Th ird Session, 40th Parliament

OFFICIAL REPORT OF DEBATES OF THE LEGISLATIVE ASSEMBLY

(HANSARD)

Wednesday, November 26, 2014 Aft ernoon Sitting Volume 18, Number 8

THE HONOURABLE , SPEAKER

ISSN 0709-1281 (Print) ISSN 1499-2175 (Online) PROVINCE OF BRITISH COLUMBIA (Entered Confederation July 20, 1871)

LIEUTENANT-GOVERNOR Her Honour the Honourable Judith Guichon, OBC

Third Session, 40th Parliament

SPEAKER OF THE LEGISLATIVE ASSEMBLY Honourable Linda Reid

EXECUTIVE COUNCIL

Premier and President of the Executive Council ...... Hon. Deputy Premier and Minister of Natural Gas Development and Minister Responsible for Housing ...... Hon. Minister of Aboriginal Relations and Reconciliation ...... Hon. Minister of Advanced Education ...... Hon. Amrik Virk Minister of Agriculture ...... Hon. Minister of Children and Family Development ...... Hon. Minister of Community, Sport and Cultural Development ...... Hon. Minister of Education ...... Hon. Minister of Energy and Mines and Minister Responsible for Core Review ...... Hon. Bill Bennett Minister of Environment ...... Hon. Minister of Finance ...... Hon. Michael de Jong, QC Minister of Forests, Lands and Natural Resource Operations...... Hon. Steve Th omson Minister of Health ...... Hon. Dr. Minister of International Trade and Minister Responsible for Asia Pacifi c Strategy and Multiculturalism ...... Hon. Minister of Jobs, Tourism and Skills Training and Minister Responsible for Labour ...... Hon. Minister of State for Tourism and Small Business ...... Hon. Minister of Justice ...... Hon. Minister of Social Development and Social Innovation...... Hon. Don McRae Minister of Technology, Innovation and Citizens' Services ...... Hon. Minister of Transportation and Infrastructure ...... Hon.

LEGISLATIVE ASSEMBLY

Leader of the Offi cial Opposition ...... John Horgan Deputy Speaker ...... Douglas Horne Assistant Deputy Speaker ...... Raj Chouhan Deputy Chair, Committee of the Whole ...... Marc Dalton Clerk of the Legislative Assembly ...... Craig James Deputy Clerk and Clerk of Committees ...... Kate Ryan-Lloyd Sessional Law Clerk ...... Roderick MacArthur, QC Sergeant-at-Arms ...... Gary Lenz ALPHABETICAL LIST OF MEMBERS LIST OF MEMBERS BY RIDING

Anton, Hon. Suzanne (BC Liberal) ...... Vancouver-Fraserview Abbotsford-Mission ...... Simon Gibson Ashton, Dan (BC Liberal)...... Penticton Abbotsford South ...... Dr. Darryl Plecas Austin, Robin (NDP) ...... Skeena Abbotsford West ...... Hon. Michael de Jong, QC Bains, Harry (NDP) ...... Surrey-Newton Alberni–Pacifi c Rim ...... Scott Fraser Barnett, Donna (BC Liberal) ...... Cariboo-Chilcotin Boundary-Similkameen ...... Linda Larson Bennett, Hon. Bill (BC Liberal) ...... Kootenay East Burnaby–Deer Lake ...... Kathy Corrigan Bernier, Mike (BC Liberal) ...... Peace River South Burnaby-Edmonds ...... Raj Chouhan Bing, Dr. Doug (BC Liberal) ...... Maple Ridge–Pitt Meadows Burnaby-Lougheed ...... Jane Jae Kyung Shin Bond, Hon. Shirley (BC Liberal) ...... Prince George–Valemount Burnaby North ...... Richard T. Lee Cadieux, Hon. Stephanie (BC Liberal) ...... Surrey-Cloverdale Cariboo-Chilcotin ...... Chandra Herbert, Spencer (NDP) ...... Vancouver–West End Cariboo North ...... Hon. Coralee Oakes Chouhan, Raj (NDP) ...... Burnaby-Edmonds Chilliwack ...... John Martin Clark, Hon. Christy (BC Liberal) ...... Westside-Kelowna Chilliwack-Hope ...... Laurie Th roness Coleman, Hon. Rich (BC Liberal) ...... Fort Langley–Aldergrove Columbia River–Revelstoke ...... Norm Macdonald Conroy, Katrine (NDP) ...... Kootenay West Comox Valley...... Hon. Don McRae Corrigan, Kathy (NDP) ...... Burnaby–Deer Lake Coquitlam–Burke Mountain ...... Douglas Horne Dalton, Marc (BC Liberal) ...... Maple Ridge–Mission Coquitlam-Maillardville...... Selina Robinson Darcy, Judy (NDP) ...... New Westminster Cowichan Valley ...... Bill Routley de Jong, Hon. Michael, QC (BC Liberal) ...... Abbotsford West Delta North ...... Wm. Scott Hamilton Dix, Adrian (NDP)...... Vancouver-Kingsway Delta South...... Vicki Huntington Donaldson, Doug (NDP) ...... Stikine Esquimalt–Royal Roads ...... Maurine Karagianis Eby, David (NDP) ...... Vancouver–Point Grey Fort Langley–Aldergrove ...... Hon. Rich Coleman Elmore, Mable (NDP) ...... Vancouver-Kensington Fraser-Nicola...... Jackie Tegart Farnworth, Mike (NDP) ...... Port Coquitlam Juan de Fuca ...... John Horgan Fassbender, Hon. Peter (BC Liberal) ...... Surrey-Fleetwood Kamloops–North Th ompson ...... Hon. Dr. Terry Lake Fleming, Rob (NDP) ...... Victoria–Swan Lake Kamloops–South Th ompson ...... Hon. Todd Stone Foster, Eric (BC Liberal) ...... Vernon-Monashee Kelowna–Lake Country ...... Hon. Norm Letnick Fraser, Scott (NDP) ...... Alberni–Pacifi c Rim Kelowna-Mission ...... Hon. Steve Th omson Gibson, Simon (BC Liberal) ...... Abbotsford-Mission Kootenay East ...... Hon. Bill Bennett Hamilton, Wm. Scott (BC Liberal) ...... Delta North Kootenay West ...... Katrine Conroy Hammell, Sue (NDP) ...... Surrey–Green Timbers Langley...... Hon. Mary Polak Heyman, George (NDP) ...... Vancouver-Fairview Maple Ridge–Mission ...... Marc Dalton Hogg, Gordon (BC Liberal) ...... Surrey–White Rock Maple Ridge–Pitt Meadows ...... Dr. Doug Bing Holman, Gary (NDP) ...... Saanich North and the Islands Nanaimo ...... Leonard Eugene Krog Horgan, John (NDP) ...... Juan de Fuca Nanaimo–North Cowichan ...... Doug Routley Horne, Douglas (BC Liberal) ...... Coquitlam–Burke Mountain Nechako Lakes ...... Hon. John Rustad Hunt, Marvin (BC Liberal) ...... Surrey-Panorama Nelson-Creston ...... Michelle Mungall Huntington, Vicki (Ind.) ...... Delta South New Westminster ...... Judy Darcy James, Carole (NDP) ...... Victoria–Beacon Hill North Coast...... Jennifer Rice Karagianis, Maurine (NDP) ...... Esquimalt–Royal Roads North Island ...... Claire Trevena Krog, Leonard Eugene (NDP) ...... Nanaimo North Vancouver–Lonsdale ...... Hon. Naomi Yamamoto Kwan, Jenny Wai Ching (NDP) ...... Vancouver–Mount Pleasant North Vancouver–Seymour ...... Jane Th ornthwaite Kyllo, Greg (BC Liberal) ...... Shuswap Oak Bay–Gordon Head ...... Dr. Andrew Weaver Lake, Hon. Dr. Terry (BC Liberal) ...... Kamloops–North Th ompson Parksville-Qualicum ...... Larson, Linda (BC Liberal) ...... Boundary-Similkameen Peace River North ...... Lee, Richard T. (BC Liberal) ...... Burnaby North Peace River South ...... Letnick, Hon. Norm (BC Liberal) ...... Kelowna–Lake Country Penticton...... Dan Ashton Macdonald, Norm (NDP) ...... Columbia River–Revelstoke Port Coquitlam ...... Mike Farnworth McRae, Hon. Don (BC Liberal) ...... Comox Valley Port Moody–Coquitlam ...... Linda Reimer Martin, John (BC Liberal) ...... Chilliwack Powell River–Sunshine Coast ...... Nicholas Simons Morris, Mike (BC Liberal) ...... Prince George–Mackenzie Prince George–Mackenzie ...... Mungall, Michelle (NDP) ...... Nelson-Creston Prince George–Valemount ...... Hon. Shirley Bond Oakes, Hon. Coralee (BC Liberal) ...... Cariboo North Richmond Centre ...... Hon. Teresa Wat Pimm, Pat (BC Liberal) ...... Peace River North Richmond East ...... Hon. Linda Reid Plecas, Dr. Darryl (BC Liberal) ...... Abbotsford South Richmond-Steveston ...... Polak, Hon. Mary (BC Liberal) ...... Langley Saanich North and the Islands ...... Gary Holman Popham, Lana (NDP) ...... Saanich South Saanich South ...... Lana Popham Ralston, Bruce (NDP) ...... Surrey-Whalley Shuswap ...... Greg Kyllo Reid, Hon. Linda (BC Liberal) ...... Richmond East Skeena ...... Robin Austin Reimer, Linda (BC Liberal) ...... Port Moody–Coquitlam Stikine ...... Doug Donaldson Rice, Jennifer (NDP) ...... North Coast Surrey-Cloverdale ...... Hon. Stephanie Cadieux Robinson, Selina (NDP) ...... Coquitlam-Maillardville Surrey-Fleetwood ...... Hon. Peter Fassbender Routley, Bill (NDP) ...... Cowichan Valley Surrey–Green Timbers ...... Sue Hammell Routley, Doug (NDP) ...... Nanaimo–North Cowichan Surrey-Newton ...... Harry Bains Rustad, Hon. John (BC Liberal) ...... Nechako Lakes Surrey-Panorama ...... Marvin Hunt Shin, Jane Jae Kyung (NDP) ...... Burnaby-Lougheed Surrey-Tynehead ...... Hon. Amrik Virk Simons, Nicholas (NDP) ...... Powell River–Sunshine Coast Surrey-Whalley...... Bruce Ralston Simpson, Shane (NDP) ...... Vancouver-Hastings Surrey–White Rock ...... Gordon Hogg Stilwell, Michelle (BC Liberal) ...... Parksville-Qualicum Vancouver-Fairview ...... George Heyman Stilwell, Dr. Moira (BC Liberal) ...... Vancouver-Langara Vancouver–False Creek ...... Stone, Hon. Todd (BC Liberal) ...... Kamloops–South Th ompson Vancouver-Fraserview ...... Hon. Suzanne Anton Sturdy, Jordan (BC Liberal) ...... West Vancouver–Sea to Sky Vancouver-Hastings ...... Shane Simpson Sullivan, Sam (BC Liberal) ...... Vancouver–False Creek Vancouver-Kensington ...... Mable Elmore Sultan, Ralph (BC Liberal) ...... West Vancouver–Capilano Vancouver-Kingsway...... Adrian Dix Tegart, Jackie (BC Liberal) ...... Fraser-Nicola Vancouver-Langara ...... Dr. Th omson, Hon. Steve (BC Liberal) ...... Kelowna-Mission Vancouver–Mount Pleasant ...... Jenny Wai Ching Kwan Th ornthwaite, Jane (BC Liberal) ...... North Vancouver–Seymour Vancouver–Point Grey ...... David Eby Th roness, Laurie (BC Liberal)...... Chilliwack-Hope Vancouver-Quilchena ...... Hon. Andrew Wilkinson Trevena, Claire (NDP) ...... North Island Vancouver–West End ...... Spencer Chandra Herbert Virk, Hon. Amrik (BC Liberal) ...... Surrey-Tynehead Vernon-Monashee ...... Eric Foster Wat, Hon. Teresa (BC Liberal) ...... Richmond Centre Victoria–Beacon Hill ...... Carole James Weaver, Dr. Andrew (Ind.) ...... Oak Bay–Gordon Head Victoria–Swan Lake...... Rob Fleming Wilkinson, Hon. Andrew (BC Liberal) ...... Vancouver-Quilchena West Vancouver–Capilano ...... Yamamoto, Hon. Naomi (BC Liberal) ...... North Vancouver–Lonsdale West Vancouver–Sea to Sky ...... Yap, John (BC Liberal) ...... Richmond-Steveston Westside-Kelowna ...... Hon. Christy Clark

Party Standings: BC Liberal 49; New Democratic 34; Independent 2

CONTENTS

Wednesday, November 26, 2014 Aft ernoon Sitting

Page

Routine Business

Introductions by Members ...... 5597

Tributes ...... 5599 Frederick Howard Pinnock Hon. N. Yamamoto

Introductions by Members ...... 5599

Ministerial Statements ...... 5600 Work of Julio Montaner in HIV/AIDS research and treatment Hon. T. Lake J. Darcy

Introduction and First Reading of Bills ...... 5601 Bill M213 — British Columbia Oil and Gas Activities Amendment Act, 2014 D. Donaldson

Statements (Standing Order 25B) ...... 5602 Sea to Sky Gondola J. Sturdy South Vancouver Little League M. Elmore Asante Centre for Fetal Alcohol Syndrome M. Dalton Protection of resident orca population G. Holman Crohn’s disease and colitis awareness Moira Stilwell Salt of the Earth screening in honour of Buddy DeVito K. Conroy

Oral Questions ...... 5604 Reporting of executive compensation at Kwantlen University and role of Advanced Education Minister J. Horgan Hon. M. de Jong Disclosure of information by Advanced Education Minister to Kwantlen University investigation S. Robinson Hon. A. Virk R. Fleming S. Simpson Review of Kwantlen University investigation and role of Advanced Education Minister K. Corrigan Hon. M. de Jong Compliance of public institutions with executive compensation rules K. Corrigan Hon. M. de Jong Review of Health Ministry investigation into alleged privacy breach J. Darcy Hon. T. Lake A. Dix Multi-Material B.C. recycling program impacts and oversight G. Holman Hon. M. Polak Point of Privilege (Reservation of Right) ...... 5608 E. Foster

Petitions ...... 5608 G. Holman

Orders of the Day

Committee of the Whole House ...... 5608 Bill 6 — Liquefi ed Natural Gas Income Tax Act (continued) B. Ralston Hon. M. de Jong A. Weaver

Personal Statement ...... 5619 Withdrawal of comments made in the House J. Horgan

Committee of the Whole House ...... 5620 Bill 6 — Liquefi ed Natural Gas Income Tax Act (continued) Hon. M. de Jong B. Ralston A. Weaver 5597

WEDNESDAY, NOVEMBER 26, 2014 — are the very proud parents of a new baby boy born at 1:28 a.m. yesterday, weighing in at 8 pounds. I know the Th e House met at 1:33 p.m. entire precinct off ers them best wishes and a few hours’ sleep if possible. [Madame Speaker in the chair.] Hon. T. Lake: I have a couple of sets of introductions Routine Business today. First of all, I would like to welcome in the gallery today Dr. Julio Montaner, the clinical director for the B.C. Prayers. Centre for Excellence in HIV/AIDS, and Irene Day, the director of operations. I’ll have a little more to say about Introductions by Members Dr. Montaner later. Earlier today we honoured him for the cutting-edge and life-saving research he has done Madame Speaker: We have in the gallery today a along with the Centre of Excellence in HIV/AIDS here in group of individuals who have made a major contribu- British Columbia. I would ask the House to make Irene tion to ensure that government programs and policies and Julio very welcome in our Legislature today. are fairly administered. So 2014 marks the 35th anni- November is also Crohn’s and Colitis Awareness versary of our provincial Offi ce of the Ombudsperson. Month, and another guest in the gallery today is Jill With us today to commemorate this anniversary: Karl Orsten, who is the director of development for Crohn’s Friedman, our province’s fi rst, who served in that role and Colitis Canada. from 1979 to 1985; Stephen Owen, 1986 to 1992; Dulcie Here in Canada more than 10,000 cases of Crohn’s and McCallum, 1992 to 1999; and Kim Carter, our cur- colitis are diagnosed each year. In fact, one in every 150 rent Ombudsperson since 2006. They are joined by Canadians suff ers from this disease. Jill was diagnosed Ombudsperson staff members. in the third grade and, despite the challenges that she’s In addition to the office’s anniversary this week, faced, has gone on to help Crohn’s and Colitis Canada November 24 to 28 has been declared Fairness Week in build their reputation as a world leader in research fund- British Columbia in recognition of the rights of British ing and Canada’s largest non-governmental funder of Columbians to fair, reasonable and respectful treatment Crohn’s and colitis research. by public authorities. Would the House please welcome Jill to the Legislature [1335] today. Would the House please join me in welcoming these guests and in acknowledging the signifi cant contribution J. Darcy: It gives me great pleasure to welcome a they have made and continue to make towards enhan- couple of guests to the House today. Tara Hornsby is a cing openness, transparency, accountability and fairness member of the Hospital Employees Union and a care aide in our province’s public service. in the Fraser Valley, one of those 35,000 care aides in the province who are really unsung heroes and heroines of Interjections. our health care system. A few months ago she signed up to be involved in her Madame Speaker: It is the week of fairness, aft er all. union’s campaign to learn more about political action. Her name was chosen from a draw, and the prize was a trip to Hon. M. Polak: We’re joined in the gallery today the Legislature of British Columbia and the chance to have by some very special guests from Th e King’s School in lunch with me but mainly to sit in on question period. She’s Langley, the civics 11 class on their fi eld trip. Joining us joined by the communications director of the Hospital are Benjamin Budlong, Max Kai, Isaac Clay, Lisette Clay, Employees Union, Mike Old, a frequent visitor to this House. Rachel Kbilke, Sonya Liu, Eli Parabeau, Jared Regan, Will the House please join me in welcoming them today. Mac Th ompson, Emma Vanderijk, Taylor Will, Elliott Wooding. Th ey are accompanied by their teacher, Lorena G. Hogg: Mark Twain once said that the two most im- Hensel, who brings her class here every year, faithfully — portant days in our lives are the day that we’re born and and Candace Clay as well. Would the House please make the day that we fi nd out why. As to the birth date, the them very welcome. NHL was born on this day in 1917. It replaced the NHA, and it consisted of fi ve Canadian teams. C. James: It’s always an exciting day to announce Legislative assistant Suneil Karod was born on this day babies in the Legislature. Th is is a staff person, someone in 1982. He replaced previously unused space, and he has, who works in the precinct. Ismael Ribeiro, in Hansard for more than 32 years, fi lled it quite adequately. As to the broadcasting services, so I better make sure that I get this second day, he’s still searching. Please join me in wishing right, with his wife, Angela, and his daughter, Isabella Suneil a happy birthday. — thankfully, there’ll be someone to correct it if needed [1340] 5598 British Columbia Debates Wednesday, November 26, 2014

