67.5 million dollars in a non-contributory plan.
At the same time, the corporation had undertaken an aggressive payment schedule, with a plan to pay down the pension liability by 1998, requiring annual payments of over $20 million. As we heard yesterday, the pension liability has been addressed, but the price has been high for the future of Devco and the Cape Breton economy. If the federal government had assumed responsibility in the area of pensions, the corporation would have been in a much better position to secure jobs and undertake investment in future mining development.
The issue of pension liability was also addressed by Dr. Tom Kent in his presentation to this committee in May of 1996. Dr. Kent played a major role in establishing pensions for miners, who up to the early 1970s were limited to Canada Pension Plan entitlement. He stated:
We did not introduce a rich pension plan, but I think it is a fair to say that it made a great deal of difference to the social environment of Cape Breton. I always argued that the most of that pension cost was not really part of the Devco deficit.
This Senate committee in its report in June of 1996 specifically addressed the issue of pension liability and recommended the following, that:
The Government of Canada provide appropriations 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.
As we know, the government did not adopt this recommendation of the Special Senate Committee. In fact what Devco received was a $79-million loan. One debt to the pension plan has simply been replaced with a new debt to the federal government.
In the last 18 months, a number of things have happened which directly affect the future options for Devco. Some of these have been addressed by previous speakers: Rock/gas outbursts, weightings, influx of water, change in geology and depth of the mine all lead to the conclusion that the future of mining at Phalen is uncertain, and may be much shorter than originally anticipated.
It appears that in 1998 Devco may be able to redirect the use of $17 million or more that had been allocated to pay down the pension liability in the non-contributory plan. This money should be made available to foreign investment in, for example, future mining developments.
In spite of the difficulties at Phalen, changes in current operations have in some cases produced results beyond expectations. Devco currently has mining equipment available which could be used to establish a development production mine at Donkin if studies warranted. Such a mine could be phased in to full production over a five- to seven-year period.
The assets of the company, including available equipment, include a $3-million treatment plant at Lingan; hoisting equipment; roof support and wall equipment; level and slope development machinery; men and material transportation equipment; and a whole lot more. Using these assets and equipment in Donkin would not take away from the existing operations at Devco. One of Devco's major assets is its skilled and experienced work force.
All of these reasons should provide the basis for a revised corporate plan for Devco that includes the possibility of developing Donkin mine as well as considering other options. Unfortunately, that is not what we heard in presentations to this committee yesterday, and that leads us to a number of questions.
Why is no money available for Devco to develop the Donkin mine and yet money appears to be available for private companies? Why was there no consultation about the issues of privatizing one of the major assets of this Crown corporation? Why was a letter of intent signed in such a hurry, and in the midst of a Senate committee study that bears directly on such a decision? Why is it that a company contracted by DRL, the potential buyer, also has been asked to determine the value of one of Devco's major assets, Donkin mine?
There are also many questions that may not be answered until after the meeting with the minister in December. It is unclear from yesterday's discussion what the requirements are for paying back to the government the $79-million loan. As we indicated at the beginning of our presentation, the decision by the government to buy Devco with a loan, rather than assume responsibility for at least part of the pension liability, has restricted the scope of future planning and has posed a serious and unwarranted burden on Devco workers and on the Cape Breton communities. It would truly be the last straw if the federal government were to impose terms of repayment that undercut the future development of mining operations by Devco.
If it is the intention of Ottawa to strangle future operations and force privatization, it would appear that they are going about it in the right way. Privatization of Donkin mine is likely to mean the sale of Crown assets at a price far below their value. It will also mean the loss of accountability for future decisions and a risk that a private operation will, as in common practice, mine out the best coal and cease operations as profits diminish. A Crown corporation with a broader mandate can do much more and still operate profitably.
A quick look at the changes in the way Devco has defined its mission tells the whole story. Its present mission statement, according to Devco literature, limits Devco to becoming a profitable coal mining company, but as little as two years ago the mission statement included such things as, "regard for protection of the physical environment, the interest of the shareholder, the employees, the community, and the long-term economic good of Cape Breton."
The end of mining in Cape Breton would mark the end of a way of life and a culture that has been in place for three centuries. We believe that with proper planning Devco has a long-term future. We believe that long-term success of Devco coal mining operations in Cape Breton would also provide jobs in supporting industries; it would restore dignity to people in one of the most ravaged economic areas in Canada; and, most important, it would mean that mothers, fathers, grandmothers and grandfathers might see their sons and daughters and their grandchildren have a chance for a future in a place they call home, Cape Breton.
Senator MacDonald: I do not have a copy of your brief, but I believe you made reference to the fact that there is no available money in the corporate plan; could you repeat that particular part?
Mr. McEachern: They had allocated approximately $20 million in the year 1998 to pay down the unfunded liability; but, as the non-contributory pension stands now, in 1998 it will most likely not have to put that $20 million or so into the unfunded liability.
Senator MacDonald: That is the reference you were making?
Mr. McEachern: Yes.
Mr. Darrell King, International Association of Machinists: I am with local 684 of the International Association of Machinists. Unfortunately, I do not have a prepared brief; we got word of this meeting only a short while ago, and we simply made quick arrangements to come here. If you have any questions I will try to answer them.
I wish to speak today on the future matter of the Cape Breton Development Corporation. We, the members of local 684, International Association of Machinists, feel that it is of the utmost importance that the committee stress to the government the importance of developing Donkin mine. With the problems we are experiencing with our Phalen colliery, we could be in serious trouble in a few years.
As members of the transportation department, we feel that it would be within the best interests of the corporation to deliver their coal by train. Through extensive investigation, we have found that there are 22 miles of new track to be laid from Devco's rail centre to Donkin at a cost of $1 million per mile. However, bearing in mind both the lower cost of delivering coal by rail as compared to truck and the substantial amount of coal reserves at Donkin, this rail project would pay for itself within four or five years. It is also more environmentally sound to transport coal by rail than by truck.
The opening of Donkin mine would ensure that our members, who on average are 45 years old and have served from 20 to 25 years, would have a suitable future in Cape Breton; it might also ensure a job future for our sons and daughters in Cape Breton. I hope this Senate committee will stress to the government the importance of the Donkin mine to us, as an alternative to what we fear we may be facing in the future. At this time, I would like to thank the committee and the senators.
Mr. Steven Drake, President, District 26, United Mine Workers of America: Honourable senators, the United Mine Workers of America has 1,350 employees who work for Cape Breton Development Corporation. On their behalf I would like to thank the senators for their continuing interest in the Cape Breton coal industry.
We believe that the Donkin mine could be very important in conjunction with Devco, but we also believe that a few select individuals with special interests are refusing to promote it. About a year and a half ago, 13,000 Cape Bretoners signed a document basically to support a Donkin operation within Devco as part of a three-mine Crown-owned corporation. In October of this year, at the UMWA 39th Constitutional Convention, the delegates unanimously supported the same basic motion, to keep Donkin within Devco as part of a three-mine Crown corporation.
We have here, for the Senate, a petition which was done last week. It contains approximately 700 names of concerned people who work in Devco, including UMWA people, CAW members, IMA members, CUPE members and also members of confidential employee ranks. The issues that are evolving around Devco right now are of great concern to everybody in Cape Breton.
I would now like to fill in a few blanks as to how we, as a union, believe we got to where we are today, and I will touch briefly on the Sable gas issue and the Donkin mine issue in more detail.
One of the biggest problems in the Cape Breton Development Corporation today is a lack of trust between the unions and management. In relation to the present lack of trust, I go back to 1994. In late 1994, early 1995, the Cape Breton Development Corporation was notified by Nova Scotia Power, their largest customer, that they were arbitrarily cutting the price of coal to Devco, and the cut was somewhere in the vicinity of 20 per cent. At that time, the president of the corporation, Mr. Ernie Boutillier, suggested that that type of price cut would basically decimate our industry. Mr. Boutillier stated that deep mining would be abandoned at Prince mine and the surface operations would be shut down to a standstill, and the Phalen colliery would be a dedicated supplier to Nova Scotia Power. That made no business sense to anyone.
The unions at that time joined forces, and it was a nice feeling to know that, along with the corporation, we were fighting for the same issue. The unions joined forces with the corporation to fight the Nova Scotia Power attack, and the board of directors and the management of Devco and the unions basically fought off the same page. It was quite successful at the time.
Devco went to the length of going to court with Nova Scotia Power over this breach of contract. I believe that is what Devco called it. From the information that Devco gave to all the unions, we thought that Devco had a pretty good case, and that Nova Scotia Power could not arbitrarily cut the coal price. Up until June of 1995 that fight continued. Then the administration at Devco was changed and the president retired. He left the industry. That is the official word.
We have a new administration in place now. Mr. Joseph Shannon was appointed President and Chairman of the Board of Directors. Mr. Shannon proceeded to negotiate the contract with Nova Scotia Power. Mr. Shannon stated at the latest Devco consultation on November 12, 1997 that the across-the-table negotiations with Nova Scotia Power were conducted exclusively by Mr. Shannon himself. There were no legal representatives from Devco, no board members or management people present at the across-the-table negotiations. All the unions were present at this meeting, by the way. Mr. Shannon also stated that he "...could not remember if the Board ever saw the revised sections of the 33 year contract or if the matter was simply discussed at Board meetings."
The union lost a little bit of faith and trust in the process and in the management direction at that time.
For approximately 8 months, the previous administration on the Donkin issue had cooperated with the UMWA on promoting a Donkin package and investigating the viability of Donkin mine as the future of Devco. The union had put together a detailed plan for opening a small-scale operation at Donkin mine as a contingency factor for exactly what we are facing today. It is almost two and a half years ago that we presented that to Devco. Devco's people, including the board of directors, management, and some of the engineering people, had agreed to work with the union on forwarding this plan. Devco went so far as to take our plan and send parts of it to the U.S. Bureau of Mines for verification.
When Mr. Shannon came to the corporation in 1995, that cooperation on the Donkin project ceased. The Donkin issue, the path that we are on today with it, started somewhere back in 1995. We are disappointed that management decided to make that decision.
Because of the lack of trust, which has been like a festering wound for a long time, the situation at Devco is becoming unmanageable. There is no such thing as a perfect relationship between unions and management. We have made many efforts in the past two years to make the Devco relationship more positive.
The UMWA came to Ottawa to meet with Alfonso Gagliano, who was Minister of Labour at the time. We got in touch with his office because we wanted to, and attempted to, start a program called Relationship by Objectives through the federal government so that the federal government would have the inside scoop as to what was going on at Devco with industrial relations.
George White, the president of the Cape Breton Development Corporation, wrote a letter to the minister, or to the minister's office, saying that Devco would prefer to do it on their own. If they were going to get their house in order, they would prefer to do it Devco style. They proceeded to do so, and they hired a company called Ernst and Young at great expense to the corporation. The plan is called Beyond 2000. This is the new plan that they are dealing with. It was not what the union wanted. It was not what the union supported.
One aspect of the negative industrial relations and their repercussions is that, as union executives, we feel that Devco is trying to exclude the district executives and deal directly with the local executives on many global issues. Moreover, a letter of understanding was drafted, called "Partnering." It is the first letter of understanding in our collective agreement, and our membership accepted it. It is a very detailed document and it calls for cooperation. It suggests that we are willing to cooperate with the company on just about anything if the company gives us some respect and dignity in return. That was our commitment to this corporation.
Devco's problems are very complex, but a substantial percentage of them can be traced back to lack of accountability and lack of responsibility on Devco's part to the owners of Devco, ultimately the Canadian taxpayer. There have been many instances where major decisions have been made by Devco's board of directors and management based on very sketchy information. The Donkin deal was one; the Nova Scotia Power deal was another; so was the shutting down of the pumps at Quarry Point, which resulted in Lingan colliery being flooded above the Phalen colliery. We are dealing with millions of dollars per year in pumping the Phalen colliery right now.
Those were all management decisions. The unions had no say in those issues. However, when the unions sit down with the corporation to try to deal with these matters in an effective manner, Devco's responses are very vague. They are evasive; they consistently avoid the truth when it does not fit their agenda.
