Westray Mine
Public Inquiry
Commission

Stellarton, Nova Scotia

Day 66

28 May 1996
Morning Session




Index to online transcript, Westray Mine Public Inquiry
http://alts.net/ns1625/950013index.html



HEARD BEFORE
The Honourable Justice K. Peter Richard, Commissioner

PLACE
Stellarton, Nova Scotia

COUNSEL
Solicitor for the Commission
Mr. J. Merrick, Q.C.

Solicitor for the Department of Justice Canada
Mr. John Ashley
Mr. Colin Campbell, Q.C.
Ms. Lynn Gillis

Solicitors for the Department of Justice Nova Scotia
Mr. R. Endres, Q.C.
Mr. J. Traves

Solicitor for the United Steelworkers of America
and the Nova Scotia Federation of Labour
Mr. David Roberts

Solicitor for the Westray Families Group
Mr. B. Hebert

Representing the United Mine Workers
Mr. Hugh McArthur


Representing the Canadian Union of Public Employees
Mr. Robert Wells

Representing the Town of Stellarton
Mr. Clarence Porter, Mayor




INDEX for DAY 66
(Pages 14394 - 14658 in the official printed transcript)
Page Day
Witness: Mr. Donald Cameron
Opening Address by Mr. Cameron 14394 66
Examination by Mr. Merrick 14433 66




May 28, 1996 - 9:30 a.m.

COMMISSIONER  Good morning.

ALL  Good morning.

COMMISSIONER  Mr. Cameron.

MR. CAMERON  Good morning, sir.

COMMISSIONER  Some months ago Mr. Cameron, through Inquiry counsel, Mr. Merrick, requested that he be provided with the rather unusual opportunity of making an opening address. After due consideration and consultation with Inquiry counsel, I agreed to permit Mr. Cameron to make an address. And it's not without precedent in public inquiries, but it is rather unusual.

      In this case, recognizing the pivotal role which ex-Premier Cameron had in the development of the Westray project and also the fact that his involvement has been subject to considerable public speculation since the disaster, I felt these were reasons enough to give Mr. Cameron that sort of latitude.

      In a letter of April 16th confirming this, I set out certain stipulations, which I understand Mr. Cameron has agreed to, in fact, he's fulfilled. The comments will be a matter of sworn testimony and will be subject to cross-examination.

      The comments will not endure any longer than one hour at the outside.

      The comments will be relevant to the terms of reference of the Inquiry and to the extent possible, be evidentiary in nature.

      And finally, that if Mr. Cameron intended to introduce any documentation, that the Inquiry be given copies of that two weeks in advance. Well, I am informed by Inquiry counsel that that stipulation has been met. Is that correct, Mr. Merrick?

MR. MERRICK  Yes, we received some documents just this morning, but I don't think that that's any kind of a problem.

COMMISSIONER  Have they been distributed?

MR. MERRICK  No, I'm just looking at them now. We'll look at them over the break. I don't think that they are particularly of assistance, but we'll take a look at them.

COMMISSIONER  Okay.

MR. CAMERON  I won't be referring to them.

COMMISSIONER  Okay, fine, Mr. Cameron. Well, on that basis then, Ms. Isenor, would you swear the witness please?



MR. DONALD CAMERON, sworn, testified as follows:

THE CLERK  Please state and spell your name for the record.

A.  It's Don Cameron. C-A-M-E-R-O-N.

COMMISSIONER  Okay, sir.

OPENING ADDRESS BY MR. CAMERON

MR. CAMERON  Thank you, Commissioner, for allowing me to make this presentation this morning, and, of course, after which I will answer all questions as long as necessary for this Inquiry.

      I did contact legal counsel for the Inquiry, I believe, last July, I asked to meet with them and asked if I could make a presentation with the condition that I would like to make some opening comments. And I hope that, in fact, it will be useful for the Inquiry because it will probably speed up the process. Because I know many of the comments I want to make are issues that you and others are very concerned about.

      Just to set the record straight, I have taken vacation days to prepare myself for this Inquiry and also vacation days to be here the next two days, or whatever time it takes, and I have not asked for any transportation costs to come to the Inquiry.

      Well, much has been written and said about this project, so much in my view that the truth has been lost in the story. Someone once said the following, I think it's just a perfect fit the kind of condition we find, and I'll quote this person:

"For the great enemy of the truth is very often not the lie, deliberate, contrived and dishonest, but the myth which is persistent, persuasive, and unrealistic. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without discomfort of thought."

Well, I expect they will be some today who will feel some discomfort before I finish. Now everyone is interested in the political aspects of this story, and it certainly is part of your mandate to look at the politics of this whole issue. So let's get to that issue.

      This is a story of a terrible tragedy, and the reality of that tragedy gave credibility to those who want to play the rotten game of politics in Nova Scotia. It's about the shameful conduct of a few politicians who played the usual game of politics by pitting Cape Breton against Mainland Nova Scotia. But after the explosion they did something very unusual, they milked every ounce of political benefit they could from the death of 26 human beings.

      I will provide you with an internal Liberal Party memo that will leave you no doubt about this. And all this material that I refer to, I presented to Mr. Merrick last July. And, Mr. Merrick, I don't know if you have this memo I gave you, but I'm sure it's in your file somewhere. But I want to quote just one or two lines from it.

      You know there's good people in every political party and there were people in the Liberal Party that told me they were disgusted with the way this was being handled. It wasn't very long after, I got a brown envelope with a name on it, my name on it, and inside was a memo and there was a lot of stuff in that memo that simply wasn't true. But the part about milking political advantage out of a disaster, I think that maybe you will admit after you hear this that that statement is not on the line.

      This is a memo from Moses Coady to Bernie Boudreau. "Bernie asked, 'Should we, the Liberal Caucus, be doing this? Are we doing it right?' The answer, 'Yes, yes, yes. It's art work.' " Well, I have other words for anyone that would describe the death of 26 miners and whether we're doing it right, whether we're exploiting the situation enough, I have other words that would describe it a lot better than "art work."

      And it wasn't very long after that I got a letter of apology from Moses Coady about the whole issue, and I provided that to Mr. Merrick too, last July.

      I will show you too later on how – because I think it's important for us to make the comparison because this whole issue is simply out of control. It's important to see how politicians conducted themselves 12 years ago when we had a methane explosion and death at DEVCO, and no one can argue that that project didn't have great political support and still has great political support. I think the contrast will strike you.

      It's about also a few civil servants in Ottawa who conducted themselves like politicians. They delayed the project for over a year and after the explosion hoped that people would believe that that's exactly why they were doing it. That delay resulted in the change of company plans and led to the development of the Southwest section where the explosion occurred.

      This is a much more difficult area to mine, but the company decided to produce coal to fulfil the contract with the Nova Scotia Power Corporation and at the same time continued to develop their tunnels north.

      Civil servants' arguments on why the mine should be developed were to be kind distortions of the truth. Safety was never a concern to them in that report. I will produce their words which prove what I'm saying is true.

      And I don't believe the media can say that I haven't been involved in this whole issue. Now their bias is no one's secret, but their influence is totally underestimated.

      After the 1988 election campaign – I want to give you an example of how this works. After the 1988 election campaign, there was a correspondent for Thompson newspaper that wrote every word – made a story on every word that Mr. Boudreau would utter. So every day you'd have a press release in the paper. And, of course, if you do that, people think, "Well, there must be something wrong with this project."

      You know, it became a joke around the press gallery in Province House that she was a personal press secretary for Mr. Boudreau. Other members of the press gallery would joke about it. They would joke about it to us.

      Right after the 1980 – 1993 election, a funny thing happened. Of all the press people that could have been hired, this particular correspondent was plucked out that and given a contract in a position that an interview process would be normal. So I guess we could call this a political decision.

      You know, we had other journalists that were able to find an old bus in Pine Tree in the woods and somehow write a story about it and how it was connected with the project.

      But when I told a journalist that a few hours before the mine blew up that Arnie Smith changed the methane meter on the continuous miner, from written testimony, you know, no one could see the importance of telling that to the public. But yet, it was quite important to try to link a bus in Pine Tree to this project. I just make those examples to show that maybe, maybe there was another motive in some of the writings.

      The public have been well briefed on the political side and the political allegations. Some people want you to believe that this project was all about getting me elected in 1988. That we put this project together in a hurry, in a rush. That I had to have a press conference just prior to the election in 1988. Well, let's look at some of those allegations.

      An effort to open a coal mine was started back in the 1970s in Pictou County to deal with a very serious pollution problem at the Trenton generating plant. This pollution was documented for everyone to see, well documented for everyone to see. The local papers were filled with articles about the damage from the pollution. The file I have is over one inch thick of clippings. A greenhouse in that area had to be closed down because the emissions from the sulphur were burning the leaves of the plants.

      A report by Department of Environment in 1975, that I gave to you last summer, Mr. Merrick, that 1975 Department of Environment report said this about the pollution:

"Results of the study demonstrate there were a few periods when the concentrations of sulphur dioxide, particulate matter in the ambient air, exceeded the maximum acceptable levels established for the national ambient quality objectives. It also stated the reduction in air pollution from a thermal plant may be achievable through better use of quality coals containing less ash and lower sulphur impurities, and this is being considered as a Provincial policy."

And, indeed, it was. I'm sure that anyone in Pictou County will tell you that in 1997 [sic] the Regan Government then had a major announcement in the paper that they were going to open a major strip mine here in the Foord seam in Pictou County for this very reason. They were going to do drilling, additional drilling, in Springhill and Thorburn and the Debert areas to identify more low sulphur coal.

      And the interesting thing about that was DEVCO wasn't very concerned about this new competition. And because there wasn't a wash plant available at the time, that project didn't proceed.

      In 1980, Department of Environment issued another report. "Sulphur dioxide levels have increased over the past year and readings above [decibel?] range of the national ambient air quality objectives are occurring at a significant level." And, again, that's the report I gave you last July, Mr. Merrick.

      Well, in 1985 the Power Corporation decided they'd address the problem. Soon after, a decision was made to build Trenton 6, a new 150-megawatt plant at Trenton, to replace the two 20-megawatt plants, the two old ones. And the two – Trenton 3, 4 and Trenton 1 and 2, which were only 10 megawatts each. And they didn't have any pollution controls on them at all.

      Now this would leave the Corporation with Trenton 5 which had pollution control on for ash, but nothing, no control over sulphur emissions. The new 150-megawatt unit would have equipment to – for the fly ash but, again, it would have no controls for sulphur emissions. So you can see that the fly ash problem would be solved but the sulphur emissions would essentially double with Trenton 6. Double in an area where you already had a documented problem with sulphur dioxide. Now just think about that: double, in an area where you already had an established problem with sulphur dioxide.

      The choice was very simple. You could install scrubbers or you could burn low sulphur coal. If you want to install a scrubber, it will cost at least $125 million, I've been told, and at least $16 million more a year to operate that scrubbing plant.

      So no one at this time anywhere would be considering building a new plant, like Trenton 6, without taking some precautions, without taking – installing scrubbers or without burning low sulphur coal.

      The planning going in New Brunswick at that time clearly showed this; they were going to install scrubbers, and clearly, our own planning to build Point Aconi. The Point Aconi was built, again, to take care of the sulphur emissions that everyone knew was a problem. So no one would build a new power plant at that time without doing something to reduce sulphur emissions.

      But for some strange reason, some people felt that in Pictou County, where we had a documented pollution problem, we could build Trenton 6 and burn high sulphur coal without any problem at all.

      Now between 1980 and 1985-'86, Suncor spent six to seven million dollars identifying this low sulphur coal. And in 1986, I believe, Suncor received a letter of intent from the Nova Scotia Power Corporation to purchase coal from this proposed mine. In 1986.

      I might add, there was no opposition from DEVCO about that or any other Nova Scotia politician.

      Because of crude oil prices, and Suncor was in the heavy oil sands project, they decided to look for a partner or sell the project.

      And in 1987 Placer enters an option agreement with Suncor to purchase this project. They met with the Nova Scotia Power Corporation, I was told, and confirmed a letter of intent to purchase coal.

      Still no opposition from DEVCO and still no opposition from any Nova Scotia politician.

      The project was recommended to the Board but turned down. Instead, the Board decided to amalgamate with Dome, a much larger undertaking.

      In 1987 Suncor entered an agreement with Curragh and on December 2nd, 1987, Suncor and Curragh Resources signed a letter outlining this agreement.

      And, Mr. Merrick, I provided you a letter from Suncor saying how this process took place. I know there's a lot of people concerned about how this process actually took place, so I provided you a letter last summer, a letter from Suncor, outlining how they actually chose Curragh in this project.

      Now I know there's been a lot of allegations that somehow there was political interference how Curragh was actually chosen for this project. It certainly doesn't indicate that in the letter. But I just wanted to remind you I did provide you with that letter.

MR. MERRICK  I don't want to interrupt you, Mr. Cameron, but if you want to look at Exhibit 141, tab 3, page 4, can you identify if that's the letter you're referring to?

A.  Sure.

Q.  It's a black ring-binder.

A.  This one here?

THE CLERK  Tab 3, page 4?

MR. MERRICK  Tab 3, page 4.

A.  No, it's not the letter at all, Mr. Merrick.

Q.  What's the date on your letter?

A.  It's May 30th, 1989, and the Select House of the – Standing House of Economic Development, we had this allegation that somehow proper procedure wasn't followed to have Curragh selected as the buyer. And Suncor wrote a three-page letter outlining how Safton, S-A-F-T-O-N –

Q.  Yes.

A.  – how that sale took – actually took place. So –

Q.  All right, we have –

A.  – if you need another copy, I'll be happy –

Q.  No, we have the May 30th, '89, letter in the data bank. It's just not marked as an exhibit.

A.  I see. Well, just let me go back to the other letter that was signed between Suncor and Curragh Resources on December 2nd, 1987. They signed the letter agreeing to make this sale.

      Now the date December 2nd, 1987, is the one I want you to remember because remember, I was not Minister of Economic Development until April 22nd, 1988. So all of this, the purchase of the project, all the background, took place prior to me even being Minister, and, quite frankly, I really didn't have very much to do with it, because I really wasn't in all that good terms with my Party during that period of time. So I really didn't know what was going on unless someone locally would clue me in. So I wasn't involved at all until April 22nd, 1988.

      In fact, when I was asked by the Premier to join Cabinet at that time, I was standing outside the door of the Legislature with notes in my hand to give a speech in reply to the Speech from the Throne. And in those notes I was about to tell my colleagues that, in fact, I would be not running for re-election in that '88 election that everyone knew was coming. And I reflected on the last 15 years with some sadness, but especially because I was not able to change the political system more.

      So you can see those people that continue to say that this project was conceived and built and carried out in 1988 just to get me elected, you have to have quite an imagination when you look at the facts.

      How would I know when Suncor signed that letter with Curragh in December, '87, that it would have anything to do with me when I simply was finished with public life at that point in time?

      And, of course, we've heard many times about this famous press conference that I had that I needed before the 1988 election campaign. Well, the fact is that I cancelled the press conference. It was the Heather Motel. I walked to the front of the room and I cancelled the press conference. I think that's inconsistent with anyone that would believe he needed a press conference to get himself re-elected again. But the lie has been said, and even when I pointed out to the press that I cancelled the press conference, it's been repeated over and over and over and over and over again.

