Proceedings of the Special Senate Committee on
the Cape Breton
Development Corporation
Issue 3 - Evidence - Afternoon Session
OTTAWA, Monday, June 3, 1996
The Special Senate Committee on the Cape Breton Development Corporation met this day, at 2:00 p.m., to continue its study on the annual report and corporate plan of the Cape Breton Development Corporation and related matters.
Senator Bill Rompkey (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I wish to welcome to our committee Mr. Alfie MacLeod, the MLA for Cape Breton West.
Perhaps you could make your presentation, following which we will ask you some questions. As you were here this morning, you will realize that, while people do not have all the answers, they at least know what the questions are at this point.
Mr. Alfie MacLeod, MLA, Progressive Conservative Party of Nova Scotia, Cape Breton West: Honourable senators, thank you for giving me this opportunity to appear here.
As I thought about this presentation, I pondered long and hard about what I would say. I decided the first thing that I would talk about is why I felt it was important to take advantage of this opportunity to appear before you today.
First, I am a proud Canadian from Nova Scotia. I am also a Cape Bretoner. Another thing that most of you will know is that I have the honour to be an elected provincial representative from the beautiful island of Cape Breton representing the constituency of Cape Breton West. What some of you may not know is that I am a former employee of the Cape Breton Development Corporation or Devco, as it is called. You could not say that there is just one reason why I am here today but, rather, that there is no reason I can think of that would prevent me from being here to make representations on behalf of everything I know and love.
Honourable senators, I am not an engineer; thus, I am not qualified to comment on the viability of the engineering assumptions being made. I am not a financial manager; therefore, I am unable to comment on or confirm the soundness of the fiscal plans. However, I do know a little bit about the island of Cape Breton, the workers of Cape Breton and their capabilities. I know that each and every one of us here have one common goal: to keep Canadians working. The specific goal today is to make Devco economically viable.
You have already heard from the chairman of the board of directors of Devco, who has had the benefit of the independent assessment of Devco by John T. Boyd Company. You also have heard a presentation by Mr. Steven Drake from the United Mine Workers of America. My comments are made only after listening carefully to both of those presentations, as well as to the others that have been made, and listening to Devco employees, the union, the company and to my caucus colleagues. It is after consideration of all this information that I wish to make the following comments and recommendations.
First, I will deal with the impact on the economy. It is of prime importance to put the situation in Cape Breton in its proper perspective. Putting the economy of Cape Breton in its best possible light would be to say that the economy is static. All employment sectors have been affected by the downturn in the fishing industry and by cuts in employment in the public sector, particularly with municipal amalgamation and provincial government cutbacks in the health and education sectors.
Cape Breton's unemployment rate increased from 19.8 per cent in February of 1996 to 23 per cent in March of 1996, and it remains at that level today. This increase translates into a loss of 4,000 jobs. There has been no net job creation in Cape Breton since June of 1993. At that time, the employment number was 47,000 employed. In March of 1996, it remained at 47,000 employed. Any minor decrease in the unemployment rate since 1993 is directly attributable to the decline in the labour force participation rate. In June of 1993 this rate stood at 52.2 per cent, while in March of 1996 it stood at 49.1 per cent. This indicates that fewer Cape Bretoners are looking for work. When you factor this into the overall picture, the real unemployment rate is probably more than 30 per cent.
Figures released in the 1993-94 annual report showed that Devco contributed more than $204 million to the Cape Breton economy, including $45 million in goods and services purchased from Cape Breton suppliers. In the 1995 annual report, these figures increased dramatically to $212 million to the Cape Breton economy with $63 million being spent on goods and services. You can well imagine, then, the economic impact of the 700 lay-offs proposed by Devco in a work force on Cape Breton island of 61,000 people.
Honourable senators, Cape Bretoners are not unemployed because they want to be; they are unemployed because job opportunities are few and far between. Each and every job is critical. I know that all of us here today take the responsibility of our jobs very seriously. If we did not, we would not be getting together like this to tackle this tough situation. However, it is not just our responsibility to do everything we can to ensure that Devco is a viable operation, the employer and the employees have responsibilities.
John Kennedy, in his tragically short time as president of the United States, used a line from Francis Bacon, the great philosopher. Kennedy said:
In a time of turbulence and change, it is more true than ever that knowledge is power.
I mention this because some of the players in this situation are not privy to all information. They do not have all the knowledge available. Only certain portions of the independent study conducted by John T. Boyd and Company, one of the world-wide recognized experts in the field, have been released for public consumption. Only certain portions of the five-year plan have been released. What could these reports possibly contain that would be more damaging than the effect of not releasing the information? It puts the union and the workers at an extreme disadvantage because they do not have the benefit of the independent assessment carried out by Boyd.
In addition, by not releasing the five-year plan, the employees are made to feel less than equal partners in this initiative. All of the cards must be put on the table for all of us to see that all may have the same facts available to them for consideration. The company must offer complete transparency in its work plan and disclose all information relevant to that work plan.
The employer is not the only one with responsibilities. Workers too have responsibilities. One of the elements of the presentation made by union president Steven Drake was with regard to employee empowerment. This part of his presentation has received, I believe, less attention than it should. Some of you may say that "employee empowerment" are the buzz words of the early 1990s and they are now fading in the light of some other new fad. However, let's step back and look at this matter.
Labour-management relations at Devco in the early 1990s were strained and at a very low level. Both the unions and management were trying to recover from a strike in the summer of 1990. There was a deep sense of mistrust among the parties. Consultants were brought in to try to develop a transition to a more cooperative approach by all parties. Joint labour-management committees were set up to make recommendations on various issues at hand. However, when the committee made the recommendations, the company rejected the proposal and made unilateral decisions diametrically opposed to the committee's recommendations. All of us who have worked hard on various committees can readily imagine the feelings of betrayal experienced by those on the committee. The company's actions made the whole process an exercise in futility which took labour-management relations back to an all-time low. Despite all of this, it is never too late to try to foster a labour-management partnership. A joint management and union partnership is essential for any business to survive and succeed in today's marketplace.
Some of you may remain sceptical, but there are success stories indicating that employee empowerment was a key element to their success. Many companies which are familiar to us, such as General Electric, a huge, diversified manufacturer of everything from tiny light bulbs to giant locomotives, advocate team-based involvement.