The key indicators in Devco's five year plan are production, development and inventories. None of these targets has been met. When Devco was asked for an analysis to focus on these issues and these results, basically we received misdirection from the corporation; they prevaricated. They are missing these targets.
Based on the Senate hearings in 1996, we do not understand where the corporation is coming from. They stated that contingencies would be built in to compensate for the problems at Phalen colliery and that the targets would be met. They stated that this would not be a plan of convenience, but would be a plan that was achievable. Despite the fact that the miners, every union and most of the confidential people have a sincere wish to make these targets happen, they are not happening. I do not believe that we should be asked by the corporation or the federal government to believe in this plan any further.
Devco can only succeed with the proper people in place. That can only be accomplished by good government. The federal government should examine the testimony of all three Senate hearings on the Cape Breton Development Corporation and do the necessary things to secure a long-term future for Devco and the Cape Breton families who depend on the coal industry.
One step in that direction might be to look at the five-year audit done by the auditor general. The minister has been asked to release that document. It may be helpful for the Senate to examine it. Our understanding is that it is only available to the Devco board of directors. I am not certain why. With that, I will end my presentation, but I know that we will get some questions on Donkin and Sable gas.
Senator Butts: One common thread that everybody has emphasized is the need for Donkin. Am I fair in saying that? You witnesses are not in the same union, but you are unanimous in that. You three agree. Does that have anything to do with the present problems at Phalen?
Mr. King: The problems at Phalen have nothing to do with the opening of Donkin. The problems at Phalen are geological and mining problems. There are serious problems at Phalen. Mr. Drake can speak on the project; they are the miners; but the opening of Donkin is a back-up plan.
Senator Butts: So there is a connection.
Mr. King: If Phalen goes tomorrow, the employees of Devco are in a bad situation. We have no jobs.
Senator Butts: So that is the urgency.
Mr. Drake: It has been publicly suggested that the unions' attempt to open Donkin mine is a knee-jerk reaction to the Phalen situation. That is not so. We have been pushing for the opening of Donkin mine for 15 years.
In the past three and a half years, the UMWA has developed a plan for a small scale operation at Donkin mine. That has never been out of the public focus for the past three years. Donkin has been a very important issue. As I stated earlier, 13,000 people down home signed a petition to open Donkin as part of the three-mine operation.
Again today, the focus is still on Donkin. It has not been intensified due to the problems at Phalen colliery, because almost everyone at this table projected those problems at Phalen colliery over the past three and a half years. This is not anything new. We ran into this problem at approximately the same depth, 700 metres, many years ago at No. 26 colliery, and before Lingan colliery shut down at approximately the same depth we were starting to have these problems also. We can extrapolate the position from the information that we have had over the past 10 to 15 years from 26 colliery and Lingan colliery.
Senator Butts: But would you agree that there is a new urgency?
Mr. Drake: Yes.
Mr. Grant: I would like to elaborate on what happened to our industry in regard to trying to get Donkin started. In 1973, we lost No. 12 colliery through a fire. We could not save any of that equipment at all. The mine was evacuated immediately. In fact we left one miner underground. He is still there. In 1984 we lost No. 26 colliery through a fire. No equipment was retrieved out of No. 26 colliery. In 1994 Lingan colliery was lost through water and the same thing happened. If in the event that Phalen colliery is closed due to rock/gas outbursts, all of the equipment can be retrieved including the surface hoist. There is a surface hoist at Lingan colliery too. They are worth a tremendous amount of money.
If Donkin mine is opened, all of the equipment used today at Phalen colliery is retrievable -- for example, coal cutting machines, driving machines, and large electric transformers, and all of the underground equipment could be transferred to the Donkin project, which would otherwise be a tremendous cost compared to a few years ago, if Phalen colliery was lost to fire or flood or whatever. The fact is that all of that equipment is there and it is worth millions and millions of dollars.
Senator Forestall: Are you suggesting that this might be the wiser course, to retrieve this equipment from Phalen now, have Devco hang on to Donkin and take a look and see what is there?
Mr. Grant: Devco will do some exploratory drilling; in fact they are getting ready to do it now. If that drilling proves through geological conditions that Phalen colliery cannot be developed any further, then there would be a place to go. Take these millions of dollars worth of equipment that we have there and start at the Donkin project. I am not trying to close Phalen colliery, but if we have to, we have to, and we will have to accept that at some point in time. However, assuming we do not lose Phalen colliery through fire or flood, if we lose it through rock/gas outbursts, then we can retrieve that equipment with no problem at all and we could use it at the Donkin project.
Senator Forestall: Your colleagues would agree with that?
Mr. Drake: For the past several years, the mining at Phalen colliery has had certain amounts of success depending on the geological conditions. This will continue as long as Phalen colliery is feasible, viable and economical. However, at some point in time, if we continue to run into these problems, someone, not mother nature, probably an accountant, will say Phalen cannot be run economically anymore. If that happens in the next three to five years, there is nowhere to go if Donkin is not ready.
What happens to the 1,700 people who are working in the Cape Breton Development Corporation? What happens to the 6,000 people and families that are dependent on Cape Breton coal mining? There is nothing to help them. Donkin must be opened under Devco's umbrella. A mere 250 jobs under a private concern will not cut it. Basically, Phalen will be operated as long as it is safe and economically sound. It will not be the unions that will shut it down, it will be someone with a pen.
Mr. McEachern: Donkin is coming to the forefront. If you take Devco's best-case scenario and things do not change in Phalen colliery, there may be five to seven years left. In five to seven years, if you do not have development in a mine, what do you do with your people? It is more urgent than it has been.
Senator Butts: This fall is different from the others. I was struck by how well you overcame the adversity before and how production was brought up and all the demands were met. It was a great act by the miners and the workers at Devco. However, now there is a whole different attitude; is that fair to say?
Mr. Drake: Everyone is still determined to make this work, but if you have an old car which has been patched five or six times and you are driving the Cabot Trail, I do not know if you will make it every single time. There are a lot of patches on Phalen colliery to date. We will still try it. We will keep doing it, but at some point in time we will need a new car.
Senator Butts: So you are close to the time of needing a new car?
Mr. Drake: Yes.
Mr. King: We have a brand new pier down there that has lasted hardly any time because we got out of the export market. The reason Devco got out of the export market was the problems with Phalen. We could not get the coal to export overseas. We lost a tremendous amount of sales overseas. However, if Phalen does go and Donkin opens, that export market can open back up. Devco will pay for itself quite quickly.
There was approximately $4 million in exports going over that pier before, but now there is nothing. That pier cost $15 million dollars; it was built for larger ships and now it is just sitting there. It is a waste.
The Chairman: It is one thing to go up the hill in a broken down car that is not running very well, knowing that the new one is sitting over there -- provided you know the new one will start. There is some indication from the Boyd report and from others that the coal that is in Donkin will be very difficult to retrieve. It may be very difficult to market. It is extremely important for our credibility as a committee, and for your credibility as the people who work in this situation, to make sure you are not in the position where some "expert" can come along and say that the seams in Donkin are such that you need a type of recovery that requires a specific type of technology, and not even know whether that will work.
Mr. Brendon MacIntyre, United Mine Workers of America: Credibility is the big issue. All the employees we represent, our members and everybody at this table, feel that the presentation that was put before you people by the company was not credible without Donkin being in the process. The company's plan stated that Phalen colliery would continue on for 15 or 20 years or more, and then six or eight months later Phalen is in pretty bad shape. The lifetime of that colliery has been roughly seven years or, if we want to stretch it, maybe 10. Exploration and everything else is on speculation. How can you keep planning a coal industry on speculation? Donkin must come into play for the overseas market. That is part of the credibility for our plan.
The Chairman: You have answered from that point of view, but simply to say that Donkin will solve all of our problems if we spend $100 million or whatever it is, maybe the $400 million must be spent to find out if it is a credible alternative. There is coal there, but there is some question as to whether having reached that point is the whole answer.
Mr. Drake: We are miners; we think we are experts at that. For engineering, we will seek an engineer's opinion. I have some information here. Hopefully it will clear this up. If you read the reports of the Senate hearings, you will see that this was discussed in detail.
I have here a 1979 report called "Energy...A Plan for Nova Scotia", which I am sure Senator Buchanan is familiar with. This report states that:
The most important development in the Cape Breton coal fields will be the Donkin mine.
Mr. Joseph Shannon was involved on the planning board at that time and so was a gentleman by the name of Mr. William S. Shaw. The Montreal Engineering Company in 1979 did an engineering study on the Donkin block and this is what they said:
The Donkin Resource Block is free from major disturbances; risks at Donkin are no different than any other typical project.
We have opened 110 coal mines over the past 300 years in Cape Breton, and according to that statement this is no different from any of those.
A company called Kilborn Engineering in 1981 did another study for Devco on the Donkin block. It said that:
Geology is free of significant faulting and annual production of 3.8 million tonnes is economically feasible should the Donkin Mine go into production.
In 1984, a company called Associated Mining Consultants Limited said that:
Minimal surface facilities would be required for a small scale operation at Donkin. Selective mining should be undertaken during trial mining period at 500,000 tonnes per annum. An orderly changeover to longwall operations is feasible.
These are things we have been promoting for three and a half years.
Listen to what Devco's annual report of 1985 had to say. Mr. Joe Shannon was the chairman and was acting president of Devco at the time:
Analysis of the 2700 tonnes of coal mined at the Donkin-Morien Project was particularly encouraging.
This sampling indicated that by selective mining -- 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 1 per cent.
Yesterday, Senator Butts asked whether the selective mining technologies were iffy. In 1995 a report called the "Assessment of Horizon Control" was done by Public Works Canada. It states that:
There are a number of technologies, under development, that could potentially be used for selective mining at Donkin.
That was Alan Craven from P. Engineering, AMCL in 1979. In 1984 he was involved with Associated Mining Consultants who did a report on Donkin. In 1997 Mr. Craven stated:
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 at Donkin will be lower in sulphur.
Cape Breton has been using selective mining for the past hundred years. It is nothing new either to us or worldwide.
The Donkin seam is 12 feet high. There is 12 feet of coal there in the harbour seam. The top portion of the coal is high in sulphur. The bottom portion of the coal is high in sulphur. The centre of the coal is very low in sulphur. When Devco was cooperating with us on this issue, we received data to verify that. It is a very simple process. You can do it without any high-tech equipment by leaving the roof of the coal, which would be about one and a half to two feet of high sulphur coal. The centre portion, seven feet or so, would be good coal. The problem is in dealing with the floor coal, and there are technologies available and in various stages of development.
Included in the operation of Donkin should be the utilization of the Victoria Junction wash plant. By blending and washing coal at the Victoria Junction plant, we can further reduce the sulphur content of the Donkin coal. Also we have one of the newest technologies at the Point Aconi Plant. It is called fluidized bed combustion, and that once again reduces the sulphur content. Worldwide, coal mining industries are developing clean coal technologies. That is one of the recommendations we will be making here at the end of the day.
At one time people were very high on the Donkin mine. Many years ago they said it was no different from any other mine we had open in Cape Breton, but somehow the political atmosphere, or something, changed, and everything that the unions were saying that made common sense no one wanted to listen to. They put up road blocks and they objected, but their objections were very weak and we do not believe that their arguments would stand up.
We have made the offer to Devco's chairman and acting president at that time, Mr. Shannon, to debate this issue publicly. We have received no response. However, their argument on selective mining and the quality of Donkin coal, as far as we are concerned, is very weak. I hope that answers your questions.
The Chairman: Has a cost analysis been done to determine what range of costs would need to be spent in order to get to the point where a decision is made to move ahead and develop Donkin? There has been $80 million spent in sinking a couple of shafts and tunnels and so on, but presumably to start from now, it will cost a number of millions of dollars to get to a point where yes, this is a viable situation. Do you have any numbers?
