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

Issue 3 - Evidence - December 6, 2007

OTTAWA, Thursday, December 6, 2007

The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C- 15, An Act respecting the exploitation of the Donkin coal block and employment in or in connection with the operation of a mine that is wholly or partly at the Donkin coal block, and to make a consequential amendment to the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, met this day at 8:30 a.m. to give consideration to the bill.

Senator Tommy Banks (Chair) in the chair.


The Chair: Good morning, ladies and gentlemen. This is a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.

My name is Tommy Banks. I am a senator from Alberta, and I have the honour of chairing this committee. To my immediate right is Senator Pierre Claude Nolin, deputy chair of our committee. On my far left is Senator Bert Brown, representing Alberta. Next to him is our guest, although not a member of the committee, Senator Gerard Phalen from Nova Scotia, who knows a thing or two about coal. To my right is Senator Colin Kenny, who is the chair of the Standing Senate Committee on National Security and Defence.

The committee will begin its examination of Bill C-15, respecting the exploitation of the Donkin coal block and employment in or in connection with the operation of a mine that is wholly or partly at the Donkin coal block and to make a consequential amendment to the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, introduced in the Senate November 21, 2007.

It is our pleasure to welcome Gary Lunn, P.C., M.P., Minister of Natural Resources. Mr. Lunn is accompanied by Stephen Lucas, Assistant Deputy Minister, Minerals and Metals Sector.

Welcome to the Senate of Canada. Minister Lunn will be with us for an hour, but his officials can be with us longer to answer further questions, if need be.

If time permits, we will go in camera at the conclusion of this meeting to discuss future business and decisions made by your steering committee.

Minister, please tell us about this bill. You have the floor.

Hon. Gary Lunn, P.C., M.P., Minister of Natural Resources: It is a pleasure to be back before this committee. I have had, as you know, frank and fruitful discussions in the past. I look forward to our discussions today.

I am pleased to speak to you today concerning Bill C-15, the Donkin coal block legislation. The purpose of this bill is to facilitate an economic opportunity for Cape Breton Island and the province of Nova Scotia. The bill does this by creating a legal framework for a mining operation at the Donkin coal block. The economic opportunity is to bring Donkin coal to the surface from an area some three kilometres offshore Cape Breton and transport that coal to market. This operation would produce 275 direct jobs and hundreds of millions of dollars for the provincial economy in terms of salaries, equipment, and a range of goods and services.

The opportunity is before us now, because in December of 2004, the Province of Nova Scotia put out a call for proposals to explore the feasibility of developing this resource. A year later, Nova Scotia announced that Xstrata Donkin Coal Development Alliance was the successful bidder. The company immediately launched a multi-million dollar study to evaluate the potential for bringing a mine into production. That study is currently under way, with a major decision point in February, and, if all goes well, a positive decision on mine development next August.

There are about 25 people working at the Donkin site at present. Xstrata has drained the water from two tunnels dug to the coal face in the mid-1980s by the Cape Breton Development Corporation. The company is now preparing to drill into the coal seam to obtain further information on the resource. From a resource standpoint, everything appears favourable so far. However, for Xstrata to come to a positive decision there is another issue that needs to be clarified: That is the issue of Bill C-15.

There are two regimes — the federal regime and the provincial regime — which creates a level of uncertainty for companies and regulators. If made law, Bill C-15 would remove this uncertainty. It will make clear to companies, employees and regulators themselves what laws will apply and who shall enforce them.

Bill C-15 is the result of cooperative federal-provincial effort. The objective of this effort has been to establish regulatory clarity, to facilitate economic development and to do so in a way acceptable to both governments. In March of this year, federal and provincial officials agreed on an approach. This was followed by a period of federal-provincial consultation with the public. These sessions resulted in assurances that labour, community and industrial groups both understood and supported the proposed regime. Employee and employer groups, community organizations and the Canada-Nova Scotia Offshore Petroleum Board were all supportive.

The legal framework in Bill C-15 covers resource development and a number of labour matters. The latter includes labour standards, industrial relations and occupational health and safety.

The bill provides the Governor-in-Council with the authority to make regulations incorporating provincial laws into the body of federal law. Should the province amend its laws, those changes would be incorporated into federal regulations.

The federal government would have an opportunity to modify, if necessary. Any provincial law incorporated federally would be administered and enforced by the provincial official responsible for the relevant provincial law.

By means of this legislation, both levels of government will be able to work together to ensure that the occupational health and safety provisions will serve the Donkin miners well. More specifically, Nova Scotia's Trade Union Act, the Occupational Health and Safety Act and the Labour Standards Code will be incorporated into federal law through regulations, should this bill become law.

Nova Scotia has accepted to amend its occupational health and safety laws to include certain elements that exist under federal law. This is meant to provide the highest level of protection for the workers. The labour matters covered by Bill C-15 will not in any way sacrifice accountability, transparency, or health and safety for the sake of regulatory efficiency.