L. Popham: It is my pleasure to welcome Leo Gerard in the Ombudsperson’s offi ce in their communications to the chamber, the international president of the United department. Steelworkers. On Monday night I had the pleasure of making him dinner, and a little bird told me about some E. Foster: It gives me great pleasure today to introduce of his favourite things. We had four pounds of Quadra two constituents of mine. Bob and Rosemary Buchan Island mussels; Saltspring Island garlic bread; Saanich are in the precinct today. Bob and Rosemary are here Peninsula tomatoes; one of his favourites, Vancouver to visit their son Wade Grant. Wade is a special adviser Island kale; and a little bit of B.C. wine. in the Premier’s offi ce, so would the House please make We always appreciate it when Leo visits our province. them welcome. Th ank you for coming. G. Heyman: It gives me great pleasure to introduce Hon. C. Oakes: Today I had the true privilege of meet- two very engaged constituents in Vancouver-Fairview ing an inspirational Special Olympian. Ben Vanlierop has who are joining us in the precincts today. Ros Kellett is a won gold and silver medals in swimming. retired high school teacher. She’s been a great commun- Th is past summer we hosted the Canadian Special ity activist in Fairview for many years, very engaged in Olympics here in British Columbia. It was the largest my constituency association and one of many people who in our history, and it was a great partnership with UBC. have contributed to our democracy by seeking election B.C. was successful in the international summer Special to this Legislature. Olympics. B.C. makes up over half of the team. With Ros today is her husband, Neale Adams, a for- Ben, thank you very much for coming. mer reporter as well as a former advocate of co-ops, spe- Dan Howe of the Special Olympics, thank you very cifi cally housing co-ops, which is how I met Neale many much for coming. more years ago than I am going to admit in this House. Would the House please make them welcome. Will the members please join me in making Neale and Ros very, very welcome. G. Holman: I’m pleased to introduce today three of my constituents from the Southern Gulf Islands Recycling Hon. S. Bond: We’re very delighted today to have in Coalition, a group that provides such an essential ser- the House Nicki Tuttle and her new husband, Connor vice throughout the Gulf Islands. Th e three representa- Blakesly. Nicki is one of two "Nickys" in the front offi ce tives are Richard Philpot, who also represents the Pender of JTST. She does a fantastic job. She’s part of our ad- Island Recycling Society; Peter Grant, who manages the ministrative team, and she’s a true joy to work with. She Saltspring recycling depot; and Ann Johnston, a long- does lots of very special things, takes care of us very well. serving member of the coalition, also representing the [1345] Mayne Island Recycling Society. Would the House please I should say that Connor is going to do very well, be- make them feel welcome. cause she makes fantastic cupcakes for our offi ce on a regular basis. We love working with her. We’d love to wel- S. Hamilton: It’s my pleasure to rise in the House to- come both Nicki and Connor to the House today. day and introduce someone who I just recently met. Th is is an individual who left a very successful career as a soft - D. Donaldson: I have two very special constituents of ware engineer for Apple. As a matter of fact, he helped Stikine here today. Dini ze’ Namoks, hereditary chief from design the interface for the many iPads that I’m sure are the Wet’suwet’en, John Ridsdale, is here visiting. John and in the House right now. I are related through marriage in the hereditary system He woke up one day and decided he wanted to become and have worked together quite closely for over 20 years. a mayor. Goodness knows why. But it’s my pleasure to Joining him, as well, in the gallery is a member of the introduce to the House today the new mayor of Saanich, Gitxsan, Wilp Gyologyet, from the Lax Gibuu, the wolf Mr. Richard Atwell. Would the House please make him clan, Muxs wun buhn. Th at’s Kyhm Yunkws, who is also feel welcome. my son. Would the House, the Legislature, please make welcome these two special guests who are honouring us V. Huntington: I, too, have a couple of introductions with their presence today. today. I’m pleased to personally reintroduce Dr. Karl Friedman and his wife, Elizabeth, who are with us today. J. Th ornthwaite: Also joining us in the Legislature to- As you noted, Dr. Friedman was the fi rst Ombudsman in day are Robert Davidson; George Kaminsky, who’s a con- British Columbia. I am personally pleased to say they are stituent of the member for West Vancouver–Capilano; distinguished constituents of mine. and Doug Barber, who’s my constituent. All of them are I’d also like to mention that Brad Densmore is with with the Canadian Pulmonary Fibrosis Foundation. Th is us. Brad worked in my offi ce as communication and re- foundation provides education and support for people af- search offi cer for three years or more and is now working fected by pulmonary fi brosis. Th ey’re here to meet with Wednesday, November 26, 2014 British Columbia Debates 5599

the Minister of Health, myself and other members of the S. Chandra Herbert: I would like to join with the House and raise awareness of the disease and its impact Minister of Health in welcoming Dr. Julio Montaner and on those who are dealing with it. Irene Day from the B.C. Centre for Excellence in HIV/ Would the House please make them welcome. AIDS, which is housed in my constituency of Vancouver– West End in the excellent though very old hospital, St. S. Sullivan: On Monday night in New York City a resi- Paul’s. I just want to thank them for their leadership from dent of British Columbia won an international Emmy the ’90s on up. award. His name is Damon Vignale, and his fi lm is Th e [1350] Exhibition. He’s not only a resident of my riding, but he Th ey’ve led the way in British Columbia and indeed also lives in my building. I’d like to acknowledge his great have helped lead the way across Canada and the world. honour that he brought this province. Let’s hope that the Canadian government adopts their programs and brings them nationwide, as Brazil, China Tributes and other nations are doing. I want to also acknowledge Keits Morton, a young FREDERICK HOWARD PINNOCK man who…. I thought how to introduce him. I would just say that probably the greatest honour would be that Hon. N. Yamamoto: Earlier this morning my part- he’s an engaged citizen, something that we should all as- ner, Fred’s, father passed away. He was predeceased by pire to be and something that more of us need to engage his son Stephen but survived by his wife, Shirley; his son in — citizenship. Fred; and his two daughters, Claire and Kathy; and sev- Welcome Keits and, certainly, welcome Dr. Montaner en grandchildren. and Irene Day. My Fred was named aft er his father and followed in his footsteps in the RCMP. Fred’s dad was a young constable M. Bernier: I think everybody in this House knows working in P.E.I. when he met his wife-to-be, Shirley. and would agree with me that we wouldn’t be able to do Th is was early in the 1950s. He met her at a country barn what we do if it wasn’t for the dedication and hard work dance, where she apparently parked illegally and he was of the staff that we have. So it’s a real pleasure for myself issuing her a ticket. to introduce one of our staff members helping on the gov- Anyways, they fell in love, but at that time in the RCMP ernment side, with us today. I think he’s really excited to you actually had to have served for fi ve years at a min- be in the House with some friends, to be watching ques- imum with the RCMP before you were allowed to be mar- tion period here live, rather than on TV in his offi ce. Will ried. Plus, you had to have $1,200 in your bank account. the House please make Blake Hodson welcome. Well, he had neither. He borrowed money from Shirley, which he apparently paid back right aft er the wedding. He G. Kyllo: I’m proud to welcome Kathleen De Vere and took a punitive transfer to Ottawa in order to get married. Graham Stark to the House today. Th ey’re local small He took that punitive transfer to guard Parliament Hill, business owners in the fi eld of video production. For which we know now, aft er the recent incidents in Ottawa, the last eight years they’ve run the Desert Bus for Hope is a noble and courageous responsibility. He retired aft er video game Internet telethon. Th is event started eight 35 years with the RCMP, and he spent 28 years in retire- years ago in a parent’s basement and, in their fi rst year, ment. raised $22,000. Th is year they raised a total of $635,000 Th ank you to this House for allowing me to recognize just last week. Th e Minister of Technology and Citizens’ Frederick Howard Pinnock. He was a good man, and his Services and myself were privileged to actually join them was a life well lived. on set last week. Th e charity supplies toys and games to children in hos- Introductions by Members pitals and domestic violence shelters, including the B.C. Children’s Hospital and Victoria General. Tens of thou- M. Dalton: I have three guests in the gallery here today. sands of volunteer hours have gone into putting on this One is Anthony Van Grol, who is the general manager fantastic event. I’d like the House to make Kathleen and for AdvanTec. It has several hundred employees in British Graham feel very welcome. Columbia based out of Langley but includes a large manufacturing unit also, in Maple Ridge. Th ey build spe- A. Weaver: As my friend from Peace River South men- cialized modular units for the oil and gas industry. tioned, we can’t do what we do without the help of our Also, we have Ron Madill, who is the owner of Spruce constituent and legislative researchers, but they can’t do Hollow Heavy Haul, from Abbotsford, and from Maple what they do without the help and support from their Ridge, Bill Christianson, who’s an engineer with Supreme parents and their friends. On that note, I’d like to intro- Structural Transport also based in Maple Ridge. duce the father and two very close friends of a legislative Would the House please make them feel welcome. representative, a research assistant in my offi ce: Terry 5600 British Columbia Debates Wednesday, November 26, 2014

Hartrick and Dan and Susie Taft , who are here in the gal- ity to live longer and healthier lives. Th at cocktail has lery today. Would the House please make them welcome. since become known as the highly active antiretroviral therapy, or HAART, and it has become the international B. Routley: We have a couple of steelworkers here standard of care. in the legislative precinct that I want to acknowledge. I Th anks in large part to the work of Dr. Montaner, an want to start with Leo Gerard, the amazing president of HIV diagnosis is no longer a death sentence. HAART the Steelworkers, who has done so much to strengthen can lengthen and improve the quality of life of those with the union movement, throughout North America but ac- HIV, adding up to 5½ decades of life. HAART treatment tually worldwide, in his work. I know it’s more than nine also reduces the viral load of those with HIV to virtually unions that have joined with the Steelworkers. I know undetectable levels, thereby dramatically reducing the that the Steelworkers are also, ironically, one of the largest likelihood that they will transmit the disease to others. unions in wood, and I happen to know something about Th is key aspect of HAART treatment is the principle that. I’ve grown to have great admiration and respect for behind the made-in-B.C. treatment as prevention strat- the work that Leo does. egy, also pioneered by Dr. Montaner. Th is strategy re- I want to thank you on behalf of all working people for duces the spread of HIV by introducing HAART at the the incredible work that you do to make things better for earliest possible stage following an HIV diagnosis. Th is working people all over the world. strategy virtually eliminates HIV- and AIDS-related mor- Tom Harkins, an amazing…. He spent decades work- bidity and mortality and, at the same time, signifi cantly ing at the Nanaimo mill. He spent decades representing reduces the spread of HIV. working-class people and doing things like pounding in In fact, treatment as prevention has decreased HIV/ signs at federal and provincial elections for candidates — AIDS–related mortality by more than 95 percent and new some more deserving than others. But I appreciate your infections by more than 66 percent. It’s a strategy that has work on my behalf, even when I wasn’t your fi rst choice. been adopted internationally — by France, Spain, Brazil, On the other hand, both of these people are incredible Argentina, the United States and China. in terms of helping working people everywhere, and on In September of this past year the United Nations behalf of them, I want to thank them and welcome them launched its 90-90-90 treatment target, which has a goal of here to the Legislature. ending the AIDS epidemic, worldwide, by 2030. Th at tar- get is modelled aft er B.C.’s treatment as prevention strat- Ministerial Statements egy and would not be possible without the work of Dr. Montaner and the B.C. Centre for Excellence in HIV/AIDS. WORK OF JULIO MONTANER IN Dr. Montaner has deservedly been the recipient of HIV/AIDS RESEARCH AND TREATMENT countless awards and accolades, including — just to name a few — the $100,000 Knowledge Translation Hon. T. Lake: Fellow members of the Legislative Award from the Canadian Institutes of Health, two sep- Assembly and guests, earlier today I was extremely priv- arate fi ve-year $2½ million awards from the National ileged to have the opportunity to acknowledge and hon- Institute on Drug Abuse at the U.S. National Institutes of our a British Columbian who has made extraordinary Health, induction into the Royal Society of Canada, an accomplishments in the fi eld of HIV and AIDS research, honorary doctor of science from Simon Fraser University, treatment, care and prevention — Dr. Julio Montaner. the Order of British Columbia, the Albert Einstein World Dr. Montaner is joining us here today in the Legislature Award of Science and the Queen Elizabeth II Diamond along with the director of operations for the B.C. Centre Jubilee Medal. for Excellence in HIV/AIDS, Irene Day. Just this year it was announced that he will be inducted [1355] into the Canadian Medical Hall of Fame. Today I was Th e Centre for Excellence is a world-class organiza- honoured to add to this list by presenting him with a tion that we are fortunate to have right here in British certifi cate of recognition on behalf of all grateful British Columbia. As director, Dr. Montaner has been respon- Columbians. sible for spearheading tremendous advances in the treat- Next year, in 2015, Vancouver will host the eighth ment and the prevention of HIV and AIDS, helping International AIDS Society Conference on HIV British Columbia become the only province where new Pathogenesis, Treatment and Prevention. Of course, Dr. HIV infections are consistently declining. Montaner will serve as the conference’s co-chair. But even before that, as head of the St. Paul’s AIDS In a few days, on December 1, we will observe World clinic, Dr. Montaner was making a remarkable impact AIDS Day, a day that is about more than simply raising in the field of HIV/AIDS research and care. He was awareness about HIV and AIDS. It is a time for the world oft en the driving force in the development of what is to unite in the fi ght against the spread of HIV. known as the drug cocktail to treat and manage HIV/ As we join together in this fi ght, British Columbians can AIDS, giving HIV-positive individuals the opportun- be particularly proud of the B.C. Centre for Excellence Wednesday, November 26, 2014 British Columbia Debates 5601

and Dr. Julio Montaner. I ask that all of my fellow mem- D. Donaldson: I move that a bill intituled the British bers join me in thanking Dr. Montaner for his tremen- Columbia Oil and Gas Activities Amendment Act, 2014, dous contribution not just to our province but, in fact, to of which notice has been given in my name on the order the entire world. [Applause.] paper, be introduced and read a fi rst time now.

J. Darcy: On behalf of the offi cial opposition, I want to Motion approved. say ditto to everything the Minister of Health said today. All of us who work in public service and all of us who aspire to D. Donaldson: I’m pleased to introduce this bill that community service hope to make a diff erence, some small prohibits the conversion of natural gas pipelines to trans- diff erence, in people’s lives. But very few can say, as Dr. Julio mit oil or diluted bitumen by forbidding the Oil and Gas Montaner can say and we can proudly share in saying: be- Commission from granting such an authorization under cause of his work, literally tens of millions of people’s lives their permitting authority. have been saved, not just in Canada but around the world. Natural gas pipelines can be converted to use for oil. [1400] It’s technologically possible and is central to proposals It’s very rare that this House rises as one to salute elsewhere in Canada. Th is bill addresses concerns of someone, but Dr. Julio Montaner is certainly one of those many in the province, especially First Nations and other rare individuals who deserve it. I understand from read- residents of the northwest, that proposed natural gas ing a profi le of Dr. Montaner just a few months ago that pipelines could be converted at a future time to trans- some of his early work was inspired by his father in his mit diluted bitumen from the Alberta tar sands to the native Argentina. north coast. Dr. Julio Gonzalez Montaner, who treated people with In fact, the Dini ze’ and Ts’ake ze’, the Wet’suwet’en her- tuberculosis, advised his son, I gather, that in treating a editary chiefs on whose traditional territories three nat- stubborn respiratory disease, he shouldn’t use just one ural gas pipelines are proposed, not only support this bill respiratory drug; he should use several. That’s some- but guided me to introduce it to the Legislature. Th ey are thing that Dr. Montaner took forward in his early work fi rm that the prohibition on converting these pipelines with HIV/AIDS, working at St. Paul’s Hospital, treating must be made in legislation, not through a watered-down people who came with what was then an unknown dis- process of regulation. ease in British Columbia and Canada and around the Th e drawbacks of that approach were exposed when world. It was later understood to be a particular type of the government unilaterally decided through an order-in- pneumonia that came from HIV/AIDS, and eventually, council last April to exempt new natural gas production fa- as a result of that work, it came to be recognized. cilities from the environmental assessment process. Outcry Years later Dr. Montaner built on that earlier work from the Fort Nelson First Nation led to reversal of that and innovated several new treatments. As the Minister decision, but it highlighted how regulation can be created of Health has explained, that triple therapy became the or changed at the whim of a minister behind closed doors. standard of care around the world, and for what was once Th is bill gives the certainty needed that natural gas known as a death sentence, the incidence of this disease pipelines will not be used to transmit diluted bitumen plummeted by 90 percent around the world. in an end run around the widespread opposition to It truly is the case that because of that work that Dr. Enbridge’s northern gateway project. Montaner has done with his colleagues and the brilliant Whereas First Nations and northern residents sup- work that he’s now carrying out at a national and an inter- port well-planned and diligently monitored industrial national level to treat the infection and to prevent the development on their natural landscape, the risks associ- spread of HIV/AIDS, truly tens of millions more lives ated with the Enbridge project far outweigh the benefi ts. will be saved in this country and around the world. Th e Minister of Natural Gas Development promised to He is truly a great British Columbian, a great Canadian, the Wet’suwet’en in a public forum in Moricetown that and we are honoured and humbled by his presence in this he would put legislation in place so natural gas pipelines House today. Th ank you to Dr. Julio Montaner. could not be converted to transmit oil. I trust that in the spirit of reconciliation with First Nations, I will fi nd sup- Introduction and port from the minister for this bill. First Reading of Bills I move that this bill be placed on the orders of the day for second reading at the next sitting aft er today. BILL M213 — BRITISH COLUMBIA OIL AND GAS ACTIVITIES Bill M213, British Columbia Oil and Gas Activities AMENDMENT ACT, 2014 Amendment Act, 2014, introduced, read a fi rst time and ordered to be placed on orders of the day for second read- D. Donaldson presented a bill intituled British ing at the next sitting of the House aft er today. Columbia Oil and Gas Activities Amendment Act, 2014. [1405] 5602 British Columbia Debates Wednesday, November 26, 2014

