moved that Bill C-11, an act to authorize the divestiture of the assets of, and to dissolve, the Cape Breton Development Corporation, to amend the Cape Breton Development Corporation Act and to make consequential amendments to other acts, be read the second time and referred to a committee.
Mr. Speaker, the legislation which is now coming before the House for debate, Bill C-11, is an important component in the reshaping of the coal mining industry on Cape Breton Island. I hope that all hon. members will be able to give this legislation their prompt and favourable attention.
The bill is quite simple. It provides the legal authority for the Cape Breton Development Corporation, otherwise known as Devco, to sell all or substantially all of its assets consistent with a privatization plan recommended by Devco's board of directors and agreed to by the Government of Canada in January of this year.
Timely passage of this bill will allow us to proceed as quickly as possible to secure a purchaser for Devco's assets and to finalize a transaction which can help lift some of the clouds of uncertainty about the future of coal mining on Cape Breton Island and confirm the maintenance of good solid private sector jobs.
Let me put this bill into context. For some 300 years coal mining has been an integral dimension of Cape Breton's existence. It is ingrained not only in the island's economy, but also in its heritage, its culture and its very way of life. For the past three decades, since 1967, Devco, as a federal crown corporation, has been the principal instrument by which mining activity has been undertaken. There are strong historic bonds between the corporation and Cape Bretoners which cannot be taken lightly and which must be treated respectfully.
Any accurate reading of the present day realities and future possibilities would indicate that a turning point has indeed been reached. The time has come for some fundamental change.
It is instructive to note that as far back as the Donald Commission of 1966, in a report entitled “The Cape Breton Coal Problem”, a recommendation was made to phase out coal mining on Cape Breton and shift the local economy to other more viable alternatives. Devco was created as a result of that particular report. Its mandate was to discontinue uneconomic coal mines while providing other employment outside the coal industry and diversifying Cape Breton's economic base.
Since 1967, as a Devco shareholder, the Government of Canada has invested approximately $1.6 billion in keeping the corporation's coal mining operations afloat. The federal treasury has also provided more than $500 million over that same time period for economic development initiatives beyond coal, first through Devco's industrial development division and after 1998 through the then newly established Enterprise Cape Breton Corporation, known as ECBC. Everyone would agree that this is a great deal of money, particularly the operating subsidies for Devco.
Beginning in the early 1990s, shortly after the economic development mandate was shifted from Devco to the ECBC, successive federal ministers in successive governments established target dates by which Devco was to have implemented business plans to attain commercial viability in its coal operations without the need for ongoing subsidization. Most recently, in 1996 my immediate predecessor fixed 1999 as such a target date and provided Devco with a federal loan of some $69 million to be drawn upon over that three year period while commercial viability was being achieved.
The board of directors, the management and the employees laboured mightily toward that important goal. However, unfortunately, by late 1998 it became evident that the goal was simply unattainable. Chronic geological problems, productivity levels that were below industry standards, quality considerations, uncompetitive costs and pricing led the board of directors to some serious and unavoidable conclusions.
They requested that their 1996 loan obligations of $69 million be forgiven, plus they identified a further requirement of some $81 million to keep Devco functioning through the year 2000. The board of directors recommended that when the specific mining operations then under way in Devco's Phalen mine were completed in about 15 to 24 months' time, Phalen should be closed. They also recommended that a private sector buyer should be sought to purchase all of Devco's remaining assets, that being the best and most realistic way to sustain as many coal mining jobs as possible, estimated at perhaps up to 500 jobs, in a commercially viable operation.
The board of directors further recommended a human resources compensation package for those employees, estimated at approximately 1,000, who would not likely find work with a new private owner. That package, including early retirement incentives for about one-third of the affected employees and severance and training arrangements for the other two-thirds, was costed at approximately $111 million. The package is fully consistent with the requirements of the collective agreements between Devco and its unions, and in some respects it exceeds those requirements.
The Government of Canada accepted those recommendations from the Devco board of directors and it added a further initiative, an incremental $68 million in a fund to further promote economic adjustment and development on Cape Breton in addition to what would normally be undertaken by either the ECBC or the Atlantic Canada Opportunities Agency, or the federal department of Human Resources Development Canada or any other federal department or agency. I announced all of these decisions last January.
Since that time there has been a number of further developments, some of them good and some of them bad. On the good side, the Government of Nova Scotia has come forward with an incremental $12 million to add to the economic development funding, bringing the available total for economic development now to $80 million.
As requested by Cape Bretoners, local consultations have been undertaken to obtain the very best possible local advice about how to use that new funding. Everyone wants wise decisions to be made to achieve sustainable, long term economic diversification and growth. Community groups, the clergy, labour organizations, industry and business representatives, local authorities, academics and private citizens have been putting forward some very creative and innovative ideas to reshape and reinvigorate the local economy.