Mr. Chair, Bill C-15 also clarifies the matter of royalties. These will be collected by the province and then be remitted to the Government of Canada. An equivalent amount will then be flowed through directly to the province. In other words, the Province of Nova Scotia will receive 100 per cent of all royalties.

The bill requires that an agreement concerning royalties with the Province of Nova Scotia is subject to the approval of a Governor-in-Council. For greater certainty, it has been made clear that the User Fees Act does not apply to any fees contained in provincial laws incorporated by reference.

Finally, a consequential amendment to the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act is required to ensure that regulation of both coal and coal gas production lies with the province. Certainly, coal gas will fall under the accord act.

Mr. Chair, I believe that the measures being taken in Bill C-15 will provide the regulatory certainty required for the Donkin coal block project to proceed. They will provide the highest level of protection for workers involved. They will permit both levels of government to retain their current positions with respect to ownership and jurisdiction. It will facilitate the economic development of Cape Breton Island.

I would add, Mr. Chair, that Bill C-15 is also an outstanding example of cooperation between the provincial and federal governments. It is an example of the governments fulfilling a common interest in seeking the development of the Donkin block. By introducing this legislation, the Government of Canada is demonstrating its commitment to the economic development of the Cape Breton community and to Nova Scotia as a whole.

Thank you very much, Mr. Chair. I look forward to questions from you and members of your committee.

The Chair: Thank you. I am sure there will be some. We have been joined in the interim by Senator Milne, Senator Sibbeston and Senator Mitchell. We are about to be joined by Senator Adams.

Senator Nolin: Good morning, minister. Thank you for accepting our invitation to appear.

My questions are somewhat legally technical. You have with you Ms. Fortin from Legal Services of your department, and perhaps she can be of help in answering the questions, or you may know the answers yourself.

It is quite unusual to have such a legal framework where provincial legislation will be incorporated through regulation in federal legislation. Ms. Fortin, is that unusual, or do you have examples or precedents that provide us with clarity?

Anne-Marie Fortin, Senior Counsel, Legal Services, Natural Resources Canada: I do not think it is unusual. This is a mechanism that we call an administrative inter-delegation, an incorporation by reference. It has been used in Canada for at least the last century, I would say. It has been used especially in the transportation industry, where instead of having one federal regime, we incorporate by reference all the provincial regimes. I am not very familiar with the transportation regulations, but it is not an unusual mechanism.

It is a little different in Nova Scotia because we are familiar with the accord regime where it is mirror legislation. In this case, this is more of a typical regime where in the federal legislation, instead of repeating what exists in provincial legislation that we agree with, instead of having one big act, we say use these provisions that exist in the provincial legislation, and we are making them federal law for federal purposes.

Senator Nolin: Under the Constitution of Canada, section 92(a) states that non-renewable resources are provincial matters. Why does the reverse not apply?

Mr. Lunn: I had to accept the advice of the officials. We worked with the province in terms of the best way to proceed.

It is being explored by Xstrata as to whether the economics are there to ensure that this project can proceed. We would not want it not to proceed because of a technical issue or wondering the best route to go.

We have been advised by both levels of government in cooperation that this is the best way that we can allow the project to proceed, even though there are jurisdictional issues. The province deals with the enforcement and the rules, but we maintain our jurisdictional rights overall without relinquishing those.

Again, the officials have advised me. This is not political. It is a provincial matter, and I have accepted the advice of the officials. They believe this is the best way to proceed in order to deal with these issues. The province has also agreed with this, and that is why we are proceeding on this basis.

Senator Nolin: I have one last technical question. It relates to clause 7, where I have a problem with the wording in French.


Except as otherwise provided in the regulations, then some acts are mentioned, their regulations do not apply to the Donkin coal block.

If I follow the text, does that mean that the act — which we have in front of us — does not apply unless its regulations specify that it does? Is that what you mean by this text?

Ms. Fortin: True, federal legislation is sometimes drafted in a complicated way. When regulations are mentioned in connection with a federal act, they are the ones made under the act, the act that comes from the bill in question. They are the regulations that will be passed if the act is passed. The regulations here are the regulations attached to the acts listed: the Canada Oil and Gas Operations Act, the Canada Petroleum Resources Act, and the Federal Real Property and Federal Immovables Act.

Senator Nolin: I understand that, Ms. Fortin.

Ms. Fortin: So the regulations may be made under the bill and may be excluded, but they can be reintroduced and reapplied under clause 7.

Senator Nolin: To me, it seems a little strange that the act states that the acts and their regulations will not apply unless regulations are passed and the Governor-in-Council proclaims the opposite. Is that a little strange?

Ms. Fortin: It is quite strange.

Senator Nolin: You are asking us to make an act not take effect, I understand why, to allow effective financial management. Why would you want to change a decision of Parliament by regulations? Do you understand my concern?

Ms. Fortin: It is quite unusual, I agree. This was included at the suggestion of the Department of Justice. The question that arose was: are we sure that, in the future, there would not be a particular provision in those acts and those regulations that could be very useful to us? At that point, we wanted to keep the flexibility to be able to apply them again without coming back to Parliament. That is the reason behind the provision.

