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

Issue 18 - Evidence

OTTAWA, Wednesday, June 21, 2000

The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C-11, to authorize the divestiture of the assets of, and to dissolve, the Cape Breton Development Corporation, to amend the Cape Breton Corporation Act and to make consequential amendments to other acts, met this day at 9:30 a.m. to give consideration to the bill.

Senator Mira Spivak (Chairman) in the Chair.


The Chairman: Honourable senators, our witnesses today are union representatives. Welcome, and please proceed.

Mr. Ricky Wiseman, General Chairman, International Association of Machinists: Three of us will give a short presentation; Mr. Drake's presentation is more detailed

Mr. Richard Carroll, President, Canadian Automobile Workers: Thank you for the opportunity to speak here today. I want to touch on some of the points that Mr. Shannon raised last evening. He stated that in 1995, the same year a secret cabinet document recommended the closure of Devco, the corporation was trying to get more people in the 5 per cent pension plan. He mentioned the benefit of $1,500 per employee in the 5 per cent plan compared to $405 in the non-contributory plan. When this was raised, the union's argument was, "If they are truly interested in the well-being of our employees, then let us into the PSSA pension plan." The big difference between the two plans is the buyback option in the PSSA plan. In 1995, you could not buy back into the 5 per cent plan, but you could in the PSSA plan. Recently, the buyback was put in the 5 per cent plan, but it is so expensive few, if any, would use it. I can assure you that no one joining the 5 per cent plan in 1995 would receive a pension of $1,500 a month now.

For the most part, Devco has kept unionized employees out of the PSSA plan. Only those who have confidential status or are non-union employees can access the plan now. I would like to tell you about our former CUPE employee, John Chadwick, who worked at Prince mine. John worked for Devco for 28 years. He was a mechanical shop supervisor at Prince mine. In 1998, he was offered and took the job of chief mechanical supervisor, a confidential or non-union position. A short time after, John joined the PSSA plan, something he could not do as a CUPE member. Shortly after, some managers were moved and John lost his job. However, because of a clause in the CUPE contract that states that you can return to your job if you are out of the union for less than a year, John returned to CUPE. John stayed in the PSSA pension plan even though he was now a CUPE member again. Shortly after Minister Goodale announced the January 1999 plan for Devco, John was eligible for an ERIP. Before accepting it, he bought back all of his time in the PSSA plan, and that was 28 years. As a result, he now receives a monthly pension of $1,500. About $900 goes to paying for his buyback and he receives the other $600. If anything happens to him, his wife will receive the full $1,500 a month.

Mr. Shannon said that Devco received $1.7 billion in government funding and spent $1.4 billion on employee pensions. He made it sound as though if it were not for the pensions, we would have done fairly well. The fact is that the non-contributory plan is funded by the company, based on paying 1 per cent of employee earnings into the plan. I have no idea how large this deficit would have been had the company been contributing 5 per cent or 7 per cent of employee earnings, as required by the other pension plans. It may have been less, because the pension plan seems to work out well for both the employee and the employer.

Our 5 per cent pension plan is fully funded and has a surplus of over 10 per cent. This has allowed Devco to take a holiday from paying their share into the plan for the last two years. A lot of our pension liabilities came from people who were in the plan when Devco took over. I have an uncle who was 48 in 1968 when Devco took over DOSCO. In 1969, he was offered a pension; he was 49 at the time. For one year working with Devco, he received 16 years of a PRL, and for the last 15 years he has received the non-contributory pension plan. So, for one year working for the government, he has received almost 31 years pension. Conversely, before our arbitration ruling, we had people that had 31 years in the corporation that were not offered one year ERIP. That says a lot about the change and what the government has thought about miners in the last 30 years.

I believe that all Devco employees hired after the government took over in 1968 should have been put in the PSSA pension plan. As Mrs. Budden said last night, we were regarded as government employees during wage and price controls, why not for pension purposes?

Mr. Leo Gracie, Vice-President, CUPE 2046, Canadian Union of Public Employees: Our local represents supervisors, health nurses, railway dispatchers and security officers. At this time, I would like to thank this Senate committee for allotting time for us to voice our concerns on allowing Bill C-11 to be changed from what it means today. As you will hear more from others making presentations today on this bill, I would like to focus on one of our major concerns.

As you can see from this sign, Beyond 2000, for the past five or more years we have been told and led to believe that we have a future with the Cape Breton Development Corporation well beyond 2000. As you would imagine, our people have set their lives and futures on the promise of beyond 2000. For 33 years, the federal government, through the Cape Breton Development Corporation, has made the commitment to thousands of employees to work until retirement. Why is the promise not being kept for the last employees of the Cape Breton Development Corporation? I ask this committee to make this government honour its commitments under Bill C-11 and provide early retirement to the employees who are still on the books at Devco.

As you may well be aware, there is a major concern for the future of coal mining in Cape Breton after Devco. Still today, representatives of the employees at Devco have not been allowed any information concerning the sale process, the potential buyers, or any opportunity to discuss information concerning the sale process.

In closing, I would like to ask this committee to make the federal government honour its commitments to Devco workers by revisiting the adjustment package and providing enough ERIPs to offset any job losses. I would also ask this committee to have the federal government, through the Cape Breton Development Corporation, immediately enter talks with the union representatives to provide a safety net for the employees remaining with any potential buyer. This should not be a large step for the federal government and Devco, when you look at the statements that they have made, namely, that there are 519 jobs in the new industry. If this Senate and the federal government are sincere when they say they are concerned about the employees and their families, then make the commitment to additional ERIPs to offset any job losses and provide a safety net for the remaining employees to work until retirement.

I again thank you for this opportunity to voice our concerns. I hope that you will seriously consider any requests.

Mr. Wiseman: I represent the International Association of Machinists and Aerospace Workers. I would like to thank you for the opportunity to be here. I represent a group of locomotive engineers, conductors, machinists, welders, pipe fitters, and boiler makers. We pretty much run the gamut. In the interest of brevity, I will keep it short and to the point.

Although the issue that I will deal with does not speak directly to Bill C-11, this bill has a major impact on the issues with which I want to deal. I am glad to see Senator Boudreau here. I am not sure if he has taken Senator Graham's seat as an alternate on the Treasury Board, but the issue that I am going to deal with is something that the Treasury Board can have a great deal to do with.

A majority of our members and some of the members of the other unions at Devco belong to the Public Service Superannuation Act. You can correct me if I am wrong, but I believe the legislation has not been changed. We have employees with average contributory years of approximately 24 years and an average age of 25 years. As the legislation stands now, through no fault of their own, they will cease to be government employees prior to the age of 50, which mandates a 50 per cent reduction in their benefit regardless of years contributed to the plan. In the history of the plan, when government did downsizing or closure, they directly dealt with this issue by putting in place a waiver of reductions and a window of opportunity for people to walk into this situation without the reductions.

In my communication with the head of the Treasury Board, whose name escapes me now, the door has been closed in our face with regards to our request to have this waiver granted. From what I have seen in the federal government over the past two years, whenever there has been a reduction or a closure in the public sector, the government has spoken directly to granting a waiver and creating a window of opportunity for the people who have contributed to a plan to reap the benefits without penalty. Bill C-11 creates an opportunity for the government to walk away from their legal obligations.

The plan itself is in a surplus. I am not sure of the correct figure, but it is in the vicinity of $30 billion. The government has passed legislation to be able to grab back money from this fund. If there were ever a situation that cried out for special enactment or special legislation, to enable these people to draw the benefits to which they are truly entitled, it is Bill C-11.

If in the event you do not see fit to reconsider Bill C-11 and its ramifications on the Devco workforce, then, morally, the least you should do is revisit the PSSA. You should ensure that the employees who have contributed to this over the years and are entitled to their full benefit would not be penalized. It is through no fault of their own that they have ceased to be government employees prior to the age of 50 years.

Would you give that some consideration? Senator Boudreau or Senator Graham, I know you were alternates on the Treasury Board. Could you please bring some focus to this situation?

We have heard Chairman Shannon and others from Devco and the federal government saying that we do not contribute to a plan, therefore, we are not entitled to what other people receive. These people did contribute to a plan, and they should be entitled to the benefits that the rest of Canada has been granted through the years. That means a waiver of restrictions, a waiver of reductions and a window of opportunity to meet the criteria.

Senator Graham: How much money is in the fund?

Mr. Wiseman: I am not sure. If my recollection is correct, I believe it is in the vicinity of $30 billion. I believe that the federal government enacted special legislation that they could grab that surplus, but I might be wrong. I thank you very much for the opportunity to speak here.

Mr. Steve Drake, President, United Mine Workers of America: Thank you for allowing us this time to speak. Before I start the presentation, there are a few things that require clarification for the purposes of information for the Senate regarding statements by Mr. Goodale last night that were misleading and some things that Mr. Shannon said that were misleading. I think these must be corrected for the record. I wish Mr. Goodale and Mr. Shannon could be here today to speak to these items.

Mr. Goodale said last night that the Devco unions agreed to the joint planning committee. That is incorrect. We did not agree to that. We were forced into that position because the federal government, in January 1999, arbitrarily made a decision to enforce criteria for retirement and closure on the unions and the workforce at the Cape Breton Development Corporation. They did so for the first time in 32 years.

We felt that the joint planning committee process would be a last resort, because if that process broke down it would lead to a roll of the dice in arbitration. That is not the best way to close down a Crown corporation.

Mr. Goodale mentioned that there were some safeguards in place with respect to the sale of Devco assets. He said that the two safeguards were Devco board approval and government approval. I refer you to page 12 of the document that I handed out. It is the Bill C-11 privatization document. The second point is "Beyond 2000: A Fatally Flawed Plan 1995 - 2000."

Devco's board of directors met with the Senate several times in 1996 and 1997. They put on the public record that they had a plan beyond 2000, and that plan was well documented. Mr. Shannon stated to the Senate on May 27, 1996:

We had to build a plan which was conservative enough and believable enough for the people in Ottawa; it had to be achievable and supportable but yet aggressive enough to keep us in the coal mining business.

That is the same board of directors that the federal government is telling us is part of their safeguard plan for the 900 remaining people in this industry. There is much information here; I hope you will review it. There are numbers here with respect to the provinces and the commitments that Devco made on behalf of the coal industry to the federal government and to the Senate in 1996 and 1997.

There is a revenue summary on page 15 of my document. Mr. Shannon and Mr. Goodale were correct that Mr. Hockin had said in 1990 that the corporation had a mandate for self- sufficiency and commercialization. From 1991 to 1995, prior to the present administration taking over at Devco, the average revenue of the corporation was somewhere around $240 million per year, with a high in 1993 of $266 million. After the five-year plan was approved in 1996 by the federal government, the revenues in 1996 dropped dramatically to $188 million, and in 1997 and 1998 they dropped again to $167 million. In 1999, they dropped to $98 million.

In the year 2000, although the annual report has yet to be released, the corporation produced just slightly over 600,000 tonnes of coal. The revenues from coal production alone, not inventory carried over from the previous year, for the year 2000 will be approximately $42 million. That is according to the information that we were given four years ago under the beyond 2000 plan. The company is about $157.6 million off the earnings at the time the plan was written.

These are hardly the types of guarantees, board approval and government approval, that are going to give any confidence to the employees that this plan for privatization will work any better than the recent five-year plan of the corporation. We are very much afraid that we are looking at a Transport Canada situation here. The Senate is our last hope to make recommendations and to amend this bill, to stop another Transport Canada situation.

Five hundred and fifty people, senior workers for the Cape Breton Development Corporation, lined up at the general mining building two weeks ago to take severance. They are the people who are assigned to these jobs, according to the corporation's plan. These coal miners know what a long-term coal industry should look like. They have no confidence whatsoever that either the current plan or Bill C-11 will allow the federal government to move forward.

They have no confidence that that plan has any chance of working. These people are frightened for their futures. They told us that they want to work, but they are scared to death to take this step without any information and without any questions being answered on the privatization process.

We are 17 months or 18 months into this process and we do not even know the name of the company. All I saw yesterday from the minister and Mr. Shannon, with all due respect, was step-dancing and fiddle playing and obfuscation. I did not hear any answers respecting what will happen in the next year and a half.

Mr. Goodale also said that Devco satisfied the collective agreements in 1999. That is an error. I have provided a copy of Mr. Outhouse's arbitration decision. On page 25 of that decision, section 41, Mr. Goodale stated that Devco satisfied the collective agreements in 1999 with the arbitrary announcement of downsizing on January 28.