The panel that was assigned to conduct these consultations with Cape Bretoners is now preparing its summary report of what it heard. Federal and provincial officials will use that information as the basis upon which to design an economic investment strategy for Cape Breton. The initial elements of that strategy should be operational during the first quarter of the year 2000.
Also on the positive side, Devco has engaged the firm of Nesbitt Burns to serve as its financial adviser and to see out potential purchasers of Devco's assets. The assets for sale include the Phalen and Prince collieries, the Donkin Mine site, the corporation's coal pier and railway, its coal preparation plant and related mine infrastructure. Private sector expressions of interest are expected in December.
The legislation now before us is the key to moving that process forward. The future hinges in large part upon that process being successful, and of course Devco and the Government of Canada will be most interested in a buyer who will make the most tangible and long term commitment to Cape Breton.
On the negative side of the equation, since our announcement last January Phalen Mine has experienced two very serious roof falls which have raised questions about human safety. The board of directors consequently took the position, and I think everyone agrees rightly so, that for safety reasons first and foremost Phalen had to be closed now, not sometime in the latter part of next year which had been the original expectation last January.
This early closure precipitated by very serious safety considerations punched a $70 million hole in Devco's business plan due to lower revenues on the one hand and higher expenses on the other. It also raised questions in the minds of those employees who based upon our January announcements were expecting certain specific benefits at a certain time under the human resources package, all predicated upon Phalen being in operation about a year longer than that which has turned out to be the case.
I am pleased to confirm that we have successfully reprofiled the timing of some of the funding that we announced last January. We have also increased that funding by another $70 million. This will allow us to sustain the corporation through the current fiscal year, that is to April 30, 2000, and to ensure the human resources benefits remain intact as originally expected.
We have of course received many representations calling for that original human resources package to be revised. On this point I do not want to raise any expectations because any room to manoeuvre on this point financially is very limited.
However, because of the new and unexpected situation created by the roof falls and consequently the early closure of Phalen, the human resources package is being assessed in the context of fairness among different groups of employees, relevant precedents, both those from the past and those that might be anticipated in the future, and overall fiscal responsibility. If any adjustments are made in the overall package, I would expect them to be relatively modest.
Returning explicitly to the privatization process and Bill C-11, it is important to note that the bill is not only required to complete any potential sale of assets. It is also an integral and key element in the whole privatization process. It sends a clear signal of serious intent. It will help to bring prospective buyers to the table and keep them there, leading hopefully to an early and successful conclusion.
Beyond providing the legally required sale authority, the bill creates no new ministerial powers and no delegated authorities. It maintains what is called the general advantage of Canada clause which will ensure that the Canada Labour Code will continue to apply, a point that is important to Devco's unions and employees. That is in the bill.
Also there are the usual provisions about the continuation of previously existing legal proceedings. For example, the United Mineworkers Union has initiated a grievance proceeding under subsection 17(4) of the existing Devco Act. While the new bill would eliminate that particular section, it would not affect the outstanding grievance because that grievance was started while the previous provision was in the law so the rights that existed under that particular provision are continued.
During our consultations the province, the Cape Breton community and Devco's workers asked that the proceeds from any sale of Devco's assets remain in Cape Breton. Subclause 2(2) of the new bill will ensure that happens.
Devco will also continue to be accountable to the government. The terms and conditions of any proposed sale of Devco's assets must be approved by the Government of Canada. After the sale the current Devco board of directors will remain in place to ensure that all other obligations are properly looked after.
The Financial Administration Act also ensures accountability with respect to how Devco uses the proceeds. It must as a crown corporation operate within an approved business plan, summaries of which are tabled in the House.
The changes I have outlined are contained in the first five clauses of Bill C-11. The consequential amendments that follow in the remainder of the bill remove various provisions that are no longer applicable or would no longer be necessary under the current act.
As I said at the outset, the bill we are discussing today is straightforward and simple. It is a bill that is as much about Cape Breton's economic future as it is about Devco's past. It is as much a beginning as it is an end. We are trying our very best to move forward along the best available path.
We all know that none of this is easy. The challenges that are to be faced are enormous, but by allowing a private sector operator to purchase Devco's mining assets we are taking a tangible step to try to maintain the maximum possible number of coal mining jobs in Cape Breton in a commercially viable context for the long term.
May I once again give my assurance to Devco, most especially the employees and their families but also the management and the board of directors, that the Government of Canada takes the issues surrounding the Devco situation very seriously. We wish to work in a very constructive way with all of those affected to try to arrive at the end of the day at the very best possible situation for all concerned. We must be most concerned about the future of Cape Breton.