Senator Nolin: In clause 13(4), when the inclusion of provincial legislation is allowed, you add ``as amended from time to time.'' That is worrying too. What does it mean? Does it mean that at the moment the province amends its act, the regulations are automatically amended too? Is that what it means?

Ms. Fortin: Actually, that is a technique that is used quite frequently. In particular, it is used in the Offshore Accord Act in Nova Scotia. That is why we have retained the authority to amend provincial regulations because if the day ever came when the province passed regulations that did not suit us at all, we would have the luxury of being able to correct them.


Mr. Lunn: We retain our sovereign right to not accept the regulations, but they would be adopted unless we chose otherwise. They would be incorporated. We would still have exclusive jurisdiction if we chose to exercise that and not accept the regulations. We could change them, add to them or amend them if we see fit. I understand the default position is that they would be incorporated.

Ms. Fortin: The premise is that they would be incorporated as amended from time to time. We put a backstop in the legislation just in case. I think NRCan could speak more to that.

I do believe the deal with the province is that we would work together to know what they are amending and to be consulted so we never have to revert to that. If there are any issues that need to be ironed out, they would have been ironed out previously.

The Chair: On that question, the fact that the regulations under the named acts do not apply to Donkin, is clause 7 of the bill in any way moving to the lower common denominator when it comes to the safety of mine workers?

Ms. Fortin: No. None of these statutes deals with the safety of mines, whether they are coal, gas or exploitation. They deal with operational issues with respect to exploitation as well as tenure issues. It would be incompatible to have two regimes for tenure. Therefore, we are adopting the provincial regime through the Donkin coal proposal.

Senator Milne: My question follows on from that. I am trying to square this circle where it says in clause 7 they do not apply and then in clause 13 that they may, on recommendation, be applied. That is basically what it says.

Ms. Fortin: That is correct.

Senator Milne: That brings me to this question: Does the Government of Canada at any point during the development stages of this mine intend to perform an environmental assessment, or does the Province of Nova Scotia?

Stephen Lucas, Assistant Deputy Minister, Minerals and Metals Sector, Natural Resources Canada: I will respond to that question, Mr. Chair. The Province of Nova Scotia has been notified by the company in regard to the environmental assessment and will be undertaking it. They have agreed to scope in this portion of the offshore for their assessment. At present, officials with Canadian Environmental Assessment Agency are assessing whether there would be federal triggers that would trigger a federal environmental assessment as well.

Senator Milne: You do not know, then, whether the Nova Scotia standards meet the Canada standards, are the same or lower?

Mr. Lucas: In regard to the environmental assessment, there has been work between ministries of the environment through the Canadian Environment Assessment Agency to look at equivalency of standards. Certainly, if it is in the provincial realm and is not scoped in federally, we would be comfortable with their environmental assessment.

Mr. Lunn: If there were a deficiency, we would ensure that those standards were brought into the scope of the provincial assessment so the federal standards would be met.

Senator Milne: They would be.

Senator Kenny: There is nothing in our briefing book that relates to the quality of the coal and whether the project itself is one that we should have going forward. We have a technical piece of legislation here that deals with what I would call federal-provincial arrangements, but there is nothing about the substance of whether this is a good idea or not. One presumes it is economically good for someone, or it would not be proceeding, but we do not know whether it is good for Canada and whether the quality of the coal produced will cause more environmental problems than not.

I am surprised that the minister did not make reference in his initial comment about why this is a good project. Instead, we have just heard a speech about how he has worked things out with the province. I would be grateful to hear his explanation of why this project should be going forward.

Mr. Lunn: That is not our decision, as I said in my opening comments. There are decision points coming forward in February and ultimately towards August by Xstrata. They are literally investing hundreds of millions of dollars if this project eventually goes forward. They have people on the ground. This is a large coal deposit, with approximately 100- million tons. That is why they are moving forward. There is a great opportunity. There is a lot of excitement on Cape Breton about this project.

There is no risk to the federal government, I should emphasize. There is no risk to the taxpayer in any way, shape or form. Those issues have all been dealt with.

There were some regulatory issues dealing with health and safety and a number of other issues between the province and the federal government, as you know. This is in the offshore, so technically under federal jurisdiction, so we had to resolve some of these issues so the project could go forward.

The federal government is assuming no risk on this project, and ultimately it will be up to Xstrata to evaluate the economics of this project and determine whether the project goes forward. They are putting all of the capital into this project, and obviously they will be doing the evaluation on the economics of the project.

All the information we have received so far is very favourable and positive, and there is a lot of enthusiasm on the ground. However, obviously more work needs to be done, and there are decision points coming forward. What we are doing today, if this bill ultimately passes, will remove some of the uncertainty from a regulatory point of view, while again ensuring strong regulatory standards can move forward so that everyone knows the rules of the game, which again creates that one level of certainty in the evaluation of this project.