Mr. Drake:Mr. Steve Farrell, president of Donkin Resources Limited, did work together with the UMWA in 1994, 1995 and 1996 on a Donkin plan. The initial dollars for the first year at Donkin would be somewhere in the vicinity of $10 million. That would be to put a very small scale surface facility over there for the men, get the tunnels pumped out, and re-establish the security of the two tunnels that are there now. You would have to establish fresh air, compressed air, fresh water and make sure the roadways were travel-worthy. That would take somewhere in the vicinity of 12 to 14 months. Mr. Farrell did these numbers on his own.
In the second year the costs would probably be $25 million for equipment purchases and things like that. Every one of us knows how much equipment Devco basically has that they already own that we could utilize at Donkin mine. There is quite a bit of it. That would cut down the cost substantially. In the third year it would probably cost around $40 million to $50 million. The total cost for a small scale Donkin operation was somewhere between $100 million and $125 million over a three- to three-and-a-half-year period.
Mr. Farrell spent quite some time producing these numbers. It took us eight or nine months to get this information and then we presented it to the board of directors. At that time they were working with us on that project.
Senator Buchanan: I certainly agree with everything that Mr. Drake has just said. The studies that he mentioned are all in the book in front of him. Those studies were commissioned by us back in 1979-1980. It is important for members of the committee to take a look at the people who were involved in that study. That was not a fly-by-night study. That was done over a long period of time with some of the top mining engineers that you could find, not only throughout Cape Breton and Nova Scotia, but in Canada. Those people spent many, many months putting that together. Montreal Engineering and Kilborn Engineering are two of the best you will find in this country and still are. That is why we commissioned them to do that.
Bill Shaw from Antigonish is probably one of the best known geologists in Atlantic Canada as far as coal and off-shore gas are concerned. There is no one who will question that. He led that task force and the group who put that together.
That was followed up in 1981 by Kilborn Engineering. It was followed up again in 1984 by Associated Mining. So with respect to the idea of determining whether Donkin is feasible, that has been done. That is finished. That is why the province back in 1979 brought in the drill ship to delineate the seams in the Sydney coal fields at Donkin. That was completed at a cost of $6 million.
Then under the auspices of the federal government, notably getting underway in the 1980s under Allan J. MacEachen, together with the provincial government, we ensured that the two tunnels were built at a cost of $80 million under the guidance of Montreal Engineering and Kilborn and others. The feasibility of Donkin is there.
I was in Antigonish last Sunday and I spent over two and a half hours with Bill Shaw. He is as convinced as he ever was that Donkin is feasible. What Mr. Drake said about the seams is absolutely correct. You will find it in all the reports. The floor and the roof have higher sulphur. The centre is very good, being low in sulphur. The coal on the floor that you mine can be washed down in the Victoria Junction Plant and then you are left with very good coal. It is not that difficult to mine that coal, according to Kilborn, Montreal Engineering, and Associated Mining -- every one of them.
I do not understand why there are so many people today who question the feasibility of the Donkin mine. The amount of coal there is incredible. It is not a few million tonnes of coal. If you look at the ultimate amount, it is 100 million tonnes of mineable coal and more. It is feasible and it is there.
The present chairman of the board of Devco I have a lot of respect for. He is an excellent businessman, he is a Cape Bretoner and he knows Cape Breton. Back in the 1980s he did say that Donkin was very feasible, and the analysis of the 2,700 tonnes of coal -- and all the reports said so at that time -- was not only encouraging but stated that it was excellent coal. We should get away from this business of talking about the feasibility of Donkin. Donkin is feasible and Steve Farrell, who is one of the noted mining engineers in Cape Breton, has said so; he agrees with all of those reports, 1979, 1981 and 1985.
People thought the flooding of the tunnels was the end of the Donkin mine. That was the saving of the Donkin mine. It was proved that you had to flood the tunnels to stop deterioration. As Mr. Drake and others know, that water can be pumped out in a matter of months and then you are at the coal. They are at the coal now. When that water is pumped out, the coal is there. When you start to develop the rest of the mine, you sell the development coal to deduct that from the overall costs, and that, too, is all in those reports which Mr. Drake has in front of him. So let us get on with it.
There are really three threats to Devco and the coal industry of Cape Breton, and therefore the coal industry of Nova Scotia. The first threat is the problems at Phalen. The witnesses and the men and women they represent deserve a lot of credit for what they have done in the Phalen colliery over the last number of years. So far they have saved the Phalen colliery, but there may come a time when they cannot save it. As Bill Shaw was telling me on Sunday, those rock bursts can get very dangerous, and more falls can be expected. The one they had two years ago was bad, but there could be worse. So the Phalen colliery is a threat.
The second threat is the lack of initiative on the new Donkin mine. It is a lack of initiative on the part of the government and of Devco. I am not saying that in a political sense, because the former government also skated around the issue. We tried to get them to move on it, but we could not.
The third threat to the future of coal mining in Cape Breton and to the future of Devco is that natural gas, because of the cost, may replace coal mining in Cape Breton. I have been saying for a long time that the future of Devco depends on having the Donkin mine bring in coal for years to come. As recently as two weeks ago, Premier MacLellan said the same thing: the future of Devco and coal mining in Cape Breton depends on the Donkin mine.
So many people have made that statement, and it is backed up by so many reports by the most competent mining engineers and geologists, that I just cannot see any reason for not moving ahead. Moreover, not one of those reports indicates that the cost would be $400 million, or even close to it. If you take the dollar figures in those reports from Kilborn and Montreal Engineering and bring them up to 1997 dollars, you will see that it would take less than $200 million to develop the rest of the Donkin mine.
Is that not correct, Mr. Drake?
Mr. Drake: It would be significantly less depending on the size of the operation that you went to. Steve Farrell and I have talked extensively about the Donkin operation and the $400-million price tag being floated around. Mr. Farrell made the following statement:
Any realistic cost analysis of the Donkin mine must take into consideration that the day of the mega-project is gone. The Donkin mine can be developed on a small scale basis for well under $100 million if we use the assets Devco already owns. Costs for a full scale operation can be injected on an as needed basis over the long term. $400 million for a Donkin operation is pure fiction.
The people who are supporting the sale of Donkin mine basically have provided no concrete evidence and no critical data that Devco could survive long-term without Donkin mine.
Would it be appropriate to show a couple of slides just on Donkin?
The Chairman: I have no problem with that, but I was waiting for Senator Buchanan's question.
Senator Buchanan: Last year Joe Shannon and George White said that the life expectancy of the Phalen colliery was 12 to 20 years. That was last year. Last week on television I saw them say that the life expectancy is now 5 to 12 years -- probably seven years. If the life expectancy were five years, the Nova Scotia Power Corporation would simply say, "We will have to get another fuel to generate power at Lingan, Point Aconi and Point Tupper, because they will not have any coal for us." That would be the end of the coal industry, and that is why Premier MacLellan said last week that the future of coal mining in Devco depends on the Donkin mine. We have been saying that for years, but it goes in one ear and out the other.
The work force at Devco is about 2,200 people directly involved in coal mining in Cape Breton. Multiply that by the factor of 3.5 indirect jobs and you are up over 7,000. Multiply that by number of people per family and you are over 20,000 people in industrial Cape Breton who will be affected if the coal mining industry goes down in the next five or six years because there is no Donkin replacement or the possibility of natural gas. Keep that in mind.
Is that correct, Mr. Drake?
Mr. Drake: That is pretty accurate.
Let me show you some slides on this. One is on the markets for Devco. Incidentally, there is a copy of this slide in the package we provided. Part of the marketing strategy or study Mr. Farrell is doing includes Eastern Europe as a market. If you look across from Cape Breton Island to eastern Europe, you will see that we are the closest port in North America to the Eastern European market. We have been marketing our coal in all of those countries, and we have developed a good relationship with those people over the past 15 to 18 years. However, Mr. Farrell is not going over there simply to look at Devco's already established markets. Those markets should stay within Devco and Donkin should stay within Devco also.
This second slide is a picture of the actual tunnel at Donkin. That is the face, which is approximately 11,000 or 12,000 feet underground. Right there at the coal scene, the harbour scene, there are two tunnels just like this. They are 25 feet in diameter. These are state-of-the-art tunnels. Basically, these tunnels must be pumped out and the security must be re-established before the mining can start again. It would take about three months for the pumping procedure and eight to 10 months to establish a secure travelling area.
The last slide is called the "Future of Coal in Cape Breton." It used to say "Nova Scotia Coal Resources," but we changed it. The yellow portion of the pie chart says, "Remaining, 278." That is 278 million tonnes of coal, and that refers to Pictou county and Inverness county and other areas of Nova Scotia where we have been mining coal over the past 300 years. The pink portion of the chart, where it says, "Other Sydney, 850," refers to 850 million tonnes of coal from the seams in the Sydney fields, which we have been mining since 1685. We have opened 110 coal mines in the "Other Sydney" coal fields as indicated in that pink portion.
Now, to repeat, we have successfully opened 110 coal mines there. We have successfully marketed and sold every bit of that coal. Therefore, I do not buy the argument that we cannot open one more coal mine in the same coal fields and market it successfully.
The bottom of the pie chart, which is blue, shows the Donkin portion, which is 1.578 billion tonnes of coal. The estimates of the recoverability of this coal vary from 50 to 60 per cent, but the bottom line is that there are several hundred million tonnes of coal in the Donkin coal fields that we can successfully retrieve.
So there is a long-term project at Donkin by which we can keep this industry alive and keep these people working; but it is not just about jobs for Cape Breton. This is an energy source for the Province of Nova Scotia. Should we be dependent just on natural gas? That does not make economic or business sense. Donkin mine is a viable operation from our perspective.
The Chairman: Just as a matter of interest, most of the Senators on this committee are from Atlantic Canada; so we know what it is to be raised on the farm and to depend on fishing, and so on. If what you are saying is correct, and I accept it as being correct, and we have actually mined and successfully marketed all of this coal, why is it that in the minds of the Canadian taxpayer the coal mining industry in Cape Breton is seen as an endless hole into which the taxpayer is expected to pour money? Surely, if it had been as successful over the years as we had all wished -- regardless of bad management, bad seams, or bad whatever -- we would not be in this situation; we would be working on a surplus and would have the money ready to develop Donkin.
What is so different about the situation now that it would let me to go before my peers and before the people and say, "Right; we need to put another $100 million into this resource in order to have some opportunity for it to be a successful economic venture." And we are talking about an economic venture, not a socio-economic venture.
Mr. Drake: First of all, one of the major problems at Devco is the lack of accountability and the lack of responsibility for decisions that cost the taxpayers millions of dollars on a regular basis. The first thing we must have at Devco is an investigation into what has happened to the money. We had $168 million back in 1990 and Devco was on the way to being self-sufficient. Then we were heading toward that self-sufficiency in 1995 and the Nova Scotia Power contract was negotiated and we lost another $30 million; so that was another $30 million kick that we had to deal with.
The Nova Scotia Power contract states that, under the terms of the Devco contract, the price of coal purchased for the Lingan, Point Tupper and Point Aconi plants will be reduced annually, such that the price for the year commencing on January 1, 1997, will be 18 per cent less than the price paid for the coal on March 31, 1995.
The previous Devco management was going to court over this issue. We had done our part; all of the unions and the confidential employees at Devco had done their part to move toward self-sufficiency. All of a sudden this contract is negotiated and these price reductions are put in, and in a time frame in which we do not think we can pay the bills on those issues.
We do not make the $30 million decisions. We mine coal probably better than anyone in the world. We are expert coal miners and that is exactly what we do. If we had a management team and a board of directors that was held accountable and responsible to the taxpayers of Canada, this industry could work and make money. We cannot keep on wasting millions and millions of dollars on bad decisions, like the Donkin mine, the Nova Scotia Power contract and issues like that.
Coal mining industries all over the world develop their plans on 10 to 15 year scales or a 30 year scale, as was mentioned yesterday. If you are a supplier for a generating company like Nova Scotia Power and you are developing a plan for five years while they are developing a generating facility for 30 years, that does not jibe. Devco's plans change each year. Every time we turn around, Devco changes directions. We cannot follow them any longer. If we had a set direction for the next 10 to 15 years, Donkin mine might not be the saviour, it might not be the panacea for everything that ails Cape Breton Island, but it would help us to stabilize the economy in Cape Breton Island, and we could move forward from there. There is a good argument for it.