      I believe the force to have that press conference that way came from the company to fulfil some requirement of the Security Exchange or the Stock Exchange Commission; I'm not sure. But I wasn't happy to have the press conference, and that's why I cancelled it.

      That night the company had a press release in Toronto, which, again, I guess, would support the concept that they, for some reason, wanted this announced in the public.

      But, again, it's a little bit of information that will show you that those people that makes those kind of comments are apparently doing it for other reasons.

      And I provided you, Mr. Merrick, with a note from Wilkie Taylor, one of the correspondents at that press conference, and he says there was no press conference. There was no indication in my story, nor, indeed, in the notes that there was a press conference. So, clearly, there was no press conference. But we've heard it, hadn't we?

      Now the opposition started to this project all of a sudden in 1987. Before that, it was no secret, the drilling – it was in the news, there was no opposition to this by DEVCO or anyone else. But in late 1987, the opposition started to this project.

      And officials at the Federal Department invited management of DEVCO to a meeting in Halifax in December '87. And they told them the whole details of the whole project. I think it was kind of rather unprofessional, really, to speak about details of another project to someone else, but they did it.

      Results, the results of that was DEVCO produced a confidential paper that was delivered to the Provincial and Federal Governments in March '88. And I know that you have that, too, Mr. Merrick.

      It was about 13 pages long, and I think there was about seven lines about concerns for safety. But the whole paper was concerned about DEVCO and the great disaster that this mine was going to cause on DEVCO.

      And then, of course, it's a very good time to get involved in this because everyone knew that we were in the middle of an election campaign in '88, and so it became an election issue. And, again, I hear all these allegations that this was just an election issue that we used and didn't care about anything else. And, especially me, that it was just an election issue to get myself elected. And I think you've heard that over and over again and people referring to that.

      I think it's important for us to look, really, who used this in the 1988 election campaign. Well, in Cape Breton, the Liberals used it to their advantage, and they said things like, "Mine proposal stupid." They said, "Area Liberal candidates found in opposition to proposed mine." " 'Mine idea insane,' says Liberals." You know, the papers were full of that.

      Now if you look to those articles, it wasn't that it was stupid because they didn't think it was safe. It was stupid because they wanted to protect DEVCO. And that's not strange to think that you're trying to protect jobs in your own riding. So that's not shocking. But the strange thing was, when you come across the causeway and you got to Pictou County, then the very same party had this to say, "Coal mine development supported by Central Nova Grits." And "The resolution called for the Federal Minister of Regional and Industrial Expansion to improve funding for Westray immediately so the work can begin in Pictou County this summer." "Liberals against false promises, not development." "I and the Nova Scotia Liberals support a coal mine in Pictou County." "Pressure must be maintained," the Liberal candidate, the Liberal member for Pictou East and a friend of mine, and still is, "If the county residents want to see a proposed coal mine established in Pictou, they must maintain pressure on the Federal and Provincial Governments or risk the loss of development." "Local Grits issued Premier ultimatum, but the Liberals, unwilling to wait any longer for the mining project to commence, have issued the Premier an ultimatum, issue an election writ on Saturday the 6th and announce the mine start or a petition would be circulated through Pictou County."

      And even in the Legislature, every Member of the House voted to support the opening of that mine, every Member of the House did.

      You know, we had Pictou politicians Ottawa bound, all the mayors and the wardens. They demanded that a meeting be arranged by Mr. MacKay, I believe, so that they could go to Ottawa and stress the importance of this project on the Ottawa government.

      And Liberal MLAs defend Westray Coal. Mr. Brown and Mr. Lorraine came over, and they said they had nothing but praise for the project on the work that was being carried out there. And even after the election, the new Member from Pictou East, Mr. Fraser, "If we adhere to our own environmental policies of sulphur dioxide reduction, then that means installing expensive scrubbers at Trenton Generating Plant. The other option is local coal."

      Now we've heard this for at least four or five years, and I'm sure that people would say, "Well, that mine was started because Don Cameron wanted that for an election issue. He wanted to use that in an election campaign." I just ask you what reasonable person would look at this, what I read, and say it was Don Cameron that wanted it for the election campaign, especially when I cancelled the press conference a few days prior to the campaign? This is how the politics worked in this situation.

      I would like to – Mr. Merrick, is that Federal order part of the evidence now?

MR. MERRICK  Yes, it is. It's Exhibit 143 – 141, tab 3, page 95. This is the – not order, sorry, Memorandum to Cabinet?

A.  Yes. Yes.

Q.  Dated November 10th, 1988? We put it in –

A.  I think so. Yeah.

MR. MERRICK  – for you.

A.  I did want to turn to the Federal position because they had a major effect on this coal mine, a major, major effect on this coal mine. And I've read a little bit of Mr. Rogers' comments and how he opposed this mine. I'm struck by a couple of letters that was sent, and I know I got these from the Commission. One was from Premier Buchanan to Harry Rogers saying, "Thank you for your letter of January 9th. Without your determination and strong support, the Westray project would not have proceeded. It will be a stimulus to all the country – all the county."

      And there's another note from Bill Redrupp saying, "Harry says that he is very optimistic about the way things are going and certainly feels good about it. And, much to my surprise, he continues to reinforce his position in the last two weeks that he is highly supportive of our position." It's not exactly what Mr. Rogers said during his testimony here, but maybe there's some confusion.

      But I think it would be useful to turn to the Federal order.

MR. HEBERT  Mr. Commissioner, if the witness is going to refer to documents, perhaps he could give us a date and who they're from and –

A.  Sure.

MR. HEBERT  – it would greatly assist in cross-examination.

A.  I got this – this is the letter of February the 2nd, 1990. It's from the Premier in Halifax to Mr. Rogers, and I got it through – the information was given me through the Inquiry, so you must have it.

COMMISSIONER  Mr. Merrick, do we have a number –

MR. MERRICK  Just – I'm sure it's in our data bank. I'm not sure if it's been marked as an exhibit yet.

THE CLERK  Just a second and I will –

COMMISSIONER  Well we can – we can check that out. Carry on then –

A.  And –

COMMISSIONER  – Mr. Cameron.

A.  – just so – if you want to write down the other one, it was – there's numbers at the top. It must be your numbers at the top here.

MR. ROBERTS  Just read them to us.

A.  "139.16."

MR. MERRICK  Yeah.

A.  And it says, "O55."

MR. MERRICK  That's the exhibit book and page.

COMMISSIONER  Okay.

A.  And that is from Bill Redrupp to file, and it's the third paragraph down.

COMMISSIONER  Thank you.

A.  But I'd like to turn to the Federal position and really look at the major effect it had on the total project.

      Well, in my 20 years of public life, dealing with public officials, I never, ever dealt with a – and I want to emphasize only two or three, I've never really dealt with people like that. They were so unprofessional. And I just want to go through some of the things that they were telling their Cabinet Ministers and then you can decide. Maybe I have a bias, so you can decide.

      The first issue they wanted to deal was the displacement of DEVCO coal from local markets. Now at this time DEVCO was shipping 300,000 tonnes of coal to Trenton, 300,000 tonnes of coal to Trenton. And they would lose that when the Pictou project came on stream.

      But, at the same time, the Province was building Point Aconi. And that project would buy 500,000 tonnes of coal from DEVCO. So, yes, they would lose 300,000 tonnes, but they would get another sale of 500,000 tonnes to Point Aconi. Well, the math I have, that's an increase of 200,000 tonnes a year.

      Federal Cabinet were never told this. The Federal Cabinet were told that displacement of DEVCO coal from local markets would have a cost in 1988 dollars, a negative financial impact of $290 million. That's what they were told. And even, even if they would shut the Lingan Mine down because this mine was going to come here, that they could shut that down, they still would lose, I think, $150 million in profit that they were very, very concerned about.

      Well, this was simply false, of course. That they assumed that every ounce of coal going to the new plant, Trenton 6, would be from DEVCO. And we know already this morning and from your evidence that you had before that in fact a letter of intent was signed back in 1986 to buy low sulphur coal for that new Trenton plant. And that letter of intent was again put to Placer in '87 and again to Curragh.

      So, clearly, there was no intent to buy coal from DEVCO. And in their own confidential document that you have that they wrote to the Federal and Provincial Governments in 1988, in that, if you go down, I think, it's to the second page or so, they say that they acknowledge that there is no requirement for the Power Corporation to buy DEVCO coal for Trenton 5 or Trenton 6 after 1989. They acknowledge that.

      So to go to your Federal Cabinet and tell them that you're going to lose $290 million in cash and that $150 million will be required from the Federal Government to make up part of this shortfall, when in fact they were going to gain 200,000 tonnes extra at Point Aconi is a lie. And you shouldn't deal that way with anyone; you should be truthful.

      They also told the Federal Government that they would have to shut down Lingan and they had 1300 job losses. Now what politician wants to see job loss? Did you ever meet a politician anymore that wanted to see a job loss, 1300 of them, in an area with high unemployment?

      Well, was that true? They didn't tell the Federal Government that every tonne of coal they were bringing off Lingan was costing more than they could sell it anywhere. And that was the problem. They didn't tell the Federal Government that it wasn't developed properly. They allowed the mine not to be developed properly. And, of course, Pictou project is not going and we know that Lingan Mine is closed down. So it simply had nothing to do with this project. They didn't tell the truth again. But that's what they put to the Federal Cabinet.

      They said that Sydney to Truro rail line would close down too, "It will be gone." And then they said, "But we should force the Provincial Government to pay $100 to $300 million, and if they would agree to pay $100 to $300 million, then we wouldn't be concerned." But we know what's going on in the rail lines in Canada. Short lines are shut down right across the country. They're preparing CN to be sold, privatized, and it had nothing to do with the Westray coal project. But, again, to put these – this information, one-to-three hundred million dollar demand to be made in the province.

      You know, could you really call that a professional way to deal with an issue? To take an issue and make those kind of comments and then blame it on a coal mine in Pictou County?

      And, in fact, these people, if they didn't force Mr. Comeau and Mr. Buchanan to sign a letter saying, and, Mr. Merrick, you have a copy of this letter, saying that, "No coal from Pictou County would ever cross the causeway." "No coal from Pictou County would ever cross the causeway."

      If they didn't do that, the sensible thing would be to have had coal blended because the Cape Breton coal is low in ash. The Pictou County coal is high in ash. And there should have been some Cape Breton coal come to Trenton 5 plant and blended with the Pictou coal. And the same thing should have happened at Point Tupper where they have a very serious pollution problem. And that's what should have happened and, in fact, that would have increased the usage of that mine.

      And, instead, they forced this internal trade barrier within our province so that couldn't happen, that not one pound of coal could go across the causeway. Again, it wasn't very farsighted on their part because, by blending coal, you could save millions of dollars for the use of electricity, and you could have helped the environment in both places.

      They told the Federal Government that this mine was going to make so much money it didn't need federal assistance at all. At the same time, they were telling our officials in Nova Scotia that this was a very marginal project.

      And then they said, "Well, we will go out and we will get an outside consultant to agree with it." So they went out and got Clarkson Gordon, and they said, "Clarkson Gordon agrees with our figures." But the company said, "Well, we will go out and get an outside consultant," and they got Price Waterhouse. But the Cabinet was never told about the other consultant.

      They told the Cabinet that we need a signed deal, we needed some commitment for DEVCO with the Power Corporation. And they really forgot to tell the government that we had already a 33-year deal, a contract that went to year 2010. But they kept saying, "We need this ten-year deal." What they wanted to do was lock in the artificially high prices for another ten years so that every business and every person in Nova Scotia could be at a disadvantage vis-a-vis other provinces.

      These are the kinds of things that a few of these people put in the document to the Federal Cabinet to try to make a decision.

      They said that we were going to start a trade war. If there was one pound of this coal shipped from Pictou County outside the province, it would start a trade war. We'd have trouble with the GATT. We'd have trouble with the Free Trade. And they just simply forgot the fact that DEVCO is subsidized on every issue, and yet they ship out more than two million tonnes a year, and we didn't start a trade war with that. But somehow this little mine was going to start a trade war.

      They said that there's no benefit could be quantified for the reduction of sulphur. Just think about this: they told the Federal Cabinet, "No benefit could be quantified for the reduction in sulphur." By burning Pictou County coal, we would reduce the sulphur emissions by 30,000 tonnes a year in an area that we know was a real pollution problem. Thirty thousand tonnes a year. And they told the Federal Cabinet they couldn't quantify it.

      They said, "We're on a system-wide basis, and if we spread, in theory, this pollution over every inch of the province, we're going to be all right. We going to meet the system-wide basis," and completely ignored, and they were told there was a local pollution problem at Trenton, completely ignored it.

      If I'm not right about this, then why is the current government allowing the strip mine to be operating and that low sulphur coal going to that plant today? And why is the Nova Scotia Power Corporation now combined with a private company to look for methane in the Pictou County area to burn at the Trenton plant? They know they have a sulphur problem there. They know they can't burn all high-sulphur coal in those plants and meet the requirement. And they are looking for other ways just as they did then. But, yet, no credit could be given.

      And this government, at that time, called themselves "green." They were an environmental government, and they had officials saying, "We are going to force you to use this coal and put another 30,000 tonnes a year of S02 into the air.

      And just compare that the Point Aconi plant where we spent $500 million building the plant. It will take 16-$20 million more a year to operate that plant, and we will reduce sulphur emissions there by about 28,000 tonnes a year less. And look at the expenditure. And, by the way, I support the Point Aconi plant. I always did, and I always will because that's what will give DEVCO a future, not the political leadership they've had in the past.

      Well, the whole paper, really, was all about DEVCO. It was supposed to be a request for support for another company, but the whole paper – and it's that thick, it was all about DEVCO. There was no mention of safety in it. I think people should understand that. You read it. There was no mention about safety. There was no concern about the difficulties that a mine might experience. They said that this company is a reputable company and it could overcome easily any of the technical difficulties. There was nothing about safety.

      Well, what effect did this delay have on the project? I think that's important. Well, it held it up for 14 months. When you look at those tunnels, they were stopped and for 14 months they were not proceeded with. The company had a contract to sell coal in mid-1991 to the Power Corporation.

      Because of that 14-month delay, they changed their plans. They changed the direction of the tunnels, and they went into the Southwest section, a section that they didn't plan to go in. In fact, I remember when the mine started, looking at the original plan. I remember Mr. Phillips telling me, "We may never mine that. It's on our plan to mine, but we may never mine it. There may be better coal somewhere else. But we may pick that on the very last on the way out."

      So it's very clear that if we didn't have the Southwest section, that 26 people would be alive today. So I would say the fact it was delayed, the fact that it caused the company to change its plans, the fact that they went into the Southwest section, the fact that that's where the explosion was, that most people would be alive today if this process was allowed to proceed on a normal basis, and all those misconceptions and lies weren't put to the Federal Government.

      Now, I ran across something in the material that I was given by the Inquiry just this morning. There was a real fuss about the financing of this mine by the Federal Government. In May, May 22nd, 1988, up to 27 million would be earmarked for the Western Diversification Fund to help Ontario Hydro afford western Canada's coal. They were saying that there was never any other support anywhere for a coal mine. And here, in the very same time when they're arguing about this, there was no problem, no fuss at all. They spend $27 million and the province adds another $16 million, so that western coal can be burnt in Ontario. And these people were saying, "It's against all our rules to help coal mines or coal."