Statements Majors All-Stars — 12 team members, which includes (Standing Order 25B) two sets of twins: No. 1, Michael Oyhenart; No. 2, Daniel Suarez; No. 9, Matthew Suarez; No. 3, Nico Cole; No. 6, Rod SEA TO SKY GONDOLA Betonio; No. 10, Josh Matsui; No. 11, Emma March; No. 15 Evan March; No. 12, Ryan Mah; No. 13, Vicarte Domingo; J. Sturdy: Th e Sea to Sky Gondola is the new west coast No. 18, Joseph Sinclair; No. 18 Magic Mackenzie; their mountain experience that takes visitors on a scenic ride manager, Brian Perry; and coaches Rick Domingo and high above Howe Sound, British Columbia’s southern- Jonathan Mackenzie; and special coach Ed O’Leary. most and North America’s southernmost fj ord. Aft er a Th anks also to the volunteers and parents who sup- protracted gestation, some protests and, ultimately, a lo- ported them all the way. cation change, the gondola moved beyond being a pro- Th e South Vancouver Little League is one of the small- posal and opened this past May. Since then it has had an est leagues in B.C. and across the country. When I was astounding 250,000 unique visits. Nearly 12,000 season fi rst elected, in 2009, they told me they were the only passes have been sold, and the business by all accounts league in the Lower Mainland that didn’t have a batting has exceeded all expectations. cage yet, so I worked to help them get one, because I The Sea to Sky Gondola takes visitors on a ten- knew the kids needed it to become champions. minute ride up the northwest ridge of Mount Habrich, Th e fi rst group to use it and benefi t, at a young age, is from a base station nestled between Shannon Falls and this group that went on to the World Series, or as they call Stawamus Chief Provincial Park. At the summit lodge it, baseball Disneyland. Past president Graham Randell visitors can take advantage of walking trails, viewing plat- tells me that they knew they had a special group of talent- forms, a suspension bridge, a restaurant and, of course, ed kids when they were just fi ve or six years old. Baseball a bar — all while enjoying the panoramic views of the was their number one sport, and they never left the park. Stawamus Chief, Sky Pilot, Mount Garibaldi, the Port of Th ey always wanted to be playing. Squamish and the district of Squamish. Th ey’re all continuing to do that in the intermediate, Th e gondola has proven to be a signifi cant employer peewee and bantam divisions and are also now help- in the area and has shared its benefi ts by increasing visits ing with coaching. Th ey will also be speaking in schools to many other local businesses and attractions. Not only to encourage more kids to get involved. Next year the does the gondola open up subalpine walking trails to South Vancouver Little League will be hosting the B.C. seniors and individuals with disabilities; it also provides provincial championships from July 18-26, so I invite all improved access to the Shannon Creek basin for hikers, of you to come down to Memorial Park in Vancouver- climbers, snowshoers and skiers. Previously diffi cult-to- Kensington to watch some great baseball. reach trails are now just a ten-minute ride away. Next steps may include a Grouse Grind–type hiking access. ASANTE CENTRE FOR Th is is truly one of the most outstanding new attrac- FETAL ALCOHOL SYNDROME tions in the entire country. I want to encourage everyone who hasn’t already done so to head for Squamish, and M. Dalton: Fetal alcohol spectrum disorder is an um- aft er a quick — or not so quick — visit to the Britannia brella term that describes a broad range of eff ects that can Mine Museum, hitch a ride on the Sea to Sky Gondola, develop if a fetus is prenatally exposed to alcohol. Due for you will certainly not be disappointed. to impaired brain development, individuals with FASD may struggle with learning, communication, attention, SOUTH VANCOUVER LITTLE LEAGUE memory, reasoning and social skills. In 1993 a group of concerned citizens in Maple Ridge M. Elmore: In communities across B.C. and Canada banded together to take action around FASD and estab- kids look forward to the opening day of Little League lished the Fetal Alcohol Spectrum Disorder Society for baseball. I was an avid player in northern Manitoba, and I British Columbia, a non-profi t organization. loved the game so much that I would sleep with my glove [1410] under my pillow and run out to the fi eld aft er school. Th e society’s eff orts eventually led to the creation of the Little League baseball brings communities together, and Asante Centre, which specializes in providing assessment, this year a special team from my constituency did just diagnosis, family support services, education, training that and more. and research. While public awareness and prevention Th e South Vancouver Little League was established in are key to addressing FASD, the Asante Centre recogniz- 1956, and for the fi rst time ever they became our provin- es that individuals and families who live with this invis- cial and national champions and went on to play in the ible disability will experience a multitude of challenges Little League Baseball World Series. throughout their lifetimes. Over the years the Asante Members, please join me in congratulating the 2014 Centre has expanded its services to address autism spec- Canada Little League champions, the South Vancouver trum disorder and other complex development needs. Wednesday, November 26, 2014 British Columbia Debates 5603

Recently I attended a retirement dinner for the belov- Crohn’s and colitis in the world. More than 10,000 cases are ed pediatrician Dr. Kwadwo Ohene Asante, who is one diagnosed each year. Th at works out to 28 cases every day. of the key individuals behind the centre’s work — hence, Th ese diseases aff ect one in every 150 Canadians and the Asante Centre. Dr. Asante was the fi rst physician to cost the nation $2.8 billion a year in medical expenses and bring FASD to the forefront of Canadian medicine, while missed work. Crohn’s and colitis are chronic infections practising in northern B.C. I should also mention here that infl ame the lining of the gastrointestinal tract and in- that Dr. Asante’s colleagues, including executive director hibit the body’s ability to digest food and absorb nutrition. Audrey Salahub, were inspirational in building the original Symptoms can include loss of weight, appetite loss, nausea, founding team of founders, including public health nurse fever, anemia, fatigue, diarrhea and severe abdominal pain. Pam Munro and Julianne Conry, a registered psychologist. Th e incidence of both diseases has been rising considerably Supported by the government of British Columbia, since 2001, particularly in children under the age of ten. the Asante Centre in Maple Ridge is now international- While there is no cure for Crohn’s disease, drugs and ly recognized and has provided training in Canada and sometimes surgery can provide relief. Colitis can be con- countries abroad, including New Zealand, Australia and trolled with medication, and in some cases by removing the French Réunion Island. part of the colon. Th ese conditions aff ect all aspects of life and can be very diffi cult to talk about, particularly PROTECTION OF because of the stigma surrounding bathroom diseases. RESIDENT ORCA POPULATION But there are organizations working hard to change that. In March our government provided $150,000 to G. Holman: I rise today to speak for constituents of Crohn’s and Colitis Canada, B.C.-Yukon division, to help mine who cannot represent themselves in this House, the them continue to improve research capacity, raise aware- resident killer whales — or orcas — of the Salish Sea. Th e ness and provide education and resources to people living southern killer whale population has declined to its low- with these diseases. Crohn’s and Colitis Canada helps suf- est level since 1985, with only 78 members remaining in ferers take control by learning about their disease and the the pod. Th at’s two fewer members than in 2001, when treatments available, and connects them to other people the whales were fi rst proposed for listing under the feder- suff ering from the same condition so that they can pro- al Species at Risk Act. Th e hopes raised by the recent birth vide guidance through experience. of a calf, which only occurs every fi ve years for a female [1415] orca, have been dashed since the calf has disappeared. Th is is important work. By supporting their eff orts, we Th ese are remarkable animals by any measure. Th ey can help patients overcome embarrassment, get the diag- live longer than many humans. Th ey engage in complex nosis they need and empower them to take charge of their sonar-based communication. Th ey form lifelong fam- health and quality of life. ilies headed by matriarchs. Many of us have seen these magnifi cent animals at a distance, perhaps on a very ex- SALT OF THE EARTH SCREENING pensive ferry trip. Some of us have had closer, more dis- IN HONOUR OF BUDDY DeVITO concerting encounters, as I did once on what seemed to be a very, very small sailboat. K. Conroy: Th e Kootenays are full of historical events. Imagine these awe-inspiring creatures forever extirpated Th e showing of Salt of the Earth at the theatre in Castlegar from the Salish Sea. In 2008 Fisheries and Oceans Canada on December 15 and 16, 1954, was one such event. Th e released a recovery strategy for northern and southern blacklisted Hollywood movie, which was seen by 900 resident killer whales, but despite federal legislation and a viewers, brought the spectre of McCarthyism to rural B.C. related court order, there have been no meaningful actions Th e movie depicted the story of a violent 15-month-long to address the key risk factors for these whales. strike in the early 1950s at the Empire Zinc mine in New About 40 years ago dozens of orcas were ripped from Mexico and highlighted the powerful role of the miners’ their pods and sold to aquariums around the world. As a wives in winning the strike. result of this and our inaction since then, resident orcas Th e showing six decades ago was sponsored by Local are on the brink of extinction. 480 of the International Union of Mine, Mill and Smelter I believe most members of this House would agree that Workers. Th e union, who represented the workers at we must act urgently to avoid the destruction of these Cominco in Trail, felt the story needed to be told and, in iconic animals. spite of the risks, did just that. With this 60th anniversary the historic fi lm was shown CROHN’S DISEASE at the same location on November 16. The United AND COLITIS AWARENESS Steelworkers Local 480 was again a sponsor, as were other Steelworkers locals and progressive people in the area, ex- Moira Stilwell: As you have heard, according to Crohn’s cept this time there was no fear of reprisal for either sup- and Colitis Canada, our nation has the highest rates of porting the show or attending. 5604 British Columbia Debates Wednesday, November 26, 2014

Ron Verzuh, born in Trail and raised in Castlegar, took way tried to disassociate himself from the role that he the initiative to bring Salt back to the Kootenays. As a played as a volunteer member of that board.” Th at was historian and Canadian writer specializing in labour his- the end of the quote. tory in B.C. and the Pacifi c Northwest, Ron was thrilled In light of the information that’s now become available to welcome a full house to remember our history, as well to the minister, does he still stand by his assertion that the as to dedicate the showing to Buddy DeVito, who was at Minister of Advanced Education was not only complicit the Castlegar theatre back in 1954. but an active participant in violating guidelines? Buddy passed away October 29 at the age of 94. He [1420] was born and raised in Trail, working in the family shoe repair business until he enlisted in 1941. He returned Hon. M. de Jong: I will repeat for the hon. member to Trail in ’45 and resumed working in the family busi- what I think I said inside this House and know I said ness, retiring in 1985. Buddy was a life member and outside of the House. Th at is, confronted by the docu- past president of the Royal Canadian Legion, an alder- mentation that was tabled by the opposition, acknow- man and mayor of Trail and chair of the regional district ledging that it is relevant to the matter that Mr. Mingay of Kootenay-Boundary. He also worked for six years in was examining and rendered a report around, it seemed Sudbury, Ontario, for the Mine, Mill union there. appropriate to me to provide that information to Mr. He was a strong proponent of peace and a heartfelt so- Mingay and to ask him to analyze whether or not he had cialist, never failing to make his opinions known wher- seen it before and, if he has not, whether or not it alters ever he travelled. Buddy is survived by his longtime either his fi ndings or the recommendations that fl owed partner, Maureen Mitchell, his four children and seven from his report. grandchildren, as well as by all of us who knew him and will miss him, as he truly was the salt of the earth. Madame Speaker: The Leader of the Official Opposition on a supplemental. Oral Questions J. Horgan: When the Mingay report, round 1, was REPORTING OF EXECUTIVE COMPENSATION tabled, we on this side of the House called for the resig- AT KWANTLEN UNIVERSITY AND ROLE nation of the Minister of Advanced Education. We were OF ADVANCED EDUCATION MINISTER hopeful that he would recognize a British parliamentary tradition and he would do the right thing. J. Horgan: What a diff erence a few months makes in Unfortunately, he didn’t do that. In fact — making mat- this Legislature here in the province of British Columbia. ters worse — the judgment of the Premier was drawn into Six months ago when we on this side of the House question when she said the following: “Th e Minister of raised questions around the integrity of the Minister of Advanced Education is committed to making sure that Advanced Education, he characterized the accusations the rules and the intent of the rules are followed. I have as outlandish. spoken to him and have absolute confi dence in him and “Outlandish,” he said, when the member for Vancouver– his ability to serve as Minister of Advanced Education.” Point Grey laid out fairly comprehensive evidence of Th at was when it was just troubling and disturbing. wrongdoing by the board and by the executives at Th at was just when “Well, he must have known about it, Kwantlen University. but he wouldn’t have really had any hand in it.” Th en a review was done and, as with all B.C. Liberal Now we’ve tabled evidence in this place. We’ve refreshed reviews, “We’re going to get to the bottom of this,” they the memory of the Minister of Advanced Education. He declared in the press release. Months went by, and a re- was complicit and involved in circumventing the rules of view was tabled — a review that provoked the comments this place. He deceived the Legislature. He deceived the “troubling” and “disturbing” from the Minister of Finance Minister of Finance. Most importantly of all, he deceived — but again, no action beyond that. the people of British Columbia. Th is week, when we tabled further information in this So again, to the Ministry of Finance: how can you pos- House, the Minister of Advanced Education said that sibly continue to defend this man? he had recused himself from any involvement in any- thing to do with Kwantlen University, which is what you Hon. M. de Jong: I have heard the Leader of the would want from your Minister of Advanced Education Offi cial Opposition quoted, I hope correctly, in describ- I would expect. ing the work that Mr. Mingay undertook as being good Th en we discovered that there was not just knowledge work and professing a measure of reliance in that work. of wrongdoing by the Kwantlen board but actual par- I agree. ticipation by the Minister of Advanced Education. Th e I also agree that it is entirely appropriate to take docu- Minister of Finance rose on Monday, and he said: “Th e mentation that has been presented in this chamber, that minister, in conveying information to Mr. Mingay, in no does bear on the matters that he was reviewing, and have Wednesday, November 26, 2014 British Columbia Debates 5605

him examine those documents for relevance and to de- Hon. M. de Jong: That is what the Leader of the termine whether or not they would alter any of his fi nd- Opposition is saying — that it is an unforgivable sin not ings or any of the recommendations that fl ow from that. to be able to recall with precision every single e-mail that But I can also say this, unhesitatingly. I have also someone has sent and no longer has access to, two years watched the Minister of Advanced Education undertake aft er the fact. his duties as a minister of the Crown and apply himself Th at measure of perfection may exist somewhere in diligently and exhaustingly to the task of furthering the the mind of the Leader of the Opposition. I happen to interests of students in British Columbia and the inter- know that it doesn’t exist in reality. I also happen to know ests of the institutions they attend for training and edu- that there are members sitting on the opposite side of the cational purposes. House who know very well that that measure of perfec- tion does not exist in reality. Madame Speaker: Th e Leader of the Opposition on a further supplemental. DISCLOSURE OF INFORMATION BY ADVANCED EDUCATION MINISTER TO J. Horgan: Again, it certainly wasn’t my intention to KWANTLEN UNIVERSITY INVESTIGATION ask questions of the Minister of Finance today. I had other bear in mind. But the issue at hand, I think, speaks S. Robinson: We’re not searching for perfection, but directly to the Minister of Finance, to the Government we are looking for honesty. On Monday we learned that House Leader. I would think as one of the senior mem- the Minister of Advanced Education misled a govern- bers in this place, he would understand that integrity ment investigator and misled a Finance Ministry inves- doesn’t involve do-overs. You have it or you don’t. tigation. On Monday the minister told this House that Th e question at hand here is…. Misleading once, shame “the fullest of information available to myself was pro- on us. Misleading twice, I would suggest: shame on you vided for Mr. Mingay.” and shame on the government of British Columbia. I To the Minister of Advanced Education, if the minis- don’t believe that the people of B.C. want their children ter was sincerely trying to provide Mr. Mingay with the to emulate an individual who says it’s okay to circum- fullest of information, why didn’t he tell Mr. Mingay that vent the rules as long as you’re not caught, and then he conducted business as the Kwantlen vice-chair using when you’re caught, to blame bad briefi ngs for the cir- his RCMP e-mail account and that Mr. Mingay ought to cumvention. look at his past correspondence there? It’s not okay to say: “I had no idea I was so intimately involved.” It doesn’t work that way in the real world. It Hon. A. Virk: It’s certainly no secret that I was, in- shouldn’t work that way in cabinet. deed, a member of that national police force, as I was a Again, I just have to say to the Minister of Finance: volunteer member of that board. I certainly shared with I don’t know how you can defend the behaviour of the Mr. Mingay all of the information I had to the best of Minister of Advanced Education. my ability. In terms of those e-mails, this is some 3½ years ago Hon. M. de Jong: I have also been here long enough — the incident the members opposite refer to. I didn’t to know that the search for perfection is destined to be have access to those e-mails at the time of Mr. Mingay’s a search in vain. interviews, and similarly, nor do I currently have access [1425] to those e-mails. Th e Minister of Advanced Education has not ducked responsibility. He has in no way endeavoured to run from R. Fleming: As of this week all British Columbians the responsibility he had as a member of a board that, in know, including government members of that side of the Mr. Mingay’s report, was found to have not conducted House, that the Advanced Education Minister misled a the procedure in accordance with all of the requirements. government investigator and misled a Finance Ministry Although the issue here around disclosure…. Mr. investigation. Mingay makes clear in his report the matters were dis- Let’s go back to Monday. On Monday we had quite closed in one instance but not in conformity with the a spectacle in this place. We had quite a spectacle in PSEC guidelines. this place on Monday, where we saw the Minister of Th e Leader of the Opposition, by virtue of the com- Advanced Education, for 90 minutes, huddle with the ments he has made here today in his questioning of me, Minister of Finance aft er he faced questions and before I think impliedly says it is unforgivable. It is unforgiv- he went out to face the media, when he fi nally went out able not to recall every single e-mail that a person has and acknowledged that he was heavily involved in the sent two years…. Lavack contract negotiations. He said that the emails had suddenly “refreshed” his Interjections. memory about his role in those negotiations. I want to 5606 British Columbia Debates Wednesday, November 26, 2014

ask the Minister of Advanced Education this, because he’s Finance and misled this House again when he claimed asking British Columbians to believe that pathetic excuse. that he’d provided all the relevant information. [1430] Let me ask him, in his career as an RCMP officer, Madame Speaker: Member. I would ask that member whether he would have accepted this same excuse from to withdraw that fi nal comment. a suspect that he was investigating who had suddenly re- freshed their memory as a convenient way to describe the K. Corrigan: I withdraw, Madame Speaker. withholding of evidence? On Monday, as the Minister of Finance has already said, he wrote to Mr. Mingay and asked him to review the Hon. A. Virk: As I’ve noted a number of times before, new e-mails we tabled in the House and determine if they the e-mails that the members across the aisle refer to are changed the conclusion in his report. What the Finance a string of e-mails from some 3½ years ago. I did not have Minister didn’t do either is he didn’t ask Mr. Mingay to access to those e-mails at the time of the interview with get to the other missing correspondence from the minis- Mr. Mingay, nor do I have those today. ter’s RCMP e-mail account. Th e Finance Minister didn’t Certainly, I do not have the specifi cs of those strings ask Mr. Mingay to access Kwantlen’s archived VP aca- of e-mails. Indeed, 3½ years ago my recollection…. I cer- demic search records binders — the very place the last tainly wish my recollection was better, that I had a per- set of e-mails were found. fect memory. But not having access at that time or now To the Minister of Finance: why should we have any — that’s a fact. confi dence that Mr. Mingay’s do-over investigation will be any more thorough than his last one? S. Simpson: We know the bar for a minister is set [1435] high in terms of holding to the integrity of the offi ce. We know that in most instances a minister who is under in- Hon. M. de Jong: Well, it’s an interesting observation vestigation would step aside until that investigation was from the hon. member. Quite frankly, it does — whether completed. We know that in this case the minister has she wants to admit this or not — impugn in a very nega- chosen not to do that, and the Premier has chosen not tive way Mr. Mingay, someone who has served govern- to ask him to do that. ments of all political stripes and who the Leader of the Can the minister tell us that if the bar is set high, if he Opposition has described as doing good work. really wants to resolve this, did he not feel any obligation, Mr. Mingay will take the material that has been pro- when Mr. Mingay was appointed, to have at least called vided to him. He will not happily seek direction from me Kwantlen and said: “I want you to make every piece of or anyone else about the manner in which he conducts paper available to Mr. Mingay that involved me”? If he that ongoing review and assesses the relevance for the had done that, these e-mails would have been made report he has prepared. available. Look, I get that this doesn’t fi t with the political nar- Why didn’t the minister support Mr. Mingay’s work rative that the members opposite want to weave. But the and, in fact, ask for all the Kwantlen information to be material has come to light. Th e material has been provid- made available? ed to the author of the report, and the responsible thing is to allow the author of that report to conduct the work Hon. A. Virk: Well, the member opposite knows that that he needs to do. Mr. Mingay was asked by the Minister of Finance to con- duct the review. As such, it wasn’t appropriate for me to Interjections. provide direction to that university or Mr. Mingay on how to conduct that review. Madame Speaker: Th e Chair will hear the answer and the question. REVIEW OF KWANTLEN UNIVERSITY Please proceed. INVESTIGATION AND ROLE OF ADVANCED EDUCATION MINISTER COMPLIANCE OF PUBLIC INSTITUTIONS WITH EXECUTIVE COMPENSATION RULES K. Corrigan: I fi nd these answers unbelievable. We have a minister who approved and devised a plan to break K. Corrigan: Once again, we have, in the answer from compensation rules. He was, further, actively involved in the Minister of Finance, a government which is pre- a plan to break the disclosure rules and to hide that from tending to be honest and open and is doing the very op- government. When there was a review, he didn’t provide posite by limiting the terms of reference. critical evidence in his possession to the investigator. He Th at the Minister of Advanced Education misled a denied any wrongdoing or minimized his wrongdoing in Ministry of Finance investigation is one very unaccept- this House. Finally, on Monday he misled the Minister of able matter, but the fact that he was part of a broader Wednesday, November 26, 2014 British Columbia Debates 5607