Senator Buchanan: I agree with what Mr. Drake says. If you look at those studies, with the capital cost of the new mine escalated to 1997 dollars, the amortization of that capital cost will be recovered through the sale of coal plus the costs of running the mine.
One of the problems of the Cape Breton mines is that they go so far out under the sea that the transportation cost to get the coal up to the surface is high. I was down in those tunnels when they were digging them and I know that the coal is there, but even if the transportation costs of bringing that coal out, when the mine is developed within two and a half years, is high, it is still very low compared to the costs for existing mines; so your costs are way down and you can amortize the capital cost, which is under $200 million, over a period of years; and you will see that in the Kilborn and Montreal Engineering studies.
By virtue of the Mineral Resources Act of Nova Scotia, no leases of our mineral resources in Nova Scotia can be transferred without the specific written consent of the Province of Nova Scotia. The mineral resources of Nova Scotia, including coal, are owned by the Government of Nova Scotia; therefore, Donkin's leases cover a resource belonging to Nova Scotia. Those leases are with the provincial government and they cannot be transferred without the specific written consent of the Government of Nova Scotia -- in other words, the present government led by Premier Russell MacLellan, who has made it clear he is not too happy with the situation.
Would you agree with that, Mr. Drake?
Mr. Drake: Yes.
Senator Losier-Cool: If I may change the subject, are there any women miners going underground?
Mr. Drake: There is one. We will take as many as we can get as soon as Donkin mine is opened.
Senator Losier-Cool: Are there any women executive members?
Mr. Drake: No.
Senator Losier-Cool: I am from Bathurst, New Brunswick, which is also a mining town. I have experience with the teachers' union, and my questions will be mostly on labour relations.
Yesterday, Mr. White and Mr. Shannon said that at least one good side of the story was that labour relations had improved. Is that your opinion, since your last appearance here with this committee? If the answer is yes, what do the unions do to improve relations?
Mr. John MacLeod, United Mine Workers of America: As Mr. Drake mentioned earlier, we tried to get something going, especially with UMWA being the largest union, but we were unsuccessful. When Devco was being advised on how to get the process started, it was our recommendation that UMWA get involved. At that time George White did not want us to set out on our own to get a process from within. However, he did agree that we should proceed with this, with Ernst and Young being observers in the process. Devco utilized Ernst and Young from the beginning for our management quality improvement. We did not feel that they should be involved or that they should start the process unless we all agreed that they should be the consultants we should use.
At that point we looked for UMWA and management to sit down and come up with a process that we were willing to follow, after which we could get the rest involved. That did not take place. George White proceeded with his management quality teams. He set the teams up. We did not oppose that, however, because we felt that that was the type of process we should have. Employees would have input into what machinery should be bought or what adjustments should be given to the machinery. That did work well, and we came up with a lot of suggestions for improvements for the next wall face and what general improvements should be made at Phalen. For instance, they set up a team to look at different developments.
They were looking at getting a process going, and we did not oppose that. The only thing we did oppose was that, as district executives, we were not informed of what was taking place on a day-to-day basis; we were not informed of what they would look at. That communication was not delivered to the district office.
Senator MacDonald: Relations have deteriorated.
Mr. MacLeod: As far as communications with the district office go, yes.
Senator Losier-Cool: So you do not agree with what was said yesterday?
Mr. MacLeod: I agree that they are working or they seem to be working on the local level to get things going, although there is probably a lack of communications a lot of the time; but there are still some problems, although this team concept is working well.
Senator MacDonald: I get the impression that the solution to part of the problem here would be to get rid of the management of Devco. Do you think that would help?
Mr. Drake: It would help if the federal government looked at Devco as an investment and directed the management of Devco to be responsible and accountable for their decisions; if they made good business decisions, that would help. I am not sure firing them all would help; we have been through that four or five times, and it did not help, because the people that come to Devco are appointed politically, and that is not the way to get the most qualified people in this industry.
Senator Forestall: They just keep coming back.
Mr. Drake: There are some exceptions. We have had some expert mining people in our industry. Jim MacLellan has been in the industry for 50 years. Jim is on the board of directors. I have a lot of respect for him and his capabilities.
On the other hand, Devco gets some people here that live in Disneyland in relation to the mining industry. They do not know what is going on and they make decisions that have a long-term effect on the viability of our corporation. If the federal government could maybe keep a closer eye on Devco and on what is going on, maybe that would go a long way towards helping our industry survive. If we fire them all, we will just get another bunch back.
Senator Losier-Cool: Devco's main problems are not on the union side but on the management side, or the side of the federal government; is that what you are saying?
Mr. Drake: There is no perfect relationship between unions and management.
Senator Losier-Cool: Perfect relations would be too much to ask for.
Mr. Drake: The unions have problems. The management people have problems. I guess we also have problems with the way the federal government seems to give Devco a free hand. That could be tightened up and could go a long way to addressing some of the problems.
We met with the office of Alfonso Gagliano, the Minister of Labour, and with the minister himself, and we made a sincere effort to get the federal government involved in that process. However, Devco said they would like to get their house in order Devco's way. That was a mistake once again.
Mr. King: I do not think we are here to iron out our problems with Devco management or with the unions. We are here to open Donkin mine. Management has a different aspect of opening the Donkin mine. Our future is to open the Donkin mine. There are problems with management; CUPE have problems, and CAW have problems, but they can be ironed out.
I have been involved in union politics for the last 10 years. I have been 21 years with Devco. We fought our battles with managers, good and bad. We fought with both of them. I am not asking the Senate to try to iron out my problems with management. I am asking the Senate to help me keep my job by opening the Donkin mine.
Senator Losier-Cool: That was not the purpose of my question. You agree that any corporate plan will have a better chance of success if there is a good labour-management relationship.
Mr. Drake: Definitely.
Senator Losier-Cool: Do you think that there is a good labour-management relationship here?
Mr. King: As far as our aspect of management relations go, they are good relations. At times we do have fights with our management at the railway, but over the last number of years with the problems we are having at Devco, the books will show that all aspects of Devco have proven that they can mine coal more cheaply, through negotiations, through the changing of work habits and things like that. We have downsized to a point where we are mining coal more cheaply than we were five or six years or 10 years ago. Every year we are changing.
Maybe there are bad relations sometimes, but if we were mining Donkin right now, with the coal resources that are in Donkin, I feel with the manpower that we have, we would be making money and government would not be supporting us. We would be making money.
Senator Forestall: I just wonder about jobs over there, if Donkin must be opened. If there are a billion plus tonnes of coal out off the cape under water, if there is a significant amount of coal out there, it will be brought to the surface one way or another. Are you suggesting that Devco is the only group capable of doing that?
Mr. Drake: Any mining company could take the Donkin operation and successfully operate it. The most successful method would be to utilize Donkin resources to the fullest extent under the Crown-owned corporation, Devco.
Senator Forestall: Would you sooner have a Crown-owned corporation that you can brow beat or a company that is producing coal and providing jobs. Devco has not been a good manager. I participated in the development of Devco. Getting the mine open and operating seems to me to be your primary concern.
Mr. Drake: We are not here to brow beat a Crown corporation. If the Crown corporation is operating properly, that is one thing; but we are taxpayers just the same as everybody else, and we have a right to question how our tax dollars are spent, and with Devco, on a regular basis, they are not spent very well. That is unfortunate.
We would not be here today, if the federal government said to Devco, "You are accountable now." We would be down there mining coal. We would be making decisions based on good mining principals in conjunction and cooperation with Devco management. Unfortunately, that is not the case.
If you know the history of Cape Breton coal miners, you know that we do not fight on every issue; but when an issue comes up that takes a struggle or a battle, we will be up front and centre on that issue. The way the Cape Breton Development Corporation operates is wrong. They are making huge mistakes and there is no accountability.
If that was recognized by the federal government and Devco was made accountable and responsible for its decisions, 95 per cent of the issues on the industrial relations level would disappear, and 95 per cent of the contractual issues; there would be no browbeating, or anything of the sort.
When Devco makes a decision, for instance, in order to try to save $50,000 on a job and then blows $20 million or $10 million or $5 million through mismanagement and a poor decision, then the global issues are the ones we are dealing with and they are basically the ones for which we browbeat Devco.
Someone has to hold their feet to the fire. In this case we did not want to be the opposition. None of the unions wanted to be the opposition. We want to work and mine coal and that is exactly what we do the best. If someone has to hold their feet to the fire and the federal government is not doing it, then it is up to the taxpayers of Canada to do that. If Devco becomes accountable and responsible and we can work with them as a team, we will do it; but we will not watch our industry go down the drain and our families leave Cape Breton Island to go to Western Canada unnecessarily.
Senator Forestall: The coal is in the ground. It takes hard work to get it out. That is employment. Last night I asked Joe Shannon about the possibility of bringing back some of those early layoffs, particularly those who are still under 45, and hanging on to them in the event that Donkin comes on stream under Devco. Shannon left me with the impression that he would not do anything about Donkin until those who had made a bid had either been able to prove or otherwise abandoned their offer. I find that somewhat regrettable, because in the meantime nothing is happening and there is the possibility of flooding at Phalen, and flooding would cause the loss of that equipment.
Mr. Drake: It could.
Senator Forestall: Very easily. It is possible to overcome the problem, if you bite the bullet and shut Phalen down and open Donkin. However, if you try to keep both of them going and that works, that is fine; but if it does not work, then your tab up front is not less than $100 million; it will probably be $115 million or $120 million down the road.
Mr. Grant: Donkin should certainly be under Devco. Yesterday, Devco told you that 46 is about the average age of the employees. Without Donkin, there are employees with 20 to 25 years of service who will end up out on the street. I will get a pension out of it, but they will not. I represent employees will be out on the street with a vested interest in the corporation of 20 to 25 years, and if that operation goes to Steve Farrell and he hires his 250 employees off the street from people who really need jobs in Cape Breton, the 1,700 employees with Devco will not fit into the picture. I have a vested interest in the workers that I represent of 20 to 25 years in that coal industry. That is why Donkin should remain part of that industry.
Senator Forestall: Under Devco.
Mr. Grant: Yes.
Senator Forestall: That is the gist of it. I have sympathy for you. I understand what you are saying completely, if it falls through, but it does not solve the problem of how you get Donkin on stream. If Devco says it will go ahead with it, what happens then to all those who took early retirement? Will some of them be able to come back? I asked about whether there was any ongoing training, or if they were bringing some people in who could train others, who would constitute a training force? Shannon said they were not doing any of this at all.
Mr. Grant: If, as you are saying, our young people, people with 20 to 25 years experience, go on the street, and have to go to western Canada or have to go to Ontario, they will not be available, if at some point and time somebody says Donkin will be opened. We want Donkin opened under the federal government with Devco so we can have our people employed in the mining industry for the next number of years. We need that employment in Cape Breton.
Senator Buchanan mentioned before that opening Donkin will affect more than 20,000 people on Cape Breton Island; that is why we are here. It is not just for me or one of the other guys. We are here for everybody on Cape Breton Island, trying to keep Donkin in the big picture of Devco for the survival of Cape Breton Island.
Senator Forestall: You do not have much hope for the private sector to succeed, for Steve Farrell to get the money?
Mr. Grant: The federal government invested approximately $80 million to $90 million in tunnels in Donkin. If Steve Farrell wants to go mining coal, let him go down to Inverness. Never mind stealing it from us.
Mr. King: It has been noted in Cape Breton, and in Canada generally, that the private sector has come in and taken over industries. They have raped the industries. The steel plant in Sydney is a prime example. In 1964 and 1965, the steel plant had a rail and plate mill, and so on. It was handed over to the private sector. They took everything out of Cape Breton and left. The steel industry is now practically gone in Cape Breton.