One company I read about and which I thought had many similarities to our situation, was Avcorp Industries Inc. It is an aerospace components manufacturer with two divisions, one in Quebec and one in B.C. Avcorp had a $23 million debt and had lost money every year from 1989 to 1992. The company introduced a continuous improvement program which shifted decision-making from head office to the shop floor. Workers hold weekly meetings to track cost-saving measures and brainstorm to come up with new ones. In fiscal 1994 the firm saw their sales increase by 13 per cent. In the last report available in 1995, their third-quarter revenues were up 40 per cent from the same period in the previous year, with a nine-month operating profit of $1.4 million.
This firm was in crisis. By working together, labour and management increased productivity and boosted profits. That type of empowerment requires total commitment from all parties. Empowerment is said to be the key that turned around small companies like Avcorp and large companies like GE.
You may wonder why I spent so much time talking about other companies. Senior management and union leaders are still light years apart at Devco, and empowerment is required to get them together to provide for and ensure the long-term survival of Devco. Devco's CEO said that the immediate goals are to put the right management team in place and develop a better relationship with Nova Scotia Power. That is all well and good, but we must not fall back into our old ways. We must move forward and take a page from the book of those companies which are successful, and one of those successful pages is employee empowerment. A committed partnership between labour and management could well mean the difference between success or failure for Devco, and the difference between life or death to the Cape Breton economy. Management and labour must not only talk the talk, they must walk the walk.
While I do not wish to use simple comparisons to discuss very serious issues, the best way to describe how I feel about the next two points I wish to make is that we are putting all our eggs in one basket. The Boyd report indicates:
...there is little likelihood that Donkin could be developed as an operating colliery under any commercial standards at current coal realization levels due to these factors: massive capital expenditures, long lead times, suspect reserve data, inferior coal quality, et cetera.
The report went on to say:
...speculation on the development of a new colliery is a distraction to resolving the substantial immediate problem of making Devco commercially viable.
I would challenge these comments. For every one of these points, I could bring you six different opinions from the one offered by the Boyd report with regard to developing Donkin mine. The development of Donkin has been written off due to the comments of the Boyd report, and this cannot be allowed to happen. Donkin is a part of the solution.
I go back to a week ago Sunday, May 26, to tell you about a shut-down that was required at the Phalen mine due to water problems. The 2 east wall was shut down from 10:30 a.m. until midnight. I do not have to tell you what a major flood in Phalen would mean. The whole corporate plan will be carried out the door on a flood of water.
Yes, we can implement the recommendations put forward by the five-year plan; however, we must also carry out the study of the viability of Donkin. We cannot just rely on Phalen mine to support this proposal.
The other concern I have is that Devco has only one primary customer, NSP. I would reiterate my earlier point about the fact that all the information is not available to some of the players. We do not even know the details of the new price and tonnage agreement that was recently negotiated between Devco and NSP.
The 1994 Canadian Minerals Yearbook indicates that, with the general improvement of many countries' economies, coal trade should increase. The European Union, which is geographically close to Nova Scotia, accounts for more than one-quarter of the world hard coal imports, and the import requirements are expected to rise. We must do our homework and expand our customer base. It would seem that we have a good customer literally right in our back pockets.
Where does this leave us? The first problem is that all the eggs are in the Phalen basket. A roof collapse or a major flood will mean failure of the plan.
I would recommend that the development of Donkin must be undertaken when markets are identified. Development of Donkin could be funded through available cash flow if pension and environmental liabilities were assumed by the federal government. If Devco closed, these liabilities would immediately be the entire responsibility of the federal government. These liabilities should be assumed now to give Devco the opportunity to be profitable and to eventually expand.
The second problem is that there is one customer: NSP. If NSP switches to another supplier, it will mean failure of the plan.
In this regard I would recommend that export markets be exploited and explored.
The third problem is that if labour and management cannot both put the past behind them and work together for the future, it will mean failure of the plan.
In that regard, the president of the union has put forward concessions and a plan which would be fundamental to the long term success. My recommendation is that a commitment must be made by both parties to work together to take the necessary steps to ensure the success of Devco.
The fourth problem is that management is not transparent and open and does not share information and the development of new ideas.
If this plan is not built on the basis of trust, mistrust will corrode the base until ultimately the failure of the plan is inescapable. Exchange of information must be the norm so that all participants are working from a level playing field.
We can and must take the above actions to ensure that we have done everything possible to mitigate against such failure. Devco, if relieved of its financial environment liabilities, can be a profitable and viable operation and a major employer in Cape Breton.
This is not just about the economy of Cape Breton Island, nor is it about the economy of Nova Scotia. These sessions are about the hundreds of Cape Breton men, women, and children whose heritage is being threatened. The people employed at Cape Breton Development Corporation are more than just names or check numbers on a piece of paper. As a former employee of Devco, I can relate to the stresses and the strains that these people are going through. The names are those of people with whom I have worked. The fear is real. I have shared it. If the people who work at Devco had an opportunity to appear before your committee, they would tell you that this is a real problem that needs a real solution. I am willing to roll up my sleeves and pitch in and work with all the parties to assist in bringing this problem to a productive and successful conclusion.
Honourable senators, please join with me in doing your utmost to be part of the solution for Cape Breton Island.
Senator Murray: Mr. MacLeod, you said you were a former employee of Devco. Where did you work?
Mr. MacLeod: I started my career with Devco. I worked in the ID division, and then I served a period of time underground at Prince mine. I then served about seven years in the quality control department as a lab technician. I moved on from there to coordinator of training operations on the surface, and then I was safety coordinator for surface operations.
Senator Murray: That is pretty broad experience.
You talk about the importance of good labour management relations. Can you shed any light for us on this absenteeism problem? It seems to us that management and union cannot even agree on the definition of "absenteeism."
Mr. MacLeod: This morning you asked a question regarding some of the people who make up these numbers. It is my belief that some of the people who are included in these numbers are off on long-term sicknesses and have severe health problems. That drives the numbers up.
There is a long history of the union and management being unable to identify the problems which cause absenteeism and why people stay off work.
Senator Murray: To what do you attribute what appears to be a relatively high accident rate in the Devco mines?
Mr. MacLeod: I do not know of any one situation or reason that could lead to the high number of accidents. It is an industry which is plagued with a lot of hazardous work and, when you are underground in wet, damp conditions, it is easy to get into a situation that can create an accident. Although a large number of accidents are reported, again, the number of lost time accidents is assessed differently.
Senator Murray: It is another area, Mr. MacLeod, not only of disagreement but also -- and I do not think it would be too strong to say this -- mistrust as between union and management. We have representatives from management here. It is clear that they do not believe that some of the members are acting in good faith on this problem of the accident rate.
The only point I make -- in view of the fact that you volunteered your services to role up your sleeves and work with all parties -- is that it would be good if the two could at least agree on the definition of absenteeism to begin with, and then perhaps some concerted effort could be made to bring down the accident rate, if it is the problem that we are told it is.