      Let's get to the Provincial loan. I know a lot of people are interested in that, our part in this. Well, I didn't expect we would have to have a Provincial loan. I expected what we would do in the province was to give a coal contract and provide the leases, et cetera, et cetera, for the mine. And the financing they were going to get through the federal authorities. So the $12 million loan was something that came sometime after they started a negotiation with the Federal Government.

      We agreed to provide a $12 million loan on $130 million project, which is not unusual. What is unusual is we charged them 11.75 percent interest. That is very unusual. We asked them to pay back all the money before they took any profits out of the company. And after they got the full production, they had to pay the loan back in four years, some pretty stiff guidelines to it.

      I asked Mr. Merrick and I asked the Justice lawyers for some time now, would they please ask the Department of Development to get other projects done at that time. Everyone has said that this was a "sweetheart deal." Well, I think it would stick out like a sore thumb if it was. And all I wanted was ten or fifteen or five other projects at the same time, in the same period of time so we would know they were done under the same conditions, to look at how the Provincial Government operated with companies. What would be normal to do for companies at that period of time?

      Well, for some reason, I just can't get that information. It's funny, I would think, Commissioner, you'd like to know what kind of deals were made at the same period of time, so you could satisfy yourself if this really was a special deal. This stuck out. Because the ones that I can think of like Michelin Tire that I was involved in, we gave them a 43.5 million loan with no interest for 15 years.

      Louisiana Pacific, I think, was costing us something like $750,000 a year.

      Amherst Aerospace, we made a terrible deal there. We were pressured to keep the plant going and we made a terrible deal. And I got involved and personally called Ken Rowe up and now there's a new plant there. But I know that it was a – if you want to look at a good deal, clearly, these would be good deals.

      This one here, 11.75 percent interest, I can't think of one other deal that I made that we charged a company 11.75 percent interest. I really can't. And I thought it would be useful if we could have that information. So I would think it's not what you'd call "a sweetheart deal."

      Now there's another interesting thing that would support what I'm saying that this wasn't really such a special deal. Curragh went out to do a private placement, and I provided this, Mr. Merrick, back last summer to you too. This is a memo faxed to Roy Sherwood from Curragh Resources. I'm not sure what number you would have on it, but –

Q.  What's the date of it?

A.  The date is August 30, 1991. And Curragh wanted to use Nesbitt Thompson to have a private placement raised of 55 million dollars.

      It's interesting when you look what they wanted to do with that 55 million dollars. They had a zinc-lead mine out in Faro, and they wanted to use some money there. But when you read it, they said that they wanted to pay – after expense and prepay the 12 million dollar loan to the Province of Nova Scotia. They wanted to pay it off. They wanted to pay it off on August 30, '91.

      Now if this was such a special deal that we did in financing, can you think of one reason why a company would want to pay it off early? I think it's pretty concrete evidence that they thought this was the worst financial deal they had with all the whole project. In fact, that's what they told me. In order to save money, they were going to refinance it and get rid of our loan, pay us off completely.

      And just so you'll know the kind of cooperation we got from the Federal Government on this issue, they just refused to even answer the request from the company. And not only did they hurt this project, but they hurt the project out in the Yukon where it was employing hundreds and hundreds of people.

      I also want to comment, I reviewed the interview from Tom Merriam, the former Deputy Minister of Industry, and he leaves the impression that he had one week. I don't think he did it on purpose, but when you read it, you almost get the impression he had one week to do the 12 million dollar loan. After the Federal Government said no, I was told they wanted us on the hook financially too. You're going to have a 12-million dollar loan. That's when we found out.

      Maybe Merriam was surprised about the fact that we were going to be involved, but they had months and months and months to negotiate that loan. And the record is clear, it did take months, and months, and months to negotiate the detail of that 12 million dollar loan.

      And then after we did negotiate the details, the Federal Government came back to us again and said, "Now we want you to fully subordinate it." So every time we did something, the loop – the hoop was raised another notch for us to jump through. So that's why we had a 12 million dollar loan, and that's why it was subordinated. We were told by the Federal Government, "You must do this."

COMMISSIONER  Mr. Cameron, in fairness to you, I must say that you have ten minutes remaining, just so you'll stay on track.

A.  Well, time flies, doesn't it?

COMMISSIONER  Yes.

A.  Well, we can go through some of this later on then maybe. All this –

COMMISSIONER  Well, you're certainly going to be subject to examination at some length by Mr. Merrick.

A.  All this material, you know, I've read that people are concerned about it, so I'm not sure why you wouldn't want to hear it, but you know, you're the boss, Commissioner, and I'm going to follow your advice.

COMMISSIONER  Well, those are the terms under which I agreed to do it, Mr. Cameron, so we'll stick to those.

A.  Okay.

COMMISSIONER  Okay, thank you.

A.  I want to go to the explosion. I think the people should be interested in that. Everyone agrees it was in the Southwest section. Not everyone agrees where.

      There was an RCMP map that I provided with you last summer. There was notes on that map. They said there was pyrite in the coal face which is a hard rock that would cause sparking.

      They said the continuous miner was in an "on" position. They said the shuttle car wasn't full.

      The interesting thing is that when you look at where they found the bodies, you'll find that of all the men operating the equipment, the gentleman on the continuous miner was the first one out. It seems to me that that's pretty clear evidence that he had the most warning when he saw the sparks, the blue flame. He wouldn't sit and look at it.

      If it happened at the bolter, why wouldn't they be running out? Why wouldn't they be further ahead?

      I think it's pretty obvious that in all likelihood the reason for the sparking was there. The machine was working, and the gentleman running the machine was the furtherest out.

      Well, that was continuous miner 2002. And that was – let's look at this machine the day before, May 8. Now I'm not going to make any allegations. I'm simply taking the words of the miners themselves. These are not my allegations. But I think the issue of that meter on that – that methane meter on that continuous miner 2002 seems very important. And it has been really kept from the public.

      I got this from the Inquiry, it's an interview of – the RCMP interview of Mick Franks is what I'm looking for.

COMMISSIONER  Mr. Franks did give extensive evidence to the Inquiry and I believed covered those points. So –

A.  I just wanted to –

COMMISSIONER  – it is a matter of public record, Mr. Cameron.

A.  Yeah, I did want to just run over it again because he said very clearly that the day before that he saw Arnie Smith change that methane meter on that. And when I read his testimony, he wasn't sure how much he changed it, because he said, "Well, that wouldn't be right because he didn't change his spans," I think the exact words were. "So I don't know what it would be. I don't know what that machine would be set at." And that's in the RCMP testimony. So it's not that he just adjusted it up to 1.5, but then he made the follow-up statement, "Well, I don't know what it would be because he just used a zero button and the spans weren't changed. So at the head I don't know what the level would be." So I think that's pretty important.

      I also said well, what else has happened there? What else happened in that mine that night? We had testimony from Harvey Martin and – no, from Mike Franks – Mick Franks and Harvey Martin that was done by the Inquiry, and they were talking about the test buttons and they told us that the test buttons were pushed over and over and over and over again so often that they would blow the breaker switch. And all I'm asking people is that it seems to me that these would be pretty important items of why that explosion took place on that night. What would the combination be if this was taking place? The machine adjusted up; the operator didn't know, and if some of these other things were going on?

COMMISSIONER  And all of that's in evidence.

A.  Well, Commissioner, I guess my problem with that is that I called two or three people last night to ask them, just to do a little sampling, if they ever heard this, and they said no. And my concern with this issue is that we don't want to look at the truth. It's much more fun blaming someone else and then, especially, it's a much better story saying, "Well, the reason we're blaming other people is that the political people interfered, and that's why they didn't do their job."

      Who was it that changed that meter? Was it the inspector? Was it the regulators? Was it Don Jones or Pat Phelan? Was it the politicians?

      Who was pressing the reset button so the machine wouldn't shut down this safety device? Was it the inspectors? Was it Don Jones? Was it Pat Phelan? Was it politicians?

      Who was shutting off the dust collectors, which was a safety device on the machine? And we had testimony of that too.

      My concern is that we dealt with those things, but they're simply lost in this other story that we want to create about this whole project. I mean, if we truly want to find why that mine blew up, I think this is pretty important evidence. It's vitally important evidence.

      The fact that they would shut the vent tubes off with black plastic in an area they didn't think they – that it was necessary, wouldn't that allow methane to accumulate? The fact that Mr. Dooley testified that the last shift before the explosion that he was in the mine, that he found an opening in the barrier, six to eight inches long and one to two inches wide, wouldn't it – wouldn't you or I go and get a piece of plywood and cover that up, knowing that the methane was coming out at over three percent? And those things are important because somehow when that flame lit at the continuous miner and went up on the roof and the men were running, it went to an area that it could explode.

      You know, I don't see why we can just – because we don't like to hear these things, that we can sweep them under the carpet. And I resent people, when they say that this is blaming the victims, the victims –

COMMISSIONER  I want to make it per –

A.  – are the people that died.

COMMISSIONER  I want to make it perfectly clear, Mr. Cameron, when you use the term "we" that you are not including me –

A.  No, I will –

COMMISSIONER  – because I'm not part of that "we."

A.  No, I wouldn't do that, Commissioner.

COMMISSIONER  No, okay. I'm here quite independent of the "we."

A.  Commissioner, I'm not inferring that –

COMMISSIONER  Okay, I just want –

A.  – and I'm sorry if you took –

COMMISSIONER  I just want to get that on the record; that's all.

A.  The bottom line, that this is a very, very important issue, and it's not fair to say we're blaming the victims. The victims are the people that died. The victims are the family that's been going through hell for the last four years trying to find answers. And I guess what I can't understand – I do understand why people cut corners. I think we all cut corners in our lives. What I don't understand is for these experienced miners that were doing this.

      And when I read the testimony, I see that the younger guys, the inexperienced guys, were the guys that was questioning a lot of these things. They were saying, "Are you sure this is right, this is safe?" And I don't understand why these people don't come back and take responsibility, because if you don't, what happens is there's another story comes from it.

      And the families that have been grieving, and their grieving has turned to anger and bitterness, will never find any peace if they don't get the truth.

      And that's why I'm so upset that people wouldn't own up to what they were doing. And instead of briefly speaking about it and shoving it under the table. The bottom line is that that mine blew up on that morning because of what was going on in there at that time. That's the bottom line.

      Now you're not going to let me have any more time, are you?

COMMISSIONER  Mr. Cameron, no, I'm not, bluntly. What I –

A.  I had a lot of good stuff here.

COMMISSIONER  What I am going to do is advise you to consult with Mr. Merrick over the break or at noon time, and with your own counsel, to make sure that the points that you want to get in evidence are brought into evidence. Because I don't want to blot everything out, but I want to get on with the more formal part of the Inquiry. And for that reason, you can get the evidence out through Mr. Merrick or through your own counsel, but at this time I will call on Mr. Merrick then to continue with this examination.



EXAMINATION BY MR. MERRICK

MR. MERRICK  Mr. Cameron, I regret having to open my questioning of you on this point. And as you've been making your opening comments I've been thinking about whether I really should. But it seems to me that your opening comments have made a very fundamental point that we have to identify.

      You were a person who was in a unique position to be able to give us some insight on what have been some very serious questions that have been raised in this inquiry. We have had evidence not just of individuals engaging in safety violations, we have had very disturbing evidence of the level of competence by inspectors and regulators.

      We've had very disturbing evidence of the lack of understanding of the regulators' roles in this province and what their mandate was under the legislation.

      We've had evidence of regulatory gaps, where one department would assume that another department was doing something. That raises very serious questions as to what can be done about that. How can we correct those gaps for the future?

      And we've had evidence as to the approach and level of competence of performance of people throughout the system, not just in the company, but right up to Deputy Ministers' levels.

      And I had hoped to hear from you some insights and some candid addressing of those issues.

      What you have done instead is criticized politician partisanship on the part of others and said that that was a factor in all of this and that distorted the merits of it, and yet your whole opening comment was political partisanship.

      You started with an opening comment, and I'm going to paraphrase it back at you. You said, "The great enemy of the truth is not the lie..." And then these are my words, but the distortion and partial truth, and partisanship leads to that.

      And here's my problem: We have to deal with the merits of the causes of the explosion of May 9th, not politician partisanship in this Inquiry. Political partisanship interferes with the ability to deal with it on the merits.

      I'm going to suggest to you that it interfered with the contribution that you could make to us, and the reason I'm making this comment at the very beginning is because it suddenly brought home to me crystal clear that that is a very underlying, all-pervasive feature of Nova Scotia leadership life. Because I tried to vision you, sitting in your various offices, and your compatriots on both sides of the political spectrum, imagining how you would be dealing with the merits, and I couldn't get the image out of my mind that you would have been dealing with this mine, and whether it should be set up, and how it was to be regulated, with the same interference coming in from political partisanship as I think was displayed in your opening comments. Now that's a long-winded opening question. Do you want to respond to that?

A.  Was there a question in that –

Q.  Yes.

A.  – or is that just a statement of fact?

Q.  It's a statement, and I would ask you to respond to it.

A.  Mr. Merrick, you have continued, through this whole inquiry, to deal with political allegations. You have.

Q.  That's the way you see it?

A.  Yes, absolutely. And if you wish I'll make – I'll document it for you. So to make the statement now that somehow I'm supposed to be the statesman above all this when all this is swirling around, and every political allegation that was made, you looked into it.

      And, you know, I would think you'd want to know the fact that everyone is saying that we did this in 1988 because it was an election campaign, and it was done to get me elected, and you heard that over and over and over and over again. And you certainly have inquired with your questions with that tone in mind because I've read them.

      I would think you'd like to know that, in fact, the project started long before '88. In fact, I didn't even know the company. I think that would be important.

      After all the questions asked, you know, I read this testimony and there's hardly a time you don't try to link me in some way or other. "Well, did you talk to Don Cameron or did he put any political pressure on you?" I think politics is a major component of this whole issue, and anyone that believes it's not, then there's nothing I can do.

      I'm here to answer the questions as best I can, and I'm going to try my best. I don't agree with all the statements of fact that you put in your questions either. You know, you make these statements, and I'm not sure that they're – that I can accept everything that you put in your questions. But I'll do my very best with you.

Q.  All right, and we'll get to them. I just think that we have seen this morning, very early in your presentation, a very significant fact of Nova Scotia political life.

A.  I think I followed your lead in the last number of months, the kind of questions that you've been asked [sic].

Q.  Well, then maybe we are both just partisan Nova Scotians.

A.  Well, maybe we are.

Q.  Let me –

COMMISSIONER  Just one moment, please. I'm not going to permit an engagement between counsel and the witness of this type and nature. Mr. Merrick, you may proceed to ask the questions, and I take Mr. Cameron at his word that he'll answer them to the best of his ability. And I will, at the end of the day, make whatever conclusions I have to make based on the evidence that's before me as I've been doing for the last 18 years. Okay?

A.  Commissioner –

COMMISSIONER  Thank you.

A.  – I'd be very happy to abide by that, and I'll the questions in the tone that the – the same tone that the questions are given.

COMMISSIONER  Thank you, Mr. Cameron. Mr. Merrick?

MR. MERRICK  Let's begin, Mr. Cameron, with the very beginning of this project and that was the establishment of the mine. I want to just get it clear whether the justification for Trenton 6 was to reduce sulphur emissions. I take it it was not?

