Crown Committee (6 October 2005)

Crown and Central Agencies Committee

From Crown And Central Agencies Committee Hansard
6 October 2005

SaskWater 2004 Annual Report
To view this section on video, click here, and start play at 55:20.

Mr. DAutremont: Thank you. Id like to welcome the minister and his officials here. The last discussion you were having, every time I get my power bill on the farm for my water well or theres a problem and Im putting a new pump in or Im crawling down the water well, I think the price I pay in the city isnt that bad. On the other hand whenever I get my bill every month in the city Im wondering, gee, thats a lot of money. I think its all a matter of perspective.

And I think at the end of the day if you add up the water costs for a rural family theyre not unsubstantial. Its just that you dont get the bill every month; it comes in large chunks every once in a while. And indeed water quality is always a concern in small communities, on the farm, or even in the cities. Theres been large amounts of money spent in upgrading the water systems for Regina and Saskatoon in the last couple of decades, and theyre always a concern when it happens but everybody is pleased when they turn the tap on and the water actually comes out, which sometimes on the farm that isnt the case.

You mentioned that there was $264 million spent on infrastructure through Canada-Sask agreements. I wonder if you could provide us and I dont need it right now but a list of the projects that were included in that.

Hon. Mr. Prebble: Saskatchewan Environment will have that information. We can certainly request it from them and try to get it for you, Mr. DAutremont.

You know, were not at the decision-making table. SaskWater isnt at the decision-making table. But obviously, Government Relations is, and therefore we certainly have access to that and can make sure that members of the committee get that information.

Mr. DAutremont: Thank you very much. Does SaskWater involve themselves in hydrology?

Hon. Mr. Prebble: Were not involved in hydrology. Now, Saskatchewan Watershed Authority is. And the way things are basically divided up and have been since 2002 is that SaskWater is focused on providing water solutions as they pertain to water treatment facilities, so good quality treated water, delivery of raw water to communities, and waste water treatment. The hydrology side is being looked after by the Watershed Authority.

Mr. DAutremont: Thank you. So when youre looking at providing a system, putting a system in place and SaskWater participating in providing water to communities, you rely on the Sask Watershed Authority then to tell you whether or not there is an available water supply, what its adequacy is, what its long-term potential is. So you dont do the evaluations yourself?

Hon. Mr. Prebble: Thats accurate, Dan. We dont do the . . . We rely on the Watershed Authority for the provision of the information you describe.

Mr. DAutremont: When youre looking at a project then, how do you determine whether or not the information youre getting is suitable to put the viability of a project, your due diligence on the project? Do you rely solely on the information from Sask Watershed Authority? Do you rely on the other communities that are partnering with you in a project, or do you also get some advice and information from other outside agencies?

Hon. Mr. Prebble: Im going to see if Mr. Cram and Mr. Kramer would like to speak to that. Ill maybe ask Mr. Kramer first because I think this process is important to understand and these are good questions. So Ill turn it over to Mr. Kramer first as president of SaskWater to speak to that process.

Mr. Kramer: Thank you. First of all, on your questions around the adequacy of the source of water, those would be questions that would be dealt with by the Watershed Authority, in the same way as a business might come to the authority to know if there is enough water available to it before there was an allocation given. We at SaskWater, if we were interested in a supply for a community, we would need to go and have that adequacy verified by the authority. It is a regulator of allocations for water use, so that arrangement would be and that expertise would be with the authority.

Part of your question I think would relate to how would we go through a due diligence process of even a business arrangement with a community. I think in that case when a community comes to us and says they are interested in a potential SaskWater solution, we would have people in all of operations and in engineering and in our business development divisions, the three divisions of SaskWater, they would have a project team and would look at that opportunity in that community, and would look at what is the quality of the water. Hence what kind of operating expertise or what kind of operating process does one need to get a solution . . . whats the volume of the water, which is the Watershed Authoritys issue. But we need to ensure that thats adequate and what kind of a engineering solution would be needed in terms of infrastructure for that community.

We would attach costs to those. And then depending on whether this was a project that checked on all counts basically that there was sufficient water, that there was a operating procedure that would treat the water to meet regulatory requirements, and that it would be as the minister described, something that we could cover our costs then we would proceed.

Id say as well, in terms of due diligence we have a due diligence model for financial analysis which we have taken through our private auditor to ensure that it is something that is adequate, something that requires enough financial information and provides enough financial information so that what we take to our board when we have a recommendation to proceed with a project is proper due diligence to ensure that this is a viable project from an economic perspective.

So all of those pieces would go into analyzing whether or not we would proceed with a project: the adequacy of the water source, whether we have proper information, ensuring we have proper information on treatment requirements, and that this is a proper business case. When all that fits, we would take something through to our board and proceed with a solution for a particular community.