Senator Kenny: Mr. Chair, with all due respect to the minister, if this project turned out not to be a good one, the way we would deal with it would be by not passing regulations like this and not facilitating the process. I think it is incumbent on the minister to make the case for the project and why it is good for Canada first. Once we understand why it is good for Canada, then it makes sense to fix up the regulations. It is a pig in a poke if you are saying fix up the regulations so we can move a project ahead without making the case first that it is a project that is worthwhile for Canada.

Mr. Lunn: It is the chicken or the egg. Again, we believe this is in the interests of Nova Scotia. We believe it is in the interests of Canada to move this forward. We are assuming no risk. There is no liability to the government or the taxpayers financially. The environmental assessments, as we talked about with Senator Milne, would have to be evaluated. Obviously, that is an important issue for the Government of Canada. We would ensure that all the federal standards are met. However, it is important that we set up the framework and pass this legislation at least to create the opportunity for this project to go forward.

On an economic basis, I should make clear that this would be a decision by Xstrata. They are assuming 100 per cent of the risk and putting up the capital. The federal government is not putting capital in on this project.

Senator Milne: I understand that Mr. Chong, in his remarks on Bill C-15, talked about setting up a major projects management office. Will this project fall under the purview of that major projects management office?

Mr. Lunn: At this point in time, the major projects management office is an initiative under the federal government. We have invested $150 million over five years to help become more efficient on how we deal with projects from a regulatory perspective.

Senator Milne: Like this.

Mr. Lunn: The project has not started except in applications. We anticipate that sometime in the spring, in the first quarter early in 2008, they will begin to receive projects. However, having said that, I believe this project will go through the provincial environmental assessment; we will ensure that the federal standards are incorporated or whatever the process is to do that. They may be involved, but I am not positive of that, primarily because the provincial authority will likely take the lead. We will ensure that, if there is a gap between the provincial environmental process and the federal process, that gap will be incorporated in the provincial process. We have an agreement to deal with that. It is not certain.

Senator Milne: When Mr. Chong mentioned that in his remarks on this bill, it sent a signal to me that it would fall there.

Mr. Lunn: It would depend on the trigger. There could be a trigger under Fisheries and Oceans. If there is a trigger and it is a major project, there is no question that it could fall within it. We could see a trigger, but I do not want to speculate and say that it will for sure. We are quite enthusiastic about the major projects management office that is coming forward, and it is on schedule and on track. If there were a federal trigger, yes, without question, this would fall as a major project.

Senator Milne: Has Natural Resources Canada or any other federal government agency been approached by the Government of Nova Scotia or by Xstrata about what I understand will be the necessary dredging of Sydney Harbour if this project goes ahead for funding? If you want to ship that coal out of there, you have to dredge the harbour, and there are enormous environmental concerns as a result of that.

Mr. Lunn: I am not aware of that, but we can try to get back to you with an answer. No one has raised that issue with me, and I have met with both the province and with Xstrata. We will follow that up and report back to this committee chair. Someone else may have looked into it, but I am not aware of it.

The Chair: With respect to the questions raised by both Senator Milne and Senator Kenny, this bill contemplates the possibility of something happening. Members of this committee are highly sensitive to these questions because of the closing of Devco, which came to this committee at the last ``kick of the cat.'' It was this committee that recommended the closing.

The reasons behind that decision include issues to do with the nature of the coal — which is bituminus in this mine as well as others that were previously in operation. That brought about the case that Nova Scotia Power, for example, would buy this coal. I am not talking about coal from the Donkin mine — because I do not think any has ever been taken out of it — but from other coal mines close to it, which I believe contain the same sort of coal. Nova Scotia Power imports its coal from Virginia rather than buying indigenous coal. Devco was shut down in the end because it was determined that an end to decades of federal subsidy had to be made. It was not a profitable or a break-even mining situation.

What has changed that would now interest someone in looking at this new project? Is it foreseen by the government that this is a profitable operation that will not require public subsidy?

Mr. Lunn: We have made it very clear that this project has to be commercially viable on its own.

The Chair: On its own?

Mr. Lunn: Yes, without government subsidy. We have made it very clear that the federal government will not provide subsidies to this project.

Again, the province put out a call for proposals. They awarded a successful proposal from Xstrata to do an evaluation and go in. All the information that has been brought to our attention is favourable to this point. However, Xstrata will have to make the final decision on an economic analysis. There are a few decision points culminating with the final economic decision in August. That will determine whether they proceed. That outlook is favourable so far.

However, while we will deal with the regulatory issues that we are dealing with Bill C-15, this project must be commercially viable for it to proceed as it will not receiving government subsidy.

The Chair: You have referred to environmental assessments. Will they be characterized as comprehensive environmental assessments? There are environmental assessments and there are environmental assessments.

Mr. Lunn: I would submit that we have some of the highest environmental standards of any country in the world. You know the processes. They can sometimes literally take years to go through; they are very exhaustive. This government is very much committed to ensure transparency. The province is assuming the responsibility to move forward with this bill. If there are any gaps between the federal and provincial legislation, we will ensure that these gap are taken into consideration and we will ensure that the federal standards with respect to the environment are met.

