Legislative Assembly of Ontario

AGENCY REVIEW
ONTARIO NORTHLAND TRANSPORTATION COMMISSION

TOWN OF ENGLEHART

BEARSKIN AIRLINES

TIMMINS CHAMBER OF COMMERCE

SAULT STE MARIE ECONOMIC DEVELOPMENT CORP

OLAV HAAVALDSRUD TIMBER CO LTD

GORE BAY-MANITOULIN AIRPORT BOARD OF MANAGEMENT

NORTHERN ONTARIO TRANSPORTATION COALITION

ONTARIO NORTHLAND TRANSPORTATION COMMISSION

SUBCOMMITTEE REPORT

CONTENTS

Thursday 7 March 1996

Agency review

Town of Englehart

Bettyanne Thib-Jelly, mayor

Harvey Middaugh, associate

Bearskin Airlines

Harvey Friesen, president

Timmins Chamber of Commerce

John Bragagnolo, president

Sault Ste Marie Economic Development Corp

Bruce Strapp, economic development officer

John Reynolds, chair, norOntair adjustment committee

Olav Haavaldsrud Timber Co Ltd

Grant Haavaldsrud, human resources manager

Gore Bay-Manitoulin Airport board of management

Bryan Barfoot, municipal representative

Northland Ontario Transportation Coalition

Harry Kelly, co-chair

Ontario Northland Transportation Commission

Matt Rukavina, chair

John Wallace, president and CEO

Subcommittee report

STANDING COMMITTEE ON GOVERNMENT AGENCIES

Chair / Présidente: Laughren, Floyd (Nickel Belt ND)

Vice-Chair / Vice-Président: Martin, Tony (Sault Ste Marie ND)

*Bartolucci, Rick (Sudbury L)

Crozier (Essex South / -Sud L)

Ford, Douglas B. (Etobicoke-Humber PC)

*Fox, Gary (Prince Edward-Lennox-South Hastings / Prince Edward-Lennox-Hastings-Sud PC)

*Gravelle, Michael (Port Arthur L)

*Johnson, Bert (Perth PC)

Kormos, Peter (Welland-Thorold ND)

Laughren, Floyd (Nickel Belt ND)

*Leadston, Gary L. (Kitchener-Wilmot PC)

*Martin, Tony (Sault Ste Marie ND)

Newman, Dan (Scarborough Centre / -Centre PC)

*Preston, Peter L. (Brant-Haldimand PC)

*Ross, Lillian (Hamilton West / -Ouest PC)

*Wood, Bob (London South / -Sud PC)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Brown, Michael A. (Algoma-Manitoulin L) for Mr Crozier

Doyle, Ed (Wentworth East / -Est PC) for Mr Ford

Martel, Shelley (Sudbury East / -Est ND) for Mr Kormos

Wildman, Bud (Algoma ND) for Mr Laughren

Also taking part / Autre participants et participantes:

Bisson, Gilles (Cochrane South / -Sud ND)

Kormos, Peter (Welland-Thorold ND)

Miclash, Frank (Kenora L)

Wood, Len (Cochrane North / -Nord ND)

Clerk / Greffière: Tannis Manikel

Staff / Personnel: David Pond, research officer, Legislative Research Service

The committee met at 1010 in room 230.

AGENCY REVIEW
ONTARIO NORTHLAND TRANSPORTATION COMMISSION

The Vice-Chair (Mr Tony Martin): Good morning. I suggest we get rolling here, given that we want to make maximum use of the time we have to look at this important agency and give people a chance to ask some questions.

TOWN OF ENGLEHART

The Vice-Chair: The first presenter today is Bettyanne Thib-Jelly, from the town of Englehart. We thank you for coming. Please make yourself comfortable. Normally, there's a pail of water in front so you can have a drink if you get thirsty, but since the OPSEU strike there's no water. But there are juices and things.

Mrs Bettyanne Thib-Jelly: If there isn't water, I'll just have a juice. That will be fine.

Good morning, Vice-Chair and members of the standing committee on government agencies with respect to the ONTC. I would like to take this opportunity to introduce you to my associates from Englehart: Harvey Middaugh, who has 40 years of experience with the ONR, CNR and Via Rail; and Allan Bowles, the president of the chamber of commerce from Englehart. We travelled to Toronto on the Northlander yesterday, and we wish to praise its excellent service. We hope to catch it again at noon today on the way home.

I'll go over what's in your folder real quickly. You'll find copies of a letter from the Temiskaming Municipal Association. I'm chair of Temiskaming Municipal Association and also an executive of FONOM. We have a motion letter from the township of Chamberlain supporting our views, and a community profile of the town of Englehart.

What is Englehart's role in this all-encompassing picture? Englehart is a railway town that is proud of its history and its founders. We believe the ONTC is a development road for the north and is dedicated to the north's wellbeing. We believe we can help the decision-making process, and I have started this by creating a mayor's task force about the ONTC as it relates to rail operations. We believe the community should be involved in the decisions, and when there is a major impact planned in some community or another, the commission has a responsibility to involve the municipality. We understand that the ONTC has the responsibility to rightsize its operations. We in Englehart have made this commitment. We will get involved and ensure that all the pertinent information gets to the commission, but we ask that we have the necessary vehicle to allow this to happen. There should be someone from the ONTC to sit on this task force. Given Englehart's history and understanding of the importance of rail, the commission would be enhanced with a resident of Englehart sitting as a member.

What should be done? The ONTC should develop a strategic plan for the next five years. This should be well-thought-out and involve public input. It should clearly define what its mandate is and what it should be doing to achieve that mandate. It must contain rationale for their decisions and the proposed impact on municipalities.

What are our concerns? We believe the ONTC should be rightsizing. We don't like the word "downsizing." It has only one direction. This means it should have the right amount of employees in any area to do the work efficiently. An example of this is the closing of the mechanical shops in Englehart. We understand that there are contracts out for work for Via and GO Transit systems. The ONTC should be aggressively pursuing these avenues, but we are concerned that because they are in a position of downsizing they will not pursue these contracts aggressively, thus losing them to Bombardier. Why would they not pursue them? They have just offered buyout packages, even though this work is up for bids. How do you bid jobs, knowing you need more manpower, when you've just offered many a buyout? We are strongly advising that the Englehart mechanical shop should be left open to repair the cars and the North Bay shop to do the contract work.

Decisions should be made with the knowledge of their impact on the municipality. For example, the town was told that the ONTC was going to close its mechanical shop in Englehart and reassign the 20 employees to North Bay. The impact of Englehart losing $1 million is much greater for us, due to our size. It has a great impact on our hospital, schools, real estate and businesses, not to mention the human factor.

Is the downsizing actually a cost saving? The above scenario does not represent a cost saving, as the company will still be employing the workers, paying their moving expenses and guaranteeing prices on their housing in a depressed market. The decision to downsize in the town of Englehart can only have a negative impact on the operations of the entire Ontario Northland Railway. We are the heart of the ONTC.

Let me explain. First, 13 trains go through Englehart, while three go through North Bay and two go through Cochrane. It makes sense that the bulk of maintenance should be handled in Englehart. Second, there are mines operating presently in Timmins and Noranda which require trains to send rail cars from one mine to another. These trains are made up in Englehart. With all the trains planned to be made up in North Bay, the empty cars from Kidd in Timmins would now have to be hauled all the way to North Bay. This cannot increase customers' or operations' efficiency by carrying empty cars an extra 240 miles. When the trains are made up in North Bay, this means adding extra engines because of the heavy grade between North Bay and Tomiko. Then they use these engines again for the rest of the trip, though they are not necessary. This is not diesel efficiency.

The majority of the revenue in ONTC is earned north of North Bay. The bulk of the benefits goes to North Bay. The eliminating of Englehart as the town where the trains are made up just enhances this unjust situation, as this will lead to more jobs leaving Englehart to go to North Bay. This was tried in the 1970s, apparently, and did not work.

We are concerned about the safety of the ONTC as it continues to downsize the maintenance of way. Coupled with downsizing in signals, which can detect bad track, hot-boxes and high-water detectors, we see, as is happening everywhere else, more train derailments. We find this very disturbing, considering the number of lakes and rivers that the acid trains run by. An environmental disaster is just waiting to happen.

We are concerned about the viability of rail should the federal government discontinue its subsidy of passenger service. There is a real danger of the north losing yet another important piece of infrastructure. This would also force freight rates to go up and may threaten its operations. This would just add to the loss of air services, the threat of bus deregulations and the impending closing of our airports.

In conclusion, the direction that senior levels of government are taking make us wonder whether we will still be there. With the further disruptions in transportation infrastructure it will be hard to attract people and businesses to our area. This will lead us to a stagnant economy.

If the pattern continues, we see an increase in truck traffic on our highways, causing the breakdown of this service and the cries for four-laning highways in the north. We do not need four-laning. It already exists in rail. We need the ONTC to aggressively pursue freight and get the truck traffic off our highways. We need more people travelling the passenger train and fewer cars on the highways. This was achieved when the ONTC put on a half-price sale. The empty trains were three-quarters full. The economies of scale show it could work; if they price rail affordably, people will use it. Now you can get a limousine to pick you up at your door and drop you off in Toronto for the same price.

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The ONTC can be and is a very important development tool for northeastern Ontario. We must re-emphasize that the ONTC should be rightsizing, pursuing contracts that will benefit the commission; cuts, if necessary, should be made in the administration area, which seems to be spared, not in the field, where cuts seem automatic. We need the people doing work in the field, not administration adding to the bureaucracy. The commission must do long-range planning and justify the decisions. Their plan must take into effect the opportunities around them. It must look at the lifting of the caution in Temagami, the new mines, expansions in the lumber industry and Rail Haul North. It must look at all the players involved and get them together to find what helps the employer, employee and the customer economically and socially.

We thank you for your time and urge you to deliberate cautiously, as your recommendations may have a great impact on our future in northeastern Ontario.

The Vice-Chair: Thank you. We'll now move into a round of questioning. We have about 20 minutes.

Mr Bob Wood (London South): Perhaps I can open the questioning, Mr Chair. Your community obviously has given a lot of thought to this and you obviously have a lot of community-minded people who want to make a difference for the community in the region. Have you approached the commission to work with them on some of these issues? Do you have a working relationship with them now?

Mrs Thib-Jelly: Not yet, but we've started up the mayor's task force and we have requested communication with them, yes. That was just last week we had the meeting.

Mr Bob Wood: We do have the chair and president of the commission here today, so if you had a couple of minutes afterwards, I don't know whether these gentlemen would be available. One of them says he is, but I can't see the other, so I don't know.

Mrs Thib-Jelly: They're both nodding.

Mr Bob Wood: I hope you might accept their invitation to take a few minutes with them to get this process going, because I think it's very important that they understand your concerns and vice versa. I know it's early to find out what they're saying and what your concerns are and what can work and what cannot. I'd like to get a bit of a feel from you on, to what extent do you see the government putting subsidies into the commission? Do you think they should be big, little, none? Have you given any though to the level of subsidy you think would be appropriate?

Mrs Thib-Jelly: I think big.

Mr Bob Wood: Okay. I know it's premature to ask you more than that, because you really haven't worked with them to see what the numbers are and so on.

Mrs Thib-Jelly: They would probably have to look at their numbers etc and do a study. We haven't done any studies, but we plan on doing that with the mayor's task force; we want to do an impact study for economically, socially etc and then probably work with the government from there. I was being facetious when I said "big," or greedy or something.

Mr Bob Wood: I realize it's a premature question because you haven't seen the numbers and worked with them. Could I probe you any more on your thought on that? I gather you think there should be some subsidy from the government of Ontario to the commission?

Mrs Thib-Jelly: Yes, I do.

Mr Bob Wood: If in fact you were able to see the level of service you want without a subsidy, would that be a problem? You would not have a problem if a solution came forward that didn't require a subsidy and gave you what you want? You want the subsidy because you think that's needed for your community to develop the way you'd like it to develop.

Mrs Thib-Jelly: I think it would probably work better if we had a subsidy. The mechanical shop we have there now employs, what, about 17, Harvey? But if they make progress and get more bids and more jobs, probably there would be more action at the shop in Englehart, so I would think money put into that shop would benefit.

Mr Bob Wood: Would your ultimate goal be to get out of subsidization entirely so you're able to compete on all fours with everybody else? Is your goal to get out of subsidization or would you see the subsidy as being permanent?

Mrs Thib-Jelly: How long have we had it, Harvey? Subsidization has been there for --

Mr Harvey Middaugh: From the beginning.

Mrs Thib-Jelly: With the passenger service it has, and I think the freight is operating on its own. I think the freight is what's really keeping your railway hopping, but the passenger train is still an important part of the north.

Mr Bob Wood: Ultimately would you see it as more desirable for you to have a permanent subsidy from the government of Ontario for the commission or would you see it as more desirable that the thing be self-sustaining, that the entity doesn't require any money from the government of Ontario?

Mrs Thib-Jelly: If it could be self-sustaining, probably ultimately that would be the best way to operate, yes. But I don't think that could happen. I think you do need that subsidy to operate.

Mr Gary Fox (Prince Edward-Lennox-South Hastings): Good morning, and thank you for your presentation. What indication do you have of federal subsidy? Have you been getting some?

Mrs Thib-Jelly: Yes, but I see a cut to Via Rail in the paper this morning, so that's debatable also.

Mr Fox: To better understand this, Englehart is really the hub of the rail system?

Mrs Thib-Jelly: We see it as that, yes, because we're the middle point between North Bay and Cochrane, and Englehart always was the central location where they did all the repairs etc to the trains. We have 13 going through, so obviously we're the ones who should be doing the repairs.

Mr Fox: You haven't indicated to us how many jobs are involved here.

Mrs Thib-Jelly: Approximately 20 jobs, but they're just relocating, they're not being cut. They're being relocated to North Bay, so we don't see that as a saving. That was our point.

Mr Fox: Good point.

The Vice-Chair: We'll move to the Liberal caucus.

Mr Michael Gravelle (Port Arthur): Good morning, and thank you for coming down today. I want to actually focus specifically on the issue that I think has the most impact, literally, the closing down of the maintenance yards in Englehart, the 20 jobs being relocated to North Bay. The argument you make is that it doesn't make sense, based on the fact that the jobs are going elsewhere. In your brief, you make it very clear that there is a really good argument that moving the jobs to another location, particularly North Bay, actually will be less efficient. Can you explain that to the committee in some detail, in essence repeat that and make us understand very clearly that the loss of jobs -- let alone the impact it obviously is having on your community, which is profound.

Mrs Thib-Jelly: As I mentioned, they were going to make up the trains that will be going to Timmins in North Bay, so that obviously means another 240 miles of travelling on the track. And suppose you have a breakdown in Iroquois Falls and the train has to have repair; if you have nothing in Englehart to go up there to do any repairs, they have to go all the way to North Bay, which is twice as far to take your repairman up to do any repairs.

Mr Gravelle: I think it's also important for the committee to hear just what the impact on the community means. In a town of 1,700 -- it's 20 jobs -- the economic impact is profound. I think you make comparisons to what it would mean in larger communities. Again, can you explain for the committee what this ultimately means for a community like Englehart.

Mrs Thib-Jelly: If you look all along the line, Englehart is one of 26 communities in the district of Timiskaming. In your brief, you'll see that the TMA has supported our feelings about the closure of the shop. It doesn't just affect Englehart, you have all those 26 municipalities, Kirkland Lake, Earlton, New Liskeard, Haileybury, Cobalt. They all work in conjunction with each other, so if you have one small municipality that suffers, it's sort of a domino effect and carries on into your other communities in Timiskaming.

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Mr Gravelle: One of the criticisms that those of us in opposition and I specifically have is the lack of consultation on all the decisions that are made affecting northern Ontario. Obviously, we feel a great deal has been taken away from northern Ontario. I think it's important to ask you formally, was there any consultation in any form before this information came to you in terms of a decision? Did anybody come to you as mayor or to anybody in the community and say, "This is what we're thinking of doing, and we would like your thoughts on it"?

Mrs Thib-Jelly: No. I was away at the time. It was February 14. I was away on holiday.

Mr Middaugh: Valentine's Day.

Mrs Thib-Jelly: Valentine's Day, right. When I came back, the announcement had been made. There was no consultation with council. The deputy mayor was taking my place, and there wasn't any consultation.

Mr Gravelle: That's what's astonishing, to make decisions that are going to have such an extraordinary impact on a community, obviously decisions you have every right to be a part of because of the extraordinary impact, particularly as the government continues to maintain, as it did in its campaign document and everything else, that it was going to be increasing consultation in northern Ontario. There are many examples of it, but this is one particularly frightening one, because the impact is so profound.

Mrs Thib-Jelly: That's why we're excited about setting up the mayor's committee. I think we would be able to get some input if we were able to get representation on the commission and then someone from the commission to sit on our committee, and we could have some dialogue. We see that we could have some input.

Mr Gravelle: Obviously, you've done absolutely the right thing in terms of the task force. I'm glad you'll have an opportunity to have some time to talk to the president and the chair of the board. The unfortunate thing is that it shouldn't be something you have to pull together afterwards. You should have been encouraged to be involved. There's no question you should have been asked about it in advance. It's something that is, in essence, inexcusable.

Mrs Thib-Jelly: I think we'll request possibly a six-month waiting period so we could maybe dialogue and make some improvements.

Mr Michael A. Brown (Algoma-Manitoulin): I certainly appreciate you coming down today. This is an issue we haven't heard a great deal about in this committee to date, talking about the rail operations, really the heart of Ontario Northland's operations, at least in terms of size of revenues and number of employees and all that sort of thing.

I'm going to pick up a little bit on Mr Gravelle's point. I have some sympathy for the board of Ontario Northland and the decisions they're making, because the same thing that just happened to you happened to them: The government, out of nowhere, without any consultation, decided to cut subsidies to certain things and pretty much directed Ontario Northland what they were to do and put them in the position where they were going to have to make some decisions very quickly about the economies of the smaller towns and places in northern Ontario. That is something I worry about a great deal, representing a riding which is basically small-town northern Ontario.

As we look at the impact of 20 positions in Englehart, that is an extraordinarily hard thing for a small community to accept. It will have a huge impact on the way you do business, far greater than at Sudbury or at North Bay or at Timmins or at Thunder Bay; this is a huge component of your workforce. It will no doubt have some effect, I gather, on forestry operations, the shipping of those products out. Have you got to a point where you understand what the multiplier effect of this might be to the town, or is the committee still working on that?

Mrs Thib-Jelly: We haven't. We just picked a round figure of $1 million, but probably it would be higher.

Ms Shelley Martel (Sudbury East): Thank you very much to the delegation for coming on the Northlander. I suspect you're okay to get home. Probably next year, though, when the second round of cuts hits ONTC, you won't be riding on the Northlander because it won't be there. I suspect that's the next big thing that will be going down the drain in northern Ontario.

Let me follow up from where Mr Brown was trying to put into context where the ONTC finds itself. While the decision made directly affects you and you're very unhappy, I'm not sure they've been given much choice themselves by the Tory government.

On November 29 the Tories announced that $10 million would be taken from ONTC. That represents fully two thirds of the whole subsidy they now get from the province to run all the services that have to be subsidized. All of a sudden on the 29th they're operating with two thirds less than they had been, which I think has caused some decisions to be made which made you unhappy and other northern communities unhappy, but which in fact are the fault of the Tory government. You were talking about what the impact would be, that you're trying to work on that. Don't you think it would have made a whole lot more sense if the government had looked at some of those things and done some of that work before, rather than just cutting the subsidy and letting the chips fall where they may?

Mrs Thib-Jelly: Maybe we still have to look at the whole picture. When you have a house to run, you have to do your cutting, and I suppose you can't show favouritism. I would hope that even with this cut they can look at getting after and obtaining contracts for their freight and to look again at the passenger service, and maybe through the buyout they are having they might be able to take a second look at these obvious job losses. I don't think it's a fait accompli; we still have time to take a second look.

Ms Martel: And that would be your hope, that the ONTC can do that, even knowing that the government is not going to give them any more money so they're going to be operating with two thirds less.

Mrs Thib-Jelly: That's my hope. I'm a hopeful person.

Ms Martel: Let me ask you about subsidies, because you are also impacted by the decision on norOntair. Luckily for your community, you have a private sector carrier that appears to be wanting to come into that community. If you were in the position, though, of Gore Bay and Hornepayne and the three others that right now have no other private sector carrier interest and will lose service at the end of March, would you not think that subsidy would be pretty important to continue, to make sure your community, if it were in that position, would still have that service?

Mrs Thib-Jelly: Yes, and if I came from one of those places I would maybe come down and make a presentation to maybe take another look at it. I don't think when people make decisions it has to be an absolute final. You can always look around a little and see if there's something else you can do to alleviate the problem.

Ms Martel: Do you have any indication from Air Creebec about whether their fares will be the same as norOntair fares are now?

Mrs Thib-Jelly: I don't have any indication.

Ms Martel: And do you have any indication from them at all of how long they're going to operate the service in the community? Have they given any time commitment?

Mrs Thib-Jelly: No, I don't.

Mr Bud Wildman (Algoma): Thank you for your presentation. Mr Chair, the mayor indicated that she didn't think there should be favouritism involved when you're making cuts. Have you contacted the MPP for Nipissing to ensure there's no favouritism for North Bay?

Mrs Thib-Jelly: For Nipissing? I haven't contacted him, no.

Mr Wildman: Just to make sure there's no favouritism in these cuts for North Bay.

Mrs Thib-Jelly: Well, no. We didn't think of that.

The Vice-Chair: Thank you for coming. Your being here has been most helpful. We hope you have a safe return on the Northlander and that you enjoy it, because we don't know how long it will be there. Is that what we're being told?

Mrs Thib-Jelly: Thanks a lot.

The Vice-Chair: We're supposed to stay neutral here in the chair.

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BEARSKIN AIRLINES

The Vice-Chair: Our next presenter is Mr Harvey Friesen from Bearskin Airlines. Welcome, Mr Friesen.

Mr Harvey Friesen: Ladies and gentlemen, good morning. Thank you for asking me to come down this morning. I'll try and be brief with my presentation and allow adequate time for questions.

My name is Harvey Friesen. I'm from Sioux Lookout in northwestern Ontario, a community that has never had subsidized air service. I'm the president of the company and I've been with the company now for about 26 years. I joined the company in 1970 in a northern reserve, Big Trout Lake, where we operated two Cessna 180s on floats and skis and we had no airstrip. That was it for air service.

During breakup and freeze-up we were basically isolated. We managed, we survived and we now have airstrips right through the north and it has made a significant difference, we're happy to say. We've expanded from the two-airplane charter service to a scheduled service, as well as charter and we now have about 22 airplanes on regular sched and charter service.

We service areas from the Hudson Bay to the north, into Manitoba, Winnipeg and as far east as Ottawa. We were running into Minneapolis for a short period of time. However, we terminated that service when Northwest Airlines decided to take over. However, we have been operating sched service now for about 15 years, or actually 16 years. We started our first sched in 1977 and that was from Big Trout to Sioux Lookout with a small twin-engine airplane and basically applied for licences and grew from there.

We have been running competition to norOntair on many routes in northwestern Ontario, and we were also a contractor at one time for norOntair and ran the Twin Otter service actually with the maintenance contract and the pilot contract. This was terminated not too long ago. We basically added service in the area and our contract was terminated and the Twin Otters were removed and taken to Sault Ste Marie.

However, the communities haven't really felt a decline in service other than a few that we felt we could not go in and sustain the service that had been given by norOntair. We don't operate on a subsidy. We've been on our own, and although we are looking at getting a subsidy, the government has asked us to go into Atikokan and with the town and the local community they feel it's important that they have it. I understand that we've reached an agreement with ONTC where we're going to service them and try and build a service and maintain it, if possible.

The norOntair mandate was originally set up to provide air service to remote communities where private services were not viable. Over the last 15 years, private sector carriers, including Bearskin Airlines, were ready and willing to step in. With the cost reduction required by the province, it seems only sensible to eliminate a subsidized service that duplicates private enterprise. We feel that this is the best time to hold norOntair to its mandate; norOntair did serve its purpose. It promoted air travel and helped build air service to the communities in northern Ontario which it served.

Following the termination of norOntair, Bearskin Airlines and other private carriers will provide service for 14 out of 17 communities presently served by norOntair. Only Chapleau, Hornepayne and Gore Bay will be without immediate replacement air service. Of these three communities combined, the total norOntair tickets purchased amount to less than two passengers per return flight to each community. Some of these communities have had subsidized norOntair air service for 10 years or more and yet the passenger traffic has not grown and cannot support air service today without a subsidy.

There would be various reasons that this would happen. One would be perhaps rail access, road access or the cost of the air service itself, but the fact remains that at the current level of traffic the communities cannot support a private enterprise carrier at these levels.

Is that necessarily bad? We don't think so. A vast majority of towns in Ontario cannot support air service. Terrace Bay, Ear Falls, Rainy River, Kitchener, Guelph, there are hundreds of communities in Ontario that do not and cannot provide air service and can we subsidize all of these?

In some cases, the drive to these airports from these communities is less than what some people near Toronto or southern Ontario do to commute to work each and every day. An hour to an hour-and-a-half drive, as I understand, is not uncommon here in Toronto to go to work and that is all that the drive is to these people.

The termination of norOntair in our eyes will allow savings of annual subsidies currently provided, will allow the selling of norOntair assets which could go to reduce the deficit and they can strengthen the private carriers providing a better revenue stream to the government by the carrier and its employees.

Private enterprise carriers have adjusted frequency of service to ensure demand has been met and Bearskin stands poised to adjust their frequency, should the marketplace and economy demand it. Bearskin applauds the government on this decision and firmly believes it is on the right course with norOntair.

That pretty much concludes my presentation. I'd like to thank you again for allowing me to be here.