A.  No, that's dead wrong, it was. You had Trenton 5 with no pollution controls on for sulphur.

Q.  Yes.

A.  It had pollution controls on for ash. You had Trenton 3 and 4 and Trenton 1 and 2; two 10s and two 20 megawatts. They had no controls whatsoever. So the decision was to get rid of those four smaller units and build a new power plant that would have ash controls on it and burn low sulphur coal. And burn low sulphur coal in Trenton 5, and then you would have a real reduction in sulphur emissions. That was the plan right from day one.

      If it wasn't, why wouldn't we build another Point Aconi, or why wouldn't we build what New Brunswick was doing? They were building scrubbers at the very same time. No one would build a plant at that period of time without making – taking some effort to reduce the sulphur.

Q.  At what point was the decision made that it would be low sulphur coal in that power plant as opposed to using scrubbers?

A.  Well, I suppose when they signed a letter of intent back in 1986 with Suncor. That's where they were going to burn the coal, the low sulphur coal.

Q.  At what point did you personally come to a decision that there should be a new mine in the Pictou area to supply that coal?

A.  Well, it wasn't my decision, that decision was made before I even came – even was Minister.

Q.  I acknowledge that –

A.  I started in '86, '87, '88. That wasn't my decision. It was a decision by the private sector that came in and said, "Here's an opportunity. There's low sulphur coal here. They want it at the Trenton plant. They have a pollution problem, and we're going to spend six, seven million dollars exploring for that coal."

Q.  You're quite right. I didn't mean "decision" in the sense of governmental decision. I'm talking about you personally. When did you come to the conclusion yourself that there should be a mine to supply that coal in Pictou County?

A.  There should be or could be? There's a difference.

Q.  Your view that a mine was the right way to go, as opposed to bringing it in from somewhere else, as opposed to blending, as opposed to scrubbers.

A.  Well, I'm sure back when I was a backbencher, along with everyone else in Pictou County knew something about this. We met with, I think it was John Shillabeer at Suncor, and he briefed us on what they were going to do. The other two members, three members, in Pictou County.

      And clearly PICORD and the Industrial Commission, they were writing letters urging, supporting the opening up of a coal mine.

      So I guess everyone – there was a common belief that it would be a reasonable thing to do if you could find low sulphur coal and solve the pollution problem. It looked like a reasonable proposition.

Q.  Had there been any extensive canvassing of options or alternatives?

A.  You'd have to ask the Power Corporation that.

Q.  What about from your perspective? Had you yourself known enough or been involved in the canvassing of any alternatives?

A.  I was recommending to the Power Corporation that they would put much higher stacks so that we would have less pollution from those old units. I went to a lot of public meetings. I had a lot of pressure on me. So they – my approach to the Power Corporation was, "Look, why don't you spend ten million or whatever it's going to take and build a new stack with some controls on it?" They come back and said that wouldn't make very economic sense and what they'd have to do is build a new plant and burn low sulphur coal.

Q.  I'm talking about when the proposal is for the new Trenton plant and how it was going to be fuelled. Do you know of any efforts to evaluate alternatives to the establishment of a new mine for the supply of that coal?

A.  I suppose they could take low sulphur coal in.

Q.  Do you know if that was ever explored?

A.  Well, I don't know. I know that they looked at the issue of scrubbers and they didn't think they had the space. They looked at the issue of putting scrubber on and burning the high sulphur coal, and they said, "We just don't have enough space here." If you know where the Trenton plant is, you'll understand.

Q.  We've had some evidence that there was other sources of low sulphur coal that would have been available in the country. Was that canvassed at all?

A.  Well, I don't know. You would have to ask the Power Corporation.

Q.  All right. We have had evidence that the establishment, at least with public support, of a mine in Pictou County would have been contrary to a Federal policy that had come into being at about 1987, which was the Mineral and Metal Policy of the Government of Canada which stated that the private sector was the best place to allocate resources among alternative activities and investments. Was that policy in your consideration at all?

A.  I heard about it after the project got going. I just read you this morning they were able to find money out West to assist the coal industry there, and that was in 1988. So I don't know if they applied that policy across the board. I know, by reading the press, that they spent a great deal of money supporting the coal industry in B.C., building the rail lines to get it to the ports to Japan. I don't know if that was included in the policy or not.

Q.  So your awareness as a member of government in those days, you were not aware of this federal policy until after the Westray Mine was established?

A.  Well, it was part of the debate that the Federal Government come out – you know, I guess the way I look at it, the Federal Government decided – that department decided they were going to scuttle this project, so they went out and they had guerrilla warfare on it, and they found every organization and every department could find anything that the reason that this shouldn't go ahead, they got them to lobby. And so later on, they had the Coal Association and they had the Mining Association write letters. But that was later on.

Q.  The only point of the question is that, to an observer, it would appear that we have sort of a basic Federal-Provincial problem here if we've got federal policies being established that either are not informed to the Provincial level or that Provincial activities run completely counter to them. It doesn't sound like the way a smooth Federal-Provincial system should operate.

A.  Well, you know, I was aware of it after the fact, but I still think that it's very strange that in May, '88 that they could find the money for the western coal. How did they get around the policy there? I just read that to you this morning. There was no fuss by anyone. No fuss by the Coal Association. That was all right.

Q.  All right.

A.  So, you know, there must have been some looseness to this policy.

Q.  Let me move on to Curragh itself. What knowledge do you have as to how Curragh became involved in the project?

A.  Well, I told you I provided you with that letter.

Q.  Yes.

A.  Which outlines how they were chosen. I never heard of the company before. They were chosen before I even became Minister. There's all kinds of allegations, you know, I've heard. But it doesn't cost much to have an allegation.

Q.  Well, that's one of the purposes of today is to get the facts out. There had been allegations that you were instructed to get ahold of Mr. Frame or that Mr. Frame was referred to you by various other parties.

A.  Why would I be getting ahold of Mr. Frame when I wasn't even in Cabinet and wasn't even going to run again?

Q.  Do I understand you then to be giving evidence that as of the end of 1987, certainly into the early part of '88, you would have had no involvement with Curragh in relation to its proposal to Westray?

A.  I can't recall.

Q.  When do you recall the first connection between yourself and Curragh as a proponent of the project?

A.  Well, clearly around, you know, the first part of '88 and then I became Minister. Clearly, clearly, we – you know, as the Member in the area, I'd be informed what was going on. I mean, by the first part of '88, it was clear the company made an agreement. It was in the paper. They were going to buy the project and proceed. So – but no real formal issues until I became Minister. And then it was ongoing.

Q.  Can you give me the first incident or point in time that you can recall being connected with Curragh or knowing of the Curragh project?

A.  No, I don't want to speculate.

Q.  But you are clear that you would not have been involved until after, apparently, Curragh had at least put its offer into Suncor?

A.  You mean, picking Curragh as a – I was not involved in picking Curragh, I can tell you that. I've heard –

Q.  That wasn't my question.

A.  You know, I've heard stuff being said at the time. I've heard that Esso wanted it and the government wouldn't let Esso have it because they wanted to just tie up the leases and ship low sulphur coal in from South America and supply Nova Scotia with that coal. And I remember someone in the government saying, "Well, you know, that's not what we want to do. We want to provide jobs." But believe me, I wasn't on the inner circle before I went back in Cabinet.

Q.  No, I appreciate that, but that wasn't quite my question. I'm taking it from your evidence that you did not know of Curragh or Curragh's involvement in the project until probably after Curragh had made its offer to Suncor. Is that fair?

A.  I don't want – you know, I took an oath this morning, and I'm not going to lie, but I'm not going to just answer questions just to satisfy you either. I can tell you I wasn't involved in any way until after I became Minister. I might have been as a Member informed about things. I might have met Gerald Phillips in the meantime. I would think it might be likely. Clearly, the papers would have something about Curragh buying the project. I don't know. I didn't review that. If you have some documents, I'll review them and explain them to you.

Q.  When do you recall first meeting Mr. Frame?

A.  My recollection is after the project was well on the way.

Q.  And can you identify that for me? What are you talking about in terms of timeframe.

A.  Well, I would say that maybe the first time I talked to him – the Premier told me to come in his office and they had him on a speaker phone, and there was some other people there. And I think that's – I said, "Hello," that's about it. I didn't know him.

Q.  Can you place that in point of time?

A.  I really can't, sir.

Q.  Would it have been after you went into Cabinet?

A.  I wouldn't even want to – I wouldn't even want to make that claim.

Q.  If I can turn you to that black ring binder that we looked at during your opening comments, Exhibit 141. Turn to tab 3 at page 66.

COMMISSIONER  Fifty-six?

MR. MERRICK  Sixty-six.

COMMISSIONER  Sixty-six.

MR. MERRICK  That's that handwritten memo from Nancy Hood that we'll come back to again, I'm sure. If you turn to the second page, stamped page 67.

A.  Yes.

Q.  You'll see in about the first main paragraph there, it says, "In early September..." And she's repeating here comments that she has attributed to Mr. Merrick. She says, "In early September, '88, D.C." which is you, "approached C.F." which is Mr. Frame, "to undertake the project. D.C. was and is convinced this is a good deal, even though T.M." and I believe that to be Mr. Merriam, "and the rest of staff are dubious at best." And then she says, I can't make out her handwriting, something about "...is question whether D.C. was told to approach C.F., Elmer MacKay, Brian Mulroney, and Buchanan." That is not consistent with what you recall, I take it?

A.  Well, this is not true. I mean, it's not true. This is September, '88. And Curragh made a decision on December 2, 1987, to proceed with the project, to buy the project. They signed the letter with Suncor. Now we're September '88, and you're saying I approached Cliff Frame.

Q.  No, my only question and the real nub of what she is saying there that I want your comment on, and whatever time it may have been, is there any validity to her statement that you were told to approach Clifford Frame?

A.  I did not –

MR. ENDRES  Can I just make a point? The document I have at page 67 says, "D.C. approached by Clifford Frame." Not that he approached. That's the first part.

MR. MERRICK  Well, I'm reading –

A.  Now that could be different. But I can tell you I didn't approach him, and I wasn't asked to approach him. I think it does say "by."

Q.  Okay, if you'll just slow down while I catch up to everybody. I'm reading where it says something about an unidentified word "Is question whether D.C. was told to approach C.F."

MR. ENDRES  No, in early –

MR. MERRICK  Page 67.

COMMISSIONER  I'm on 67, but I can't –

A.  Are you on the second paragraph?

MR. MERRICK  First paragraph, no, first paragraph under the heading, the first bullet. It starts "early September."

COMMISSIONER  Okay, "D.C. approached C.F. to undertake..."

MR. MERRICK  Yes, and then go down.

A.  What's in before that? Is that "by"?

MR. ENDRES  Yes, that's what it says to me.

MR. MERRICK  Can't tell you. You can have just –

COMMISSIONER  "Approached by..." Yeah, I think that's right, "approached by."

MR. MERRICK  Then you go down three more lines. There is a word that looks like maybe, "There is question whether D.C. was told to approach C.F."

A.  Well, I can tell you it's not true.

Q.  All right, in whatever year.

A.  In whatever year. I didn't approach Cliff Frame.

Q.  All right, and by the time you know of Frame, he was in the deal?

A.  Absolutely.

Q.  Okay. Do you know how many other possible bidders there were that were dealing with Suncor?

A.  I don't know if that's in the letter I provided you or not.

Q.  The Suncor one?

A.  Yes, the May 30th letter that –

Q.  I've got it. Do you have it?

A.  Yeah, there's no –

Q.  I don't see –

A.  He doesn't – it doesn't say how many people, but – no, I don't know how many extra – how many people applied, but I'm sure that that must be available somewhere.

Q.  And I take it that you do not recall knowing how many or who they were back at that point?

A.  Well, there was a fuss about how Curragh got this and –

Q.  Yes.

A.  – so that I knew about Esso, and I knew why the government didn't like the idea of bringing in low sulphur coal from South America. With our own low sulphur coal here, they said, "They just want to tie up the leases." That's what I was told.

      I knew about Coalcor. MacKenzie and Rose were very upset because they felt they didn't get a fair shake. And I don't know if anyone else applied or not. I really can't. But that was – that was the stuff that was in the news or in the talk at the time.

Q.  All right. Did you know anything else about this business of the Esso and the province or the government wasn't in favour of it because they intended to bring in South American coal? Do you know anything more about that?

A.  I was just told that Esso wanted to tie up the leases and then bring their coal in from a big mine, a low sulphur coal mine they had in the south, and we didn't think that would do much for jobs in Nova Scotia.

Q.  Did you ever have any evidence or proof that that was what Esso was intending to do?

A.  I was just told that.

Q.  The Coalcor proposal, what, if anything, did you know about it?

A.  I met with MacKenzie and Rose in New Glasgow one day. They called me up. I was doing the backbench. I don't know what power they thought I'd have, but they called me up and wanted to have a meeting. And I thought it was a strange conversation, I guess.

Q.  Do you know anything more about their proposal?

A.  They were determined that they were going to do it. And they assured me that they had information that – from, I guess, Ottawa, that the financing would never, ever go through and that they wanted to do it.

Q.  Your meeting –

A.  And I asked them about their financing and I thought they gave me a very strange answer. I said, "Well, do you have the financial clout to actually pull this off?" And they said, "We're tied up with some British mining company and we're going to – we're going to buy all our equipment from this one company, and they are going to give us a rebate on that equipment. And that we're going to use that as our – as our down payment." And I thought to myself, "That sounds like a kick-back to me," but I didn't say it to them. But, you know, they didn't seem to have any source of money. I didn't understand how they were going to do this major project without having a source of money.

Q.  I take it that when you had that meeting with them, it would have been after Curragh had started its financial applications through the Federal Government, if they were –

A.  Well –

Q.  – asking you about the federal financing or telling –

A.  I can –

Q.  – you about it.

A.  I can tell you I was still a backbencher at the time, so it was prior to – it was prior to April 22nd, '88 and some months prior to that, I would say.

Q.  All right. Do you know what, if any, involvement the province had in helping to choose or expressing its views on who Suncor should deal with?

A.  No, the letter from Suncor explains some of that, and –

Q.  And that's one of the reasons that I asked the question. The letter from Suncor, the May 30th, 1989, letter says, "The initial selection of candidates was made by Suncor and approved by N.S.P.C. as acceptable, potential developers.

A.  Uh-huh.

Q.  I'm assuming then that N.S.P.C. had some ability to express their preferences?

A.  You will have to ask N.S.P.C. that.

Q.  You never became aware of any communications or involvement that N.S.P.C. had in the selection process?

A.  No, not at all.

Q.  And I'm assuming, from your evidence, that you're not aware of any involvement that the Provincial Government had in the selection process?

A.  Absolutely not.

Q.  Do you have any information to indicate that anybody from government or the province had approached Suncor to talk about Curragh's involvement in the bidding process?

A.  Could you repeat that?

Q.  Do you have any information to confirm or deny that anybody from the Provincial Government had approached Suncor, to discuss with Suncor, Curragh's involvement in the bidding process?

A.  Absolutely not.

Q.  Let me take you to a document that I would again ask for your verification of, or denial of, or comments on. It's in Exhibit 141, tab 3 at page 1.