Mr. DAutremont: Okay thank you. When youre looking at a project say the one in the Humboldt area, the one in the Melfort region what do you look at in terms of financial viability of those kind of projects? Do you expect a payout over a fixed period of time to pay for the project? How does that work and what time frames would you be looking at?

Hon. Mr. Prebble: In terms of Ill let Mr. Cram speak to this question and Mr. Kramer as well but Ill maybe make some initial comments, Dan.

The first thing I would say is that today projects are looked at on basically a break-even basis. In other words SaskWater doesnt enter into a project arrangement where it cant ultimately recover its costs. But in the two projects that you describe, certainly in the case of the Melfort project particularly, that wasnt the case. You know, Melfort was built, and there was never a sense that the full cost of the project would be recovered. And that wouldnt be done today. But were certainly not apologizing for that having been done for the Melfort region. They have very good quality water. Many communities are served by the project, so its a very worthwhile project.

SaskWaters carrying the debt on both the Humboldt and the Melfort projects and its one of the reasons, by the way, why that debt doesnt go down as quickly as I would like, but Im not apologizing at all for the investment that was made. You know it was a very good investment, but the practical reality is that these two projects were looked at over a 30-year time horizon, I believe it is . . .

Mr. Cram: Melfort would have been 25, I believe.

Hon. Mr. Prebble: Okay, so Melfort is 25.

Mr. Cram: And Wakaw-Humboldt was 30.

Hon. Mr. Prebble: And Wakaw-Humboldt is 30. So a 25- and a 30-year time horizon and then essentially the cost recovery to the degree that it takes place on those two projects is done over that period of time.

Mr. DAutremont: Thank you. So current and future projects, youre looking at a break-even scenario. Would you be looking at similar time frames 25, 30 years for that return or are you looking, would you be looking at a shorter time frame?

Hon. Mr. Prebble: Were now looking at a 20-year return.

Mr. DAutremont: Thank you. When youre looking at these kind of projects, Ill just take the I imagine theyre both the same but the Melfort one. You draw water from the Saskatchewan River, and you have a treatment plant. Im assuming thats at Melfort, I dont know, just looking at the map . . .

Hon. Mr. Prebble: I believe it is.

Mr. DAutremont: What if people are drawing water off of that system prior to the treatment plant at Melfort? Then they would be getting untreated water. Do you have a provision that they have to treat it at that point or how does that work?

Hon. Mr. Prebble: Ill let Mr. Cram speak to the details on that.

Mr. Cram: Yes, the treatment plant is at Melfort, and if anybody wants to take water off prior to that point we would enter into a raw water agreement with them, and they would have to treat it. Or we could look at treating it for them if they wanted us to take a look at that. Right now all we have taken off that line is the ski hill, and it uses it to make snow, and theres probably a few farms that take the raw water, but wouldnt be using it for drinking.

Mr. DAutremont: No, I wasnt necessarily thinking of that particular line. Just in general if someone was to draw water off of that for some reason.

When youre looking at this kind of a system, if you have a place like Melfort which may or may not be economical for them to take it Im sure theyre a large enough community that they would be economical but if you had a community that it was not viable economically, who would go out then and try to solicit other customers for SaskWater or for the project? Would that be the responsibility of SaskWater? Or would that be the responsibility of the community that was initially proposing the project?

Hon. Mr. Prebble: Essentially SaskWater tries to take a leadership role in that area, Mr. DAutremont. What SaskWater does is it . . . Theres a marketing and business development arm of SaskWater, a little division within SaskWater and there are . . . If a community comes to SaskWater and says were interested in doing this kind of a project, we try to work with them in terms of identifying other customers who might also be interested, which really means for the most part other communities, although there may be a rural water pipeline association that would be interested in forming. So there may be individual rural users who would be interested in hooking up to the system. And weve got well over 1,000 of those rural users hooked up, so thats something Im very pleased about. But theres obviously a long way to go in terms of the work ahead.

Mr. DAutremont: If someone was to come forward with a proposal, what kind of feasibility studies do you do? Does SaskWater do the feasibility studies or does the proposing community have to do the feasibility studies?

Mr. Kramer: It could really be either. We would have our due diligence model that Ive described, kind of information that we need to know and verify to ensure were certain of initial infrastructure costs and operating costs and adequate supplies of the water. But then the actual business analysis, the work to develop the business plan, we could do some of that. We do it as a service for communities that want to work with us. But if they have a consultant that they would want to do that business plan, if it meets the criteria that we need, thats certainly an acceptable approach as well.

Mr. DAutremont: So the community that was going to make a proposal would have to get a number of the ducks lined up initially in coming to you, and then you would do the business feasibility study on it.