Senator Kenny: Minister, are you telling us that the environmental assessment will include the use of the coal? Environmental assessments have to do with the actual production of the process.

For example, is Nova Scotia Power undertaking to use this coal? What has changed that, all of a sudden, this coal is now something that is good to burn and to put into the atmosphere?

Mr. Lunn: First, I will not speculate about what may or may not happen or about where the markets for this coal are. Obviously, we have to let the process take its place.

There is an economic opportunity for the people of Cape Breton, where there is a lot of enthusiasm to proceed. We will ensure that all the federal standards are moving forward. As you know, senator, our government is very concerned about the environment, specifically climate change, and have taken specific actions on this issue.

There are some exciting things happening with respect to coal. I appreciate we are a bit off subject here, but there are some exciting things happening from a technological point of view with respect to using coal for the production of electricity as this technology is advancing. Possibly that is a topic for another day, honourable senators, as it does not deal with this bill. However, climate change and reducing CO2 emissions are important to our government.

However, I do not know how far we want to go down that road at this hearing, senator.

Senator Kenny: I should like to go down that road. On another day, I should like to hear witnesses from Nova Scotia Power to tell us whether they plan to use coal of this type, along with an explanation.

I am all for jobs in Cape Breton, but we in the Senate remember what happened in the past with the coal. We should like to know exactly how this is consistent with this government's environmental policy and whether the reviews that are in place will include how the coal will be used in a ``clean'' fashion. Nothing would please me more than if you brought forward information as to how this project will be clean and why it is worthwhile for it to be expedited by legislation of this sort. In fact, I am surprised you did not bring such information before us, minister.

Mr. Lunn: I would only add, senator, that, as you know, the province of Nova Scotia uses a lot of coal today in their electricity production.

Senator Kenny: That is coal from Virginia.

Mr. Lunn: Exactly. It is from Virginia.

We, as a government, are exploring a number of options. We are imposing very strict regulations on producers for reducing their CO2 emissions. There are some exciting technological developments with respect to clean coal, whereby they have the ability to take virtually all the pollutants out of coal-fired electricity generation, the NOx the SOx of particulate matter. That is then combined with carbon sequestration. That is where the technology seems to be moving.

We take this matter very seriously. There are a number of things that we are acting on, but, again, I do not have information about the actual markets for this coal in front of me. That would be part of Xstrata's business case.

Senator Kenny: I think you would find a lot of enthusiasm here if that information were put on the record.

The Chair: The question of further witnesses for this bill is the subject of the in camera part of the meeting that we will have after the minister and his officials have left.

Senator Nolin: Minister, because of the discussion we are having now and the importance of the federal responsibilities, in clause 8 of the bill you are asking for the authority to delegate. I want to be convinced of — and this committee needs to be very clear on — what you want to be able to delegate. Basically, what is the meaning of ``the administration of the exploitation of the Donkin coal block?''

Mr. Lunn: There are basically three sections to that, but my assistant deputy minister will get into those.

Mr. Lucas: That section refers to the delegation back to Nova Scotia of the provincial laws as proposed in the bill to be incorporated by reference into federal law. The effect of this is incorporating the provincial laws — in some cases amended to reflect federal standards, such as in the area of labour — that are incorporated by reference into federal law. We are then delegating them back to the province to administer.

The Chair: As amended?

Mr. Lucas: As amended.

Senator Nolin: I understand that part, but what is the scope of ``administration of the exploitation?'' I do not want the minister or any responsibility of federal Crown authority to be delegated to whomever.

In light of the discussion we are having now, I think it is important that we are convinced that the federal Crown will still be accountable for what is going on in there.

Mr. Lucas: Again, under the federal statute it is delegated back to the province to administer. This maintains the federal claim on the jurisdiction for the offshore. Therefore, it is under the federal realm.

Senator Nolin: You have just alluded to environmental assessment. We understand the federal process. I am not familiar with the Nova Scotian process; there may be differences. We think that the minister should retain the authority on that, to ensure that what will be delegated is done properly.

Mr. Lunn: We retain all of our authority, senator. The officials can correct me, but on a number of statutes in health and safety, we are incorporating their laws into ours. Where there are deficiencies, we will ensure that federal standards are fully met. We then delegate those authorities back and they would be administered by the province.

Those regulations will be administered by the province. We retain our jurisdictional right over all of these authorities. We are not just completely delegating this to the province because we want to ensure that the federal standards are incorporated.

We incorporate the provincial laws into ours, and we ensure our standards are met fully, and then they are delegated back. They are administered by the province. At any point in time, we still maintain our full jurisdiction.

The Chair: So ``delegation'' does not mean ``abdication.''

Mr. Lunn: That is right.

Senator Nolin: I just want to circumscribe the expression in English, ``the administration of the exploitation,'' which is different in French: ``régir l'exploitation.'' Someone can build an argument that it is different.

Mr. Lunn: If there are language issues between the French and English — and obviously your committee has suggestions on how to improve that — we would welcome those suggestions.

Senator Nolin: No, your answer reassures me, as long as you retain the authority.

Mr. Lunn: We retain full jurisdiction, yes.