They broke the collective agreement. They broke the Canada Labour Code, and they broke the Devco Act.

Section 41 says: "It should be observed that the 1996 and 1997 ERIPs were the products of JPC agreements." The 1999 announcement was not. It was the first time in Devco's history that there were no negotiations with respect to downsizing. Section 41 goes on to say: "The 1996 ERIP was subsequently reflected in the UMW, CUPE and CAW collective agreements, but not in the IAM contract."

For the record, the contract says:

The corporation agrees that if further work force reductions are required during the term of this Agreement, it will provide an early retirement incentive program (ERIP). This program shall be subject to all criteria negotiated by the joint planning committee. The goal of this program is to achieve the required work force reductions on a voluntary basis and thereby reduce the need for displacement of other employees.

The clincher, in Mr. Outhouse's decision, is in section 42:

It seems quite plain, therefore, that the contracting parties did not intend to lock in the 1996 ERIP eligibility criteria for the life of the UMW, CUPE and CAW collective agreements. Perhaps the best evidence of such lack of intent is the 1997 JPC agreement which contains slightly different eligibility criteria than the 1996 JPC agreement.

The unions never agreed to what Devco did in 1999. It was done arbitrarily by the federal government, and it did not satisfy the collective agreements.

Mr. Shannon said yesterday that Nova Scotia Power had very high coal and electrical rates. These documents I have here are from Devco. This particular one is from 1982. It is entitled, "The Business Review and Forecast," and is put out by the Cape Breton Development Corporation. These few facts may change your views about the Cape Breton Development Corporation, and this is very important. In this article, the company says that saved Canada more than $160 million in 1981.

The statement reads:

In 1981, the Nova Scotia Power Corporation paid $60 million for Cape Breton Coal, used for electrical generation. This coal effectively replaced 6 million barrels of oil, which could have cost Nova Scotia $120 million. Additionally, the federal government would have had to pay $100 million extra in oil equalization payments. In short, by using $60 million of our coal, our country saved more than $160 million. That was only one-half of our coal sales for 1981.

This is on the public record. I do not know exactly what Mr. Shannon was getting at when he was talking about Nova Scotia Power and the ratepayers. Nova Scotia Power is a private company. They made approximately $100 million in profits last year. They did not reduce our electrical rates by so much as a nickel. I really do not know what he was talking about.

Also, in Devco's 1995 annual report -- which is a public document -- Mr. Shannon mentioned that Senator Buchanan somehow restricted export efficiency at the international coal piers, and there were a few questions about it. That was a misleading statement. In 1992, Devco's annual report showed 1.8 million tonnes of coal over the international piers. It had nothing to do with 4,000 tonnes of coal being laid down. We have a very efficient operation. When we need coal for a coal boat, our trains, operated by the IAM, come right around the trestle, drop the coal, and it is loaded efficiently. In 1993, we loaded 1.8 million tonnes of coal.

Mr. Shannon was talking about the efficiencies for an import facility. They want to lay down more American coal on our turf. That is what Mr. Shannon is talking about -- instead of putting down 4,000 tonnes of coal, let us put down 800,000 or 600,000 tonnes of coal. In addition to that, in 1992 or 1993 or 1994 -- I do not have the exact document date -- the federal government and Devco's board of directors approved an expansion in the export market for the corporation. They did that because they did not want Devco tied to one customer -- Nova Scotia Power -- because it does not make business sense to do that.

Thus, the corporation spent $15 million improving our export facility. We have a state-of-the-art, brand new export facility in Cape Breton. The purpose of the expansion, basically, was to get away from one customer.

The plan over the last five years is in the documents from the Senate hearings -- and Senators Buchanan and Murray would be familiar with this. This plan was raised at the Senate hearings of 1996 and 1997, when Devco's board of directors approved a plan to get out of the export market completely. That plan was a complete reversal of 25 years of operational methodology at the Cape Breton Development Corporation. They told us that they wanted only one customer -- Nova Scotia Power. Again, that was brought before the Senate and it did not make sense to anyone. Devco reversed that direction, once again, and implemented a proposal for 700,000 tonnes of coal per year to be exported. It is not happening today; we have no export market. That is one of our problems.

The contributory pension is another issue that Mr. Shannon raised yesterday, and I would to be very clear about this. Mr. Shannon said that everyone should have been in the contributory pension plan and that Devco was promoting it. We agree with that. However, in 1967, government policy dictated that 6,500 people would come in from DOSCO -- the private coal operator that was shutting down in Cape Breton. Those 6,500 people were covered by government policy that said that there would be no contributory pension plan. The government would take over 100 per cent of the liability, and they did. Those 6,500 people were never asked to get into a contributory plan. It was the responsibility of the federal government.

In addition to that, in 1974, 3,500 of those people were collecting pensions with less than seven years service with the corporation. At that time, the federal government came in with a voluntary contributory pension plan. It worked such that each union was required to get 25 per cent of their members to agree to participate in this voluntary contributory pension plan in 1974. Of the approximately 4,000 people that were working for the company at that time, the vast majority of them had been hired from DOSCO, who had watched 3,500 of their brothers leave the corporation on the government-guaranteed pension plan -- non-contributory, by government policy. It was virtually impossible to get those same people, when miners wages were very low, to contribute the percentage out of their pockets, when the government had already said that they would guarantee the pension plan.

At the same time, as a result of the oil crisis, the federal government was ramping up production and workforce numbers in Devco. The federal government and Devco sat down and negotiated something with the unions. It took a long time to do this. However, by 1982, when the Devco numbers were increasing, the federal government said, "We have to make this mandatory now." Therefore, they went to the unions and to the corporation and said, "What will we do?" The unions promoted a contributory pension plan, in 1982, for every person who was hired after that date. The unions put it in their collective agreements, so that every person who came in was bound by the law of the collective agreement. An employee who started with Devco automatically contributed to a contributory pension plan. Therefore, Mr. Shannon's message yesterday was not accurate. These facts are on the public record.

Mr. Shannon also said something else that was very misleading. He said that a person who contributes to the contributory pension plan will get $1,800 per month on retirement. He said that a person who does not contribute to the contributory pension plan will only get $405 per month. That does not make sense, he said, "so why are you not in the contributory plan?" He also said, "We promoted this." However, they promoted it in 1997 and 1998.

Look at the way a pension plan works. If you make full contributions, for 30 years, in the 5 per cent Devco contributory pension plan, and you reach 60 years of age, there are no actuarial reductions. You will collect $1,800 per month. However, for each year that you are under age 60, there is an actuarial reduction. For each year that you are under the 30-year contribution level, there is an actuarial reduction.

Mr. Shannon promoted it in 1997 and 1998, and we are shutting down in the year 2000. Most of the workers are 45 and 46 years old. They would have contributed for only two years. They are 15 years under the 60-year age limit. It is pennies they would collect, not $1800 per month. Mr. Shannon irked me yesterday when he said that, because it is very misleading. I hope that the Senate understands these facts -- they are in the Devco pension document and our collective agreement. It is not as simplistic as Mr. Shannon pretended yesterday.

On the last page of the document, the left-hand side, you will see the revenues of the Cape Breton Development Corporation. From 1968 to 1998, Devco coal miners produced $4.08 billion in revenues from coal sales. That is from coal sales. The coal miners went underground and manned the trains and did the surface work and everything else and retrieved enough coal to produce $4 billion in revenues. Those revenues paid for the $1.4 billion in pensions that Mr. Shannon was talking about yesterday. Coal miners produced that money. That was not a gift from the federal government. It was not a gift from Devco. It was money earned by people who went down into the mines every day since 1968.

Devco's policy was government policy. Downsizing costs came out of a tonne of coal. They paid it on an as-you-go basis. There was never a real plan with Devco. As a matter of fact, in 1993 or 1994, their non-contributory pension plan, which was supposed to be fully funded, was under-funded to the tune of $120 million. Recommendations were made in 1996 and 1997 by this Senate, that the federal government take responsibility for that, but they did not, and do you know what happened? The coal miners went underground, mined the coal to produce the revenues to pay off that 30-year, $120 million debt. I think that the coal miners who are there today paid their way.

Mr. Shannon mentioned that VIA Rail and CN employees had pensions. Yes, they did, but when VIA Rail and Marine Atlantic set up their pension plan, it was mandatory and it was policy. Devco's policy was to have no mandatory contributory pension plan until 1982. Miners were just following government policy.

It is our opinion that what happened with respect to pensions and revenues is not something for which coal miners should be apologetic or ashamed. It was for the good of Canada; it was government policy. These other companies had their pension plans by policy. Devco had sections 17 and section 18 of the Cape Breton Development Corporation Act to look after those exact same things. There was no mandatory pension plan.

Senator Buchanan and I could talk about this next topic for the next six months. There are literally volumes of information on Donkin mine. I am a third-generation coal miner. I have been in this industry for almost 24 years now. I would stake my reputation and the reputation of my family on the fact that Donkin mine could be opened successfully tomorrow if the political will were there to put the wheels in motion. There have been many roadblocks thrown up on the Donkin mine over the last five years.

I will not get into the specific details on the engineering documents. Those documents are on the record. Donkin Resources Limited has interested shareholders and potential investors, including banks. They have an engineering document that confirms that Donkin mine could be opened. That is their perspective.

My perspective is that of a 24-year coal miner whose father spent 40 years in the mines and whose grandfather was in the mines in 1920. In my perspective as a coal miner -- and it should be a little more credible than that of a truck driver -- Donkin mine is no different than the other 110 mines that we opened in Cape Breton over the last 300 years. We have opened 110 coal mines in the Sydney coal field and sold 300 years' worth of coal. Donkin is also in the Sydney coal field. I say we can open one more mine and successfully make it 111.

I would challenge anyone at Devco or at any engineering firm to prove me wrong. We offered to hold an open debate with Mr. Shannon on the Donkin mine. Mr. Shannon has not been forthcoming on that.

The situation in which we find ourselves today is that the Government of Canada followed a certain policy over the last 33 years. I will just read from the policy statement by Prime Minister Lester B. Pearson on Cape Breton coal, dated December 29, 1966.

The federal government realizes that the Cape Breton coal problem is essentially a social one. It is because of its awareness of, and concern for, the well being of individuals and their communities that the federal government is prepared to assist, on a massive scale, the transition of the area from dependence on a declining natural resource to a sound economic base...

At page 3 of the same document:

The rationalization of the mines will be related to the success in the introduction of new industries. The Crown Corporation will be instructed to give full consideration to the need for orderly adjustment, including the implementation of a generous early retirement plan for the miners...

That was recommended by Dr. Donald. What about the orderly adjustment plan and new industries? That job is not complete yet. There are still 900 people back home who are entitled to the same kind of benefits that were in this document.

In 1974, Mr. Tom Kent, who was the Devco president of the day, gave a public press release on behalf of the Cape Breton Development Corporation, on February 20, when Devco was ramping up production and workforce numbers due to the oil crisis. It states in part:

The corporation and the unions are agreed that, in the unlikely event that some future change of circumstances should again necessitate a reduction in the workforce, pre-retirement leave would be restored. Also, a temporary PRL --

That is pre-retirement leave.

-- benefit will be paid if, because of special problems, any men have to be laid off beyond the duration of UIC benefits and vacation pay.

Even back in 1974, the government and Devco's board of directors were contemplating an avenue in the event of downsizings.

In 1999, when Devco made their arbitrary decision to downsize by force, without negotiations, their board of directors and the federal government abandoned every bit of the humanitarian legislation by which they had abided for over 30 years. The unions put forward an argument based on 31.5 years of past practice in this corporation.

In 1967, 6,500 people came from DOSCO, a private corporation. Those 6,500 people had never worked for Devco. A promise was made, which was enacted into legislation on July 6, 1967. Some of those people -- Richard Carroll's uncle, for example, worked for Devco for one year and got a pension for 31 years. He is still collecting that pension today.

By policy, under sections 17 and 18, Devco provided retirement benefits to date for 7,829 people, to my best calculation. That information is included in the document I handed out as the first or second attachment.

After page 24, there is a letter to Senator John Buchanan dated June 15, 2000. Next is a detailed document, covering 1968 to 2000, on exactly what the corporation did. It provided 7,829 ERIPs or some type of retirement benefit to Devco employees.

In 1999, when the arbitrary decision was made by the government not to negotiate as they had in the past, the unions decided to take them on legally. The only thing we could do was go to arbitration.