Mr. Kramer: We would even help them line up their ducks in the sense of adequate water supply or understanding their own challenges for treating the kind of water they had. Some of them come to us just wanting to know what SaskWater might do for them. And in that case we would have our engineering people and our operating people, along with our marketing and business people, all part of a working team that would bring a proposal forward, see whether all of the items could be dealt with in an economical fashion and then take that through to our board if it was a project that was viable.

So we can pick them up basically at any particular level. Some come with us just at a request level to say, let us understand what our challenges are from the ground up.

Mr. DAutremont: Okay thank you. In putting together projects, what would you be looking at as an average annual cost per customer that someone today could expect to pay if they were thinking you know we need a fresh water supply; three communities down the road are also in the same position? As a rough, very rough guideline, what kind of annual cost or cost per customer so that people could just quickly think is this viable for us or not?

Hon. Mr. Prebble: The vast bulk of our customers, with the exception of the Humboldt and Melfort lines which are the two big regional systems, theyre paying basically $7 for 1,000 gallons of water. And so thats the rate, for instance, that you would find around Saskatoon just to use a different example.

Now, Dan, the customers there are you know paying $7 for 1,000 gallons of water. There are some customers that are paying up as high as close to $11 for that same 1,000 gallons of water. And along the Melfort line for instance, the charges are well in excess of $10. Ill get you the exact amount.

Mr. Cram: No, on the Melfort line, the charges are in the $7 range. On Wakaw-Humboldt, theyre over $8 but 7 is pretty typical.

Hon. Mr. Prebble: And so Im going to correct myself here. Marts already corrected me, but Mr. Cram has noted that customers on . . . Hes indicated what the customers on Humboldt and Melfort are paying. Its Hague thats paying up close to $11, Mr. DAutremont.

Mr. DAutremont: And on the systems that you operate, what would a typical customer use in a month or a year?

Mr. Cram: We say as a rule of thumb that a household would use 7,000 gallons a month. Is that the right number? Yes.

Mr. DAutremont: So 50 bucks a month really.

Mr. Cram: Yes.

Mr. DAutremont: Okay. That was the kind of number I was more looking for. And at that kind of a rate, that would provide the break-even point for most systems.

Hon. Mr. Prebble: Thats correct.

Mr. DAutremont: Okay.

Hon. Mr. Prebble: Not uniformly so. I mean, so this varies a little.

What weve tried to . . . the other thing weve tried to do, just so that you understand, is weve tried to standardize the rate a bit. In other words, not every customer is . . . I mean, its unfair if every project reflected simply its costs and nothing more and nothing less. Then wed have a whole series of different rates across the province.

So when we chose that $7 figure, it was trying to come up with something that seemed fair to everyone and put us at . . . Were not at break-even, but were . . . Well, you know, our loss for the year is 1.5 million. Then theres a municipal charge on top of the SaskWater charge, and we dont control what that municipal charge is. What were in effect doing in most of these communities is were delivering water to the community. And then the municipality is choosing to distribute it on its own local system to the household, and it levies whatever charge it thinks is appropriate. So we dont . . . You know, thats outside of our jurisdiction.

Mr. DAutremont: And the municipal charge probably also includes . . . Then the disposal of the water as well would be in all likelihood part . . .

Hon. Mr. Prebble: Thats correct.

Mr. DAutremont: Of the water charge.

Hon. Mr. Prebble: Yes.

Mr. DAutremont: Yes. Okay. And I understand as well that on some systems, you got greater distances and fewer customers. Obviously the costs are going to be greater versus a concentrated population that would access this. Okay. Well thank you on that particular set of questions.

Are there any communities requesting this presently or projects that you have on the go right now?

Hon. Mr. Prebble: We just finished a project at St. Louis in terms of expanding the regional pipeline system to St. Louis, and I think the community is very pleased with the quality of the water that theyre getting now. I had a chance to be out there recently and the feedback was good. And weve just taken over the Elbow water treatment plant, and were going to be doing significant upgrades at Elbow. And what weve done here, Mr. DAutremont, is we have purchased the water treatment plant from the community of Elbow, and were going to run the plant for them, and were going to do significant upgrades to the plant. So theyll be about a million dollars invested in Elbow when were done. And then were going to be serving two small neighbouring communities with that water as well.

Mr. DAutremont: So you dont have any other large projects that youre looking at at the present time?

Hon. Mr. Prebble: Were looking at two other projects with communities. We are not to the point yet where decisions have been made on these, and I mean this is sort of an ongoing process within SaskWater. But we are working with La Ronge on a regional pipeline project there that could potentially include neighbouring customers like Air Ronge, the Lac la Ronge Indian Band. I mean I just want to make it clear this is simply discussion thats happening right now and planning, but theres no final decisions that have been made around this.