I feel that if a private person comes in to take over the Donkin mine, they are going in there to take the coal as fast, as cheap and as quick as they can. They will ruin the industry. They will try to make millions of dollars. It will be gone within a few years. Furthermore, under Devco it would be mined a lot more safely. We would get a lot more coal out of it and it would last a lot longer than if a private industry came in and took over the Donkin mine. That is my opinion.
Senator Forrestall: Tell me what you know about the letter of intent. When did you first learn that there was a bid for Donkin?
Mr. Drake: The day they announced it on the radio. We did not hear about it beforehand. We heard it on the radio and it was in the newspapers the next day. It was very abrupt. It was right after the Senate hearings, as was mentioned yesterday. There was no consultation with the unions. Mr. Farrell was quoted in the Cape Breton Post and the Halifax Herald as saying that he was very surprised at how quick and decisive Devco was on this issue in terms of signing that letter of intent.
We called that day, I believe it was April 16 or 17. We asked our lawyer to see if that corporation was actually registered with the government. He could not find it on the Internet. To the best of his knowledge, it had not yet been registered.
We feel that the Donkin deal should be investigated. We have a couple of recommendations on the Donkin mine. That is one of them. We feel that the federal government should conduct an investigation into the circumstances leading up to the hasty decision by Devco's board of directors to endorse the sale of Donkin mine.
We also feel that the federal government must critically examine the economic climate in Cape Breton and rethink their position on Devco and Donkin and immediately move to open Donkin under Devco's jurisdiction.
We also feel that the $300,000 government study that Mr. Steve Farrell of Donkin Resources is doing right now should continue and proceed to its conclusion. When it is completed, that study should be turned over to Devco and the federal government for assessment in light of the situation at Phalen colliery today. That is the only way we can have any trust in this kind of deal with Donkin.
Senator MacDonald: Everyone who has appeared before this committee has supported the Donkin mine; everyone, without exception. This committee has recommended it. However, there is only one problem. We cannot get the money to do it. The federal government will not give it; it is not in the corporate plan; nor will the provincial government give it. We can go around lamenting that fact or we can talk about Paul Martin and the deficit, but it will not change anything.
The only person who has come forward so far, encouraged by the minister's meeting before this committee last March 20, is from the private sector, and that is Steve Farrell, of whom you have spoken highly today as a mining man. You have given great credence to his views with regard to the potential of the mine, except for one thing; you say, "Don't let him do it." You say that if we give him $400,000, he will attempt to identify the potential of the Donkin mine by simply studying the existing data. He is doing a feasibility study. The only thoughts here about the feasibility of the mine have come from Senator Buchanan and you. I do not know who else has talked about it. However, you are guessing.
Mr. Drake: Guessing at what, senator?
Senator MacDonald: Guessing at the cost.
Mr. Drake: Who is guessing at the cost? I am not guessing at the cost. I know what it will cost to open Donkin mine. It will cost $100 million. I made that perfectly clear here on the record today and on the record in 1996.
Senator MacDonald: With all due respect, it is all well and good to say you know what it is. How do we know you know what it is?
Mr. Drake: You will have to take my word for it, senator. I have never been a liar.
Senator MacDonald: Don't talk about lying! We are talking about the very data that Farrell is looking for, which contain studies that put the cost up around $500 million.
Mr. Drake: That is not even close, senator. That is a mistake. You are wrong.
Senator MacDonald: How do I know that Senator Buchanan is not wrong?
Mr. Drake: I think I know where you are heading. May I explain it one more time?
If you look at the public record of the original Senate hearings, you will see that we explained in detail the cost analysis of the Donkin operation. Those numbers were done by Steve Farrell, not Steve Drake. Those numbers were given to us by Steve Farrell, when he was working with the UMWA. Mr. Farrell has an interest in Devco remaining operational because he has an engineering firm that sells equipment to Devco -- mining equipment. Mr. Farrell was sincere.
We went through all these numbers and we did some comparisons. With regard to the controversy over costs -- and this is from the 1986, 1987 and 1988 annual reports of the Cape Breton Development Corporation -- it is stated that the new Phalen colliery is on stream and on budget. Fixed assets are stated at cost. The Phalen colliery is stated at $185,928,000 total cost to date.
That is Phalen open and operational from a green, grassy field. That means we bore the tunnels and do everything we have to do at Phalen colliery, including purchasing new equipment for $186 million.
The 1995 annual report of the corporation states that the acquisition cost of Prince colliery over the lifetime of the project is $150 million. That is from a green, grassy field. We have to bore the tunnels and purchase new equipment.
The Westray mine, despite the obvious lack of safety, started from scratch -- a green, grassy field. They drilled the tunnels and brought it into production for $100 million. The expenditure included all the surface facilities, a coal wash plant, mining equipment and tunnels.
We have a large percentage of the surface facilities, as Angus Grant mentioned, at Lingan colliery. We have some of the mining equipment within Devco. We own those assets right now. We have a coal wash plant; and the tunnels are already drilled. The tunnels are the most significant cost in any mining operation, and we have spent $80 million there.
The original 1979 estimate for the Donkin mine included the following as a significant portion of capital costs -- and the highest cost that we could find was $400-million to open a Donkin operation from a green, grassy field: In terms of tunnel drivage, they call for four tunnels. We have two. That was a major expenditure cutback from the original $400-million price tag. With regard to underground drivage and equipment, we have a methane extraction plant at Lingan colliery that can be refurbished, a wash plant and expansion, all of which are included in the $400 million price tag. We have a $150 million washing facility, which the Crown owns, sitting on the Sydney-Glace Bay highway right now.
With regard to surface facilities, I believe it was Kilborn Engineering that said that minimal surface facilities would be required at a Donkin operation to start a small-scale operation. With regard to surface site preparation, most of the surface site preparation was done back in the early 1980s, when we decided to do the tunnel. So there is a huge cost taken off the $400 million.
Add to that the fact that we have the two tunnels there and the fact that we own all this equipment and you can see why I firmly believe that we can open it for between $100 million and $125 million, which is exactly what I said on the record last time. The extra $25 million would come into play if you did not capitalize the coal we produce while we are mining. These numbers came right from Steve Farrell, not from Steve Drake.
The Cape Breton Development Corporation's annual report for 1995 says that included in the fixed assets is $80,678,000 in acquisition costs on the completed access tunnels of the Donkin development project. Even if Donkin were to cost $200 million, we have spent $80 million already. We are not looking for a megaproject the size of Phalen colliery. We are looking for a project that we can get into as inexpensively as possible with the future prospect of opening a full-scale operation at Donkin mine to continue the Cape Breton Development Corporation as an economic benefactor to our island.
Mr. Steve Farrell said that any realistic cost analysis of the Donkin mine must take into consideration that the day of the megaproject is gone and that the Donkin mine can be developed on a small-scale basis for well under $100 million if we use the assets Devco already owns. He said that costs for a full-scale operation can be injected on an as-needed basis over the long term. He went on to say that $400 million for the Donkin operation is pure fiction.
We feel that the people who are promoting the Donkin mine have not put up a good argument as to the cost of the Donkin mine. Four hundred million dollars is totally out of the question. As for having money, as was mentioned yesterday, they had no money whatsoever. They did not have the $300,000 to start the project. Where will they get the $100 million to complete the project?
As Senator Butts asked yesterday, if we have to move away from the development sections of the Phalen colliery, would there be any other moneys that we could utilize for any other projects? I do not know what the Devco development budget is for Phalen colliery. Perhaps the Senate could determine exactly what that is on their five-year plan for development at Phalen colliery. Normally, it would be between $10 million and $20 million per year.
If they are doing that, and this exploration finds that we cannot go any further at Phalen colliery, there is a pool of resources into which we can tap. As I said earlier, there is $10 million for the first year at Donkin under Devco. We could use that pool of resources to start this project under Devco.
I believe that I have provided information. I am a coal miner and I think I am good at what I do. I am not an expert on all these things, so I searched for people who are. I have documentation from people who are very respected in the coal mining industry in Cape Breton and across Canada and in the United States. They firmly believe that $100 million to $125 million, depending on how you spend the money, would open a Donkin operation.
Senator MacDonald: Regardless of how you feel about the operation of Donkin by Donkin Resources Limited, they have now been given $400,000 to come up with a figure, which I think you would probably accept, to develop the mine.
Mr. Drake: If Mr. Farrell remains consistent with what he has been saying for the past two and a half years, he will probably come up with a figure similar to what we have stated here today.
Senator MacDonald: Regardless of what you have thought about the proposal of Donkin Resources in the long run, no one here has said anything nasty about Mr. Farrell.
Mr. Drake: Steve Farrell is an expert coal miner and that is all we have to say. He is an expert at what he does.
Senator MacDonald: You attended our meeting yesterday. We were puzzled about the whole proposition with regard to Donkin.
Mr. Drake: So were we.
Senator MacDonald: We had a fairly heated discussion. What happens when that $400,000 runs out? We have not even heard from Steve Farrell yet, but from what we have heard from Devco, they must then go to the market with the information they have. They have to lay out all their financial plans. They have to lay out the directors of the company and how much they have put into it, and then they have to get people to invest in it and operate it. They have such a serious job ahead of them that, without wanting to rain on their parade, I am sorely puzzled as to how they can do it.
We are back now to where Devco will get the money to do it.
Mr. Drake: I think I just gave you a reasonable option from the development costs at Phalen colliery. If this exploration does not prove that Phalen has 15 to 20 years, Devco has money built into its budget for development. The Senate could probably get those numbers tomorrow from Merrill Buchanan, the vice-president of finance for the Cape Breton Development Corporation, to find out exactly what is budgeted for development costs at Phalen colliery and any new capital assets they might not be using over the five-year plan if that exploration does not prove to be fruitful.
Senator MacDonald: That is a good idea. I have also been aware of your remarks with regard to the equipment which would be made available. Also, are the holes that have been drilled in Phalen under Devco's responsibility?
Mr. Drake: Yes, that is a Devco responsibility.
Senator MacDonald: Is that to determine exactly where they stand on Phalen?
Mr. Drake: Yes.
Senator MacDonald: So if they came upon bad news -- God forbid! -- they could immediately put Plan B into operation. That certainly would be an impetus to get the Donkin mine going.
Mr. Drake: If Devco continues with this proposal to sell Donkin mine, there will be no Plan B. With Donkin under Devco's umbrella, that is our Plan B. Until they have information which can pass the litmus test, I do not believe, none of the miners believe, and many Cape Bretoners who know the mining industry do not believe, that Devco should be allowed to sell this asset. It is one of the most important assets that Devco has right now besides the people who work there.
Senator MacDonald: That seems to be a generally accepted view. However, with these exploratory holes Devco seems to be taking the temperature of the Phalen mine.
Mr. Drake: They have been taking the temperature for a long time.
Senator Forrestall: We are trying to raise a magical $100 million. In the three or four years it would take to bring the mine to a workable state, how many people would be employed? It would be a relatively small number. It would involve some infrastructure work. The big crunch for money would not come until the third or fourth year, I assume.
Mr. Drake: Somewhere around the third year, yes.
Senator Forrestall: So you would have three years. Perhaps there is an internal way that Devco has not bothered to look at. That three years, together with what they have budgeted for in their plan, begins to come up the ladder a bit, does it not?
Mr. Drake: That is one of the best points we could possibly hope to have raised here today. Devco must explore all their options. One of the options right now, given the situation at Phalen colliery and the projected longevity of Phalen colliery, is that they should not move away from having the Donkin mine as an option for the future. They should be exploring every possible avenue to try to get money.
Mr. Ernie Boutilier was the immediate past president of the Cape Breton Development Corporation. Just before the new administration took over, Mr. Boutilier said, essentially, that Donkin has always been in the future of Devco. He said that, if Donkin is feasible and we get to that point where Phalen or Prince might have to cease operations, he was not too worried about the money, because there will be a way to find the start-up costs for a Donkin operation.
He worked for the federal government. I do not think you say something like that unless you have a directive from the federal government. Someone should be looking at every single angle on opening up a Donkin operation under Devco's umbrella.