When we went to arbitration, we made the case that Devco had behaved, by policy, by law, a certain way for 30 some years and that it could not change direction in midstream and not provide the same benefits to the final Devco employees.

The arbitrator agreed with the unions. He disagreed with Devco's position and provided, by law, an additional 249 ERIPs. The number is not 246, as they say. The problem was that Mr. Outhouse said that although he saw the need for this type of adjustment, he could not justify the $79 million that it would cost to cover the remaining Devco employees for ERIPs.

His final decision was inconsistent with the basis of his award. If the policy was good enough to stop Devco from downsizing arbitrarily, and if the past practice was good enough to provide an extra 249 pensions, what about the remaining Devco employees? Do they not fall under the same type of legislative guidelines? We say they do, and that is the problem we have here today.

Going back to what I said earlier about the situation that was facing the federal government in 1967, 6,500 coal miners were going to be thrown on the street by a private corporation. That corporation was DOSCO. DOSCO said, "We are not going to be responsible for the pension entitlements for these 6,500 people. We are not interested in what is going to happen to these 6,500 people in the future. We are just going to shut this industry down." Dosco basically said, "We are going to throw these people on the street." Most of those coal miners were 40 years old or better. They had 20 years or better service. They were going to be thrown into an economic dilemma because Cape Breton's economy was very depressed.

During the debates in the Senate on Bill C-11, the Honourable Jean-Luc Pépin was the Minister of Energy, Mines and Resources, and he was addressing the recommendations from Dr. Donald in the Donald Report. In his recommendations, Dr. Donald said that the magnitude of the social problem arises from the current employment of some 6,500 persons in the Sydney Mines and a reduction of the labour force to 3,000, assuming 2.1 million tonnes of production a year. Currently, the mine recruits some 300 miners per year. Under a phasing-out program, no recruitment of young miners would be needed, and with an early retirement program the miners' problem of economic adjustment will be greatly eased. The Government of Canada followed that. Dr. Donald recommended that an enlightened early retirement plan be adopted, as a means of alleviating the social dislocation resulting from the mine closures called for in the coal rationalization program.

Minister Pépin went on to say, on June 15, 1967, at pages 1552 and 1553 of Hansard:

Of course, we cannot allow this situation to endure. However, nowhere in Canada shall we find one social problem comparable to this one. Here, and I insist upon this because it is the reason for our intervention, here we are faced with an important urban labour force, we are faced with established collectivities which depend almost entirely upon a big industry which is no longer profitable, which cannot survive for more than a few years, by means of substantial subsidiaries. This is probably the most thorny problem that this country has ever had to meet.

That thorny problem is no different today for the remaining 900 Devco employees. They are over age 40, the majority. They have more than 20 years, the majority. They have being thrown out of work in a depressed economy. It is the same problem. The federal government would not allow a private corporation to do this in 1966, but the Government of Canada is asking the Senate to pass this legislation. The Senate has the power to stop the federal government from doing that to 900 employees who have dedicated all of their working lives, not a part of it, to a private corporation and then coming into Devco. These people have worked for Devco every single day of the last 20 to 24 years, all of them. They have contributed to the Crown. They have helped make Canada a better country. That is what they were asked to do in 1967; that is what they were asked to do during the oil crisis; and that is what they were asked to do over the last 33 years, and they have done their duty.

I will say just one more thing. Later, on June 20, 1967, in the clause-by-clause debate on clause 17(4) of the bill, which is one of the key sections that we would like the Senate to make amendments to, Mr. Pépin stated:

Mr. Chairman, I do not think I need repeat that this legislation is both social and humanitarian and that there is a relationship between the phasing in and phasing out. The principles are very clear.

He goes on to talk about all reasonable measures to reduce, as far as possible, any unemployment or economic hardship that can be expected to result therefrom.

Devco followed that mandate for 33 years right up until 1999, January 28. That statute is still on the books. From what I heard yesterday, and from what I have been dealing with for the past year and one-half with respect to Devco's privatization and Bill C-11, the coal miners and the coal miners' representatives in the unions do not have any information about what is going to happen post-Devco. None of the questions has been answered. I sat here last night until after 10:00 o'clock, and none of the questions was answered. I do not think the Senate knows any more than we know about what is going to happen after Bill C-11 is passed into legislation. The government is asking the Senate to stamp a document without having received answers as to what is going to happen to the remaining long-term 900 Devco employees, and I say that is wrong.

Senator Murray said yesterday that the system is such that average working Canadians can come to the Senate or to the committee of the House of Commons and make their peace. We are making our peace, and we have been making our peace for the last year and one-half on this issue. We say emphatically that, if Bill C-11 goes through unamended, it will be the end of the Cape Breton coal industry and 900 more Devco employees will be thrown out on street with very questionable futures. We say that cannot be allowed to happen.

I have a couple of recommendations here. For your information, and I am not sure of what the other three unions have in their numbers, but the UMW has 543 people right now with more than 20 years service in this corporation. I am sure that Mr. Wiseman, Mr. Gracie and Mr. Carroll can attest to that. They have a large number of people with more than 20 years service also.

The recommendations that I would like to make to the Senate are contained in the document I handed out, the Bill C-11 privatization document. I would like to go through the summary.

The United Mine Workers of America submits that, based on the preceding information, the following assumptions can be made. One, the Devco act gave clear directives to management that the corporation's mission was to adhere to the social mandate established by the legislation. Section 17 and 18 guaranteed that past, present and future employees would be treated with dignity and respect if downsizing were necessary.

Assumptions number two: Contrary to vague statements from Devco, the collective agreement does not carry the same level of legal guarantees as section 18(2) with respect to pensions and lump sum payments for employees who are laid off or retired at an earlier-than-usual age. In fact, the collective agreement is applicable for ongoing operations. Full closure or privatization, we believe, falls under section 17 and 18 of the act.

Assumption number three: Including the early retirement incentive packages granted in Mr. Bruce Outhouse's arbitration award over the course of 33 years of downsizing, the corporation retired more than 7,829 employees. No differentiation was made between employees hired pre-1968 from DOSCO or post-1968 with Devco. Regardless of hiring dates, employees who fit the criteria of the day were granted early retirement, sometimes with as little as one year of service.

Assumption number four: A successful sale -- by whose definition we are not quite sure -- does not necessarily translate into or guarantee a successful long-term coal operation. Right now there are too many unanswered questions.

Assumption number five: A new buyer would assume ownership today of two flooded coal mines and one operational coal mine, Prince mine, which requires large infusions of capital for mine improvements.

Assumption number six: The average age of the senior workers presently slated to own a job at Prince mine is 47.5 years.

Assumption number seven: As in 1967, the economy of Cape Breton today will make adjustment very difficult for these coal miners.

Assumption number eight: There are 669 UMWA members who do not qualify for ERIPs. Total Devco employees before unions and the confidential employees who do not qualify for retirement packages amounts to approximately 904 Canadian citizens.

Devco's legislated mandate promised to provide job security and economic stability to coal miners in Cape Breton Island. The job is not finished. An overwhelming majority of Devco employees feels that the lack of transparency and openness in the privatization process is a clear indication that the end result may eliminate their hard-earned and legislated right to work and retire with dignity. Justice must not be denied.

The recommendations are as follows: The decisions that led to the financial and operational crisis at the Cape Breton Development Corporation were not in keeping with internationally accepted mining practices. The UMWA and the Devco unions submit that by not acting on employees' concerns the government acted improperly in the exercise of its governmental discretion and breached the standard of care. As a result, members of the UMWA and Devco employees will suffer considerable damages.

Bill C-11 will invoke privatization by force and employees will be left without the protection of section 17 and 18 of the act. The remaining 904 Devco employees fall under the same legislation as the 7,829 brothers and sisters who retired from Devco under section 17 and 18 of the Devco act. They have the same legislative right to work and retire with dignity.

The United Mine Workers of America, Canadian Union of Public Employees, the International Association of Machinists, and the Canadian Automobile Workers are calling on the Senate of Canada to ensure that the following recommendations are in place prior to agreeing to the final passage of Bill C-11. The first recommendation is the retention of section 17(4)(b) of the Devco act; the second recommendation is the retention of section 18(2) of the Devco act.

Recommendation number three is a government-guaranteed safety net for all Devco employees. Early retirement options would be based on the June 2, 2000 arbitration award of Mr. Bruce Outhouse. This would include the carry-over of earned Devco pensionable service to the privatized coal company. In 1967, with respect to this recommendation, involving DOSCO and Devco, Devco allowed 6,500 private coal company employees to carry over all of their pension time. This recommendation relates to the situation in 1967, when DOSCO was closing down. Since there would have been economic and social turmoil in Cape Breton, the federal government stepped in and did not allow that to happen. The government took those 6,500 people into a Crown corporation, allowed them to carry over their pensioned credit time from the private company into Devco, and to continue on that same path until they reached a criteria for retirement. We are asking the federal government to provide the same benefit to the 904 Devco employees, if this corporation is successfully privatized.

The Chairman: Are you talking about the $30 million?

Mr. Drake: No. This is a carry-over of pension time, and the federal government would be responsible. This would not be attached to a private operator; there would be no responsibility there -- quite similar, only in reverse, to what happened in 1967. Instead of going from private to Crown, we are now going from Crown to private.

Senator Buchanan: Are you saying that that will not happen with the new company?

Mr. Drake: That will not happen with the new company.

We believe that the 900 Devco employees not included in the pension categories of the January 28, 1999 or the June 2, 2000 decisions are being cast into the same hellish fire that the federal Liberal government felt compelled to resolve for 6,500 private-sector employees in 1967. These 900 Devco employees are mostly in their mid-40s, with more than 20 years of service with the Crown, and they are living in one of the most depressed economies in Canada. The one difference I can see is that these 900 people spent their whole working lives in the employ of a government-run coal company, and the 6,500 employees who benefited from the Devco act with respect to pensions spent most of their working lives in private industry. I would ask that the Senate seriously consider the recommendations we made with respect to Bill C-11 and with respect to a government-guaranteed safety net.

In closing, I would like to quote an expression I read in yesterday's Cape Breton Post. Someone must watch over Crown corporations and, indeed, the watcher is supposed to be the federal government. It was a Latin expression, and it goes like this: "Ed quis custodiet ipsos costodes?" Translated, it means: Who watches the watchman? I believe that the Senate must watch the watchman, and with respect to Bill C-11 the Senate must watch very carefully.

The Chairman: Thank you, Mr. Drake. Just for my edification, on this last page where you have the revenues, what do you mean by "materials"? What would the profits be? There are no profits here.

Mr. Drake: Revenue, wages, and materials. Materials would be purchases.

The Chairman: Of the company?

Mr. Drake: The purchases of Devco, yes, whatever they purchase for the ongoing day-to-day, year-to-year operations.

The Chairman: You do not have any profit picture here though. Do you have that?

Mr. Drake: No. It is on the public record. Just prior to the present administration, Devco was in the profit mode.

Senator Buchanan: I want to get this straight on the record.You are saying that there will be no carry-over of Devco pension benefits to the new operator, that the employees of the new operator will start from year one?

Mr. Drake: The employees that are scheduled today to go to the new operator are the senior employees in all of our collective bargaining units. Their average age is somewhere around 46, and the average service is somewhere around 22 or 23 years. They are expected to start from scratch with this new company with respect to earning pension credits and, since most of them are in the non-contributory plan, that is all they would be entitled to at age 65, unless the new company puts in a pension plan. Therefore, a 46-year-old person must start from day one with respect to pensions, and that is not justifiable.

Senator Buchanan: I agree.

Mr. Drake: Successor rights apply, but if Bill C-11 goes through -- we hope it goes through amended -- it is our understanding that there will be successor rights but that the carry-over of pension time will not be a part of those successor rights, so a person will not be credited with the time that they worked for Devco.

Senator Buchanan: Thank you for clearing that up because there has been some confusion about the carry-over of benefits. That is a very unfair situation, in my opinion.

Senator Finnerty: Do you know that for sure?

Senator Christensen: Has it been negotiated?

Mr. Wiseman: There has been no negotiation.

Senator Finnerty: How can you say that then? We do not know until the negotiations happen what the carry-over will be.

Mr. Drake: Could I respond to that? The problem is that there have been no negotiations for 17 months. Devco and the federal government have not responded to any of our questions.