practice of circumventing government compensation some members that were working for the Ministry of rules is another. Yesterday we learned that we can add Health were treated in a way that we have considered in- the B.C. Cancer Agency to the list of public institutions appropriate. We have admitted that. Some people were that are fi nding creative ways to get around executive treated in a heavy-handed way. We have acknowledged compensation limits. and apologized for that. Th is morning the opposition asked the Auditor General Th e Leader of the Opposition said that we besmirched to conduct an audit of how many public institutions are people’s reputation and character. Is it just me, or is the skirting PSEC compensation rules. Will the Minister of irony lost on the members of the opposition? Th ey con- Finance ask the Auditor General to do the same? tinue to do that day in, day out to highly dedicated public servants in the province of British Columbia — throwing Hon. M. de Jong: Well, is there any better example of out people’s names, besmirching their reputations on a what’s really taking place here? Th e member stands up daily basis in question period. and expects to be taken seriously by referring to a trans- Ms. McNeil will do her review. I look forward to see- action that the government disclosed in a press release ing that review December 19. in July of this year. Th e member stands up and concocts this whole conspiracy A. Dix: Th e minister says “heavy-handed,” as if that’s theory about what’s taking place at the Cancer Agency. Th at some sort of defence for the government. Th ey fi red sev- whole incident was discussed. It was revealed by the govern- en dedicated public servants. Six of those fi rings — six of ment during the tabling of the public accounts. Oh, yes, the seven — have been withdrawn and rescinded. Th e word public accounts that proved something else the opposition isn’t heavy-handed. Th e word is incompetent. Th e word said couldn’t happen — the confi rmation of a balanced budget. is mean. Th e word is cruel. I get that the hon. member and her colleagues have On top of that the Premier’s closest public service ad- purged the memory of that day from their minds, but it viser, Mr. Dyble, and one of her closest political advisers, happened. It was real. Th at issue was dealt with in a fi scal- Ms. Mentzelopoulos, approved the decision to taint these ly responsible way, and it confi rms how serious the gov- researchers with the suggestion of an RCMP investiga- ernment is about all agencies adhering to the wage and tion that did not exist — a decision that could not, at the settlement guidelines that we have in place through PSEC. time, have been supported by legal advice, a political de- cision by people in the Premier’s offi ce. REVIEW OF It’s why we need an independent review, an independ- HEALTH MINISTRY INVESTIGATION ent review that does more than, as the government says, INTO ALLEGED PRIVACY BREACH identify process improvements related to HR manage- ment but does what they promised, which is get to the bot- J. Darcy: Let’s talk about another review that is also tom of the matter; a review that deals with more than six casting a shadow on the integrity of this government. months of this scandal, the full 29 months of the scandal. The Premier said she wanted to get to the bottom of One that compels John Dyble and Graham Whitmarsh the wrongful terminations of eight health researchers and the Minister of Finance and Margaret MacDiarmid who made British Columbia a leader in drug evaluation. to appear before the inquiry. One that relies on docu- She said that in her heart she felt that these fi rings were ments other than those provided by the government itself. heavy-handed. And one that puts Rebecca Warburton, Ramsay Hamdi, [1440] Dave Scott, Malcolm Maclure, Ron Mattson, Bob Hart, Now we have further confi rmation that she, in fact, Bill Warburtonand, of course, Roderick MacIsaac at the didn’t mean any of this because her offi ce was part of heart of the review and not an overthought. these terminations. Will the government today announce a real public in- John Dyble and Lynda Tarras designed a review with quiry into this disgraceful aff air? one purpose: to protect the Premier’s inner team. Th ey [1445] put Ms. McNeil in a box that she, quite simply, couldn’t get out of. Now Graham Whitmarsh, the man that the Hon. T. Lake: I think what’s disgraceful is the charac- Premier blames for this whole aff air, has told Ms. McNeil terization of dedicated public servants. Th eir characters that he won’t participate in that review. are being assassinated every day in question period. Th e To the Minister of Health: is the minister going to put Leader of the Opposition and the other members of the protecting the Premier ahead of his duty to his ministry opposition claim to have secret knowledge, and they are by condoning John Dyble’s concocted review, or will he the judge and jury on dedicated public servants every day fi nally, fi nally send this matter to the fully independent here in question period. review that it deserves? Ms. McNeil is an independent labour expert doing a review of HR processes that were utilized. She will be and Hon. T. Lake: We know that in some circumstances is interviewing people in the public service. It’s unfortu- 5608 British Columbia Debates Wednesday, November 26, 2014

nate if members outside of the public service do not wish won’t be receiving adequate funding to keep their depots to participate. We look forward to her report December operating. 19. It will be given to the assistant Attorney General. We It reads as follows: “We, the residents of Pender Island” look forward to making that report public. — and also there’s another petition here from Mayne Island that has already been presented to the minister; MULTI-MATERIAL B.C. RECYCLING about 1,800 in all — “urgently request that the Minister PROGRAM IMPACTS AND OVERSIGHT of Environment enforce the recycling regulation, sched- ule 5, in order to ensure that Multi-Material B.C. provide G. Holman: Recycling services on the southern Gulf full funding for recycling depots in isolated rural com- Islands are provided by non-profi t societies operating munities that handle the material for which MMBC is small depots. Th ese societies have informed the Minister now legally responsible.” of Environment that the one-size-fi ts-all funding formula [1450] of Multi-Material B.C., MMBC, will cover less than one- third of the real cost of operating these depots. What Orders of the Day this means is that recycling depots on the Gulf Islands will cease operations within two years and 25 employees Hon. M. de Jong: Continued committee stage on Bill 6. will lose their jobs unless MMBC provides fair funding. [1455] Th e question I have for the minister: will the minister ensure that MMBC lives up to its legislated responsibility Committee of the Whole House and ensure the necessary funding to keep these recycling depots operating? BILL 6 — LIQUEFIED NATURAL GAS And given the problems that MMBC is creating through- INCOME TAX ACT out the province, not just for non-profi t recycling depots but (continued) for small businesses such as Syntal, which just closed oper- ations on the Saanich Peninsula, will the minister ensure Th e House in Committee of the Whole on Bill 6; M. that there’s an independent review by the Auditor General Dalton in the chair. of MMBC? Will you ensure that that’s authorized today? Th e committee met at 2:59 p.m. Hon. M. Polak: First, let’s remember that we began in British Columbia with a tremendously successful pro- On section 11. gram of recycling all across the province. But there was one notable diff erence from the way in which things will B. Ralston: Th e question I have on subsection 11(2) now begin to operate under MMBC. Th at is that under the is the reference to “the following rules” that apply in ap- old way of doing things, it was the property tax payer who plying section 251. Can the minister explain briefl y what paid for their blue box services at their home. As a result that means? of the move to make those who produce packaging and printed paper cover the costs of this disposal, the CRD, for Hon. M. de Jong: I try to say all of the provisions in the example, will receive annual funding of $5 million. act are important, and where they adopt provisions from It is a new program. It will take time to make sure that the federal legislation, that is always important. things are functioning adequately for everyone across the [1500] province. But make no mistake. We believe that the people Th ere is added importance here where, from a practical who produce the packaging should pay to get rid of it. point of view, it’s understood that we will need specifi c rules for non-arm’s-length transactions. For example, [End of question period.] when we talk about transfer pricing, the rules around non-arm’s-length transactions become very important. Point of Privilege Th ey are required for the purposes of the act where (Reservation of Right) specifi c rules for control apply — for example, in claiming a reserve or what the determination of controlled persons E. Foster: I rise to reserve my right on a point of privilege. is, based on the meaning of “control” under the federal act. As I said, it’s also anticipated that there will be a large Madame Speaker: So noted. number of non-arm’s-length transactions. And under the federal act — and this is where the inclusion of these pro- Petitions visions is important — any persons that are considered related parties operate at non-arm’s-length as well as G. Holman: I want to present some petitions here those that factually deal at non–arm’s length. Th is legis- from the southern Gulf Islands, the same islands that lation, through section 11, adopts those principles. Wednesday, November 26, 2014 British Columbia Debates 5609

B. Ralston: I take it from the focus on this in the act operation of this provision on those incomes. that the minister or/and his staff were anticipating that this particular plethora of non-arm’s-length transactions Hon. M. de Jong: Th e member is correct. Th e manner is something that is likely to manifest itself, given the cor- in which these amounts are calculated is important, and porate nature of some of the proponents that are global there is a precise methodology for so doing. companies, which are integrated companies that control I wonder if the member would be content if I off ered all the steps of the supply chain, whether it’s the upstream, at this time in response to say that the answer to the the actual extraction of the gas, the pipelines, the lique- question about net income is probably best dealt with at faction and the shipping. section 54, where there is a description of how that is cal- Is that why, in this act, there is a particular focus and culated. Similarly, net operating income is defi ned par- concern about non-arm’s-length transactions? ticularly at section 23 and net operating loss at section 24. We’re coming up to those two sections rather quickly. Hon. M. de Jong: Yes, precisely. Th e general purpose of this section is to ensure that it is understood the act is to be interpreted in the manner Sections 11 and 12 approved. that ensures there is no double counting of any amount in computing income inclusions, expense deductions, tax On section 13. reductions or tax paid. Th at’s the principle that is sought to be enshrined here. B. Ralston: We’ve spoken about the reference to trusts Th en the member’s very legitimate question about how earlier. In the survey of the corporate landscape and an- these amounts are calculated might be better examined ticipating the way in which proponents may structure in the specifi c sections where they are dealt with, as I’ve their business for tax purposes, is it anticipated…? indicated. Obviously, this is, I suppose, not entirely within the knowledge of the government. But analyzing the indus- Sections 15 and 16 approved. try and the proponents, is there a sense that trusts will be used as a method of managing the payment of tax in On section 17. a way so as to minimize it in a way that other structures may not? Is that the reason for the concern about trusts B. Ralston: This part begins, I think, the heart of in the language that’s attached in this particular section? the matter: the application of the tax and liability for tax. I know that my colleague the member for Oak Bay– Hon. M. de Jong: I think I understand the member’s Gordon Head said that he had some questions on section question. If I can answer it this way, hopefully it’ll be 18, I believe. I may have incorrectly recalled the section helpful to him. He has correctly, I think, described the number, but I believe it’s in this part that he will be ask- importance and, dare I say, preoccupation with the pro- ing some questions. visions in the previous section relating to non-arm’s- Can the minister then explain…? I think the starting length transactions. point of January 1, 2017, is fairly clear. We’ve examined By contrast, I don’t think there’s anything that leads the defi nition of an “LNG source.” It is conceivable, then, us to believe there will be a widespread use of trusts. But given this defi nition, that a single integrated operation there is a recognition that it is possible and that we need may have for tax purposes a number of diff erent LNG provisions to be able to deal with that eventuality if it sources? Is that what the implication or the possible were to occur. I would diff erentiate section 13 and its ramifi cations of this particular section are? It ties tax to relevance from section 12 and its relevance in that way. “in respect of each LNG source.” Perhaps the minister [1505] could just explain how that will work. [1510] Sections 13 and 14 approved. Hon. M. de Jong: Th e member has identifi ed the two On section 15. main provisions, the date being fairly self-explanatory. Th e only correction I would make to the description B. Ralston: Th is seems to be a fairly signifi cant sec- the member offered, which I think essentially gets it tion in the sense that it talks about how a taxpayer’s net right…. You are obliged to fi le a return for each facility. operating income and net operating loss from an LNG Th e only correction I might make is — the hon. member source are to be calculated. referred to integrated operations — that you need not Can the minister explain, I suppose, beginning with be an integrated operation to have more than one facil- (a)…? Perhaps a brief description of the diff erence be- ity and, therefore, fi le more than one return. It’s conceiv- tween net income, net operating income and net oper- able that you could be simply the owner of facilities, for ating loss would be in order fi rst, before explaining the example, or, I suppose, of land on which facilities are lo- 5610 British Columbia Debates Wednesday, November 26, 2014

cated, and all of the manifestations that we went through. Certainly the range has come down quite a way. Again, But you need not be an integrated operator to perhaps be I think that was explained in a very open and candid way. obliged to fi le more than one return. Can the minister explain, then, what considerations at the policy level went into making that calculation? B. Ralston: An LNG source is not required to be resi- dent in British Columbia and not required to have a Hon. M. de Jong: Th anks to the member, who, I think, permanent establishment in British Columbia. Is that has phrased his question in a fair and generous way. I correct? would say, broadly speaking, two factors account for what we have before us in section 18, or two processes, Hon. M. de Jong: Th e taxpayer is not obliged to be a if you will. resident. One relates to an ongoing body of work that led to the initial identifi cation of the range that the member re- B. Ralston: Some of the legal commentary suggests ferred to, up to 7 percent. Th at is the analysis our offi cials that that, I suppose, legislative eff ort or legislative intent have been doing relating to our competitiveness vis-à-vis may be subject to some challenge. Perhaps the minister other areas of the world who are either engaged in this can just explain how such a broad interpretation is legally activity or vying to be engaged in this activity. sustainable should that be challenged in the future. One of the things…. I think the member probably has it, and I won’t burden him with more paper. But at the Hon. M. de Jong: Can the member maybe be a little time we announced the details of the taxation measure, more specifi c about the nature of the challenge he’s re- I think on the day the bill was tabled, we presented some ferring to in some of the commentary? Th ese statutes are charts and materials that are our competitiveness com- frequently examined from a variety of considerations. parator. Yes, it is our work. Is it perfect? Undoubtedly not, and the member may have criticisms of some of B. Ralston: Th e example that was provided to me was the assumptions. Nonetheless, that is the work that has a non-resident third-party marketer of LNG who — even helped inform us, in part, with respect to the settlement though it’s a non-resident of British Columbia and does of a particular rate. not carry on business or have a permanent establishment Th e second body of work — ongoing work — is the in the province — could still be required to pay LNG tax. discussions that have taken place with proponents as a means of understanding their cost structures and the Hon. M. de Jong: Th e analysis, of course, that has elements that are perhaps unique to investments taking taken place prior to and during the draft ing of this relies, place in British Columbia. fi rst and foremost, upon the interpretation of the consti- Art or science? I hesitate to say, but those, I can say, are tution in the powers it aff ords the province to apply dir- the two areas where work is focused and have taken us, ect taxation for activities within British Columbia, which ultimately, to a point in time where we were obliged to is why the bill is draft ed in the way it is, tying everything make a decision about a rate that we thought was appro- back to activities at an LNG facility. Th erein lies the basis priate, that met the test we had set for ourselves about a upon which the constitutionality of the bill and the juris- fair return but also a fair return for British Columbians diction to apply the taxation measure are established. that also rendered us competitive. I won’t go on at length about this being one of many Section 17 approved. features that contributes to that competitiveness matrix, but clearly this is one element, and an important element. On section 18. B. Ralston: In the budget this year — the minister, B. Ralston: Th is section sets out the rate, a tax equiva- obviously, will be intimately familiar with the budget — lent to 3.5 percent of the taxpayer’s net income. Th ere’s there was not a…. It was a topic box in the budget which a calculation of net income that we’ll deal with in more set out some goals and likely the range that we spoke of, detail later. of revenue to be derived from this tax. [1515] [1520] Can the minister explain how this percentage of 3.5 Now, we’ve spoken earlier of the competence and ef- percent was arrived at? I think the minister has been fair- fi ciency and insight of senior staff in the ministry, so ly candid and his colleague the Minister of Natural Gas presumably this wasn’t a decision taken lightly. I’m won- has been fairly candid that there was initially a proposal dering to what degree there was modelling done of pro- that this tax be up to 7 percent, so certainly there was a spective revenue, given that range, in settling not upon range considered. I note the minister’s insistence, and I the number that’s in the bill but the number that preceded think this is accurate, that he did say up to 7 percent; he the bill, the topic box that was in the budget documents didn’t say 7 percent. I accept that. last spring. Wednesday, November 26, 2014 British Columbia Debates 5611