Mr Frank Miclash (Kenora): Harvey, thank you very much for coming down to Toronto to make your presentation. To begin with, I have to say that besides yourself in this room I'm probably the second most frequent flyer of Bearskin. As a pilot myself too, and as somebody who's been kicking around airplanes since I was 15 years old, I have to comment on the service, the efficiency, the safety. When I get on an airplane, I look at the tires before I get on it, believe it or not, and take a quick look around before I get on. As I say, from the past nine years using this service, first of all, I just want to put on the record that I've been very pleased in using it.

As well, it's been nice to watch a corporation grow in the riding and, as Harvey has indicated, the services from both Thunder Bay and Sioux Lookout -- Sioux Lookout is the second-smallest community in my riding of the four major communities, and to have that service there and the maintenance there and to watch it grow too has been a plus for me.

Harvey, you were saying that you're going into Atikokan and you're going to try to create a service that's going to be there, stay there. What are some of the things you see that you will need in the future to ensure Atikokan retains that service?

Mr Friesen: Basically all we need is traffic. If we get the support of the people and the traffic to warrant and justify the air service, that's pretty much all we need. We can of course use the help and assistance of the town to keep the costs of going into Atikokan down. That's of course vital. We, like any other business, have to adjust our costs depending on our expenses and that's basically it. If we can remain viable in there, that's our business. We want to continue to go in there, provide a good service and grow.

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Mr Miclash: What role do you see the provincial government playing in this?

Mr Friesen: Basically, the support of the airport. The airstrip and the nav aids I understand are being turned over to the federal. The airstrips are being privatized. However, MTO at this point I believe is maintaining the airstrip; basically, ground services to support air traffic.

Mr Miclash: So you see that as being a responsibility of not only the federal government and the municipality, but the provincial government to help out in those areas as well?

Mr Friesen: Yes, I believe so.

Mr Michael Brown: Good morning. I've also been impressed by your service. My questions will relate to the viability of the routes. I represent Elliot Lake and Gore Bay, and I understand the frequency of especially Gore Bay is not likely to sustain a private carrier. We have seen over time I think three carriers that in my recollection come and go, trying to provide service to that small community. We've also seen in Elliot Lake's case a number of carriers come and go. You're a businessman, and a good one; it's grown, your business. I just wonder how long you're going to give the communities a chance to show profitability, because some of these routes are marginal. I understand that. That's why norOntair was there in the first place. Do you foresee in the long haul you'll be in all these communities?

Mr Friesen: It's really hard to judge the length of time. It basically depends on the support and demand that there is. Obviously, if there is little or none we won't be there very long at all. If we can get close to breakeven and we see that there is light at the end of the tunnel, we try our best to provide the service, the fares at a proper level, and market properly to grow the demand and expand it -- to put a figure on that is very hard. Some communities that we've attempted to go into we've worked at for a year, a year and a half before we finally have thrown in the towel. Other times it's been as low as two, three months. It really depends on the future outlook, and of course this is all dependent on the economy and very much on the support of the community.

Mr Wildman: Thank you very much for being here. I've flown on your aircraft around the north and I know of the service that you provide. I'm interested, though, along the lines of questions that were being raised by Mr Brown. You said you support the government's decision to eliminate subsidized service that duplicates private sector service, and I can understand that position. You went on to say, though, that you believe 14 out of the 17 communities currently served by norOntair will be served by private carriers, and then in further questioning you said there was no guarantee about how long they might be served based on whether or not they would be viable, which we all understand. You said that only Chapleau, Hornepayne and Gore Bay would be without service as of the end of this month. Are you intending to provide service into Wawa?

Mr Friesen: Yes. We made the announcement yesterday.

Mr Wildman: Oh, just yesterday. If that is the case, you're suggesting then it would be appropriate for someone in Chapleau to choose to drive either to Wawa or to Sudbury in order to get airline connections to southern Ontario or to other parts of the country.

Mr Friesen: I said it was appropriate? I don't believe I said that was appropriate, no.

Mr Wildman: You said that Chapleau, Hornepayne and Gore Bay can't support air service without subsidy -- I wrote that down when you said it -- and you said that you didn't think it was necessarily a bad thing because lots of communities didn't have air service and people had to drive. I would think, then, you're suggesting that people from Chapleau shouldn't complain about having to drive 90 miles one way to Wawa in order to get service or close to 200 miles to Sudbury to get to air service.

Mr Friesen: As I pointed out, many people have to drive many hours every day, and in these days where deficit and debt are extremely high, it's probably something that could be tolerated. With the good roads, no isolation, it's probably something they could do, given the fact that education cuts, health cuts are taking place. Maybe there's a better place to put the tax dollars.

Mr Wildman: Since you raised health care, that's one of my main concerns, because without regular air service, and with the cuts in subsidies from MTO to the operation of municipal airports, it seems very likely that a place like Hornepayne, which I would submit to you is somewhat more isolated than Guelph or Kitchener, as you mentioned, will be without fixed-wing air ambulance if the airport cannot continue to operate. And if that's the case, people who are very isolated will be in a very vulnerable position in case of serious accident or heart attack or other serious illness.

Mr Friesen: The scheduled service is not utilized by the Ministry of Health for the transportation --

Mr Wildman: I understand that, but without scheduled air service and without MTO subsidy, which will end as of the end of next year, the airport may not operate, and without the airport, fixed-wing air ambulance no longer continues.

Mr Friesen: If the airport were to close, I would then say yes, that's correct. There's also the helicopter service, if that's necessary.

Mr Wildman: Yes, I recognize that.

Mr Friesen: There are helicopters based in Thunder Bay and other places in northwestern Ontario.

Ms Martel: Mr Friesen, you said earlier that you had made an agreement with Atikokan to provide air service into that community?

Mr Friesen: We have an agreement with Atikokan and the Ontario government.

Ms Martel: Right. Are you going to get a subsidy from the Ministry of Northern Development and Mines to operate that service?

Mr Friesen: That's correct.

Ms Martel: You just finished telling us that ONTC should not provide subsidies or should not provide a subsidized service into communities, but it's okay for you to get a subsidy from the Ministry of Northern Development and Mines to operate in Atikokan. Don't you see the contradiction there?

Mr Friesen: No, I don't. I had been asked to --

Ms Martel: Can you tell me why not?

Mr Friesen: Excuse me. We've been asked to provide air service, and we have said no, we cannot go in there. They have asked us to do this. We've said we prefer not to do this service because it's not viable. However, they feel it's important and they are willing to do this. So on that aspect, I have agreed to go in and provide it, not --

Mr Wildman: On that basis, Mr Chair, I think it's important that we invite a representative of the Ministry of Northern Development and Mines back to this committee to explain why they aren't offering the same thing to Chapleau, Hornepayne and Gore Bay.

Mr Gilles Bisson (Cochrane South): A subsidy is a subsidy is a subsidy.

Mr Peter L. Preston (Brant-Haldimand): So what you're telling us is that they're going to subsidize one airport, rather than all 17.

Mr Friesen: That's what I understand.

Mr Preston: That's a little better than the whole shot. You've been providing service in the north. Have you been doing it for fun or have you been making a buck?

Mr Friesen: I've been making a buck -- not very much.

Mr Preston: Don't mention the word "profit," because that's a bad word in here for some people. You've actually expanded your service and made a profit.

Mr Friesen: Yes.

Ms Martel: You had some government contracts, too. Don't forget that.

Mr Bert Johnson (Perth): Your time is up.

Mr Bisson: Bert, don't be out of order. You're the Deputy Speaker around here.

Mr Preston: What will be the effect of this closure on your company? Are you going to be able to expand some more and continue to make a profit?

Mr Friesen: Yes, we hope to continue to make a profit and we have intentions to expand the air service.

Mr Preston: Shame, shame. We understand your company is committed to providing service to these communities that were previously served by norOntair. What is your actual commitment to the communities?

Mr Friesen: There are no hard commitments to the communities at this time. We have told them that we will do our utmost and we need them and their support to make it happen.

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Mr Preston: I hear this more often, community support. Are you telling me that if the people really want an air service in there, they can do a lot towards supporting an air service?

Mr Friesen: Absolutely. That is one of the primary areas where they can guarantee air service for themselves.

Mr Preston: Where are your maintenance facilities?

Mr Friesen: We have two maintenance facilities, one in Thunder Bay and one in Sioux Lookout, and we do have contract facilities at other locations, just in minor overnight maintenance.

Mr Preston: So an expansion of your service will mean more work in those areas.

Mr Friesen: Yes. It will.

Mr Preston: Those are all my questions.

The Vice-Chair: Any further questions from the government caucus? If not, we want to thank you for coming forward. Your being here today has been helpful.

TIMMINS CHAMBER OF COMMERCE

The Vice-Chair: I ask Mr John Bragagnolo, from the Timmins Chamber of Commerce, to come forward.

Mr John Bragagnolo: Before I begin, I just want to tell you that I did take the committee's instructions to task, so I did prepare about a 15-minute presentation and allow about 15 minutes at the end for questions.

Good morning, members of the standing committee on government agencies. My name is John Bragagnolo and I am the president of the Timmins Chamber of Commerce. Before I begin my remarks, I would first of all like to thank you for allowing the Timmins Chamber of Commerce an opportunity to make representation before you this morning at Queen's Park.

The Timmins chamber represents 470 small, medium and large businesses within the municipality, with a total voting membership of 655. Our mission statement is that the Timmins Chamber of Commerce is a non-profit, volunteer organization which represents a wide range of business and community interests. We are committed to our community and will encourage its growth by promoting business opportunities. We have always been very proactive in voicing our members' concerns with respect to local, provincial and federal government policy while actively addressing educational, civic, social and economic issues.

I am pleased to appear before this committee today on behalf of the Timmins Chamber of Commerce to share our views with respect to the Ontario Northland Transportation Commission. My intention is to give you a brief overview of the position of the chamber regarding the ONTC and how it relates to transportation and communication issues affecting northern Ontario, and more specifically the city of Timmins. Following my presentation, I would be happy to answer questions from the committee members.

Northern Ontario comprises 84% of the province's land mass. This 346,000-square-mile area has a population of only 821,000 people, which represents a mere 8% of Ontario's total population. Upon reflection on these statistics, the great challenges faced by northern Ontario relative to effective transportation and communication based solely on its sheer vastness and relatively small population base should become readily apparent. It has also become clearly apparent through our deliberations that efficient, effective and, most importantly, economical transportation and communication are key requirements essential to northern Ontario's sustainable economic future.

It is impossible to discuss transportation and communication issues in northern Ontario, and more specifically Timmins, without discussing the services presently provided by the ONTC. Likewise, it is impossible to discuss the future transportation and communication requirements of the north without also discussing the future of Ontario Northland.

Established in 1902, the Ontario Northland Transportation Commission is a schedule 2 crown agency reporting to the provincial government through the Ministry of Northern Development and Mines. The mandate of the ONTC, and I quote from their corporate material, is, "To operate a transportation and communications corporation providing services which will be in the best interest of its customers, employees, the communities it services and its owners: the people of Ontario."

The ONTC has served the people of northern Ontario well and has been a true pioneer company in the development of northern Ontario. However, the Timmins Chamber of Commerce feels the time is right for the government of Ontario to complete a comprehensive review of the mandate of the ONTC as well as its present operations to ensure that they are providing the most effective, efficient and economical services relative to an ever-increasing competitive global marketplace that businesses in northern Ontario are facing on a daily basis. The Ontario government must dialogue with the stakeholders in northern Ontario relative to these issues. It is imperative that all options are discussed and debated so that at the end of the day a workable and affordable plan regarding transportation and communications is in place in northern Ontario ensuring the sustainable future of business, not only in Timmins but throughout northern Ontario.

The Timmins Chamber of Commerce has always had a philosophical problem with government of any kind competing directly with private enterprise. While I could speak at length about this philosophical problem, I will limit my remarks just to say that we feel the role of government in today's economy is to create a climate which will encourage people to go into business, help businesses grow and attract new investment and jobs.

Government should not be a hindrance to business because of overregulation, overtaxation or poor fiscal management caused by debt financing.

I will discuss the ONTC in the context of three key areas, namely, rail freight, telecommunications and, finally, a few comments relative to norOntair service and the recent decision of the government to sell off norOntair. I have chosen this context because these three areas comprise over 80% of ONTC's total revenue and they are areas that have the greatest impact to the business community of Timmins.

Rail freight: The Ontario Northland Railway network is comprised of approximately 700 miles of mainline track. The southern terminus of the railway is in North Bay and extends northward to Moosonee and Hearst with connections to CN at North Bay and Rouyn-Noranda and to CP at North Bay and to the Algoma Central Railway at Hearst. The existence of this railway allows rail freight services for the transportation of mineral and forest products, chemicals, petroleum and other products to and from northeastern Ontario and northwestern Quebec.

The rail line that is controlled by the ONR leading to Falconbridge's Kidd Creek division metallurgical site in Timmins is in many ways the economic lifeline of a very large part of Timmins' local economy, as Falconbridge is Timmins' largest employer. This rail line is the only viable method Kidd Creek can utilize to feed the met site with custom feed ore from other mines as well as to ship the copper, zinc, other metals and sulphuric acid that is produced locally for the world market.

Falconbridge-Kidd Creek is truly a world-class mining company with a vision and has always been very proactive in attaining its desired results. Kidd has worked very hard at reducing its costs in order to remain very competitive in the global market. It is finding it increasingly difficult to compete on the global front because of two main expense areas, namely, the cost of Ontario Hydro, and more specifically an area that I'll concentrate on today, the cost of rail transportation.

With Kidd Creek Mines' ore reserves steadily depleting, the Kidd Creek metallurgical site will be required to attract more custom feed to maintain their site as a viable operation for the future. For those of who you don't know what custom feed is, instead of getting ore from their own mine, they will get ore from other mines not only located in Canada but potentially elsewhere in the world, process the ore at the Kidd Creek metallurgical site in Timmins and then ship out the products from there.

Mr Bisson: Concentrate.

Mr Bragagnolo: The concentrate. Thanks, Gilles.

With the increase of custom feed materials, the costs associated with rail transportation become even more relevant.

When one compares Kidd's rail rate per ton mile for copper and zinc among rail carriers used by Kidd, namely, the ONR -- by the way, Kidd Creek is their largest customer -- CN-CP and certain US carriers, a grave concern rises with respect to the ONR. The ONR rail rates are approximately two and a half times higher than CN-CP and approximately two times higher than Kidd's US carriers. This disparity in rates must be addressed by the ONR and the government of this province, and it must be addressed immediately.

All that is requested is that the business community of Timmins have a level playing field comparative to the remainder of the country. The ONR must become more competitive within its rates if it is to continue in the area of rail freight in northern Ontario so that the playing field does indeed become more level. ONR must be able to benchmark its rates with its competitors throughout the entire country.

If this cannot occur through the ONR, then the government must explore options and find a mechanism to ensure that rail rates in northern Ontario are as competitive as in the remainder of the country. One option worth exploring is to see the impact on rates if CN or CP took over the rail lines now being operated by the ONR. This option might prove not to be feasible, but is an example of the types of options that should be explored. While I concede that only certain portions of this line might be viable from a commercial perspective, the needs of the communities of the remote north that rely on rail transport must continue to be met by the government.

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As we head into the next millennium, it is imperative for Timmins to have efficient, effective and economical rail freight service to ensure the future viability of such operations as the Kidd metallurgical site in Timmins.

Moving on to telecommunications. When one examines the financial statement of the ONTC, it becomes evidently clear that this operation is the largest moneymaker for the commission. In fact, in 1994 operating income for telecommunications was $9.8 million dollars, while total operating income for the ONTC was only $8.8 million. The majority of the profits derived from this division comes from the monopoly that ONTel has relative to the long-distance service it provides from the west of Hearst to the north of North Bay, including the east coast of James Bay.

The existence of this monopoly has been a great concern to the Timmins Chamber of Commerce, as it places the business community of Timmins at a competitive disadvantage.

Many telecommunications alternatives which are available in other parts of Ontario are not available to customers in the Timmins area because of the ONTC monopoly. Consider the following two examples:

(1) In Bell Canada territory, customers can purchase their long-distance services from a number of different providers, such as Unitel, AT&T and Sprint Canada. Customers located in Timmins can only purchase long-distance services from Northern Telephone Ltd which are provided by Ontario Northland.

(2) In some parts of Ontario, customers can purchase long-distance services from a reseller, such as Fonorola or London Telecom. When a reseller applied for service in Timmins, it is my knowledge that Ontario Northland denied the request.

The mandate of the ONTC was very timely 20 years ago in the area of telecommunications. With the emergence of new technology and competition in this field, the Timmins Chamber of Commerce feels that the ONTC is no longer meeting its mandate in this regard. The need for effective, efficient and economical telecommunications in Timmins becomes a competitive necessity as a result of the large distances that must be overcome when doing business in Timmins.

Furthermore, Timmins is paying excessive and artificial rates in the private network realm for such things as computer circuits because ONTC is the only provider between the communities of northeastern Ontario. Businesses located in Timmins cannot afford less access to telecommunications than places such as Sault Ste Marie, Sudbury and North Bay. Because of the ONTC we have less access in Timmins.

We do not necessarily require better rates from ONTC, as we realize their long-distance rates are the same as the Stentor Group. This group is made up of such companies as Bell Canada, BC Tel, Sask Tel and the like. What we do require, and what we require immediately, is open competition in the area of long-distance services for Timmins. All we are asking is that we be allowed to play from the same level playing field as our counterparts in Sault Ste Marie, Sudbury and North Bay.

Historically in the area of telecommunication, competition has accelerated the advance of new technologies and reduced costs to consumers. One only has to look to the Bell story to find evidence on how quickly this can occur. When Bell was suddenly faced with competition, it advanced its strategic plans forward five years in the space of a single year to meet the new competition.

As an example of how a telephone company can thrive by embracing change and welcoming competition, one need not look further than the success story of NB Tel. New Brunswick Tel created 2,000 jobs last year by developing a world-class call centre for the province. They were able to establish this because they were able to meet the requirement of a stable, reliable, bilingual workforce. By coincidence, this is the same kind of workforce that exists in Timmins.

I believe that by allowing competition into the areas covered by ONTel long-distance services, we would see lower long-distance costs, lower computer circuit costs, improved service and more advanced technologies.

Since the long-distance service controlled by ONTel is really a mere speck in the area of telecommunications on a national basis, one option the government might want to consider is the potential selling off of this portion of ONTC in order to help get its fiscal house in order.

Moving on to norOntair. The fact that norOntair, part of the ONTC operation which required direct government subsidies, competed with and on some routes competed head to head with private enterprise, was a major concern of the Timmins Chamber of Commerce. The decision by ONTC and the government of Ontario to get out of the air service in northern Ontario at an annual saving of $5 million to the taxpayers of this province was greatly applauded by the Timmins Chamber of Commerce. The norOntair example is a prime example of how private enterprises can respond to transportation needs in northern Ontario. It is my understanding, since the announcement that ONTC was ceasing norOntair operations effective March 31, 1996, that private enterprises have already announced that service will be continued in 14 out of 17 communities being serviced by norOntair.

In closing, I would like to say that Timmins continues to reap the benefits of a thriving local economy and major industry expansion in spite of the many obstacles, bureaucracy and government overregulation and overtaxation of our industries. The future of advances in transportation and communications will be of paramount importance in the future economic growth and sustainability for northern Ontario.

For the ONTC to remain an integral part of that future, it must find ways to improve rail service while lowering its rates to allow businesses in northern Ontario such as Kidd Creek to remain competitive in the global marketplace. In the area of telecommunications, ONTC must embrace and allow competition to ensure that the competitive disadvantage presently experienced by business in Timmins no longer exists. If these goals cannot be achieved by ONTC in the near future, the government must find an alternative mechanism to ensure that Timmins's and northern Ontario's future, in the area of transportation and communication as it pertains to business, will continue to shine brightly.

I thank you for affording me the opportunity to appear before you today to share the position of the Timmins Chamber of Commerce concerning the ONTC. This concludes my remarks, and I will be more than happy to answer any questions that you may have with regard to my presentation.

Mr Bisson: Thank you very much, John, for travelling all the way from Timmins to Toronto in order to present to this committee. I'd like to signal to the committee that John is an integral player not only as president of the chamber of commerce, but has been involved in the community a lot of years on many issues. Although we may agree on some, I've got to say up front that I don't agree with most of what you have to say in this particular presentation.

There are a whole bunch of things I'd like to ask you questions on, but I don't have the time. Let me ask specifically about the norOntair issue. We went through a whole process in the community of Timmins, from Air Canada being the monopoly air carrier in Timmins, to deregulation, to private carriers. Both Air Ontario and CP eventually came in and offered competition of services to our community. Rates have actually gone up; they haven't gone down. We haven't had stability of rates. We used to be able to fly from Timmins to Toronto for about two thirds of what we're paying now. Within a year of privatization and private competitors coming in, an arrangement was made between those airlines that, quite frankly, we pay more. We got more frequency of flights, but we lost jet service. So I don't agree with your basis on this.

What strikes me in this is that you're saying on the last page of your document here that 14 out of 17 communities are going to be serviced by norOntair. I imagine that you as a northerner share the same concern: What happens to those other three communities? Who should pick up that air service?

Mr Bragagnolo: I think that is open for discussion by the business community, the governments and those communities working together to come up with an alternative solution. If it's not feasible for private enterprise to go in there, then maybe some mandates that are being covered by the ONTC might apply to those communities.

Mr Bisson: Would you favour the ONTC taking over those three small communities left over or would you say the private sector carrier should get a subsidy?

Mr Bragagnolo: I think whatever turns out to be the most effective and economical answer. If the ONTC can come in there and do it more economically and efficiently than the private enterprise, then that's an option that should be explored. If private enterprise can come in there and do it more economically and efficiently than ONTC, then that option should be explored.

Mr Bisson: The problem with that is that there's a bit of a contradiction in what the government is saying, as you saw this morning. They're saying no subsidies should apply. We found out this morning that subsidies are being offered to a private carrier. Rather than that subsidy going to norOntair-ONTC, it's going to the private carrier. But the second issue is that you can't have your cake and eat it too. I'm just wondering if you can comment on that.

Mr Bragagnolo: The three communities that aren't being picked up by some of the private enterprise, and I don't have the facts in front of me -- I think if you look at the usage of those communities, for example Chapleau, if they average two passengers per day on their air service it's a busy day. Those kinds of issues need to be addressed. If the usage isn't there, then there are alternatives that need to be explored.

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Mr Bisson: But the issue is that in this case Bearskin will still get a subsidy. In regard to Chapleau, it might be only a couple of people on average using that thing per day, but what do you do when those services are really needed? Do you not offer it to people in the north at all?

The other thing I just want to get into is a long-term commitment. If the private sector carrier six months from now, out of the 14 communities that presently have air service, finds out he can't make it on his own, do you have a concern that those communities might be in jeopardy?

Mr Bragagnolo: I don't think they're going to be in jeopardy. I think businesses, before they move into the realms of new marketplaces, research their market areas and have a fairly good idea of what kinds of returns they're going to get. I'm sure if they were going in there with the intention of only providing service for six months or one year, they probably wouldn't do it.

Mr Bisson: Do you think there's a chance that the air service may come out. We know that there were four private air carriers that went into Elliot Lake, we've seen that across northern Ontario, because in some places there just isn't the market to sustain them. That's why norOntair was created in the first place, because the private sector wasn't picking up the service. Would you say there is a danger that the private sector air carrier could, let's say, in some of those communities say, "There isn't a market; I've got to pull out"?

Mr Bragagnolo: It's not an extreme concern of mine. I think there's a remote possibility of that happening, but it's not a major concern.

Mr Bisson: What would you do if you were the president of the chamber of commerce in Chapleau? What would be your position?

Mr Bragagnolo: I would try and find ways so that everybody can work together to come up with a solution to the problem. I don't think you can count on the government or the ONTC to come up with every solution. There's an area that needs to be covered, and there needs to be dialogue that happens so that if there's a problem, there's a solution that is developed as a result that's in the best interests of that community.

Mr Bisson: Okay. I've only got a couple of minutes and there's a whole bunch of other things.

The Vice-Chair: You've got about 10 seconds.

Mr Bisson: When CP pulled out of Timmins --

Ms Martel: What did the chamber say?

Mr Bisson: Yes, ask it. It's your question.

Ms Martel: What did the chamber of commerce say when CP pulled out of Timmins?

Mr Bragagnolo: When CP pulled out of Timmins, I think the chamber of commerce knew there weren't enough people utilizing that route for it to remain effective. They understand that as business people; if the marketplace isn't there, if they're not able to compete in that marketplace, then --

Mr Bisson: The chamber opposed that, though, John.

Mr Bragagnolo: We didn't oppose the CP pulling out. No, Gilles.

Mr Gary L. Leadston (Kitchener-Wilmot): John, I'd like to thank you for coming down. It's probably one of the most articulate, well-presented and statistically effective documents and presentations that I've heard in my short term in the Legislature.

I really appreciate your frankness, and in particular your honesty, because you not only speak of Timmins's, but you speak of northern Ontario's future. I as a member of this government, a member of this committee -- even the opposition I think is interested in not only the province of Ontario in particular but in northern Ontario's future. Because it represents only 8% of the population, there has to be dialogue, and the chamber in the northern communities as well as in the southern communities have to dialogue not only with government but with business, with the private sector, with the communities, with the people who are affected with any change in our lifestyle.

I had some questions pertaining more specifically to your proposal, but you've covered it so well and so adequately that I don't feel it's necessary. What I'm really interested in, is the chamber prepared to work with the government, with the private sector and with the community to develop alternatives, as has been suggested by the opposition?

Mr Bragagnolo: Yes. The areas, as I mentioned before, where private enterprise can handle things, in my opinion they'll do a better job than government. For those marketplaces that aren't viable, yes, I think there's dialogue that needs to take place at all levels to come up with a solution that is workable for everybody involved.

Interjection: Such as Atikokan.