Successor rights do apply, but with successor rights, pension credits do not automatically go. If the pension credits from the Devco situation for those 904 employees carried over into the new corporation, what you are asking a private company to do is to take over the liabilities for 20- and 24-year service people who will retire and hit the retirement window of 25 years, now that it is set by the Outhouse decision. Instantly, that private company will not make a profit because that debt is quite large. The federal government has not given us any indication whatsoever that they would willingly go beyond -- and I heard Mr. Goodale yesterday and he did not say it yesterday either -- what they had arbitrarily implemented on January 28, 1999.

They were forced by the law, on June 2, 2000, to increase the level of that package. The federal government did not do that out of the goodness of their hearts. They were forced to do it by arbitration. That is the law, it is binding.

We are in a position right now where we can only assume that the government is not willing to take the responsibility for those 900 people in the same manner that they took the responsibility for the 6,500 DOSCO employees in 1967.

If we had that in writing from the federal government, if that became part of the privatization process, the unions have all agreed to work with the private corporation, to make that industry work. Cape Breton coal miners are the best coal miners in the world, as far as I am concerned.

We have committed to make this private industry work if we are given a chance to negotiate a decent package to guarantee work until retirement for the remaining 900 employees.

Senator Cochrane: On page 24 of your document, you have listed your recommendations. You speak about the retention of sections 17(4)(b) and 18(2). Within those sections, and I am sorry I am not familiar with them, is this situation being dealt with?

Mr. Drake: Yes.

Senator Cochrane: Do the carry-over of their years of service account within these sections?

Mr. Drake: Not exactly. However, sections 17 and 18 provide for all reasonable measures. In the last 33 years, "all reasonable measures" has translated into 7,829 retirement packages.

Section 18 holds the corporation responsible for dealing with pension issues. In combination, those sections give us an opportunity to sit with the corporation on a regular basis in the process of downsizing, over the past 33 years, and negotiate the criteria that would fit the downsizing requirements of Devco at that particular time, 1974, 1968, 1987, 1991, or 1987.

The criteria are always different, because Devco requires at certain times 500 people to leave the industry by retirement, or 700 or 800. The criteria have always met the downsizing package of the day. To do that, we have always relied on sections 17 and 18.

If those sections were retained and we could get this guarantee of a safety net to carry over the pensionable credits, then the unions would be more than willing to sit down with the new employer and negotiate a collective agreement that would allow the Cape Breton coal industry to continue as economically as possible.

Senator Buchanan: There is still some confusion about this, but perhaps we will get it settled later.

You were here last night and you heard the very eloquent Edna Budden discussing the miners who are over 45 and the problems and concerns that she and other families have. What do you make of her presentation? Do you agree with her presentation or are there parts of her presentation that you agree with and parts you do not agree with?

Mr. Drake: There are some things we can agree with, but there are other things with which we cannot agree.

We have supported Ms Budden and Ms Brown in United Families with respect to the family issues that they are promoting across Canada, particularly in Ottawa. However, when it comes to contract negotiations and items that fall under the guidelines of collective bargaining, we have reserved the right to deal with that exclusively. We get that direction from the members of our unions.

With respect to what Ms Budden said last night about the 45-year old, in the last year we have had direction from the majority of our membership to deal with retirement by seniority, by service time. It prevails in every other part of our collective agreement.

Unfortunately, what Ms Budden is talking about is falling back to the old Devco criteria of a point system, disregarding the service time of an employee with respect to any kind of a downsizing in pensions. No, we cannot agree with that.

What we are told by our members, and they have made it clear, is that if there is any further downsizing it will be done by seniority and service -- and Mr. Bruce Outhouse stuck to that when he made his arbitration decision on June 2. He did not put in an age requirement; he put in a service requirement for 25 years of service.

If we could keep that 25 years of service, with a carry-over of pension time, the federal government would only be responsible for a short period of time for these remaining 904 employees, with respect to carry-over of pension credits.

At the end of the day, it is the only way that the federal government should want to walk away from the corporation, with the same respect, dignity and humanitarianism that was evident in the original act. I think the federal government should do that today.

Senator Taylor: May I ask a supplementary? Ms Budden came up with only about 200 some.

Senator Buchanan: Four hundred and ninety-two.

Senator Taylor: Four hundred ninety-two versus your 700 to 900. There is a big difference there.

Mr. Drake: What she did was she gathered a portion of the workforce, which is -- I do not want to offend anyone or sound like I am being defensive or anything -- but you have to be very careful when you are talking about people's lives and with respect to losing their jobs and getting pensions or not getting pensions.

The unions have fought very hard over the past six years to try to include the full Devco workforce, as per the Devco Act, with respect to downsizing or pensions. What Ms Budden suggested yesterday was that only 492 people should be considered. We do not agree with that.

We think the 904 remaining Devco employees fall under same legislation with the same rights as the 7,829 people who left before them. What Ms Budden said was that, through her calculations, there were approximately 916 employees left. She is pretty accurate there. We think it is around 904, because a few people have passed away since January 28, 1999. There is a significant amount of stress for people, and there have been some bad circumstances and situations for all of us.

There are 904 employees left. In our opinion, they should all fall under the same guidelines. We are hoping that the Senate will see this in the same light that the government saw it back in 1967, that it should not be done this way.

Senator Taylor: You are separating who is left and who might get jobs. They are two different items in your mind. You just want to look after 900 now, regardless of what happens to them down the road?

Mr. Drake: No. I spoke to Senator Buchanan about this last night. With respect to Prince mine, there is only one coal mine left in Cape Breton. In a coal mine, development of your future blocks of coal is the key to a long-term, efficient operation. Right now, at Prince colliery, what we have is a section underground that is developed, and we are mining that section of coal. It is a block of coal and it is called 1 North.

There will be no coal left in 1 North in six or eight months -- or whatever the time frame might be. When 1 North is depleted, the next block of coal will not be ready to mine for several months. In the case of 2 North, it may be as long as 12 months before we can go on to mining coal in that face.

Devco is currently working on a small backup block of coal called 10 East. There will be a gap between the end of 1 North and the start-up of 10 East. That gap is vital. What will happen to the employees under a private company when there is no coal production? Will they be laid off permanently? Will the mine be shut down? Will they continue with costly development when they are not producing coal, or will they just shut down Prince mine, lay off the employees, and import the remaining 1 million tonnes of coal for Nova Scotia Power's requirements? All we can currently produce at Prince, at full capacity, is about 1.1 million tonnes of coal.

There are 904 people who have a very questionable future in the coal industry. There are many unanswered questions. To date, the federal government and Devco's board of directors have refused to respond to any of our questions respecting the future, post-Devco. I think you can understand our concern for those 904 employees. We do not want to cut that group in half or in quarters. The whole group of 904 employees has very serious concerns.

Senator Buchanan: Some members of the committee may not have full knowledge of what is going on down there. For instance, last night, there was discussion about the provincial government issuing a ministerial order to stop stockpiling. That was inaccurate. The fact is that it had nothing to do with the export of coal; it had to do with importation and stockpiling of coal by Devco. Devco wanted to ensure that they had lots of American coal on the ground at the Sydney coal piers, in the event they needed it, because of problems in the mines. They were not prepared to open a new mine. The people at Whitney Pier were not happy about that. I did not blame them at the time, and you fellows would not have either. It had nothing to do with exporting of coal, as you have said today. The railway was able to bring the coal from the mines to the Sydney coal piers and export it without stockpiling.

The witness last night said, "You stopped us from stockpiling the coal, by ministerial order." I did not sign the order, although I okayed it. The reason for the order was environmental. It had nothing to do with the export of coal, but rather importation of coal.

Mr. Drake: That is correct.

Senator Buchanan: The nub of this entire problem is the uncertainty faced by 900 men and their families. What Mr. Drake just said about the Prince colliery is true. The Prince colliery could go down in a year's time, and be down for months, putting these people on the street. The Prince colliery may go down within four or five years; there would be no jobs.

There have been many comments around this table and prior to these hearings about a new mine in Cape Breton. I am not a mining engineer, but I have for many years been a proponent of a new coal mine in Cape Breton. My government put up the first $5 million in 1979 to drill the holes in the Donkin area in the Sydney coal fields to delineate the coal seams. Two tunnels were drilled.

You can talk all you like about who is to blame, whether it is the former Liberal government or the former Tory government. However, that is not the important thing. The important thing is that the mine was underway. The two tunnels were drilled. The coal is excellent, for thermal and metallurgical purposes.

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

Senator Buchanan: The question is coming. One has to explain the situation properly before asking the question.

The fact is that there should be a new coal mine in Cape Breton. There has already been $85 million has been spent on it. The tunnels are flooded. Steve Farrell told me this morning that some of the things I talked about last night were nonsense. The fact is that his group did put a proposal in along with the Cape Breton cooperative group. Someone said last night that they did not have the investment. If that is the case why would the banks --

The Chairman: Please ask a question, Senator Buchanan.

Senator Taylor: They are talking about the pensions of the past, not the future.

Senator Buchanan: Oh, they are looking to the future.

Is your group looking to the future?

The Chairman: Senator Buchanan, please ask your question.

Senator Buchanan: I just did.

Mr. Drake: We are looking at what will happen to this coal industry after Bill C-11 is passed. If Bill C-11 is passed in its presents form, there will be no coal industry in Cape Breton. Nine hundred people will be thrown in the street, in the same manner that 6,500 people were going to be thrown in the street in 1967. Therefore, we are looking toward the future. We are trying to ensure that future by asking the Senate not to pass this bill in its present form.

With all due respect to everyone in the Senate, after six years of dealing with these issues, I know the process here. We come here and we put our hearts on the table. Everything I have said in the six years that I have been coming here is true. It seems that when the government wants to do something, they do not listen to us. We are only important when we vote, and I think that is wrong. I do not think the system is working properly.

The Senate has an opportunity to do something very good for these remaining 900 employees by telling the federal government that you want answers before you stamp that document, that you will not pass this bill until the governments tells you exactly what will happen to those 900 employees and what the industry will be like when it is privatized.

If you do not get those answers, we will go into this brave new world with a blindfold on, and I do not think that is what the system is supposed to do. It is not supposed to hurt Canadians.

The Chairman: Senator Graham, please.

Senator Buchanan: Chair --

The Chairman: I am sorry, Senator Buchanan. You will have another opportunity on the next round.

Senator Buchanan: You stopped me in the middle of my question.

The Chairman: I thought that was your question.

Senator Buchanan: No, it was not.

The Chairman: Then put your question.

Senator Buchanan: What we are talking about around this table is a human tragedy. Some of you do not seem to understand that it is a human tragedy. A way of life is going down the drain.

The Chairman: We do understand.

Senator Buchanan: Some say that you need markets for coal. Well, the market is there. There is a 3-million tonne market right there in Cape Breton.

The Chairman: Please ask your question.

Senator Buchanan: There are groups looking to open a new coal mine, to erase some of this uncertainty, if we can hold this bill up until we have all the answers.

I think the federal government is concerned that someone will ask them for more money.

The Chairman: Ask your question, please.

Senator Buchanan: The groups that want to open a new coal mine have expertise and experience. They are miners. They are not asking for financial help from the federal government, are they?

Mr. Drake: From our understanding, Donkin Resources Limited has backers to open the Donkin Mine. If the political will were there, I think that Donkin Resources Limited would move forward with that. However, after that happens, what happens to the 904 employees? I reiterate that that issue must be addressed before Bill C-11 is passed, and there must be guarantees. Those people must be provided with the same dignity as the 7,828 people who left before them. That is imperative. I cannot understand how anyone could say that anything less than that is reasonable and acceptable.

Mr. Wiseman: Senator Buchanan asked whether pensionable time would be carried over to the new corporation. We answered that it would not. Senator Finnerty seemed to be a little perturbed by that.

In January, when we met with Minister Goodale, we were given the commitment that any safety net or any carry-over of time would be a negotiable item. Obviously, it is a major concern to us if we are going to go to a new corporation.

Since the day we sat down with this joint planning committee, we have pushed to have this on the table and dealt with. We are dealing with 900 people who have no idea what is around the corner. To put it in a personal perspective, I have 24 years with this corporation. I am not entitled to an early retirement, nor am I looking for one. I am looking to work. However, after 24 years, the government cannot say that it has met its obligations by getting me a job with the new corporation. The new corporation will, for lack of a better word, rape the assets, make its money, walk away, and not meet any of the moral or social obligations that the government had. If they decide to fold up tent after six months, I will be entitled to nothing. I have to decide whether I want to continue working or to accept the severance package that the government is offering me.