Senator Nolin: You are asking for the authority to delegate the administration only.

Mr. Lunn: That is right.

Senator Mitchell: Minister, I was interested to hear your statement that we have the highest environmental standards in the world. Well, the world is at Bali and they do not think we have the highest environmental standards in the world whatsoever.

You mentioned great enthusiasm on the ground for this project. We all agree — Cape Breton and Nova Scotia, an excellent opportunity to have good economic development.

However, I should like to see some substantive enthusiasm from you and your government about environmental standards, commitments and initiatives that will reduce and offset the greenhouse gas emissions that will be involved in whatever happens to this coal one day, wherever it is used.

I hear platitudes and spurious arguments. I heard platitudes the last time you were here about solar-fired street lights.

I really think you argue against the Kyoto Protocol, not because you are opposed to it specifically, but because you are opposed to any protocol that would do anything substantively to reduce greenhouse gas emissions because you really do not want to do it.

I also feel that, when you argue that we will wait for China and India, what you avoid is ever admitting that you will wait for the United States and make no effort to put pressure on the United States whatsoever to do something about climate change. My questions are specific and I do not want platitudes.

First, when will you structure, initiate, start the carbon-offset market that you said you would do in your recent Speech from the Throne? What day will you initiate that?

The Chair: Sorry, Senator Mitchell, that is off topic. We are dealing with Bill C-15.

Senator Mitchell: Chair, what I know is that we have been having a discussion here about environmental standards and studies and whether they are federal or provincial. Clearly, one of the most critical environmental issues involved in this is greenhouse gases. I am not saying that we should stop this project, but we need to start talking about greenhouse gas reductions when we talk about projects like this.

They do not have to mutually exclusive. I think you can walk and chew gum at the same time. I think this can be done, but I do not see the government doing it.

I should like to be reassured that somehow, where federal government environmental regulations will be brought to bear on this, they will include serious substantive initiatives to reduce greenhouse gas emissions.

The Chair: As they relate to this bill.

Senator Mitchell: Sure. I think this will have something to do with greenhouse gases, so thank you very much.

Mr. Lunn: There was a fair amount of latitude given with the question, so I will take a similar amount of latitude in my answer. I will try, in the broadest terms, to keep it to coal, because that is what we are discussing. There are exciting opportunities with respect to coal.

The senator mentioned action. I would submit that that is exactly what we are doing in our standards. We are looking at ways where we can actually make a difference and reduce CO2 gases. I could sit here and talk about the 13- year record of the previous government, but that will not be to anyone's interests. We all know the history, what has happened: We all know that greenhouse gases rose by 33 per cent.

Specifically, with coal, our government is investing significantly in technology to develop coal-fired electricity generation without any emissions, and combine that with CO2 sequestration. I am engaged right now, as we speak, with a number of proponents about constructing, in various parts of Canada, projects where they will be able to burn coal to produce electricity that will produce virtually zero emissions as well as fully sequester greenhouse gases.

We live in a very large country. It is very diverse. Provinces like Quebec, Manitoba and British Columbia are blessed with an enormous amount of hydro. Provinces like Nova Scotia may not have those natural resources or that opportunity and use other forms of energy such as coal Our government is working to develop technologies that will make a difference, among a number of others we are working on to deliver. We are imposing some of the toughest standards.

I would submit that there is no other country in all of Europe that will force their industries to reduce greenhouse gas emissions that is close to what we are imposing on Canadian industry. We are taking action and we will be measured.

We are also realists. We understand that we need a balanced approach. Again, I would challenge the record of our Prime Minister and our government up against the previous government, any day, time or week, very proudly.

There are some great advancements being made with respect to the development of technology for using coal. We are very proud of that. We have launched a carbon-capture task force that will deliver. It is examining the opportunities of taking greenhouse gases from coal-fired electricity generation. How do we move that forward? What are the next steps we need to take as a government to start sequestering that on the ground? That is real action. That is what will make a difference.

We fundamentally believe that China, India and the United States must be engaged to take action, or we will not succeed.

I will leave you with one comment: China, in the next five months, will put brand new electricity generation by coal on their grid that is equivalent to all the electricity generated by emissions. If you remove all the emission electricity generation in all of Canada, every piece of Canada that we have, all of the emission-fired electricity generation, China alone will put that much new electricity on their grid in the next five months.

It is imperative that we push these countries and push them hard. I know the previous government does not share that approach and they wanted to walk away, but it is something that we fundamentally believe in, and we will continue to pursue that aggressively.

The Chair: I have allowed wide latitude in this respect, but we will go back on topic to Bill C-15.

Mr. Lunn: Thank you, Mr. Chair.

The Chair: It may have to do with other witnesses on other aspects of the bill that we may wish to hear from in the future, but today we are dealing with the minister on this bill. He is coming very close to the amount of time he has given us.

Senator Mitchell, please ask another question on this bill specifically.

Senator Mitchell: It is great that you are thinking about it, questioning it and have task forces for it.