Were conscious of the fact that the Government of Canada has regional pipeline funds, and they are potentially available to La Ronge, Air Ronge, Lac la Ronge Indian Band if they decide at the end of the day that theyre interested in using them. And SaskWater has been working closely with those three communities on a potential application for regional pipeline, a regional pipeline project. And so thats in the planning stages. Whether it will definitely go ahead or not, I cant say at this point. But theres certainly serious work being done.

Similarly were looking at . . . weve been working and having discussions with Caronport on a pipeline that would run out there, basically using the pipeline that runs from Buffalo Pound to Moose Jaw and accessing it and delivering good quality water at Caronport and possibly to the neighbouring RM. Again these are discussions, and again we would try to help Caronport access the federal dollars that I made reference to earlier, this regional pipeline fund that theyve set up.

There have been some discussions with the community of Kamsack. Those again are just . . . And by discussions I mean we sit down and we look at, you know, what could be a potential solution to their water problem, what kind of cost would we be looking at, are there provincial or federal funds that could be accessed, and do they want help in kind of putting together a detailed plan. If they do, we try to provide that as much as possible as a service to them. And then at the end of the day, each of these communities needs to make a decision themselves about do they want SaskWater as a partner or do they want to take the help that SaskWater has given them and use that to make an application but basically at the end of the day run the system themselves and apply for the money themselves.

Mr. DAutremont: Thank you. The federal money that you mention being available that La Ronge is looking at is that monies that are available to anyone who meets the qualifications, or are those federal monies directing to First Nations?

Hon. Mr. Prebble: No, these are federal monies that when they were announced there were a number of communities that they were kind of . . . had signalled potential interest and they were actually referred to in the announcement. I dont know that the money is limited to just those communities. It might be. I should get some clarity on that myself and Ill ask my officials about that in a minute. They will provide that clarity.

But this $27.3 million . . . and when the federal government announced this, they had been having some discussions with SaskWater and with a number of communities in the province, and they for instance referenced in their news release La Ronge. They referenced Caronport. They referenced the Kindersley-Kerrobert area in their news release. Now Im going to ask one of my officials to comment on whether other communities are kind of free to apply to that money or whether that money is essentially targeted.

Mr. Kramer: Yes, it would have been. The minister has identified some of the areas. There would have been five that would have been initially identified by Infrastructure Canada and Western Economic Diversification. There was La Ronge. There was Caronport regional. There was a base around Rosetown, a base around Kindersley, and then Regina east essentially White City, Balgonie, Emerald Park, Pilot Butte.

So those five areas were identified to give them the opportunity to bring forward business plans. I believe the business plans need to be submitted to the federal government by the end of November or in and about that time frame with an expectation that there would be some choices made in some months after that as to whether projects might proceed.

But those five areas were pre-selected at that point based on some local interest in developing regional systems. If these five areas choose not all to proceed at this point in time, I think we as a province would also be interested in the discussion with the federal government in whether theres opportunity to look then at other areas. But the five were pre-selected in Minister Goodales announcement from July that set in place this process to develop business plans and then have some project approvals in months after November.

Mr. DAutremont: Okay thank you. In answering one of the other questions earlier in the day, Mr. Minister, you mentioned something on the provincial bodies, provincial associations sit on there and make recommendation. I wonder if you could tell me what the membership breakdown is on those bodies.

Hon. Mr. Prebble: We can get that for you, Mr. DAutremont. Again this is Saskatchewan Environment and Government Relations that are kind of the primary lead departments here, particularly Government Relations. But SUMA and SARM are both represented in this process and Government Relations is at the table. I believe, but I would stand corrected on this, that were looking at a committee of about six, at least six members, and Government Relations is certainly at that table. Well get you the detail on that so that you . . . because every community should understand what the decision-making process is and I want all members of this committee of course to have that information. But just to be clear, SaskWater is not involved in this decision-making process.

Mr. DAutremont: Okay, thank you very much. Go back to the 2004 on the piping and the pumps that Ms. Eagles was talking about, who is responsible for the damage that may occur to some of this equipment? Is it the individual who was using it at the time the damage occurred, is it SaskWater, or is it the individual who reports the damage?

Mr. Cram: If theres clear damage to equipment by abuse, then the individuals responsible. Normal wear-and-tear maintenance is the responsibility of the Watershed Authority.

Mr. DAutremont: Okay, so if somebody drives over the pipe, theyre responsible for it, but if the seals go in the pump, thats maintenance.

Mr. Cram: Right.

Mr. DAutremont: Okay thank you. I was just wondering in my own mind why some of this damage might not get reported and were all . . . [inaudible] . . . On the question of some of the legal costs and the outstanding legal activities dealing with the fallout from SPUDCO, are there any ongoing legal actions taking place that SaskWater and by extension the government be held responsible for any further costs?