Hon. M. de Jong: I’ve got some material that I’m happy been relevant. It was certainly relevant in the minds of to share with the member that relates to modelling at proponents who we were engaged in discussions with. various rates — at 7 percent, at 5 percent, at 3½ percent. Secondly, the realization that for some LNG taxpay- No question, the reduction in the rate reduces the rev- ers, because of how they were structuring, they would enue that will fl ow to the Crown in the event that projects be paying the higher-tier rate as opposed to the 1½ per- proceed, construction begins and completes, and LNG, cent almost immediately, given the manner in which their liquefi ed natural gas, begins to fl ow. operations are structured. Th at, too, bore some relevance I have some material, for example, for a typical — well, to the discussion that was taking place. All of it factored I’m not sure there is such a thing — two-train facility. I into, again, overall questions of competitiveness relative think most of our modelling revolved around two-train to what was happening elsewhere in the world in the in- facilities. I’m happy to share that with the member to dustry — in an evolving industry. demonstrate how we think the LNG income tax at 7 per- cent would have operated, how it would operate at 5 per- A. Weaver: Coming back to the revenue projections, I’m cent and on the graduated basis included now in the bill. wondering if the minister would be prepared to also send me the same information that would be sent to the critic. B. Ralston: Certainly, the minister and his staff , and the government generally, are aware and have expressed Hon. M. de Jong: Happy to provide the hon. member their awareness repeatedly of the requirement to be inter- with the same material. nationally competitive. Th at awareness would have ob- viously factored into the position that was taken in the A. Weaver: Is there a ballpark fi gure as to the pro- spring. jected revenue from a two-train system, say, in terms of I do recall…. I think it’s a study by Ernst and Young, the next decade, that the minister is able to share, from which was commissioned as part of that process, which the LNG tax rate? said that the spring document, the range that was proposed in the spring, was indeed competitive, and Hon. M. de Jong: Th ere is, and again, I’m happy to they compared some North American jurisdictions — provide it to both members. Both members will appreci- Louisiana, Texas, Oregon, I believe, maybe one on the ate that there is a series of assumptions tied to those cal- east coast and Australia as well. culations — the size of the operation fi rst and foremost I suppose what I’m leading up to, and I don’t think this amongst them. We have that material, and I’m happy to is any secret, is…. I know the minister has given a public share it with him. answer about this, but I’m just wondering, given the rela- tive short passage of time, seven months, what changed A. Weaver: In the revenue projections that were done, so dramatically. When you had all this work about com- one of the key assumptions would be the future price petitiveness — a very thoughtful, highly professional — or certainly the future spread — of natural gas prices public service preparing the documents — disclosed between Asian markets and North American markets. publicly, what confi dence did you begin to lose that you In 2012 the deputy minister did a presentation at the didn’t have when you tabled a document with the budget? Generate B.C. conference, where he put forward in this Obviously, the budget is the paramount and most im- presentation, publicly available, 20-, 30-year projections portant document in the government process. Th is is a of an LNG price spread maintaining about the same as fairly signifi cant position that was taken last spring. I’m it was then. Th at is $16 to $6 or…. It was a $12 spread just wondering how that decision came about, and then maintaining essentially in perpetuity. we’ll perhaps pursue why it changed. My question to the minister is: in the LNG projec- [1525] tions, was this same data used — that is, an assumed $12 to $13 spread in the price of natural gas in Asia versus Hon. M. de Jong: I’m trying to answer, particularly British Columbia? Or if not, what LNG price spread was the member’s question. I would say that broadly speak- assumed, or what variables were assumed in this regard? ing, initially at least, two important features guided the [1530] conversation and the internal discussion — and he’s right, an important one — and a vigorous discussion ensued Hon. M. de Jong: What I can provide the member with internally. — and I was casting my mind back — is a chart, a graph Th e evolving forecasts around revenue, around the that actually projects, or projects as best we could, based price LNG is fetching internationally…. And that con- on available information, what we believe the spread will tinued to evolve through the spring, summer and to some be going forward, out to at least 2020, and we may have extent, now, although you begin to see reports and fore- it for beyond there. casts that have the price levelling out and actually com- It does not, I can tell the member — and I’ll provide ing back somewhat from lower levels. Th at would have it to him — show a constant diff erentiation. It shows a 5612 British Columbia Debates Wednesday, November 26, 2014

growing diff erentiation as you move out past 2015 and Hon. M. de Jong: I understand both the relevance and into 2020. Rather than me trying to describe it to him, the importance of the question. I hope the member won’t better for me to give it to him. think I’m trying to evade either. Th at question is answered directly as part of a budget- A. Weaver: We don’t have access to PowerPoint in ing process in circumstances where we are confronted the chamber, unfortunately. Th e one I have before me is by the happy circumstance of having the revenue fl ow in. showing the projected change going from 2012 to 2046, We’ve just done the second-quarter update. I won’t refer with the price increasing in North America to just under to that, because it doesn’t really touch on the future. But $8 per million Btu and in the Asian market to just under in February we’ll introduce another budget that will have $18. Th at diff erence, basically, was constant in time. budget forecasts for the next three years, and the member Th e minister is, then, suggesting that diff erent projec- will want to watch closely. tions of future natural gas prices were used, such that the In the event that a fi nal investment decision has been spread actually increased with time? My question, on top taken and we are in a position with some certainty to of that, is: what would happen to the price projections, begin tracking construction activity and ultimate pro- and has the government actually undertaken modelling duction, part of the challenge for government will be to studies to refl ect the new Asian market price for natural start revealing those numbers and project how we think gas, as signed through the recent China-Russia agree- they will begin to fl ow and how we intend to allocate the ments and the U.S. agreement that came through the Gulf money. We won’t be in a position to do that, though, and Coast, where substantially lower than present prices were won’t do that until we have secured a fi nal investment de- done for long-term contracts? cision and see the industry actually taking steps forward — where this legislation that we’re dealing with actually [D. Horne in the chair.] becomes relevant in a practical way.

Hon. M. de Jong: A couple of things come to mind, B. Ralston: The minister said that one of the con- one being…. Well, fi rstly, the information upon which siderations that led the government to set the rate at we have been relying, the modelling, is ongoing. As 3.5 was that one proponent, I think he said, in discus- intervening events occur and infl uence that price, part sions or negotiations with them, I suppose, thought that of the challenge, not just for government but propon- they would be paying the 3.5 percent right away, yet the ents themselves, is to assess what the impact of that is go- structure of the act is very diff erent. Th ere’s an initial 1.5 ing to be going forward. Th ere are lots of theories about percent payment, which is deductible against paying the what that will be. 3.5. Th en there’s also an investment account, from which It probably represents the single biggest challenge, I a statutory rate will be calculated. Th at will be excluded, would say, certainly for government but also proponents as I understand it, from the calculation on which the 3.5 who are making decisions around the investment of bil- percent is made. lions of dollars, who are gazing into that crystal ball and Can the minister explain, then, how that representa- asking themselves: what is the product I produce going tion was made, apparently by one of the proponents in to be worth in those marketplaces? discussion with the government — and at least explain [1535] it? I mean, I appreciate there may be some commercial Th ere’s an added feature to this that is relevant for the confi dentiality — that’s usually what the government member to have in his mind when he considers revenue relies upon in these matters — but given that the min- forecasts. Th at is the fact that under the terms of the act ister has said that, I think there’s some obligation to put the pricing point exists here in Canada at a point at the some fl esh on those bones. facility. Th at, of course, doesn’t mean that the price in an Asian market, for example, is irrelevant, but the forecasts Hon. M. de Jong: Again, it’s a fair question. I don’t are tied to the pricing point here in Canada. think that in answering I’m revealing any deep, dark trade secrets. A. Weaver: A fi nal question on this track, then. In light [1540] of the uncertainty in future revenue projections from the In circumstances where a taxpayer actually hasn’t con- LNG tax rate, here set at 3.5 percent and then increasing structed a facility — and that is conceivable; they own to 5, does the government in its revenue modelling have the gas fl owing through and become a taxpayer on that an estimate as to…? Well, fi rst off , will the money from basis — they wouldn’t have a capital investment account this be put into general revenue, or was the plan to put to draw down before paying the higher rate. Th ere likely it into a prosperity fund? If so, what time frame does the would not be a period of paying the tax at 1½ percent. government believe it needs to have in order to actually Depending on who the taxpayer is and how their in- get $100 billion into that prosperity fund from this 3.5 volvement in the liquefaction process is structured, it’s percent LNG tax regime? conceivable that they could be paying the higher rate Wednesday, November 26, 2014 British Columbia Debates 5613

and wouldn’t have the larger investment account to draw B. Ralston: Th is is a qualitative question, I suppose. down fi rst, in the way that an integrated operator would I’m only dealing with it because the minister has men- who has built an LNG facility. tioned it. [1545] B. Ralston: As far as I understand, none of the propon- To what extent was this a notion that some LNG ents are in a position where they already own a pipeline. sources would be paying the 3.5 percent — or if it were I suppose the only one that might be somewhat in that higher — right away? To what extent was that deter- range would be the Woodfi bre operation where the nat- minative in the decision to lower the range from up to 7 ural gas pipeline to Vancouver Island runs through their percent down to 3.5 in the rather dramatic way that that property. But that proposal is operating on a scale that is occurred when the legislation was unveiled? very, very diff erent from the major proposals in Kitimat and Prince Rupert. Hon. M. de Jong: I think the fairest way I can charac- As I understand it, there is — with that possible excep- terize it is that in the course of conversations and discus- tion of Woodfi bre, which is an anomaly — no propon- sions with proponents, the question of how the structure ent in that position. Th ey ultimately may build a pipeline, and the tax regime would interrelate came up. I wouldn’t and they may build a liquefaction plant. But in terms of want to leave the impression with the member or the com- a pipeline to deliver gas to a liquefaction plant, I’m not mittee that this was a determinative factor relating to the aware of that. rate that was ultimately set and is before us in the section. Perhaps the minister could enlighten me. Th e question of the degree to which the overall struc- ture and the rate might infl uence behaviour or the man- Hon. M. de Jong: To the member’s point, I’m not ac- ner in which investors structure their operations would tually sure that Woodfi bre qualifi es as an exception either. certainly have come up. But I don’t want to overemphasize Here’s the diff erence. If you’ve got an LNG plant, there the degree to which the question we are dealing with to- is certainly a set of assumptions that attach to the owner day ultimately determined the rate before the committee. of that plant, but it’s quite conceivable that the owner of gas will take gas through that plant and will become a B. Ralston: Another question as to whether this may taxpayer. Th ey will pay a rent or a toll or whatever to the have been a factor or not. Under the B.C. Mineral Tax Act, owner of the facility. But as the owner of the gas, and if Crown royalties are deductible against federal income tax, that is all they own, they incur a liability related to the as I understand it, and also British Columbia income tax. transformation, the conversion of the gas, and do not As I understand it, the federal government has not taken have the capital investment account to draw down. a position on whether the LNG tax will be deductible Th at’s the circumstance. It doesn’t relate to the “pro- against federal income. Th at’s leaving aside the separate ponents” who are talking about constructing a facility. It question about accelerated capital cost allowances. relates to others who may make use of that facility. Has the minister engaged in any discussion or his offi - cials engaged in any discussion with the federal ministry B. Ralston: I believe that was mentioned in some of of fi nance about whether that will come about, or is he the commentary — that there is a disparity in the appli- aware of any discussions that proponents may have had cation of the tax in the exact way that the minister has with the federal ministry of fi nance about the tax becom- described. ing deductible against federal income tax? Is the minister concerned that some…? I mean, ob- viously from the perspective of revenue, he’s probably, Hon. M. de Jong: I don’t have a defi nitive answer for understandably, not concerned. Would that not be a the member. We strongly suspect, of course, that there problem in the sense that some will pay the 3.5 percent are discussions taking place between the proponents and almost immediately and others, given if you’re making the federal government. Th e member has mentioned an- an investment of $10 billion to $15 billion, won’t be pay- other area that has engaged their attention vis-à-vis the ing the 3.5 for some time? Is that a problem, or is that just federal government. We’ve not received a specifi c ad- the revenue design and the minister is content with that? vance ruling from the federal government to this point, and I’m reluctant to off er an interpretation of how the Hon. M. de Jong: Two things. Primarily, of course, the federal Income Tax Act would purport to deal with this act and the structure remove uncertainty. I suppose one in response to an application for deductibility. It’s prob- could also make the point that the agency that doesn’t ably premature for me to off er an opinion, unwise for me have the capital investment account to draw down also to off er an opinion, on that matter. hasn’t made the multi-billion-dollar investment neces- sary to construct the facility and is, therefore, not deal- B. Ralston: But surely, if the tax is deductible against ing with whatever costs are associated with sourcing that federal income tax, that’s a major advantage, just as the amount of capital. shift ing to the fast write-off of the depreciation process. 5614 British Columbia Debates Wednesday, November 26, 2014

Rather than 25 or 26 years, it was down to seven, as it is in ating with proponents project development agreements. manufacturing — and have the plants classifi ed as manu- I think the Premier has announced that they will be com- facturing facilities. Th at would be a signifi cant fi nancial pleted by November 30. Th at’s this year, 2014. advantage. It’s been reported publicly that the compan- It would seem to me to be a reasonable provision in ies are seeking that. such an agreement, granted that the provincial govern- [1550] ment doesn’t control the tax treatment that the federal As part of the discussions — I hesitate to call them government may decide to give these projects. negotiations, although sometimes that language is used [1555] by diff erent government ministers — would that not be Would it not be prudent in such a negotiation to at an important factor to consider in designing where to least address that in a project development agreement, set the rate? where it would materially alter, in a favourable way to the If the tax is going to be deductible, or if there are other proponents, the revenue that they get — contrary to the deductions from federal income tax and depreciation position that they’re in now. It would seem to me to be a allowances that are going to be put in place, would that reasonable contingency to include an agreement. not be an important factor to know in the dealings with Can the minister tell the House whether, in those pro- the proponents? ject development agreements with the leading propon- Obviously, that could have a very material eff ect in ents who are the ones that are closest to fi nal investment terms of the outcome. But it seems to me that the min- decision, those kind of considerations are taking place? ister is saying we’re setting this rate, and the proponents may gain further fi nancial advantages down the road to Hon. M. de Jong: To the member, he’s correct. Th ere minimize their tax, and that’s fair enough, and that won’t are ongoing discussions. In fact, in the case of the project aff ect our decision now. It seems to me a bit shortsighted development agreements, I would say you could prob- on behalf of the province and upon the potential revenue ably in a certain limited way apply the term “negotiation.” not to make those inquiries. But I would say to the member that those project de- velopment agreements are being discussed bilateral- Hon. M. de Jong: I don’t know that I’m going to of- ly, between the proponent and the province of British fer the member a satisfactory answer in acknowledging Columbia as a jurisdiction, and we are not purporting this. Th ere are matters over which we have constitution- — to this stage at least, to this point — to roll into those al authority and jurisdiction and matters that we do not. agreements provisions that would necessarily, to be Th ey are together all relevant, particularly from a pro- meaningful, involve making the federal Crown a party ponent’s point of view. Th ey remind us constantly and to the agreement. validly, in my view, that they are examining and consid- Th at’s a longwinded way of saying that the negotia- ering this matter on the basis of an overall cost structure tions, discussions, thus far relating to project develop- and are less concerned with who’s getting what share of ment agreements have been between the proponent and the tax take. the province and have not engaged the direct involve- Yet we are also obliged to be forthright with propon- ment of the federal government. ents, as I will try to be here, and say we are not in a pos- ition to off er up federal currency and certainly not in a B. Ralston: Well, I don’t think I’m suggesting that the position to provide any measure of assurance about fu- federal government be directly involved in those nego- ture treatment from the federal parliament. tiations. Clearly, they’re between the major proponents I don’t, again, want to leave the impression with the and the provincial government. What I’m asking is…. It committee that we have provided those assurances. I can would seem to me to be a reasonable contingency that, in say that, with respect to the capital cost allowance issue, the event that there is change in the federal tax structure we have been supportive of the advances made by pro- that benefi ts proponents, there be some contingency plan ponents and those who wish to be engaged in the LNG about what alternatives are available to the province of sector who have made submissions to federal offi cials. British Columbia in terms of the revenue that it receives. We have lent our voice to those submissions but, again, Th e Minister of Natural Gas Development is quoted have not been in a position to say to proponents or guar- as saying that these project development agreements will antee them a particular outcome. “write the fi scal structure in stone.” I think that’s how he put it. Clearly, proponents are looking for certainty, but if B. Ralston: I appreciate fully that the minister can’t changes benefi t them, is there no provision for recapture guarantee the outcome of ongoing negotiations, as by the province of some of the revenue that may accrue to they appear to be, or lobbying with the federal govern- the proponent? Th ey get protected on the upside by having ment. But the minister has acknowledged, and I think certainty on the tax rate in the agreement, to the degree the Minister of Natural Gas Development has acknow- to which you can fetter the parliamentary sovereignty. ledged here in the House, that the government is negoti- [1600] Wednesday, November 26, 2014 British Columbia Debates 5615

Be that as it may, there doesn’t appear to be, in what dustry. Tax policy, certainly, is a component of that. the minister is saying, any eff ort to look out for the pub- To take another example that the member has alluded lic interest in just such an event that I’m speaking of. It to: the desire of proponents to seek an adjustment on the may very well happen. It may not, but certainly, surely, capital cost allowance. that can be written into an agreement as a contingency. [1605] “If this happens, then this will happen.” Th at would seem If I followed the member’s logic, it would be to include to me to be the currency of negotiations. a provision that were the federal government to see fi t to do that for their own purposes in terms of adding to the Hon. M. de Jong: Not to be argumentative — I don’t competitiveness of Canada as a jurisdiction, we would mean to be, but I also want to be forthright with the mem- include a provision that would claw that back or adjust ber and the committee. Th ere are a variety of contingencies the benefi ts and take some of the benefi ts. As attract- that may well impact on both the economics of these pro- ive as that might be from a treasury perspective, it is (1) jects and therefore the revenue that accrues to the Crown speculative and (2) seems to me would be counterintui- and the province and the right of British Columbia. tive to the eff orts the industry would make to seek more Th e project development agreements that are being favourable tax treatment from the federal government. discussed and, we hope, eventually fi nalized as between I think I understand the point the member is making, the proponent and the province of British Columbia will and I take it he disagrees with the approach that we have focus on those matters and those areas over which those pursued in taking a very complicated set of discussions two parties have responsibility and jurisdiction. I under- and focusing on those matters that are within the direct stand the member’s view that the agreements should constitutional responsibility and authority of the prov- include, in his view, contingency provisions that take ac- ince, but that is what we have done thus far. count of other circumstances. I’m certain that one can imagine circumstances in B. Ralston: I reject the language that the minister has which that might be advantageous to the proponent chosen to characterize my comments with — clawing it or advantageous to the province, but I can only tell the back. What I’m saying is that this is indeed a feature of member directly and in a forthright manner that on a fi scal stability agreements in countries around the world. very complicated engagement, the focus has been those Th ey’re not unknown. Th ey’re very common in many, matters that fall within the jurisdictional authority of the many countries in the world. When a proponent makes province and the authority of the proponent to infl uence. a signifi cant capital investment, there’s a sense that they want some kind of fi scal stability, and that’s what’s being B. Ralston: From what the Minister of Natural Gas off ered in this agreement. But many of those agreements Development has said, the rate of 3.5 percent — this rate, — not all, but many — do off er the opportunity to at least I’m suggesting or concluding, based on the language he reopen and negotiate if there is a signifi cant reduction in used — will be written into just such an agreement, a tax to the proponent. project development agreement. Th at’s what the propon- It seems to me only logical that if the proponent is ents are looking for — this 3.5 percent rate to be locked seeking certainty and no increases, they shouldn’t ne- in and on January 1, 2037, up to 5 percent. So those two cessarily benefi t entirely and completely from any re- rates that are referred to in section 18 would be locked ductions in tax without some negotiations to share the into that agreement. additional revenue there. I don’t understand the reluctance of the minister, on I can see the minister is rejecting that. I’m not sug- behalf of the province, to say: if there are changes in the gesting a clawback, although I suppose that is on the min- total…. And it is a question of competitiveness. Th e rate ister’s mind, given some of the discussions about social is being set at a rate that presumably meets those criteria. welfare policy that we hear here where there is just such a If it becomes more favourable to the proponent by thing. I’m not suggesting 100 percent clawback. I’m sug- changes in the federal tax structure, why shouldn’t there gesting that a negotiation where some of the reduction in be some opportunity on the part of the province to take tax and, therefore, the increased profi t be shared, given advantage in some negotiated way, an understood way that these are natural resources that belong to the Crown. and foreseen way, of the extra revenue? I don’t under- But I understand that the minister is rejecting that and stand why the minister, on behalf of the government, that provisions like that won’t be included in these agree- would sit on his hands in that situation. ments, which are, as the Minister of Natural Gas seems to think, being conducted in secret and will not be disclosed Hon. M. de Jong: Well, I’m not sure that I’m going to publicly, if ever. I’m not sure. He talked about commer- be able to satisfy the hon. member. I think I understand cial confi dences and how revealing them could crash the his point, and I think he disagrees with mine, which is stock market and things like that. that we are engaged in discussions that are endeavouring Th ese are major investments, and the tax treatment, if to ascertain the overall cost competitiveness of this in- it changes through federal action, seems to me to be a 5616 British Columbia Debates Wednesday, November 26, 2014