Mr Bragagnolo: Atikokan might be a prime example.

Mr Leadston: The fact that there's a willingness on the part of the community and on the chamber, because you are a major voice and a major player in the development of the north in our province in particular, and there has to be that very strong willingness to sit down at the table to explore alternatives and other options. Obviously, if it's not financially viable and feasible for any carrier to service a particular area, it's just not the way to do business.

The major impact, if you're only driving an hour or an hour and a half, as was indicated by the delegation previously -- it's nothing for anyone in southern Ontario or in Ontario to drive an hour or an hour and a half to and from their place of employment. That's not a hardship. Many of us are doing it, but that's a way of life; that's an expectation. I guess the same expectation should apply in the northern communities if you have to drive that distance for transportation.

Mr Bisson: Hornepayne is not Oshawa. That's what you guys don't understand.

Mr Bragagnolo: Sorry, I'm hearing comments from both sides. It's making it difficult.

I agree with you. There are unique challenges to everywhere you live. If you're living in downtown Toronto, you have unique challenges relative to living there. When you live in a place like Timmins, it creates a whole new set of unique challenges. When you live in a place like Hornepayne or Chapleau, there's a whole set of other unique challenges. But as northerners, one thing we're very proud of is that when we're faced with a challenge, we like to hit it head on and overcome those challenges. Our way of life in northern Ontario by far is probably one of the best ways of life I could imagine.

Mr Rick Bartolucci (Sudbury): Let me just follow up on the point Mr Leadston makes that I take exception to. We may be only a mere 8% of the population, as he suggests, but our contribution to Ontario is far greater than 8%. Our revenue contribution to Ontario is far greater than 8%.

John, I'm going to try to be as polite as possible to you. As an individual, I respect you, but I have trouble respecting the positions of chambers of commerce from the north. Your position is no exception. Certainly the Sudbury chamber's position is warped at best, and I'll say that publicly. On page 4 you say, "The Ontario government must dialogue with the stakeholders of northern Ontario relative to these issues." Before November 29, what type of dialogue did this government have with the Timmins Chamber of Commerce with regard to these cuts? What type of dialogue did the Ontario government have with the municipal council of the city of Timmins? Can you tell me the answer to those two questions?

Mr Bragagnolo: Are you asking specifically regarding transportation and communication issues?

Mr Bartolucci: Yes.

Mr Bragagnolo: With regard to norOntair, we were the ones who initiated the dialogue. We wrote to the Premier and to the Minister of Northern Development and Mines, addressed the concern we had with the competition of norOntair with private enterprise and that the government take a look at this whole issue. Somebody must have heard what we were asking, because we're sitting here today having this exact dialogue. I'm happy with the response.

Mr Bartolucci: John, you're telling me you had no dialogue then. You're telling me you wrote the government with a recommendation; November 29 these millions of dollars are axed; and today we're here talking about it after the fact. So in fact you didn't have any dialogue with the government. Is that correct?

Mr Bragagnolo: No, I don't think that's a correct statement.

Mr Bartolucci: How much dialogue did you have with them?

Mr Bragagnolo: We probably had just as much dialogue with this government as we've had with other governments over the years on issues. I'm not a partisan person. I see governments --

Mr Bisson: On a point of order, Mr Chair: I'd like to point out that the chamber of commerce met many times with ministers of the crown in the previous government and had a very proactive role in the decisions of our government --

The Vice-Chair: Excuse me, that's not a point of order. We're working on Liberal time, so I would ask Mr Bartolucci if he has any further questions for the deputant.

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Mr Bartolucci: John, let me go back to the level of service for norOntair, because I'm concerned about that. What's going to happen when it ceases? Are you satisfied that the level of service will be the same as it is now?

Mr Bragagnolo: I'm not saying it's going to be the same as it is now, but I think it's going to become more effective and more economical, and that's important.

I see this turning into a one-sided, norOntair issue. A lot of other issues regarding transportation and communications are even more important than the air service in northern Ontario, for example, the monopoly I alluded to in telecommunications, the rail rates. These are very important issues that need to be addressed if the business community of Timmins is to enjoy in future the success we're enjoying today.

Mr Bartolucci: What you're saying to me is that the level of service isn't going to be same, that the opportunities for those people who have to access air service to get to Sudbury for medical attention will not be there, and the chamber of commerce is not concerned about that.

Mr Bragagnolo: Access to medical services and norOntair are two separate things. There are ways around that. For example, the last presenter talked about helicopter services. Maybe there's a program that needs to be looked at --

Mr Bisson: From Hornepayne to Sudbury?

Mr Bragagnolo: Yes, Hornepayne to Sudbury, Gilles. The air ambulance up there right now, the helicopter, services a very wide area of northern Ontario. Those kind of programs: We can't afford to have the level of service that presently exists in those areas. We need private enterprise to come in and offer the level of service it can afford and can make a profit at. If we can't afford those levels of services, we need to review them and come up with an alternative that is agreeable for everybody, but it has to be an affordable alternative.

Mr Bartolucci: You know what? More than that, it has to be not only affordable; it has to be a caring alternative. This is what's clearly lacking in the government's approach to northern Ontario. You, as a member of the north, should not only be concerned about dollars and cents but about the human resources found in the north.

Mr Bragagnolo: I'm very much concerned about the human resources found in the north. Unfortunately, the dollars and cents of rail costs, of long-distance costs, have an ultimate effect on the human resources of northern Ontario. We have these competitive barriers that we have to overcome if we're to create more jobs and if we're to keep the same job levels we have in northern Ontario. While we have a philosophical difference, I think my views very much address the views of the human resources issues in northern Ontario.

Mr Bartolucci: I think I heard the bell.

Mr Leadston: Mr Chair, on a point of personal privilege: I'd like to correct the record. Mr Bartolucci implied that I used the word "mere." It was used by the delegation in his remarks as a mere 8%. I believe I said "only." It was not said in a sense of being negative, as obviously was implied by Mr Bartolucci; I don't believe it was implied by the delegation and it certainly was not implied by myself.

The Vice-Chair: I want to thank you for coming. Your being here has been helpful.

Mr Bragagnolo: Thank you very much for having us.

Mr Wildman: In light of the presentation made by Mr Friesen of Bearskin, I would like to move a motion.

I move that the committee invite the Minister of Northern Development and Mines to come again before the committee to explain fully the government subsidy offered to Bearskin Airlines to provide scheduled air service to the community of Atikokan, and further, to explain whether similar government subsidies will be made available to other northern communities which are losing norOntair air services without replacement as of the end of this month, or subsequently are left without private air services.

I'd like to speak to it if I could; the time frame is such that I won't prolong the discussion. But it seems to me that a subsidy is a subsidy is a subsidy. If it is being provided by the taxpayers to provide a needed service in Atikokan -- and I want to make clear that I'm not opposed to providing air services to Atikokan, but if there is a need for a subsidy in a community like Atikokan and the Ministry of Northern Development and Mines is prepared to provide such subsidy, it seems rather odd that the minister would be taking the position that the subsidized air services to Hornepayne, Chapleau and Gore Bay should be discontinued.

It seems to me there is a contradiction in the minister's position and the government's position that has been demonstrated this morning by the presentation by the representative of Bearskin Airlines. If the government thinks a subsidy is justified in one community, why would the government take the position that similar subsidies would not be justified in other communities that require air services?

I think we should give the minister the opportunity to explain to the committee this rather strange contradiction in his position. Considering how important this matter is to many northern communities, I hope the minister could return in a timely fashion. Perhaps if he comes back before the end of March, he'd be able to fly here.

Mr Bob Wood: The government members do not support that motion. The minister has been very generous with his time, having come here once and having offered to join us for a day in northern Ontario in May.

Mr Wildman raises a point that he's quite entitled to raise, which goes right to the heart of, should we give any subsidies at all? I think, however, the most efficient way of dealing with that question at this point is for the committee to ask the minister the question, as has been done before in this committee. I would encourage Mr Wildman to request that the question go to the minister, and I'm sure the minister will give us an answer. If he's not satisfied, he can certainly ask a question in the House starting in 10 days' time. But the government members are opposed to asking the minister to come in twice within this period of a couple of weeks.

Mr Bartolucci: I will support the motion. It makes an abundant amount of sense, and it also will provide the minister with an opportunity to clarify his position of being a spokesman for the north when clearly now we see that there are areas of the north that he is shutting out from a process that can be life-threatening. I don't understand why the people of Atikokan, as important as they are, are more important than the people of Hornepayne or Gore Bay. I suggest it only makes common sense to have the minister come before us to at least explain the rationale for his decision.

Ms Martel: I disagree with the government, because the important thing we have to remember is that this committee is now charged with the responsibility of dealing with matters affecting this commission, and one of the most important matters affecting this commission and hence northern communities right now is the loss of norOntair service which occurs at the end of March of this year. Three communities will be left with absolutely no air service by the end of March of this year.

I understand that the minister was already before the committee. For the life of me, I can't understand why the minister didn't tell committee members that the Ministry of Northern Development and Mines was actively working with the community of Atikokan and with a private sector carrier, namely, Bearskin, to provide air service to that community.

Members should recognize that the community of Atikokan isn't even one of the 17 on the list that the minister talked about in November, one of those communities that was due to lose air service. Atikokan lost its air service some time ago, yet we have the minister engaged in negotiations to provide a direct subsidy to Bearskin to provide service to that community.

I think the minister should come back to this committee. He should explain why it is that it's okay for the Ministry of Northern Development and Mines and his Tory government to provide a direct subsidy to a private sector carrier to provide service into one community but not to do the same thing in three others. There is no sense of fairness there. That cannot be justified. That's a completely unacceptable position for a minister of the crown of this government to take. You cannot pit northern communities against each other like that.

I strongly suggest to the committee members that it's not good enough to say the minister will join us sometime in May, in November, to discuss this matter further. By that time, three communities will no longer have air service, and that's unacceptable.

Again I would say to the committee members that it's incumbent that the minister come before this committee and explain why it is that his ministry is prepared to offer a direct subsidy to a private sector company to go into Atikokan and is not prepared to do the same thing for Hornepayne, for Gore Bay and for Chapleau. I think that would be unacceptable to the northern communities affected. It should be unacceptable to all members of this committee that he should pick and choose northern communities in such a way.

Mr Bert Johnson: I move the question now be put.

Mr Wildman: Can we vote on it?

The Vice-Chair: Okay. We'll entertain a vote on whether the question should be put.

Mr Michael Brown: Can we debate that?

The Vice-Chair: No, that's not debatable.

Mr Michael Brown: Can we have 20 minutes? We'd like 20 minutes to talk about it.

The Vice-Chair: We have a motion on the floor that requires that it be put without any further discussion.

Mr Michael Brown: Exactly, and we want 20 minutes to caucus it.

The Vice-Chair: Okay, we'll take a break.

The committee recessed from 1140 to 1159.

The Vice-Chair: On the advice of the clerk to myself, we're going to entertain the vote on whether we should put the question. All those in favour of putting the question, raise their hand.

Ms Martel: Recorded vote.

Ayes

Doyle, Fox, Bert Johnson, Leadston, Preston, Bob Wood.

Nays

Bartolucci, Michael Brown, Gravelle, Martel, Wildman.

The Vice-Chair: The vote has been to the positive, so we will move to the vote on the motion.

Mr Bartolucci: Just a point of information for the government committee members in the event that Mr Wood isn't available: At the time a motion to call the question is made, the Chair has the discretion either to accept that motion or to refuse it, it is my understanding from the rules of procedure. Am I correct or am I incorrect?

The Vice-Chair: I'll have the clerk look into that and report back. I'm told that at this point, we're to move on to the vote. That was the decision I made.

Mr Bartolucci: I respect the Chair and I will definitely not challenge the Chair. I just want you to understand, Mr Chair, that according to the rules of procedure, if the Chair does not feel there's been adequate time for debate or discussion, the Chair can rule a motion to call the question out of order. Thank you.

The Vice-Chair: We'll move on to the vote on the motion. All those in favour?

Mr Wildman: Could we have the motion read, please, Mr Chair?

The Vice-Chair: Mr Wildman moved that the committee invite the Minister of Northern Development and Mines to come again before the committee to explain fully the government subsidy offered to Bearskin Airlines to provide scheduled air service to the community of Atikokan, and further, to explain whether similar government subsidies will be made available to other northern communities which are losing norOntair air services without replacement as of the end of this month or subsequently are left without private air services.

Mr Michael Brown: A recorded vote.

Ayes

Bartolucci, Michael Brown, Gravelle, Martel, Wildman.

Nays

Doyle, Fox, Bert Johnson, Leadston, Preston, Ross, Bob Wood.

The Vice-Chair: The motion is lost.

SAULT STE MARIE ECONOMIC DEVELOPMENT CORP

The Vice-Chair: We will now move to our next set of witnesses and call forward, from Sault Ste Marie, Mr Bruce Strapp, economic development officer, and Mr John Reynolds, chair of the norOntair adjustment committee. Please make yourselves comfortable, and whenever you're ready, go ahead.

On this one, I'm asking to vacate the chair so that I might have a chance to ask questions. I'm asking Mr Bartolucci to take my place in the chair.

The Acting Chair (Mr Rick Bartolucci): Welcome, gentlemen. We look forward to your presentation. You know we have half an hour, and whatever time is left over from your presentation can be divided by the three parties for questions.

Mr Bruce Strapp: I'd like to thank you for the invite to speak to you today. I'm Bruce Strapp, from the Sault Ste Marie Economic Development Corp. Also with me today is John Reynolds, the chairman of the norOntair industrial adjustment committee. He's involved with working with the employees to determine their future if norOntair closes at the end of March. We hope these employees will have jobs after March 29, 1996.

Just some background information: The Sault Ste Marie Economic Development Corp is a non-profit organization whose mandate is to carry out the city's strategic implementation plan. This plan was developed from a major community initiative called RAPIDS. The plan was a result of the threat of our major industry closing and the potential of losing over 5,000 industrial jobs. Algoma Steel, St Marys Paper, Algoma Central Railway and several small manufacturing companies were threatened by closure but were able to restructure their business because of the hard work of the industry, employees, community and government. The city would like to take a similar approach with norOntair currently operating in a deficit by the Ontario Northland Transportation Commission.

NorOntair is what we would like to focus on today, and the potential loss of jobs. First, the city of Sault Ste Marie recognizes the present government's priority to cut expenditures and reduce the deficit. All government is doing this today, and we have to do it, but we have to look at how we deal with those expenditures and how we can find solutions to the threat of discontinued service. We agree if a service does not make sense, don't do it, but norOntair makes sense. If it is the request of the government to allow the transition to a private sector carrier to continue the operation of air service, then the best approach is to try and look at means and ways in which we can create a new business venture to use the infrastructure and the employees that are in place.

In November of last year, the province unveiled its budget that called for the reduction of funding to ONTC. It was determined norOntair would no longer be operated by ONTC. Not only were the employees shocked, but the city of Sault Ste Marie is concerned they would lose another important business. Not only Sault Ste Marie, but other communities are voicing their concerns on the loss of jobs, air service and the reduction in the northern quality of life.

NorOntair employs 80 employees and has a positive economic impact on the airports and communities in northern Ontario. There are 80 people employed by norOntair and I think it's important to tell you where those people are employed. In North Bay there are 11 employees; in Sault Ste Marie there are 56 employees; in Kirkland Lake there are two employees; in Earlton there are two employees; in Chapleau there are four employees; in Wawa there are two employees, and in Fort Frances there are three employees. Eighty direct jobs.

There is an additional immediate impact on the 25 employees of Skyservices, a Sault Ste Marie firm providing norOntair with fleet maintenance. There are other direct jobs in the air service industry directly connected to providing norOntair products and services. Airline service counters, ground crews, airport restaurants, taxi and limousine services are functions where employment is attributable to the load levels and the frequency of the takeoffs and landings of norOntair.

In northern Ontario the loss of norOntair revenues will have a negative impact, especially when many communities are in the process of taking over their airports. Without norOntair revenues, these airports might no longer be viable. In many cases, municipalities are responsible for the operation of their own airport. They are under tremendous pressures because the MTO grant for airport operations will be eliminated. In the last few years, the province has invested major dollars for capital upgrades. This has been in the millions of dollars. If municipalities lose the norOntair revenues and the MTO grant, the municipal budgets will no longer be able to sustain these airports. They will close and the provincial investment will be lost.

These communities might not have access for fixed-wing medevac services. Helicopter medevacs has been discussed as a solution but are known to be many times more expensive, but the worst impact is that lives could be lost. The access to health specialists by people in rural northern Ontario to the major urban centres is a major issue in the north, and northern citizens will demand it. This issue alone will be a major barrier for future population, business and tourism growth in northern Ontario. The population will continue to migrate to the GTA and will continue to cause the government more congestion problems in the south. Why do we subsidize transportation such as the TTC and other networks in the south but won't invest a small stipend in the north?

Let me remind you, northern Ontario is 90% of the land mass and, I heard earlier, was only 8% -- I had 10% of the population. It must be going down. But we provide major revenues for this province because of our resource wealth: the mining, the forestry and the tourism. This could disappear because we'll not have the human resources in the north to create these opportunities. We're certainly going to have more barriers to attract doctors to the north if the air service is reduced.

NorOntair services 17 northern Ontario communities with two Dash-8s and four Twin Otters. On February 25, Minister Hodgson assured 14 of the 17 communities the private sector would provide service. This, of course, is air service to the satisfaction of the province, not the communities impacted. For the three communities where air service is not in place, some sort of arrangement will be established to continue air service beyond March 29, the scheduled date for closure of norOntair. This will cost somebody, and most likely the municipality.

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As anticipated, the private sector has responded. Several operators have publicly announced they will provide service to those communities that will make them profits. They will provide service using smaller planes, 10- and 19-seaters, compared to the Dash-8s and the Twin Otters. Geraldton, for example, will have their service reduced to a single flight from Thunder Bay. They will lose its flight to Sault Ste Marie in which most of their fishing tourists travel to Geraldton. To travel via Thunder Bay will add cost to the tourist and these visitors might not be willing to pay the extra hundreds of dollars to get to Geraldton. They will go somewhere else and Geraldton's fishing resort industry and economy will suffer.

Many communities question the type of service to be provided by the private sector to date. Passengers are comfortable with the quality of service provided by norOntair. It will take some time for a private sector carrier to achieve this confidence. The scheduling frequency and routes between communities have been determined by the ONTC with considerable input from the people of northern Ontario. Linkages with major connectors, such as Air Ontario and Canadian Regional, provide excellent business connections with the urban centres and Toronto. Several mayors and reeves stated that they could fly to the major urban centre and get back in the same day, but after March this might not be possible.

Costs of doing business would increase. The safety record of norOntair has created the confidence of the travelling public. In many ways, norOntair has created the marketplace for this type of air service. The confidence in the continuity of service has always been there with norOntair. I have witnessed, in a particular airport, a single passenger waiting for a non-norOntair flight only to find out it wasn't going to pick her up because of a maintenance problem. I wonder if that particular flight was just not economical because of the distance this community was out of the way of the direct air path.

Questions surface, such as: Will the replacement carrier be there tomorrow? What schedules and routes will be implemented and what price? Will the replacement carriers and their service standards be sufficient to keep the confidence of the marketplace? Will they provide the revenues to those airports to sustain those airports?

There is some speculation by the communities who operate their own airports that they will have to make concessions in order to keep any type of air service. This will increase the burden on the local taxpayer. Will there be sufficient levels of long-term business to ensure the airports in the smaller communities are viable and thus able to sustain facilities for emergency air service? Who will replace the economic loss of an industry that spent $13.75 million in 1995 in all of northeastern Ontario?

Within that expenditure, there are millions of dollars being spent in the following areas:

Salaries, wages and benefits	$3.47 million
Repairs and maintenance	$2.73 million
Fuels	$1.81 million
Utilities	$320,000
Tools, operating supplies	$170,000
Building and passenger services	$210,000
Airport service contracts	$1.78 million
General plant expense	$1.45 million
Other operating costs, such as travel
agents' commissions, insurance, taxes	$1.16 million

What are the flow-through or downstream economic losses of this level of expenditure in wages, goods and services to the communities? Does the impact of tax generated, because of such expenditures, not offset the ONTC's projected $4.5 million subsidy?

The Sypher Mueller report, on which the ONTC and the government of Ontario has based their decision, was flawed. In the eyes of the employees and Skyservices, this deeply flawed document containing incomplete and inaccurate tabulations of load information may have given bad advice to ONTC and the province. Comments to that effect have been submitted in writing to ONTC without any notice of amendment to the report. It appears that the commissioning of the report may have been made with the desired outcome predetermined. Certainly norOntair management did not even know about the joint decision beforehand.

There had been mention that once norOntair stops its service, the private sector will be able to expand into this marketplace and provide the service, but consider that norOntair had created this market. Northerners trust norOntair and the ONTC. Maybe this market will disappear and so will the private sector carriers. The private sector players have criticized norOntair, saying "unfair competition," but haven't they developed their own business and grown because of norOntair?

In late January, the employees engaged in the development of a business plan with a private sector operator who was considering a tender on the norOntair operation. Within 48 hours of analysing the sparse data available on load factors and without applying that carrier's normal marketing and business strategy, they were able to reduce the annual operating deficit to approximately $1 million per year.

This looked very hopeful and we began working towards developing a plan, but the employees' hopes were dashed away. The investors withdrew their interest of joining the norOntair employees and submitting the tender for two reasons: There was insufficient time and information to develop an accurate evaluation necessary to justify the capital funding required, and the announcement of the closure of norOntair on March 29 and the unwillingness of the province and the ONTC to extend the date created a situation that would be difficult to reverse in the minds of the travel agents and travelling public. The death bell had rung.

The tenders for norOntair assets have proceeded without considering selling air service as an operating entity. It appears that the highest bidders will take everything and we don't know when the announcement of the results will be made. The city and the Sault Ste Marie Economic Development Corp believe there is a solution to this situation.

First of all, give ONTC the mandate to operate the air service in the most economical means. This air service always had a political mandate to meet the needs of northerners, but give it some business savvy and see what would happen.

Second, allow a little more time for the private sector and the employees to prepare and implement a plan to take over norOntair. To do this, use all the resources available: the communities, ONT, MND and M, the employees and some of the experts from the Ministry of Economic Development and Trade and the Ministry of Labour. They have had success like this in the past and there are many stories like that in northern Ontario.

That is what government can do: Create the environment for a new business opportunity. Right now, there is an air service consultation committee with members representing the 17 norOntair communities, the ONTC and the Ministry of Northern Development and Mines. The mandate is to proactively and collectively seek out and advise on means to provide scheduled air service to all communities currently served by norOntair. It is to assess the financial viability and service provision of the airports served by norOntair with and without scheduled air service and recommend the extent of any provincial financial or other assistance that is desirable.

Finally, it is to report to the Minister of Northern Development and Mines and the 17 communities served by norOntair on March 29, 1996, setting out the action that has been taken, the status of scheduled air service and the airport operation, together with any recommendations for the future consideration of the minister. This committee has not been able to see all the information on what is happening with the tenders or all of the private sector response. This committee has to be given this opportunity.

The city of Sault Ste Marie participates on this committee and we believe that this is a good partnership. Sault Ste Marie has a proponent who wishes to buy norOntair as a going concern and we believe that there is a viable solution to this. A new business can be created in northern Ontario. It will retain and create jobs and will continue to provide quality air service to all communities. We ask this committee to request Chris Hodgson, Minister of Northern Development and Mines, to hold off on any announcements of the sale of norOntair assets until the air service consultation committee has looked at all possible options, including a new norOntair business.

Thank you very much for the opportunity to present our views on this situation. You can see that Sault Ste Marie is very concerned about what happens.

Mr Bob Wood: Am I correct in my understanding that on April 1, the Sault is going to have both bus service and air service? Do I have that right? You're not going to lose either bus service or air service as a result of what's been done with norOntair?

Mr Strapp: Yes, I don't think we're going to lose any of the service to Sault Ste Marie.

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Mr Bob Wood: Yes. You properly set out in your presentation the effect of job losses on a community. Obviously there are going to be job gains as well, because all these other carriers are taking over the routes that you outlined. Have you done any calculation of the effect of the job gains on the economy in northern Ontario?

Mr Strapp: We haven't looked at the job gains in northern Ontario just because of the speculation right now there might not be. For example, in Sault Ste Marie, we have a really strong self-interest here that some of the other carriers that are involved in looking at norOntair are certainly not looking at Sault Ste Marie as a location to operate their operations. So there's going to be a direct loss of jobs, we believe, in Sault Ste Marie. Where those jobs might go, or if there are new jobs created, will depend on how the air carriers are going to set that out, and we don't think that the magnitude will replace the norOntair jobs that are going to be lost. But there are no economic studies done to take a look at that.

Mr Bob Wood: You touched on the question of the subsidization of norOntair, and the private carriers of course have said that they think it's grossly unfair to be competing with an entity that's getting so many tax dollars when they get none. What's your response to that argument?

Mr Strapp: Well, certainly one of the things is that the air carriers who are there now weren't there before norOntair; otherwise we wouldn't put norOntair into northern Ontario to service the north. These air carriers have expanded and grown in northern Ontario because I think they've been able to get into the marketplace by identifying routes that weren't adequately serviced by norOntair and have been able to capitalize on that.

In regard to the public sector competing with the private sector, I think in some situations public sector subsidy has to be there if it's not a viable operation, and we always in the transportation game are playing the definition of levels of service, whether it be done better by a public sector or whether it's going to be done by a private sector. In many cases today we can see that the public sector's getting out of transportation, but there has been reduction in service. There are several cases, such as train and rail passenger service, where we see communities no longer being serviced, but they had the service before that.

Mr Bob Wood: Do you see any merit in their complaint about competing with public money?