Hon. Mr. Prebble: Well the answer is that there is one outstanding legal action and that is . . . its not directly related to SPUDCO, but I want to flag it because I dont want to say . . . I mean, it is the Kaukinen-Fjeld lawsuit against Minister Sonntag and the former minister, Carol Teichrob, in which SaskWater is named. Thats the only outstanding lawsuit. And I just say that because obviously during the SPUDCO period, Mr. Kaukinen and Mr. Fjeld worked for the corporation as president and a vice-president. So Im just referencing that. Its not directly related to SPUDCO but its out of the SPUDCO era and so now . . . That suit has not been active.

And as you might recall but I just want to make sure that everybody knows that this has happened we covered Ms. Teichrobs legal expenses as of April in that. Now they were quite small. It was just, I think it was $7,100 if I recall. But because she had been a board member of SaskWater and again the context for the suit was largely based on remarks that shed made as a former board member of SaskWater.

Apart from that, there are no other outstanding lawsuits. All other lawsuits have been resolved, including the one in relation to the Dolmans.

Mr. DAutremont: The one, the lawsuit related to the Dolmans, was that settled through negotiation? Was it dropped or did it go to trial and has ended?

Hon. Mr. Prebble: No, it didnt go to trial, Dan. It basically was settled through negotiation, I guess would be the fair way to describe it.

Mr. DAutremont: Was there any cost to SaskWater in that settlement?

Hon. Mr. Prebble: Well first of all, there were legal costs incurred by SaskWater along the way and Ive referenced those. Theyre in the range of about $12,000. I can get you the exact number if youd like but theyre small, you know.

The Sask Valley Potato Corporation also incurred legal expenses, and those were in the range of about 29,000 and again I can get you the exact number so about, you know, roughly in the range of $40,000 in legal costs altogether there. And the nature, I should probably comment on the nature of the settlement, because in the Dolman case the settlement essentially at the end of the day was negotiated with Saskatchewan Valley Potato Corporation. And it involves the commercial lease arrangement for the rental of storage bins and the last of the remaining potato storage sheds that is actually owned by Saskatchewan Valley Potato Corporation. It was of course originally owned by SaskWater and then transferred over to Sask Valley Potato Corporation. And this is, the last remaining shed is located at Broderick.

So because the lease arrangement governs an ongoing business relationship, the specific details are required to be kept confidential. And this in significant part is at the request of the Dolman family. But I can say that the settlement did not include a substantive cash settlement payout. And the direct costs including legal fees should not exceed $100,000.

Mr. DAutremont: So the total cost youre saying then of the settlement to SaskWater or the government, Sask Valley Potato Corporation, will be less than $100,000.

Hon. Mr. Prebble: Right. And whats happening is that there is now a commercial leasing arrangement in which the Dolmans are making use of storage space in the potato storage shed.

Mr. DAutremont: Okay thank you because I was concerned when you said not substantive what your definition of substantive . . .

Hon. Mr. Prebble: Thats why I wanted to clarify it. And Im really speaking in relationship to other costs that have been incurred. I still consider $100,000 to be significant, but bearing in mind that this originally was a lawsuit that involved, you know, the initial request from the Dolman family, I think, was in the range of about $800,000.

Mr. DAutremont: Well less than 100,000 is certainly less substantive than the 35-plus million that was lost in SPUDCO so . . .

Hon. Mr. Prebble: The losses on SPUDCO were significant and Ive apologized for them on behalf of government again and I dont want to in any way understate those. They were unfortunately a significant loss for taxpayers.

Mr. DAutremont: Okay thank you. You say the other case dealing with the Kaukinen and Fjeld case has been inactive now.

Hon. Mr. Prebble: Yes, I mean theres been very . . . I dont want to say theres been nothing happening. Theres been some exchange of letters between lawyers, but theres really been nothing significant happening on that case in the last year.

Mr. DAutremont: Did SaskWater or some entity related to SPUDCO have to put aside contingency funds for this case in case it becomes active again?

Hon. Mr. Prebble: I want to just check on that, Dan. Im just going to ask my officials for a little bit of advice on that. Im not aware of a contingency fund, but I want to be absolutely certain that theres not one there. So the answer is no on that, Dan. And we basically see this case as being a very defensible case, but Ive certainly learned in my time in government that theres no guarantees around outcomes. But at this point there isnt a contingency fund in place for this.

Mr. DAutremont: Thank you. Not being familiar with how these kind of cases proceed, has SaskWater or any entity associated with the SPUDCO deal made any moves to have this action cease?

Hon. Mr. Prebble: Because this is active litigation, Im being advised that I cant discuss it beyond what Ive done already and I apologize for that.