As the spokesperson for the largest union, with approximately 1,350 employees, I am here to say that, if Devco wants to get back to the table with our union and look at a cooperative effort at putting together some sort of financing proposal, we will cooperate 100 per cent. But when they are slamming the door on the unions on these global issues, we must take that fight somewhere, whether it is to the public, the Senate, politicians, or whatever the case may be. This is our industry and it is vital to Cape Breton's economy.
Senator Moore: At the bottom of the first page of your submission, you state:
It is discouraging for the miners and their families to hear the continued denial of the Corporation on their plans not to remain in the mining industry.
I find that confusing. I should like you to explain that to me, in a positive way. If they are saying they are going to stay in the industry, do you want them to deny it? I do not understand what you are trying to say there.
Mr. Grant: What I see in that comment there is that Devco is not denying that they are staying in the coal mining business. They are saying that they will be a two-mine operation and they will sell or give away the Donkin assets and stay in operation; but, as miners, we all realize that Devco cannot exist after a certain period of time without the Donkin project. Devco is denying that they are not staying in the coal mining business; we believe that they are getting out of the coal mining business. When they sell their Donkin assets and let Phalen colliery close itself and let the Prince colliery work itself out, we will have nowhere else to go, if we do not go to Donkin mine. Devco is denying at the present time that they want to get out of the coal mining business. They are saying to us that they want to have a stable workforce of so many people, but we realize that, for them, Donkin is not in the long-range future of mining in Cape Breton.
Senator Moore: I did not hear that yesterday. Were you sitting in on the hearings yesterday afternoon?
Mr. Grant: Yes.
Senator Moore: I did not hear testimony to the effect that they were getting out of the mining business.
Mr. Grant: No, I did not say they were getting out. I said they are denying that they are getting out. They are saying that they will be in it for a long time.
Senator Moore: That is what I thought.
Mr. Grant: We are saying to you, senator, and to Devco, that they cannot be in the coal mining business in Cape Breton without the Donkin mine, because the future of Phalen colliery today does not look good. Devco is saying to us that they are staying in the coal mining industry, that we might level off at 1400 people, and that we will have a good workforce and continue operation. That is what they are saying. They are refusing to admit to us that they are getting out of the coal mining industry, because we see them getting out of the industry if they do not have Donkin.
I do not know if that answers your question, but I have tried to do so.
Senator Moore: I have figures here concerning the development of Donkin varying from $100 million to $400 million. In view of the fact that Canadian taxpayers have spent more than $1.5 billion on Devco, why do you believe that a publicly owned and operated Donkin mine is better for the Canadian taxpayers and Cape Breton than a privately owned and operated one?
Mr. Grant: I mentioned before about the collieries closing under Devco. We got up in the morning on March 3, 1973, and we did not have number 12 colliery. We had 1,000 jobs gone, just like that. We got up on April 6 or April 8 in 1984, and we did not have number 26 colliery. We lost 1200 jobs. In 1994, in Lingan colliery, we lost approximately 800 jobs. We have been hit from every side.
We are not trying to blame that on the federal government, but as miners in Cape Breton, and as Canadian citizens, we need another chance at the Donkin project. We have survived these major shutdowns of 12 and 26 and Lingan collieries. We absorbed our people into the workforce over a short period of time. I think the senator was asking how we could move people into Donkin. We had to do the same thing with Phalen colliery when 26 closed. We had people out on the street for a long period of time, but we juggled people around and eventually got them all back into the mining industry. We have been hit every which way since 1973, and Devco only became owned by the federal government in 1968.
We feel that there is a justifiable reason to invest in the Donkin project: it is for the survival of Cape Breton Island.
Mr. King: All you hear is what it costs to operate Devco. What about the money that Devco puts into the economy of Cape Breton? We pay taxes. We work for Devco and we pay taxes. The people that work for the grocery stores where we buy our groceries pay taxes. If we get back into the foreign market with a Donkin operation, that will be foreign money coming back into Devco. When we sell our coal overseas, we are paid in American money, which is extra money for us again. That will be money coming back into Canada. Over the past number of years, when we were in the foreign market, we made money. It might have cost us $25 million or whatever but we made money coming into Canada.
It did not just cost the taxpayers $1.5 billion with nothing in return. They did get returns. It might not have been a profitable operation at the time but there were reasons for that.
Devco does make money in the long run if you look at the taxes that are paid, and so on.
Senator Moore: I accept all of that.
Mr. Drake: A few weeks ago there was an announcement that the provincial government in Nova Scotia would be spending some money on some jobs at Michelin Tire. They were to invest approximately $25 million. A lot of people were saying that that was a bad investment, that this was a huge, multinational corporation making billions of dollars. The premier has said that we will get that investment back over the long term. We will get it back in Canada Pension payments, in UIC payments, taxes, HST, and things like that. I have heard statements like that from the federal government on many occasions, when they want to spend money somewhere.
Here is Devco. The federal government did not give it away; they invested $1.5 billion in a Crown corporation no different from Canada Post, CN Rail or any of the other Crown corporations you can find in the book which they still invest in today.
I do not know if anyone has ever done a study on Devco, except to say, "We are not spending any more money on it, because we have spent $1.5 billion on it already." Well, that investment had a return. There are 6,000 people right now in Cape Breton who draw pensions from Devco. They have families. There are 1,700 miners down there. They have families. They spend every dollar they have.
The coal mining dollar does not stay in the coal miners' pockets. Unlike private business, who want it for their shareholders and bank accounts, the coal mining dollar right now is spread across Nova Scotia, and it benefits our economy.
Maybe the Senate could give us a number so we could use it to back this up. If the federal government invested $1.5 billion in Devco and the miners in the Cape Breton community, what did they get back? Maybe someone could give us that number. I do not have it, and I do not have the assets or the capability to get that number.
Devco is an investment in Canada and in Canadians. We do not think it should be thrown in the garbage can.
Senator Forrestall: Senators, we have some funds; why could we not commission a study to respond to that? Senator Butts has looked at this on and off over the years. Do we have any money to hire someone to look into that?
The Chairman: I do not know the quick answer, but we will take it under consideration.
Senator Moore: I do not think anyone is questioning the community benefits. We are all sensitive to the money that comes back to the federal treasury in various forms of taxation and the economy that is generated in the communities by the spending by Devco employees. My question was aimed at the difference between Devco being privately owned and operated and publicly owned and operated. That is what I was asking. I am still not sure that I am satisfied with the answers I am hearing.
Mr. Ron Coté, Board Member, District 26, United Mine Worker's of America: Senator, did you say that $1.5 billion was spent on Devco?
Senator Moore: Yes.
Mr. Coté: Where did you get that figure? You are saying it came directly to Devco. I have worked 28 years for Devco. One of the directors told me when he was a manager of one of the collieries a few years ago that Canada made a wheat deal with Russia. In return for that wheat deal, Devco had to buy mining equipment that was obsolete.
If you look at the accountability of Devco, we are saying it was a government agency at the time and that the government was not accountable. Now the government has to be accountable for its money. We are saying that this mine is feasible. As Senator Forrestall said, why would they spend so much money on Devco? Why would you not spend this money on people to keep 7,000 employees working and earning a decent wage?
If I was a businessman and came to you and said, "Here is a plan so that your senior employees can remain at work, and you can give them respect and dignity, and you can make a profit," why would you not do that?
Senator Moore: I agree with that. My question is what is the difference between the public purse being used to do it and a private company doing it?
Mr. Coté: The difference is that you have senior people who have worked at Devco for 20 or 25 years. Why not give them the opportunity to go out on a pension down the road when this mine is feasible? If Donkin Resources takes it over, they will not hire us. There is no way. They will hire junior people with no liabilities. You will still have 7,000 people going out with no pension, so it will cost more for the government.
Senator Forrestall: What if it were a condition of the sale that Donkin Resources Limited buy Devco?
Mr. Coté: Can you guarantee that?
Senator Forrestall: I do not care how silly it may seem, but if the options are not explored, we do not know the answer.
Mr. Drake: I think your question was what would be the difference between a private organization opening Donkin and the Crown opening Donkin.
Senator Moore: Yes, assuming that they will both have to spend whatever the number is to develop this.
Mr. Drake: That is a fair question, and I hope I can answer it.
Right now there are 1,742 people working at the Cape Breton Development Corporation. That is the number Devco gave us last week, so it is pretty accurate. The average age of most of those people is 45 or 46. If Donkin Resources opens a new mine in Cape Breton, they will employ 250 people. They have already made that clear. The maximum coal we ever sold there was in 1992 after developing that market for 15 to 18 years. We sold 1.8 million tonnes on that market. Mr. Farrell was saying that they will produce 1.5 million tonnes of coal, so you can pretty much equate that with 250 employees. We can put that off to the side for a second with a private concern opening a mine and putting 250 employees to work.
With respect to the 1,742 people who work at Devco, we have two old coal mines, Prince colliery and Phalen colliery. Phalen is only 11 years old, and it got old quickly because we mined it quickly. I do not know the exact time frame, but it took a long time for 26 colliery to get down to the 700-metre depth. It took 11 years to get Phalen colliery down there. Phalen colliery is an old coal mine.
I do not know how Devco can back up its promises. They have been speculating for the last three years. At a meeting on November 12, 1997, we asked the executive assistant to George White, the president of Cape Breton Development Corporation, about the 15- to 20-year life expectancy of Phalen colliery. He said that with the plan prior to this, the life expectancy was 15 to 20 years based on the information they had. He said that, and I quote: "The information made public last year was not based on solid exploration of the Phalen mine." Brendon MacIntyre said that Devco took their five-year recommendations to Ottawa based on speculation.
Devco have been speculating for a long time and have not been able to back up their argument. When their argument is poked full of holes by anyone, whether it be the Senate, the unions or the public, Devco do not have the ammunition to back up their argument. They are telling us to base the future of 1,742 employees on Phalen colliery and Prince colliery. We firmly do not believe they will be here in 20 years. We are 46 years old on average. What will happen if something happens to Phalen and Donkin is privatized?
The difference, senator, is that, with a Donkin operation under a Crown corporation instead of a private operation, we will employ more than 250 people. We may be able to offset the social pain that will come if one of these mines shuts down. With the Donkin operation privatized, we will not be able to do that.
In your information package, there is a letter. I believe Senator MacDonald read a quote from that letter yesterday. It is on the Donkin operation. Basically, it says -- and I suppose it was a little sarcastic -- that selling the Donkin mine makes as much sense as buying shares in Bre-X, and that is a fact.
In an internal report dated October 6, 1983, representatives of Devco presented the following data on the Donkin mine to the Second Coal Operators Conference in Sydney, Nova Scotia. The paper was titled, "The Donkin-Morien Mine: Building the Mine of the Future." It stated:
Production of 4.507 million tonnes per annum is considered possible and economically feasible...
This is Devco speaking.
... application of a 0.15 relaxation factor to allow for practical considerations results in a planned run-of-mine output of 3.831 million tonnes a year, which will make Donkin-Morien one of the largest underground coal mines in the world. At full production the Donkin-Morien Complex will provide 1,284 jobs.
The paper was presented by J.C. Marsh, Assistant Project Manager.
Devco's numbers on a profitable Phalen colliery in their projections presented to the Senate and the government last year showed that Phalen colliery in the future would produce 2,281 million tonnes of coal and have a workforce of 716 people. That would be profitable.
As to the tonnages for the Donkin operation, we believe the figure of 3.3831 million tonnes a year is feasible from a full-scale Donkin operation. We know for a fact that you do not need 1,284 people in a mine with today's new technology; so the numbers will drop from that 1983 estimate. The 716 employees at Phalen colliery produce 2.2 million tonnes of coal profitably by Devco's projections and numbers; if something happened to Phalen and we transferred them into a Donkin operation with tonnages of 3.381 million tonnes per year, that would be 1.6 million tonnes per year more coal with the same workforce. That would be a gold mine.
They are suggesting 250 employees, which is not what we need at Donkin. We need an operation that will be full-scale and will compensate for any pain and suffering that could happen due to the closure of Phalen colliery.