A.  Page 1.

Q.  It's a confidential memorandum that I have not been able to identify the author of. It probably was internal to Westray because it's marked to Mr. Frame, Mr. Redrupp and Mr. Forgaard.

A.  Uh-huh.

Q.  And if you look on the first paragraph under the title, "Political Front," –

A.  Uh-huh.

Q.  – it says, "Bob Coates called John Buchanan. He," and I'm assuming by "he," means Buchanan, "had talked to Thompson, the Chairman of Suncor, but didn't get much response. The bidding process has started, and it is hard to change. Buchanan was to call me for another chat, but has not done so. Bob says he is very busy, but I suspect he doesn't quite know how to handle Suncor."

      It sounds, from that, as if Mr. Buchanan was trying to speak to Suncor on behalf of Curragh. Can you comment on it at all?

A.  I'm not aware of this. I don't – I don't find it very alarming either that if Sun – if Curragh decided they wanted to be part of the bidding process and they were a little late getting in it, it looks like they were a little late getting in it, they're going to call as many people as they can to try to get in it. And if they call someone in Nova Scotia, because that's where the project was, I wouldn't find that alarming. I don't know. I wasn't involved in this.

Q.  You don't know anything about it?

A.  No, I don't. But to say it's "Political Front," my, we wouldn't want to look at the political front, would we?

Q.  Only to the extent it interferes with the merits. Do you know if you, the Provincial Government, or the Power Corporation, had ever dealt with any of the other bidders for the Suncor project?

A.  I can't – I'm – I can't – no comment on that. I didn't and I can't speak for the Power Corporation.

Q.  You have indicated the views or the comments that were expressed about the Esso bid and the problem with it, that it would just haul in –

A.  That was a comment made to me in the hallway that we're not going – we're not going to do that. We're not going to take low sulphur coal from South America if we have our own here.

Q.  The only –

A.  And I don't know who made it; it might have been the Minister.

Q.  It's seems that Curragh is the one that begins to have dealings with the Provincial Government and begins to have dealings with the Nova Scotia Power Corporation. We have not seen any evidence of any of the other potential bidders having that same contact, other than maybe the Coalcor meeting with you as a backbencher. And I'm curious as to why the connection all seems to be with the one bidder?

A.  I don't think that would be right. Reading this letter from Suncor, I think it's pretty obvious that they all had to deal with the Power Corporation. And Suncor would have to make sure the Power Corporation found them acceptable. So when I read this letter from Suncor saying how the sale was done, I wouldn't – I would have difficulty agreeing with what you're saying. But you would have to ask Suncor and the Power Corporation that.

Q.  All right. That's a mid-morning break time, Mr. Commissioner.

COMMISSIONER  Take a break.



INQUIRY RECESSED  (TIME: 11:01 a.m.)

INQUIRY RESUMED  (TIME: 11:16 a.m.)



COMMISSIONER  Thank you. Okay, Mr. Merrick?

MR. MERRICK  Thank you. Mr. Cameron, let me just finish off the point that we were dealing with before the break, and that was what other bidders may have been in the play at the time.

      Do you know anything to support the suggestion that we've seen that one of the reasons that Esso may not have been considered was because it wanted to take time to evaluate the project and the Province may have been in a hurry to get on with the establishment of a mine?

A.  All I was told, they wanted to ship their coal in from South America. They have a very large mine there, I think they called it a "pig," and they didn't know what to do with it. And they wanted to get sales. There was no – what I was told, there was no concern about extra study. I mean, that seam was studied to death, so I suspect that wouldn't be the issue. There's – there was reams of studies by three other companies before that. So I believe that they wanted to ship their coal in, which seems like a logical business decision.

Q.  All right, let's talk about the Nova Scotia Power Corporation contract. As you've pointed out, there were letters of intent exchanged between Suncor and the Power Corporation back about 1986 or thereabouts.

A.  Um-hmm.

Q.  For how long had that contract been under negotiation; do you know?

A.  The letter of intent or?

Q.  Well, the fact that they're – for how long had the parties been negotiating?

A.  I don't know. I wasn't in Cabinet, had nothing to do with that period of time.

Q.  You aren't able to tell us whether it goes back for a number of years into the early '80s?

A.  I knew the Power Corporation wanted to buy coal back in the late '70s, and they brought in George Wimpey. So even though this – it was an ongoing issue to try to get this low sulphur coal. It went on – they had a problem and they were trying to fix it.

Q.  Do you know if the terms and conditions – let me back up. I assume from reading the letters from Suncor that the terms and conditions of the supply contract with the Power Corporation had been pretty well established down to the short strokes by the time Suncor sold the project. Can you comment on that?

A.  No, I can't.

Q.  You don't know to what extent there may have been some negotiations that still had to close a gap for a final agreement?

A.  I cannot. All I know is when I cancelled the press conference a few days before the election in 1988 that they still had some minor details left for the Power Corporation to iron out, and I just said, "I'm not doing it."

Q.  You weren't involved in those negotiations that –

A.  Ab –

Q.  – that were monitoring –

A.  Absolutely –

Q.  – what was happening?

A.  – not.

Q.  All right, let's go to the $12 million loan.

A.  Um-hmm.

Q.  Tell me how that came about.

A.  Well, it came about, I guess, because of a decision by the Federal Government that they wanted – they wouldn't accept some of the monies that Curragh was putting in, money they'd have to put in for guarantees of cost overruns, the money they put in to guarantee the remaining $100 million loan, that they wanted them to have additional money in as equity. And so that initially, it came to us that we would be required to give them a $12 million loan. And then when we agreed to that later on they said, "Now you have to fully subordinate it."

Q.  Well, give me that, because that's something we do not have a good record in the documents on as to the development of that $12 million loan. We know that there was the commitment ultimately made for it, but we don't have much leading up to that. Can you be as specific as you can, when did you, or did the Government, first hear that the Province was going to be approached for a loan?

A.  I'm not sure where it came from, if it was through our people and the Federal – you know, some of the officials, and through the Federal officials or the company came and said, "Now we're required to have additional money and, you know, we're going to ask you for a $12 million loan," I really can't tell you. All I know is that it came after the project was proceeding and it was another requirement that we had to meet after the project was proceeding.

Q.  What's your first recollection of your first knowledge of it or involvement with it?

A.  Well, it would be very soon, just prior to our Department getting involved.

Q.  Give me a time reference, please.

A.  I'd have to go back and look at the dates when our Department actually started to negotiate the loan. It wouldn't be – it would only be a few days before that.

Q.  Let me show you the documents that we have and see if they can assist us at all.

A.  Okay.

Q.  In Exhibit 141, at tab 3, page 19, that's a memo from Mr. Redrupp internally in Westray, and he makes reference there to this additional requirement. And I'm going to come back to some ports – portions of it.

A.  This is 1989.

Q.  Yes. And my impression was, reading this memo, that this may have been early on when the loan came into being. No, I'm sorry, I'm wrong on that. That talks about the bridge financing. That's not the loan itself.

A.  That's well after they were involved –

Q.  Yes –

A.  – so –

Q.  – you're right. Tell me – you say that somehow the company approached, or somebody approached your Department with the fact that this was now going to be an additional requirement?

A.  That's right.

Q.  Tell me about the negotiations that took place. Obviously, they don't just walk in and say, "Give me a $12 million loan"?

A.  I think it was pretty clear cut they needed the requirement of the 12 million to satisfy the demands by – for the Federal financing.

Q.  Why did you understand they needed the 12 million?

A.  The requirements from the – that the – to meet the requirements of the program they were applying under in the Federal department.

Q.  Well, what were the requirements that they had to meet? I mean, surely, it wouldn't have been a requirement that Government loan money, necessarily. It must have been to satisfy some other requirement?

A.  It was a requirement. They – when they refused to accept some of the money the company was putting in as equity, to meet the equity part of the program, the Federal Government would accept a loan fully subordinated by the Provincial Government. But that came after. We talked about the loan and then the fully subordinated came a little bit later. That was another little surprise that came along.

Q.  But did you understand at the very beginning that the company was looking for a loan from the Province in order to meet equity requirements?

A.  Not that. It's to meet the Federal requirements. And I had the sense too that the Federal Government were saying, "Well, we're going to get their necks in this too," you know. "We're going to be putting money out; we're going to have them on the line too."

Q.  Well, I'm sorry, I'm not clear on this. What was your understanding as to why they needed the 12 million? Surely, it wouldn't have been just that they needed a government lender? It must have been because they were short of the money. They needed it for equity. Nobody else had it. They didn't have it, whatever.

A.  I told you, I had the sense the Federal Government were determined to have us in it financially, not just the coal contracts and the leases, but we were actually going to have some money in it too. That was my sense, talking to some people. And it was also a requirement to fulfil the obligation of the program they were applying under.

Q.  Now we've had Mr. Rogers' evidence that under the A.E.P. program they needed to have a 20-percent equity component. Now that equity could be made up in a number of different ways, one of which would be a fully subordinated loan from another lender. Was that your understanding of why the Province was committing itself to the 12 million?

A.  I guess the argument was with the Federal Government is they wouldn't accept some of the monies that the company was putting in. They wouldn't accept the fact that the company had to ante up dollars to guarantee that the project, any cost overruns, and they had – there was a set amount. And they wouldn't accept the fact that the company actually had to ante up money to guarantee the rest of that loan that the Federal Government wasn't guaranteeing. There was an argument there. You know, that's when they went out and got the consultants too. So –

Q.  All right, let me try it from that angle then. What did you understand the company had offered to try to satisfy this requirement for equity? When you say that they were going to have to ante up money, explain that to me.

A.  Well, they had to have the resources to actually guarantee completion, and they had to have the resources to guarantee the remaining part of that loan that the Federal Government was guaranteeing.

Q.  This wasn't money that was going to have to be expended up front; this was an obligation that the company might have?

A.  It was an obligation the company had to have, and it couldn't use that – those dollars out in the Yukon, where they were desperately trying to strip more territory to continue that operation. So, I mean, it was assets that they had to tie up. That's the way they put it.

Q.  Well, what commitment –

A.  That was their argument to us at least, anyway.

Q.  What commitments was it that the company was prepared to make which were not being accepted?

A.  Well, I don't know. You'll have to ask the Federal Government why.

Q.  I'll tell you why I'm asking this. Twelve million dollars Provincial money, it was loaned to the company. I'm assuming that a very clear case would have been made for the need for the Province to loan that money before it would have been loaned. I'm trying to find out what that clear case was. So far you've told me that they needed it, and they needed it because some commitments that they were prepared to make on their own weren't good enough. So can we get anything more we can? What was the clear case for loaning –

A.  I would –

Q.  – $12 million of Provincial –

A.  I would suggest –

Q.  – money?

A.  – that you talk to the officials that did – actually did the negotiations if you want the answer.

Q.  All right. I just want to get your understanding. Are you able to give us anything more specific as to what your understanding was as to why $12 million of Provincial money was put into the project?

A.  It didn't seem to be out of the way. Twelve million dollars at 11¾ percent on about a $130 million project, that was pretty mild compared to most projects we got involved in. So it seemed to me it wasn't something that would alarm. It didn't seem to be unusual considering all the other projects.

Q.  Mr. Cameron, that answer sounds to me like you're saying, "Look, we've given away so much money before to so many other things..."

A.  No, no.

Q.  "...this didn't matter."

A.  Don't start that nonsense with me. That's not going to work.

Q.  Then give me your answer.

A.  I gave you my answer. You don't like the answer.

Q.  Well, let me just make sure and then we can move on, because I want to be fair to you. Are you able to tell me anything more as to what the basis or justification was for the $12 million loan other than the company required it because their other commitments they had made weren't being accepted?

A.  In order to put the financial package together, they needed $12 million more that could be accounted as equity to meet the financial requirements of that program.

Q.  Do you know of any effort – do you know if the company was challenged on that?

A.  The Federal Government made it very clear to our officials that that was a requirement. So there was no mistake about it; the Federal Government wanted us in this deal.

Q.  So am I now understanding that the $12 million loan was put in because the Feds required the Province to loan the money?

A.  The Federal Government wanted us to be in it financially. That comment was made to me by someone.

Q.  Can you direct me to anything specific on that?

A.  No, I just remember them saying they want our necks in here. They want us involved financially in this too; they're not going to go with us buying the contract and providing the leases and then the money. They're going to make sure that we have some money on the line too. That's why I think that's very consistent, was when the company wanted to go and make the private placement, it was agreed to by the bank, agreed to everyone, and they were going to pay us off, the Federal Government just sat on their hands and said, "No, we're going to keep them in there. We're not going – even though it was going to help the project, we're not going to do it." They wanted us in this too.

Q.  Let me come back to when the loan was made. Do you know if any attempt was made by the Province to challenge the company on whether they could raise 12 million of equity in some other fashion and thus avoid the Province having to put that amount of equity in?

A.  Well, I think the company was challenged many, many times because the company complained to me about how tough it was negotiating with Elizabeth Cuddihy. And I just told the company, "You have to make the deal with her and the other officials, and that's the way it is." So I suspect they were challenged many, many times because they thought that we took a far, far too tough a stand.

Q.  But can you give me any –

A.  But I wasn't part of those dealings, so –

Q.  Can you give me anything specific that would give me confidence that the Province really tested the company, and it wasn't just the case that we willingly handed over $12 million when the company perhaps, if pressed, could have come up with it from some other source?

A.  Well, you'll have to ask officials that actually did the day-to-day negotiations.

Q.  From your position you can't give me anything further on that?

A.  No.

Q.  The question that has been raised is why a company in a $130 million project should not be expected to put more equity into a project than just nine million cash up front. Did you ever know how much Curragh's investment actually was in the project?

A.  Well, they said at that time they had 10½ million in and then they bitterly complained that some of the financial commitments they were making weren't being accounted properly. And so there was an argument, and there was an argument, and two consultants, the Federal Government's and theirs, Price Waterhouse. So –

Q.  Do you know if they did, in fact, put in 10 million and, if so, in what form?

A.  Well, they paid eight million, was it, to Suncor? Wasn't it eight million?

Q.  I've heard figures of nine, but –

A.  Well, they paid something there. And I'm sure there was money spent, you know. They started the project. There was money spent. And at that time they didn't have a loan – anything from us, so they must have spent some money.

Q.  Did the Province ever require Curragh to account for its equity investment?

A.  You'll have to deal with our accountants on that.

Q.  You were never aware of that?

A.  I wasn't the accounting department.

Q.  All right. In a – in reality, though, the Province was becoming a lender to this company, was it not?

A.  Absolutely.

Q.  Did it ever concern you that there was a relatively low amount of equity put into this project by the company?

A.  It met the requirements. And there's lots of other projects just meet the requirements.

Q.  This would be less than a 10-percent equity injection, if that's all they put in was their purchase money to Suncor.

A.  Well, I'm not accepting that as fact because I can't speak for the company.

Q.  And you can't tell me what different facts may be?

A.  Well, it's – you know, it's four or five years now, so –

Q.  And I'm taking it, I'm sorry to be belabouring this point, but I assumed that there would be some evidence on this. You do not recall any meetings with company officials in which you would have pressed them on whether they really needed the $10 million, and what –

A.  Well –

Q.  – justifications they had?

A.  – we pressed them – we pressed them very, very hard through our officials, and that's why the company complained over and over and over and over again to me that the officials I had negotiating the deal were far too tough. And I'd just point them back to the room and tell them that's who they had to deal with. So they must have been pressed on a number of times for them to complain to me over and over and over again.