I have just one more question regarding your statement that the federal government should assume the pension and environmental liabilities of Devco. We have had some discussion about this with just about every witness who has appeared. Where do you think the cut off should be? What portion of those liabilities do you think do not belong on Devco's balance sheet?
Mr. MacLeod: At the outset, I should like to comment on the statement you made about the accidents and the unions not getting together. When I flew here on Saturday, on the plane were six members of the UMW who are on their way to a safety course in South Carolina. The UMW has been very vigorous in its support of accident prevention in the corporation. They had to persuade the management to allow one of the safety coordinators from Phalen colliery to go with them. The union has identified that as a major problem and is working towards a solution. It will be a long road because we did not get to where we are now quickly and we certainly will not get back quickly.
It is my understanding from numbers I have seen that $900 million would be the cost to the federal government if Devco were to close its doors tomorrow. If the federal government takes on some of the liabilities created by pension problems and by the other social costs, we would be able to save money in the short term. At the same time, we would be able to prolong the viability of Cape Breton Development Corporation and make it a viable operation. People who worked at the corporation did not have to belong to a pension plan until 1982. Before that, the liabilities of the pension plan were allowed to grow. It is a significant drain on the economy of the Cape Breton Development Corporation.
Senator Murray: Would 1982 be the starting point?
Mr. MacLeod: It would be a good starting point. There have been a number of downsizing exercises since 1982. A number of early retirement programs and pension programs have been offered. However, that is only creating a false economy in the island of Cape Breton. When my son becomes 20 years of age, he can not go and apply for an early retirement pension, nor will he be able to apply for a job at the Cape Breton Development Corporation because we keep cutting away at the workforce.
Senator Buchanan: I will confine my questions to the Donkin mine. I have no difficulty at all in agreeing with what you are saying about the Boyd report. However, last week we were told that, within the whole Boyd report, only a very small percentage of the time was spent on the Donkin mine. I cannot understand how they could have come to the conclusions they reached, such as the one related to capital expenditures.
Today you heard the auditor general's people and others say that there has not been a study conducted concerning the true costs of completing the Donkin mine. We all know that. Yet, the Boyd report talks about "massive capital expenditures." If you ask them today what that expenditure will be, they will tell you they do not know.
The report also talks about long lead times. It is obvious to me that they do not know what they are talking about. The lead time is very short because the tunnels already exist. You know the tunnels are at the coal face now. Where is the long lead time?
The report also mentions suspect reserve data. I have a document here that indicates clearly what the reserves of coal are, and the information is not suspect. I will tell you why I say that in a minute. I think Mr. MacLeod can agree with the qualifications of some of these people.
Inferior coal quality is also mentioned.
The Chairman: Senator Buchanan, could you just give us the title of that document?
Senator Buchanan: This is entitled: Energy, A Plan for Nova Scotia. I will give you the names right now so that they will be on the record. Concerning the coal section, Coady Marsh, B.Sc., an engineer employed with Devco and director of the task force from Devco, helped put that section together. He is one of the top mining engineers in Cape Breton. There is also John Amerault, a professional mining engineer; Fred Brothers, who I cannot place at the present time; John Calder, a geologist; Lloyd Creaser, who Mr. MacLeod would know very well; Stephen Forgeron, one of the top geologists with Devco; Kevin Gillis, another top geologist; Bernie Kirk, an engineer with the Nova Scotia Power Corporation; John LeBlanc, director general of the Nova Scotia Region Employment Immigration Canada; Roy MacLean, another professional engineer; Pat Phelan, MBA, another mining engineer; Wynne Potter, one of the most distinguished geologists in Nova Scotia; Ed Smith, geologist, Nova Scotia; and the former deputy minister of mines of Nova Scotia, Bill Shaw, a distinguished graduate of Saint F-X University who is a professional engineer and a professional geologist.
Anyone who would say that these people put together a report which contains inaccurate information, would be completely off base. The Boyd report refers, once again, to suspect reserve data and inferior coal quality.
You worked in quality control, and I am sure you know what I am talking about. I have all the figures here which indicate that in the Donkin harbour seam, there is about 500 million tonnes of mineable coal. Do you agree with that?
Mr. MacLeod: Probably a bit more than 500 million.
Senator Buchanan: I am glad you said that, because the other night even the Devco people said there was more than 500 million tonnes of mineable coal.
What about the sulphur content? They refer here to, "inferior" coal quality.
Mr. MacLeod: Again, as I mentioned, I did work in the quality control department. I was working in the lab at the Cape Breton Development Corporation when a lot of the testing was done on the coal from the Donkin seam. Although I do not remember details right off the top of my head, I do remember that the quality of coal, especially at the centre of the seam, was very good coal.
The roof coal and the floor coal were of lesser quality, but the centre coal was of a high quality. There are mining techniques available. A good proposal had been put forward by the CAW to the board of directors of the Cape Breton Development Corporation about selective mining and horizontal mining.
There is also a coal preparation plant on Grand Lake Road with which some of the senators would be familiar. That plant has the capability of separating good and bad coal through specific gravities and through the washing process. There are ways of reclaiming the good coal very easily out of those blocks of coal from the Donkin mine.
Senator Buchanan: Mr. Chairman, that information from the witness conforms with the testimony of the Devco people last week. In the centre section of those seams, the coal quality is about 1 per cent which is excellent, low-sulphur, metallurgical coal. The Devco people agreed with that, but the roof and the floor are high sulphur. It averages out to about 3 per cent of the whole coal seam, and the seam contains about 500 million tonnes of coal.
I doubt that any of us will be around to see them mine even one-quarter of that.
Senator MacDonald: What is the date of the report?
Senator Buchanan: This report was completed in 1980 by Montreal Engineering. Boyd either did not look at this report or decided to take no notice of it. These studies were conducted by all of the people whose names I read from the report. Montreal Engineering and Kilborn Engineering were the lead engineering companies which carried it out.
Senator MacEachen would likely agree that these two corporations are probably two of the best you will find in Canada for carrying out this kind of engineering work. The Donkin feasibility study was completed by those two companies. They are, as I say, among the best in this country at that kind of engineering work.
Overall, I have no difficulty agreeing with your evidence. As you heard this morning, the Auditor General would also recommend a study to determine the true cost of a new mine.
Why do you believe there should be a new mine, Mr. MacLeod?
Mr. MacLeod: Again, it goes back to my theory that you do not put all your eggs in one basket. The problem of rock outbursts which we have at Phalen colliery is not a common problem in North American coal mines, not even in other Cape Breton mines. Phalen mine is quite susceptible to them.