Senator Moore: How could those numbers be achieved? How could you have double the output given the example you were citing?
Mr. Drake: You would have a 12-foot seam.
Senator Moore: Is there better equipment?
Mr. Drake: No. There is the same type of mining equipment. There are different mining conditions from ours, but I will use that as an example. To have 100,000 or 150,000 tonnes a month from a coal mine with 400 people is not unachievable. These numbers are projected by an engineering firm and projected by Devco as to the tonnages. At Donkin mine, there are three seams able to be mined. I am not an expert on multiple-seam mining, but it is done all over the world. These numbers are straight from Devco's books.
The difference between private and Crown is that the Crown can employ more people, and the profits, instead of going into someone's bank account, whether it be in Canada or a foreign country, would be injected back into the economy by way of jobs.
Senator Moore: Lack of accountability, lack of faith and change in management have been mentioned a number of times today. I have also heard that it does not matter who the management it is, it will be the same thing. Is this just a classic case of union and management agreeing to disagree? Everything I have read over the last few years would suggest that things are getting better and better and relationships are getting stronger between the unions and management.
I find that to be inconsistent with what I have heard today, particularly from you, Mr. Drake. The company must report and account to the shareholders here in Ottawa. It is not as if there is no accountability. You may want to respond to that.
Mr. Drake: If Devco has bad news to report, they must gloss over their report somehow. We have been watching this for years. The corporation came here and said that everything was fine. They said they negotiated contracts with the unions and for the first time in 21 years we did not need conciliators. We have the bonus system negotiated outside of the collective agreement. That is a big plus for the corporation. Everyone is getting along famously due to this "Beyond 2000" plan.
I listened to Mr. Shannon when he made his initial presentation. With all the rosy concepts which Mr. Shannon described, nothing was said about mining coal.
Senator Moore: Mr. White told us that in some detail.
Mr. Drake: I am talking about Mr. Shannon's presentation; I am not dealing with Mr. White.
We read Devco's annual report. The problems we have in this industry, the major global problems that we see as coal miners on a regular daily basis, which you cannot see because you are here in Ottawa, are not being addressed adequately.
We mentioned the ABM-20 the last time we were here. Devco paid $6 million for two pieces of that mining equipment and our productivity went down by approximately 40 to 50 per cent on that equipment. We have argued about that equipment until we were blue in the face. That equipment will sit idle in Phalen colliery until a decision is made by someone about what will happen to it.
As to the micro-issues in industrial relations, we deal with about 96 per cent of them on a regular basis and resolve them. Sometimes there is a little fight, but often there is not. We resolve those issues. But the global issues are very difficult to resolve because the door is slammed in our face. We think the people who make the decisions must be held accountable. We have been saying that for 20 years.
One thing you will hear today, and it appeared in Hansard earlier this year and in 1996, is that we have been as consistent as possible. We do not have anything to gain by beating up on Devco management.
Mr. Grant: Our people working in the mines get along very well with the on-site management, the supervisors. We always have problems, but the fact is that we do not have to love the manager or president of Devco; we deal with them on a daily basis and sometimes we end up in arbitration. However, when we, as the executive of the union, find out through the press that Devco is giving Donkin away, that creates a problem for us.
You were asking about how Donkin Resources will get their money. I do not know where they will get the money, but for the first $300,000 they went to the government. That is how they got the first $300,000 to do the study.
Yesterday, the committee heard about pensions and getting the books in order on the pension aspect. We just found out over the last three weeks that on our contributory pension plan, where we pay 5 per cent, Devco had a campaign to solicit more membership in the plan in 1997 and got 93 new members to join from the ranks, and so Devco stopped putting their money in. They found out that they could take a holiday in 1997 and not put their part, over $800,000, into our contributory pension fund. Devco never said one word about that to you people yesterday, but the fact is that that is where the mistrust lies; it is on the bigger issues.
Our people are down there mining coal, cleaning up 3 Centre today, trying to get 4 Deep going, and there is not a problem between the onsite people and the men. It is what we have to put up with from the top officials at Devco, who are making decisions to give Donkin away, and who are not putting that $800,000 into the contributory pension plan after going out and soliciting and getting 93 new members in that plan in 1997.
Senator Moore: Do they encourage the new members to participate in the contributory pension plan?
Mr. Grant: We agree that the more members there are in the pension plan, the better off the plan will be. We supported Devco's decision to solicit our membership, not only CAW, but all members within Devco, to join that plan. There were special meetings in the evening so they could explain to the employees and their spouses the benefits of joining this plan.
As a result, 93 new people joined that plan this year. We support that. However, we sure were not as supportive when we found out that, after getting those members, they were taking a holiday.
Senator Moore: There is no doubt in my mind that coal mining is the toughest job in the world.
Mr. Grant: It is even tougher than being a senator.
Senator Moore: Canada probably has the best miners in the world. I understand what you were saying earlier about the community benefits and so on, but you will not have it both ways. You will always be at loggerheads with management over some things. If that is the situation, you have to find a solution. I do not know if you have a joint committee that cooperates on these matters, but that happens in many companies these days; they share information that is of benefit to everyone. Perhaps that is something to strive for. You cannot be the union and also be the manager. You have to accept that.
Mr. Drake: We are not trying to do that, senator; not even remotely. If they manage the mines, we will mine the coal and we will get along famously, but if we are mining the coal and they are not managing the industry, we will have a problem every time.
Mr. MacIntyre: When they made the announcement on Dockin, we were in the same hotel on a different floor. They did not have the courtesy to come and tell us that Donkin would be sold.
Senator Buchanan: Senator MacDonald talked about the capital cost of the new Donkin mine. I took a moment to refresh my memory on the reports that we commissioned. The reports of Montreal Engineering and Kilborn Engineering and Associated Mining and Steve Farrell's report to the UMW, once brought up to 1996 dollars, all show that the continued development of the Donkin mine to two walls will cost out at an average of $125 million. All of these people cannot be wrong.
Someone mentioned the Boyd study. Do you know that the Boyd study, although it did touch upon the Donkin mine, did not do any broad analysis or in-depth analysis of the Donkin mine?
Is that right, Mr. Drake?
Mr. Drake: In May of 1997, Senator Murray made it perfectly clear that the Boyd study simply gave Donkin mine the brush-off. If they spent $500,000 on that study, they spent 50 cents on looking at Donkin. They put hardly anything into it. They were a bit contradictory on the Donkin issue.
Senator Buchanan: That contrasts sharply with the reports of Montreal Engineering, Kilborn Engineering, Associated Mining and Steve Farrell.
It is important that we look at the people who were involved in this study. Steve Farrell is one of the best mining engineers around. Coady Marsh and Bill Shaw were also involved in this study. These people know what they are talking about. Maybe I do not, but these people do: Coady Marsh, Ewart Blanchard, Mr. Kirkpatrick from Power Corporation, Armand Pinard, Steve Rankin, Joe Shannon, Bill Shaw, D. G. Brown, Kingsley Brown, Al Carroll, John French, Victoria Harnish, Richard Hornby, John Smith, Arthur Turner. These are engineers, professional people in the business of coal mining, and they took a long time to put this report together.
This report contains an extensive analysis of the mining costs of the Donkin mine; it was done by Montreal Engineering and is called the "Donkin Mine Feasibility Study."
I think you have that, Mr. Drake?
Mr. Drake: Yes.
Senator Buchanan: They claim that, based on the criteria, the project should recover all capital and earn a return equal to the assumed cost of federal financing of 10 per cent per annum; at the prices estimated, the Montreal Engineering study shows that coal appears to be competitive with any other option. That is the Donkin mine coal.
Senator MacDonald was right: the feasibility of the mine has been mentioned here today, but on the basis that the feasibility of the mine has already been proven. Now let us get on with the job of pumping the tunnels out and finding out how much it will cost in 1996 dollars based on all of these engineering reports.
Senator Moore and Senator MacDonald are obviously worried about the money, but I say that the money will be recovered. Montreal Engineering said that, by amortizing the capital cost over 25, 30, or 40 years, the cost will be recovered in the revenue and it will be sufficient to cover all costs and all loans by the federal government.
I have a question concerning the Cape Breton Alliance. I have spoken to two or three members. Bill Shaw has been retained by them to do an analysis of Sable Gas and determine how it may affect, negatively or positively, industrial Cape Breton and the mining industry.
Mr. Drake, are you on that Cape Breton Alliance?
Mr. Drake: Yes.
Senator Buchanan: What does your union think about Sable Gas and its impact on the coal mining industry? Bear in mind that the Power Corporation has already said they intend to do a deal with the Sable Gas producers for Tufts Cove in Halifax. That is not a bad thing, because, as Senator Forrestall knows, the soot from the oil has been a problem for years. We have received many calls about that over the years. Natural gas will be a big help for the environment in the Halifax-Dartmouth area to get rid of the heavy crude oil that they now burn.
Last week, I spoke to people in the Power Corporation and in Sable Gas and they say that it appears that getting natural gas into industrial Cape Breton and using it in the Lingan 1, 2 and 3 and Point Aconi does not appear to be feasible as far as competing with coal. That is good news for the coal industry.
Mr. Drake: We did a bit of research but it is limited because we do not have the assets to dig deeply into the area. That is why we are part of the Cape Breton Alliance.
I will direct your attention to the chart entitled, "Energy is marketed in British thermal units."
In one pound of coal, there are approximately 13,000 Btus. That is its energy value. A metric tonne is 2,200 pounds. One tonne of coal is equal to 28.6 million British thermal units, or MBtus.
Nova Scotia Power presented the argument that, depending on gas prices, it could convert its 350-megawatt generating station at Tufts Cove to burn 60,000 MBtus of gas per day and one 150-megawatt unit at Trenton to burn natural gas in the amount of 30,000 MBtus of gas per day.
That combined 90,000 MBtus of natural gas per day is equivalent to 3,146.8 tonnes of coal per day.
On the last chart, we have taken the 90,000 MBtus of natural gas, which Nova Scotia Power has indicated they are interested in using daily at Tufts Cove, and multiplied it by 365 to find the energy use per year. We arrive at an energy value of 1.148 million tonnes of coal per year.
Nova Scotia Power indicated that they will be doing that. There were some questions yesterday about the Sable Gas deal and how it will be utilized at Tufts Cove. As Mr. White said yesterday, and I am pretty sure he is correct on this, Nova Scotia Power put their most efficient plant on line first. From the indications in the Sable Island review panel report, it looks like Nova Scotia Power will utilize what they call a combined-cycle generating facility at Tuft's Cove, which means they add an additional cycle to the burn before they produce their electricity at the other end. That increases the efficiency.
It is our understanding that Tuft's Cove is a high-cost plant and a high polluter because of the high sulphur oil. Nova Scotia Power have basically turned down the volume button on Tuft's Cove. We do not know the exact megawattage they are producing, but let us say it is approximately 100 megawatts. The capacity is 350 megawatts. If Nova Scotia Power do what they are indicating and take the Tuft's Cove project and turn it into a combined-cycle plant, their efficiency will be increased from their maximum today of 350 megawatts to somewhere in the vicinity of 834 megawatts. We got that number from friends in the corporation.
The significance of that is that if Nova Scotia Power is getting, say, 100 megawatts out of Tuft's Cove right now and it is at idle, then if they increase that to 834 megawatts, that will be a substantial increase in their output which they will have to sell somewhere; they cannot just produce it. If they cannot increase their market shares equivalent to that 834 megawatts, they will have to turn their volume down somewhere. All the indications are that that would be Lingan generating station in New Waterford and Point Aconi on the north side. Depending on how much electricity they can possibly sell, they could turn the volume button on Point Aconi and Lingan from where it is today, which is at approximately nine or ten, and turn it down to eight, or seven, or six. The number will depend on exactly what decisions Nova Scotia Power make. We cannot predict that or speculate on it.
What we do know is that that involves a substantial impact on us. That represents one-third of our coal production right now. We can perhaps produce 300 million tonnes a year. That equates to one-third of our jobs. Out of 1500 jobs, potentially this could have an impact on 500 jobs.