Mr Strapp: In northern Ontario we, as northerners, have always looked at investment from two sectors, from the public and private sectors. Certainly if they were able to provide the service of going into certain communities and being able to do that and keep the same level of service that the communities want, I would say that norOntair would be probably the first organization to back out. But when the air service is not there to the needs of the communities, that's where the mandate of ONTC was to provide it.

Mr Bob Wood: Would you see a system of transportation that had no public subsidy to be more or less attractive to investors, particularly in northern Ontario? Do you think there'd be greater investor confidence if there was no subsidy, or do you think there's greater investor confidence if there is taxpayers' money subsidizing the transportation system?

Mr Strapp: I think what you might see is you're going to have your urban centres up north polarized. The private sector will be able to come in and look at the lucrative markets and it'll eventually hurt the rural communities. So the private sector would love to have those major urban centres and you'll see maybe the investment going that way. But I'm sure you're going to see the rural communities suffer where you're going to have a polarization going to the urban centres.

Mr Bob Wood: Looking at the north as a whole, do you think it's going to increase investor confidence, make no difference, decrease it?

Mr Strapp: I think we're in a period where we have to look at a transition. If we really, truly want to try and privatize the transportation system, I think there's a mechanism you have to put in place to do that transition. Just by going cold turkey and say, "On a certain date we're going to take out public sector," there's no guarantee that you're going to have the private sector coming in and pick up full service to northern Ontario without some sort of subsidy.

Mr Bob Wood: I may have one other question. Do we or don't we? No? How much time do we have left?

The Acting Chair: You have exactly 28 seconds.

Mr Bob Wood: We'll waive it.

Mr Michael Brown: I enjoyed your presentation. I appreciate the motion that you're suggesting we put before the committee, because I think it's the right one. I think, if you look at the history of what's going on here, you, like us in the opposition in both parties, are absolutely in awe. This started with a press release on November 29 which followed Mr Eves's statement to the Legislature regarding finances which was the most obscure, sly statement you ever saw. The statement, if you will recall seeing that press release, did not mention norOntair. What it did say was which of its services they would subsidize, yet only by determining that norOntair wasn't on the list were we able to find out that norOntair was therefore gone. I confirmed this with the commission. There has been no public -- there was no discussion before the decision with anybody that we know of that norOntair be gone. It just never took place.

But I wanted to tell you their agenda is clear, and from the questions we just heard, the agenda of the government is clear: If private enterprise can provide it, it will be provided. If it is not, if it can't be, it won't be.

I'm all in favour of private enterprise. I think that's great. But what we're hearing is there's going to be carriers to some of the locations. We don't know how long they'll be there. We know already that the level of service, in other words, frequency of flights, time of day, those kinds of things, is being dramatically reduced even for the I believe 14 that have some kind of private air carrier coming.

It's clear to me that nobody understands on the government side what the realities of northern Ontario are like, especially outside the major centres. You're not saying this is going is impact greatly the citizens of Sault Ste Marie in terms of whether they can get to Toronto or Sudbury etc. But the people from outside of Sault Ste Marie who want to get into Sault Ste Marie are going to be the ones that are drastically affected, and there seems to be no comprehension over here that this is what it's about.

I guess what I'm amazed at is that the employees of norOntair had no opportunity, in a real sense, to see if they could make this operation viable. Clearly, in my mind, if they were to provide the same level of services being suggested by the private sector, they could very well be far more competitive than at the levels of service they're now providing, because they're providing a good service in terms of frequency of flights.

Could you tell me a little bit more about the group that was trying to make the bid on behalf of the employees?

Mr Strapp: I knew these questions were coming up, and that's why I thought it would be good for John to come along.

Mr John Reynolds: I should say, without disclosing the names of the people that we discussed norOntair with, our employee privatization committee had terms of reference. The first was to examine the purchase of the airline, and through the timetable made available to us, that was impossible. We very quickly found that out.

Secondly, we sought an affiliation with an existing carrier, and we met with two groups, one of the groups representing two carriers that were looking at developing an alliance. One of the groups we've continued to meet with, including today. The other group we met with over a period of two weeks and really had an immersed period with them of two days in which we did some number crunching. And, sir, that is the group Mr Strapp referred to when they used their model and the data that were available and applied all of their costs and method of operation and saw a reduction to the $1-million loss per year. Even then, they backed away because there wasn't sufficient time for them to move ahead with getting a tender in.

But there was a considerable amount of thought given to the configuration of services that would be offered, and both of the groups that we talked to did not at any time look at reducing services to any of the communities that currently are being serviced by norOntair. And this had a great deal of appeal, of course, to the employees, because they could continue to see norOntair as the airline that they had experience with.

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Mr Tony Martin (Sault Ste Marie): That was really, I think, an interesting summation of some of what you've been doing and the very difficult and important work that's gone on over the last little while around Sault Ste Marie and with others interested to try and put an alternative together.

You weren't here this morning when Mr Friesen came to tell us that northern Ontario was the same as southern Ontario, that driving from Hamilton to Toronto is the same as driving from Wawa to the Sault to go to work. We know what that's all about, because both of us lived in Wawa for a time in our life. It sounded like the Conservative members agreed with that, that northern Ontario is the same as southern Ontario.

I'm here to suggest to you that it's not, that we have challenges up there that are different and that we've learned over a period of time to deal with in a different way. Just in the last five to six years, Bruce has outlined the way that we've dealt with the very stark challenge to the base of our industrial sector in Sault Ste Marie to bring new partners to the table, to create new ways of doing business that are very competitive on a global scale now and that we think should be given the time to unfold and be copied.

My question to you, Mr Strapp, today is, in light of the time lines that you've worked under so far -- and I just have to reference that the day you were on your way to meet with the minister was the same day he announced that the whole thing was going to be up for sale and over by March 31. It didn't seem to be a whole lot of time. How much time would you really need to put this plan together so you could effectively present a case to the powers that be to have this new alternative unfold?

Mr Strapp: We've had some discussion with the employees and the investor group, and I think the most important thing that they've outlined to us is that they can react very quickly. What they probably need is a little more openness on the part of ONTC management and the province to allow for a process of letting the operation go as a going concern. They feel they could probably do it very quickly. If they could start fairly quickly right now, in several months, and it could be only a couple of months, they might be able to take over norOntair as a viable concern.

Their biggest problem is having a transition of not losing the reservation linkages, to be able to do the due diligence of the operation, to be able to get in there and have their management group go in and work with them and try and make sure they have an understanding of what's going on and then be able to put in place the business takeover. That's normally what happens with any sort of corporate mergers or whatever. In a merger that is a friendly merger, you do have cooperation where the management can interact and be able to do that, and I think they could do that very quickly.

We had some very good discussions with them. We want them to meet with the communities, we want them to meet with ONTC, we want them to meet with the minister to outline their strategies. There's nothing like a face to face to show the solution that they have, and certainly to the city we really want to push this.

The other thing too is they brought a whole new perspective to this business. It's not only going to serve northern Ontario, but it's going to be a great business to export into the US. Sault Ste Marie, because of our geographical location, the whole area of open skies, with the Dash-8 plane as a new transportation vehicle in the aviation business, there are many countries that are using this as a training centre. We've got pilots over Romania doing Dash-8 training. We can go into Pittsburgh, which is a major airport facility, Minneapolis, Winnipeg, all of these areas, as a private sector opportunity. We would put some major linkages between our resource industries -- the mining, forestry and tourism in the north -- also with the US.

There's a major opportunity here that I don't any other air carrier can look at. So we're looking at this as a major business opportunity that'll create some new growth for Ontario.

Mr Martin: I think you've already answered the question I was going to ask. What kind of an operation would it be? Algoma Steel, ACR, St Marys Paper, that came together, employees, the financial institutions and management and investors, very viable private sector operations competing around North America and the world now: You're anticipating that norOntair would be the same kind of operation that would have potential to develop further, even, is what you're saying today?

Mr Strapp: Yes.

Mr Martin: But you need the time?

Mr Reynolds: Of course, Mr Martin. We've had discussions with these groups, and it is very encouraging to hear people who are in the business start to develop market plans. As everyone in this room should know, Sault Ste Marie is smack right in the middle of this country and can be a major distribution point not only for freight but for courier services etc. It's also smack right on the US border, and it can be a distribution point to major metropolitan areas in the United States. It's very encouraging when you hear people with such plans and it becomes awfully frustrating when you hear that they won't have the time to implement these plans.

The Acting Chair: Mr Strapp and Mr Reynolds, I'd like to thank you very much.

Mr Martin: If I might, Mr Chair, I'd like to place a motion before the committee. I move that this committee request the Minister of Northern Development and Mines to delay the decision to withdraw norOntair service to 17 northern communities and instead allow the employee group in Sault Ste Marie to work with the private sector, ONTC and the provincial government to develop an alternative air passenger service which will continue to provide quality air service to the communities now benefiting from norOntair service.

The Acting Chair: Mr Martin, I respect your motion and I'm going to ask that we defer that motion until after lunch and we will debate it, because there will probably be some significant debate on it. Would you allow us to defer it to after lunch?

Mr Martin: Yes.

The Acting Chair: Thank you very much.

Mr Bob Wood: Mr Chair, on a point order: You might encourage this to be done at 4 so we don't back up the other presenters, if Mr Martin doesn't have a problem with that. We otherwise have all these people running behind.

The Acting Chair: Would it be possible then to allow only an hour for lunch and reconvene at 20 to 2?

Mr Bob Wood: It isn't for me, unfortunately. I'm stuck with things in between.

The Acting Chair: All right, that's fine. That's fair.

Mr Martin: I would want it put as soon as we get back from lunch. This is really important and is of an essential nature.

Mr Michael Brown: Mr Chair, I do think that this motion will generate a significant amount of debate, and I would just want to point out to the committee that this is a major issue in northern Ontario. It affects communities large like Sault Ste Marie and small like Gore Bay, and we'll need some time to adequately talk about this.

I'm quite prepared to deal with it whenever the committee believes would be the appropriate time, but certainly we need adequate time, and I don't want to take that away from any of the presenters. I can foresee that the ONTC just being here for half an hour is not going to be adequate whatever to our party and that it may take longer than that. We'll find out if the government has any degree of seriousness about this issue and whether they will permit that.

So when it's debated I don't particularly care, but I believe it needs an adequate amount of time for us to try to make an impression on a government which appears to have made this decision behind closed doors on November 29 with some whiz kid out of Harris's office. I think it's a done deal and it was a done deal back then, but nevertheless I think we should do our best to try to make the case and try to save some semblance of air service for northern Ontario.

The Acting Chair: Respecting all three parties' points of view, we've had the motion now read into the record, correct? So it is on record, and the Chair will suggest that we defer the debate and discussion of the motion to after lunch. We can think about it during lunch, and if we see after lunch that it's going to take a significant amount of time, then we might want to defer it to another time. We'll allow that one hour or one hour and 15 minutes to do some thinking. Yes, Mr Leadston?

Mr Leadston: Mr Chair, I think it's important to the individuals who will be appearing this afternoon to maintain the time frame that we have set for them. We heard this morning some of them had to make flights, and I think it's really inappropriate to put the groups and the individuals who are coming this afternoon at some risk in terms of their travel plans.

I'm not opposed to debating the question. Perhaps we could do it at the conclusion of the meeting, after we've given the individuals and the groups their allotted times, the times that were agreed upon with them -- and they obviously made travel times based on those times -- and then have a full and open and frank debate at the conclusion of the meeting.

The Acting Chair: I respect that point of view. Some of us have travel commitments right after the last presentation though, I know, in all three parties.

Mr Martin: I would suggest to you that the people who are presenting this afternoon will have just as intense an interest in this as we have in this motion being put, because it's a little lifeline that's been thrown out now that we might want to grab hold of in terms of this service. So I would say, let's have lunch. Let's come back at 2 o'clock and at 2 o'clock we can decide when it is that we want to debate this motion.

Mr Michael Brown: Just on that, I would suggest that certainly the permanent Chair of the committee would be able to make the appropriate decision.

The Acting Chair: That's right. Exactly.

Mr Bob Wood: Only with the majority of the committee. It comes down to --

The Acting Chair: By the majority of the committee, that's right. Might I suggest that we reconvene at 2 o'clock and that the subcommittee will meet right after?

Mr Strapp and Mr Reynolds, I thank you very much for your presentation.

The committee recessed from 1240 to 1403.

The Acting Chair: I call the committee back to order.

The first item of business is to debate a motion that was presented before lunch. Mr Haavaldsrud, I'd ask for your indulgence with a little bit of a delay that will take place. We apologize for it. This motion emanated from a previous presentation. We thought it would be best to at least debate it at this time. So I'd ask the clerk to read the motion again.

Clerk of the Committee (Ms Tannis Manikel): Mr Martin moved:

"That this committee request the Minister of Northern Development and Mines to delay the decision to withdraw norOntair service to 17 northern communities and instead allow the employee group in Sault Ste Marie to work with the private sector, ONTC and the provincial government to develop an alternative air service which will continue to provide quality air service to the communities now benefiting from norOntair service."

Mr Martin: Given that there is a lot of activity happening out there around the possibility of some pulling together of the resources that are available to guarantee in a more concrete way the kind of service that these 17 communities and perhaps others in the north have enjoyed and would like to further develop as their communities develop, as their economy develops and as the economy of all of northern Ontario develops, it seems to me that, one, we're really rushing this thing.

If you heard the presentations that people have made so far, everything has been done almost at breakneck speed. November 29, there was an announcement made that ONTC was going to be losing some of its subsidy. Subsequently out of that we found out that norOntair was the main target, and then there were some deadlines trotted out. People just had a hard time getting over the initial shock and trauma of the thing, to get their heads around this. There was a flurry of meetings. There was a group that met of the small communities that were affected. There was another group of the small communities and large communities together. There was a mayors' task force group along the Timmins-North Bay corridor.

Because the north is so massive and large and because at this time of year transportation, as we're talking about here, is challenging, it's been hard to sort of get it all together so that we could put something on the table that this government could look at that would be perhaps in the better interest of the north than what they're doing now, which is really a fire sale of the assets. That basically is what I understand is going on unless I'm told differently, a fire sale of the assets and then an opening up of the field so that the private sector will come in. We've heard today that the private sector is going to come in to the more lucrative communities -- mind you, in some instances to the more lucrative communities with more subsidy, not necessarily from ONTC but from MNDM now. So we're talking subsidy anyway and I think you want to move away from subsidy. That seems to be the bottom line in all of the presentation the government is putting forward.

We have developing out of Sault Ste Marie, I would say, because that's where the employees are mostly located -- and there has also been some private sector interest shown from some people who have made contact with the employee group out of Sault Ste Marie to maybe offer another alternative very similar to the restructuring that happened at Algoma Steel and St Marys Paper in Spruce Falls and Ontario Paper in Thunder Bay. That is private sector in nature, but it includes more players and therefore brings more resources to the table and has proven so far to be effective and profitable and not to be a drain on the provincial purse, which you don't want, and really, if we can do it without doing that either, we don't want. What we want is stable, dependable, long-term transportation opportunities for the people of the north, whether that be by air or train or road. As you've heard told here, that is challenging at best up there given the distances and the weather and the topography that we have to go through.

Maybe we could get some clarification from Mr Wallace or somebody on this. There is I believe a proposal at your table that doesn't fit the terms of reference of the request that was made for proposals that you've perhaps looked at but you're not including in the tendering process, one that we think is worth looking at but will require, though, the minister giving you the kind of time you would need to see how that fits and if it is something on which you could in the end get a buy-in from all of the major players in the north. I'd like to know if that package is there and if you're looking at it, what the status is and how it fits with the request for tenders on the equipment and so on that's there.

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The Acting Chair: I'm going to have to rule the inquiry out of order. He's not a witness. He will be a witness later on and that question may be appropriate at this time, but right now could you put things through the Chair?

Mr Martin: Sure. I'm sorry. Let me suggest that the package is there and it needs to be looked at and there needs to be some discussion ongoing. Because the other thing that's happened in the meantime is the mayors from across the north, particularly those affected most directly, including my own, gathered in Sudbury last week and met with the minister, and the minister struck a task force of those mayors, a small group of them, to look at alternatives and to make some recommendations. So if you're striking a task force and you're asking them to do some work, it seems to me that it makes sense that you give them the time to do that.

I say this not in a way to be adversarial or in any way negative, but we who live in the north and represent the constituents of the north and have some real, genuine concern about this particular piece of the transportation infrastructure in the north are asking you to do nothing more than to ask the minister to give us a bit more time to work this thing out so that we might come up with the best solution in the end. Given that we have to factor in the whole question of competitiveness and the contribution by the government that, from what we heard this morning, is going to be there as it stands now anyway in some shape or form, we might have something here that could play out in the end to not cost the government anything. As a matter of fact, if we were to believe Mr Reynolds this morning, and I have no reason not to, this particular little enterprise has the potential to even be more contributory to the northern Ontario economy if it's allowed to sink roots and grow.

Those are my comments. I'm asking you to consider it and to vote with us to ask the minister to give us a bit more time so that we can flesh this thing out and look at it in a way that allows us to see the pluses and the minuses and see if in the end it is the best alternative given the direction that's in front of us today.

Mr Michael Brown: I'm pleased to indicate my support for Mr Martin's reasonable motion today. His motions aren't always reasonable, but this one is, Tony, so thank you.

As we go back through the events since November 29 around this, it becomes very clear to most of us that the government's only agenda here is to get rid of norOntair. That appears to be the agenda. Whether it provides service as the most cost-effective carrier doesn't seem to be a question. The level of service doesn't seem to be a question. Which communities get service doesn't seem to be a question. What really is the question is, should we have a crown corporation doing this or not?

The government unilaterally decided it shouldn't be. They also decided that the time lines would be impossible to meet, that no one would have any opportunity to look at this as a system rather than just as a number of various routes. The government has not indicated that each of the stops that norOntair presently services will be serviced. Nobody has asked any of the questions that I think northerners have been asking now since November 29. Most northerners, I would say, are very offended at the way this process has unravelled.

You would have thought that if the government had some intention of providing service, not just for a week or two or three months or four months but on an ongoing basis, what they would have done is put this system at least out to tender, and that the people at norOntair would have had the ability to bid like anyone else. But none of that's happened. I have a community that will get no air service. I have one other community that will get substantially less air service in terms of scheduled service, and that's just not on for the people I represent.

So what Mr Martin is saying is: "Look, get your act together. Decide what your policy is. Do you believe that Gore Bay should get service? Do you believe that Elliot Lake should get service? Do you believe Chapleau should get service? Do you believe Hornepayne should get service? Do you believe that, and what steps are you going to take if you decide they should? Do you believe it should be done as a system? Do you believe one carrier would do it better? Do you believe that in two or three segments it could be a system, one in the northwest, part in the northeast?" I don't know. We don't know what you're thinking. All we know is that you unilaterally, under the cover of a financial statement, instructed -- be clear about this. The minister instructed ONTC to get rid of norOntair.

Mr Len Wood (Cochrane North): Mike Harris.

Mr Michael Brown: Quite clearly that's what's happened and to date we have not seen any reason to believe that the government really cares about providing service to these areas, except for this morning, Bearskin, in their presentation, surprised everybody by telling us that the ministry, not ONTC but the Ministry of Northern Development, is going to subsidize a community for air service that isn't even one of the 17 now being served.

Mr Preston: On a point of order, Mr Chair: That's not what was said today.

Mr Michael Brown: That's exactly what was said, and it's not a point of order. You're just as rude as ever over there.

The Acting Chair: It's not a point of order. It is in fact what was said this morning. Go ahead.

Mr Michael Brown: So what I'm saying to you, as Mr Martin was just saying, is that given the lack of any direction from the government, given the lack of any kind of commitment to northern communities, to northern employees, we had a very interesting proposal from, I believe, the people in Sault Ste Marie on how this could be an expanding industry which would actually create jobs, cost the government nothing. All Mr Martin is suggesting is that we take a couple of months and have a look at it. But there is no confidence in any of my communities or any of the other communities I've talked to through the north that there will be air service for them tomorrow, the tomorrow after March 29, and that even if there is, it will continue six months or 12 months or 18 months down the road. It looks to me like this is just a way for the government to say: "Oh, well, it was somebody else's fault. It was Bearskin's fault that they cancelled that run. We had nothing to do with it."

The politics of this is just unbelievable. All we're asking is that you approach this rather critical issue for northerners in a businesslike way. Show some confidence, show some direction. Therefore, we will be supporting Mr Martin.

Mr Fox: Mr Chairman, I suggest we proceed with the rest of the presentations so that perhaps some of the questions that the opposition members say haven't been asked could be asked and we could have a clearer idea of what we're dealing with here today.

The Acting Chair: Mr Fox, your point is well taken, but we're in the middle of a discussion of a motion, and that's impossible unless the mover would defer.

Mr Martin: Actually, Mr Fox, I think that might be a good idea, because we have some people coming in front of us who may have some further information to contribute. I would suggest, as well, Mr Fox, if you're serious about considering this, that you might want to send somebody to maybe check it out with the Ministry of Northern Development and Mines to see if they'd be interested and give some indication that it wouldn't be something that they'd totally and absolutely object to, which is the extended month or two that would be required, so that at the end of the day we would have that information as well as the information that we get from Mr Wallace and Mr Haavaldsrud and Mr Kelly.

The Acting Chair: Mr Martin, are you suggesting then, on Mr Fox's recommendation, that you're going to be asking for a deferral?

Mr Bob Wood: I'd like to make it clear that at the end of the day we are not going to support this motion.

Mr Michael Brown: Perhaps you could give us a vague reason why.

Mr Bob Wood: I'd be pleased to do that, but I'd rather do it when we -- I don't mind postponing it to the end, but I don't want --

Mr Len Wood: That's southern Ontario shitting all over the north again.

The Acting Chair: Could I please finish with Mr Martin and we'll go to you?

Mr Bob Wood: Yes. I would like to make a submission before we get totally off this.

Mr Martin: If that's the stance of your caucus, Mr Fox, then I'm willing to put it off till the end of the day for a vote so that we can hear from the others and perhaps ask those questions so there will be more information on the table, so that maybe you in your wisdom and your concern for the north might be willing to actually vote for this. I would hope that might be something that would be within your realm as an independently elected member who was elected by constituents who maybe have some friends and relatives in northern Ontario, and perhaps because of that have influenced you re this whole question.

It is so fundamental to the future of all of our communities that we have good transportation services -- air, road, railway -- and we have to do everything within our power to find a way to do it in a cost-effective way. That's all we're asking here, a little bit of time so that we can look at all the factors, consider all of the proposals and ideas that even the mayor's task force is going to have to look at, because if in fact we're going to continue down the road that we're on now, which is that partway through March the tenders are open and at the end of March norOntair disappears, these folks, the mayor's group, will have met for nothing too. They'll have wasted a lot of time and gas and energy going across the north meeting and coming up with proposals in the end, because norOntair and the assets that are there and the goodwill that goes with that and everything else is going to disappear.

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All I'm asking for today is a bit more time to consider those factors. Maybe by the end of the day we will have others, Mr Fox, who might have the independence of mind to go against the grain here and vote with us in this instance. If that's the case, then I'm certainly willing to move with Mr Fox's recommendation to hold on the vote here until we've heard from those deputants.

The Acting Chair: Then I guess it's a motion of deferral to the end of the day. That's without debate, so I'd ask for the vote. All in favour of the deferral? Carried.

Mr Wood, would you like to wait to make your comments until the end of the day?

Mr Bob Wood: Yes. I didn't want my friend to proceed on a misunderstanding as to what our position ultimately was going to be, which is why I was rude enough to interrupt you, and I apologize for that.

The Acting Chair: It isn't a problem, Mr Wood.

Mr Leadston: I think it's obviously against the parliamentary rules of procedure and it's highly inappropriate to use profane language in this legislative setting. It's a standing committee. I would hope the member would apologize, or at least acknowledge the inappropriateness of his comments.

Mr Len Wood: If I offended anybody --

Mr Leadston: You obviously have.

Mr Len Wood: -- I will withdraw that particular word. But I will say clearly that Mike Harris is a disgrace to northern Ontario because he's the one who directed norOntair to shut down and sell off those planes so that Bearskin would be able to get more passengers. Bearskin is a disgrace as well because they have refused to come into northeastern Ontario and pick up the routes that norOntair has let go. It gets people very angry when we see some people from southern Ontario supporting Mike Harris destroying northern Ontario.

The Acting Chair: Mr Wood, thank you for your comments. I think now it's time to go back to the agenda and proceed with it. I will relinquish the chair.

OLAV HAAVALDSRUD TIMBER CO LTD

The Vice-Chair: Mr Haavaldsrud from Haavaldsrud Timber Co in Hornepayne. Thank you for coming today.

Mr Grant Haavaldsrud: My name is Grant Haavaldsrud. I'm the human resources manager for Haavaldsrud Timber Co, Hornepayne, Ontario. It's my first time in front of any committee such as this so I'm a little nervous. I hope that doesn't come through too much. I'll just go directly into my presentation.

The Ontario Progressive Conservative Party is taking an aggressive approach towards deficit reduction. It is an approach that is both timely and necessary. Many of the legislative changes will help to ensure economic stability and eventual growth throughout the province. One such change, however, could seriously threaten the health and prosperity of communities in northern Ontario.

The government of Ontario has cut provincial funding to the Ontario Northland Transportation Commission by $10 million as of 1997. The ONTC, in turn, announced the closure of norOntair as a non-commercial air service that provides freight and passenger air service to communities within northern Ontario by March 29, 1996.

Many of the affected communities have been serviced only by this one carrier. Hornepayne, for example, is dependent upon norOntair for the continued operation of its airport. Although many of these communities will be accommodated by alternative air carriers, Hornepayne is one community viewed as being "profit-challenged." It may simply not have the amount of traffic necessary to sustain private air service.