Mr. DAutremont: Oh, yes, the typical lawyer answer, isnt it say nothing. Well I think its a case that you know it goes back now a good number of years, and at some point in time I think it would be worthwhile to have it go away. And Im not, certainly not suggesting that a whole bunch of money being spent on making it go away, but actions that could take place that would make it go away, I think, would make it beneficial to everybody. So, you know, thats my comment on it.

Hon. Mr. Prebble: Thank you for that advice. I understand what youre saying.

Mr. DAutremont: Well its worth what you paid for it. What is SaskWaters current involvement with the Rafferty and Alameda dams and the areas surrounding them?

Hon. Mr. Prebble: Dan, we have very . . . as far as I know we have no involvement in this, certainly no significant involvement, but Ill let Mr. Kramer speak to this in terms of detail.

Mr. Kramer: Really nothing to add . . . the responsibilities for operation of Rafferty-Alameda are with the Watershed Authority, and SaskWater doesnt have any customers that we would supply from those sources directly so that there isnt a role for SaskWater in its current mandate of a commercial Crown dealing with water and waste water.

I might take a moment just to describe the role of the Watershed Authority because we recognize that many of those activities were within SaskWater and that reorganization means that what used to be sort of a set of activities now is changed. But I think the simplest way for us to describe the mandate, the Watershed Authority deals with the issues of water as a natural resource. So all of the natural resource issues are really within executive government. Theyre within the Treasury Board Crown of the Watershed Authority, and the issue is then tied to the provinces 45 major pieces of water management infrastructure like Gardiner, Rafferty, Alameda. All the issues tied to drainage, tied to water allocation, tied to watershed planning are ones that are the responsibility of the Watershed Authority.

And SaskWater then, as weve described, has a responsibility thats commercial. Its a CIC Crown and would deal with the provision of water and waste water services on a commercial basis to industry, to communities, or to individual residents. But all of those activities that used to be in SaskWater as part of resource management now are within the Watershed Authority including activities around Rafferty and Alameda.

Mr. DAutremont: Okay thank you. Did not, though, SaskWater hold authority for or even title to the lands around the Rafferty-Alameda project?

Mr. Kramer: Yes, thats correct. And with the separation of mandates, as Ive described . . . Back on October 1, 2002, would have been when the two pieces of separate legislation would have been proclaimed. That land base that was with SaskWater would have gone to the Watershed Authority and is now administered by that organization as part of its ongoing duties as well.

Mr. DAutremont: Okay thank you. So the land was transferred to the Watershed Authority. Was there any value attached to that transfer because there were debts associated with the construction of the Rafferty and Alameda projects? The land would have made up part of the assets of that. Was there a financial value to that transfer?

Mr. Kramer: We have been told that the lands were not transferred at any particular value, that the Rafferty-Alameda project itself in terms of accounting purposes was never capitalized, so it would have been a transfer of an asset but not at any book value. Its really a transfer of responsibility but not a transfer at any financial cost.

Mr. DAutremont: Who retained the loans then that were associated with the Rafferty and Alameda projects? Did SaskWater retain those loans or, did the Watershed Authority assume those loans or has some other government entity taken them?

Mr. Kramer: I am told that there wouldnt have been loan funds that would have been provided per se in construction. There would have been a number of funders including the federal government, provincial government, and some funds that came from the USA [United States of America] as well, but there wouldnt have been loans per se so that the project would have been built with allocational funds. But there werent any loans that were outstanding or loans that were part of the funding arrangement.

Mr. DAutremont: Okay thank you. I thought at one time that SaskWater had been carrying on the books a value for loans for that project, but I could have been mistaken on that. I know the people in the area are certainly very happy with the projects. Theres lots of boating and fishing going on in there. On the Alameda theres a park has been built on the east side with a nine-hole golf course.

I know one of the difficulties though that has arisen from that was there was funds originally allocated for that through SaskWater that henceforth were not available to carry out those projects, and also that on the west side of the Alameda reservoir there was a desire by the communities to have a boat launch there which seemed to be a real struggle with the government to finally get that done. And I know at the end of the day the communities just said they were going to go ahead and do it and the government could then deal with it afterwards. And I think they finally did get approval with that imminent action. The government finally relented and allowed a boat launch to be placed at the appropriate spot.

So I know the people in the area are very pleased with it. Actually there is a lot more water in there than the opponents of the project were forecasting. I havent noticed anybody walking across the reservoir as of late during the summertime. Certainly there are lots of people out there during the wintertime ice fishing, but you know some members actually even received flippers to do their walk, but I dont believe they ever did it. So its been a good project for southeast Saskatchewan despite all the opponents rhetoric about it, and I think people want to see it further develop rather than be limited. So those are my questions and I believe my colleague has some questions.