Q.  Yes, and no doubt you can be pressed on the terms of loans. I'm talking about the basic commitment for the 12 million. Let me ask this. How much time elapsed from when the company first comes and says to you or to your Department, we need $12 million, and when the commitment was made them to them that, subject to the lawyers working out the paperwork, you've got 12 million?

A.  Well, not a long time but, of course, they knew then that the conditions would take months to do and it did.

Q.  But how long would have elapsed between when they told you they needed the commitment and you gave them the commitment?

A.  I can't tell.

Q.  Weeks? Days?

A.  I really can't say. I can't speculate on that.

Q.  Just give me a second, I may –

A.  That's why I think it would have been so useful, Mr. Merrick, if you provided those other financing deals with the companies around that time. I think you would have had a comparison. And maybe some of these concerns you'd see are pretty normal, but for some reason that's been hid from you. I can't quite understand why we couldn't put our hands on those other financial deals that the Province made through that year or two.

Q.  Well, I'm interested, Mr. Cameron, in the merits of this particular transaction right now.

A.  Well, we'd find out –

Q.  We –

A.  – if these were out of line with what we were doing in other transactions. I think that would give you a pretty clear picture.

Q.  We do know, if you can turn in at tab 3 of that same exhibit, this time to page 11, flipping back a bit. That's a letter, September the 9th, 1988 –

A.  Um-hmm.

Q.  – from you to the company, and that is a commitment for parts of the package including the $12 million loan.

A.  Yeah.

Q.  Can you place for me, using that as a reference point in time, how much prior to that you would have at least committed the Province to the loan?

A.  It was months before that, I'd say.

Q.  Was it?

A.  I don't know. I'd have to go back and see the other dates, but –

Q.  What about the other commitments that we see in there, including the take-or-pay contract and the mining lease? Had there been a commitment of those two points as well, months prior?

A.  Let me put it this way, Mr. Merrick: There's nothing in this letter or any other letter that wouldn't be approved by Cabinet either as an O and R, Order-in-Council, or as a – after Cabinet was finished the book we'd always go around the table. There would be nothing in a letter from me to any person in any company anywhere that wasn't approved by Cabinet.

Q.  Well, you're answering a question I haven't asked yet, and I'll come to it in a few minutes. All I want to know, the other two points of commitment in this letter, have they been given to the company months previously as well?

A.  Well, the take-or-pay contract was something that come on after again. That was another requirement by the Federal Government. I think it was the Federal Minister that suggested that. I think I read that somewhere.

Q.  Had you made a commitment to –

A.  He decided that he wanted to up the ante again and see if we can – after having a signed contract, "Well, now go and get them to get another one." I mean, to me, it was another – another part of the delay process.

Q.  Had you made a commitment on the take-or-pay months prior to September 9th, 1988?

A.  I don't know when we made that commitment.

Q.  But would it have been prior to this letter?

A.  I could tell you that it approved in Cabinet before we wrote this letter.

COMMISSIONER  Mr. Merrick, on that $12 million, it's in my mind that this – there were previous loans on an interim basis and the 12 million sort of rolled those in. Is that –

MR. MERRICK  We've had evidence that there was interim bridging loan –

COMMISSIONER  Yes.

MR. MERRICK  – and it was done subsequently that was paid out of the $12 million loan, I guess.

COMMISSIONER  Yes.

MR. MERRICK  That all went through at the time the Federal financing finally came through.

COMMISSIONER  Okay, that's – yeah, that's what I was thinking.

A.  Commissioner, maybe I can clarify that for you. The $12 million loan was made up front and then, with the delays, and the pressure came on to supply – to get the project ready to supply coal. The company approached us for an interim loan after they had some pretty good assurances, and we did, that the Federal government would go ahead with their financing to get the project started.

COMMISSIONER  But the interim came out of the 12?

A.  Well, I don't know – that's exactly what happened.

COMMISSIONER  Or was part of 12?

A.  That's exactly what happened.

COMMISSIONER  Yeah, okay. Okay.

A.  They didn't get eight and twelve on top of that.

COMMISSIONER  No, no, no, I realize that. Yeah.

A.  They – when – before they got the 12-million cheque, they had to pay back the eight million, plus the interest.

COMMISSIONER  That's what I –

A.  It was $8,250,000 –

COMMISSIONER  That was my understanding, yeah. Okay, thank you.

A.  But the $12 million loan was before that.

COMMISSIONER  Yeah, okay. Thank you. I'm sorry –

MR. MERRICK  Just to fin –

COMMISSIONER  – Mr. Merrick.

MR. MERRICK  Just to finish off my point, Mr. Cameron, from where you sat, your understanding as to why there had to be the commitment for the 12 million, you said that you had heard that the Feds wanted the province on the line as well, financially?

A.  Yes, I did.

Q.  Other than – can you identify how that requirement was conveyed to you? Did somebody tell you verbally? Was in it a document?

A.  I believe maybe it was some officials dealing with the Federal officials, but they wanted us on the line too. And the fact that they wouldn't allow us to be released, which would have helped the project, it's pretty obvious that they weren't going to let us off the hook. We were going to keep our money in there come hell or high water. I mean, why wouldn't you approve that private placement? What would – what benefit would there be not to approve it if it's going to help everyone? And we were going to get our $12 million back. Why wouldn't you approve it? It was the attitude that, "We want these guys there –

Q.  You've skipped –

A.  – period."

Q.  You've skipped ahead now to when the company was trying to do a debenture issue.

A.  I think it's – all it does is it gives credibility to my statement that the Federal Government wanted us in there. They were going to keep us in there, and that was it.

Q.  Let me come to the interim loan and see if I can get from you anything to help in understanding why the Province was required to flow those funds. Can you recall how it came into being?

A.  Well, the pressure was on. It was delayed. The project was delayed and the pressure was on. There was a coal contract. And there was assurance that the Federal Government would come through sometime, and the concept was, "Well, if they're going to come through, you gave us $12 million. Advance some of that, and we can actually start the project and try to keep to schedule."

Q.  All right. So the company –

A.  That's my understanding.

Q.  Well, you were, at that point, the Minister responsible for it?

A.  Uh-huh.

Q.  And you've told me that the company came and said, "Look, we need cash because..."

A.  "We would like to start the project."

Q.  "We would like to start the project; we need cash"?

A.  Uh-huh.

Q.  And the province basically gave it to them?

A.  Well, we didn't gave [sic] it to them. There was a lot of – a lot of conditions attached to it. You will see –

Q.  All right, you loaned it to them with paperwork?

A.  Yeah, at 11.75 percent interest, I might add.

Q.  All right. But can you point me to anything to indicate that the province satisfied itself first that there was no other option and that the company couldn't, itself, generate $8 million in cash to start its own project?

A.  Well, I – the company was having some difficult [sic] out west because low mineral prices and the Canadian dollar. And we knew that, so I don't – you know, either the money had to come from the other project out in Faro or they had it in their back pocket. So –

Q.  Well, let's –

A.  Apparently our officials decided it was necessary. They proceeded to put the paperwork together. So –

Q.  But they wouldn't make the decision to grant the interim loan. That would have to come at your level or above?

A.  That the Cabinet – Cabinet, finally.

Q.  All right.

A.  I would take that to Cabinet and say, "Look, they want to start the project. They would like an advance of the $8-million loan. We already committed to giving them $12 million. I don't know what's so difficult about this. You say, "We make a deal. We're going to give you $12 million, and we know that the project has been delayed." And they say, "Well, look, advance us some of that money under these conditions. Let's get going." I don't – there's no secret or anything hard to understand. If we didn't give them the $12-million loan prior to that, then I can understand.

      I don't understand what you're driving at. We committed to give them a $12 million loan. We knew they had a Power Corporation contract. And because we gave them eight million of that a little before, I don't understand the point.

Q.  Well, let me bring it down to – and maybe I'm not sophisticated enough to be able to accept these things, but the province is a banker. It's being asked for a loan. Whenever I would go to a banker to ask for a loan, he would first shake me down until he saw the colour of my change.

A.  Uh-huh.

Q.  And only if he was absolutely satisfied that, (a), I needed it and, (b), I was going to give him my three lives hereafter as security, he would give it to me.

A.  Yes.

Q.  You're telling me that the company walked in and said, "Give me 12, because we need it."

A.  That's –

Q.  And it was given?

A.  I – I didn't tell you that. Now, Mr. Merrick, please don't do that to me. I'm not going to let you get away with it. You've done that to every witness, and I'm not going to let you get away with me. I didn't say we walked in – they walked and said, "Give me 12 million and you can have it." I finished telling you that they complained over and over, and over, and over again how tough the negotiations were about that $12-million loan. It seems that our Department went through a very thorough negotiation with them because of all the complaints of how tough the negotiations were. A $12-million loan was granted. Cabinet approved it.

      Now to say that some – that some strange thing happened because we gave them eight million up front, after that negotiation took place, I don't know what you're trying to get at.

Q.  Well –

A.  But please don't make statements that – they just walked in and we handed them the $12 million.

Q.  Let's me ask –

A.  That's not fair.

Q.  Let me ask it this way. What efforts are you aware of of the province making to challenge Westray on why they needed to use Provincial money to start it up? Do you know of any efforts or evidence that they gave that they wouldn't be able to put it in themselves, if required to?

A.  Well, Mr. Merrick, all I can tell you, that our Department took a number of months to negotiate that loan. I know the people involved. I know they're good people. I know they can be very firm. I know the negotiations were long and strenuous. The company complained over and over and over again that they were too tough. They went back and they finished the deal. I would assume from that, that our officials did their job.

      The very fact that we ended up with a loan for $12 million at 11¾ percent interest on $130-million project, and you wouldn't give me the other information I wanted to show how much tougher this loan is compared to every other one we made during that same period of time, tells me they did a very good job. Why didn't you give me that information on all those other deals that were made during that period of time? And I will guarantee you that we never charged one other person 11¾ interest. And I will guarantee it that those deals were better deals for the company than this one. So I would say from all that, and when you look at the way that government was operating at the time that this was a very tough deal to get through.

Q.  Let me make sure I've understood you fairly. You, as Minister, can you tell me today, what efforts – what satisfied you that the company required Provincial money and could not raise it from its own resources –

A.  I –

Q.  – other than –

A.  I took advice –

Q.  – there were tough negotiations –

A.  – from my officials.

Q.  – with your officials?

A.  And if my officials came back and said they didn't – they don't need the $12 million, then they wouldn't have got the $12 million.

Q.  What evidence can you tell me today that your officials were, in fact, negotiating with the company whether they needed it at all, as opposed to merely negotiating the terms of the documents?

A.  You will have to talk to them.

Q.  You don't know? Do you know if your officials were instructed to go out and challenge the company as to whether it needed it in the first place, as opposed to what terms it would be granted on?

A.  My officials did a very good job in negotiating that $12-million loan, Mr. Merrick. And if you would look at other deals made at the same time, that's the conclusion that you would come to. I just don't understand why you want to beat this to death and try to have another story come from it.

Q.  All right. Let me see what – if we can get any assistance or fill in the picture at all from some of the documents. If we can go to that document I showed you a few minutes ago incorrectly when we were talking about the $12-million loan, that's at tab 19 of page – sorry, page 19 of tab 3. And that's that internal company memorandum. The part that seems to talk about the interim financing is over on the second page of it, stamped page 20, second major paragraph. It starts, "Following my conversation with Peter, I talked to Don Cameron."

COMMISSIONER  I'm sorry, Mr. Merrick, where are you?

MR. MERRICK  It's page 20 now of tab 3, Exhibit 141.

COMMISSIONER  Oh, 20, okay. I was on the wrong page.

MR. MERRICK  It's the second page of that memorandum.

COMMISSIONER  Okay, thank you.

MR. MERRICK  The second paragraph says, Following my conversation..." et cetera, et cetera. And then if you go down about six lines, you will see the sentence that starts:

"Don said he wanted to set up the machinery for the province to make some undertaking to advance bridge funds to Westray Coal. And in this regard, he wanted to send his Deputy, Tom Merriam, and Elizabeth Cuddihy to Toronto on Tuesday, January the 17th."

A.  Yeah. So?

Q.  Do you see that?

A.  Yeah.

Q.  It sounds almost as if they were coming to you with a requirement that could not be met anywhere else. It sounds more like you were offering them money to just facilitate things?

A.  I didn't write this memo.

Q.  No, I know.

A.  Believe me, they came to us to try to get the project going. They were held up. They wanted this interim financing to get moving. So I don't – I didn't write this article, and if that's the way he wants to put it in his handwriting, that's fine. But I – that's not the way it happened.

Q.  If we look down the last paragraph on that page, it says:

"In advance of the Tuesday meeting, Westray Coal is preparing a detailed listing of required work and related expenditures and contractors over at least the next three months and the discussion should be held on the security position which the Province might be looking for and any advancement of bridging funds. Naturally, the Province would think at first that they should get a first charge on the coal property, but I seriously question whether they should be entitled to a first charge..."

et cetera, et cetera.

A.  Uh-huh. Yes –

Q.  Right?

A.  –there was quite –

Q.  I take it –

A.  – an argument about that.

Q.  Yeah. Now this is dated January 12th, 1989.

A.  Uh-huh.

Q.  Can you tell me if you can recall anything prior to this point in time dealing with the interim loan?

A.  I can't say for sure.

Q.  Would it have been – would the need for the interim loan have come up at about this time?

A.  I don't know. You have all the documents from the Department. Was there anything prior to this?

Q.  Let me ask you this: Do you have a recollection of a specific request coming in to initiate this as opposed to the Province possibly suggesting it?

A.  My recollection is that we didn't suggest it.

Q.  No.

A.  The company was pushed for production. They had to get the project going to meet – to meet the contract at the Power Corporation.

Q.  Do you recall a specific request for the funds prior to it getting to this stage that we see in this memo?

A.  I can't honestly tell you if someone approached before that, Gerald Phillips or someone else said, "Look, can we have an advance on some of that money to get the project going?" I can't honestly tell you today that it was before this date or after the date. I don't know. Or Marvin Pelley, I can't tell you that.

Q.  All right. Just following through the documents that we do have before us, if you flip over to the next page, it's a memorandum from Elizabeth Cuddihy to –

A.   Which one?

Q.  The next page, stamped page 21.

A.  Okay.

Q.  It's that memorandum.

A.  Uh-huh.

Q.  Elizabeth to Tom Merriam. The only reason I note this is that it's several days later. It must have followed the meeting in Toronto on January the 17th that was referred to.

A.  Uh-huh.

Q.  And it refers to the maximum interim financing to be provided would be $4 million.

A.  Uh-huh. And she's referring, in her lead-in paragraph – she says:

"This will confirm your instructions to me on January the 21st wherein you advised the following arrangement was made between the Minister," that would be yourself, "Mr. Merriam and Westray."

So a deal – a basic commitment had been made by that point, I take it?

A.  [No verbal response].

Q.  At least she suggests in her wording that a basic commitment had been made?

A.  Uh-huh, that might be.

Q.  All right. Now if you look at paragraph four, she raises the question as to what happens if this project doesn't go ahead and how does everybody get money back. The proposal that Mr. Redrupp had set out in his memo that we looked at a few minutes ago is that naturally the province should think they'd get a first charge, but the company would want to do something else.