Without a commitment from the provincial government to maintain air services to remote communities such as Hornepayne, the local municipality will have difficulty in justifying the expense of operating an airport solely from municipal funds. The local ratepayers will bear the cost of maintaining an airport whose only customers are the occasional recreational user and Medevac. A declining population base will further hinder Hornepayne's ability to keep this airport operational.

We simply cannot allow the closure of the airport. It will not only mean a loss of a mode of transportation, Hornepayne will lose access to an essential service: the Ministry of Health's air ambulance. The government must consider the impact norOntair's loss will have on the affected communities in northern Ontario, whose infrastructure is not healthy enough to accommodate radical reform.

Air service in northern Ontario, and more specifically in Hornepayne, is an essential service that must be maintained. Without a scheduled air carrier, health care provision will be gravely jeopardized, tourism revenue will decrease, existing business will experience increased loss, and economic development and diversification, so essential for the continued viability of small, isolated communities such as Hornepayne, will suffer.

The township of Hornepayne is situated in the district of Algoma, approximately 410 kilometres northwest of Sault Ste Marie, 97 kilometres north of White River, on a secondary highway which links Highway 11 to Highway 17. Established in 1928 to provide a midpoint refuelling and servicing station for the railroad, Hornepayne has from the outset been subject to issues related to its location.

In figure 1, it's evident how large an impact transportation has upon the residents and businesses of Hornepayne. Sault Ste Marie and Thunder Bay, the largest communities in the region, are a five-hour drive away. The nearest surgical hospital is located in Hearst, a one-and-a-half hour drive. The nearest movie theatre is three hours away in Kapuskasing. Hornepayne is an isolated community.

With a population of only 1,544, a labour force of 935, the town must rely upon the provincial government to supplement municipal revenue. In 1990, a new health care facility was built through a provincial grant. A new Catholic school was built in 1994, again with government funding. The provincial government has helped fund many projects in and around Hornepayne to aid in the social and economic prosperity of the community. With the proposed municipal funding cuts, towns like Hornepayne will rely even more heavily upon the government to ensure services are available to the residents.

The Ministry of Transportation of Ontario has announced funding cuts to the local municipalities for airport operations. In 1995, municipal airport subsidy payments totalled $34,800. The current proposal for 1996 will see that figure cut in half, and by 1997, this funding will no longer be available. All costs of operating these airports will be borne by the municipalities in which they reside.

Currently, there is capital funding available for the upgrading and maintenance of municipal airports through the airports capital assistance program. This funding will be denied Hornepayne, however, should the airport be unable to procure a scheduled air carrier. Much of the upgrading is necessary for the continued operation of the airport and includes repaving the runway surface and the installation of updated lighting. If this funding is denied, municipal ratepayers will be forced to cover its cost in order to keep the airport open. At an estimated cost of $1.8 million, Hornepayne may not be able to generate the capital necessary for its completion.

If Hornepayne is unable to attract an alternative air carrier, its loss will seriously impact the community. With the possibility of employment loss related to operational changes to the Canadian National Railway, many residents have expressed a desire to relocate. Additionally, there has been a potential loss in new residents due to Hornepayne's apparent instability. Without government intervention, many of the services now available to the residents of Hornepayne, including air service, may be lost as the community's population declines.

The Olav Haavaldsrud Timber Co Ltd is a family-owned, family-operated lumber manufacturer located in Hornepayne, established December 8, 1954, by Olav and Elna Haavaldsrud, two Norwegian immigrants. We've been in operation for over 40 years. The company directly employs 150 men and women in the forestry sector. Although small in comparison to many, the Olav Haavaldsrud Timber Co Ltd is the second-largest employer within Hornepayne, directly employing 10% of Hornepayne's population with spinoff employment throughout the region. Canadian National Railways, the town's largest employer, provides work for over 275 people.

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Lumber produced on site is shipped via rail and truck to southern Ontario wholesalers. Wood byproducts such as chips and sawdust are shipped by rail to QUNO Corp's pulp and paper plant in Thorold, Ontario, and by truck to regional companies such as James River in Marathon and Domtar in Red Rock. The cost of doing business is heightened by escalated transportation expenses.

As an employer, attracting skilled labour to remote communities such as Hornepayne hinges upon the services the region is capable of providing. Issues such as education, recreation, housing and health care are investigated by prospective employees prior to any formal commitment. One of the largest factors, however, is the distance from larger cities and family members. Having a scheduled air carrier within the community can often be a key selling factor in luring new employees to the region.

Additionally, the Olav Haavaldsrud Timber Co Ltd relies daily on the air service that norOntair provides. Given Hornepayne's remote location, it can often take weeks for inventory replacement through ground carriers. While machines are idle waiting for replacement parts, the company's productivity suffers, jeopardizing their competitiveness.

Recent winter conditions have further emphasized the need for reliable air service. Highway closures between Thunder Bay and Hornepayne and between Sault Ste Marie and Hornepayne have been exceptionally frequent. Delays in the reception of mail and courier packages have resulted from treacherous and often impassable roads.

The accompanying table indicates the amount of norOntair usage for parts and safety equipment replacement during 1995.

As the above clearly illustrates, norOntair has been an integral and vital service to the Olav Haavaldsrud Timber Co. Over $100,000 of parts, safety equipment and replacement inventory was transferred through norOntair to the Haavaldsrud work site in 1995. The same inventory carried by ground couriers would have increased downtime by an estimated 30%.

The norOntair passenger service is used frequently by Haavaldsrud employees, clients and service agents. Many of these clients and service agents are based in southern Ontario. To drive from such locations as Toronto, London and Ottawa can take 12 hours or more. The rail passenger system, from the same locations, takes longer still. It is inconceivable to remain in business with service agents in these areas without an air service in operation.

Additionally, should the municipality decide the operation of the airport is too costly without an air service provider or funding from the government, its closure will mean additional loss to the company. The airport is often used by our company through plane charters for business meetings, the purchase of new machinery or equipment and for harvest site reconnaissance. The Ministry of Natural Resources uses it as a base for fire suppression in the area. QUNO Corp, the sustainable forest licence holder for the Nagagami forest, conducts aerial spraying and harvest site preparation from the Hornepayne municipal airport. All of these services will be lost if our municipality is unable to keep the airport functioning.

The Ontario Northland Transportation Commission was formed in 1902 to fulfil a transportation need among the scattered and isolated communities of northern Ontario. The government of the day, the Progressive Conservative Party, recognized the inherent transportation issues facing these northern towns and established the ONTC to oversee specific remediation.

In 1971 norOntair was founded to service many of these northern Ontario communities in an effort to improve social and economic development. It opened an avenue to prosperity in communities encumbered with their remote location. The ONTC recognized air service in the north as an opportunity to exercise its mandate: to operate a transportation and communications corporation providing services which will be in the best interests of its customers, employees, the communities it serves and its owners, the people of Ontario.

Throughout the years since its inception, the ONTC has managed to provide this service while coping with continued cuts to its operational funding. Until now, norOntair had managed to stay in operation despite a declining service base and funding reductions. The ONTC continued to adapt its operation while still providing the service that northern Ontario so desperately required. Now, however, the government has forced the closure of this important line of transportation and seriously jeopardized the possibility of air service to communities such as Hornepayne.

The Hornepayne Community Hospital is a non-surgical facility servicing Hornepayne and the surrounding area. Built in May 1990 at a cost of $5 million, it accommodates both acute and long-term patients. The hospital relies heavily, however, upon emergency air ambulance services for transporting acute trauma cases to larger, better-equipped centres.

During the years of 1994 and 1995, the air ambulance was called to respond to medical emergencies on 164 separate occasions, averaging over one call per week. In comparison, ground ambulance services have been used 26 times from April 1995 to February 1996. Winter road conditions have hampered highway travel, potentially disrupting ground service and emphasizing the need for an operational airport.

Many patients having both elective and emergency surgery in larger centres are expected to recuperate on an outpatient basis. Generally, this implies the patient will return home to recover. Potential complications can mean the patient must be transferred back by air to the appropriate hospital. Births are also treated out of town, with many transferred to Sault Ste Marie where surgical staff are located. Although most are transported using ground ambulance services, the air ambulance must be available should complications so necessitate.

NorOntair has also been an important component of the hospital's operations. Through their service, local patients have benefited from organized visits from specialists. It has also proved to be a major selling point for the community in enticing new physicians to the area. One of the north's largest problems with respect to community health care continues to be the lack of doctors willing to reside in these small, isolated communities. Scheduled air service has helped alleviate that problem by providing a solution to transportation issues.

Again, if the municipality is unable to obtain the capital funding to upgrade the airport, it may be unable to provide a suitable landing site for the air ambulance, an essential service within Hornepayne. Additionally, physicians may choose not to relocate to the area given its isolation and lack of scheduled air service.

The two main economic sectors within the north are forestry and mining -- natural resources industries -- and tourism and recreation -- service industries. The natural surroundings of the Canadian Shield lend themselves well to outdoor activities. Hunting, fishing and other recreational activities draw thousands of people every year to the region and contribute greatly to the economy of the area. People come from diverse locations to enjoy the natural and remote experiences available within the north.

With a scheduled air service in place, these people can easily arrive within the area where they can transfer to their intended destinations. Local remote tourism outfitters cater to their hunting and fishing needs. If the air service is unavailable, however, these people may be encouraged to travel elsewhere.

Local economic development is difficult at best, again due to Hornepayne's location. Without a reliable air service, not only in the short term but through the years to come, new business creation will become increasingly difficult. Air service is essential to modern business operation.

Transportation costs have always been a primary issue to companies wishing to create new business in the north. Hornepayne is plagued by its distance from southern Ontario markets or larger city centres. Many of the region's businesses, therefore, have tended to be focused on natural resource development or the tourism service industry.

Innovation is the key to establishing diversification and economic development in the north. Conventional business, beyond natural resource development, is difficult to cultivate in the isolated communities of northern Ontario. Scheduled air service helps to enhance potential economic growth. More importantly, however, a lack of air service foreseeably could impede opportunities for economic development.

Communities within northern Ontario face many adversities based upon their inherent isolation. Because of a sparse and scattered population base, transportation issues are at the forefront of economic and social concerns. The Ontario Northland Transportation Commission was established to identify the transportation needs of the north and take appropriate measures to accommodate them.

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One of the ONTC's solutions was the establishment of a government-sponsored air service. NorOntair helped make many northern Ontario communities accessible where once there was isolation. NorOntair has had an important and measurable impact upon the communities it serviced. The ONTC has indicated that norOntair has fulfilled its original mandate. It has established air travel to isolated communities in the north, improving social and economic development within those remote northern towns.

Once norOntair is gone and communities such as Hornepayne are without air service, will not the mandate of norOntair be relevant once more? The question remains, therefore, how will the government ensure that air service will be maintained once the current system is discontinued?

NorOntair's operations will cease on March 29, 1996. When that happens, many of the large communities once serviced by norOntair will be accommodated by alternate carriers. The smaller, more remote towns, however, face an uphill battle to secure service they once considered to be a stable resource within the community. If the government is unable or unwilling to provide aid in this endeavour, our fear is that the operation of the airports will become cost-prohibitive in nature and eventually lead to their closure. Another service to residents of northern Ontario, an essential service, will be lost.

The Vice-Chair: Thank you very much. We have about 12 minutes left, so we'll divide that by three, and it gives everybody about four minutes each. We'll start with -- where were we, Rick?

Mr Bartolucci: We start with the Liberals, the NDP and the government.

Thank you, Grant, for your very excellent presentation. I have a couple of very, very short questions. In reality, does this mean the slow death of the town of Hornepayne?

Mr Haavaldsrud: I think there are many factors that would comprise what you're asking me. If you're asking if it will have an effect, of course it will. I sit on the economic development committee within Hornepayne, and part of the problem that we're seeing is the dwindling population base that we're having to deal with. Without economic development -- and I think the airline is key to that -- the possibility of keeping the town viable is becoming more remote.

Mr Bartolucci: The Economic Development Corp, has it been approached by the government with the possibility of the government subsidizing in some way some form of air service?

Mr Haavaldsrud: To my knowledge, the PC Party has been stating that there will be no subsidies for any of these residual communities.

Mr Bartolucci: We found out this morning from a private carrier, from Mr Friesen from Bearskin, that in fact in a community in northwestern Ontario, Atikokan, the government has granted a subsidy to that airline to provide service. How does that make you feel?

Ms Martel: That's exactly what he said.

Mr Haavaldsrud: That's certainly upsetting news.

Interjection: They're negotiating.

Mr Bartolucci: In reality, with all respect due to Grant, the gentleman said that he had negotiated with the government for the subsidy. The subsidy is in place. The service is going to be provided. Grant, I apologize for the interruption. How does that make you feel as a person and a company and a history that has invested heavily in the town of Hornepayne?

Mr Haavaldsrud: It makes me feel very angry. Granted, we are a very small community. I'm not sure what kind of political clout that Atikokan has over Hornepayne or Wawa or any of the rest of the 17 communities in dispute, but I find it odd that one community not even among the 17, I believe, is being subsidized, if in fact that is true.

Mr Bartolucci: Thank you very much, Grant, for your presentation.

Mr Michael Brown: You're a businessperson and, like most business people, understand debts and deficits and all that sort of thing and that you cannot run a province the way it's been run for the last five years. You actually have to balance your books. You have to do that kind of thing or you can't be in business. You know full well that this province used to do that and the last time we had a balanced budget was in 1989, so it ain't that long ago. However, we have some special challenges in northern Ontario and I think you would agree with me that some services are going to need to be subsidized. Communities like Hornepayne, like Gore Bay, like Chapleau are just not going to get services if it's just survival of the fittest. Darwinian capitalism isn't going to work. But would you object to a guarantee from the government that there would be air service; in other words, it didn't matter to the government how it happened as long as it did and they would be prepared to provide a subsidy to the private sector if that would accomplish the same thing for Hornepayne?

Mr Haavaldsrud: I don't think it matters who does it as long as there's some kind of service available to us. Speaking only on behalf of our company, we would entertain service once a week if that were all this government is able to provide. But the thing is that we have to have some kind of scheduled air service within Hornepayne.

The Vice-Chair: Thank you very much, Mr Brown. Your time is up. You did really well. You go second all the time. The New Democrat caucus.

Ms Martel: Mr Haavaldsrud, I'd like to thank you very much for an excellent presentation which touched really on all of the items that we as northern representatives in some of these communities have great concerns about: health care recruitment and retention of professionals, economic development etc. You said to us that your company employs 150 people directly. Tell me about the wealth creation that you generate on an annual basis from your company.

Mr Haavaldsrud: Are you asking what we produce?

Ms Martel: How much wealth do you contribute to the economy of Ontario as a consequence of operating?

Mr Haavaldsrud: I don't know exactly what that would be. Well, last year we produced 53 million board feet of lumber directly sold to southern Ontario, so it's maintained within the province. I would estimate it's in the tens of millions of dollars.

Ms Martel: So you make a significant contribution to the province both in terms of what you create, which is used in southern Ontario, and the people you employ. Do you think it's too much to ask then from this government that a little bit of that comes back to your community in the form of scheduled air service to make sure you can continue to operate?

Mr Haavaldsrud: Our stance has to be that air service is maintained. What I see happening if this air service is denied us? Back to what we were talking about earlier, I think the possibility for economic growth and development is going to decline to the point where there won't be any in Hornepayne. If I could be allowed the latitude, I think part of the PC government's vision is to perhaps see some of these communities self-sufficient, but if we are not allowed the tools to become self-sufficient, then we'll never get to that level.

Ms Martel: In your own particular company, you mentioned that if your inventory had had to be moved by ground transportation, that would have meant a downtime for your company of about 30%. What does that represent in dollar figures? What's the loss there to your company by having that occur?

Mr Haavaldsrud: It's a little difficult to say because if you're talking about a part for the woodlands department or a part for the sawmill, there are different costs related to those. Our average wages are pretty well standard with every other company in the same sector, so we have to deal with competitiveness with those companies. If we're down 30% longer than those other companies, then that's certainly a competitive advantage that they have over us.

Ms Martel: It puts you at a distinct disadvantage, in other words.

Mr Haavaldsrud: That's right.

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Ms Martel: You sent a very good letter to the Premier, which was dated December 14, 1995, and you outlined some of the concerns that you were good enough to outline to the committee today. Specifically, you asked the Premier two questions:

"Mr Premier, what will your party do to ensure that air service into the isolated community of Hornepayne is maintained? If the answer is privatization, then what guarantees can the Progressive Conservative Party provide to ensure the continuation of services, beyond the short term?"

I wonder, Mr Haavaldsrud, have you received a reply from the Premier with respect to this very important letter and issue?

Mr Haavaldsrud: I received a form letter thanking me for my input.

Ms Martel: Did it give you any sense that Mike Harris, Premier of the province, formerly from northern Ontario, cares one whit about what's happening to norOntair and what that means to you in Hornepayne?

Mr Haavaldsrud: It's difficult for me to speak on behalf of the Premier, but the response I got was not indicative of someone who is concerned about it.

The Vice-Chair: That's it. Your time's up. We'll move then to the government caucus.

Mr Fox: I want to commend you on your report here today; it's excellent, very detailed. The first question I have is, how often do you have flights now going in and out of Hornepayne?

Mr Haavaldsrud: I believe it's a daily service.

Mr Fox: You mentioned in your statement that even if you had weekly service, it would be something to you.

Mr Haavaldsrud: Yes.

Mr Fox: The other thing is, without the ONTC, do you still have helicopter emergency service?

Mr Haavaldsrud: As far as I know, we don't have a heliport in the area.

Mr Fox: You don't. So you'd absolutely have no service if you didn't have this.

Mr Haavaldsrud: That's right.

Mr Fox: So how would you handle emergency cases then? Because you've got to get them -- the nearest hospital other than your own is Sault Ste Marie?

Mr Len Wood: They would just die.

Mr Fox: Answer my question, sir.

Mr Haavaldsrud: The nearest surgical hospital is in Hearst. It's a drive of probably an hour and 45 minutes by ambulance or vehicle. That's provided of course that the roads are open.

Mr Fox: That would also be your nearest airport, Hearst?

Mr Haavaldsrud: That's right.

Mr Fox: And we're looking at how many miles away, or kilometres?

Mr Haavaldsrud: I think it's 150 kilometres, something like that.

Mr Fox: It's a fair distance.

Mr Len Wood: If the roads are open.

Mr Preston: I have a question. I don't want you to go away with the wrong impression. There are some people in this room who take a statement, twist it around and turn it into fact immediately.

Ms Martel: That's not true. That is not true.

Mr Preston: Mr Chairman, may I please have my time?

The Vice-Chair: You have the floor.

Mr Preston: Thank you very much. The statement was made this morning that there were negotiations going on regarding subsidies into certain areas in the north. That is fact; I've checked it out. They are going on. What was not said was whether there were any negotiations going on regarding subsidies in other areas that have not been picked up by private enterprise. So don't go away from here with any misconstrued ideas.

Mr Len Wood: Have you got a subsidized --

Mr Preston: Pardon me, sir.

Ms Martel: When are the negotiations starting for the other communities?

The Vice-Chair: Mr Preston has the floor.

Interjections.

Mr Preston: I think maybe I should just wait until it's their turn and yap out drivel like they do. But I don't do that. I take my turn and I allow them to take their turn, but that's not the way they operate.

Yes, there are negotiations going on. Feel confident of that. Thank you very much for your presentation.

Ms Martel: Only with Bearskin and Atikokan, not with anywhere else.

Mr Preston: Like I said, drivel, out of order.

Mr Bob Wood: Did I correctly understand your comments earlier? Let's assume the worst and air service does not continue to Hornepayne. Your company would not move from Hornepayne as a result of that, I take it?

Mr Haavaldsrud: We're based out of the Nagagami forest. Most of the wood that we obtain comes from that forest. It's difficult to think that we would move our sawmilling operation away from that area.

Mr Bob Wood: Do you have any reason to think that CN would move if the worst happened and air service didn't continue to Hornepayne?

Mr Haavaldsrud: I don't know if air service has any effect on the CN at all.

Mr Bob Wood: You have no reason to think that they would move.

Mr Haavaldsrud: I don't, no.

The Vice-Chair: That's the end of the time we have. We want to thank you for coming forward today, Mr Haavaldsrud. We understand it was a long way to come down for this, but it was really important that you were here, and what you had to contribute was helpful.

Mr Haavaldsrud: By the way, I did fly down.

Mr Bartolucci: Mr Chair, just a point of information before Mr Haavaldsrud leaves: In fact, to clarify the record, indeed what the opposition parties have been saying with regard to the subsidy is what was said this morning.

Mr Preston: By the way, Mr Chairman, while you were replaced as the Chair, the Chair was not unbiased at all. The Chair was very biased and said, "No, that's not what happened." I don't believe that --

Mr Len Wood: You just sound like an arrogant Tory yapping away like that.

Mr Preston: I am, thank you. I'm not a wannabe; I'm in.

Mr Len Wood: You're just as arrogant as Mike Harris and Chris Hodgson are.

GORE BAY-MANITOULIN AIRPORT BOARD OF MANAGEMENT

The Vice-Chair: The next presenter is Mr Bryan Barfoot, a municipal representative from Gore Bay. Would you come forward, Mr Barfoot. I want to thank you for coming today. Proceed.

Mr Bryan Barfoot: Chairman Martin and committee members, my name is Bryan Barfoot. I'm here today on behalf of the municipalities that support the Gore Bay-Manitoulin Airport. I'll provide you with some insight into the effects that the cancellation of norOntair service will have on our community.

I'm an airline transport-rated pilot and a licensed aircraft maintenance engineer. I've been self-employed in the aviation-related business over the past 20 years. From September 1988 to December 1991, I was a principal in the operation of scheduled flight service between Gore Bay, Elliott Lake, Manitoulin East and Toronto Pearson airports. The company was known as Manitoulin Air Services Ltd. As such, I have firsthand knowledge of the costs and the challenges associated with providing scheduled air service in low-density markets.

Our decision to discontinue providing the service was prompted by the economic downturn in 1990, coupled with increased costs due to the addition of GST as well as landing fees at Toronto's Pearson airport in 1991. We tried to provide a high-quality level of service. Our MPP, Mr Brown, used it a fair bit of the time and I think he can attest to the level of service that we did provide. Unfortunately, it was not profitable. In our best year I think we sustained losses in the neighbourhood of $75,000. Due to the demand for the service that we demonstrated, we were able to convince norOntair that there was a market there that it should consider serving, which it ultimately did. They started regular flight services shortly after we discontinued.

There exists a very delicate balance between cost and utilization. That situation existed then and it continues to exist today. Today's return-ticket cost between Gore Bay and Toronto is almost double what we were charging in 1991. In my opinion, this fact, coupled with norOntair flight routings and connections through Sault Ste Marie, accounts for its low passenger loads, which are less than 40% of what I experienced while running the service from Gore Bay.

While I commend the ONTC and norOntair for their high standards and the quality of service they provided, I feel that the restrictions in their mandate hindered them from meeting the needs of many of the communities they served. The announcement in late 1995 by Minister Hodgson of budget cuts to the ONTC was not unexpected, but his announcement that all of the cuts should come from the norOntair division was, to me, unbelievable.

As chair of the Gore Bay-Manitoulin Airport board of management, I prepared and submitted the following proposal to the minister on December 15, 1995. More than 30 letters of support from local interests accompanied this report. I will read it to you. The information contained is still relevant today in my mind, even though the changes have occurred.

Purpose. In response to the Minister of Northern Development and Mines's recent announcement of budget cuts to the ONTC, the Gore Bay-Manitoulin Airport Board of Management presents this proposal for consideration in advance of any decision that will affect the existing ONTC operation.

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Background. The Gore Bay-Manitoulin Airport Board of Management includes representatives from the town of Gore Bay and the townships of Barrie Island, Burpee and Gordon. The board is negotiating with Transport Canada for the transfer of the Gore Bay-Manitoulin Airport to municipal authority. This process is in accordance with the national airports policy announced by Transport minister Doug Young in July 1994. We have made considerable progress to date, and a transfer could occur early in 1996.

Progress in these talks by the community of Manitoulin Island to acquire the Gore Bay-Manitoulin Airport leads the regional/local airports in the Ontario region. Our community recognizes the importance of accessibility in support of our business, recreation and tourism industries. The Gore Bay-Manitoulin Airport is a vital part of our transportation infrastructure, and the scheduled flight service provided by norOntair is the only year-round public transit service that is available to Manitoulin Island.

Overview. There can be no question about the need for government to exercise fiscal responsibility. It is not our intention to suggest that it should happen only in areas that do not affect us locally. Our community has already embarked on a course where we have agreed to assume responsibility for the future operation of the Gore Bay-Manitoulin Airport. Until now, it has not been a direct financial burden to the community. The board faces a number of challenges in the years ahead but is confident that a high level of service will exist while reducing the overall cost.

Any decision that would ultimately result in the loss of scheduled flight service to Gore Bay would also destabilize the board's ability to justify proceeding with an airport transfer. The consequences of such a scenario would see the airport closed. Should this occur, the financial loss to local tourism and industry would be substantial.

Before our provincial government or the ONTC decides what course of action is necessary, we need a thorough review of past events and present conditions. If we work on this together, perhaps we can discover a means of elective surgery that will avoid an amputation.

The norOntair mandate. I make mention of the fact that the board was unable to obtain a written transcript of Minister Hodgson's address to Queen's Park and would stand corrected on any matters that we assumed from media reporting, which was the only information we were able to obtain at the time.

The board remains under the impression that the bulk of the budget cuts should come from Ontario Northland's norOntair division. Apparently, this would allow private enterprise to provide the necessary aviation-related service. While in theory this rationale appears sound, it assumes that private enterprise is ready and willing to provide service to the many northern Ontario communities served only by norOntair. There are a number of examples where private carriers have commenced service to communities served by norOntair and even compete with norOntair. Since the private carriers are unsubsidized, to our knowledge, their only reason for entering a market is for the profit potential. We assume that any community served by norOntair alone does not have sufficient traffic volumes at present to become a profitable point of call for another carrier. There is therefore very little hope for most of the remote northern Ontario communities presently served by norOntair of having another carrier take over if norOntair service ceases.