Crown Investments Corporation 2004 Annual Report
To view this section on video, click here, and start play at 1:23:09.

Mr. DAutremont: Id like to ask a few questions as well about the Meadow Lake pulp mill. And I believe that CIC has a 50 per cent interest in that, do they not, as of December 31, 2004? Thats correct? Meadow Lake Pulp Limited Partnership.

Hon. Ms. Atkinson: Investment Saskatchewan, as you know, has been set up to deal with a number of assets that were formerly held by CIC directly. Investment Saskatchewan is a subsidiary of CIC, and Investment Saskatchewan has an equity interest in the Meadow Lake pulp mill.

Mr. DAutremont: So as of December 31, 2004, CIC had responsibility for some, if not all, of the 50 per cent of the Meadow Lake Pulp Limited Partnership.

Hon. Ms. Atkinson: Through Investment Saskatchewan.

Mr. DAutremont: Currently now. But in December 31, 2004?

Hon. Ms. Atkinson: Since 03. Since 03 Investment Saskatchewan has had responsibility for the Meadow Lake pulp mill.

Mr. DAutremont: So why would these be listed as the corporations jointly controlled enterprises then in the annual report, rather than being reported by Investment Saskatchewan on page 67?

Mr. Swystun: Mr. Chairman, the note the members referring to is the CIC consolidated statements, and it treats all Crown corporations, including subsidiaries as well as the holding company, as one company. So these notes would relate to operations of all subsidiary Crowns. This particular note that youre referring to includes Investment Saskatchewan. There would be notes pertaining to operations at SaskTel or SaskPower and so on as well.

Mr. DAutremont: Okay thank you. Further on, on page 76 and 77 of those consolidated financial statements, while CIC was still the entity which was controlling Meadow Lake Pulp prior to 2003, what was the financial position of that investment? How much had been lent to Meadow Lake Pulp and how much had been repaid?

Hon. Ms. Atkinson: Well get you that information. We dont have that type of detail with us this afternoon, but well get the member that information.

Mr. DAutremont: When you transferred Meadow Lake Pulp from CIC to Investment Saskatchewan, I wonder if you could give us the financial position at that point in time then and how much had been lent in total to Meadow Lake Pulp and how much had been repaid in total, and what was the financial position.

Mr. Swystun: Well endeavour to collect that information as well.

Mr. DAutremont: In your consolidated financial statements as well, on page 77 you talk there about the . . . one, two, three, the fourth paragraph on this, you talk about the marketplace for pulp and paper and how it reflected into the operations of Meadow Lake Pulp and how it impacted on their financial abilities. You talk about:

    Using managements best estimates based on assumptions that reflect the most probable set of economic circumstances, the corporation has taken a provision . . . [for] $30 million in the current year . . .
Now the $30 million provision that was taken, Im assuming thats a writedown. Is it not? And then later on it says:
    However, given the wide fluctuation in world commodity prices for pulp, this estimate could change materially in the near term.
Based on whats happened up at P.A. [Prince Albert] and the unfortunate circumstances there, is CIC looking at any improvement in the investment that Investment Saskatchewan has in the Meadow Lake Pulp?

Mr. Waller: I dont believe theres any indication of improvement in that investment. And in fact earlier in the year Investment Saskatchewan was given the authority to purchase debt from certain third parties, which was done. As we sit here today, I dont believe that CIC is aware of any specific intention to further write down the investment in Meadow Lake Pulp Mill, but beyond that, Mr. Chairman, I think the question should be addressed to Investment Saskatchewan.

Mr. DAutremont: Thank you, though but from your estimates and information on the subject, the economic environment for pulp and paper hasnt improved since this report was written.

Mr. Waller: Absolutely not.

Mr. DAutremont: So if Investment Saskatchewan were to come to you then with a proposal for investment in this kind of venture or to further invest in this kind of venture, would it seem to be economically prudent?

Mr. Waller: That would depend on the nature of the investment. What our role would be is, if they bring forward a proposal that requires CIC board and cabinet consent, the role for Crown Investments Corporation staff would be to review the proposal. And one of the things that we would be looking for is an assessment of the risks and the benefits that are inherent in the investment.

I mean there are still a number of people operating pulp and paper mills in North America. And given the announcement earlier in the week, I think there is a committee that has been charged with the responsibility to seek out other investors to replace the current owner.

Mr. DAutremont: Well we had two mills in Saskatchewan, and as of earlier this week were down to one. And looking at the financial picture as has been presented in your consolidated report, that one, to be kind, is struggling. And Im not sure what all the problems are in pulp and paper other than it seems a glut on the world market. But it makes the viability of these operations questionable on a financial circumstance.