In addition, from the reports that we have received on combined-cycle gas plants, if natural gas production went to mainland Nova Scotia and Nova Scotia Power decided that, instead of building a new coal-fired plant, they would build a gas plant, they would build it on the mainland and not in Cape Breton. That additional electricity would go on Nova Scotia Power's electrical grid. Once again, that would affect the coal mining industry negatively.
Deregulation will be a reality in Canada. Nova Scotia Power might be competing with Ontario Hydro, Quebec Hydro or with electricity produced in Boston from Nova Scotia gas from Sable Island. All the Americans would have to do is turn it around and ship it right back here on our lines. Deregulation would allow them to do that.
Will Nova Scotia Power be competitive with those other industries or will they have to turn their output down even more significantly? If so, where will they do it? These are a lot of questions that we feel have not been addressed adequately by the Sable Review Panel.
Before I finish with the Sable gas issue, I want to read into the record a couple of recommendations from the 1983 Venture Development Proposal for Nova Scotia, which was a report on the Venture Natural Gas Project. Under "Recommendations", No. 1 is:
That a socio-economic impact statement be prepared to evaluate the benefits to Nova Scotia, and particularly Industrial Cape Breton, of any decision in which the government is considering a conversion of the production of thermal energy from coal to gas.
The report then recommended:
That a comparative study be made of the total impacts/benefits associated with offshore supply bases in Halifax, Dartmouth, the Strait of Canso and Industrial Cape Breton.
In 1997, in the report on the Sable Island Project, the first addendum under the term "Socio-economic Assessment" states that:
The social impacts of a project are changes affecting individuals in the communities where they live. These changes may relate to economic conditions, employment, health status, education, social organizations, or values and perceptions about quality of life.
Forward planning and design: When social implications are taken into account at an early stage, effective mitigation and benefit enhancement measures can be built into the project.
The public was provided with extensive, detailed information about the project, and three rounds of open houses held in the three community impact areas enabled people to ask questions, receive answers and voice their concerns.
The socio-economic impact settings in the three places they are talking about are: Country Harbour, Point Tupper and Halifax-Dartmouth. They did not even mention Cape Breton in this assessment, and yet Cape Breton will feel the most negative socio-economic impacts from Sable gas, whether we have it or not.
In 1983, when they looked at the Environmental Assessment Act for the definitions of a "socio-economic study" and an "environmental assessment," they interpreted those definitions as meaning, "We must do a study in Cape Breton." What we cannot figure out is why, in 1997, when they took the same information from the same Environmental Assessment Act, they interpreted it to mean that "We do not have to do a study in Cape Breton."
I am not sure if this is the appropriate time, but, if I may, I want to put on the record the recommendations of the UMWA on Sable gas:
1. That Mobil and their proponents should be issued a deficiency statement by the Sable Review Panel based on the lack of attention to the socioeconomic impacts of Sable gas on industrial Cape Breton.
2. That Mobil and their proponents must be directed to conduct a detailed socioeconomic impact study on the positive-negative impacts of Sable gas on Industrial Cape Breton. Particular reference should be directed to the impacts on the coal industry.
3. That Mobil and their proponents must develop a comprehensive plan to mitigate any negative consequences that Sable gas will force upon Industrial Cape Breton's economy and future generations.
If there are any questions on Sable gas, I will try to answer them.
Senator Butts: Senator Buchanan and I know engineers. He knows all the good ones and I know some of the bad ones. That is a problem to me.
You say that the Boyd study did not go anywhere, but it gave five specific reasons against Donkin. One of them was the impossibility of doing selective mining, which is why I asked that question last night. Management agreed with me that it was uncertain. There are no prominent marker bands; that is how Boyd put it. If that is not specific, I do not know what it is.
Another engineer, who is a friend of mine, has not appeared before this committee, but he told me that in 1988, when they flooded Donkin, they doomed it. We have not talked about that. He said he was on his knees to keep them from flooding Donkin. Furthermore, he said that if they take that water out, which has been in there since 1988 and is so black and polluted, we will have another tar pond. That was the information I got on that.
Mr. Drake: Should I address that?
Senator Butts: First, I have two or three other points. We have been told that a tonne of coal coming out of Devco now is $8 to $10 a tonne too expensive to be sold on the international market. Do you feel any responsibility for ensuring that Devco will be commercially viable?
Mr. Drake: On the Donkin issue, the preponderance of evidence showing that flooding those tunnels was the best thing to do far outweighs one or two other people who indicate otherwise. At the time, we said "no" also, but for a different reason. We said "no" because we wanted the mine opened immediately. We had no data to back up any argument that suggested that this was not a good idea. Most of the water that is in Donkin mine right now is ground water, water that has filtered through from the surface or underground. There has been no mining there since that time.
We have a $2.5-million water treatment facility that the corporation installed at Lingan colliery in 1982. It was commissioned over a period of seven days and then shut down. It is state of the art technology, and it is brand new. It was never used. It would be simple to take that water treatment facility over to the Donkin operation. Even if we had to reprogram the computers to deal with a different type of water -- the basis of the plant is there; it cost $2.5 million -- would not cost a lot of money.
Senator Butts: I wish I could be so optimistic, but the person who said this is also a mining engineer, and he was there at the flooding. That is the problem that I am going home with. It will be simple to pump that out, but the acid is there.
Mr. Drake: That is what water treatment facilities are designed to do, namely, to treat water so that it will be environmentally acceptable.
Senator Butts: You are not the only one who knows that the water treatment facility is there.
Mr. Drake: Devco paid to put it there.
Senator Butts: That is right. They built it.
Mr. Drake: Everyone knows it is there, yes.
Senator Buchanan: Devco has stated that they would have no difficulty with pumping those tunnels out.
Senator Butts: I did not hear that. I heard from another engineer.
Mr. Drake: Most of the information we have, even from Mr. Farrell, indicated that it would be just a regular mining operation to de-water a mine. That is done all over the world on a regular basis.
Senator Butts: It is easy to pump it out, but what do you do with it when you get it out? It will require so much treatment that it will add millions of dollars to your costs.
Mr. Drake: No.
Senator Butts: Well, I guess I have the wrong engineers and the wrong friends.
Mr. Drake: The second part of the question was the responsibility of employees to reduce the cost per tonne at Devco.
If you look back on the record, we have said time and time again that one of the main problems at Devco is our high cost per tonne, and everyone must play a part in reducing the cost per tonne. That is on the record. Some of the senators commended the unions for taking that responsibility during the Senate hearings.
Cape Breton Development Corporation historically shut down for three weeks for miners' vacations. There is a substantial amount of time in a three-week period where you could be producing coal. Historically, miners vacation in Cape Breton. We agreed in our contract, based on the information that Devco gave us, to waive that shutdown at Devco for the miners' summer vacation to allow the corporation to have a guaranteed rate of production. Depending on what the corporation wants to do, they are allowed to do it now. That is a contractual item. That was a major concession for our people. Basically, they gave up the right to have miners' vacation for those three weeks during that year. Now it must be scheduled. It is still a voluntary thing. If the corporation cannot get enough volunteers to work miners' vacation and produce coal, if necessary, then the corporation has the right to schedule those people. That is one thing we did.
Another cost that was associated with the cost per tonne with Devco was a bonus schedule, which fluctuated from year to year. It was one of the major issues that Mr. Shannon mentioned last year that had to be dealt with, to get a grip on exactly what the costs per tonne would be because it did fluctuate. All the unions agreed to factor that bonus into the guaranteed wages of each individual union's membership. That gave Devco a better handle on it. There is no longer a bonus system at the Cape Breton Development Corporation.
Those are two of the things that Devco wanted us to do. We agreed, as responsible employees, that we had to do that, and we did it. It was a hard sell, but we sold it, and the membership accepted it. That is on a global scale.
On a smaller scale, we have introduced many cost-saving items that reduced the cost of tonnage to the corporation. Before Lingan colliery shut down, we had a waste recovery team, and it was very effective. We gathered equipment that had been sitting idle for years, weeks or months, or whatever the case may be. We refurbished it and used it again. That saved the corporation a substantial amount of money.
That concept had basically fallen by the wayside for a little while. Two years ago, we approached the corporation and re-instituted that at the Phalen colliery and saved a substantial amount of money. These are all ideas that we can utilize to reduce the cost per tonne.
So, yes, we do accept the responsibility as employees that we have to do our fair share. If you could travel to Phalen colliery right now, you would see that we are serious about keeping this industry alive. We will do what we have to, but we need some help. That is why we are here, and that is why we are hoping the federal government will take the three Senate hearings and say, "Yes, there is something that we can do here. These people have some good ideas. Let's utilize them and try to make this industry work."
Senator Forrestall: How serious is the potential for a major water problem at Phalen? What it is, on a scale of 1 to 10?
Mr. Allie MacLean, Member, United Mine Workers Association: On a scale of 1 to 10, I would go 2.5. We can handle a water problem.
Senator Forrestall: As you get into more and more rock, does that hold any major problem?
Mr. MacLean: We do not know what is ahead of us until they do the exploratory.
Mr. Drake: To summarize, we have said a lot here today and during the last few times we have appeared before in the Senate. We are not saying that everything we are saying is 100 per cent accurate and 100 per cent right, but you will have to decide that when you make your recommendations. We agree with several of the recommendations that have already been made by the Senate committee. If you leave here thinking about what we have said here today, that can only be a good thing as far as the industry is concerned because the Senate has a better chance to get the ear of the federal government than we do.
This is a piece of Cape Breton coal. My dad makes these for souvenirs. He is a 40 year mining veteran. He gives these away to friends. In order to understand the Cape Breton coal industry, you have to understand the psyche of the Cape Breton coal miner. We are not just underground employees. We do not see ourselves just as guys who go underground to mine coal. We have spent 300 years developing a brotherhood in this industry.
When you are five miles underground, you are working at the most dangerous job in the world. The guy beside you is family, and we are protecting our family right now. What would you do if someone was hurting your family?
For Cape Breton coal miners, this is not a piece of coal. It represents family, dignity and a way of life. We should all be looking to protect that.
The Chairman: You have evoked many questions and concerns, and you have answered a number of them. We will be considering them very seriously.
I should like you to take away with you the fact that every one of the senators who participated in this particular inquiry are people know not only where you are coming from, but also where you come from. To a large extent, we come from the same origins.
You speak about the brotherhood of 300 years of coal mining. If you think about what has happened to the fishery in Atlantic Canada, and you say, "Let us do something with these fishers; we will retrain them and get them to do something else." They could move them, and so on, but the response is that the fishery is not just a means of making a living, that it is a way of life for many people who live in Atlantic Canada. It is what gives us our strength and makes us the type of people that we are. Bonds have been developed over generations, and in some instances centuries, because of the hardships that we have lived with and what we have had to work through.
We have always succeeded, in my opinion, when we look at it as a community, a brotherhood, a way of life. Things are not the way they once were, 30 or 40 years ago, where it was the employee against the employer, the union against the management. That applies not only in the coal industry, but everywhere. We are competing in a global marketplace in virtually everything that we do. It is becoming more and more so.
The "us" against "them" -- and, believe me, when I told you that I have spent a significant amount of time in the union movement and representing unions. The "us" against "them", which I used to be involved in up to my neck, is more becoming Devco, as an organization, and the union, as the leadership of your membership and the employees, together against the global competition. That will be increasingly so, from what you have said in relation to the competition that may come in with natural gas, and so on.
I am very encouraged by the fact that at the working level there seems to be a large level of commitment to work through some of the problems, to do it better, to try to make it more competitive on a world basis.
What comes out of our recommendations -- and we make recommendations only; we do not make policy -- is that we are on the side of advancing your opportunity as an industry, as workers, and communities, to continue to improve your way of life and to continue to be a viable part of what we realize is a very valuable part of Atlantic Canada.
On behalf of the senators -- and certainly on behalf of myself -- we appreciate what you have brought to us. We appreciate what you and our industry and your people mean to Atlantic Canada.
The committee adjourned.