legitimate subject for discussion. But clearly, the minis- Lastly, I would say this, and I hope the member will ter has rejected that, and I’ll move on. accept this from me as being accurate and valid. At each Th e package that was set out in the spring in the budget step of the way when there was engagement with pro- with the range up to 7 percent, then the change. Would it ponents on the matter of taxation policy generally and be fair to characterize that as a negotiating position that taxation rates in particular, the point was made that the was set out in the budget, and then the minister went out sovereign jurisdiction for setting those rates rests with to discuss it, or his offi cials, with proponents? Was that the Crown via deliberations in this chamber, and that a best-eff orts position — this is what the regime should that point has been and will continue to be emphasized be — or was it intended as a negotiating position with a at every step of the way. view that down the road it would be lowered in the man- ner than it’s been lowered? Certainly, it has that appear- B. Ralston: I thank the minister for those comments. ance, at least to some. Looking at subsection (b) — this is the provision where [1610] the rate rises to 5 percent in 2037 — can the minister ex- plain what considerations went into (1) selecting the date Hon. M. de Jong: Thanks to the member. I’ll just and (2) selecting the rate — the date of January 1, 2037, quickly revisit a couple of his parting comments on the and the rate of 5 percent? issue we were canvassing. I think it would be incorrect or [1615] inaccurate to take my earlier comments as representing a defi nitive position on all manner of stability measures Hon. M. de Jong: To the member: as he might expect, that might be included in a project development agree- several factors. Forecasting around price and price de- ment. If I left that impression with the member, then I velopment would have been considered. regret that. Th at was not my intention. Another feature that I don’t want to suggest was com- As well, I would say this, because I think the member pletely absent from the consideration is the notion of has a legitimate interest. Th e Minister of Natural Gas, I picking a date that would create an incentive for propon- think, has been incorrectly characterized as suggesting ents to move as quickly as possible to take advantage of that the project development agreements will not be an initial lower period. First movers in the establishment available in the public domain. Th at is not the intention. of this industry in British Columbia will, of course, enjoy Th ey clearly have relevance and touch on matters that a longer period of time at the lower rate than those who are important to British Columbians and involve re- perhaps wait longer to establish their facilities. So there sources owned by British Columbians. So the intention are two considerations, at least, that would have factored is quite the contrary. Th e member, as a result, I believe, into the settlement on the date. will have an opportunity to render his own judgment on provisions contained within those agreements. I presume B. Ralston: I suppose one wonders, given the shift and hope that he will welcome that opportunity. in what is described as market conditions between the Th e question, then, that I think he’s put, in the context spring and the fall and the change in the rate, what con- of our ongoing discussion around section 18, is whether fi dence one might have that that rate in 2037 responds to or not it would be fair to characterize the reference to the real conditions. Clearly, estimates have been off in a very range of up to 7 percent, which accompanied the tabling short period of time. Th e natural resource industries are of the budget in February of this year as a bargaining or notoriously volatile. Is it really just…? negotiating position. I would say emphatically that that What I’m interpreting the minister as saying is that is not the case. the increase in the rate was put far enough out that there First and foremost, the government’s intention was to was rate stability in an eff ort to induce fi nal investment address a desire that had been articulated by proponents decisions. Would that be a fair characterization of what and others alike that some indication be given as to the happened? structure of the taxation regime that the government was contemplating — in this case, a two-tiered structure that Hon. M. de Jong: I think, in part, that’s fair — provid- related to an initial lower amount while capital invest- ing certainty for that initial period of time at the rate. I ment costs were being paid down. wouldn’t want to suggest otherwise. Th e objective, at the time of the budget, was to provide some insight into the approach and the thinking that was Sections 18 and 19 approved. developing within government as to the structure that the LNG tax we now have before us, in all its voluminous mag- On section 20. nifi cence, would entail. It was, I thought, appropriate to include with that some indication of the range which the B. Ralston: Th e tax pool is an important concept for government at the time felt might be appropriate, subject, as understanding the way in which the tax operates. I know I said, to the time, ongoing analysis and ongoing discussion. that there were some graphs that were provided, but es- Wednesday, November 26, 2014 British Columbia Debates 5617

sentially, the pool that’s created is created in a couple of Hon. M. de Jong: Th e short answer is: we were seek- stages. Th e focus is to pay the taxpayer back for the tier 1 ing to structure this in a way that would see some cash tax paid at the outset by reducing the tier 2 tax. fl ow to the Crown. A conventional construct on income Essentially, the tier 1 tax functions as a minimum tax, taxes allowing, fi rst, for the deductibility of capital ex- if I can put it that way. I think that’s how it has been de- penses, for example…. scribed to me. But it’s deducted against the higher rate, [1625] the 3.5 rate, until payments of all those 1.5 percent pay- If that were to be applied in conventional terms, the ments are exhausted. Is that a fair description of the tax Crown would be waiting a longer period of time before it pool? saw any revenue fl ow via this instrument. Th e construct is designed purposely to begin to see a revenue fl ow to Hon. M. de Jong: I think that’s an accurate description. the Crown earlier than would otherwise be the case in [1620] more traditional income tax models.

Section 20 approved. B. Ralston: Essentially, that 1.5 is really a prepayment of the later tax. Have proponents suggested, or is it the On section 21. intention of the government…? It’s unlikely that at that stage they would be profi table. Have they asked or made B. Ralston: Th e term “net operating income” — can representations that interest be paid upon the amount the minister explain how that’s calculated? Th at’s an im- of prepayments? portant step in the tier 1 tax, to calculate the net operat- ing income. Hon. M. de Jong: I thought I heard the member in- clude in his question a reference to something about Hon. M. de Jong: I can do one of two things. I can start payments when there was a loss. To be clear, this tax is to read section 23, or we can deal with it in a couple of payable — even this tier 1 tax is payable — only if there sections, where the defi nition of “net operating income” is a net operating profi t. In a situation where there’s an operating loss, even this initial amount wouldn’t be pay- is set out in fairly excruciating detail. able. Th en the member had another question, but maybe he B. Ralston: I do note that the defi nition of “net operat- could remind me of it. ing income” is coming up. But perhaps the minister could just explain how the tax on that operating income…. Th is B. Ralston: Well, thank you for that clarifi cation. Th at is to be diff erentiated from the calculation of net operat- was an error in how I described it. ing income itself, so if we leave a more detailed discus- Th e balance of the tax pool, which is the 1.5 percent, sion to section 23, can he explain how the tax will be then will ultimately be deductible against the 3.5 percent calculated, then? when the triggering events take place. Given that it’ll be calculated, it’ll be a tax pool, and it’ll be calculated for- Hon. M. de Jong: I’ll generalize, and hopefully, the ward, have proponents made representations that interest member won’t hold me to task to account for the over- be paid upon the dollar value of the tax pool, given that generalization. But if we think of this in terms of rev- it’s essentially a prepayment against a future tax? enues less allowable expenses, operating expenses, we get a sense of what net operating income is intended to Hon. M. de Jong: I am advised that the answer is no. represent. But if they’re reading or watching these debates, maybe Th e relevance here is how the section sets out the re- they will tomorrow. quirement to pay the tax on net operating income at 1.5 percent and provides that the 1.5 percent tax is not B. Ralston: Well, certainly, that’s something that has payable if the taxpayer deducts an amount from its net occurred to some of the commentators. I don’t think it’s operating loss account balance or its capital investment an idea that comes out of the blue. account in that year. If there are no deductions from the I suppose that the next question is, then: if those rep- net operating loss account or the capital investment ac- resentations were to be made, what would the minister count in a given year, then the tax at 3½ percent — and say? Or is he unwilling, perhaps, on such short notice to ultimately, the 5 percent rate — would apply. take a position on that? As I understand the structure now, it’s not proposed to do that. B. Ralston: Th e 1.5 percent rate, tier 1 rate, is then ul- [1630] timately deductible against the tier 2 tax payable until all of those payments are exhausted. Can the minister ex- Hon. M. de Jong: A bit of a discussion, as the mem- plain why that choice was made? bers of the committee would see. 5618 British Columbia Debates Wednesday, November 26, 2014

Th e act does not contemplate the calculation and pay- Hon. M. de Jong: If I understood the question cor- ment of interest in the manner the member, I think, is rectly, the facility is king — or queen, whichever term is suggesting. Is that a matter that might be reviewable and appropriate these days. You can certainly contemplate require a secondary decision? It may well. At the moment having multiple taxpayers attached to a single facility, the most direct answer I can give the member is that the and for each of those multiple taxpayers, they can draw act before us does not contemplate the payment of inter- income and expenses from multiple sources with respect est in the manner that he has described. to the return they fi le for that facility. Perhaps a bit un- usual, but the tie-in to an individual LNG facility is fun- Section 21 approved. damental to the operation of the act.

On section 22. B. Ralston: Back to the case of the off shore company without a permanent establishment in British Columbia B. Ralston: Section 22 deals with exemptions. that falls under the jurisdiction of the act and has in- Subsection (3) talks about “prescribed circumstances” come. Obviously, there will be some administrative pro- and subsection (4) “prescribed person” or “prescribed visions in regulation. How is it envisaged that that will class of persons,” giving authority to say that no tax would be administered and regulated and, I suppose, enforced be payable under the act. Why is that provision in the act, if it’s not done? leaving, presumably, the discussion to the cabinet to ex- empt payment? Is this a standard boilerplate clause, or is Hon. M. de Jong: I’m actually glad that the member there some design in this that goes beyond just wanting asked the question now because, at some point, I had to address every contingency? meant to make this point. Th e administrative and en- forcement provisions that are normally part and parcel Hon. M. de Jong: I think the explanation for the pres- of a bill and a statute like this do not appear. Th e admin- ence of the two subsections is as follows. Th e member has istrative and enforcement provisions are in the midst of being draft ed now, and the member will see those this correctly identifi ed the incorporation of federal exemp- spring when the Legislature reconvenes. tions in the earlier subsections. I’m reminded that a situ- ation could arise where the federal government and the B. Ralston: Just so I’m clear, then. Th at will come in federal tax statute — I’m going to make up a term here the form of separate legislation to administer the act? Or — de-exempt someone that we wish to continue to ex- will it come in the form of regulations which are then empt, in which case having the regulatory power to do made public? so would be appropriate. [1640]

Section 22 approved. Hon. M. de Jong: An additional piece of legislation. Th at may well include some regulatory enabling provi- On section 23. sions, but it would be a separate piece of legislation.

B. Ralston: Net operating income and net operating Sections 23 and 24 approved. loss are set out in sections 23 and 24. Just as a basic ques- tion, why was it felt necessary to have them in two separ- On section 25. ate sections? Why not just have the calculation of income in a single section? B. Ralston: I guess the question is…. Th is reiterates [1635] the reference again to “source.” The minister has ex- plained, I think, in some detail a number of times that Hon. M. de Jong: I don’t have a magical answer. Th e the eff ort is in the act to tie income to an LNG source. advice I’ve received is that the draft ers felt that setting out Th is seems to repeat provisions that are elsewhere in the the defi nitions and calculation methodologies in separ- defi nitions section. I’m just wondering what the added ate sections was better from a draft ing point of view and legislative increment is here? What is being said here from a construct point of view, given the relative import- that’s not said elsewhere? ance of the terms. I think it was a style of art in terms of the draft ers’ preferences. Hon. M. de Jong: Th ank you to the member. Th e ter- minology is technical and at times confusing. Th ere are B. Ralston: Will each business or property that earns two types of sources: “LNG source,” which — the member income from an LNG source be required to fi le a separ- is correct — we have talked about and discussed insofar ate LNG tax return, or would amounts be aggregated for as its relevance with respect to an LNG facility; and then a facility as a whole, for example? this term, “source,” as utilized in the federal Income Tax Wednesday, November 26, 2014 British Columbia Debates 5619

Act, referring to multiple sources of income by a business. Act of British Columbia, where there is a prescribed rate Th is section deals with the latter as opposed to the former. of return on capital that’s then deductible before net in- come is calculated, as I understand it. B. Ralston: Th ank you. Th at wasn’t clear to me, but then I just wanted to understand why the minister has perhaps I’m not reading it closely enough. I’d confused chosen to proceed in that way, dealing with the invest- the two. Other than adopting the language of the federal ment allowance or the investment account. If he wants Income Tax Act — I think in division 2 that’s essentially to answer it now or in connection with the later sections, what takes place, with some inclusions and exclusions — that’s fi ne. It suits, for my purposes, dealing with it here does this section do anything else? with this division, because the division is basically telling how net operating income is calculated. Hon. M. de Jong: My advice is that this section is based on federal Income Tax Act concepts of what in- Hon. M. de Jong: I’m obliged to the member for the come from a source represents, and that’s the intention clarifi cation. behind the section. We touched on this briefl y when we considered some of the defi nitions, and the member then correctly pointed Section 25 approved. out that in other taxation legislation there are provisions for interest deductibility related to actual interest costs On section 26. incurred by a taxpayer. We have chosen, for reasons that I touched upon when B. Ralston: Th ere are a number of sections in this div- we were discussing the defi nitions earlier, to adopt this ap- ision — 26 through 43. I’m told that this describes how proach, which sets out a methodology formula for calculat- the computation of net operating income is modelled on ing an allowance and does so on an equitable basis without the computation of income under the federal act and is regard for the individual circumstances of each taxpayer. adjusted for specifi c inclusions and exclusions. Th e desire was to provide equal and, we felt, equitable treat- I understand the major adjustments or some of the ones ment, and that, at its core, is what has led to the approach we’ve referred to — income does not include interest, divi- in the provisions contained within the division. dends or hedging gains; no deduction allowed for capital cost allowance; and no deduction for fi nancing charges, B. Ralston: Just to return to the investment account. Th e including interest — all of which we’ve addressed earlier. analogy is drawn by some of the commentators with the But a deduction is allowed for the investment allow- Mineral Tax Act. But there are provisions in the upstream, ance, based on the taxpayer’s adjusted capital investment in the royalty treatment of natural gas itself, that are, I think, account. Can the minister explain the thinking for al- more closely analogous to what’s in the Mineral Tax Act. lowing that deduction from net operating income? [1650] [1645] I’m wondering, when it comes to, particularly, facili- ties — we’ve even discussed that they may be classifi ed as Hon. M. de Jong: I apologize. I want to make sure I’m manufacturing facilities for the purposes of a capital cost answering the question that the member wants answered. allowance — why it was felt necessary to adopt an analo- I think we’re on section 26. I may have misunderstood the gous concept from the Mineral Tax Act. I’m wondering nature of the question, or maybe it’s a broader question why that is. Why is a statutory rate of return deductible relating to a series of sections in aggregate. from net operating income? I can see the advantage to the taxpayer, but I’m wondering, from the perspective of the B. Ralston: I was perhaps attempting to move a little bit government and revenue, why that decision was made. faster in looking at the division as a whole. If the minister is resisting that, I’ll revert back to going section by section. Personal Statement

Th e Chair: Perhaps we could deal with the division WITHDRAWAL OF COMMENTS and then deal with the sections. MADE IN THE HOUSE

B. Ralston: We’ve discussed a number of adjustments J. Horgan: Hon. Chair, I rise to withdraw comments I that are diff erent from the Income Tax Act that are de- made during question period earlier today. ductions that are not permitted — interest, hedging gains and losses, fi nancing charges, including interest. Th ose Th e Chair: Th ank you. were dealt with in the defi nitions section. Th ose are not permissible deductions from net operating income. Debate Continued Th ere is a concept of the investment allowance. It’s re- lated to the same type of mechanism in the Mineral Tax Hon. M. de Jong: Probably two factors. I’d begin by 5620 British Columbia Debates Wednesday, November 26, 2014

suggesting that the objectives as between this act and [D. Horne in the chair.] the Mineral Tax Act are perhaps somewhat diff erent. I will also acknowledge that what we were, in part, trying Sections 26 and 27 approved. to achieve here is a measure of certainty for the Crown, recognizing that an alternative approach might incent On section 28. behaviour that ultimately would have negative revenue consequences for the Crown. B. Ralston: Th is section deals with the valuation of Perhaps a bit of a trade-off , and the member might inventory. Th e administrator, or the act, protects the point that out. On balance, in assessing this we felt that power to deem whether transactions have occurred at creating certainty, creating equitable treatment — and fair market value. certainty that preserved unto the Crown the right to I’m wondering, fi rst of all, what is intended by an in- set the rate — was an advisable and appropriate way to ventory. It excludes, in section 2, land. Is it capital and proceed. natural gas in the plant? Th at would seem to be — capital assets and gas in the plant. Th at would be the fi rst ques- B. Ralston: It seems to me that the structure of the in- tion. Secondly, in subsection (5) what powers does it give come that’s being taxed is…. Th ere were some changes to the administrator? that were made with the announcement about the de- ductibility of construction costs in advance. For some of Hon. M. de Jong: Hopefully, I’ve captured the essence these facilities, that’s huge. of the member’s question with respect to subsection (5). Th en there’s a period where there’s a lower rate, which [1715] is ultimately deductible. Th en when you come to net It is an important section, because relative to calculat- operating income and you’re entitled to receive back as ing the various incomes and valuation, this is the section deductible all your payments on capital, only then do that deems a disposition of LNG or natural gas liquids or you begin paying on your operating income. It does fol- natural gas at arm’s-length prices where no sale occurs or low the model of many jurisdictions in terms of deal- where a sale occurs between non-arm’s-length entities. So ings with mines. from the perspective of the valuation process and deal- [1655] ing with non-arm’s-length transactions, the deeming of I’m wondering, if the industry chooses to character- a disposition, in the way contemplated in subsection (5), ize itself as a manufacturing facility for tax purposes, why is very, very important. this particular structure was set in motion? B. Ralston: Th is gives the administrator, then, the Hon. M. de Jong: I hope this is helpful to the member power to deem what the administrator decides is a fair in terms of further trying to articulate some of the dif- market price, as opposed to…. No? Well, a transaction ferences and the rationale. I’m reminded, of course, that takes place. Th e related parties — there’s a price that’s re- the mineral tax regime is a royalty-based regime. Th e ported. Does the administrator, then, have the power to member knows this. In this case, it is an income-based say: “Even though you’ve reported it as this price, I deem regime, so all of the implications of that diff erence also it to be this price?” Is that the scope of the powers here? factored into the decision to structure the allowance ap- proach versus the traditional fi nancing charge deduct- Hon. M. de Jong: As one might expect, this happens in ibility approach. various stages through this legislation. Th e section we’re dealing with here — 28, and particularly 28(5) — is that B. Ralston: In section 26 the deductibility of capital mechanism by which the deemed disposition occurs at gain and capital loss is not permitted to be calculated. arm’s-length prices where no sale occurs or where a sale Why was that decision made? occurs at non–arm’s length. In and of itself, that does not create any authority for the administrator to step in and Hon. M. de Jong: I hope this helps. I’m reminded that substitute valuations. It deems a disposition. Th e taxpayer the federal act includes capital gains and capital losses is obliged, then, to deal with that. in the calculation of income. Pointedly and purposefully, When we get into subsequent sections around transfer the decision and our intention is not to include that in the pricing, there is a mechanism by which the methodology calculation of income — therefore, the specifi c exclusion or the calculations can be reviewed with a view to ensur- that the member has noted in the section. ing that the proper approach has been taken. Th at power is not created in section 28(5). Th e Chair: Th e committee will take a brief fi ve-minute recess. Sections 28 to 31 inclusive approved.