Until all the facts are on the table, as Senator Buchanan said, this bill should be held up. It is immoral and unfair not to provide a safety net for the people who have given their time to the corporation, leaving them with an uncertain future.

Senator Graham: Welcome, gentlemen. Mr. Drake quoted Jean-Luc Pépin, a former minister responsible for mines in Canada, the minister through whom the Cape Breton Development Corporation reported to Parliament. You referred to Bill C-11. Just for the record, that bill was then Bill C-135.

Mr. Carroll, there was reference made to an uncle of yours who worked for one year for Devco and then got a pension for so many years from Devco. How many years did he work for DOSCO?

Mr. Carroll: He started with DOSCO when he was 15 years old and he was 49 when he retired. He was with DOSCO for 33 years and with Devco for one year.

Senator Graham: Was he in a contributory pension plan with DOSCO?

Mr. Carroll: I do not believe that DOSCO had a contributory pension plan.

Mr. Drake: The records for the Dominion Coal Board show that there was no contributory pension plan with DOSCO.

Senator Graham: Mr. Drake, in your documents you say that a new buyer would assume ownership of two flooded coal mines. Could you identify those?

Mr. Drake: Our understanding is that, for some reason, Donkin Mine was brought back into the package. Donkin Mine is currently flooded, as is Phalen colliery. Therefore, two flooded coal mines are in the bid package. The operating coal mine would be Prince mine.

Senator Graham: I want to talk about the joint planning committee. You said that you did not agree with the joint planning committee, that you were forced into it.

Did you object at the time to a joint planning committee?

Mr. Drake: The simple answer to that would not be the proper answer. The answer goes back to the fact that Devco negotiated every downsizing package with the unions from 1968 to 1999. In 1999, the government arbitrarily forced that on the unions. The unions asked the corporation and the federal government, over a period of more than a year, to renegotiate a package, which is the proper way to do a closure. That is the way they did Marine Atlantic, NAV CANADA, CN, and so on. Devco is the closest comparable because they did it for over 30 years.

The federal government and Devco repeatedly turned down requests for negotiations. In January 2000, a large number of coal miners virtually shut down the coal industry in Cape Breton. The federal government then agreed to a joint planning committee process. We again asked the federal government to negotiate, and the government refused. Our last resort for any kind of a downsizing strategy, particularly a closure, was arbitration.

Senator Graham: Did you object to the joint planning committee at the outset?

Mr. Wiseman: No, we did not.

Mr. Drake: We were denied it.

Mr. Wiseman: We requested it right from the start. When it became public knowledge that there was going to be a downsizing, we requested a joint planning committee. They said that the criteria set down in the announcement was achieved through an earlier joint planning committee process and that we were not entitled to one. We grieved, argued, and protested. We wanted to form a joint planning committee. We never objected to a JPC process. We were only able to achieve one when the miners occupied the mine and shut down the mining industry. The government then realized that the way to resolution was to provide a joint planning committee process.

Senator Graham: At some point, the joint planning committee came into being?

Mr. Wiseman: Yes, after a year.

Mr. Drake: You must understand that the joint planning committee process falls under the Canada Labour Code. Our legal representatives showed us documentation that indicated that prior to the JPC on Devco being forced into arbitration on a major issue, in the history of that section of the Canada Labour Code there had only been two instances where it had been forced to arbitration.

That indicates the tough stance the federal government was taking with respect to negotiating a proper workforce exit strategy. This was the third time in the history of that section of the Canada Labour Code that it went to arbitration, that the joint planning committee was unsuccessful in negotiating a proper workforce exit strategy. In the 24 years of my career with the Cape Breton Development Corporation, that is the biggest black mark on their record.

Senator Graham: Did you object when the joint planning committee came into existence?

Mr. Drake: We did not object to the JPC.

Senator Graham: What was the alternative?

Mr. Wiseman: Our objection when they were finally forced to have a joint planning committee was that the representatives of Devco had no mandate to negotiate with us. The first statement made by representatives of Devco was that there was no more money, that we were spinning our wheels and they would go to arbitration. In fact, there was no negotiation. It was window dressing. We spun our wheels for a month and then went to arbitration.

Senator Graham: How many days did the joint planning committee sit?

Mr. Wiseman: It may have been two weeks, but we did absolutely nothing.

Mr. Drake: There was no forward movement because of the lack of commitment and lack of mandate by the corporation to try to negotiate a proper exit strategy. Our last resort was to go to arbitration. When you go to arbitration, you make your best case and roll the dice. That is not the proper way to exit a corporation with the mandate of Devco, which is a humanitarian, social mandate. That does not mean you beat up your employees and kick them when they are down.

Mr. Wiseman: If you read Mr. Outhouse's report, you will see that he states clearly that there was no room for mediation. As a matter of fact, when we brought in Mr. Outhouse to mediate the situation, we met for about three minutes. He said, "There is absolutely no room for movement here. That is the end of it. Let's take it to arbitration."

Senator Graham: Mr. Drake, you say that if Bill C-11 goes through unamended -- and I may be paraphrasing, but I think I am quoting you correctly -- it will be the end of the coal industry on Cape Breton Island. Yet, last night we heard both the minister and Mr. Shannon say that Bill C-11 is essential because the federal government has announced that it is getting out of the coal business. They said that Bill C-11 is essential for the sale and the continued operation of the coal industry in Cape Breton. How do you reconcile those points of view?

Mr. Drake: With all due respect, Minister Goodale and Mr. Shannon told us that the last five-year plan would work and that we would be in a profitable position this year. They told the Senate and the government that, yet they are about $157 million off this year. They also told the Senate that they would implement the $750,000 Donkin study, and they did not do it.

They also told the Senate and the federal government that they would implement something called "multiple entry mining" at Prince mine, something for which they put money aside. They did not do that. They said a lot of things over the last several years, but none of it has come about. I do not want to sound too critical, but those are the facts. You cannot argue with the facts, as far as I am concerned.

With respect to your question, senator, these same two guys who said all these things are now telling us that Bill C-11 is essential for something -- a successful sale and ongoing operation. From the standpoint and viewpoint of the federal government and Devco, a successful sale does not necessarily translate into the same thing for the employees. The employees and the taxpayers of Canada have a right to expect that a successful sale will translate into a successful long-term operation.

I watched Minister Goodale and Mr. Shannon dance around the question last night for almost two hours. They would not answer these questions: What will it look like after it is sold? How long will this company be here? How much coal will they produce? How many employees will they keep after the sale process is done? None of those questions were answered. With that many questions unanswered, they are saying, "Pass Bill C-11 because it's necessary." Bill C-11 might be necessary for privatization, but if Bill C-11 in its present form is passed, if it is rubber-stamped blindly, without answering these questions, then I believe the coal industry in Cape Breton will die. I believe those 904 employees will be on the street.

We predicted -- and this is in the proceedings of your meetings, and Senator Graham you were there in those Senate hearings -- that if the Devco five-year plan that was proposed in 1996 were approved by the board and by the government, that we would not be in this position today. No one can deny that. We are predicting the same thing today.

I am not a truck driver or a millionaire. I am a coal miner. I listen to coal miners. The coal miners in Cape Breton are telling me that if they continue the way they are going with respect to the Prince colliery, it will not continue to operate. I believe those coal miners. I have no reason to have confidence in Devco's board of directors or the federal government with respect to what they have done in the past five years and say, "Sure, boys, we will give you this carte blanche and you can go forward into the good night with this plan." That will not work because no one has put the proper checks and balances into it. All that stuff is in your office, Senator Graham. It is on the record.

Senator Finnerty: Did the minister not say last night something about 500 jobs being guaranteed?

Mr. Drake: No.

Mr. Wiseman: He guaranteed in January that he would sit and negotiate, and no negotiations have taken place.

Mr. Drake: There is no guarantee of those jobs. As a matter of fact, Mr. Outhouse made his final award on June 2. The next day, on Saturday, June 3 -- and I have not heard this myself, but I have heard about it, and Mr. Gracie can speak to it because he heard it -- Minister Goodale said on the radio, "We cannot guarantee those jobs." On Monday morning, there were 250 coal miners outside the general mining building, senior people, saying, "We know there is no guarantee there, but now he has said it, so we better get our names on this enhanced severance list or we will lose that." On Tuesday morning, the people who did not get in there on time on Monday to sign up for this enhanced severance, coal miners with 20-some years of experience and seniority, 40 years of age, saw their dignity go down the drain. They were sitting on lawn chairs with sleeping bags at 11 p.m., waiting for the next morning to get into the general mining building at 8 a.m. to sign off their jobs.

That is what went on down there. We take this personally, and I think we have a right to take it personally. There are 900 people being hurt down on Cape Breton Island. I am sorry if I sound a bit upset, but I am a little upset. The government is ignoring Canadians right now by doing what they are doing. Our last chance is for the Senate to stop this bill and tell the government, "You are not doing this to those Canadians. We will stop it and you will answer our questions. If they are not answered satisfactorily, that bill will stay here until 2005."

That is the Senate's job. I am not an expert, but I think that is the Senate's job. There are too many unanswered questions. I am not sure of the numbers, that is, how many senators are on the Liberal side and how many are on the Conservative side, but I know that the numbers are not equal. I know that just in terms of voting strength, the Liberal side can pass this bill.

I am asking the Senate today, when you make this decision, make it with all the information that you can possibly get. It should not be about politics; it should be about people. I am asking that when you do vote -- and I hope you will communicate this information to your colleagues -- vote with your conscience. If you do that, then this bill will not be passed.

Senator Graham: For the information and clarification of our colleagues here, you said that the corporation was off $157 million with respect to its projections. Were you referring to the fiscal year that just ended, namely, March 31?

Mr. Drake: Yes, I was. I refer you to page 13 of the document that I provided.

Senator Graham: If it is for fiscal 1999-2000, would you agree that a large part of that $157 million loss, or whatever that they were off in their projections, would be attributable to unanticipated geological happenings at the Phalen mine? Would that be a fair statement?

Mr. Drake: I will clarify that. I clarified it in 1996, and we clarified it again in 1997 for the Senate. We have been clarifying it for the last three years for the federal government. Devco made projections based on their five-year plan.

On May 27, 1996, Mr. Joe Shannon said, "We are here tonight because we believe that this plan will work. We believe that we will build a management system that can deliver on this plan." The plan was based on all the knowledge they had about Devco. The plan was to show a profit this fiscal year, 1999-2000, of somewhere around $60 million, I believe.

Devco had all the information about the Phalen colliery and the Prince colliery. They knew that we had water problems at Phalen. They knew we had rock outburst problems at Phalen. They knew we had weighting problems, heavy sandstone problems at Phalen colliery.

The unions have spent the last five years telling management this: "The things that you are trying to implement right now will put us in a bad position with respect to production over the next five years." Devco refused to listen. It is all on the public record, every bit of it. I can reiterate it here, but it will take an hour or two. It is all on the record.

Devco refused to listen to the miners. Devco went helter-skelter and did what they said they wanted to do. Here we are today where, despite the fact that every single event with respect to Phalen colliery -- and that was supposed to be the big producer -- was predictable, and predicted and, therefore, preventable, nothing was done about it by Devco's management team or their engineering department.

The last part of the question was: Was the loss of revenue here due to the unforeseen geological problems at Phalen? No. Those problems were all foreseen. They were all predicted, and the federal government and Devco were aware of them. They did absolutely nothing about them.

In my opinion, that is incompetence. In my opinion, no one was watching Devco.

Senator Graham: I don't see how --

The Chairman: Senator Graham, we must move on. Everyone wants a chance to ask questions.

Senator Graham: I just want to find out the source, for clarity purposes, of the $157 million figure that you have used.

Mr. Drake: All right.

Senator Graham: And when you say that it is the fault of the corporation, how can you anticipate rock outbursts or geological problems?

Mr. Drake: Phalen colliery had a mine plan; Devco ignored the mine plan. In the upper sections of the Phalen colliery, as we were mining down, Devco came to a section called "6 East." They increased the length of the wall panel. If you know geologically that the Sydney coal fields have a sandstone bed running through that entire system, at a certain point as you are driving underground, you should be prepared to deal with that. The further you go underground, the more weight there is. Certain things must be done to alleviate that. One of the things that you do not do in those circumstances is increase the length of the wall panel. Devco did that. We asked Devco not to do that. We hired experts to show Devco what would happen. No one listened.

