Debates of March 7, 2005 (day 50)

I’m willing to wait until we go page by page in details when we get to that. Thank you.

Thank you for that, Mr. Pokiak. Any further general comments? Mr. Pokiak.

Thank you. I still have a little bit left. Thank you. I’ll go back again in terms of the costs of heating and gasoline fuel. Is there any way that government can step in at any certain point after privatization or can they reconsider taking back the delivery of service? Thank you, Mr. Chairman.

Thank you, Mr. Pokiak. Mr. Roland.

Thank you, Mr. Chairman. There may have been a way to impact on some of the prices during the initial phase of the transfer when the assets would still be GNWT assets; where there may be an option to get back into it if the company found that it was not feasible or if the working agreement was not honoured. In the particular case…(inaudible)…the transfer of the facilities has happened, an agreement was reached on that and followed through with. Once we’ve devolved ourselves of the assets, it is very limited in what we might be able to do in affecting the price. That would be much the same as if we were asked by…Aklavik would be another small community that’s private sector, going in there and trying to impact on the prices. I understand in the smaller communities it is very expensive, but the policy has been and we don’t have the tools to step in on the prices of products. A lot of times you’ll find in the private sector area they’ll operate with what they call rack price or it floats with the cost of the product and then add your transportation and other charges. What we found within our own area with the remaining communities we’re involved with, the price of the product has gone up over the winter. Thank you.

Thank you, Mr. Roland. Mr. Pokiak.

Thank you, Mr. Chairman. Just one last one here in petroleum product. Once the department decides to privatize I’m just wondering if they take into consideration, it might be fine and well to go ahead and privatize say bulk petroleum products, but does the department consider if after two years if the company can prove that they can take care of the petroleum products, does the department consider a third year that things will not change after year three? Thank you, Mr. Chairman.

Thank you, Mr. Pokiak. Mr. Roland.

Thank you, Mr. Chairman. Mr. Chairman, what we do in a number of cases or in the past, again, we haven’t got into privatization initiatives for a number of years now, but what was done in the past when a community or business would request that this be done and there was support for it, an agreement would be put in place. There would be a timeline established as well for the final transactions to happen and the company would take over full operations. I believe in the case of Tuktoyaktuk it was a five-year agreement that was in place, but after year four there was an agreement to proceed with the full transfer of the assets and liabilities. Thank you.

Thank you, Mr. Roland. Any general comments? If not, we’ll go to detail. Page 5-10, revenue summary, detail. One moment while we get the committee to that page. Thank you, committee. Page 5-10, revenue summary.

Agreed.

Page 5-13, directorate, operations expenditure summary, $7.606 million.

Agreed.

Pages 5-14 and 5-15, directorate, active positions.

Agreed.

Page 5-17, asset management, operations expenditure summary, $35.285 million.

Agreed.

Page 5-18, asset management, grants and contributions, grants, total grants, $260,000.

Agreed.

Pages 5-20 and 5-21, asset management, active positions.

Agreed.

Page 5-23, information and communication technology, operations expenditure summary, $622,000.

Agreed.

Pages 5-24 and 5-25, information and communication technology, active positions.

Agreed.

Page 5-27, activity summary, petroleum products, operations expenditures summary, $772,000. Mr. Braden.

Thank you, Mr. Chairman. This is an area of interest to me on an annual basis to see how we’re doing with the provision of petroleum services to communities that do not have private sector infrastructure. This is the kind of thing that government should do to step in and make sure that services are supplied safely and adequately. There are a couple things, Mr. Chairman, in the business plan document that refer to this, and in a couple of paragraphs there is a discussion that after several years now of debate over whether or not to try to privatize or turn PPD over to some other agency, the decision is now to leave it with Public Works and Services. That’s fine, so now we can get on with some longer-term planning and stabilization here.