Phalen is located underneath Lingan and 1B. There is a significant amount of water there. Previously, these two mines have been flooded. That water has a tendency to follow the cracks and eventually it may go into Phalen. We had that problem just one week ago.
The present Devco budget for pumping water out of Phalen is about $5 million per year. It is important to have in place a process and a plan for using the work force. In my opinion, that plan is Donkin. This very capable and qualified work force could be moved to Donkin to meet the obligations, as put in place by the board of directors of Devco, contained in their long-term contracts with Nova Scotia Power Corporation and other companies.
Senator Buchanan: Are you familiar with many or most of the people I mentioned who were on this task force?
Mr. MacLeod: I am very familiar with some of them. Some are still employees of Devco and I am sure they would share their thoughts with us.
Senator Buchanan: What about Steve Farrell?
Mr. MacLeod: I know Steve Farrell, yes. He is a former employee of Devco.
Senator Buchanan: Is he a competent person?
Mr. MacLeod: Yes, he is well respected in the mining industry.
Senator MacEachen: I would thank Mr. MacLeod for his presentation. It is well balanced and helpful.
You say, Mr. MacLeod, that only certain portions of the five-year plan have been released. You also say that you listened carefully to the presentations by the chairman of the board, Mr. Shannon, and the president of the union.
In your opinion, has the committee received the five-year plan in whole or in part?
Mr. MacLeod: I believe, sir, with all due respect, that even the Auditor General's report stated that only a summary of the five-year plan had been received. They never expressly said that they had seen the whole five-year plan or that they had the time or the ability to read the whole five-year plan. It seems we have all been exposed to the summary of the five-year plan but not necessarily to the meat and potatoes of the five-year plan.
Senator MacEachen: It is important for us to have the full five-year plan, not portions of it. We had better track that down, Mr. Chairman, because Mr. MacLeod is alleging that we have had only a portion of it.
The Chairman: I will ask the Clerk to follow up on that and to obtain the full five-year plan from Devco.
Senator Stanbury: The document we have is called the "Corporate Plan Summary."
The Chairman: Yes, it is a summary.
Senator MacDonald: Mr. MacLeod, thank you very much for coming up to see us. I did not get the impression from the evidence last week that there was a great argument against Donkin mine. Of course, the advocates of Donkin mine have no more articulate spokesman than our friend Senator Buchanan.
However, management did not appear to have any views in opposition to the reopening of Donkin. It seemed to be a matter of price and timing. They were saying that they have 20 or 25 years of life left in coal. When that is exhausted, there must be another avenue, another source of coal.
The next argument was that it will cost a great deal of money. Someone responded, that it would only cost $125 million. The matter was under dispute and was never settled.
I have two questions. First, have you any personal opinions on the cost of putting Donkin into operation?
Mr. MacLeod: Certainly, many figures have been passed around about the cost of opening Donkin. The directors of the Cape Breton Development Corporation will likely tell you that it will cost around $400 million to put Donkin onstream. On the other hand, the union will say that it should take about $120 million to put Donkin onstream.
There is a former mine manager in New Waterford who claims he can get the whole thing going for $2 million. Sometimes one must question the statements coming out of New Waterford. I say that with respect because my grandfather comes from there.
Donkin coal mine is already developed to the face of the coal. It is a matter of pumping out the water and putting the infrastructure into place. The $400 million number seems way out of line. The cost will probably be closer to the $100 million.
You have to consider the quality and the experience of the people who work with the corporation. You also have to consider the infrastructure which is already in place in the Lingan colliery which has been closed down because of water problems. You could rebuild that infrastructure and move it to the Donkin site. Then the costs of developing the Donkin site would go down substantially.
The other thing that we do not need in Donkin right off the bat is a great wash-house. We need two or three buses to take the people from the current wash house to the current work site and back to the wash-house. There are all kinds of methods of getting that mine on stream and developed.
It only stands to reason that a new pit of coal that is close to the surface will be more profitable than a pit which has been in service for about 20 years, as has the Prince mine. The Prince mine will only become viable if the east-west operation is reduced in favour of the north-south operation in order to extend the life of that mine.
Last November, Phalen had one of the biggest rock falls of any pit in the history of Cape Breton Island. As a result, 1,200 people were laid off for three months in order to make up the capital lost by that downturn. That created much heartache on the island.
My suggestion to this committee is that we put the safeguards in place now so that if there is a downturn in one of the other collieries -- which we hope there will not be -- we will be ready for that; we will have our insurance policy in place. That insurance policy is, in my opinion, Donkin, on which we have already spent a considerable amount of Canadian taxpayers' money. We are investing in the welfare of the taxpayers of our province who are the shareholders of this corporation. We owe it to them to take out the money that would create an economical mine like Donkin and put back into the pot some of the money that has been spent over the years keeping the Cape Breton Development Corporation going.
Senator MacDonald: I mentioned that the discussion last week was on cost and timing. On the timing, you say that an accident such as flooding would render the whole five-year plan meaningless. Your suggestion is that we set up a contingency plan costing either $2 million, $125 million or $400 million. How many years do you think it would take to put this contingency plan into operation?
Mr. MacLeod: I cannot honestly answer how many years it would take. It depends, of course, upon how much money you are willing to spend each year. The long and the short of it is that we have to look to the future. For too many years in Devco we have only looked at the term of the five-year plan or only one year down the road. We now have an opportunity to put something in place which will have long-term viability.
That is what this is all about. People in Cape Breton do not want handouts. They do want a secure future; they do want an opportunity to work and make a living in order that they can keep their families in the area to which they are accustomed. By investing in the future of our province, we are investing in the people of our province and, in turn, the people of our country.
Senator MacDonald: Senator Buchanan, did you cite any 1980 cost figures?
Senator Buchanan: Yes, I cited them this morning to the witnesses from the Office of the Auditor General.
The Chairman: We can circulate that.
Mr. MacLeod: I understand from some briefing notes I read that you are hoping to put your report forward by June 11.
The Chairman: No. We will be asking for an extension on that.
Mr. MacLeod: June 11 is a very important day in coal mining history. It is Davis Day or Miners' Memorial Day. It would be a very appropriate day for the report on the coal mining industry to be presented. It is certainly not a day which should be forgotten by the members of this committee.
The Chairman: Thank you for bringing that to our attention and thank you for being here. In addition to speaking for others, your personal experience has been very helpful to us.
Our next witness is Mr. Robert Chisholm, MLA and Leader of the New Democratic Party of Nova Scotia.
Welcome, Mr. Chisholm. Please begin.