When we arrived at 6 East, we started to have roof falls. I spoke to Devco's geologist, Mr. Steve Forgeron -- who, by the way, is one of the most honest people in the Cape Breton Development Corporation; he will not distort the truth for anyone. I will use some numbers loosely. I have the documentation at home. If the Senate wants it, I will send it to you.

I told Mr. Forgeron that we began to have massive roof falls when we got to 6 East, at a certain depth in the colliery, and those wall panels were extended. We had a lot of them. That number might have been 30, I am not sure. The next panel we came to, I believe, was a panel called 3 Centre, which was a little deeper in the mine. We had a couple more roof falls -- more than the 30. As we were getting deeper, the incidents were increasing from 30 to 40 or 45, whatever it was at 3 Centre. Devco ordered the extended wall panel, against the wishes of the unions who are all representing 25-year and 30-year coal miners. When we get to 7 East, we are deeper in the mine. The sandstone weighting is heavier. The natural gravitational pull of the earth is greater. We needed to do something different. Devco did not do anything different, and we had more roof falls in 7 East.

Based on their geological studies, Devco was predicting those roof falls. Steve Forgeron was predicting those falls. The best was 8 East, the one that Devco told us to base our lives on.

Senator Graham: For clarity, 8 East is where the problems have been in the last year?

Mr. Drake: Senator, 8 East is even deeper than 6 East was four years or five years ago. Devco continues with the same side panel, which did not work in 7 East or 6 East.

Mr. Shannon loves to compare us to Australia and the United States. In the United States, when they have similar conditions but not quite as drastic as we have in a submarine mine with respect to water and weighting, they do two things as the norm to reduce the incidents of weightings and roof falls. First, when getting deeper they reduce the size of the wall panels accordingly. They have had success. Where they do not reduce the size of the panels, the heaviest hydraulic supports possible are placed into the area. The norm is about 980 tonnes. Devco used the same 550 tonne roof supports that they used back up in 6 East, which made no sense to any of us. It risked the lives of the employees of the corporation.

Mr. Forgeron told me that in 8 East they were predicting problems before they even started. They had the geological evidence and the background information from 6 East, 7 East and 3 Centre. They were projecting 80 to 90 roof weighting incidents.

How could you predict it? They already knew it would happen. They have 300 years of mining experience in the Sydney coal fields. If anyone wants to argue that point, maybe Steve Forgeron should be up here.

Senator Finnerty: As you heard last night, I am from a mining community, and have suffered this my whole life. I know what you are going through. My dad retired at 71 with no pension. He worked all of his life in the mine.

The fact remains this it costs taxpayers of Canada billions of dollars for companies that have been negligent with their employees over the years. In view of the fact that Canadian taxpayers have spent $1.7 billion on Devco coal operations since its inception, why do you believe that the public ownership of the Cape Breton coal mining industry is better for the country than a privately owned company?

Mr. Drake: That requires two answers. First, the government invested $1.7 billion in the corporation, as a matter of public policy, in the same way that they spend money on health care or education. It was a matter of public policy in 1967.

Second, the return on that $1.7 billion investment was, according to Devco's records, $4 billion in direct revenue. That money was spent in Canada. That money kept thousands of coal miners and their families working, sending their kids to university, spending in the community, generating taxes, making Canada pension contributions. That $1.7 billion had a huge return. From 1968 to 1998 there were $2.2 billion in wages. If you take that money and spin it off into an economy the size of Cape Breton Island, the economic windfall is huge.

That was a good investment. The government got a good return on that investment. The problem is that when the government wants to get out of Devco they say, "We sunk $1.7 billion into that black hole. We have been great." Yes, the government has been good, but the coal miners and the coal industry have been good for Canada. Canada saved billions of dollars on Cape Breton coal industry in oil equalization payments alone. In 1974, when the mines were expanded, they called on these 900 young coal miners, the very people they are throwing on the street today, and said, "We need you guys to help us with the oil crisis." At the time, the government was saying that they needed to get the province of Nova Scotia off foreign oil because they were sending Nova Scotia $80 million to $100 million a year on oil equalization payments. That is all on the record.

At the end of the day, with respect to Devco, the federal government should stand up and say, "We made a good investment. Now, we have to get out reasonably and we must look after these 900 people."

With respect to the other part of your question, Devco has had some problems with respect to political patronage, et cetera, over the last 30 years. It is a known fact. That part of Devco has not been good.

If this bill goes through, there will be a private company. I have not said today that a Crown corporation is better than a private corporation, or vice versa.

However, it seems as though the federal government will privatize the corporation once the bill is passed. That is 99.98 per cent certain. We have committed to working with that private corporation and we will mine coal to the best of our ability, because that is what our people do. However, do not throw those 904 people on to the street as DOSCO was going to do to 6,500 workers in 1967. We will work with the private corporation, so allow us that bit of dignity.

Senator Finnerty: There is a situation in Kapuskasing, Northern Ontario, where the employees took over a plant that was scheduled for closure. I do not know if you are familiar with that.

Mr. Drake: I am not.

Senator Finnerty: It was for similar reasons. However, they have turned it around.

Mr. Drake: What kind of plant is it?

Senator Finnerty: It is a paper mill. It is run very successfully by the unions and the employees. Is that a consideration?

Mr. Drake: We have looked into employee ownership. As a rule, employee ownership does not work out well over the long term, although there are good examples of where it has worked. However, with respect to Devco, we have two flooded coal mines, the Donkin and the Phalen, and we have one customer -- Nova Scotia Power <#0107> that has been very adamant over the past five years that they will arbitrarily reduce our coal prices on a regular basis. We also think that the Prince mine could last over the long term if Devco spent some capital dollars on it. I will give you an example from the last Devco annual report, year-end March 31, 1999. Capital expenditures for 1994 were $38 million. Capital expenditures for 1995 were $26 million.

When Mr. Shannon took over and the present Devco board of directors implemented that five-year plan in 1996, capital expenditures were $5.8 million, the lowest in the corporation's history. In 1997, capital expenditures were $8.1 million; and in 1998, they were $12.7 million. A portion of that -- $11 million -- was for roof supports that we did not think were needed. The 1999 capital expenditures were $7.9 million.

The point of all that is that Devco has captained the Titanic -- the ship hit an iceberg and the captain said to the crew, "Here's the keys, take over now." I do not think that employee ownership would work with Devco after what they have done. They have struck the iceberg and the ship is sinking. Now they expect the employees to take the keys and take the ship for a sail. It would not work and I do not think anyone could expect it to. With all due respect, employee ownership can work, but it must be in ideal circumstances -- not in a situation where a company is failing and suddenly comes up with employee ownership as a solution.

Senator Finnerty: I should like you to look at what is happening in Kapuskasing. That was a no-win situation. Everyone said that it must close because it was not profitable. However, it is now very successful.

Mr. Drake: I looked closely at the Algoma steel mill. They were successful, but they laid off many employees and shut down their own Canadian mine. They are now importing the material from the United States.

There is no doubt that there are success stories, but there are also many failures. I would like you to look into the Transport Route Canada situation. There was a request for a bill to allow the employees to take an ownership position. To the best of my knowledge, that failed miserably, and those employees were left holding the bag.

In the situation in which we find ourselves in the coal industry, they are asking us to take over a rickety boat.

Senator Taylor: Thank you for an interesting presentation. You put your cause forward very well.

I think that the taxpayers of Canada are telling the Canadian government -- regardless of the party -- that they want the government out of Air Canada and the CN. In other words, as you are saying, perhaps there are too many large faces opening up when they should be narrowed. I do not think private enterprise is always the answer, but whatever the reason behind it, there is a trend today toward privatization. There is a willingness to believe that the government cannot run coal mines, oil companies, railroads, or airlines. There is a probably a lot of truth in it.

You mentioned political interference and so on, but we have a problem. It can be argued that diversification at Devco throughout the years in Cape Breton has been a long time in coming. I do not know whether the private sector is using its imagination and ideas along with the good people of Cape Breton.

As you know, coal miners make good citizens. I come from Alberta, where there are people who are similar to Cape Bretoners, and they are the backbone of the province in entrepreneurial areas.

Mr. Drake: Bring that business back to Cape Breton.

Senator Taylor: They probably will. Your climate is better.

Mr. Drake: I hope so.

Senator Taylor: The issue boils down to the fact that when you make that transition, you must be fair to the employees and the people who are switching over, because you do not know what will happen. On the other hand, no one will buy a company that has a lot of debts. Therefore, the government must say, "If you are buying this, it should be clean as a whistle. Go ahead and make your own deal with the miners, arrange your own capital, create your own methods of mining, and we are out of it." The government cannot get out of the fact that up to 900 employees are gone.

You were part of the joint planning commission, and now, in a way, you are asking us to throw out the arbitration findings. Likewise, I suppose Devco could have come back and said, "Arbitration was too good, and we want you to throw it out and do something else." Thus, we are between a rock and a hard place -- you went to binding arbitration, which has said that this is fair, and that these pensions will be okay.

The minister and others have appeared before us and said, "We have 500 jobs." I agree with you that there is no guarantee of 500 jobs the day after tomorrow or in five months.

I am in the energy business and I believe that you are on the up curve. Natural gas has doubled in price and coal markets will increase. In other words, you might be looking at a whole new rainbow opening up. It is a good time to get out of the business and let the private sector, the employees, and the union try to make it work.

You are asking us, in effect, to reopen the arbitration and say that they reached an unfair settlement, are you not? Those seem to be strong words.

Mr. Drake: No. If you look at page 28 of Mr. Bruce Outhouse's decision, section 49, it states:

I am also keenly aware that not extending ERIP benefits to employees with between 20 and 25 years of service will come as a great disappointment to those employees and their families.

It does not suggest that they do not deserve it or that the bill should not cover them.

The incremental cost of doing so, on the basis proposed by the employee members of the JPC, would be approximately $79,000,000. I am not persuaded that this cost can be justified in the circumstances and I do not believe that the members of the JPC, acting reasonably, would have agreed otherwise. As has become painfully evident in Canada over the past decade or so, at all levels of government, even the public purse has its limits. It is also worth emphasizing in this context that most of the employees in this group are not facing the prospect of becoming unemployed, at least in the near term.

Essentially, he said that the bill provides benefits for people with 25 years of service. That is the first time that we have received agreement on that from anyone in the corporation or the Government of Canada. It was imposed by an arbitrator. He said that the bill applies to those employees.

If it applies to those employees through binding arbitration, and it applied to the 7,500 employees that went before them, is it a dollar issue here?

Is that what this has come down to? Is it not supposed to be a matter of justice and to have the laws apply equally to everyone in Canada? There are still 904 people who fall under the same bill. All Mr. Outhouse said was, "I have not got the guts to take the federal government on for $53 million plus $79 million. I do not think I can justify that under these circumstances." The federal government justified it on July 6, 1967 when they passed an act to take over those financial responsibilities and liabilities for 6,500 people who did not even work for this corporation, did not work for the government. Now they are saying, "That is good. We have that arbitrator's decision. Now we can just walk away from those other 904 employees." I think the Senate must look at that and say, "That is fine."

This arbitration might have made a decision for 249 additional ERIPs, but it did absolutely nothing to change the law. The law is still on the statute books and the federal government is asking the Senate to change it. If the Senate changes that law, it should look seriously at making absolutely certain that the federal government looks after the remaining 904 employees in the same fashion as they did the 7,829 who went before them. I cannot see any reasonable, logical solution beyond looking after the final 904 employees. It is beyond my comprehension.

Senator Buchanan: There is an interesting conclusion on page 28, which I have read many times. It concerns the finality of the arbitration. What do you make of his last line here?

Based on their seniority, they will be able to secure jobs at Prince Mine.

That is his opinion, but the minister said last night that it was his goal to arrange up to 500 jobs, which means there may be 100 or 500.

Mr. Drake: That is right.

Senator Graham: "Hopeful of securing," are the words he used last night.

Senator Buchanan: That word "hopeful" is a wonderful word. It does not mean much sometimes.

Mr. Drake: We were hoping for a five-year plan.

Senator Buchanan: However, the last line is interesting:

Should there be a future downsizing or closure at Prince, then a new Adjustment Program will have to be put in place for them at that time.

Mr. Drake: That means that there will be successor rights, because it will be declared public works for the general advantage of Canada. We will have successor rights because the Canada Labour Code will apply.