Th e committee recessed from 4:58 p.m. to 5:11 p.m. On section 32. Wednesday, November 26, 2014 British Columbia Debates 5621

A. Weaver: I’m hoping to see if my understanding of it and you earn income, that is non-taxable, but when this section is correct. First off , I note that in subsection you buy it, it’s a business expense. Th ese are kind of lost (c) it looks like it’s exempting a taxpayer from paying tax in the tax world. on the income from a disposition of an earned credit. At Is the minister open to considering amending this this point, I believe the idea here is to encourage compan- to actually eliminate one of those two so that there is a ies to reduce emissions by not taxing income from that consistent approach, so as you go from not having any desired behaviour. As a fi rst part, is that correct — why credits to sell to having to purchase credits, you’re not in this is being done? this kind of discontinuity of taxation? I’ll leave it at that. [1720] Hon. M. de Jong: Th e fi rst point I think I want to make Hon. M. de Jong: I believe that’s correct. If I might, I’ll is that I’m not going to quarrel with the member’s basic repeat what I think the member said to ensure that we’re analysis around what ordinary taxation legislation is built not at cross-purposes. around, in terms of principles of allowing the deduction Recognizing that taxpayers are required to meet green- of expenses and taxing income. What I need also, though, house gas emissions requirements under pertinent legis- to convey to the member is that the anomaly, if I can use lation, and that under that legislation taxpayers will earn, that term, or variation from that normal principle that purchase or sell various types of compliance units, this he has identifi ed is not inadvertent. section is intended to exclude income from the sale of an [1725] earned credit — but not other types of compliance units There is actually a purposeful policy position that — from tax. I think that’s what the member said. lies at the heart of what he sees here, the desire being, through this taxation measure, to incent a certain type A. Weaver: Th e next thing. I understand also that the of behaviour in certain circumstances. In ordinary cir- cost of purchasing account compliance unit would be cumstances, the member’s analysis is correct. To the ex- deducted from income — so in the calculation of a tax- tent that this is a variation on that ordinary construct is payer’s net income. I’m wondering whether the minister also correct, but it’s not accidental. It is there purposely. could confi rm that that is correct. A. Weaver: My concern with this is that we’re creat- Hon. M. de Jong: Th at is correct also. ing a tax loophole inadvertently and that it may be that a company could sell to its subself in some sense. It could A. Weaver: Th e point I’m trying to get at here is that earn a credit and sell it to a wholly owned subsidiary I was going to put an amendment forward, but I don’t somewhere. Th at sale…. Th ey’re not going to pay tax. know that it would be in order because it would be Th ey’re going to write this off here, and they’re not going changing a tax bill. to pay tax here. Th ere’s a tax sink, because the revenue It seems to me that there’s an inconsistency here. On can be lost through the transition of this process. the one hand, we are letting in the disposition of an My concern is here: has the minister blocked the abil- earned credit we are not taxing. Th at is not considered ity of companies to actually use this as a tax sink to avoid income. But at the other hand, when we buy it, it’s also paying tax by transferring hot-air credits amongst them- considered a deduction. selves? It seems to me that consistency here would have…. I mean, you can’t have it both ways. It seems that, you Hon. M. de Jong: What I was endeavouring to clarify know, we’re incentivizing behaviour by exempting in- and confi rm for the member is to ensure that he could come from the disposition of earned credits. We are also derive at least this measure of comfort. It may not be incentivizing the purchasing of compliance units, be- comfort for him. But it is that this is not inadvertent, cause we’re allowing that expense to be deducted from which is a legitimate thing for members to be on guard income in the calculation of net income. for — that is, unintended consequences for complex It seems to me that we’ve double-incentivized, in some legislation. sense, as opposed to…. I think one of these should not be Th is is not unintended. But it also does not in any way there. Either we allow them to buy a compliance and then alter the obligation that a taxpayer would face under use that as a business deduction but not also allow them corporate income tax law, either federally or provincial- to sell a credit and not claim that as income…. ly. Th e exemption or the alteration, if you will, applies It seems that there’s an accounting problem here, only for the purpose of the LNG Income Tax Act, not where you should either have them…. It should be in- other taxation instruments that a taxpayer is obliged to come here and not here, or it should be…. What I’m try- abide by. ing to get at is that it seems that there’s a problem with this legislation. Th ere’s a lack of consistency in terms of B. Ralston: I’d like to move now to section 45, if that’s the way the credits are handled — in that when you sell possible. 5622 British Columbia Debates Wednesday, November 26, 2014

Section 32 approved on division. what the rate is…. We anticipate that once the act, as we hope it will, receives royal assent, we will be in a position Sections 33 to 44 inclusive approved. to fi nalize and publicize the rate within a matter of weeks.

On section 45. B. Ralston: Can the minister explain at the conceptual level why an investment allowance wouldn’t be reduced B. Ralston: A quick question on this one. Th is per- when the capital investment account is reduced? mits the deductibility of legal fees for “preparing, insti- [1735] tuting or prosecuting an objection to…an assessment of Th ere’s a diff erence between return of capital, which is tax.” Essentially, the government is subsidizing legal bills. accomplished through the capital investment account…. Why was that considered necessary? Th at’s returned. But the investment allowance persists as long as the LNG plant is open, as I understand it, and Hon. M. de Jong: I’m advised that the section exists then that’s deductible from income that returns. I under- to maintain consistency with the federal Income Tax Act. stand the principle about the capital investment account Who knew? and the return of capital. But this is a return on capital that continues, as I understand it, aft er the capital invest- Section 45 approved. ment account has been completely paid off .

On section 46. Hon. M. de Jong: I think the concepts are diff erent — [1730] as I understood the question — as it relates to the draw- ing down on the capital cost account. B. Ralston: Th is section sets out the operation of the In other circumstances, as we talked about earlier, you investment allowance. Th ere’s a formula in here for cal- would be in a position to deduct your capital costs. You culating it. I gather that the issue of the rate will be done would also be in a position to deduct your fi nancing char- by regulation. It’s not included in the statute, and maybe ges. You still, through the mechanisms that are employed that’s because there’s a requirement to have some fl exibil- here, do the former. But in the latter instance, under this ity in adjusting the rate as things go along. construct, you are not deducting your actual fi nancing In the Mineral Tax Act, under the investment allowance costs. You are provided with this allowance mechanism rate, the rate is currently 1.56 because it uses a formula that, admittedly, goes on beyond the time, perhaps, when that is 1.25 times the bank rate set by the Bank of Canada. a debt has been retired. Th at’s in the defi nitions section of the Mineral Tax Act, We have discussed the rationale that gave rise to the and the reference is to the investment allowance rate. adoption of this approach, but it’s probably two diff erent Given that that’s in an act and has that certainty, does concepts — the one relating to capital costs and deduc- the minister expect the rate in this case to be the same? tions associated with capital costs, and the other deal- ing with fi nancing charges or, in this case, a fi nancing [M. Dalton in the chair.] allowance.

Hon. M. de Jong: Th e short answer is no. It would be B. Ralston: If the investment account is a clean way of incorrect of me to suggest to the committee that we have just deeming a certain interest cost — rather than having settled on a comparable rate. It would also be premature to be subject to the calculations and assessing the individ- for me to advise the committee that we have settled on a ual calculations of the taxpayer — I can understand that, specifi c rate. Th at work remains to be fi nalized. if that’s designed to compensate for the non-deductibility of interest and fi nancing charges. But once the capital has B. Ralston: Given that the desire, at least in part, of the been repaid, then what’s the rationale for continuing that legislation is to create investment certainty, it would seem deemed return on capital aft er all the capital is paid — if to me that, given that it would be available every year, that the rationale, as the minister suggested, was to off set the return would be deductible from income, as I understand non-deductibility of interest? it, even aft er the capital account is completely repaid. Could the minister explain the reason why it hasn’t Hon. M. de Jong: Perhaps where I may have a slight been decided upon? Is that a matter that’s still being ne- diff erence with the member is the automatic connection gotiated or considered? Will it be included in the project I think he might be making between capital cost deduc- development agreements? Or is there some other reason tion and the presence and deductibility of debt. why it hasn’t been settled upon? [1740] Again, in a conventional circumstance where a cor- Hon. M. de Jong: To the member, what I can advise poration is deducting the cost of capital and at the same him — and agree with him that there will be interest in time enjoying deductions related to fi nancing costs, long Wednesday, November 26, 2014 British Columbia Debates 5623

aft er they have exhausted their ability to deduct capital basically, statutory return on capital aft er the return of costs, for any number of reasons they may continue to capital has already been given a very preferential rate. be incurring fi nancing charges, which remain deduct- ible. Th is allows for a similar scenario under, admittedly, Hon. M. de Jong: I think perhaps…. I won’t be pre- a diff erent construct involving the investment allowance. sumptuous on the hon. member’s behalf. But where the Admittedly — the member has pointed this out — the disconnect may be is where the member, I think, draws capital cost deductions may have been exhausted, but the an ironclad linkage between the deduction of capital investment allowance would continue in the way that fi - costs to the extent that where that has been completed nance charge deductions could well continue for a cor- and a company, a taxpayer has deducted and enjoyed the poration under the more traditional regime. Th at would benefi ts of deducting the sum total of their capital costs be my attempt at explaining and rationalizing the scen- that automatically, therefore, there is no debt, and auto- ario that’s at play here. matically, therefore, in a conventional structure there is no ability to deduct fi nancing charges. B. Ralston: If that’s the case, then why is it only 75, the My response is that that is not automatically so. We investment allowance? Th e reference in 46(1) is to 0.75, have, in a similar way, tried to recognize that fact in the so it’s only 75 percent of the capital employed. What’s the formula, methodology and approach taken here. My rationale for that? sense is that I’m not going to convince the hon. member I don’t accept the minister’s reasoning there. I suppose of the wisdom of that approach, but I hope I have done the explanation stands on its own, and people can judge it. a better job conveying the rationale. If the capital is paid back and this continues, then what’s the rationale for making the investment allowance only A. Weaver: I’m trying to understand this formula 75 percent of the capital? Is that a recognition that this is here. Perhaps it was alluded to by the previous member, pretty sweet deal? Th erefore, shouldn’t it be 100 percent? but why 75 percent? Where did that number come from in the formula, and why isn’t that just embedded in the Hon. M. de Jong: I think how would I respond is to rate? Why do you need to have 75 percent of the rate say that it is designed to acknowledge the fact that busi- times the current balance and previous balance? Why nesses rarely fi nance 100 percent of their capital costs. I’m not just a rate? not sure there’s a magic fi gure. We have opted for the 75 percent amount. Hon. M. de Jong: I think the best answer I can off er I would say this also, drawing from our earlier con- the hon. member is to simply point out that in developing versations. In assessing this and settling upon its inclu- the formula and the multiplier, some thought was given sion in the act, we see value from the point of view of the to what a plausible debt-to-equity ratio might be, which Crown as it relates to preserving the revenue stream that isn’t to say that’s what’s going to exist on all projects or might otherwise be diminished in circumstances where even any project. But analysts and offi cials deemed that corporations are, as it were, incented to structure their and advised that that was a plausible debt-to-equity scen- fi nancing in a certain way. ario for projects of this sort. I heard the member refer to the sweetheart deal. Candidly, we don’t view it that way. In fact, much of the Section 46 approved on division. motivation was to preserve, to the greatest extent possible, the revenue stream, via the tax, to the Crown. On section 47.

B. Ralston: Forgive me if I am not following the min- B. Ralston: Th is, again, is a signifi cant series of sec- ister accurately. Th e capital investment account is paid tions. Th is division is the method in which the cost of off , and it’s paid off by the return of revenue. Th at’s taxed natural gas is calculated. I’m wondering if the minister at the lower rate until the capital investment account is could explain the basic principles by which that takes paid off . Th e higher rate doesn’t kick in, as I understand place. it. Yet this rate continues. Th is exemption from taxation [1750] continues even though the full cost of capital of the plant I note that there are some challenges to deciding that, has been paid off . Presumably, if the cost is paid off , there given that there will be a wide…. If fi nal investment deci- is no continuing interest deduction. sions go ahead and the plants are built, there could well be One is imputing, I suppose, to them a motive to cre- a range of costs, whether they’re the costs of gas in a long- ate or plan their fi nancial aff airs in a way that would take term contract, which might be higher than, say, a fl uctuat- deductions and reduce income even further. But if it’s not ing price such as the Henry Hub price, which would be a deductible, then that sort of ends that. market price that would vary weekly, if not daily. [1745] Can the minister explain the mechanism by which I’m just wondering what the rationale is for giving this, the cost will be calculated for the purposes of taxation? 5624 British Columbia Debates Wednesday, November 26, 2014

Hon. M. de Jong: Hopefully, I’ll start this conversa- of the cost of gas “notionally acquired” each month, and tion off in a way that is helpful by saying that in an arm’s- that’s repeated. Is that a reference to the mechanism of length transaction the valuation process would focus on the deemed purchase at the inlet, or is there some other the actual cost of the gas at the inlet to the facility — so nuance that’s designated by that term? fairly straightforward in circumstances where there is an arm’s-length transaction. Hon. M. de Jong: It refers to the deemed purchase in a non-arm’s-length transaction. B. Ralston: In the Ministry of Finance valuation docu- ment they talk about a price upstream at Spectra 2 as a Sections 47 to 53 inclusive approved. market price. Th en they speak of a transportation cost, and I think those two are added together to get the price On section 54. at the inlet. Is that a fair statement? B. Ralston: Th is section initiates a new part, which is Hon. M. de Jong: I began by referring to what, in eff ect, the computation of net income. I believe the member for the sections don’t deal with. We’re dealing with circum- Oak Bay–Gordon Head has indicated he wants to ask a stances where there’s an integrated operation and the gas question on section 57. arriving at the facility, or non-arm’s-length transactions For the purposes of this section, can the minister de- involving the gas at the facility — two issues. I think the scribe how net income is to be calculated under these member knows this. We talked about it yesterday in the provisions, section 54 in particular? defi nitional sections. [1800] By regulation we will identify a reference point for the facility, and in broader terms, we will identify a reference Hon. M. de Jong: I’m going to try and respond to the price by regulation. Th e member has identifi ed one of member’s question, and I hope he’ll appreciate that I’m the options that is available to us with respect to a refer- going to try to summarize what is in the sections. Th is is ence price that we are giving serious consideration to. We not meant to be the defi nitive interpretation of the sec- haven’t fi nalized that decision just yet, however. tions but for the purposes of the discussion. I think that’s, in fairness, what the member was conceptually asking for, B. Ralston: Can the minister, then, explain how that as opposed to a three-hour dissertation on how all these will work in the case of a non-arm’s-length transaction? calculations work. Th at’s the case of…. I understand the act to say there’s Net income is a calculation that draws on net operating a deemed disposition of the gas at the inlet, and then a income, which is revenue minus expenses less the invest- price is attributed at the outlet when it becomes LNG and ment allowance, and then adds a taxpayer’s negative cap- is shipped off . Th ere’s a mechanism for calculating that. ital investment account balance, and then deducts from [1755] that the net operating loss account and, if there’s still net If I’ve described that accurately, how will that take income, the balance in the capital investment account. place? Other details around that, but that, roughly speaking, represents the calculation of net income. Hon. M. de Jong: Gas enters at the facility inlet. It is deemed a purchase at that point, a deemed purchase that B. Ralston: Th e note I have says that net income can- draws on the reference point and the reference price as not be negative under this calculation. Is that correct? applied to the reference point and adds in transporta- tion costs from the reference point to the inlet. Th at, very Hon. M. de Jong: Th at is correct. roughly speaking, is how in an non-arm’s-length situa- tion that would work. B. Ralston: Net income is the amount on which the 3.5 percent tax is applied. Is that correct? B. Ralston: Is there a separate purchase or sale deemed when the LNG leaves the plant at the outlet to be shipped Hon. M. de Jong: Th at is correct as well. abroad? Sections 54 to 56 inclusive approved. Hon. M. de Jong: Just to clarify and respond to the member’s specifi c question. Yes, liquefaction takes place On section 57. on the way out. It’s deemed a sale if there is not an actual sale. If there’s an actual sale, there is data to rely upon. If A. Weaver: Th is is another one of these potential loop- there’s no actual sale, then it’s a deemed sale at that point. holes I was hoping to explore a little bit with a question, through an example. Let’s suppose, hypothetically here, B. Ralston: In this series of sections, there’s the notion that there are two LNG taxpayers who each own an LNG Wednesday, November 26, 2014 British Columbia Debates 5625