Mr. Waller: I think that the struggles of the pulp industry in Canada are reasonably well known. I mean first of all both pulp and paper are in markets where the demand is less than it has been. Theyre facing offshore competition, lower cost offshore competition. And the significant rise in the Canadian dollar has impacted significantly on their profitability. Thats not . . . I think that was what was part of the Weyerhaeuser announcement earlier in the week, and the Meadow Lake pulp mill operates in the same environment.

Mr. DAutremont: The Meadow Lake pulp mill though it seems over time has been struggling mightily even when the Canadian dollar was lower, and Im sure that the rise of 25 per cent in the value of the Canadian dollar has got to have a significant negative impact on that operation. And so it brings into question really the viability of pulp and paper in general in Saskatchewan unless there is some dramatic changes in pulp and paper circumstances.

Well I guess we have further questions on this, but it appears that we need to direct them to Investment Saskatchewan to get some clearer answers on this.

The Chair: Thank you, members. If theres no additional questions or comments, Ill . . . Mr. DAutremont.

Mr. DAutremont: Found another question. Page 31, public purpose perspective. Under P-2, corporate strategic objectives, P-2: CICs workforce reflects the diversity of Saskatchewan. And you list staff levels at greater than 27 per cent levels, diversity and target groups. What are the target groups and how does that break down?

Hon. Ms. Atkinson: The target groups are women in management, people with disabilities, First Nations and Mtis people, visible minorities. And I believe I said disabled people. In terms of the percentage that youre wanting, percentages . . .

Mr. DAutremont: Whats your target levels?

Hon. Ms. Atkinson: For each of those? We can get that for you. Youre asking specific information, and each Crown has representative workforce targets.

Mr. DAutremont: This isnt related to CIC but I noticed it in another Crown. They have a . . . What happens when you achieve your desired levels? Do you then start targeting another group to try and elevate their representation?

So lets say that your target is 10 per cent First Nations and youve reached 15, but your target for visible minorities is 5 per cent, but youre at 2. Do you then start targeting trying to hire visible minorities to raise that level?

Hon. Ms. Atkinson: Once again, Mr. DAutremont, I dont have the specific detail here, but my recollection is that we have not yet reached our representative workforce targets. And this is an ongoing project in terms of trying to reach the point where we have a truly representative workforce in our Crown corporations and also at our board of directors level as well and management level.

Mr. DAutremont: Well it says here that your performance measure in staff levels in diversity target groups and your performance target is greater than 27 per cent. Your performance result says youre at 28.6 per cent so that you have actually achieved your target. But Im wondering about the splits now. What happens . . .

Hon. Ms. Atkinson: We dont stop. We keep going. You know if you reach your target in terms of women in management that doesnt mean you stop, you know. That prevents women, other women from moving into management. If you reach your targets in terms of disabled people, that doesnt mean you stop and no further jobs are available for disabled people or First Nations and so on.

So I want to assure you that just because a company reaches its target doesnt mean that theyre to stop providing employment to people who represent a representative workforce.

Mr. DAutremont: If you have targets and your target is lets say 10 per cent women in management, okay, and youve exceeded that already but youre low on your visible minorities. You have two applicants for a job. One is a woman for the management position. One is a visible minority, which one do you take then?

Mr. Waller: Well all things being equal in your example, we would take the visible minority candidate. Because I think what youre really asking is if we achieve the level of representation in one of the categories, do we stop recruiting or attempting to achieve those levels in other categories, and the answer is no. We attempt to achieve a representative workforce by meeting the objectives in all of the categories.

Hon. Ms. Atkinson: Mr. DAutremont, were trying to get to 50 per cent of women in management.

Mr. DAutremont: Then why isnt that part of your performance target then?

Hon. Ms. Atkinson: Its my performance target.

Mr. DAutremont: Okay, theres some discussion still around the board table or the cabinet table on this.

Hon. Ms. Atkinson: We are trying to get 50 per cent in the legislature and the cabinet.

Mr. DAutremont: So are we.

Hon. Ms. Atkinson: 50 per cent men?

Mr. DAutremont: 50 per cent us.

Hon. Ms. Atkinson: Good luck.

The Chair: Order.

Mr. DAutremont: No. I think thats an issue though within some organizations is that . . . is how do you balance that youve already achieved a level in one area? Now do you continue to use the same measures and increase that level, but do you do that then at the expense of other hiring in other areas? Mr. Waller said no; once youve achieved that level, you want to maintain that or increase it. But in a choice where you have one of your two designated categories, then you pick from the one that hasnt yet achieved its goal. And thats the answer I wanted. Thats what I wanted to hear, but I wasnt sure what I was going to hear, so. The minister wants to go for 50 per cent off the top. Okay, thats all I had.

Back to 2005/06 Legislative Session