Mr. Robert Chisholm, MLA, Leader, New Democratic Party of Nova Scotia: Mr. Chairman and senators. I am very pleased to be here today, I was last here almost three years ago when I spoke on behalf of our party in Nova Scotia on the effects of the changes to the railways in Nova Scotia.
I very much appreciate this committee taking on the challenge of pulling together the available information with respect to Devco and the future of the coal industry in Nova Scotia. One of the most troubling aspects of this whole situation as it unfolded from January 8 forward was that there were decisions being made outside of the community of Cape Breton and the province of Nova Scotia. Decisions were being made of which many of us were unaware, particularly those most directly affected by those decisions. People within the New Democratic Party and others within the community in Cape Breton were looking for answers and information. That information has not been forthcoming. I congratulate this committee for its efforts. It serves an important purpose.
Honourable senators, I appreciate the opportunity to address this committee on behalf of the Nova Scotia New Democratic Party. Coal and the coal industry have been an important part of Nova Scotia history. Coal and coal miners have played a particularly significant role in the history of the New Democratic Party and in the whole social democratic movement in this country. I am, therefore, proud to support the submission made to this committee by Steven Drake on behalf of the United Mine Workers of America. The mine workers union has fought for decades to protect the interests of its members and the communities in which they live, and they are still fighting.
Their adversary remains the same. In the 1920's they fought Roy Wolfson. In the 1990s they are fighting the Treasury Board. Their enemy, in both cases, is the bottom line. The bottom line is a difficult adversary. Roy the Wolf, as he was known, watered his stock and the miners had to work for starvation wages so that dividends could be paid to the stockholders. That is the way it was then.
Now, federal politicians decree that for the first time in perhaps 80 years, the Cape Breton coal industry must operate without federal subsidy. Hundreds of miners pay with their jobs. Communities like Glace Bay, Dominion Reserve Mines, New Waterford, New Victoria, Florence and Sydney Mines, also suffer; but the needs of the bottom line are met.
Honourable senators have heard much detailed testimony about Devco's mining plans, its export potential and many other subjects. I claim no special expertise in the details of coal mining and therefore I will limit myself to some of the broader issues raised by the decision of the federal government and the management of Devco to drastically downsize the coal industry of Cape Breton Island.
When the announcement was made on January 9 to permanently reduce Devco's work force by 800, I felt a sense of anger and frustration. That same feeling has lingered as we have watched the machinations of Devco management, Minister Dingwall, the Minister of Natural Resources and the Government of Nova Scotia.
There was a great deal of concern expressed, a great show of consultation and much ink and air time, but when the final decision was announced last month, the result was virtually the same: Over 700 jobs lost at Devco plus thousands of indirect jobs in an economy in which jobs are all too scarce.
The loss of over 700 jobs, plus many more spin-off jobs, means more unemployment in Cape Breton, more stress on families, more stress on social and community services and, ultimately, more out-migration of the young, the healthy and the employable. If that is not enough, confirmation of the layoffs brought another round of warnings from federal politicians that, if Devco does not shape up over the next five years, it will be shut down for good.
My sense of anger and frustration has grown as this demolition of the Cape Breton economy and society has been greeted with a certain sense of inevitability. "It must occur," goes the argument, "because Devco must become commercially viable; Devco must turn a profit, and that is all there is to it."
The story goes that Joe Shannon personally rewrote the company's mission statement so that it now reads: "The mission of the Cape Breton Development Corporation is to be a profitable coal mining company." Never mind that more unemployment is being created on an island where the official rate of unemployment is nearly 23 per cent; never mind that the Devco downsizing sends a chill throughout the entire economy and society in Cape Breton.
As committee members will know, the decision to simplify Devco's mission statement was not solely Joe Shannon's. It originated with the decision of the Mulroney government to phase out federal subsidies to Devco, effective March 31, 1995. That decision to end subsidies was totally arbitrary.
The Cape Breton coal industry has been subsidized, in terms of both private and public ownership, for most of this century. In 1966, the year before Devco was established, the subsidy amounted to some $22 million per year. That works out to $118 million in today's value. Of course, in 1966, governments occasionally employed criteria other than the bottom line, criteria like the social well-being of communities.
The federal decision to end subsidies was not only arbitrary but also premature. Now is not the time to be downsizing the Cape Breton coal industry.
The federal government became directly involved in the operation of the Cape Breton coal mines back in 1967 as a stop-gap measure. The private operators who had extracted so much wealth at such great human cost from the coal fields of Cape Breton no longer wanted to operate those coal fields. Therefore, the federal government stepped in to operate the mines. At that point, the federal government negotiated an agreement with the Nova Scotia government under which it agreed to withdraw from subsidies only after there was progress in providing employment outside the coal-producing industry and in broadening the base of the island's economy. In 30 years there has been distressingly little progress in broadening the base of the island's economy or in providing employment outside the coal industry.
The steel industry has faded. Fly-by-night manufacturers have come and gone. The aerospace industry has suffered a blow with the loss of the Micronav contract and the disgraceful retreat of IMP from North Sydney.
Coal is still king in Cape Breton. Before the downturn, the coal industry and its spin-offs represented 25 per cent of the Cape Breton economy. Nevertheless, it is a much diminished king. These latest job cuts follow years of downsizing. Between 1988 and 1995, over 1,400 jobs were lost at Devco.
I was in industrial Cape Breton last week. I was told by someone with distinguished expertise in economic development issues that there is a great fear that the industrial base of the island is just about gone; that, before long, the economic base will consist of tourism and ex-Cape Bretoners coming home to retire. Tourism and retirement are fine, but what will there be for young people coming out of school? What will there be for young families? What incentive will remain for students just graduating from UCCB to stick around and try to find work at home? What option will there be besides unemployment or out-migration?
Much of the anger and frustration that I and others have felt since January 9 stems from the fact that too many people want us to keep our eyes focused on Devco's bottom line. If we keep our focus there, we will not see the effects that Devco's constant downsizing is having on the broader community in Cape Breton. If we keep our eyes focused on Devco's bottom line, we may forget that it is the entire Cape Breton community that is being subjected to the bottom-line test. If you cannot meet the bottom-line test, you are gone -- this week Devco, next week Cape Breton Island, the week after that, who knows?
We have also been angered and frustrated by the way Devco and governments in Halifax and Ottawa have kept moving the goal posts on the Devco workers. Over the years, we have heard ad nauseam about how inefficient the Devco workforce was, how absenteeism was rampant. Just last week, the chairman of Devco spoke here to this committee of an absenteeism rate of 20 per cent. At the same time, a newsletter was just released by the new president saying that it had now been brought down to 10.8 per cent.