The document also suggests that some changes in staffing and organizational structure be made, and previous debts have been written off. This is a line I wanted to explore a little bit, Mr. Chairman. If this is an area that’s provided in any detail I’d be happy to get a copy of it, but for discussion this evening I’m wondering if the Minister could advise what amount of debts were written off. Were they centred in any particular agencies or how were they distributed? Any information on the detail on this debt and the write-off. Thank you, Mr. Chairman.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Mr. Chairman. Mr. Chairman, the stabilization fund had a limit of $5 million and I’m told it still does. We are looking at making a change to that, but it is $5 million and the idea is plus or minus if the cost of the product goes up significantly that with that stabilization fund there wouldn’t be any massive increases or reductions if the price of fuel were to drop. In this case what we found was the petroleum products division was carrying, for quite some time, a very high amount within the stabilization fund. We were actually going to be hitting the ceiling of $5 million, and that would kick in the process of having to make adjustments to the fuel price, to bring more revenue in to offset that. For quite some time, there were a couple of adjustments, but it was felt that that wasn't enough to bring down the impact of the higher costs that were happening, and a request was made to FMB to write off the amount in that stabilization fund. I believe it was $4.1 million, or almost $4.2 million, to write that amount off, and then start from a clean slate, and make some adjustments in the price of the products in the communities to try and keep that closer to the zero base, or to the bottom end instead of carrying a high end. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Thank you, Mr. Chairman. If I recall, I think that was taken care of in last year's annual appropriation. Now that the Minister reminded me it was in the stabilization fund, that was where the debt was written off. If he could just confirm that, and that happened a year ago. Thank you, Mr. Chairman.

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. I believe that request was made in 2003-04 and granted in that year.

Thank you, Mr. Minister. Mr. Braden.

Okay. That sort of takes care of my next question, Mr. Chairman, was who approved this decision. I think it was approved right here, so that will take care of that question.

---Interjection

That's right, we did it. Mr. Chairman, one thing that I think is worth keeping in mind with the petroleum products division is it's my understanding -- correct me if I'm wrong -- that while the division is mandated to certainly recover the cost of the product and the cost of overhead and operations, the cost of the infrastructure of the tank farms and all the ensuring liabilities and environmental work and things that go along with it, are not recovered. They are absorbed by the government at large. That has been my understanding of the way we set up our PPD. Is that essentially still the way it works?

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, the Member is correct; that through our structure and pricing, we do not incorporate the capital costs of that into the price of the product at the pump. What we do is we do book our environmental amount of approximately $250,000 on an annual basis. So that is taken into consideration. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Okay. So I'm not belabouring the cost of this, but one thing that I think should be realized here as we go about approving this is that it does amount to a fairly direct subsidy to the people in those communities who purchase the fuels and oils from PPD. This is fine; this is all out in the open. But in terms of reconciling this as a subsidy, I'm wondering if the government is including this in its overall review of subsidies and social programs. Mr. Chairman, we have a review going on right now. I believe there are some 17 different social programs; they range from Seniors' Fuel Subsidy, to Student Financial Assistance, to the Power Subsidy Program. Is this a subsidy also being considered in that overall rollup of what kinds of subsidies our government has in place? Thank you.

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, we do account for this as a grant in kind; that portion, when we do our audited financial statements within the petroleum products division. We do identify it at that stage that it is a grant-in-kind, the capital costs in that area. So it is identified at that stage.

For the other work that's happening around subsidies within the government, right now the petroleum products subsidy is not included in that, but there was a feeling that once that was established and moving forward, that that would be another issue that we would look at. But it is not included at this time. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Thank you, Mr. Chairman. Perhaps that's a discussion we can have in another forum. I guess I would ask the Minister now, based on the principle, the idea that we have some $21 million in net book value in infrastructure that is, in effect, providing a subsidy to those customers. If we take the principle that government as a whole is assisting a certain category of people, despite and by virtue of where they live, and that if we're going to accept this as the kind of subsidy that our government wants to provide, then why don't we consider it in that large basket? It's more the principle that we're doing here, than the amount of money.

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, we don't disagree with what the Member stated. Again, the way we recognize it through our audited financial statements, it is considered a grant-in-kind. From our side, we feel that once we get up to speed on the rest of the subsidies and how that work goes on, we would then put this onto that stack, as well. But the initial phase we're working in, it has not been included. Thank you.

Thank you, Mr. Minister. I have Mr. Hawkins next.

Thank you, Mr. Chairman. Just on the line of questioning Mr. Braden has brought forward, have we ever qualified what this subsidy is? What magnitude to the dollar figure is the subsidy? Thank you, Mr. Chairman.

Thank you, Mr. Hawkins. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, we can provide that detail to the Members around that. Again, it is accounted for in our financial statements, and I believe it can be found in public accounts, as well. For example, last year we had booked $900,000 for the financing cost as well as the amortization of our facilities. So that was the amount that was booked for last year. Thank you.