It is also our impression that the establishment of norOntair was for the purpose of enhancing Ontario's transportation system by providing scheduled air service to many poorly accessible locations. There are a number of examples where the high standards set by norOntair for air travel in the north and their market development has led to the establishment of service by private enterprise. In this regard norOntair realized its mandate, and the communities continue to reap the benefit, even with the withdrawal of norOntair service. Scheduled flights to any community that relies solely on norOntair should remain unless another carrier will provide the service.

Consequential effects. Our provincial government is responsible to the people of Ontario. The citizens they act for deserve assurances that any course of action is properly charted and all consequences are thoroughly considered. For this reason, it is imperative that careful thought be given to the ramifications that could result from dissolving norOntair.

Our provincial government has already announced cutbacks in funding to municipalities and to provincial airport operations subsidies. In order for municipal airports to continue operations, they are forced to cut back the services they provide, increase municipal taxes or increase user fees. Any of these options places the financial viability of the airport in jeopardy. What are the real costs? If norOntair service is eliminated, what are the costs to government if its action results in the closure of these airports? How do you quantify the net cost of job losses, the increased cost to business, the increased cost of providing emergency health care, the losses to tourism and the write-off of capital funds that built most of these airports in the first place?

Is the minister confident that the proposed budget saving will not be offset by even higher cumulative costs to government in other sectors?

Our proposal. In the best interests of northern Ontario and the communities affected by any proposed disruption of norOntair service, the Gore Bay-Manitoulin Airport Board of Management proposes that:

(1) The Honourable Chris Hodgson, Minister of Northern Development and Mines, ensure that no changes occur to the existing norOntair operation until all affected communities are afforded a reasonable opportunity to assess the economic impact his recommendations will have on their community. They should subsequently have adequate time to present their concerns, suggestions and recommendations.

(2) In order for a proper evaluation to be completed with the prospect of concrete suggestions coming forward, complete financial and operational information with respect to the norOntair operation should be made available to those concerned.

(3) A complete written statement from the minister outlining planned or proposed changes to the Ontario Northland budget and operation be provided to those concerned to enable an evaluation based on fact rather than on news media content.

In conclusion, the Gore Bay-Manitoulin Airport Board of Management remains a willing participant in any discussions that are pertinent to maintaining scheduled flight service to Manitoulin Island and connections to the world.

To date, I have received no reply to our proposal, and as you know, the deed has already been done.

In summary, I'd like to present the following observations for your consideration:

(1) Air travel to northern Ontario is not a luxury but a necessity if any form of sustainable development is to occur.

(2) The survival of many northern Ontario municipal airports is in grave danger, given the discontinuance of financial and service support from the province.

(3) The failure of the province to respond to a sincere offer of municipal participation in the decision-making process is not a leadership style that is productive.

(4) The Gore Bay-Manitoulin Airport is set to transfer from Transport Canada to municipal ownership on March 29, 1996, and this date coincides with the last flight of norOntair. As of this date, there is no confirmation that any air carrier will provide scheduled service.

I have one recommendation I'd like to leave that is just a proposed solution. Over lunch today I was fortunate enough to share a sandwich with Mr Martin and learned that other proposals have come forward as recently as the last few days that bear some consideration as well.

Given the importance of air access to northern Ontario for tourism, business, medical evacuation and forest fire control, it is imperative that the province provide continued financial support to those locations left without scheduled air service, therefore ultimately being at risk of closing. The airport authority should have the option of using the funds to keep the airport open or to attract an air carrier by providing some form of subsidization.

Based on what I've heard in being here today, I also feel that every effort should be given to this 11th-hour opportunity that appears to have arisen. It's in the best interests of everybody concerned that all options be considered before any final decision is made. I would therefore support Mr Martin's motion even though I'm not in a position to do that.

Thank you. I'm certainly willing to answer any questions you may have.

Ms Martel: Thank you very much for your presentation, Mr Barfoot, and for coming from Manitoulin here today to participate. Let me go back to the agreement that you're to sign with the feds on March 29. Tell me if this information is correct. My understanding is that for those municipalities entering into such an agreement with the federal government, if you have scheduled air service, you will have five years of a subsidy, albeit declining, from the federal government to help you operate. If you do not have a scheduled air service, you get only two years. Is that correct?

Mr Barfoot: That's correct.

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Ms Martel: Can you tell me what kind of position that places you folks in, given that in all likelihood you haven't had any serious prospect from any private sector carrier interested in Gore Bay? What kind of position is that going to put you folks in when you sign that deal on March 29?

Mr Barfoot: In our situation, it may not have the effect that you would imagine, based on the time frame that was involved, because we had already gone down the road with negotiations and agreed upon the transfer conditions. It did place a certain amount of pressure on us from a time frame point of view, and it was brought to our attention by Transport Canada that if we did not proceed immediately, they would be in a position to roll back the amount of funding that would be available on a continuing basis. So in a sense our arm was forced, and the board reached a decision that it was still in the best interests of the community to proceed with it, to keep the airport operational.

We still feel we can continue it longer than what Transport Canada would have under the agreement they had. If we had not proceeded and norOntair ceases operation, which it is intended to do, with no other carrier they would be closing the airport a year from now. So as a result, we moved ahead with the temporary measure. The funds will eventually run out and we'll be faced with the decision of closing the airport.

Ms Martel: Can you tell us what that cost might be for the municipality? Have you done the work to assess what it would mean when you have no subsidy left whatsoever?

Mr Barfoot: Yes. We anticipate an annual deficit in the neighbourhood of $60,000 to $70,000 to operate the airport on a continuing basis.

Ms Martel: You said you didn't have any response to date from the proposal you've put forward. I understand the minister had a meeting with a number of community representatives about this very issue in Sudbury on February 23. Were you able to participate or was someone from Gore Bay able to be there?

Mr Barfoot: I was able to be participate. I was not invited, but I did tag along with the municipal representatives who were. It was great to have the meeting but, like I said, it was about two to three months too late in order to accomplish anything meaningful, in my opinion. We're left in a position of trying to salvage something without knowing what our options are.

Ms Martel: Obviously, all of you would have raised the concerns, the concern that Mr Haavaldsrud had would have been raised, people from Chapleau; what did the minister say in response to the very serious concerns that all of you I'm sure brought forward on February 23?

Mr Barfoot: I can just speak for myself. My opinion of his position was that he did make a statement that the communities would not be left without service, at least that was the impression I was left with, but there was absolutely no indication as to how that was going to be accomplished. My feeling was that perhaps he wanted to wait until private enterprise exhausted their consideration of all the airports before anything might be offered as a substitute. That is my opinion.

Ms Martel: Excuse me, it was certainly your opinion that the minister said the communities would not be left without service; is that what he said to everyone?

Mr Barfoot: That was my impression, that somehow service would be maintained, although again maybe I'm just speaking out of turn for what he may have been thinking. It may have been that he felt private enterprise would come in and serve them.

Ms Martel: Did he give any indication as to whether or not he might be interested in providing a subsidy to Chapleau, to Hornepayne and to Gore Bay much as he intends to provide a subsidy to Atikokan?

Mr Barfoot: Absolutely none.

Ms Martel: No commitment?

Mr Barfoot: Not other than him saying that the communities would have air service.

Ms Martel: But left you no idea about how that was going to happen.

Mr Barfoot: Exactly.

Ms Martel: I understand that he wanted ONTC to set up a working group to work with some of the communities and sort this out. Has that meeting occurred yet, to your knowledge?

Mr Barfoot: The committee has been established. I'm not part of it. I think there are about four communities that are involved in it, and to my knowledge there hasn't been a meeting yet, or if there has, I have not received notice of it.

Ms Martel: Do you know, at the meeting that you were at, whether the minister gave any direction to the representatives, at least from ONTC, about how this should be worked out and what he as minister was prepared to do to make sure those communities had air service?

Mr Barfoot: Not in detail. It was just more of a starting point to have a forum between all concerned parties.

Ms Martel: So we're rather late in the day, though. We're mid-March now and the end of the service is March 29. Do you have any hope that unless the government puts an offer of subsidies on the table right here and now to those three communities, you're going to get any kind of air service?

Mr Barfoot: Certainly not to Gore Bay. As I've explained, I ran the service. I know what the challenges are and what it takes. It was not profitable, and I don't think we could have run the same level of service any more economically than we did. I don't know how you'll ever entice someone to come in and put $75,000 or $100,000 of their own money out on an annual basis.

Mr Len Wood: Going back to I guess November and December, when I started asking a number of questions as to what was going to happen if you continued on the route -- I've talked to the Premier, I've talked to the parliamentary assistant and I've talked to the whip of the Conservative caucus -- they're all telling me that the private sector is going to come in. The reason why they're directing -- this came right from the Premier -- Chris Hodgson to shut down norOntair is because you're stealing passengers away from their airline, knowing full well that I was talking about northeastern Ontario and Mike Harris and the other ones are talking about northwestern Ontario, where there might have been some competition. But I was left to believe they had a solution, that before they would fire all the pilots, sell the airplanes and scrap everything, they would have a solution for some of these communities that are feeling very down-and-out. Did you have a comment on that?

Mr Barfoot: I agree that it certainly would have been nice, and we certainly felt we'd opened the door to discuss it. We had some ideas as far as operating the airport. As soon as it came under municipal ownership and operation, we were going to roll back landing fees, which were raised exorbitantly about a year ago. We see the benefit of the scheduled air service and we were going to do everything on our part to encourage it, to keep it operating.

I had proposed -- this was in our own group -- that we should form a working relationship with norOntair and become a marketing agent for them within the community. Instead of charging them a fixed rate for providing a service for an agent fee, it would be on a percentage basis. The incentive was there for us to go out and market the service, and they knew that their costs were directly related to the revenues they were getting. But we weren't afforded that opportunity, unfortunately.

Mr Ed Doyle (Wentworth East): Thank you very much for your information. It's pretty useful.

I wonder if you can tell me, sir: At the moment, and when you don't count Gore Bay, where is the closest air service to Gore Bay right now?

Mr Barfoot: It would be a toss-up between Sudbury and Elliot Lake, if Elliot Lake has service. It would be a two-and-a-half-hour drive at least to Sudbury.

Mr Doyle: One of the things that has been mentioned, and it was mentioned earlier, is the concerns about air ambulance service, medevac and so on. There was an impression left in the last presentation that there was no heliport, but you can still land a helicopter at an airport, so I don't think we should allow --

Mr Barfoot: If I might comment on that, though, the cost factor is of concern as well. Being in the business, I know that a helicopter will cost three to four times as much per hour to operate as a fixed-wing aircraft. So to access some of the more remote locations, that's the reason the fixed-wing contract emergency health care system is in place, with private carriers providing that service.

Mr Doyle: You, of course, are an ATR yourself, are you not? Is that what you said at the beginning?

Mr Barfoot: Yes, I did. I was involved in medevac service as well with Manitoulin Air Service. That was part of our approach to supplement the scheduled service with revenues through the medevac service, but the volume wasn't --

Mr Doyle: I'm sorry. Who was it that you operated with, yourself and --

Mr Barfoot: Manitoulin Air Service Ltd was the company that we operated. It provided scheduled service between Manitoulin and Toronto.

Mr Doyle: You had mentioned, of course, that it was too costly to operate and norOntair subsidized service came in and filled the gap when you were unable to continue. Am I misunderstanding that?

Mr Barfoot: No. That's correct.

Mr Doyle: Basically, you have some concerns that without norOntair, a private service may not come in?

Mr Barfoot: I don't know who would. Certainly, there are companies out there that are looking at it. None of the ones that seem serious have got any background or experience in providing scheduled service. They may be a charter or a freight carrier, and I feel that they'll go through the same learning curve that I did and that others have in trying to provide this type of service, and it won't last.

Mr Doyle: You had mentioned a concern about landing fees having gone up about a year ago. You have other very serious concerns, I would assume, about the high cost of fuel, for example. Fuel for aircraft is an extremely expensive thing, is it not?

Mr Barfoot: Oh, it is; there's no question about that.

Mr Doyle: Do you feel there's any way through privatizing that perhaps things can become more efficient in some way, some shape, some form, so that perhaps somebody who has not been in this business may take the plunge and try to get into it, and hopefully with privatization that --

Mr Barfoot: We were serving Gore Bay, Elliot Lake and Manitoulin, these three airports, in order to get the volumes we felt we needed. At the time, we were competing with norOntair out of Elliot Lake, although their flights were running east-west, Sudbury-Sault Ste Marie, and our flights were direct to Toronto. But I feel if it was possible to do it and make it viable, I'd still be in the business.

Mr Doyle: You wouldn't venture to try to get into it again in any way, shape or form?

Mr Barfoot: Absolutely not, unless there was some means to ensure that the shortfall was covered. We already lost over $100,000 in the venture, and I'm certainly not keen to go out and do that again.

Mr Doyle: Okay, sir. Thanks very much.

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Mr Michael Brown: Thank you for coming down, Mr Barfoot. I don't think perhaps the committee fully understands your expertise in this field. I don't think we've had anybody more qualified come before the committee, somebody who's actually done it. You've run these air services, and I would concur with your remark that it was an excellent service and I was probably, next to one local company, your best customer when it was being provided. So I can attest to the fact that as a private operator, this was about as well done as it could be, and yet it still couldn't make any money. So we'd have to gather from that that the private sector on its own would not, could not, operate from Manitoulin Island to anywhere, for that matter, at a profit on a scheduled service. That's what we're hearing from you?

Mr Barfoot: Exactly. That's my opinion.

Mr Michael Brown: I think it's more than your opinion. It's a fact of life, because there have been other carriers besides you that have tried it, and the low density of traffic won't do it. You have taken on a considerable challenge as a community in your contracts now with the federal government in taking over the federal facility at Gore Bay, or actually Gordon township, which I hear you saying is going to be that much more difficult without a scheduled air carrier coming in. How much more difficult, I guess, is my question.

Mr Barfoot: The difficulty arises, of course, in at some point within the next few years convincing the taxpayers that they should be supporting this airport financially and picking up the shortfall. Certainly when there's a public service there that's available to them, whether they use it or not, it becomes a lot easier to justify each taxpayer committing $10 or $15 a year towards supporting the airport. Without that, they in most cases view it as a facility for the private pilots who are rich enough to own an airplane, so why should they support it? It's going to be a very tough challenge to convince the taxpayers that this is something they should continue supporting.

Mr Michael Brown: Anybody who's familiar with the area would know that we have one of the lowest assessments around as far as real estate assessments. There isn't a whole lot of industrial or commercial assessment around for municipalities to tap into. We, unfortunately, in the Manitoulin district probably have one of the lowest per capita incomes in all of Canada, not just Ontario. So we're looking at a situation where to go out and get it from the community is not highly likely. I think you'd probably concur with that view of the world too.

Mr Barfoot: I do. Certainly, when we started negotiations for this transfer, the provincial annual subsidy was still in place and it was proposed to be available to us once the Transport Canada term expired. Since negotiating started, of course, that has disappeared, so it has shortened the term that we feel we can continue to operate the airport.

Mr Michael Brown: I'm surprised that the government members haven't made this argument, but it would seem to me that the argument the government would be making at this point is, once the 30% income tax cut is in effect, our economy on Manitoulin Island will be so buoyant that you will be able to support your airport without any problem and there will be private -- maybe Air Canada will come in. Maybe I'm a little facetious with that. But can you believe that this kind of policy -- because you have to remember, they're talking about $5 billion, borrowing $20 billion during their mandate in order to take a few bucks away from the government air service. In a serious manner, do you think the 30% tax cut will provide the opportunity for people to be flying more often and make a private sector operation viable?

Mr Barfoot: Absolutely not, because there won't be a service there.

Mr Michael Brown: And never will be. Right.

Mr Bartolucci: Just one question, Brian. Earlier on you alluded to the group that was established after the meeting with the minister. It's my understanding that the group has met once but that they're so concerned about the time line because it's so short. Could you just read for us the point you made earlier, why you think it's essential that members of all parties support the motion that Mr Martin has put forward.

Mr Barfoot: Right from the onset, as soon as the announcement was made and we picked ourselves up off the floor, there was an urgency to see what we could do. We responded immediately. Within a week we had put together proposals, we had solicited support from the community in order to get something rolling before the decision process went too long. I'm just astounded how quickly the whole thing happened. In government normally these things take years to unwind, and during that period of time either you become accustomed to the process -- at least you feel you've had adequate opportunity to properly assess it. I don't feel that it has been properly assessed, that all the options have been considered.

Mr Bartolucci: And you're truly convinced that this motion is one that's essential to the viability of those communities that would be without air service?

Mr Barfoot: Yes. Well, given what I've learned today, that there is a force out there that's willing to take a look at taking over the operation and running it as is, why wouldn't everyone want to give that opportunity a chance to be examined before it's too late? If it's dismantled, then of course the opportunity may not exist.

Mr Len Wood: Harris has got the answers.

The Vice-Chair: We'll thank our presenter. What you presented to us here today has been helpful. Thank you very much and good luck.

NORTHERN ONTARIO TRANSPORTATION COALITION

The Vice-Chair: Next we have coming before us Mr Harry Kelly, who is the co-chair of the Northern Ontario Transportation Coalition and comes from the thriving metropolis of Geraldton.

Mr Harry Kelly: Yes, thank you. I just wanted to make a correction, Mr Chairman. I addressed my opening letter to Mr Alvin Curling, and of course I had the wrong list of committee members. I apologize for that. I realize you don't have an awful lot of time, and while I was waiting I edited down my work, so I'll try to skim through it a little bit.

Basically, there are four sections in the report in front of you. There are specific report sections that come from this document, which I'll introduce into your records so that you can read it afterwards. This is the final report funded by federal, provincial and municipal governments, an excellent example of what this province can do when it puts its mind to it. The other section deals with conclusions and recommendations that I think might be pertinent to your review of the Ontario Northland Transportation Commission. And then there's a section on policy review papers that you'll find interesting, interesting in the respect that there is no country in the world where people and goods movement remains unsubsidized. I think you're all hung up on this idea of a subsidy far too much. I think what you have to look at is how you make investments through dedicated funding. That's part of the recommendations that we have before the federal and provincial governments to deal with, how we can fund transportation infrastructure.

When we began our work, which is in the specific sections, I don't think anyone would disagree with us that transportation is key to the economic and community health in northern Ontario. In fact, in Canada as a whole, over one million Canadians are involved in the transportation sector.

We came together as a coalition dealing with the effect of and the threat of and still the condition that CN and CP would amalgamate and abandon one or both of the northern rail lines. That impact on transportation, believe me, is a serious and current dilemma for all of us. The 10% of Canadians in the workforce involved in transportation, if those lines were abandoned and the federal government insisted on getting its way, would translate into 29,000 people moving out of northern Ontario, the 10% of the population who are employed directly and indirectly in transportation. Those were parts of the things we discovered as we went through talking to people from the Manitoba border to North Bay.

The coalition has 200 constituent members. It's not a union-supported matter, nor is it a job program for Iain Angus. It's a job that we put together through 75 people coming to a meeting in Thunder Bay in June 1994, and I was fortunate to be elected to co-chair with George Macey.

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We tried to find market solutions because that was the buzzword of the day. There are none. It's a simple fact that there are no industries of size to support rail and road infrastructure across northern Ontario. You do not develop the business to afford to pay all the freight; therefore, you have to deal with some form of rational funding. That's what governments are here for, to make those choices. That's why agencies are created, such as the Ontario Northland. It's an excellent agency. I wish I had one like that. I know what I would do with it. I'd put it to work, and there are things it can do.

So we cannot afford to lose one ability in air, rail, road or water; otherwise, the entire northern economy is suspect. That's on your watch. You have to deal with that -- and yours too. You have to get on board and deal with solutions. The Americans are knocking lumps out of you and they're subsidizing to the teeth, but they do it in clever and innovative ways. Any Americans here? They'll tell you how to do it.

So we have come to the conclusion that sustainability of transportation services in northern Ontario depends more on the actions by government than carriers found elsewhere. We're also saying that ongoing and stable investment funding of infrastructure improvements is needed to create the sustainability of transportation infrastructure and to provide key services. We believe that there should be transportation-source government revenues, and those we pay every day: We pay motor fuel taxes; we pay taxes on tires; we pay taxes on mode of equipment. That's all part of a funding economy, except we don't see it in one pocket, therefore we don't think it's there. Therefore, we think the $7 million or $8 million we spend on Ontario Northland is a subsidy. It's a redirection of industry-generated capital. That's what the Americans do.

In our digest of our recommendations on page 3, we have to recognize that the heavily subsidized American system will eventually take away the natural trade route that runs across northern Ontario. That will be a calamity. What you heard today and probably what you'll hear throughout your mandate from people in the north is that we're not asking for special consideration but just asking to have taken into account the fact that there are special circumstances with distance and geography.

We think, for example, the 8% provincial sales tax could be put towards a dedicated fund. Fuel taxes, property taxes. We heard many representations from the transportation operators, the fact that they felt they were paying higher rates of property tax on the rights of ways than they should have been and that the money would have been directed back into infrastructure improvement.

When we talked about the question of transportation funding, which is at the heart of your meetings here I think, and the debate about subsidies and how much is right and how much is not right, we had asked the government of Canada in our recommendations to them to work with the province to establish a transportation sustainability fund and that 100% of those revenues would come from the federal excise tax, matched with an equivalent amount at the provincial level, and if it happens at the municipal level, if that's what Bill 26 says, then I think that dedicated funding could be put towards specific applications.

We also would like to see, as a result of that, the creation of regional planning authorities. There we go; here's the socialist again talking about planning our way, but that's the only thing we can do here, is give communities the right to make decisions. I heard a lot of people today telling me that they hadn't been consulted. Maybe they were consulted 18 months ago when someone decided to put a policy paper in place and said, "Here's what we're going to do." But since we never believe politicians anyway, I guess we should have believed Mr Harris when he said that's what he was going to do. He's doing it and I give him credit for that.

But the other side of it is, how do you deal with the mitigation of it? I think we have to look at some new means of funding, not new taxes, not new bureaucracies, but dedicated funding, which the Americans use rather successfully.

We also would like to suggest regional decision-making. One of the disadvantages of the commission is that it only deals with the takeup of the, at that time, Timiskaming rail authority and therefore does not fully extend all across the north like it's supposed to, or whether some other agency could do that.

We also have done very quickly for you a policy review, 15 policy papers that will give you good reading in your off moments to tell you what the Americans are doing in transportation infrastructure. They have an act called the Intermodal Surface Transportation Efficiencies Act, a clever word that just means that if we only have so much money to spend, it should be spent in the best possible mode of transportation so they can compete against each other.

I think you can read that at your leisure, the fact about subsidies. We've seen what Canada's done with subsidies. It's removed $1.6 billion of federal subsidies to the western grain transportation system, but it made a one-time payment of that amount to the farmers and a $360-million fund to cover economic diversification. We found in our studies that actually the cutoff point for that subsidy is in northern Ontario and we wanted to suggest that some of that money should have come to Ontario.

You can read this over, out of the book. I want to just skip to the last part, section 4, things that we'd like you to work with us on.

We believe that our legislative approach to all forms of transportation service provision and related infrastructure is far too subject to the subsidy questions and creates trade distortion factors.

We believe that when the federal and provincial governments created the rail-based agencies, they became economic generators and they should have been integrated into an intermodal transportation system as opposed to running as a government agency. We believe that central planning and decision-making in such agencies are not responsive to change, and that's been evident from what I've seen today, and it's insensitive to local, regional and community needs. I wrote this before I got here, so what I heard today just confirmed that.

The coalition wishes to recruit the support of this committee to further the aims of northerners for a viable, integrated transportation system, for which we have made recommendations in this report. The federal government is introduced in pursuing it. I know that the provincial government will pursue it; it's in its interest to do so.

I think you could specifically take the Ontario Northland Transportation Commission and see whether that would be the appropriate vehicle for an agency to administer a transportation sustainability fund or you could do it more regionally. I must say, we did not hear any great voices of outrage in the 18 months or so that we talked to northern Ontarians about transportation. In fact, ONTC got high marks on everybody's calendar, and I think you heard that from people today.

We provided an evaluation framework for policy review, which I think is very useful. I'd commend that to your attention. That's appendix I of this report. It sets out an American model of how you go about not killing each other in the process of coming up with the right solutions for northern -- pardon me, I keep saying "northern Ontario," but you know I really mean all of Ontario.

Finally, in closing, I want to say that my philosophy and the philosophy of the people who brought me up is stated in that little piece of material there:

"Whatever lies behind us or whatever lies before us is small indeed compared to that which lies within us."

We have the ability to make the changes here. You're part of a dynamic and democratic process. I want to be part of that process with you. The coalition wants to help all government agencies do better, and I think we need to keep saying that more often. Thank you.

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Mr Bert Johnson: Mr Kelly, thanks very much for taking the time and addressing us. We should never assume we know everything, and we don't --

Mr Kelly: We don't either.

Mr Bert Johnson: -- so we're glad that you're here to inform us. There are two trains that I'm aware of --

Mr Kelly: Is that CN or CP?

Mr Bert Johnson: I think they're Northlanders. One goes from Cochrane to Moosonee, and I'm not sure that I'm explaining it right that it would be a tourist train --

Mr Kelly: Yes, it is.

Mr Bert Johnson: -- although that was the use that I made of it. I assume it has other uses as well. That's called the Polar Bear Express.

Mr Kelly: Largely I think they were there to connect communities that had no other means of connection, roads or air or water.

Mr Bert Johnson: There's another one that goes from Sault Ste Marie up the Agawa Canyon.

Mr Kelly: The Algoma Central.

Mr Bert Johnson: I'm sorry, what is it called?