A question was asked earlier about why we cannot solve the absentee problems. I have a copy of the contract from the United Mine Workers which lays out clearly how to handle absenteeism. This is a contract that was negotiated between the union and management. If there is a problem, then management is not doing their job because it clearly lays out what should be done in cases of absenteeism.
Despite an ever-decreasing workforce, what we have not heard much about is how Devco has increased its coal production from 5.9 tonnes per man shift in 1986 to 11.6 tonnes in 1996. Rarely do we hear of the difficult conditions under which the miners work, travelling underground through damp, dark tunnels, just to get to the coal face.
Despite making these major improvements in productivity against difficult odds, the company continues to lose money and miners continue to lose their jobs due to factors beyond their control. One such factor is the sudden requirement for Devco, like other Crown agencies, to straighten out its pension liabilities; a necessary step, perhaps, but one that workers pay for with their jobs. Where is the fairness in that? For years, politicians and bureaucrats neglected to take the steps necessary to ensure that pensions were on a firm financial footing and now it is the miners who pay the price.
Another factor was the privatization of Nova Scotia Power. Following the privatization, NSP decided that it wanted to pay significantly less for coal from Devco than it had paid previously under its long-term contract. Freed from government ownership, NSP was able to threaten to import coal if Devco did not bring its price down. That blackmail worked. Devco capitulated, dropping its price by $13 per tonne.
That cut of $13 per tonne amounts to over $30 million a year that is not going to Devco and its employees but to Nova Scotia Power and its shareholders -- 70 per cent of whom reside outside Nova Scotia. It would be news to customers if any of the lower coal prices were being passed on to them. They just absorbed another rate increase a few months ago.
Finally, we have been angered and frustrated by the apparent double standard that operates within the energy field, the continuation of incentives, tax breaks and assistance for competing fossil fuels while the Cape Breton coal industry is brutally weaned off subsidies. The latest information we have been able to collect is for 1990. It indicates that, in terms of various subsidies, incentive tax breaks and so on, over $830 million went to private corporations in the energy field.
In my view, what it all comes down to is a matter of fairness. What is happening to the communities in Cape Breton that depend on the pay cheques of those workers is not fair. I suspect most people know that it is not fair, but they cannot or will not do anything about it; they cop out, deferring to the bottom line. That should not be good enough for Cape Bretoners, Nova Scotians or, for that matter, Canadians. It certainly was not good enough back in 1966 and 1967. At that time there seems to have been a consensus that you did not leave whole communities to flounder on their own while doggedly pursuing the bottom line.
I believe it is time to revisit the undertakings in that original deal between the federal and provincial governments. Ottawa was supposed to continue the subsidies until there was a broadening of the island's economy. That has not taken place yet. The subsidies should continue until that is done. The subsidies should be aimed at stabilizing employment in the coal industry at the pre-1996 levels. If employment can be stabilized without major subsidies, so much the better.
Certainly, the mine workers union has come up with a number of proposals that would see employment levels maintained at very little additional cost to the federal treasury, essentially by staying in the export markets and reducing costs per tonne. I believe those ideas should be fully explored.
I believe the miners' proposal for Donkin has been given short shrift. Nearly $100 million has been spent on Donkin already. Development of Donkin needs to be re-examined for its immediate production and employment potential, not to mention the future possibilities that may lie with the Donkin field. If those steps are taken, then employment in the coal industry will be stabilized, hopefully for the long term.
Once coal industry employment is stabilized, attention should be turned immediately to renewed efforts to develop an alternative economic base. History over the last 30 years has shown us what does not work -- top down megaprojects and incentives to foot-loose manufacturers. Bottom-up community economic development and micro-enterprise may work, but it will take time. To buy that time what is needed is stability in keystone industries like coal and steel and the addition of some new, stable, good paying jobs through the decentralization of government activities.
This Senate committee can do its part in securing a better, more secure future for the economy of Cape Breton by recommending, in the strongest possible terms, a suspension of Devco's latest business plan and the development of a new plan to be drawn up following full consultation between management, labour and the community.
In conclusion, I want to pass on to you a comment made to me by an individual that some from the area may know. He was a steel worker for 35 years. With respect to complaints about Devco being on the government dole, he said, "People always complained about subsidies to the steel mill, but it gave me a job." He said, "I was able to raise five children, and now those five children are out making an important contribution to this country." If there is a point I am attempting to make in my presentation, senators, that is it. We must not lose focus of the medium- and long-term bottom line for this province and for this country as we consider opportunities and the future of the coal industry in Nova Scotia.
Senator MacEachen: I would thank Mr. Chisholm for his presentation and his interest in this particular problem.
On page two of your statement, in the second-last paragraph, you state:
In 1966, the year before Devco was established, the subsidy amounted to some $22 million a year. That works out to $118 million in today's dollars.
My recollection is that the last year for the subsidy was 1967-68, and the subsidy was $30.5 million. You may remember that Mr. Kent, in his testimony, translated that into current dollars. The point is the same, that there was a substantial protection or subsidy to the industry in the subventions, which was transportation assistance administered by Dominion Coal.
Mr. Chisholm is correct in saying that Parliament and the Government of Canada did acknowledge the social dimensions of the problem in the late 1960s. Mr. Pearson, who was prime minister, justified the new policy of the government on social grounds. You mentioned this earlier, Mr. Chisholm, not that we can resolve it, but certainly there is a different mood in the country in 1996 than there was in 1967 and 1968 -- a big change of mood. Whether it is good or bad is another matter, but it is something that we must deal with. I believe you have taken a stand, as it were, in favour of continued subsidies for the coal industry.
Mr. Chisholm: Yes.
Senator MacEachen: As I recollect, in his presentation, the mayor of the municipality of Cape Breton county accepted fully the necessity of viability in the industry, which is a change of attitude in a sense. He explained that they had put into their plan the necessity for a reduction of 600 jobs in order to achieve economic viability because that was more likely to lead to the long-term stability of the industry and to a permanent presence of coal mining on the island of Cape Breton. I certainly look beyond the five-year plan myself to a future beyond for Cape Breton coal. That is why a number of us have been raising questions about Donkin.
It is my recollection that Mr. Drake, on behalf of the United Mine Workers, accepted the principle of viability and the necessity of putting these coal mines on a profitable basis. In fact, he expressed his confidence that the mines could be competitive, cost-effective and profitable.
I am not criticizing your point of view, but I wonder why you have taken a different view. You have not asked for measures or for a policy that would reach a state of viability for the mines. You seem to be saying this is a case where we ought to have continued subsidies, even though the head of the mine workers is telling us that it can be profitable.