A.  There –

Q.  Do you recall anything about that?

A.  Yeah, there was a big argument. They said, "We," you know, "we have ten or twelve million and you guys only had four in. You know, at least we want to have – be on an equal footing with you." "Pari passu," or something I think was the term. "We don't want to lose all our money if – you guys are in the driver's seat here now, and if something happened, we would want at least to get some of our money out." I think that's what the argument was.

Q.  And I take it that ultimately the Province agreed to that?

A.  I think we agreed to pari passu.

Q.  Now help me with this for a second. We have a project owner who puts a certain amount of money in and borrows a certain amount of money from a lender.

A.  Uh-huh.

Q.  As Mr. Redrupp points out, normally, one would expect the lender to acquire first charge on the assets. But in this case, the borrower comes and says, "Hey, we've both got money in here; let's share equally."

A.  Except that we agreed that it would be a fully subordinated loan, that $12-million loan.

Q.  Yes.

A.  Fully subordinated doesn't give you a position.

Q.  But this is separate now.

A.  You're down at the bottom. This is an advance of that loan.

Q.  But you're – Elizabeth Cuddihy, and we'll come across one of her memos in a few minutes that says: "You've got to keep these two loans separate."

A.  Uh-huh, yeah.

Q.  The interim financing has to be kept completely separate from the 12 million for –

A.  For accounting purposes they do, yeah.

Q.  And it has to be dealt with on its own loan terms?

A.  Uh-huh, but they –

Q.  So –

A.  – were the same as the $12-million terms.

Q.  But why wouldn't the province say to Westray, "Look, we're advancing you by way of a separate loan, an advance of four million or eight million. We want security, first-charge security?

A.  And they said, "Why don't we – we go in this on a pari passu basis," so –

Q.  Joint venturers?

A.  So as – you can – if my – maybe that's what it is, until we get the Federal funding. So if we invest more money or more money of yours is invested, then that's how it will come out.

Q.  But a normal lender – if you were to go into a normal lender and say, "Look, I'm putting some equity in and I need your money borrowed on it," and instead of giving you a first charge, let's share this charge in the assets –

A.  Uh-huh.

Q.  – you would be thrown out of their office on your head, wouldn't you?

A.  I don't know. I borrowed money quite a few times, different ways, and no one's threw me out yet, so I don't know.

Q.  Was any attempt made to hold firm on this point and to challenge the company?

A.  There was a lot of discussion between our officials and the company on this one.

Q.  Well, you tell me. You were the Minister in charge. What were your instructions as to whether the province was going to challenge the company on this or hold firm?

A.  My instruction is to get the best deal you can for the Province. And, of course, by that time, the project was started. We would like to see the project, you know, completed too, so you had that hanging over your head.

Q.  Would that have affected your judgement at all, the fact that you wanted to see work going on on the project?

A.  No, I think I'd like to see, you know, what was fair, fair to the both sides. A reasonable – a reasonable solution. Sometimes people get dug in, but my approach would be, "Look, do the best deal you can for the Province, but, you know, try to – try to have it fair," because, in the end, you're better off being that way.

Q.  So that was acceptable to you?

A.  The final –

Q.  I see.

A.  The final deal was acceptable. It didn't amount to anything because, as you know, they paid it all back and we were quite sure that the Federal finance was coming. We were assured by them it was coming through. So, really, this didn't affect the mine. It didn't affect the safety of the mine. It didn't affect anything.

Q.  Well, this is January '89. We're going to come to some memos in a little while that suggest that you didn't believe that Federal financing was going to come through even as late as 1990?

A.  Well, I don't know. Maybe – maybe we were saying things to call their bluff, but we will deal with that later.

Q.  All right. In any event, can you recall what information your officials would have put before you to have satisfied you as the Minister that the province had to share a security position on this interim loan?

A.  Well, it was the best deal they could come to, and I accepted it.

Q.  All right.

A.  And it was paid off with interest.

Q.  I take it that her memo is correct that it first started out being talked about as possibly $4 million?

A.  Uh-huh.

Q.  Can we now turn to the next page over which is a further memorandum three days later. And you will see where this is a memorandum to you. In her first paragraph she makes the point that:

"In order for the Province to be in a position to provide interim financing to Westray without confirmation of banking and federal financing, any advances would have to be treated as a loan separate and apart from the original $12 million equity financing."

A.  What page are you on? I want to just make sure I'm on the right page.

Q.  Page 22, stamped page 22.

A.  Okay.

Q.  Memo, January the 26th?

A.  Uh-huh.

Q.  First paragraph. She's making the point that any advances would have to be treated as a loan separate and apart from the original $12 million equity financing?

A.  Uh-huh.

Q.  So that it was to be treated as a completely separate loan transaction?

A.  For accounting purposes yes, but it was very clear that as soon the $12 million came in, this had to be all paid off.

Q.  Yes.

A.  So you couldn't have both.

Q.  Yes. No, I understand that and that's agreed. She points out in the second paragraph:

"The provision of four million is not sufficient to enable the continued flow of progress. Cash flows indicate financial commitments must be made beyond four million in the time frame and if this is not realistic to consider..."

et cetera, et cetera. And she wants you to confirm that whatever conditions she had attached were acceptable.

A.  Um-hmm.

Q.  At that point in time, how much were you prepared to commit in the way of interim financing?

A.  I guess what was necessary to keep the project going.

Q.  Well, had you –

A.  And I think my own staff said, "Look, it's not going to be enough, it should be – by looking at all the documents, it should be eight million instead of four."

Q.  Well, she didn't say – I don't think she eight in that memo. What was your understanding as to how far you were prepared to go? Your recollection of how far you were prepared to go?

A.  I was hoping that four million would get the project going, but –

Q.  Had you –

A.  And they say that's not going to work because the Federal approval is not going to be done, so it's not going to work, and you'll be back again. I think that's the exact words they said to me, "That's not enough."

Q.  Well, let me try this on. Do you know if at that point the commitment that had been given to the company was capped at a specific amount or was it basically, you were going to give them such interim financing as appeared fair and reasonable?

A.  No, I would say that we wanted to keep it as low as possible, and the $4 million was what we came up with. I remember staff saying to me, "This won't do it; you'll have another delay. It will just get the project going. Look it, we went to the company. These are the commitments they've got to make over the next number of months, and then we'll have another situation where it's closed down again. Another fuss. So it won't do." So that's how they got back with a figure of eight million. They looked at what the company requirements would be over the next number of months that we thought would take to get the Federal financing in place and came back with this other figure.

Q.  Who arrived at the eight million? Was that what the company needed or was that what the Province was prepared to give?

A.  I think they looked at the requirements of the company over that period of time, if I remember right. I think that's what the discussion was. But, you know, this is a few years ago so, you know, don't expect me to be absolutely dead on in everything, but I –

Q.  No.

A.  – I think that that's what happened. I think that I recall that they said, "No, this won't be enough. We looked at the requirements."

Q.  So the extent of commitment by the Province was being set by the requirements –

A.  To keep the project –

Q.  – of the company?

A.  – going, yeah.

Q.  Without any specific amount being capped at that point in time?

A.  Well, up to amount –

Q.  Up to 12 million –

A.  I guess we – well, no, we decided eight million was it.

Q.  All right. Did it ever concern you as Minister that the company didn't seem to be prepared to even use its own money to do some of its own start-up on an interim basis?

A.  Well, you would have to ask the company what money they spent. You know, again, this is a statement –

Q.  That wasn't my question.

A.  No, you – in your question, though, you say, "The company wouldn't use any of its own money." I don't know if the company used any of its own money. You fill all your answers [sic] with these purported to be facts, I don't know. Maybe it is. But I would like to know if it's true. Did the company spend some of its own money along the line too? I'm not sure.

Q.  Well, that's a good question. Do you know if they were spending any of their own money?

A.  Well, I – sitting here today, no. But I'm sure if we get back and got the proper people, we'd find out the answer to that.

Q.  Do you know if you addressed that at the time?

A.  It might have been. It might have been the financial crunch. They were out in Faro where they had hundreds and hundreds of men working and got caught in low prices, and they had to strip more area off to continue the mine operating. I know they were in a financial crunch out there. I met the leader of the government out there, and he was very concerned about it, called me on a number of times about it because it meant 30 percent of their total economy. So I clearly remember that. There must have been some financial crunch on because they wouldn't be talking that way.

Q.  Well, let me come back to my question of a moment ago. Can you recall as Minister being responsible – or being concerned about the fact that the company was looking to the Province – Province's money to cover some of their initial start-up costs on an interim basis. That would suggest to me –

A.  Look –

Q.  – that the company wasn't putting in an awful lot or maybe it didn't have any ability to put in –

A.  – we gave them the $12 million loan. We had requirements of when that money would go in. The Federal Government, in their wisdom or lack of, decided we're going to play some games here, and we're going to hold the project up for 14 months. Now what was – what difference was it to the taxpayer of Nova Scotia if our money went in a little earlier than it was supposed to? We committed to put the money in. What's the point? What point are we trying to make here, that our money went in a little earlier than it was supposed to? That somehow that has some major effect.

      I'm sure when the guys are pushing the reset button to override the safety device they were saying, "Oh, yeah, that Don Cameron gave them a $8 million loan too early. We're allowed to do this now."

Q.  Well, let me move on. The next thing that came up was this business of what security position to take, and we looked at that for just a few minutes. I want to refer you to a couple more documents on that. Can you turn to page 24 in that same volume that we're going through, and this is from your Deputy to you, a memorandum dated February the 8th, '89. Do you have it?

A.  Um-hmm.

Q.  And he talks in his first paragraph about,

"That they've reviewed the most recently amended interim financing deal. It increases the funding level to eight million and lengthens the payment date," et cetera, et cetera.

And then he says in his second paragraph:

"It is unacceptable to Westray that in the event of default the Province has the right to act on its security and seize title to the company's assets and proceed to recover its interim financing in a normal commercial manner. We have included this condition because it is essential that we be able to take control of the property so that we can proceed with the mine development in event Westray cannot. However, Westray wishes to have pari passu security with the Province on its own assets. And in the even of default be entitled to release its interest in the security for its share of the value..."

and he underlines this,

"...the value of the project as a going concern. Under these terms Westray retains an ownership interest in the project even in the event of a default."

And then he goes on to point out the significance of this:

"The pari passu clause would essentially mean that the Province is entering into a joint venture with Westray with the Province assuming the financial risk. The provision for valuation as a going concern would mean that the Province would have to write Westray another cheque for 10.5 million in order to gain unencumbered rights to the property after having already laid out its 18 million in interim financing which would never be recovered."

Is that a valid point?

A.  Where does he get the 18 million?

Q.  Well, did you understand that – he points out to you that the normal commercial manner would be for the Province to have taken first security position on the assets.

A.  Um-hmm.

Q.  Westray, using this argument that they also had put money in there and, therefore, should share in the security, has now added a clause that the Province could acquire the assets only by buying them out at the value of the project as a going concern. And then he says they've got 10.5 million in there. If the Province wanted to recover its money, it would have to first give them a cheque for 10 million in addition to the eight that you'd already spent. Did you understand that at the time?

A.  Yes, I do.

Q.  Were you in agreement with Westray's proposal?

A.  Well, they put $8 million into it when they bought the project. That was their hard, cold cash. I suspect they put something else in after that. It appears they have. And what they were saying is that, "You'd be in the driver's seat, and if you want to shut this thing down, we walk away without nothing. We'd like at least to have that amount of money that we put in, back." Maybe it's not unreasonable, is it?

Q.  So if the thing were to shut down, they'd get their cheque for ten-five or whatever they put in?

A.  And we'd have the assets.

Q.  And you'd have the assets, which, I suppose, at that point was what?

A.  Well, it must have been worth something.

Q.  Couple of holes in the ground.

A.  That – you know –

Q.  Well –

A.  No, don't –

Q.  – tell me.

A.  – showboat. Don't showboat. You know, that's kind of nonsense. "A couple of holes in the ground."

Q.  But isn't –

A.  There's companies –

Q.  – this what your Deputy –

A.  There's companies –

Q.  – Minister –

A.  – looked for years at that low sulphur coal. It's a real asset and there's lots of companies looked at it. They're out there digging the same coal right now. Why do you think they're digging it? Because it's an asset. It's being sold every day to the Power Corporation, the Foord seam. As we sit here right now, it's being mined. So don't tell me that there was a couple of holes in the ground –

COMMISSIONER  Mr. Cameron –

A.  – there was no –

COMMISSIONER  Mr. Cameron. Mr. Cameron, nobody is showboating in this inquiry. We are here trying to get at the truth of what happened that contributed to or caused the May 9th disaster. I know you're after that too. And it's totally counter-productive for you to be accusing counsel of showboating or anything like that. We are not doing that.

A.  Mr. Commissioner, I'd be very happy to abide by any ruling you make. It's just that when he makes – he makes questions and puts those kind of tones in it, then I'm going to react to it, I'm sorry.

COMMISSIONER  Well, let me just ask you if you would answer the question without embellishment –

A.  Well –

COMMISSIONER  – okay?

A.  – if he could please try to ask the questions without embellishment too, I think it would be a lot easier for both of us, and I know a lot easier for you, Commissioner.

MR. MERRICK  Is that not the point that your own Deputy Minister is making to you in that memo?

A.  I don't know what the point he's making. I don't – we finally decided that it would be pari passu. It didn't cost the taxpayers one cent. It was all paid back with interest at 11.75 percent interest. I don't understand what this has [sic] with the mine explosion. It was paid back with interest at 11.75 percent. So, apparently, the decision wasn't too – a great one to take.

Q.  So that if we can just flip over to page 26, that's a letter to you to Westray, in which you confirm the Province's commitment to give the interim financing?

A.  Well, if I could read the letter, I'd be all right, but I can't read this letter.

Q.  All right, well, I've got a –

A.  The quality is not there.

Q.  I'm going to su –

A.  If that's what it says, then I accept that.

Q.  And, in fact, that's what did in – occur, was it not, that the Province agreed to make the interim financing and on the terms pari passu as far as security goes, that Westray had proposed?

A.  Yes, that's my recollection.

Q.  All right. Did it cause you any concern when your Deputy Minister had in his February 8, 1989, memo – suggested that you were, in effect, entering into a joint venture with Westray?

A.  No, I didn't see it that way. I had every confidence that the Federal Government would go through with their funding; the money would be paid back, and we went back to the original $12 million loan. And, as you know, that's exactly what happened, plus a quarter of a million dollars in interest.

Q.  Just on this one point of the – this proposal by Westray for this pari passu security business. Can you turn to page 62 –

A.  Sixty-two.

Q.  – in that same tab? This is skipping ahead now. It's a memo from Elizabeth Cuddihy to Marvyn Robar, dated May 10th, 1990.

A.  Um-hmm.

Q.  And we know from glancing at it that we're now at a point in time where the Federal financing package is finally getting put down on a piece of paper with signatures. And, apparently, from this memo, the company came to the Province and said that before they accepted the Federal financing, they wanted commitments on the three points that they – she sets out in her memo. Number one,

"Extension of interim loan arrangement. Confirmation that the Province was extending the $12 million loan and take-or-pay arrangement. The Province's agreement to the subordinated requirement."