Mr Kelly: You'll be pleased to learn that it's recently privatized. I think it's Wisconsin Central. Wisconsin Central negotiated with Algoma Central and purchased that as a continuing operation with through-linkage to the American Midwest.

Mr Bert Johnson: Was it what I would call a tourist train too, or did it carry freight cars and drop off along the way?

Mr Kelly: It had the purposes described in the legislation. It was meant to provide transportation alternatives and freight and people, but unfortunately because of the federal rules that they were under, you had to have a compartment for dangerous fuels and dangerous people and Catholics and Protestants were separated and all this kind of thing. It really wasn't a very good idea. In other words, what the Americans did was just say, "Do we need to follow this rule book? No. Okay," and put in a simple train that runs in Europe, like the Budd car, except you can do more with it. It's a bus on wheels.

Mr Bert Johnson: So that isn't one that I would call the Northlander.

Mr Kelly: But it's a good example though.

Mr Bert Johnson: Have you any indication that the Northlander will be affected by any of the announcements to date?

Mr Kelly: I think all rail and road transportation in Ontario will clearly be influenced by decisions that CN will take in its abandonment. They may result in us sitting here some other time discussing whether we should be creating a north line.

Mr Bert Johnson: But not by provincial announcements?

Mr Kelly: Not that I've heard about, unless you're going to tell me something.

Mr Bert Johnson: No, I'm asking you. I'm not aware of any and I wanted to know if there is anything that we said that in your opinion would endanger the viability of the Northlander.

Mr Kelly: Well, you did say, if I can say that, you were going to improve northern transportation and I'm looking forward to that.

Mr Bert Johnson: Are there any areas that the Northlander serves now that in your opinion could be done without, that alternative methods of transportation could be used?

Mr Kelly: Bus, road, rail, marine or air. There's always alternatives to any system. I think the management of the system is really the question, how you manage it and how you fund it. If it's seen as a cost rather than an investment, then the government very quickly will pass the instructions on and it's passed on to norOntair that it's no longer going to be in that business. And that's a concern because then you're not going to get a debate that's going to be based on intellect; you're going to get a debate that's based on emotion. You're all going to start bashing each other again and that isn't going to be any good.

Mr Doyle: Your presentation is extremely interesting. I enjoyed it.

Mr Kelly: I'll come back.

Mr Doyle: I wonder if you could tell me if you think that the way the transportation system is set up in northern Ontario today would be, in your opinion, acceptable?

Mr Kelly: It reminds me of a committee that designed a horse and that's how we got a camel. I just think it's too unstructured. It does not deal with the purpose it was created for. What business are you going to be in? If you're going to move things and people, then go to the people who design the systems. They'll tell you how to operate it. The people who build aircraft, if they relied on government scheduling for the efficiency factors they build into their aircraft sales literature, I want to tell you, they wouldn't sell one aircraft.

So you have to get it out of the political arena into the place that people own it and depend upon it. Look, they'll spend the money. As the man said there, Manitoulin Island's going to have a big tax decrease pretty soon. Maybe that's the time for new investment, but you have to initiate it. You can't just sit up here and say it's going to happen anyway because there are a whole bunch of entrepreneurs out there. There isn't. You can't look through the phone book under E, find E for "Entrepreneur," it isn't there. We don't know who he is. There could be somebody interested in picking up the pieces, but they need time; I heard that today. They need consideration that they are, after all, benefiting from previously spent public money.

The Americans would have a field day with this, I want to tell you. You guys are bordering on some real tough trade difficulties, because all of this stuff is subsidized, if you think about it as a subsidy, or it's invested, what the Americans do, in their social investments. They're buying back rail operations, they're buying back road operations. They're spending $1.8 billion in the Alameda corridor to become the biggest single multimodal facility in the world, and we're still strung out here trying to find out how it works. Strung is a good idea.

But you need communities with you and we need to work with our local representatives. The municipalities are on board: 200 of them are part of the resolution base of this document and very proud of it. Shelley Martel was the former minister who launched it. Chris Hodgson supports it. So this cuts across all the normal squabbling you folks get involved in sometimes.

Mr Preston: No.

Mr Kelly: No? You don't?

Mr Michael Brown: I think you bring a new perspective to this. I think in many respects we in the north, like everywhere, are kind of Luddites. You know, we're kind of afraid of change and don't want to do that. What we need to do is look at our systems in a broad sense, not in just a particular one-by-one-issue sense. After all, the railroads for a large part across northern Ontario, at least the main lines, went across because somebody had a vision around the time of Confederation that said, "We want to join this country," and that was the reason they went across northern Ontario at that time.

Mr Kelly: They did.

Mr Michael Brown: So we look at railroads, we look at roads. Adding to that, we also talk about the technology that's now available.

Mr Kelly: Yes.

Mr Michael Brown: Much of what we used to have to physically do can be done electronically from virtually anywhere. Have you spent some time thinking about --

Mr Kelly: We were following a northern Ontario strategy that included telecommunications and we did not want to duplicate much of what that committee was doing. But clearly, as an instrument of public policy, Ontario Northland is well-designed. It has a broad range of features. I think it just has to be operated -- is the boss sitting behind me, by the way?

Mr Michael Brown: Both bosses.

Mr Kelly: Oh, well, they're doing a great job. It just has to be designed so that they have all the tools that the private sector has. That's what privatization means to me. You're bringing private sector logic to a public solution. Does that answer your question?

Mr Michael Brown: Yes, I think you're probably right. I would be one who would advocate that the ONTC mandate, for example, needs to be rethought. They're operating the board and the organization are operating under a mandate provided by the government of Ontario.

Mr Kelly: I would have to say they're the best transportation planners we have in place right now today.

Mr Michael Brown: But my point is that we need to re-examine that in light of what we need today to allow flexibility so that real decisions can be made.

Mr Kelly: Mr Brown, it doesn't take much examination. The Americans have done all our homework for us. They have excellent legislation. It does not invite any reciprocal trade difficulties. Just copy them. There's nothing wrong with that. Research it first, but I'm just saying they have some good tools for public investment in infrastructure and they work, and they are indeed market supported because they raise the money in the capital markets. They compete for funds in the way government doesn't compete for funds. That's the difference.

Mr Michael Brown: Do you see any difficulty, though? One of our particular challenges in northern Ontario is unfortunately we don't have the density of market that you have either in the European experience or in the American experience, or even in the southern Ontario experience for that matter.

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Mr Kelly: That's why we've said that if we can do it for beer, and we're talking about some sort of price equalization -- any beer drinkers here?

Mr Michael Brown: Oh no, I wouldn't expect so.

Mr Kelly: If you equalized the price of beer and took the difference that's charged up in the north or put that into some kind of transportation fund -- I'm not saying we do that with beer. I'm just talking about the concept. If we collect from the transportation system a unitary cost and we create a series of well-designed regional authorities -- I know that sounds very bureaucratic, and that's just the way I've been trained; sorry about that -- but if we do that and let people participate in it, you get all those people for free. They're all volunteers. Over 78 volunteers work with me, and I couldn't do my job without them, God bless them. That's a fact. Did I answer your question?

Mr Michael Brown: I think the beer example is an interesting one. Understanding that the basic price of beer is government taxes, that may be a kind of model. I know we have this discussion in the north around gasoline most of the time, and that affects the way things are done. The north obviously is a big natural resource producer.

Mr Kelly: Yes.

Mr Michael Brown: As we move to an age of just-in-time delivery on many northern products, have you had a look at the truck transportation vis-à-vis that and how we could integrate that better? You know, people might be surprised. I represent Espanola, and the E.B. Eddy mill supplies Ottawa. If they're down for eight hours, Ottawa shuts down 12 hours later. That's the way it is. There's something like four hours of inventory actually in Ottawa.

Mr Kelly: The Ontario Trucking Association are official members of the coalition, and they've been greatly helpful to giving us an understanding of that industry. Believe it or not, they have a demand for 10,000 truck drivers, because they can't keep truck drivers in a job because of the long overhaul factor from Alberta right into Ontario. They'll never replace the bulk shipment market, but they certainly can replace the interim market, the 300-kilometre to 400-kilometre daily market.

That creates a more stable employment regime, a home regime, because the driver can go out and back in a working day. That leads us to the need to say that the northern Ontario land bridge needs to be redesigned so that there is a series of interconnecting nodes or intermodal nodes where we can get the best of our efficiencies, North Bay, Sault Marie, Sudbury, Geraldton, Thunder Bay, those places that already have a critical mass that you can build on.

The Vice-Chair: Thank you very much, and I didn't have to cut off Mr Brown, I'll have it noted.

Mr Michael Brown: Just with the hand signals, Mr Chair.

Ms Martel: Thank you very much, Mr Kelly, for joining us here today. Let me ask you again about the people you talked to in the time that you did the work as part of the coalition. How many individuals and groups would you say you talked to about transportation in northern Ontario when you did your work?

Mr Kelly: The first group numbered 75 and they came all the way from Sudbury Valley to meetings in Thunder Bay, and then I went on a face-to-face meeting with 28 communities, all the way up to North Bay, and met with the senior management of Ontario Northland. That's when we were recruiting input into what we should be looking for. We do 225 individual mailouts, so that means there are 225 different addresses it goes to, of which 105 or so are municipalities.

Ms Martel: Can you tell me, in those meetings you would have been really meeting with a range of people: people involved in small business; large resource companies that need public transportation to move their goods to market; concerned citizens who just wanted to be sure there was some kind of passenger service, be it by air or train, in some of those communities. Would that be the makeup of the folks you were talking to?

Mr Kelly: Yes.

Ms Martel: They said, I would suspect almost to a person, that for them all facets of transportation in northern Ontario are terribly important. Would that be correct? The companies said the same thing?

Mr Kelly: Absolutely. The companies said something different, that they could not calculate the economic cost of moving from volume shipment by rail to truck, and I don't think they wanted to even contemplate what that number would be. It would be affordable, but they may then have to relocate their businesses. That's where we get the outmigration number of 29,000. If both CN and CP abandoned the north and went for southern or northern US routes, the effect on our resource economies from the Manitoba border to North Bay would be of that dimension: 29,000 people would leave communities.

Now that's a wrist-slashing move because we did that in the face of CN crying the blues and CP crying the blues about their problems. We thought we'd have to tell them what the community perspectives were and why we were anxious to get information from them, which they gave us.

Ms Martel: So, Mr Kelly, you've met with all kinds of people from northern Ontario, a broad cross-section of folks representative of our special part of the province. They told you they were very concerned that all facets of transportation were very important. I want you to contrast what you heard against what the government has done in northern Ontario to date when it comes to transportation, and I'll just remind you of some of those things.

We know that buses are going to be deregulated. The Ontario Highway Transport Board will no longer exist after April 1 and that will have a severe and negative impact on a number of small communities in the north. The government is eliminating norOntair service to 17 communities. The government is eliminating airport subsidies in both northern and southern Ontario over the next two years. The government has stopped the planning that was going on on Highway 69 for four-laning.

I want to talk to you about passenger rail service because you were asked a question about that. The Premier, on November 30, a day after the economic statement was released, was asked about the Northlander. He was asked specifically in this sense. The minister said that certain rail lines would be protected. He talked specifically about the trip from Cochrane to Moosonee, but it was interesting, the Northlander wasn't a rail service that was protected in the announcement and Mike Harris said about this:

"There's a reason the Northlander train from Cochrane to Toronto wasn't protected. `There are choices along that corridor,' said Harris. `There are opportunities for air, bus and car transportation and there has to be some judgement made as to what is the best way to look at those services.' The Northlander service is one Harris expects will be reviewed, although he hopes it will continue."

Now next year we know ONTC is going to suffer another $4-million hit, courtesy of the Tory government, and that $4 million will almost pay for the subsidy that ONTC provides for that passenger rail service. So, Mr Kelly, what do you think about the contrast between what northern Ontario folks said to you about the vital importance of transportation and what the Tory government's been doing to date?

Mr Kelly: What they said was this. When we delivered our draft reports to the municipalities and asked for resolutions, we know that we have to change the fundamentals of how Canada's rail -- they didn't say this, but this is how it came out -- the changes at the national level to the National Transportation Act. We, first of all, were successful in getting a moratorium on rail line abandonment before December 1994. We were then able to persuade the standing committee on transportation at the federal government level to amend the draft legislation for the creation of the Canadian transportation act that will deal specifically with all the things you mentioned. There will be public notice, so it really doesn't matter whether the government falls asleep. CN and CP and any rail carrier under federal legislation must, on abandonment or plans for abandonment, put them in a three-year plan. That three-year plan has to be public, available so people can read it.

I think we've heightened the sensibilities of people to the point where they know what to look for and I would not criticize any level of government for not being able to tell people what's going to happen next because really we don't know. The federal government did not finalize the legislation on the CTA. It may survive in the new sitting. If it does, it will have impact on interlining, which will affect Ontario Northland because of fees and other regulated amounts.

Whatever the federal government does, it's just a ripple. It'll hit, and if the provincial government compounds it by also reducing investments and making changes -- all we're saying is, make that part of a planning process. I know no one wants to plan in this world any more, but that's what we have to do.

The communities that responded favourably to us responded that they wanted to see some consultation on a permanent, continuing basis in transportation-related issues in northern Ontario. That's about the most honest way I can answer that question. But did they specifically say, "I'm fed up with the government"? Hell, I get that a dozen times a day from a dozen different people about a dozen different governments. I have to be fair. It's not just something that occurs. It's just occurred.

Is the consultation as good as what it used to be? No, absolutely not, and I hope that will improve. That's why I came down here today to try and impress on you that I need to go back to those times of being able to know what the Minister of Northern Development and Mines is thinking -- not that I ever had that pleasure before, but I'm just saying that I don't get the sense of that today. I have to be fair.

The Vice-Chair: Thank you very much and thank you for coming today. Your being here has been helpful to us.

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ONTARIO NORTHLAND TRANSPORTATION COMMISSION

The Vice-Chair: I'd now like to call forward for a second time the management of Ontario Northland Transportation Commission, Mr John Wallace, the president and chief executive officer, and Mr Matt Rukavina, the chair of the board.

Mr Matt Rukavina: Instead of a presentation, Mr Chair, I would like the opportunity, and John will too, to make some comments on what you heard from some of the presenters; that may help discussion at the end. When we're finished -- and we won't be long -- we'll open it up to any questions you may have.

There are three items I would like to comment on. The word "consultation" was raised here today -- lack of consultation. As far as Ontario Northland is concerned, we do consult and we do believe in it and we do practise it.

For an example, in the fall of 1994 we set out to develop a long-range vision, a strategy. It's not just our five-year corporate plan that we revise annually, that all corporations do; I'm involved with the private sector boards and we do that. We were looking at a 10-year projection, a strategy on where we were going. In order to assist us, we sent out a request to 374 stakeholders we serve -- municipalities, chambers of commerce, customers, the public at large -- to give us some of their input to help us come up with a strategy.

The replies trickled in, so we made another mailing and we called them all personally to give us the benefit of their views. The final response was about 15% -- not much, but it was fairly representative. From that, we went ahead and developed a long-range 10-year vision. There is some planning taking place. We do consult.

When Mr Bragagnolo, the president of the Timmins Chamber of Commerce made his presentation, he talked about a couple of things I would like to comment on. He mentioned that the Kidd Creek mine and the refinery in Timmins are worried about their freight rates, that the freight rates Ontario Northland Railway charges are much more than CN and CP. He compared this on a cost-per-tonne mile. It's natural that we're going to be higher if we run three freight trains a day over a given infrastructure where the costs are fixed pretty well, but if we ran 10 trains or 50 trains a day, naturally the cost-per-tonne mile is going to be less. So that isn't a factual piece of information. We haul as much as we can possibly get, and we try to market the resource industry. I just wanted to correct that point.

Again talking about Kidd Creek and talking about consultation, we have set up a team of people from our freight operation and our marketing people together with a team from Kidd Creek so we're not at loggerheads on rates. We put everything on the table: "Here's our costs. Here's our methods. What are your requirements? Let's dovetail those so we can both gain out of the process." And we've been successful. At one stage, they used to run an acid train with sulphuric acid, as a byproduct of their concentration operation, down to Niagara Falls, and they waited until they had a whole train. Our people said: "Why? Let's put this in as part of the regular freight train with the concentrates and save them hundreds of thousands of dollars."

We are currently in discussion with them, very concentrated discussion, on some of their plans for the future and how we can assist. It benefits us, benefits them. So there's ongoing consultation with our large customers -- that's our bread and butter -- on our freight operation. We do this on a regular basis. And the rates aren't rates we pick out of the air. The rates are rates we consult and discuss with our customers.

Mr Bragagnolo raised the question of our telecommunications division, now known as ONTel, and he said it's a monopoly -- not our choice. We've been there since 1902, and we provide the long-distance service north of North Bay as well as many other services: radio services for large customers; we provide Internet connections for various people. But in the long-distance part of it anyone else can come in and compete. They make application at the CRTC and they come in and compete. We don't keep anybody out of the system.

He says that perhaps the rates, because there's a monopoly, aren't right. But we have a policy that the long-distance rates we apply in northern Ontario are based on the same rates that Bell charges in southern Ontario. So we get the benefit of the competition in southern Ontario: Bell competes with Unitel and all the big players, and our northern customers benefit because we charge those same sort of rates. It's not a monopoly where we charge what we have. We have a policy to not penalize northerners because of geography or distance. So the rates are right.

He talks about perhaps ONTel should be sold off. That part of our operation contributes between $8 million and $9 million per year to the rest of our operations. It helps subsidize our part of rail passenger service, the ferry services, norOntair services up until now. It's a necessary asset to help the rest of the operations. Often governments in the past, when something is a moneymaker, they sell it. It's exactly the wrong thing to do. This is something we should keep to benefit the rest of the transportation and telecommunications operations up north.

For an example, if it was a private sector operation -- I'm a believer in the private sector -- the dividends would go to Vancouver or wherever. All the profits that ONTel generates go back into the north. The dividends go back to the northerners where the profits are generated. They don't go to anyone else. ONTel is a necessary part of our total operation, and it should remain there.

One final thing when we're talking about consultation: At the request of the minister to all the municipalities served presently by norOntair, he held a meeting in Sudbury the day after we had our last hearing, February 22. Following that meeting, the communities represented there -- and there were 11 of the 17 -- agreed we should form some sort of group so we're not going to be talking to 17 different people through 17 different means. The representatives selected six representatives from those 17 municipalities. They agreed that I would chair the group, and we had resource people from our staff and the ministry try to develop a strategy: What's going to happen between now and March 29? We had our meeting in North Bay the following week on February 29, set up a mandate, put a bunch of figures together, and we've charged our director of air services to go and talk to all the air carriers to make sure we have turned everything over that we possibly can to entice the private sector to provide service to all the 17 communities.

To date, we've heard that it appears that three communities may not have service, but this evening our air director is meeting with representatives from Gore Bay and from Chapleau, with a carrier, to discuss service.

Mr John Wallace: Elliot Lake.

Mr Rukavina: And Elliot Lake as well, even though Bearskin has announced they're going to provide a service into Elliot Lake, one trip a day. We are actively engaged in doing that, to try and entice, try and facilitate somehow the provision of air service wherever norOntair is currently. Our next meeting is scheduled for the 18th, but we're not waiting for the meetings. On a day-to-day basis, our staff is out beating the bushes to see how we can make this happen. Thank you, Mr Chairman.

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Mr Wallace: I'd like to go back and offer a couple of points of clarification also. In our long-range planning, we recognize that Ontario Northland was in a financial crisis even before the economic statement of November 29. As a result of that long-term forecasting, we came to the conclusion that economically we were going to have to find downsizing or rightsizing, whatever you want to call it, to try to get our profit back into a position where we could have funds to keep our capital plant up to date. We set a target of about 200 positions over a four- to five-year period, and then announced an early retirement incentive plan that is currently in place and will close next Friday. The first way, we're hoping to get 90 to 100 positions we'll be able to downsize, and that's just the start. Some of it is required changes to collective agreements, and we're talking with the various unions on their contracts in order to achieve those ends.

In our analysis of the funding, we also want to point out that rail freight itself, or our rail services, are not profitable. In 1995, when we did our analysis of the final results and allocated its share of the administration fee, we will lose of the order of between $4 million and $5 million on our rail operation. Mr Rukavina has already pointed out that we have discussions going on with Kidd Creek concerned about the rates. We heard Mr Bragagnolo talk about the rates. We are endeavouring to do everything we can to make the rail freight operation more efficient and to turn it around. So we have to find these positions, and situations like Englehart are one of the results of that particular exercise.

In the case of Englehart, we would operate trains from North Bay, make up two trains, then remarshall them in Englehart yard to go off in three different directions. We have decided that that operation isn't required from a technical point of view, so we'll marshall the trains and they'll go straight through to their destinations. That means our trains will leave North Bay after being serviced and will go 250-some miles to their destination where National Roads will operate trains maybe 300 or 400 miles, so we're not exceeding the limits, by any stretch, in the operation and we're going to save a considerable amount of money.

It also is not a case of jobs being relocated from Englehart and still staying in the mix. This ties in also with our early retirement incentive program, that these jobs will allow us to offer more early retirement incentives in our downsizing efforts. It's all part of the plan to get ourselves back on target and in a profitable operation.

There were also discussions that we should be going out after contract work. Ontario Northland goes aggressively after contract work. We have gotten Inco work, Via work, Go Transit work in the past. In 1995, we had budgeted almost $4 million for contract revenue. We didn't achieve that objective because Via and other organizations are facing the same sort of thing we are: reductions in funding for their programs. So we didn't achieve that particular target. We took a good, long look at a GO Transit contract that just recently came out and found it to be beyond our means. First of all, our reason for being is to provide a freight and passenger service to northeastern Ontario, and the size of the GO Transit contract, with the time constraints and that, was just beyond our scope, but we aggressively looked at that particular work.

We also have done a fair amount of work in our shops in North Bay. We've talked about the Northlander passenger coach. They were originally unilevel coaches that operated in the GO Transit service here in Toronto, completely refurbished in our North Bay shops. That work is all gone from our shops now; there isn't funding for those types of programs and we've completed that program. We see the need to have to rightsize our organization in that particular regard.

We are also aggressively going after whatever freight business we can get and bring back over our lines. Our people are working hard in that particular area, and we've already talked about Rail Haul North in our last presentation and the efforts we're putting on in that particular effort.

There was also the mention this morning of the effect of the $10-million decision in the economic statement and its impact on Ontario Northland. That decision really did not have any impact on us making decisions such as the Englehart decision. The Englehart decision has come out of our bottom-line funding the way we are right now. I just wanted to clarify that point.

The Vice-Chair: Thank you. We'll start a round of questioning with the Liberals. You have a whole five minutes, Mike.

Mr Michael Brown: Thank you, Mr Martin. You won't cut me off, will you?

The Vice-Chair: I won't cut you off.

Mr Michael Brown: First, I want to say to you folks that I understand about consultation. I would really believe that you've made the utmost effort, at least as far as my knowledge, to go out and talk to folks about what your plans are, what your options are and how you do things, particularly around the marine services. I want to congratulate you. It has been very good in our constituency, and while there are always people who disagree with you, really and truthfully I can't say you haven't gone out and tried to talk to them and tried to understand their concerns.

That's what I want to talk about for a second. We haven't talked about ferry services for a while, and I just want to open with a question about the status of the Nindawayma. Has it now been leased, or where is it in the scheme of things?

Mr Wallace: At this point we're still negotiating with the successful bidder, so it hasn't had a contract signed for the lease. Negotiations are still under way.

Mr Michael Brown: Is it your expectation there will be one in the foreseeable near future?

Mr Wallace: We're assured by the individual that he is still very much interested in leasing it. There was a flurry of activity in the fall before freeze-up to get it going. I understand that he wants to get a greater degree of assurance from the US Coast Guard with regard to any regulations it might have and what impact it might have on him in any alterations to the vessel before it goes there. There's some pause, I guess, taking place while the US Coast Guard reviews the situation.

Mr Michael Brown: I guess we'll move from there to talk about the Chi-Cheemaun for a short period. One of the things that I guess caused at least some distress was your announcement that you would be increasing the Chi-Cheemaun's fares by 5%, which is of course well above the rate of inflation. What impact, if any, do you foresee on how many passengers you'll be carrying this year vis-à-vis next, or do you see any relationship whatever between the amount paid in fares and the amount of people who will be on it?

Mr Rukavina: No, we don't really think it's going to affect the passenger loading. Those fares remained constant for the past four years. They weren't changed. So when you add the inflation over the fifth year now, the 5% isn't out of line. We don't feel it's going to have an effect.

Mr Michael Brown: So you don't think there will be a detrimental effect on the numbers.

Mr Rukavina: No.

Mr Michael Brown: One of the things I've noticed about the Chi-Cheemaun's loads, though, is there's been a dramatic decrease in the number of buses, tours. Can you explain why that's happened, or do you have any idea why we're losing that traffic?

Mr Wallace: Not really. When you say dramatic, I'm not sure if the numbers have decreased, but I don't have any answer off the bat, no, I don't think.

Mr Michael Brown: Maybe it's just a general thing in the economy. I don't know. I don't have the numbers right with me, but there has been, as far as I know, a dramatic decrease. Of course, the Chi-Cheemaun is probably the premier tourist attraction in the area, if you talk about the number of people who use it and enjoy it for both transportation but also for the joy of taking it from the Bruce Peninsula to Manitoulin or the opposite way around. So it has a dramatic effect on our economy, as you well know.

The one part, when we talked about consultation, however, that I guess upsets me and upsets most members -- and I don't believe is in any way your fault -- is the decisions regarding norOntair. That's the lead-up. On November 29 it was all over, in terms of you were literally directed by the minister to do what you did. You can dress it up, you can say it any way you want, but the fact was he said there's no subsidy for this, and it's your choice, but there is only one choice, and that's you're out of the business. Is that an unfair characterization?