Mr. Chisholm: With all due respect, senator, I do not think that is what my presentation said at all. In fact, I am suggesting that, under the current plan presented by Devco management in recognition of the analysis done by the mine workers, unless other efforts are made to develop Donkin and to make other important changes in the operation of that corporation, come five years from now, there will nothing left but coal dust. I am suggesting that now is not the time to cut off subsidies. Now is the time to take a serious look at the future of the coal industry and put it together, but we should do it in a way that makes it more efficient and effective in the interests not only of the community in Cape Breton, but the entire country. I clearly support the presentation of the mine workers.
Without significant investment by the federal government we will not be able to do that. That refers specifically to the opening of the Donkin mine. That will take some commitment over the next four years at least.
Senator MacEachen: You accept the necessity of having commercially viable operations on the island of Cape Breton in the form of the coal industry.
Mr. Chisholm: Absolutely, within the rubric of the social and economic effects of that particular enterprise on the province. It is the same argument that I have used before about the price that Nova Scotia Power should pay for coal. If we drive the coal industry in Nova Scotia out by trying to get a cheaper price on the world market, what effect will that have on the overall economy in this province? In that case, the Utility Review Board should take that into account when setting rates for the price of coal. As I indicated in my presentation, simply focusing on the stark, bottom line is not looking clearly enough at the overall economic impact of this venture in Nova Scotia. Suggesting that it must be commercially viable -- a definition that has been used too often --does not take into consideration the impact that a dying coal industry will have on the economy of the province.
Senator MacEachen: I will take another tack. The chairman of the board has presented a five-year plan which will, over time, yield a surplus for the corporation. It is not exactly true to say that the corporation has been weaned off subsidies. It is still getting and will continue to get, over a period, assistance from the Government of Canada.
We are considering this corporate plan, and we must say whether we like it or not. If we do not like it, then we must say whether we would like to see some changes. Specifically, what changes would you recommend to this corporate plan?
Mr. Chisholm: I think there needs to be, first of all, serious consideration of the development of the Donkin mine. I am concerned, from what the mine workers tell me, about the prospects for the Prince mine, given management's plan, and whether in fact operating with two shifts will be sufficient to keep that mine in operation for very long. They have raised that concern.
I continue to be concerned with the apparent lack of commitment by management to working together with the union to come up with some important money-saving strategies that they mentioned and which would go a considerable distance to making any plan work.
Part of the issue here, as far as I am concerned, is that whatever plan is agreed to, must be one that has had the full input of all the partners. That includes the community, the mine workers and, I would suggest, the provincial and federal governments. It must be a plan that receives the full commitment of those partners in order for it to work. You probably know better than I that this is simply too important to the future of the province of Nova Scotia and the community of Cape Breton to allow it to disintegrate.
Senator MacEachen: Mr. Chairman, I would certainly accept the two comments which Mr. Chisholm has made about the plan. To take his two points in reverse order, certainly, there must be a commitment on the part of management, the mine workers, and the community to produce results.
Then there is the development of the Donkin mine which we have heard a lot of evidence on. We asked Mr. White, who is the new president and who has experience as a mine manager both at Prince and Phalen, about the Donkin, and he was very forthcoming. When asked whether it was possible to incorporate Donkin into current plans, he said, "Look, we are working to survive, and we have to achieve survival through the operation of these two mines at the present time."
I understood him to be saying that, in light of what appears to be a lack of full confidence in the ability of the corporation to turn itself around, there must be some performance before any government would commit an additional $120 million, to take the lowest figure that has been suggested, to a new investment.
I do not only support your view, but think it is absolutely necessary to look ahead, to consider the Donkin, and to be prepared for it. At the moment, do you think it is feasible for this committee to say to the government, "We want you to commit $120 million now to the Donkin before we have any performance out of this current plan"? Would that be a reasonable recommendation on the part of the committee?
Mr. Chisholm: Part of the problem here is that, as many of the experts have said, there is some concern how long Phalen will last and whether Prince will be able to continue under this plan. If there is to be a future, many people have suggested that we must start development at Donkin very soon.
I am glad to hear the scepticism coming from members of this committee about what to do relative to the coal industry and how to invest taxpayers' dollars but, at some point, someone will have to take the information that has been presented by the mine workers, by Boyd, and by the management, as well as consider all these studies and put all of the information together and decide whether there is a future for the coal industry in Nova Scotia. I think a good part of that future depends on whether Donkin will be developed. You will not be able to say one way or another until you make that determination.
I also hope that, as you prepare to make that decision, this committee, in its report, will comment on the effect on the economy of Nova Scotia if the coal industry no longer exists in five years' time. It is important that Nova Scotians understand the true impact of a failure to wisely invest monies into the coal industry at this time for the future economic well-being of this province.
Senator MacEachen: When the Cape Breton Development Corporation was organized, there was a saw-off between the Government of Canada and the Province of Nova Scotia. The Government of Canada agreed to take on responsibility for the Dominion Coal Company, the Dominion Coal fields, and the Province of Nova Scotia undertook to take on responsibility for the independent coal operators.
Mr. Chisholm: Right.
Senator MacEachen: Without drawing anything except the facts from that, the provincial government has been much more successful in closing out the coal mines than has the federal government, because there is no independent coal operator in existence today in Nova Scotia. The provincial government has shed all their responsibility to the coal industry.
Mr. Chisholm: Not necessarily voluntarily.
Senator MacEachen: I am not trying to make any comment other than state the facts. The federal government, in the preamble to the bill, said, "We are into this for 15 years, because that is what we are told about the life of the coal industry." Lo and behold, because the freedom was given to open new mines, Prince and Lingan, the industry has continued for 15 years beyond the expected life.
I believe that has happened because of the existence of the Cape Breton Development Corporation and because the Canadian taxpayers have stood behind that corporation for 30 years and under two governments. The Cape Breton Development Corporation is not the enemy of the Cape Breton coal miners. It has been the friend, as history has shown.
You are in provincial politics, not federal politics. You are running for premier of the province. Would you advocate that the provincial government come to the table and put up a substantial proportion of investment to finance the Donkin mine?
Mr. Chisholm: Before I put my premier's hat on, when Mr. Kent took over the operation of Devco, the original agreement was for a short period of time. It was a kind of mop-up operation. He has said himself -- and I am not sure if he said it at this committee -- that they found out very quickly that the coal industry was a viable industry which played an important role in the economy of Nova Scotia and, therefore, it had a future.
Senator MacEachen: I am just talking about the law. The law, which specifies a period of about 15 years, is still in existence.