plant. We’ll call the fi rst one John’s Big LNG Plant, and down. He’s approaching that critical threshold where he’s the second one is Jane’s Really Big LNG Plant. So we’ve going to have to pay the higher tax. got these two plants. Now, they’re paying down their Andrew comes along and says: “I’m going to buy your capital accounts over time and paying the tax at the 1.5 LNG facility, Mike, and call it a big one.” Now I get to percent rate. go and give Mike the money. Mike’s not making a lot of Th en John’s Big LNG Plant approaches Jane’s Really Big money, because Mike’s just paying for the capital value. LNG Plant and says: “Jane, do you want to buy me out?” So he’s not making a lot that you’re going to tax for, from So Jane’s Really Big LNG Plant then purchases out, makes a capital sale. But Andrew now gets to defer paying tax, a capital investment and buys John’s Big LNG Plant and again, for however many years. becomes Jane and John’s Really Really Big LNG Plant. Th is seems like a really gaping loophole. Is it not? Is the My question is: at that point are they, then, again able minister not concerned that this is a loophole that will to apply this new capital cost to defer paying any in- cause companies to essentially pay 1.5 percent forever, creased tax until this new capital purchase cost has actual- because they’re also looking for that Mike’s or Andrew’s ly been paid down, so that Jane and John’s Really Really LNG facility to purchase? Big LNG Plant actually, in perpetuity then, until such [1810] time as this account is paid down, will pay 1½ percent? [1805] Hon. M. de Jong: First of all, I think it’s appropriate for the member to poke and prod and try to ascertain where Hon. M. de Jong: Well, thanks to the member for the there may be loopholes or unintended consequences. example. It’s generally easier to deal with this in terms of, We don’t think, in the scenario that the member has de- as opposed to in the abstract, a real-life example. scribed, this qualifi es in that regard. It may have as much Th e fi rst thing that I’d want to point out is that not- to do with the practicality of the situation as it does with withstanding the transaction, as described by the mem- the manner in which the calculations occur. ber, both facilities are still fi ling returns. Th ey don’t get to In the scenario that the member has described where…. consolidate. Whether you own one facility or ten, you’re Let’s presume the purchase takes place the day a plant be- fi ling a separate return for each facility. comes operational. Th ere is a capital investment account, Secondly, in the scenario that the member has de- and in the member’s scenario, the sale is for precisely the scribed and assuming it is an arm’s-length transaction, amount that the vendor invested in the construction of the owner of the fi rst facility that has been purchased the facility. Unlikely, but for the sake of this conversa- out, has been bought, is going to have tax consequences tion, let us say it is so. In that scenario, nothing has been and tax obligations, including LNG income tax, because gained and nothing has been lost. Th e capital investment the income that they’ve received falls squarely within the account remains in the amount that existed when that ambit of the act — presumably, in the example given, in- plant was completed. cluding obligations at the higher rate. If the sale occurs one year, two years or three years Th e member’s second part of the question, though, I aft er the operation of the facility, the taxpayer will have think is: does the purchaser in that scenario, as it relates drawn down on that capital investment account and, in to the purchase of the facility, then have a capital invest- the example that the member has given, if the purchase ment account that they can begin to draw down? I’m ad- price is for what the cost of the facility was in the fi rst vised that the answer to that is yes. Again, assuming it’s instance, then that diff erence will attract the full rate. It an arm’s-length transaction, you capture tax on the in- will be the remainder that continues. It will attract the come derived from the seller, but the purchaser develops full rate in the hands of the vendor as opposed to in the a capital account in those circumstances as well. hands of the purchaser. From that perspective it’s diffi cult to see where the A. Weaver: Th ank you for that clarifi cation. “loophole” exists. Th e payer may be diff erent, but the re- First off , I should point out that the member for Peace sult is the same from the Crown’s point of view. River South suggested that I use Mike and Andrew’s Big LNG Facility, so I do that for his benefi t. Sections 57 to 59 inclusive approved. My concern here is that this really is then a means and way of essentially deferring paying the high rate of tax On section 60. by a company. Let’s suppose a company — this is now Mike’s Big LNG Facility — is bought up by Andrew’s B. Ralston: I believe the member for Oak Bay–Gordon Really Big LNG Facility. Th e creation of this new fi rm…. Head had a question, he told me, on section 60. I’ll defer Andrew buys it out for exactly the price that Mike essen- to him. tially put in on it. Now Andrew’s going to essentially get that amount of capital cost in his account double, because A. Weaver: I’m just wondering if, under section (1)(c), Mike’s already been claiming it, then Mike’s drawing it the minister might be able to let me know what is meant 5626 British Columbia Debates Wednesday, November 26, 2014

by the term “fi nancial incentive” and perhaps off er an B. Ralston: I understand the eff ort in the draft ing was example or two. to mirror the federal act, but there are some diff erences between the LNG act and the federal act when it comes Hon. M. de Jong: We had a little bit of a conversation to defi ning the transfer pricing rules. Can the minister about this in the defi nition section. Th e kind of thing explain the key diff erences between the two? that is contemplated here and where this term exists [1820] elsewhere is a governmental grant or a refundable tax credit. Th at is what is contemplated in the language. I Hon. M. de Jong: Th e two biggest diff erences that are should say, when I say that, I haven’t got something hid- probably worth noting here are that these provisions, den in my back pocket that I’m not telling the member drawing as they do on the federal model, also apply to about. Th e language is common to the federal Income self-dealings, and I’m advised that the federal act does Tax Act as well, and it was thought prudent to include a not. Secondly, I’m reminded that the federal rules re- reference to it here. garding transfer pricing apply exclusively internationally, and in our case, these rules apply not just internationally Sections 60 to 62 inclusive approved. but for appropriate transactions and situations that occur domestically and within British Columbia. On section 63. I guess the third thing that is worth pointing out is that because of some of the unique terminology that is part Th e Chair: Shall section 63 pass? and parcel of this legislation, some of the draft ing, by ne- cessity, in drawing the federal rules, has been altered to en- B. Ralston: I’m content, subject to what other mem- sure that we are including the relevant terminology that is bers may have to say, if we move to section 77, which in- part of this statute. itiates the division on transfer price. [1815] B. Ralston: I understand that in the definition of “transfer price,” this is the price actually paid between Sections 64 to 76 inclusive approved. non-arm’s-length entities and may be subject to an ad- justment. So there is the power within these provisions to adjust, I suppose, the nominal price or the stated price to On section 77. what is considered to be an arm’s-length price? B. Ralston: Th e minister spoke earlier about transfer Hon. M. de Jong: I’m advised that’s correct, follow- pricing rules. Th ere is an interpretation in the bulletin that ing an audit. was provided. Can the minister explain in what circum- stances these defi nitions will be applied? Th ere are a num- B. Ralston: In dealing with the issue of enforcement, ber of defi nitions in this section, beginning in section 77. I think transfer pricing is a notoriously diffi cult concept Before examining several of them, can the minister to monitor, police, administer globally, and there are in- simply explain the legislative intent in these sections deed OECD conferences and publications on dealing and in what circumstances they will be applied? I think with transfer pricing. people have, perhaps, a notional idea of where they will What would be the mechanisms of enforcement here? I apply in non-arm’s-length transactions where the oper- know there’s a penalty section. But prior to getting to the ator is an integrated operator and controls the entire sup- point of assessing a penalty, what would be the mechanisms ply chain. Perhaps he can clarify. for making those inquiries and being able to actually en- force these rules? Th e minister had mentioned earlier that Hon. M. de Jong: Th e member is correct. Th ese are there will be a separate statute in the spring that may deal important provisions. I hope this isn’t oversimplifying with this. Or are they contained in here in an eff ective way? it for anyone concerned if I were to say these sections in [1825] this part of the bill apply when, for lack of a better word, a taxpayer is dealing with itself and if that dealing would Hon. M. de Jong: Th e member is correct. First of all, have been subject to the transfer pricing rules had it been the member is correct about the importance of having between the taxpayer and a non-arm’s-length party. proper monitoring and enforcement powers. I can advise One will see reference to partnerships and looking the member and the committee again that the…. Most through the tiers of partnerships. Th e defi nitions contained of those enforcement tools and mechanisms will be in- in this section are those defi nitions required to interpret cluded in the spring legislative off ering — the power to the transfer pricing rules in the division and, as I said ear- audit and enforce and administer penalties. lier, provide a look-through rule for tiered partnerships, as Having just said that, however, I can also point to sec- another example of where a taxpayer is “dealing with itself.” tion 80 in the bill before us, where the member will see the Wednesday, November 26, 2014 British Columbia Debates 5627

ability to levy what I would deem signifi cant penalties. But ing unnecessary duplication of eff ort, because the same I would not want to leave the impression that this repre- concepts are relevant for the purposes of assessing cor- sents the sum total of the enforcement instruments or tools porate income tax obligations. that will be available. We will have a chance to explore the Th at’s one option that we are exploring — admittedly, suffi ciency of those tools in their totality next spring. early days — and beyond that we would want to off er as- surance to the member and the committee that we attach B. Ralston: In the defi nitions section here, in section suffi cient importance to this area to want to ensure that 77, there’s reference to a “transfer pricing adjustment” we have a combination of suitable arrangements in place, and a “transfer pricing capital adjustment.” Given those with federal partners and suffi cient in-house expertise, to powers, if they were used, would it follow automatically fulfi l the role that we would have as the administrators of that there would be penalties assessed if there was a need this taxation legislation. to resort to a transfer pricing adjustment, or is that an in- dependent consideration as to whether penalties would B. Ralston: I’m aware that frequently provincial gov- be assessed in some cases and not in others? ernments contract with the federal government, Revenue Canada, to administer certain programs for them. Is that Hon. M. de Jong: I’ll deal specifi cally with section 80, what the minister is alluding to, that there may well be where the member will see that there is a discretionary au- an agreement with Revenue Canada? I mean, this may thority to impose the penalty in the circumstances where, be a bit anticipatory of the legislation in the spring, but for example, the taxpayer has not facilitated through the is that what’s being contemplated? providing of material that would allow for an assessment or has otherwise run afoul of the transfer pricing rules. Hon. M. de Jong: Probably a bit premature for me to I’m hesitant to speculate about the remaining enforce- leave that impression with the member or the commit- ment provisions in the absence of allowing the member tee. Some initial conversations have taken place around to see them. Th at work is ongoing right now. In the one this notion of joint audit eff orts. I wouldn’t want at this instance that we have statutorily draft ed, I can point to stage to suggest to the member that we are on the cusp of the discretionary authority to administer the penalty. Th e some formal arrangement with the federal government. work around other enforcement mechanisms is under- We’re not at that stage. way, and we’ll assess the mandatory or discretionary na- As I say, to the extent that there have been conversa- ture of those penalties when we have that product. tions, it has been around a joint audit eff ort on this par- ticular aspect of the legislation. B. Ralston: Typically, it’s my understanding, in the case of the transfer pricing and any investigations that B. Ralston: One of the definitions — I don’t would take place, they would be taking place under the think it’s in this section, but in this part — refers to authority of Revenue Canada in assessing the income tax “Contemporaneous documentation supporting reason- fi lings of individual companies. So this would appear to able eff orts.” Can the minister explain what requirement create the necessity to create a separate enforcement arm that would be and how it would be diff erent from the or- to look at compliance with these sections. dinary conduct of business, where one is obliged to keep Again, as the minister probably knows, transfer pricing certain records for the purposes of audit by Revenue is a notoriously diffi cult concept to apply, to detect, to ad- Canada or provincial sales tax or something like that? minister, to enforce. Given that you’re dealing with some It’s aft er the Penalty section. It talks about contempor- of the biggest companies in the world, generally they have aneous documentation supporting reasonable eff orts. pretty able people who can justify and advise them in a Th ere’s quite a long defi nition of what’s required. way that they would presumably say complies with the law. Can the minister just…? What I’m interested in is: how, Is it realistic to think that the future enforcement cap- if at all, is this diff erent from the ongoing obligation of acity of the ministry is such that it could deal with these a business to keep records to justify its deductions, or kinds of challenges that may be posed? provincial sales tax, where you may be subject to audit? [1830] I wonder if there’s anything more in this. [1835] Hon. M. de Jong: Th e subject is important enough to warrant the question. Obviously, it plays an important Hon. M. de Jong: I’ve received, I think, relevant advice part in the material before us. on the matter that the member has raised. I’m looking at A couple of things. One of the options that we are ex- section 81, which is, I think, the section that the member ploring — and the member has correctly identifi ed the was referring to, which does set out the requirements for expertise that would exist federally as it relates to issues documentation to support the taxpayers’ determination around transfer pricing — is the notion of joint audits of transfer prices. Of course, the test here, the measure, and perhaps tapping into some of that expertise in avoid- is whether or not the taxpayers have made a reasonable 5628 British Columbia Debates Wednesday, November 26, 2014

eff ort to reach an arm’s-length transfer price. large measure an adaptation or adoption of those provi- Th e signifi cance of the requirement for an adequacy of sions, this will not appear mysterious to those proponents. contemporaneous documentation, I am reminded, is that unlike other circumstances where one is obliged, or tax- Sections 81 and 82 approved. payers are obliged, to present documentation in support of their returns and their fi lings, the documentation and On section 83. the methodology relating to the determination of trans- fer price must exist at that time. B. Ralston: Th is division refers to computations for Th e taxpayer must be in a position to demonstrate the fi rst taxation year. Th is would appear to be the dir- that this is the material that we relied upon at the time ections on how to set up the various accounts. Can the we made this determination. Th ey can’t paper the deci- minister explain what is the direction to the taxpayer sion aft er the fact, which is, I think, the relevance of the here in these sections in terms of computations for the reference to contemporaneous documentation, which, I fi rst taxation year? believe, is a term utilized in federal legislation as well. So it is not a unique term to our provincial statute, but it is a Hon. M. de Jong: In general terms, the section we’re concept known to the federal statute as well. dealing with now, 83, is attempting to defi ne those types of expenditures that can be included in determining the B. Ralston: In addition to creating the records contem- net operating loss account and the capital investment ac- poraneously, will there be an obligation — I’m not able to count in the fi rst taxation year. It’s intended to provide see it here; it’s a fairly detailed section — to provide those to guidance on that point and in the calculation of those the taxing authority simultaneously as well? In other words, accounts in the fi rst taxation year. will there be an ongoing stream of data into an account that would be available? It would seem one way of guaranteeing B. Ralston: When the legislation was initiated and the that the data was indeed generated contemporaneously. Or minister held a press conference, he did say that some is that an issue for enforcement down the road? costs that were previously not going to be eligible, such as construction costs and a fairly expanded view of con- Hon. M. de Jong: I’m advised that under the provi- struction, were now considered to be qualifying expendi- sions, it does not automatically follow that the taxpayer tures, I suppose. is obliged to provide the contemporaneous documenta- Is there a list, or is the minister able to give a general tion relating to the transfer pricing decisions they make. recitation here of those broad areas which are eligible to However, the authority exists within the provisions we’re be included in the capital investment account that in the dealing with to obligate or require them to provide that original proposal in the spring were not? material at the time they make the decisions if, in the view of the administering authority, that is deemed ne- Hon. M. de Jong: In answering the member’s ques- cessary or appropriate. tion, I’m going to ask that he accept that I’m restricting this description to a circumstance in which a new LNG B. Ralston: I’m looking under the defi nition of contem- facility is being constructed. Th ere is, as he notes, a case poraneous documentation. Th ere’s a reference in subsec- of an existing LNG facility. To avoid overly complicating tion (a)(vi): “the assumptions, strategies and policies, if any, this matter, I’m going to set that aside for the moment. that infl uenced the determination of the transfer prices [1845] or the allocations of profi ts or losses or contributions to Th e defi nitions that relate to an LNG facility and the costs in respect of the transaction.” Th at would seem to be defi nition of a capital cost relating to an LNG facility are a fairly detailed requirement. In discussions with propon- all instructive in determining what represents allowable ents, are they aware of these provisions? I doubt they’re en- costs. Th e fact that those costs are incurred prior to the thusiastically embracing them, but are they aware of them? fi rst taxation year does not disqualify them from being [1840] included. But as I’m reminded, they must relate to the fa- cility, and they must relate to the income that is being ul- Sections 77 to 80 inclusive approved. timately generated at that facility. Th e fact that they occur prior to the fi rst taxation year does not disqualify them On section 81. as long as they qualify under the relevant defi nitions that we have considered elsewhere in the act. Hon. M. de Jong: In short, the answer is yes. Th at is be- cause, particularly for the major proponents — and the B. Ralston: For the fi rst taxation year, would that include member has mentioned a few during the course of the de- construction costs, costs of acquisition of land, legal costs, bate — there is a familiarity with the federal rules and the engineering costs, public consultation costs and travel costs federal methodology. To the extent that this represents in of executives to and from the jurisdiction? I had under- Wednesday, November 26, 2014 British Columbia Debates 5629

stood that given the dollar amounts that were, certainly, in ferring with one of our senior offi cials who confi rms for some of the sites, invested in construction, this could sub- me that with respect to assessing the cost and the cost stantially delay, if that’s deductible, moving to tier 2 and the structure at this stage, candidly, we derive that informa- tax for some of these projects for a number of years. tion, as the member would expect, from the proponents themselves. Th ey are the best source we have at this stage Hon. M. de Jong: I think I can be, hopefully, fairly clear of the game about the likely cost structure. about this. Th e member has mentioned some of the site What we are able to do more independently, on the basis of preparation work that is taking place. Insofar as that site independently available information, is model the revenue preparation work relates to sites where an LNG facility is stream going forward — not an exact science, to be sure, but ultimately constructed, then those costs would qualify and there is independent information available, and forecasting would factor into the calculation of the capital expense cost. information from a variety of sources, that we can use. Put Th e member has mentioned some other related costs — the two together, and it allows us to make some assump- facility design costs, travel costs relating to early work. In tions about the time it would take for a certain-sized general, we should think in terms of those being includable. operation to graduate from a tier 1 to a tier 2 tax amount. What would not, I can say, though, be included is work or Th at’s what I can off er to the member at this point. expenses related to upstream developments, exploratory and drilling activity. Th at would be excluded from the cal- B. Ralston: Perhaps just to recapitulate on that point, culation of capital expenses relating to the LNG facility. then. Th e minister is confi dent in his projection of three Th at’s not defi nitive, but I hope that’s helpful to the member. to four years? Th ere would be, assuming a fi nal invest- ment decision — I think what was supposed in the ma- B. Ralston: It’s not simply acquisition of land and con- terial was 2015 — three to four years for a shift from tier struction. It would also include costs of services such as 1 to tier 2. Is that what the minister is saying, then? engineering costs, legal costs, regulatory applications — making applications through various regulators that Hon. M. de Jong: I’m reminded again by the offi cials would be required. It’s a fairly expansive defi nition of eli- that in the example I have given, and I think off ered to gible expenses, is what I’m detecting. the member earlier, we were there speaking about an in- Can the minister say whether, in the modelling that tegrated facility. was done, there’s some rough estimate of…? For some of In referring to the dates — and I was distracted for just these big projects, one does hear numbers of $700 mil- a moment — I don’t think the member meant to exclude lion or $800 million. I have no private knowledge of the the construction period. Th ere is that, and then the three- accuracy of those fi gures, but certainly large expenses. or four-year period of operation that we believe is still So in the modelling, can the minister explain how long realistic to see graduation to the second tier of the tax. it would take, if those expenses are part of the capital in- vestment account, to get to tier 2 in some of these pro- B. Ralston: I move that the committee rise, report jects? And by “how long,” I mean how long in years. progress and ask leave to sit again. [1850] Motion approved. Hon. M. de Jong: In the material that I’m happy to provide to the member — and he may already have it — Th e committee rose at 6:54 p.m. he’ll see that the modelling suggests…. Th is is where the viability and attractiveness of this industry remains. Th e Th e House resumed; Madame Speaker in the chair. suggestion is that inside of three, four years, the gradua- tion to the higher tax would occur. Th e Committee of the Whole, having reported progress, was granted leave to sit again. B. Ralston: I do remember the graphs that were re- leased. I’m just wondering whether those were based on Hon. M. de Jong moved adjournment of the House. modelling or, simply, rough estimates. I’m assuming a level of precision that’s greater than rough estimates, certainly, Motion approved. for the purpose of predicting future revenue, realizing that that’s required for the long-term budgetary process. What Madame Speaker: May I take this opportunity to in- degree of detail and hard costs were put together to make vite you all to the Christmas Lights Across Canada on the that kind of a calculation of three to four years? front steps of the Legislature in seven minutes. Th is House, at its rising, stands adjourned until 10 a.m. Hon. M. de Jong: I appreciate the member’s interest tomorrow morning. and, maybe, a little bit of frustration about the potential accuracy of some of these large numbers. I’m just con- Th e House adjourned at 6:55 p.m.

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