If there is a future downsizing at Prince that fits into the Canada Labour Code where it says that if you downsize within a 16-week period by more than 50 employees you have to put a JPC in place, then there will have to be another adjustment program worked out. However, if they lay off 49 people, they do not have to put an adjustment program in place. If, 16 weeks later, they lay off another 49 people, they do not have to do it. If they only lay off 10 or 12 people on an irregular basis, they do not have to put an adjustment program into place. If they laid off 300 people, they would have to put an adjustment program in place, but the terms and conditions of anything that bound Devco prior to the private corporation would not apply with respect to pensions.

We cannot carry over our pension time. The government has not given us that document, unlike Marine Atlantic, VIA Rail, and NAV CANADA, who all had such a document in their hands going into the privatization. That document was negotiated. We have not had an opportunity to negotiate. The federal government has indicated that they will not negotiate that carry-over of pension time. The adjustment program could -- what was that word the minister used, Senator Graham?

Senator Graham: Hopefully.

Mr. Drake: -- hopefully be implemented. Once again, there is no guarantee and they are asking us to put on a blindfold and go walking along the shoreline.

Senator Banks: If this question has been answered before, please tell me. How did Mr. Outhouse come to be the arbitrator in this case?

Mr. Drake: A group of arbitrators was recommended by the unions, and a group was recommended by the company. Minister Bradshaw selected Mr. Outhouse from those two lists.

Senator Banks: With your approval?

Mr. Drake: Yes. We think Mr. Outhouse is a fair man.

Senator Taylor: What do you make of the arbitrator's statement in paragraph 48? He says:

I fully understand that granting ERIP benefits to employees under the age of 50 who have accumulated 25 years of service is an expensive proposition.

He says the cost is $40 million, but if we did not go ahead with that, it would be quite markedly out of step with the treatment accorded to former employees of Marine Atlantic, CN, and VIA Rail in similar situations. In other words, the arbitrator seems to be saying that the miners have been treated no better and no worse than employees of other companies that have had to shut down in that area. Would you comment on that?

Mr. Drake: I disagree. That is not what he is saying.

Senator Taylor: That is what he says, the way I read English.

Mr. Drake: I can read it and form an interpretation and you can read it and form an interpretation, but I spent the last year and a half dealing with this.

However, I am convinced that anything less would fail to adequately reflect the long service of these employees and the difficult future which lies ahead of them.

The documentation that we provided showed beyond a shadow of a doubt that the long service employees still number 904 and the difficult future still faces them. However, the position that the federal government adopted on January 28, 1999 did not reflect that long service. In order for Mr. Outhouse to award anything that even resembled what was in the Marine Atlantic, CN and VIA Rail packages, he felt compelled to award those 246 pensions.

If you look at the document I handed out from Pink, Breen and Larkin, Marine Atlantic, CN and VIA Rail had 10-year either continuation of service or continuation of employment or continuation of salary packages. When CN downsized, employees were given up to 90 per cent of their salary and a continuation of pension credits until they could retire with a full pension. There were similar packages that carried over pension time and a continuation of salary at VIA Rail and Marine Atlantic. All those things were put in place for those other three companies. We based our package on those, plus a comparison of what Devco did over the last 31 and a half years prior to January 1999.

Mr. Outhouse went as far as he had the intestinal fortitude to go with respect to adequately reflecting the long service of these employees and their difficult future.

If you also look in the document that I provided, there are several pages based on three expert studies we commissioned back in 1999. One was a study by Mr. Peter Warrian, an expert on downsizing packages. The second was an economic study by Michael Gardner of Halifax. The third one was by Professor James Bickerton, a specialist in economic development from St. Francis Xavier University. I did provide those documents to the House of Commons. Peter Warrian states emphatically that miners in their 40s with 20 years' service will have a very difficult time adjusting. One of the packages he talks about is the Elliot Lake situation. It was a difficult adjustment.

Senator Taylor: You made all those points to the arbitrator, did you not?

Mr. Drake: Yes, we did.

Senator Taylor: He heard them and he came up with this conclusion?

Mr. Drake: Yes.

Senator Boudreau: My questions are more narrowly focused. I have one for Mr. Drake and one for Mr. Wiseman that will hopefully clear up some of the testimony that we have already heard.

There has been discussion about developing Donkin mine and about Donkin Resources. Some names have been mentioned, as has potential employee participation. I am aware of that because I have been contacted over the last of months. I met with the parties and they indicated what they believe is required.

If I summarize what I heard from them, they need three things. They need a contract with the Nova Scotia Power Corporation for at least 1 million tonnes of coal per year. The Nova Scotia Power Corporation is now a private corporation.

Second, they need to borrow, probably from a financial institution, somewhere between $70 million and $90 million.

Third, they need to have the union's successor rights eliminated from their operations.

This committee cannot do much about Nova Scotia Power Corporation. We have no special powers over their contracts.

Unless Senator Taylor is ready to advance $70 million to $90 million, that also cannot be impacted or affected by this committee.

The third issue is one on which this committee could make a recommendation, namely, that the bill be changed to eliminate successor rights. I am assuming you would not support that.

Mr. Drake: Do you support that position, Senator Boudreau?

Senator Boudreau: I am asking you if you support that.

Mr. Drake: I am asking you if you support it.

Senator Boudreau: No, I do not.

Mr. Drake: Thank you for that clarification. Successor rights are very important to Devco employees in whatever happens on the day after the sale. As we said earlier, that is very questionable. No one knows what will happen after that day. Successor rights are inherent in the bill and will allow senior employees to hopefully get one of those potential 500 jobs.

Senator Boudreau: I agree with you 100 per cent.

Mr. Drake: We requested that successor rights be placed in the bill and Minister Goodale assured us that they would be there.

Senator Boudreau: If I am correct in presenting those three conditions as I remember them, then in your view, that proposal by Donkin Resources will not proceed?

Mr. Drake: We met with Steve Farrell on a regular basis, perhaps 12 or 15 times, over the last two and a half years. We told him we believe that he and Donkin Resources have the best opportunity and would get the most support from the Devco unions with respect to opening Donkin mine. We have made that clear and we have said that publicly, but with respect to who would be hired, we believe it would have to go by collective agreements and successor rights provisions in the Canada Labour Code.

There is another issue there with respect to safety considerations. The federal Canada Labour Code standards are much higher than the provincial standards. As everyone is aware, we will not take a backward step on safety standards in coal mines in Cape Breton. That is too important.

Senator Boudreau: I do not think there is a person around this table who would disagree with you.

Mr. Drake: Successor rights would have to apply, as well as the Canada Labour Code.

Senator Boudreau: Yes, but I understand those are the conditions of their proposal?

Mr. Drake: That is right.

Senator Boudreau: Mr. Wiseman, you talked about the pension benefits and used your own situation of 23 years as an illustration.

Mr. Wiseman: Yes.

Senator Boudreau: Your 23 years of pension entitlement is vested and will remain and be guaranteed by the federal government. Is that your understanding?

Mr. Wiseman: Yes.

Senator Boudreau: If you were to take your severance tomorrow, walk away and perhaps get a job in Alberta, your 23 years of pension entitlement is still there. When you reach pensionable age under the plan, you will get your pension based on that 23 years?

Mr. Wiseman: Yes.

Senator Boudreau: There may have been some confusion about that. Are you concerned about blending plans and working for two years for a new company, for example?

Mr. Wiseman: No.

Senator Boudreau: Explain to me what you meant then.

Mr. Wiseman: This may have been changed, but if it has, our members have not been notified. Under the Public Service Superannuation Act, and regardless of contributions, unless maximized at 35 years or so, members who lose their employment with the federal government prior to age 50 face reduced benefits when the entitlement kicks in at age 55 or 65, or whenever they choose to draw it. Benefits are reduced by 50 per cent because the members were not in the government's employ when they turned 50.

That restriction must be removed, because our people are losing their jobs through no fault of their own.

Windows of opportunity were created when they reduced the restrictions to age 55. For example, workers at age 52 had a three-year window of opportunity to meet the criteria and avoid the reductions.

Senator Boudreau: I do not mean to dwell on this, but there are some problems with calculating entitlement, as you indicated. Your entitlement, whatever it is under the plan, is guaranteed and you will pick it up at retirement?

Mr. Wiseman: Yes. I do not have any problem with that.

Mr. Drake: May I clarify something for the record?

Senator Boudreau: Yes.

Mr. Drake: Mr. Wiseman is in a different situation from most of the Devco employees. The majority of the Devco employees participate exclusively in a non-contributory pension plan. That obligation will stay with the Government of Canada unless the pension value is commuted when the worker is severed. There is no access to benefits until age 55, and if they take it at age 55, they lose 60 per cent. It is a very small pension of $405 a month at age 65. At age 55, it is reduced by 60 per cent. It is not the same type of plan as Mr. Wiseman holds. The benefit is very minimal.

The early retirement incentive packages that we are discussing now end at age 65. These are not pensions for life. They stop at age 65. Then the non-contributory plan kicks in and that provides $405 per month for life. The ERIP is a buy-out and not an actual pension.

Senator Boudreau: To sum up, whatever the pension entitlements were the day before Bill C-11 might pass, they will be the same the day after?

Mr. Drake: Yes. Joe Shannon said that last night.

Senator Murray: Mr. Drake, we heard several times from the minister last night that before a final deal is consummated, the purchasing company will have to negotiate with the unions.

As an experienced negotiator, what do you think your bargaining power is in such a negotiation? The parties have come almost to the end of the deal, but before they sign it finally, the company must deal with you.

Where do you fit? Where do you think your union fits vis-à-vis the purchasing company and the government, which has to finally ratify a deal? Do you think you have some bargaining power?

Mr. Drake: Normally, when we are going into a bargaining position, we try to go in from some position of power. We can hold out a strike as a tool.

This a serious question, a good question. We are in a position now where I normally should not reveal anything. The federal government has not allowed us to meet. We met once with a company who may be the buyer, Oxbow. They were here to kick the tires, so to speak.

We have not had any indication whatsoever that that is the company that Devco is seriously in negotiations with, so we have not had the opportunity to have any serious discussions about what the workforce will look like or what the collective agreement will look like post Devco.

We are going into a negotiating position blind now with a company from the United States. Our union, the United Mineworkers of America, has 111 years' experience dealing with private coal operators in the United States. It is not a good experience. To use our president's words, "they are cut-throats." They will do whatever they can -- and I guess this is the way a company works -- to get around the collective agreement and increase their profits. They will have a difficult time, we think, with respect to Prince mine.

We are going into these negotiations in a weak position because, first, we are going in blind; second, the federal government has refused to provide us with any information; and third, we do not know if this new company is serious about a long-term operation. If they are not, then our position is even further weakened. It is not good for negotiations.

We think that there should be some checks and balances built in. This is the final avenue for us to ask for those checks and balances with respect to the third recommendation that we made on the safety net. If that is not in there, we are going into a very serious situation that could lead to additional layoffs. We do not think that the 500 number that the minister mentioned will be a reality. We think the number will be somewhere in the vicinity of what Edna Budden said last night, approximately 250 people.

Senator Murray: I do not want to take up the time of the committee now, because I had to step out briefly for a little while earlier in the meeting. Point me to the page where the safety net is.

Mr. Drake: Page 24.

Senator Murray: All right. I will have a look at it then.

I thought I heard you saying other things. One, for example, was the safety net, which would be part of the deal. You want a safety net as part of any deal. I then heard you talk about possible amendments to the bill. I then thought I heard you saying we should defeat the bill. We are getting a multiplicity of advice from you on this matter.

You are quite right about the numbers, but what would happen if the bill were defeated? Where would you and the rest of us be then?

Mr. Drake: If the bill were defeated, the federal government would have to continue the Cape Breton Development Corporation. That is not the ideal circumstance for us. That is my understanding.

Senator Banks: That is not it.

Mr. Drake: What would they do? Shut it down? Either way, whatever happens, whether the bill goes through or not, those 904 people and the coal industry are in trouble. We are not asking for the Senate to defeat the bill. If this bill is amended to retain sections 17 and 18 --

Senator Murray: I went through this with Edna Budden last night. Suppose you put sections 17 and 18 back in there. I suppose it is something that could be litigated. Sections 17 and 18 do not give you any guarantees. It is a kind of best effort.

Mr. Drake: Sections 17 and 18, particularly paragraph 17(4)(b), translated into 7,829 early retirement packages over the last 33 years. The arbitrator who just awarded 249 packages by law relied partially on section 17 of the Cape Breton Development Corporation Act. We think it has a lot of strength. Our whole case was based on that. The final award in the arbitration case was not in favour of the federal government. We think there are obligations on the federal government's part with respect to sections 17 and 18. We think they are very wide-ranging and powerful. It says "all reasonable measures."