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Mr Rukavina: It became a numbers matter. There was a reduction in the funding, and how do we stay viable and still cope with the reduction? When I referred earlier to the visioning exercise, we took a look long range what's going to happen to the operation, knowing that the funding couldn't stay the way it was, that it was going to keep decreasing, and one of the areas that we pigeonholed as a possible area of service to get out of that would have the least effect on our service territory was the air service. So we anticipated that may happen some time. We didn't think the cut would be that drastic, but that's what caused it.

Mr Michael Brown: One of the things that would interest me would be an analysis, at some point in the future, because I don't think it can be done now, but we know that 14 communities will be getting some kind of air service at this point. Three will not, but I guess that could change also. The air service is changing considerably. These private carriers are not offering the number of flights at the times, a lot of things that affect your costs. It would be interesting, from our point of view, to know what it would have cost you to operate under those circumstances, because the comparison between what you were doing before March 29 running a system and running a totally different system after that is not entirely fair, it seems to me, in terms of trying to evaluate the service.

Mr Rukavina: That's right, because we're comparing apples to oranges. The norOntair service is a high-class service, and it started out to be that. So when we run Dash-8 aircraft, 37-seat aircraft, having an attendant and providing some type of meal, and you compare that with a smaller aircraft, 10 or 18 -- Bearskin uses the Metroliner with 19 seats, no attendants, no meals, a lower-cost aircraft to maintain -- naturally their costs are going to be lower. I don't think there's going to be the same comfort for passengers, but I don't think comfort is the real need, I think it's a matter of getting from point A to point B on some regular basis.

Mr Michael Brown: Yes. To me, it's the schedule that is all-important in terms of being able to access Elliot Lake to Toronto or Elliot Lake to Ottawa or Elliot Lake wherever. NorOntair feeds into the major airports and then you can get elsewhere. That service is pretty critical. Right now from those communities you can pretty much connect to anywhere in a very short period of time and still be back the same day at home, which to a business traveller is most important if he doesn't have to waste the day somewhere else just because he can't get the flight home.

Mr Rukavina: All of the frequencies haven't been decreased. Let me give you an example of one that's close to home. Between Kap and Timmins -- Air Creebec is going in there -- they're going to provide three flights a day, compared to the two flights that norOntair has been providing.

Mr Michael Brown: Right now.

Mr Rukavina: For now. But at least it's an upgrade in frequency at this time.

Ms Martel: John and Matt, thank you very much for joining us here today. Let me ask a couple of questions. Firstly, who made the decision to eliminate norOntair?

Mr Rukavina: Basically, it was a decision of the minister, but I think as a result of the data that we had presented in our vision for the future of Ontario Northland.

Ms Martel: Matt, tell me how Jim Kilgour fits into the ONTC operation.

Mr Rukavina: He's our director of air services.

Ms Martel: Based on what you just said, explain this e-mail to me. This was an e-mail sent to norOntair employees on November 30. It was the same day the minister announced in a press conference at high noon that norOntair was no longer a priority, and Jim Kilgour said this to the employees:

"The minister" -- of Northern Development and Mines -- "announced at noon today that norOntair air service is no longer a priority for the ONTC and air service would be left up to the private sector. I'm sorry but I have no further details at this time and I will keep you informed as soon as we know anything further. There was no time frame given. My apologies to our employees for informing you in this manner, but no one at ONTC had any advance knowledge of the minister's press release."

It doesn't sound to me like ONTC staff, board etc had any idea that the minister, on November 30, was going to announce that this service was no longer a priority.

Mr Rukavina: That's correct on that particular day, because we had no idea that the reduction in our funding was going to be that great, that it was going to be $10 million over two years. When we had developed our vision, we took a look at various scenarios. If our funding was going to be reduced X number of dollars, what do we do? If it's going to be Y number of dollars, what do we do? It became ZZ dollars, and as a result of that, that's how the announcement came about. If the funding decrease wouldn't have been as great, then perhaps the announcement wouldn't have come about.

Ms Martel: It was a political decision, though, Matt, and the fact of the matter is that when you're given no money to operate the service, you don't have any choice about that any more. It becomes painfully evident to everyone that with a $6-million cut this year, you were going to be completely unable to operate that service. But it had nothing to do with the board or the staff looking at that as a possible alternative. The decision was made for you that day when he made that announcement.

Mr Rukavina: Except that I do feel, to be very fair, that he was basing his decision on some of this long-range consultation that we had, what's going to happen down the road, given funding, and what service then should be curtailed.

Ms Martel: Okay. In your vision document, Matt, did the board put forward a proposal that norOntair service should be eliminated?

Mr Rukavina: We did say, given X number -- and we had to take some guesses; whatever happened to funding -- what do we do? One of our proposals was that if the funding went down to a certain level, the norOntair service then should cease.

Ms Martel: You would have no choice.

Mr Wallace: Let me just add one point also with regard to Mr Kilgour's telex. It was a question of timing. We like our employees to hear first hand from inside the organization what's going on, so when the announcement was made, we wanted to make sure that we were communicating it directly.

Ms Martel: Oh, I'm not faulting you. I'll bet it was a hell of a shock to them to find out they didn't have a job and find that out by a press announcement made by the minister. I think it was entirely inappropriate the way it was done. It was unacceptable.

Mr Wallace: It was the timing, yes.

Ms Martel: Let me ask you, what are you going to do with the money that you realize from the sale of the norOntair assets?

Mr Rukavina: We're going to do two things. The first item is to try and remain viable over the next couple of years while this funding takes place while we do some restructuring to get our organization to a less expensive operation; secondly, to be able to fund up front the early retirement program. If we're going to look at funding 90 people this year and perhaps another 160 to come, we have to have some upfront dollars and we would use those dollars up front to save the dollars down the road, again, to preserve the viability of the total organization and the other services that we still provide.

Ms Martel: Here's what I'm concerned about. The minister, when he came before this committee on February 21, talked about norOntair and talked about how the proceeds from the sale of the assets might be used. I'm just going to quote. He says:

"I am encouraged by the private sector carriers' response to the new availability of air service opportunities. If there are communities that are left out in the new mix, the board, along with myself, will be working with the local interests and carriers to examine service options.

"Additionally, we have committed to the ONTC that they will be able to use the assets from the sale of norOntair aircraft...in that range." Then it says the tenders will be open this Friday. "This money will stay in the north to support the ONTC's restructuring and bridge financial needs until new developments prove fruitful."

As I read that, I am saying to myself that surely that must be a commitment to provide some form of subsidy to private sector carriers that are interested in going into some of these routes, and that that money is going to come from the sale of the assets.

Mr Rukavina: At this stage, certainly as a board, we haven't committed any money to subsidize any air service, nor have we had any direction from the minister or the ministry to provide any funding.

Ms Martel: So in terms of direction, what are you able to say to the people on the working group, who still at this point in time have three of those communities left without any air service? Have you been given any direction from the minister at all, other than to have your people go out and beat the bushes? What other positive alternative might come from these discussions?

Mr Rukavina: We're still hopeful that somehow we're going to be able to encourage someone to provide air service of some type to all of those 17 communities.

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Ms Martel: See, I guess the minister would have said to you that you would be able to provide a subsidy, or he would be able to provide a subsidy, and I'll tell you why. On February 28 there was a report in the Globe and Mail and the minister is quoted as saying, "`None of the northern communities now served by norOntair will be without air service at the end of March,' Northern Development minister Chris Hodgson said last week.

"`Today we have 14 out of 17 communities served. By the end of March we will have the rest served,' Hodgson told reporters," after appearing before this very committee.

So you're saying to us today that he in fact has not given you any direction or any commitment with respect to provincial subsidy. Very clearly, he's told the media that these people are going to be protected.

Mr Rukavina: But we're still trying to meet that target, somehow to get service to all of those communities without having to provide a subsidy.

Ms Martel: You've got no indication from him at all that he's prepared to do that, even though he's told the media that there will be service. You're not permitted to tell folks that.

Mr Rukavina: We certainly haven't had any discussion on subsidizing air service. We've just got out of subsidization of air service.

Mr Michael Brown: Ask him about Atikokan.

Ms Martel: Have you any involvement in Atikokan? No, I know they haven't. I asked him that before.

Let me ask you about the motion that was put forward by Tony, because certainly you must be concerned about your employees. You know that your employees pulled a group together in response to what is happening. They were very determined to try and put together an employee ownership package. If they couldn't buy it themselves, then they would look for other interested partners, because they very much want to maintain their jobs, but they also want to maintain the service to all of those communities.

It's unfortunate that the same day they were meeting with the minister to discuss this very issue, ONCC was also announcing the final run of norOntair, which was March 29. So obviously the minister wasn't very interested in giving them enough time to do that, even though he was right before them and they were asking him for that kind of time.

Obviously, from what Mr Strapp has said, there is something that we could look at here, something positive and an economic benefit that would be even bigger than the one norOntair provided. Would you folks be prepared to continue to work with that group and any investors they might have to look at a positive outcome, if the minister will agree in fact that the deadline for the last flight of norOntair could be put off?

Mr Rukavina: Our problem, again, is bottom line. Every month that norOntair operates, we lose $450,000. Our budget is currently projected to end up with a year-end deficit of $1.8 million this year, and that's based on a March 29 deadline for norOntair. If it's going to be extended, that's going to be aggravated. So if the money should come from some source, then you can do something, but we can't. It becomes a bottom-line question.

Mr Preston: When did you do your 10-year visioning?

Mr Rukavina: We finalized that last year.

Mr Preston: Could you tell me what the date was?

Mr Rukavina: That would've been last fall. We had a discussion with the minister.

Mr Preston: In 1995.

Mr Rukavina: And presented that to him.

Mr Preston: How long had you been working on that?

Mr Rukavina: About a year and a half.

Mr Preston: About a year and a half, and so that's a year and a half before --

Mr Rukavina: We started in the fall of 1994.

Mr Preston: The fall of 1994, and you were looking at reducing subsidies coming ahead.

Mr Rukavina: We could see that that was going to be the situation.

Mr Preston: Long before this government came to power?

Mr Rukavina: Yes.

Mr Preston: Oh, under the former government, you thought subsidies were going to be reduced and that possibly the airline had to go?

Mr Rukavina: Because under the former government, we also had some reductions in the subsidy. And we could see that regardless of what government was going to be in power, that was going to be the trend. So we had to try and come up realistically in, "How do we face it?"

Mr Leadston: Thank you very much for again appearing. Two very quick questions: The gentleman who presented on behalf of the Olav Haavaldsrud Lumber Co from Hornepayne, he didn't know how many flights go into Hornepayne, and there wasn't an answer. Do you know how many?

Mr Rukavina: There is a daily flight.

Mr Leadston: There is a daily flight?

Mr Rukavina: Weekdays, a daily flight weekdays.

Mr Preston: So don't get sick on Saturday.

Mr Leadston: The other question is, the gentleman that presented on behalf of the Northern Ontario Transportation Coalition, are you a member?

Mr Rukavina: I'm a member. I put in my $25 as an individual or whatever the fee was, so I could keep track of what they were doing, good work that they're doing.

Mr Leadston: I'm not disputing his presentation. There was no mention as to who the membership, the coalition. So you joined as a private member?

Mr Rukavina: It was advertised at large, and I sent in my membership as an interested northerner who's interested in transportation.

Mr Leadston: But the corporation didn't.

Mr Rukavina: Not as a --

Mr Leadston: Did they participate in the process?

Mr Rukavina: With discussion. We had a discussion with Mr Kelly and others when they were formulating the proposal.

Mr Leadston: I'm very curious in terms of the effect of the closure of norOntair. How is that going to affect the other transportation services provided by you?

Mr Rukavina: I don't think it's going to have an effect on the others.

The Vice-Chair: That's the end of the questioning. We now, as a committee, want to thank you for coming twice before us and providing us with the background information we needed.

Mr Rukavina: We'll come any number of times you want.

The Vice-Chair: It was very helpful.

We are now going to move to consideration of the motion that was placed earlier today. I'm going to vacate so I can speak to that.

The Acting Chair (Ms Shelley Martel): Mr Martin, if you're prepared to proceed with the motion, I'd ask you to proceed at this time, please.

Mr Martin: I just want to speak to it. It's already on the table and I think I presented most of my information and feeling and sense of urgency around this the last time. We've since had a few more people come before us and certainly, if anything, we all must have heard the sense of urgency and concern that's there around the question of the provision of air service and the stability of that service so that it isn't here today and gone tomorrow; that there be some operator take over the operation who can in fact carry it out in both the short term and the long term.

We've had examples. The gentleman who came from Gore Bay talked to us about his venture. And we heard from other folks. The gentleman who came from Elliot Lake told us about them having three or four different operators come in over a period of a couple of years. That doesn't speak to any type of stability in any of those communities, and that's what they're after. They're after a formula that will provide them with the kind of ongoing stability that will allow them to develop their community in a way that will make it self-sustaining, so that they don't have to be, even in other ways besides the norOntair piece and air service, dependent any more, or as little as possible, on the good graces of government. That's what this is about.

Northern Ontario is different. It has challenges that are unique to itself. That's why ONTC was set up in the first place and that's why a previous Conservative government set up norOntair back when it did in the first place. The reasons for that operation certainly are as critical today and as important today as they were then.

In this motion that I've tabled, I am not asking for any commitment from the government to anything other than some more time, some more time to look at this, to bring the communities together, to bring the employees together, to bring some new investors together around a table so that we can in the end arrive at something that's going to be good for all of northern Ontario.

I just have to look back at my own experience over the last five to six years in Sault Ste Marie with Algoma Steel and St Marys Paper and Algoma Central Railway. Each one of them was a different challenge, each one of them was uniquely solved, but it was the same conglomeration of people around the table. It was the employees, it was management, it was the financial institutions, and government was there playing a major role. At the end of the day, we put together a new structure, a new organization that fit, as we've heard before, the context that needs to be there today, to not be hit with countervail duties by other countries. These companies now are very profitable. They're private sector, they're very profitable and they're providing an economy for my community. If we look even further, as I said before, to Kapuskasing and Thunder Bay and some of the other communities where this was done -- Atikokan -- you have those communities more viable today because there was a restructuring that was different, that brought together all of the resources that people could attract to the table to figure out, in the end, a formula that would work, and they're working.

I'm suggesting to you, if you give these communities, if you give the north and the resources that are there now, the time that they need to come up with a new approach, a new formula, that at the end of the day you'll have something that we can all say that we're proud of and that will be, I suggest, probably very uniquely different again but will serve the needs of northern Ontario where it concerns the question of transportation.

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Air, in this day and age, is as essential as water was at one time, as rail continues to be and as road continues to be. We continue to subsidize in a major way all of the transportation networks of southern Ontario. Any of them that you look at are being subsidized in one way or another and it's major; major dollars. Why, in this instance, would you not be willing to -- and we're not even talking money here; we're talking an extra couple of weeks or a month -- ask the minister, on behalf of this committee, on behalf of the people who have come before us expressing some grave concerns about the future of transportation networks in the north, why would you not be willing to ask the minister to give all of us a little extra time so that we can find an answer to this challenge?

Mr Michael Brown: I want to reiterate my support for Mr Martin's motion. I do understand, however, the problem and I want to talk directly to the government members when we talk about this. Mr Martin says what we need is time. I agree we need time. I don't agree with Mr Martin that it doesn't cost money. We've just heard from Ontario Northland that it does cost money. It costs about $450,000 a month, so there is a cost. We have to understand there is a cost. The question is, is the cost worth paying? I believe it is.

I believe that there's also the money there to pay for it. Northern Ontario contributed $60 million to general revenues from a fund that was dedicated solely to northern Ontario. It was to be held in a trust account solely for northerners. Just about a year ago that fund was contributed to general revenue, and my friends will tell me in return for some other considerations, but the fact is there's $60 million that was paid into general revenue. It's there. It belongs to northerners. It came in compensation for northern resource revenues that we do not receive.

You have to understand, and I might get a little passionate here, but northern Ontario would be, if it was a province on its own, the fifth largest -- I believe it's five; is that right? -- the fifth largest province in Confederation in terms of people, not land mass but people. It's a big place. It has a huge economy, contributes hugely to the economy of this province, way out of proportion to the number of folks we have there.

So we had established a heritage fund which was to, at $30 million a year, it was set up so that it was a separate bank account. It was a unique structure in the provincial government and the idea was, and you would appreciate that over on your side, that in that fund, if we did not spend the money in any given year, the money would accumulate, as would the interest. So we weren't in that situation where, come March 1, everybody started to dump money because it had to be spent or there was no money. Well, that $60 million was placed in general revenues for whatever purpose general revenues get money, which is everything. That's a direct subsidy to the rest of the province from northern Ontario. Sixty million bucks' worth.

Now, I think having gotten that, it seems to me reasonable, although it's not my first option -- my first option was it should be replaced and put back in the trust account right now -- but given the fact there is $60 million that left the pockets of people in northern Ontario to particularly pay into general revenues, that you could find $450,000. You might even find $900,000 or you might even find $1.3 million to go three months looking for a solution. It does not seem unreasonable. It is eminently reasonable that that kind of investment be put back into the north where the people so generously, although they didn't know it at the time, placed $60 million of revenue in the pockets of the people of all of Ontario. It seems to me that's a reasonable thing to do. So I talk to you as reasonable people.

Talk to the minister. See if there can be either the opportunity from the norOntair people who are exploring what sounds like an exciting option, or at least some kind of guarantee for all the communities that are presently served that there will be air service in northern Ontario, not just on April 1 but into the future for many, many years. I think that's reasonable. I can't imagine why there could be a problem, given the size of the contribution that northerners made to general revenues in this province in March 1995. It is an astounding, huge pile of money that was given to the people of Ontario from northerners, and I don't think this is a whole lot to ask.

Mr Preston: My question is, what happens when ABC coalition, corporation, employees' group takes over norOntair, revamps norOntair? Are they going to be flying it for fun or profit?

Interjection: For profit.

Mr Preston: For profit. Well, will they then be flying into these places that are non-profitable, or are we going to be back in the same situation again where we've got four places that we know of right now that we have to subsidize or do something about? Tell me, is norOntair going to fly into non-profitable areas?

The Acting Chair: Are you expecting an answer?

Mr Preston: That's the question I have of Mr Martin.

Mr Martin: Sure. Mr Wildman maybe would like to speak to it too. What we're wanting to do here, Mr Preston, is to explore the possibilities that these folks could, in bringing to the table the information they have -- perhaps a new approach they might bring to this whole operation that would find them in a position to do that. I suggest to you that whatever scenario unfolds here, there are some communities that are going to ultimately, in the end, need to be subsidized one way or another.

We heard about Atikokan this morning. I have no problem with that. Atikokan needs air service subsidizing. They need the service. Hornepayne needs service. Somehow you're going to have to do that, but you're not going to do it as efficiently with three or four different operators flying in and out, based on the small resources that they have. I think you do it more effectively when you have something like norOntair, and this is the agreement that perhaps could be cut with ONTC, where one community that makes money in some way or other subsidizes the community that doesn't.

When we restructured the Algoma Central Railroad in Sault Ste Marie, there was all kinds of scepticism about that because that operation had been losing money to the tune of about $10 million a year until we got there and continued to until we got it restructured. But in the end, the new operator brought a new approach and a new relationship with the employees, and where the company was losing money big time up until that point, they are now making money. This same company took over a line in upper Michigan. When they took it over it had 700 employees. Initially, they downgraded to about 300 to 400 employees. They're now at about 1,000 employees and the pay level is equal to, if not better than, the one across the river.

You bring new people to the table, you bring a new attitude, a new approach sometimes, and if you sit down around the table and listen to what people have to say, sometimes you can come up with answers that you never thought were possible, that will give you results, that you thought maybe were impossible as well. All we're asking for here, Mr Preston, is a little more time so that we can consider some of those options and maybe come up with something that will give us a formula that will see service guaranteed to those communities that right now, under the present scenario, will just not get it.

Mr Wildman: I wanted to respond to Mr Preston but I think Mr Wood wanted to get on to it.

Mr Bob Wood: You can go ahead.

The Acting Chair: If you want to respond to the same question.

Mr Wildman: I'll make a general speech. If you want to speak to that, feel free. Frankly, I think we're making some progress in these hearings. The last day that we had hearings, Mr Preston made impassioned statements that these communities were all going to have air service as of March 31. Now he recognizes that they probably won't unless they get some sort of subsidy.

Mr Preston: I didn't say anything like that at all.

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Mr Wildman: Well, that's what I heard. The fact is that what we're talking about here is asking for some time to rethink, to consult and see if we can bring players to the table who might be prepared to provide service. Frankly, we might not be successful. I'm confident that we could be, but it's possible that we won't be, that these communities that Mr Preston asked about may not have continued air service, that the employees in the Sault Ste Marie area and across northern Ontario won't have the opportunity to participate and that some communities will get air service from private carriers and many others won't. But why not give it a chance? Why not take the time to look at it? I recognize, as Mr Brown said, it's going to cost some money, but if it's successful it might provide services that otherwise won't be there. Why not take the time to see if we can do it?

Mr Preston: I think Mr Wildman has missed too much of the afternoon. If he had been here, he would have realized that we are not talking about communities missing service any more. That part's been all gone over.

Mr Wildman: So Hornepayne's going to have service?

The Acting Chair: Thank you very much. Mr Wood.

Mr Bob Wood: I'd like to speak generally to this question. The government members do not support this motion. It's fairly clear that the minister's policy of privatization is working very well, that 14 of 17 communities already have investor-owned air service promised to them. I think that shows the kind of dynamic business people and the kind of dynamic people, generally, there are in the north.

I'd like to review briefly the history of this. The announcement was made, of course, in the financial statement on November 29 last year. An official notice of bids was published on January 22, 1996. The closing date for bids was February 23, 1996. The bids were well advertised and a number have been received. Quite a number of inquiries were indeed received during December and January about this, so there has been ample time for people to put forward bids. It would hardly be fair to the bidders at this point to say: "We've changed our minds. Your bid doesn't mean anything." The bids were open to all and I think we have to be fair to all bidders.

The fact that these bids are proceeding does not prevent the employee group or anyone else from getting into the business. I might say I've spoken to the folks from the Sault and indicated to them that the minister's door is open at all times for communication on the matter. They're obviously a very dynamic group that have the future of their community, their region and their province very much at the forefront of their thinking, and the government's going to cooperate with them. But we do have to honour the process we have put in place, and this motion unfortunately can't be adopted, in my opinion, by this committee. The government members are not going to support it.

Mr Michael Brown: I have a quick question for the government. We have an undertaking from over there that you guarantee that all 17 communities will have air service and that they will have it not only on March 31, but they will have it on March 31, 1997, and March 31, 1998. My concern here is, gentlemen, that even though we may have service in 14 communities, we will not have it for any length of time, and it is of utmost importance that the government take some kind of a role here in that it doesn't abandon the northern communities very shortly thereafter. That could very well happen because private enterprise is only there where they can make a profit. I understand that. That's what private enterprise is about. But that is not the same issue as providing community service. If you can tell me that, I think a lot of us would be a lot happier.

Mr Wildman: Just a point of clarification: That's 17 communities besides Atikokan.

Mr Bob Wood: Yes, that's right. Atikokan is not apparent in the calculation. The answer is, of course, what the customers are prepared to support, they obviously are going to get. To the extent that there are problems, I think the minister is sensitive to individual problems and he's prepared to look at any legitimate case. What he does with that case he obviously can't know until he hears the case. At this time, we don't know how many communities are going to be served by investor-owned air service. It may well be all of them. We don't know.

To the extent that there are special problems, the minister is aware of special problems and is obviously prepared to look at them. The result of that I can't predict.

Mr Michael Brown: There is no guarantee.

Mr Bob Wood: There are no guarantees in life at all, in my experience.

Mr Michael Brown: We sure know that.

Mr Martin: I just want to say to the members opposite, you've been here with us, listening for two days now to communities that have expressed to you how important it is that they have air service. We've had no guarantees from anybody that that will be the case for particularly three or four of the smaller communities.

I think we have an opportunity here to explore some other alternatives. The mayors and the task force that's been established by the minister are certainly looking at some things. It's very constrained, though, by the time lines that are in place that have just been reiterated by Mr Wood. In the interest of transportation to the north, you heard that spelled out for you very clearly and eloquently by Mr Kelly here this afternoon, how absolutely essential it is that we have a network, an integrated network of air, land, water, rail up there.

If we're going to tap at all the potential of the resources we have and the economy of that place, if it's going to be continue to be a viable part of this province in the many ways that it has become, then we need to be doing all we can to find a way to answer some of the very difficult questions that are out there. It's not good enough to just say, "Well, the private sector is interested and we think that they'll come forward." We don't know that and we don't know, when they do come forward, how long they will stay.

I'm appealing to you. I know the whip's been cracked, but as I said before, each one of you has been elected by a constituency of people in Ontario. They expect you to think independently from time to time, and when you feel in the gut of your stomach that something is right, then I think you should be willing to step out and take a chance, be courageous and say that this is in fact the right thing to do at this particular point in time. I suggest to you that in this instance, asking for a little time is not an outrageous request.

The Acting Chair: Thank you very much, Mr Martin.

On the motion, please, all those in favour of the motion that has been put by Mr Martin? Those opposed? The motion is defeated.

SUBCOMMITTEE REPORT

The Acting Chair: If I might ask the Chair to resume his duties, I understand there's a report of the subcommittee which also needs to be considered before this committee leaves today.

Mr Bob Wood: I will move the adoption of the report of the subcommittee and move that the reading of it be waived.

The Vice-Chair: Okay. Any comment on that? If not, all those in favour of adopting the subcommittee report please raise your hand. All those opposed? Carried.

That's it. Thank you very much. We will be, as a subcommittee, considering how we might come up with a report at the end of these very important two days and we'll be reporting back to the committee on that.

The committee adjourned at 1658.