And if you read the next paragraph, I'm going to see if you can help me on this because I'm not clear. She says:

"I advised you that you, Joe MacDonald, and I had reviewed the drafted Federal offer, and it was our opinion that nothing was required from the Province for Curragh to accept the Federal offer. He advised that, in his opinion, if Curragh Resources accepted the Federal offer, the Province would no longer be required to buy Curragh Resources out under the interim loan arrangement."

That was that pari passu security arrangement that we looked at.

"This appears to be the reason why he was recommending to Curragh that they not accept the Federal offer until we put a commitment in place on the $12 million loan."

Now I assume from that that Curragh was now trying to take that same pari passu buy-out arrangement from the interim loan and blend it into the $12 million loan.

A.  Well, I –

Q.  Can you help me on that?

A.  I don't assume that. That was never – that was never – as far as I'm concerned, it was never part of the negotiations. We negotiated the conditions of the $12 million loan, and there's going to be no change in that. So I don't read that in that, but maybe you do.

Q.  You can't recall any proposals or –

A.  Abso –

Q.  – initiatives –

A.  I can't.

Q.  – from the company?

A.  Absolutely not.

Q.  All right. In any event, we know that Elizabeth Cuddihy was recommending – you look over on page 63, she says:

"He seems insistent on us drafting a letter to Curragh confirming the $12 million arrangement including the subordination matter. I advised him that we are reviewing the issues, and we will be prepared to move as soon as the Federal offer is received and accepted by the company. And unless I am instructed otherwise, that is the course we intend to follow."

A.  Um-hmm.

Q.  In short, that she's not going to do anything until Curragh accepts the offer as is?

A.  From the Federal Government?

Q.  Yes.

A.  Um-hmm.

Q.  If you can then turn to page 64, this is a letter from you to Curragh the same date. Short and to the point.:

"Further to our letter of January 9th in respect of financing arrangements, we confirm the Province's agreement to extend the completion of permanent financing arrangements. We confirm that the Province is prepared to enter into a subordination agreement in respect of the 12 million loan on terms and conditions satisfactory to Curragh and the Province."

A.  Um-hmm.

Q.  I take it – do I take it from this letter that you did not follow her advice? You gave them the letter they'd been requesting and which she said she saw no need for.

A.  I'm not sure they're the same thing.

Q.  Well, I'd like your help on that.

A.  One is saying extend the permanent financing arrangement for the project from February 28 – and there were deadlines on that. They had to accept it by such and – And then the one that you're referring to is an extension of interim loan arrangements. "We confirm that the Province is prepared to enter into a subordinated agreement." Well – but that wasn't news. We agreed to that a long time ago. That was a request by the Federal Government, so I don't –

Q.  Well, I just want to make – focus it for you. If you look at her memo on page 62, bottom paragraph –

A.  Yeah.

Q.  – six lines down, she says:

"This appears to be the reason why he was recommending to Curragh that they not accept the Federal offer until we put a commitment in place on the $12 million loan. I explained to him that I was not prepared to discuss the Federal offer with Federal officials in respect of subordination until Curragh has, in fact, received an offer signed by the Federal Government."

And then your letter of that same date seems to give that confirmation –

A.  On the –

Q.  – on the subordination agreement?

A.  On the subordination, yeah. I mean, that was pretty clear cut, the Government decided we're going to subordinate. I remember we're going to Cabinet and saying, "Now they want to subordinate the loan." I wasn't too fussy about that, to tell the truth, but we realized that's the only way it was going to be done.

Q.  Are you able to tell me today whether your letter of May the 10th was, in effect, not consistent with the position that Elizabeth Cuddihy was recommending?

A.  Well, she – the letter is not – the letter is different than this. The one aspect of subordination is certainly in here, and she said she didn't want to discuss it with them.

Q.  All right, let me just finish off the point for record purposes. If you turn over to page 65, that's a letter from Mr. – well, from Westray to you, responding to your May 10th letter, and just wanting clarification. He asks you,

"To confirm that the Province will do whatever is necessary so that the $12 million from the Province qualifies as equity under the Atlantic Enterprise Program, e.g., it is subordinated to the claims of all secured and unsecured creditors."

And the Province gave that commitment, I take it?

A.  Yes, we did.

Q.  Okay. Let me move on to the next component of the Provincial involvement, the take-or-pay agreement.

A.  Um-hmm.

Q.  Why was that given?

A.  Why was it given? Again, it was another loop that the Federal Government put up after we satisfied the present ones. They said if you have a contract with the Power Corporation, that's what we needed. And then when we achieved that – I still believe that somewhere I read that one of the Ministers said, "Well, now let's go back and see if they can get a contract for the remaining amount. This was –

Q.  For the what?

A.  For the remaining amount of coal. Now, you know, this was – first they were saying the project was not viable, and we got the Power Corporation contract. They said that at one point that would be satisfactory.

      Then the next step, they said, "No, even with that, it's – we're going to have to have more coal." And we pointed out that in fact the contract with the Power Corporation was for 700,000 tonnes a year. And in the contract, the Power Corporation would buy another 100,000 tonnes when the Westville strip mine shut down, and we knew the life of that mine was getting near to the end. So then it was 800,000. So it was rather unusual to tell a company that you have to have signed contracts for – if you had signed contracts for 800,000, it would be rather unusual to say, "Well, now we want to have signed contracts remaining." They certainly didn't do that with DEVCO when they were drilling mines. They didn't know where they were going to sell the coal. So it was another way to delay the project. So they said, "Well, unless you can get a signed contract for the 700,000 up, and the fact that the Power Corporation will take more down the road, well, that's – that's – you know, that's down the road."

      So that's where the take-or-pay came from. And, again, it was enforced by this position of the Federal Government.

      And the take-or-pay was simply a very simple – everyone has tried to make it very complicated and make it something it's not. What we said to them was, "Okay, to help put your financing in place, with a clear understanding that you will never get one red cent out of this. You have to understand that." And I think they under – at least, Gerald Phillips and Marvin Pelley understood it very clearly, believe me.

      I'm not sure if Mr. Frame was ever told this, but that's for them to discuss.

      A clear understanding they would never get one red cent of it. So it would be put in place as a way to help them put their financing in place, that we would enter into a contract to take or pay for 275,000 tonnes, knowing – knowing that 100,000 tonnes of that was going to go the Power Corporation under their contract when the Westville strip mine completed operation. And it was only a matter of time – a couple of years or something and the strip mine did close down. So it wasn't going to be a long period of time.

      The company would have to make an effort and show us that they tried to sell that remaining coal at world price, low sulphur coal at world price. So they would have to find a market of 175,000 tonnes at world price.

      Now I didn't think that was a real hard deal to accept, the fact that it was low sulphur coal, that more and more and more people were very concerned about sulphur emissions.

      New Brunswick were building plants. They were going to buy low sulphur coal from South America, I think. I even talked to the Premier and officials in New Brunswick, and they said, "Look, there will be no problem. We'll buy the coal. If there's a good price, we'll buy the coal. We would rather buy it."

      It didn't seem like it was a great risk that someone would be able to sell that amount of low sulphur coal in these environmental times when people are concerned about the environment.

      We also said that, if we wanted the coal, we would have a choice to leave it in the ground and pay for it. For example, if in the next year or two we decide we're going to cut in half the sulphur emissions from the 160,000 tonnes a year for our power plants down to 80,000 tonnes a year, there would be some very tough decisions would have to be made. And you might want some of that coal.

      But if we changed our mind again and went to gas or something else, you would have to pay us back every cent of that money at the end of the contract.

      So when I looked at this whole contract, I really don't know how the company could get much off it. They would have to prove, without doubt, that they tried to sell it at world price. And world price is established by what you sold the last tonne of coal yesterday for. And they would – they'd have to tell us that, no, we couldn't sell it to New Brunswick, even though New Brunswick was actually buying a million tonnes of this coal. It seemed to me it wasn't – it wasn't something that was a great concern.

      But like everything else in this project, it was taken and it was twisted and turned and it was going to cost millions and millions of dollars and, you know, that's made the headlines. And either people didn't read or understand it. It's just that simple.

Q.  Well, let's go through it for a few minutes.

A.  Uh-huh.

Q.  Let me start, first, by its origin. Under that exhibit, tab 3, can you turn to page 6 this time?

A.  We're on tab 3?

Q.  Yes, page 6. That's a letter from Price Waterhouse –

A.  Uh-huh.

Q.  – to yourself. That's Mr. Redrupp and he thanks you for meeting with he and Marvin Pelley in the previous week –

A.  Uh-huh.

Q.  – to discuss current developments. And then he says, in the next paragraph, halfway down:

"As to the support from the Province of Nova Scotia, I want to confirm the commitments which Westray Coal will require from the Province and which we discussed at our meetings on June 29th and 30th."

And then he goes on to say:

"The Province of Nova Scotia will guarantee the sale of up to one million tonnes of coal from Westray Coal, Pictou County Coal Project..." et cetera, et cetera. "It's understood a contract purchase of 710,000 tonnes has been committed by the Power Corporation."

Would it be a fair assumption for us to make that the requirement for this commitment by the Province was first present or proposed in this time frame, and I'm talking there the end of June, early July?

A.  Well, he says, "a guarantee up to one million tonnes," so it must have been.

Q.  Well, he's referring to meetings that he had with you the previous week to discuss developments on the financial needs. And then he says, "As to the support of the Province of Nova Scotia, I want to confirm the commitments which Westray will require from the Province." And I'm assuming from that that at those meetings on June 29th and 30th would have been probably the first time that this requirement was being discussed with the Province. Would that be fair?

A.  I don't know.

Q.  Can you recall it going back any earlier than that?

A.  I really can't tell you that.

Q.  All right. In any event, we see a letter from you, if you turn over to page 9, a letter from you to Robert de Cotret, dated July the 8th, '88.

A.  Uh-huh.

Q.  This would have been a matter of four or five days later where you commit – where you say in the first paragraph, "I'm, therefore, very pleased to advise you that provincially we have agreed, in principle, to provide the following assistance to Westray Mining Corporation..." and then you talk about the three components, including the take-or-pay agreement?

A.  Uh-huh.

Q.  The conclusion I'm drawing from that is that within approximately a week of when Westray comes to you and says, "We need this commitment from the province."

A.  That's not fair.

Q.  Well, you tell me what's fair?

A.  You're saying we did it in a week. Is that what you're saying?

Q.  That's what the documents suggest.

A.  No. No, that's not right.

Q.  Well –

A.  That took a lot –

Q.  – then tell me what is right?

A.  – longer than a week to hammer that one out, believe me.

Q.  Well, can you tell me anything – can you help me with any specifics?

A.  You have all the information. You know, I didn't take information from my office, so you have all the information. So –

Q.  Well, let me –

A.  – I can tell you that it took a lot longer than a week to hammer out the take-or-pay contract.

Q.  Well, I know that following July, 1988, it goes on for quite a lengthy time hammering out the terms of the agreement. So that took a long time?

A.  Well, that's fine. That's what I'm referring to.

Q.  Do you – that's what you're referring to. My question to you was this –

A.  Wouldn't the terms of the agreement be pretty important?

Q.  Yes.

A.  I mean, doesn't that end up meet – your liability is determined by the terms in the agreement? Wouldn't the terms of the agreement be the key to the whole thing?

Q.  So what you're saying is that you recall it taking a long time to work out the terms of the agreement. And I can accept that.

A.  I guess it – what I'm saying to you, it took me a long time, from the time that this was an issue until it was actually finalized.

Q.  All right. I understand that. That's not my question. My question to you is this –

A.  You don't like the answer.

Q.  – are you able to tell me whether the assumption that we draw from these documents, that there was only about a week from the time the take-or-pay agreement was proposed, to when you write this letter to de Cotret?

A.  I can't – I can't confirm that.

Q.  All right.

A.  I really can't.

Q.  What –

A.  It doesn't seem like that to me, but I don't have any proof, so I can't argue with you.

Q.  All right.

A.  But it certainly doesn't – that's not my sense.

Q.  Well, let me come to this point then: What was being looked for here, as we've heard evidence and seen some of the documents was some assurances by the Feds, at least, and possibly the commercial bankers, that Westray had a commitment for the sale of its coal to customers.

A.  Uh-huh. It had a commitment from the Power Corporation. What efforts did you make or did you understand were made on behalf of the province to have Westray get those commitments for the balance of the coal from some other source?

A.  Well, that was the deal in the take-or-pay. After –

Q.  That was with the Province. What efforts did you make to avoid the Province having to enter the take-or-pay agreement by telling Westray, "Go out and sign your contract with the Premier of New Brunswick"?

A.  That's exactly what I told them, but we had a group in Ottawa that was going scuttle this, and they said, "No, you have a signed contract or we're not going to do the deal."

Q.  But what efforts –

A.  I pushed them and in fact they negotiated with CN and they negotiated with New Brunswick. And they negotiated other places. They showed me a list of companies they actually went out and sought. Because I didn't want to do this take-or-pay, so I pushed them to do that. The bottom line was that the same people in Ottawa who lied about the fact that it was going to cost $290 million on DEVCO, which it was completely false, those same people were saying that, "No, you're going to have to have a signed contract or the deal is not done, period."

Q.  Wait a minute now. Are you telling me that you understood that if Westray had signed contracts with other purchasers, such as the Province of New Brunswick, that that would not have been acceptable?

A.  Yeah.

Q.  You're telling –

A.  That would have been acceptable.

Q.  That would have been acceptable?

A.  Yeah.

Q.  And it comes back to my question. Why didn't you tell Westray, "We're not going to sign a take-or-pay agreement. There are customers out there. I've talked to the Premier of New Brunswick, and he's agreed to buy your coal. Go get a signed contract from him"?

A.  I did exactly that. And you know what the answer was? "This project has been talked about since the early '80s. You're the third company that has been involved in that. When you start producing coal, you come and we will buy some."

Q.  So buyers were not prepared to enter into purchase agreements?

A.  That was what my – my understanding was. And because the project was talked about so long, they said, "Well, get the project going. It won't be hard to sell this coal; get it going. When you have coal, come and we'll buy some."

Q.  All right. That's probably as good a break point as any, Mr. Commissioner.

COMMISSIONER  Okay, we will recess until 1:30 then, thank you.



INQUIRY RECESSED  (TIME: 12:31 p.m.)

INQUIRY RESUMED  (TIME: 1:32 p.m.)



The electronic version of these documents is presented here
for your information only. Care has been taken to transcribe
the data accurately. However, in case of differences, the
official version is the authoritative source.


The only known copy, accessible to the public, of
the official Westray Mine Public Inquiry transcript
is located in the Museum of Industry at Stellarton.




Go To:   Transcript Index, Westray Mine Public Inquiry
    http://alts.net/ns1625/950013index.html
Go To:   Westray Coal Mine Disaster page
    http://alts.net/ns1625/wraymenu.html
Go To:   Home Page
    http://alts.net/ns1625/index.html

Valid HTML 4.0 webpage
W3C HTML Validation Service
http://validator.w3.org/

Valid CSS webpage
W3C CSS Validation Service
http://jigsaw.w3.org/css-validator/


HTML version prepared by Ivan Smith
If you have comments, send me an e-mail: <rustfrog@auracom.com>


First uploaded to the WWW:   10 October 1998
Script upgraded to HTML 4.0:   20 February 2002
Moved to new hosting service:   23 August 2002