Could you just give us a specific date for which a carbon sequestration technology, for example, will be required for each plant across Canada to some level?

Can you give me a specific date at which point you think you will have a technology that will reduce carbon and capture carbon in some other way in plants across this country? Can you give me a specific requirement or a specific regulatory level on coal-fired power plants across this country?

The Chair: Senator, I am sorry to interrupt you. That is a good question for another day, but not for today. That is not in order with respect to this bill.

Senator Kenny: If the minister wants the bill, he will stay and answer all the questions.

Mr. Lunn: I would love to stay but, unfortunately, I have House duty and a meeting at 9:30.

Senator Kenny: Perhaps he will come back another day if he wants the bill passed.

The Chair: We will see if that is required.

Senator Trenholme Counsell: I have tried listening to everything, but I am not sure I have heard everything. I want to preface my remarks by saying that if there were ever justification for the Senate today is an example of it.

When I looked at the time sequence for this bill, it spent a few hours in the House of Commons: Second reading, to committee, third reading, sent to the Senate. Therefore, here it is, and I guess it will get the attention it deserves.

I was thinking about my involvement as a member of the Legislative Assembly of New Brunswick during the Confederation Bridge development. I will admit that perhaps there were some things that were imperfect in terms of the environmental assessment, but the scientific history will decide that.

I cannot imagine that we would have ever been at this stage without an environmental assessment. It just seems so wrong in a number of aspects that the environmental assessment has not come first.

In this case, we are concerned with the plant. We are concerned with the water, the air and the health of Canadians and the citizens of the world. You cannot just think of Cape Breton or Nova Scotia or Canada. We know these are global issues.

Perhaps this has been asked, but I want to ask the question again: Did you, as minister in your department, ever say, no, we cannot proceed with this? This is giving it the green light. There is your green light and you drive the car through.

Did you ever ask for an environmental assessment before going ahead with the legal framework to facilitate the exploitation? That would tell me that it is a go.

Mr. Lunn: First, I want to assure the senator that every environmental standard will be enforced and every assessment will be completed. They will come forward at the appropriate time. This is something that our government takes very seriously.

This is about providing a framework for the province and the federal government to deal with regulatory issues between the two governments. It is one piece that must be done. I can assure you that every single standard within the federal environmental review process will be thoroughly completed.

This bill is not deciding whether this project moves forward or not from an environmental point of view. That will happen in due course.

Senator Trenholme Counsell: You are a very high ranking minister, and I respect you. However, I would have thought that, in the 21st century, in 2007, the environmental assessment came first. Well, first, obviously, there is the project proposal and the research that goes into developing the proposal.

Then, whichever company, group of companies or consortium completes that research — that group approaches government and all the various levels of government involved in turning their economic plan into a reality.

I would have thought that presently, learning what we have from many other projects, there would have been a requirement to complete an environmental assessment before considering these other things. Is that not the thinking of Canada's government at this point?

Mr. Lunn: First, you need a project before you actually start an environmental assessment. There are jurisdictional issues. I want to bring back full circle why we are here.

This project is three kilometres from shore, so it is federal jurisdiction. The province would like to proceed with at least exploring the options and having the ability to do an environmental assessment. The province cannot start an environmental assessment until there is a project on the table.

As I have said, there are some decision points that should and will move forward. I can tell this committee with 100 per certainty that if an application is made to proceed with a project — and when we get to a decision point, that comes back to the senator's comments on economics — that will be done by the developer deciding if they have a project. If they believe they have a project, then every single environmental regulation will be strictly enforced. It is very important to our government.

However, you are not in a position to ask for an environmental assessment until there is a project to assess. That is it not on the books now. I appreciate there might be some politics being played here.

Senator Trenholme Counsell: No, there are no politics.

Mr. Lunn: I can tell you that our government takes these matters very seriously. I will conclude with this: When these panel reviews are complete, we accept their advice very carefully.

Senator Trenholme Counsell: Because I was the one who asked the question, I resent, Minister Lunn, if your comment was directed at me about playing politics. Everything I said was a matter of principle, based on some experience, a bit of scientific knowledge and a very strong feeling that we have to do things differently now. We should have done things differently previously. That is not playing politics.

Mr. Lunn: I can only reinforce by saying that there will be, in due course, if a project proceeds, a very comprehensive environmental process. We will ensure that all the federal standards are put into that process.

For the matter of record, we have completed, both under our government and the previous governments, joint environmental assessments in the past. They have been very successful, where one jurisdiction will take the lead. There have been very successful pilot projects in the past as well. Again, we will ensure the highest standards are in place as we move forward.

Senator Brown: Minister Lunn, it is a pleasure to have you here today. I want to go through some steps as I wrote them down briefly.

My understanding is that the Xstrata will assume the financial risk of the Donkin project?

Mr. Lunn: That is correct.

Senator Brown: The regulations are put in step with the province, including the environmental concerns?

Mr. Lunn: Yes.

Senator Brown: The province gets 100 per cent of the royalties. The increase in cost of energy, which coal is a part of, has substantially increased in price since the mines that were formerly in Nova Scotia shut down. I am assuming, if oil has gone from $10 a barrel to $100 a barrel, coal has gone up commensurate with that.