Senator Graham: Senator Murray was asking about section 17 and the emphasis that Mr. Drake and others have placed on that. I remember that when that act was passed in 1967-68, there was an industrial development division component to Devco. It is important to remember that section 17 may have had implications with respect to that as well.

Mr. Drake: Devco hived off the industrial development division in 1988 or 1989, as was stated last night. The industrial development division had the mandate to diversify the economy in Cape Breton, not to deal with --

Senator Graham: The government did.

Mr. Drake: Yes.

Senator Graham: The government of the day.

Mr. Drake: I do not think hiving off the industrial development division did anything to remove the responsibilities of the federal government with respect to downsizing and with respect to pensions. That is confirmed by the fact that after 1989, we had four downsizings where the government provided probably about 1,200 to 1,400 pensions between the date that the ID division was hived off and the final date of this arbitration, June 2. There were more than 1,000 pensions awarded. I think that the ID division, although it was an important part, was not integral to the fact that they also had a responsibility under section 17 to the employees.

Senator Graham: It was integral to the drafting of the legislation?

Mr. Drake: Yes, but it did not change the law.

Senator Boudreau: Senator Murray makes an interesting point about sections 17 and 18. What difference would it make if the bill were amended to include sections 17 and 18?

In effect, did your reply not indicate that sections 17 and 18, their meaning and application in these circumstances, were precisely what was arbitrated by binding decision?

Senator Taylor: Exactly.

Senator Boudreau: Is that not exactly what he arbitrated, what sections 17 and 18 mean?

Mr. Drake: I guess what I am hearing here -- and pardon me for being a little defensive -- is someone trying to find something in this arbitration decision that removes the government's responsibility for the 904 remaining employees. The arbitrator's decision was based on awarding an additional 246 ERIPs. I do not think the arbitrator's decision changed the mandate of the government under the statute. I think the statute is still there. I think the 904 remaining employees still have a right to the same benefits that 7,829 employees received previously. I do not think the arbitrator's decision changed that. We are saying that the Senate has a responsibility to ensure that those 904 people are looked after. I suppose that if I went through this arbitrator's decision, I could find a lot of things that I could pick apart and make a different case from the one I am making today. However, the case I am making today is based on the original compassion, intent, and humanitarianism that were evident in the legislators who passed this act back in 1967. We are asking for the same compassion and concern for Canadians who have given their lives to an industry. Basically, we are saying that there are 904 people here who will be hurt if this bill is passed without some kind of compassionate consideration.

Senator Murray: I do not want to argue with you on your objectives; I share them. However, I do argue with you on the means of achieving them. Putting sections 17 and 18 back into the Devco bill will not do anything for the employees. Devco will become a shell under this bill. It is just a paper company that is to be dissolved. It will be walking around just to save the funeral expenses. The employees are now in a private corporation. They are no longer covered by sections 17 and 18. Putting those sections back into the bill does not seem to solve your problem at all.

Mr. Drake: I disagree. We hired Mr. Ray Larkin to deal with the arbitration. He has been doing so for the last year and a half. He is one of the most respected labour lawyers in Canada. His advice to us is that if section 17 is taken out of the act, the government will then abdicate all responsibilities to the remaining employees in the corporation with respect to downsizing and pensions. I will take Mr. Larkin's word on that and continue to push the issue.

On page 19 of the document that we put forward, in the box in the middle of the page, it says:

On March 21, 1996, Senator Allan J. MacEachen stated the following:

I must say that unless the social equation is introduced into an examination of the current corporate plan of the Cape Breton Development Corporation, an important element in approaching the problem will have been overlooked. When the Cape Breton Development Corporation was organized and legislated it was to move from privatization to public ownership because privatization was incapable of dealing with the community and social problems which would occur from a sudden cessation of production in the coal industry.

We are in the same position today. That was visionary. Senator MacEachen has been behind the coal miners for as long as I can remember. This is what he said in 1996. If he were here today, I think he would say the same thing.

Senator Cochrane: I have a supplementary to Senator Murray's first question.

It is my understanding from what the minister said last night -- and I do not have the transcript of his exact words -- that the union would be part of the sale of Devco. They would have some say before the sale went ahead. From your comments to Senator Murray, you do not seem to be positive about the union's participation. Are you saying this is not a democratic process?

Mr. Drake: I am saying the process so far has been hidden behind a cloud of secrecy. I do not think the Senate has any more answers than we have, and we have been involved in this process since January 28, 1999. We have had no response to the serious questions we have asked with respect to the long-term future of the coal industry. We have had no answers from the federal government with respect to the exact number of jobs that would be guaranteed in the private industry. The whole process with respect to the sale is almost a fait accompli right now. We still have not had a chance to sit down with the company.

At the end of the day, the unions will have an opportunity to negotiate with a company that already has everything signed on the dotted line. No union in this country would relish walking into negotiations under those circumstances. None of our four unions is looking forward to that kind of circumstance.

We think this whole process has lacked input from one of the most important stakeholders, the Devco employees, since day one. In those circumstances, you cannot blame us for being suspicious and skeptical about the outcome. As I said in answer to Senator Murray, we are going into these negotiations in a weakened position, due to the fact that there has been a total lack of transparency and information.

Senator Cochrane: How much time do you now have to make some impact on this bill before it is passed?

Mr. Drake: This is second reading, and it is going to third reading and then Royal Assent. This is it, right here.

The Chairman: This is committee stage.

Mr. Drake: This is second reading in committee, yes. Therefore, this is it for us. However, I will be calling you on the phone.

Senator Cochrane: I am sympathetic to your cause.

Mr. Drake: I appreciate that.

Senator Cochrane: I have a concern for the people in Cape Breton. You are talking about 904 people, which is serious.

You know that when this bill was being drafted, possibly items were left out or forgotten, or maybe there was some misinformation. Perhaps I can recommend something. New legislation under Treasury Board guidelines could possibly be drafted to grant this waiver under the Public Service Superannuation Act and provide these employees with their benefits.

Mr. Drake: That would only apply to a small number of employees. Most of the employees in the 904 are not involved in the PSSA plan. They are in the Devco non-contributory plan.

However, the Senate could make a recommendation to the Government of Canada to put a safety net in place that would allow the carry-over of pensionable time for these 904 employees. That would be the same as Devco provided for the 6,500 DOSCO employees, and I believe that would fit the bill. Then, perhaps what Senator Murray said would fit more tightly.

Sections 17 and 18 might not be required at that time. From our perspective, and that of our legal adviser, unless we get a guaranteed safety net from the Government of Canada, having sections 17 and 18 remain in the legislation is our only hope for justice for the final 904 employees. That is our only avenue, unless something else is done and put in writing.

I can go on and on about VIA Rail, Marine Atlantic, and CN. They had that safety net before they negotiated with the new company. The government said what they would do and then the unions were able to negotiate a proper exit and entrance strategy. There are bumps along the road in every kind of negotiation process, but it went relatively smoothly. People felt they had input into their futures, that they were not just being left out while everything was signed on the dotted line, and someone with a dismissive arm was saying, "Come on in now and we will negotiate with you." It was not that way with Devco for over 30 years. Why does the final chapter of Devco need to be so mean-spirited? I do not understand that. I have worked for this company all my life and I have never seen this. My father worked for this company, and he has never seen this.

Senator Banks: I very much appreciate your concerns about the welfare of people, as we all do. I think that Mrs. Budden should get a medal for her tenacity.

You asked a moment ago if we would forgive your defensiveness, and I will ask you now to forgive my antagonism. I come from an industrial sector and a part of the country that, by accident of time, geography, and history, would be currently unsympathetic to the case that you make.

You mentioned a moment ago that the employees of Devco are in the same position today as they were in 1996 when Senator MacEachen was talking about the social aspect and its implications. I suggest that you could go back even further and talk about the quote from Mr. Pearson in 1968 that you introduced. You could say you are in the same position today as you were then, in terms of a perceived certainty in an industry that has existed for hundreds of years in Cape Breton.

The people in the industrial sector from which I come, and of which I am still a part, would observe that there seems to have been at least 30 years' notice here wherein everyone was fully aware that, for better or for worse -- and however sadly -- this industry will not be in the same place and operated in the same way by the same people with the same certainty of a future. The people of whom I consider myself a part would be unsympathetic because they would say, "Yeah, so do something about it, as we have and as we do."

This is by way of explaining, before my question, where I am coming from.

You have equated justice with a guarantee. In my view, justice does not equate to a guarantee. There is no guarantee where I come from.

A question was raised earlier about who watches the watchman. One of the watchmen we watch is the guy who writes the cheques. He has been writing cheques for a long time here.

Do I understand correctly that a substantial number of the people about whom we are talking have had the option since 1982 of joining the contributory pension program, which is better than the non-contributory program, but failed to choose to do so?

Mr. Drake: We understand that there are a lot of people unsympathetic to the coal industry in the country. That is because of what Devco has done and the way the mandate has been distorted by many people. We are not asking for sympathy, we are asking for justice. Where I come from, justice is guaranteed. It is guaranteed by the legislation and by 33 years of past practice at the Cape Breton Development Corporation of downsizing by early retirement and providing a guaranteed level of employment or an early retirement package. That is there. That is in stone.

The mandate of the Cape Breton Development Corporation was unique. I do not think there is one other area in Canada or one other Crown corporation or private corporation that has operated under the same kind of social humanitarian legislation that was enacted by the Lester B. Pearson government in 1967. It is not there for anyone else except the coal miners.

With respect to the contributory pension plan, I explained earlier this morning that 1982 was the first time that the corporation decided to establish a contributory pension plan that was mandatory for everyone in the corporation. All of our people were told, by collective agreement and the contract, that anyone hired after 1982 had to join that plan. It was optional for everyone else.

Prior to that, everyone else in the corporation had seen this legislation enacted with respect to retirement packages. That is the package that they fell under and that was government policy.

Senator Banks: The answer to the question is that at least some of those people had the option at one time or another to subscribe to the contributory plan but did not?

Mr. Drake: Everyone has the option. They still have the option to subscribe to the corporation's contributory plan.

Senator Banks: Have they decided not to?

Mr. Drake: They have decided not to do that for various reasons.

Mr. Carroll: Many people in the corporation would have entered the PSSA pension plan if given the chance. None of the union people can go into the PSSA pension plan now. I explained that earlier today. If we had been given that option, we would have taken it. We tried to get into that plan. Steve and I tried to do that for our union members and we failed.

That plan is better for us because we can buy back our time. In 1995, we could not buy back in the 5 per cent plan. At present, the buyback in that plan is based on age. They want our 5 per cent, and we must pay the company's 5 per cent and a penalty based on the number of years. If you are 48 or 49, you might have to pay 20 per cent. It is way out of whack and people cannot afford it.

It is different in the PSSA. You buy back based on your current earnings. One of the CUPE members did that. He had to go to confidential before he could get it. It is making a net difference to him of $600 a month. When it is paid off, it will be $1,500 a month. That plan would work for us.

It is totally unfair that because I am unionized, I cannot get in. They will have to explain that to me. If that plan were offered today, many of our people would jump at it.

Senator Banks: Correct me if I am wrong, but my understanding is that most of the 904 people about whom you are talking would have had or now have the option to subscribe to the Devco contributory plan?

Mr. Carroll: Yes.

Mr. Drake: Yes, that is correct. However, I wish to clarify that. I do not think it is that simplistic, that you are either in the 5 per cent plan or not. Excuse me for my antagonism, but it is not a case of you are a good guy and doing what you should do if you are in the plan, and you are a bad guy and not doing what you should do if you are not in the plan.

Until 1982, it was government policy to provide pensions under the Devco legislation to everyone in the corporation. Some people who were hired in 1981 and who were not contributing to the contributory plan received pensions. People who were hired after 1982 had to contribute by law to the contributory plan. When those people retired, they were still given the early retirement incentive package on top of what they received in the 5 per cent contributory plan. They still benefited from the non-contributory plan and government policy with respect to early retirement packages.

The Devco package system is a complex issue. It is not a case of if you are in it you are good; if not, you are bad. It is not that kind of situation. It is more complex than that. I understand that the people who are not in it made their own decisions, but those decisions were based on a long history of government policy.

The Chairman: Thank you very much. We have had a full presentation here and I thank you for coming.

The committee continued in camera.