Mr. Chisholm: I just wanted to respond to the implication that the federal government has been acting as a good father to Devco, to the miners and to Cape Breton.
Senator MacEachen: They have had to finance all these investments in the hundreds of millions of dollars to open these mines.
Mr. Chisholm: As they have elsewhere. It is an important contribution that they made to the economy.
Senator MacEachen: Not elsewhere. There is no other coal operation in Canada funded by the federal government. Put on your premier's hat now. I am encouraging you to do so. It is about time we had Chisholm as premier!
Mr. Chisholm: I agree. Thank you very much for your support.
The province has a responsibility to the future of the coal industry in Cape Breton and should be stepping forward to take on that responsibility. I am willing and able to come to the table with the federal government and take on that responsibility to see what kind of arrangement we can come up with that will be in the best interests of the economy, not only of Cape Breton but also of Nova Scotia.
Senator MacEachen: Would you, therefore, say that the province should come forward and contribute, say, 25 per cent of the investment for a new Donkin mine?
Mr. Chisholm: We will see what it takes. I certainly think the province has a responsibility to ensure that there is a future for the coal industry in the province. It contributes significantly to the overall economy in our province and we cannot ignore that.
The Chairman: Now that we have the provincial government at the table, a new mine opened, and a new premier elected, I will recognize Senator Buchanan. No discussion of Donkin would be complete without him.
Senator Buchanan: I was a little surprised that you would be the first one around this table to advocate a return to the subsidies that have been provided to Devco for almost 30 years. In fact, as I recall it, the UMW did not speak about a continued subsidy situation. They talked about commercial and economic viability as the future for the coal mining industry of Cape Breton.
I should like you to explain what you mean by your comments in support of continuing the subsidy which has been reduced over the years, which was supposed to be eliminated this year, and which will be continued for a while longer. Are you advocating an indefinite continuation of these subsidies? If so, you are the only one I have heard say that.
Mr. Chisholm: I should like to think that I have no fear in stepping off in my own direction. The difference in my presentation from probably many of the presentations you have had, is that I will not present myself as a coal miner or as an expert in coal mining and reiterate the arguments put forward by the mine workers and others and argue with others. I have tried to say that I think the decision to focus simply on the commercial viability of Devco, without giving consideration to the future operation of the coal industry, is detrimental to the economic future of the Province of Nova Scotia and the economic future of Cape Breton. I think the government has a responsibility, as it invests in Cape Breton or in Nova Scotia, to seriously consider its responsibility for the coal industry.
Right now, as we all know, the future for many Cape Bretonners is extremely bleak. The task of many communities to develop an economy, and to develop any kind of sustainable jobs, and jobs that have a decent wage and benefits, is extremely difficult. If it were not for UCCB, we would probably be seeing a greater out flow of young people than we are today. But we need to do something about that. We must build on our keystone industries and whatever it takes to make that investment.
At this time, we are not talking about mismanagement. The Tories, the Liberals, and everyone else, have complained at one point or another about the mismanagement of Devco. We must ensure that the operation is properly managed, and that all the information relative to Donkin is out on the table so that we can make a decision about investing in the future of the coal industry. I do not think that the five-year plan presented by Mr. Shannon does that. I am suggesting that we must seriously consider some of those issues -- that is, how we invest and how the federal government invests -- before we decide to cut off subsidies to Devco.
Senator Buchanan: I may have had the wrong impression of what we have been talking about as far as the Donkin mine is concerned. In my opinion, to start the Donkin mine right now would be wrong. What we have been advocating and what the union has been asking for over the last number of months is a total feasibility study on the costs of opening a new Donkin mine and a general feasibility study on the requirement for Donkin mine. In fact, as I recall it, the last submission they made was to the premier of Nova Scotia, Dr. Savage, to provide funding for that kind of study. That was turned down, perhaps rightly so, by the province. However, had I been the one making the decision, I think I would have gone ahead with it.
Mr. Chisholm: In fact, they laid it out fairly clearly. We had them at our economic development committee approximately one week ago. At that time I asked them what had happened to the proposal they had presented to the premier about a study, and they told me that they had not heard anything about it. The president said, "Quite clearly, we have sufficient evidence," and he laid it out. I do not know what his presentation was to you here at this committee, but he laid out what needed to be done to begin to develop Donkin so that it would be in operation. He laid out figures that showed that it would pay for itself.
Senator Buchanan: One of the prerequisites to Donkin, as we discussed this morning and last week, will be to have a study done by an independent organization to determine the true cost of a Donkin mine. That is essential because, quite frankly, around this table, as you have heard, there have been so many figures thrown around that we do not know what to accept. The only way to determine what is reliable, is to have a report by an independent group. As I recall, this morning the auditor general's people agreed that it could be done.
However, your evidence is that there should be an immediate start on the Donkin mine. Even I would not advocate that until we find out the true cost, although I do have my own idea on that from all the figures we have seen.
Mr. Chisholm: The president of the mine workers told me just the other day that, as far as he is concerned, they have a plan. He said, "It has been studied to death. We can do it." I believe that, in their presentation to this committee, they laid out the costs of development over a four-year period. It nets out at a cost of $65 million. Part of that cost involves the kind of coal and the sale of coal that is recovered in the development process. As you said earlier, there are tunnels there now. The miners have suggested that there is equipment at different sites around Devco that could be put into operation.
Senator Buchanan: I have never heard that figure of $65 million. Last week Steve Farrell suggested that the figure would be between $100 million and $120 million, or perhaps a little more. That is the problem: We do not know what that cost is, even within $10 million one way or the other.
I raise this because of your suggestion that the Government of Canada and Devco should immediately start to build the Donkin mine without knowing the actual cost. What is the cost? All kinds of figures are being thrown around. The $65 million is higher than the $2 million figure from the fellow from New Waterford.
Mr. Chisholm: I would be happy to table with the committee this report summary in response to concerns about the future of the Cape Breton coal industry by the United Mine Workers of America, which includes a study of the feasibility of opening Donkin mine, initially on a small scale with future expansion. The study indicates cash flows can be kept below $65 million to develop a new, efficient mine producing 15 to 20 tonnes per-man shift. It discusses manpower, capital costs, cost revenue and gives a total cost of $63,225,000.
Senator Buchanan: I think that was prepared as part of a demonstration project.
The Chairman: We have had that discussion, and it is by no means a dead issue.
I will draw the discussion to a close at this point. Thank you very much attending today. You have not only enhanced our knowledge but your own position during the course of the afternoon. We thank you for a very frank and useful discussion.
The committee adjourned.