The environmental assessments and improvements in coal-burning technology are obviously increasing. We read about that around the world. Those environmental concerns, as I understand, are administered by the Province of Nova Scotia, but they are overseen by the federal government.

I am pleased to see your department is supporting the Province of Nova Scotia. There certainly does not seem to be anyone else doing so.

I apologize for the manner in which your integrity has been questioned here today. I think this hearing has been largely about politics.

The Chair: I guess that is not a question. Thank you, senator.

Mr. Lunn: One point the senator raised with respect to the environmental steps sent to the province — they will be administered by the province but the federal requirements will be enforced. That is very important. Often when we do a joint assessment, one jurisdiction will take the lead over the over one. However, if there were gaps between the two, they would be incorporated to ensure that all the federal standards are met. We want to give the committee those assurances, Mr. Chair.

Senator Adams: As a member of the committee, it is not right that the minister referred to ``playing politics.'' It is not right to say that to the committee. We just want to make sure the government does the right thing. The word ``politics'' should not be used in that way.

Mr. Lunn: I did not mean that in a derogatory sense and I did not direct that at any particular senator. I should put that on the record. Senator Mitchell and I have the highest regard for one another and we commiserate often.

The Chair: We try to eschew that kind of politics, when we can.

Senator Phalen: It is important to stay on topic — the regulatory regime. The question about why a regulatory regime now was raised. The answer is, I believe, that Xstrata is prepared to invest hundreds of millions of dollars in this project. They want all the ducks in order before they do that, and part of that is a regulatory regime. If I am a corporation prepared to invest money, I want to make sure that everything is in place before I do it. I think that is simply the answer. That is why a regulatory regime is required. They want this thing settled before they agree to invest any money, and that is the first point.

Second, the question arose as to why now and what brought this on? With regard to Donkin resources, Devco drove two tunnels at a great expense to the company — $100 million. However, when they got to the coal, the price of coal had dropped, so there was nothing for them to do but close the mine and not proceed. They could not sell the coal because the price was too low. Now, the price of coal has risen. In fact, it has almost doubled since that period of time, making it a feasible project today. That is the story.

That is why they are going after the coal. A company as large as Xstrata can see money at the end of the day. That is what it is about so they want to move ahead. I think that answers that question.

With respect to the coal, Devco's plan was to mine it and sell it to Nova Scotia Power at the time. I do not know what has transpired since then, but some of that coal was to be sold to Nova Scotia Power, if that is a concern.

I do not know whether we need to know where the coal is going before we approve a project. I am not sure about that. In respect of the environment, they have been carrying out field studies to be used to prepare an environmental assessment and industrial approval process mandated by the Nova Scotia Department of the Environment and Labour. They are doing that now on site. What can they do? Right now, they can do it with water. They pumped 350 million gallons of water out of those tunnels. What did they do with the water? They aerated the water. They put the water in settling ponds and let it settle out before they released the water; and that is environmentally safe. Currently, they are doing things with consideration for the environment.

You may ask what they will do when they open the mine. I do not know that answer. I do not know whether they know what they are up against until they get into it.

The Chair: I am sorry to interrupt, senator, but this might be a discussion for a different time. Do you have a question of the minister?

Senator Phalen: No, not really. I am listening to what has been asked around the table and I am trying to provide answers.

Senator Milne: I think the only question is why the minister could not have told us this.

The Chair: When it comes time for further deliberations on the bill or its implications, we will get into those discussions. We do not need to use up the minister's time doing that.

Senator Oliver: I have a question for the minister — but first, I apologize for being late; I had to appear before another committee at 8:30 this morning when this committee started.

Minister, is it true that if this bill is passed and if Xstrata can proceed, 175 new jobs will be created and there will be approximately 700 spinoff jobs? Is it true that this is basically a legal framework bill — a contract between the province and the federal government to make this possible? Is it true that the economic viability of this project is for Xstrata, a company?

Mr. Lunn: Yes, but the number of jobs is 275, not 175.

Senator Oliver: It is 275.

Mr. Lunn: I thought you said 175. Yes, all that is true. As well, the Province of Nova Scotia also has to pass legislation, I believe.

Senator Oliver: They passed it in April.

Mr. Lunn: That is correct.

Senator Oliver: It has already been done.

Mr. Lunn: Exactly.

Senator Oliver: Is it true as well that the Province of Nova Scotia can stand to gain royalties of $5 million per year if this project gets up and running?

Mr. Lunn: That is correct.

Senator Oliver: Thank you, minister.

The Chair: Thank you, minister, Mr. Lucas, Ms. Fortin and others who appeared this morning to answer questions.

Mr. Lunn: I enjoyed my visit and I look forward to your next invitation.

The Chair: You can assume that we will be inviting further witnesses on the subject matter of the bill and its downstream implications.

Mr. Lunn: Thank you.

The Chair: We will go in camera briefly to consider future business of the committee.

The committee continued in camera.