An Act to authorize the divestiture of the assets of, and to dissolve, the Cape Breton Development Corporation, to amend the Cape Breton Development Corporation Act and to make consequential amendments to other Acts (LS-349E)

This document was prepared by the staff of the Parliamentary Research Branch to provide Canadian Parliamentarians with plain language background and analysis of proposed government legislation. Legislative summaries are not government documents. They have no official legal status and do not constitute legal advice or opinion. Please note, the Legislative Summary describes the bill as of the date shown at the beginning of the document. For the latest published version of the bill, please consult the parliamentary internet site at www.parl.gc.ca.

HOUSE OF COMMONS		SENATE
Bill Stage	Date	Bill Stage	Date
First Reading:	27 October 1999	First Reading:	8 June 2000
Second Reading:	8 May 2000	Second Reading:	15 June 2000
Committee Report:	31 May 2000	Committee Report:
Report Stage:	6 June 2000	Report Stage:
Third Reading:	7 June 2000	Third Reading:

Royal Assent: Statutes of Canada N.B. Any substantive changes in this Legislative Summary which have been made since the preceding issue are indicated in bold print.

BILL C-11: AN ACT TO AUTHORIZE THE DIVESTITURE
OF THE ASSETS OF, AND TO DISSOLVE,
THE CAPE BRETON DEVELOPMENT CORPORATION,
TO AMEND THE CAPE BRETON DEVELOPMENT
CORPORATION ACT AND TO MAKE CONSEQUENTIAL
AMENDMENTS TO OTHER ACTS

The federal government has been directly involved in Cape Breton’s coal mining industry since 1967, injecting more than $1.5 billion into coal mining operations since the inception of the Cape Breton Development Corporation (DEVCO). Obviously, though commercial viability was not a primary objective throughout much of this period, it did become increasingly important in the 1990s. In response to growing fiscal pressures, the Treasury Board of Canada in March 1990 provided DEVCO with a mandate to become self-sufficient by the end of the fiscal year 1994-95. Despite some progress, DEVCO was unable to meet this target. DEVCO’s approved five-year Corporate Plan, beginning in the fiscal year 1996-97, involved a $69-million loan to cover projected losses from 1995-96 to 1998-99. During this period, commercial viability continued to elude DEVCO. Plagued by a series of production stoppages, attributed primarily to poor geological conditions and mechanical problems, DEVCO sought and received an additional $41 million to cover losses to the end of the fiscal year 1998-99. This development caused the government to decide that DEVCO’s goal of commercial viability would not be achieved and that the industry’s best chance for continued operations rested with privatization. This decision was announced on 28 January 1999, at the same time as a $111-million workforce adjustment package and $68 million for long-term economic development. Initially, the plan called for the Phalen mine to close by the end of the year 2000. However, production was halted in this mine on 7 September 1999 as a result of the second major weighting and rockfall since February 1999. In response to this early closure, the government announced that it would increase funding by another $70 million to sustain DEVCO until the end of the current fiscal year.

Bill C-11 - intended to provide authority to DEVCO to sell its assets and take the necessary steps to close out its affairs - was introduced in the House of Commons on 27 October 1999. Assets for sale include the Prince and Phalen collieries, the Donkin mine site, a coal pier and railway, a coal preparation plant and related mine infrastructure.

Clauses 2 through 4 would authorize DEVCO to sell its assets and close out its affairs to permit it to be dissolved on a day to be fixed by order of the Governor in Council; the Government of Canada would be made liable for any legal action arising out of an obligation or liability DEVCO thereby incurred. Clause 2(2) would permit the Corporation to retain the proceeds of the disposition of any assets referred to in clause 2(1)(a). Clause 5 would declare "works for the general advantage of Canada" to be those works and undertakings operated or carried on by the Corporation on or after 15 June 1967. This provision is intended to ensure that the Canada Labour Code would continue to apply to coal miners in Cape Breton.

Clause 6 would repeal the definitions of "Coal Division" and "companies" and substitute "Chairperson" for "Chairman" in section 2 of the Act. It is unclear why the current Act continues to refer to a "Coal Division," since that division has constituted the entire corporation since the provision for the Industrial Development Division was repealed and the Enterprise Cape Breton Corporation Act came into force in December 1988. The word "companies" refers to all of the companies involved in DEVCO’s initial acquisition of property, including the Dominion Coal Company, Nova Scotia Steel and Coal Company, Dominion Rolling Stock Company, Sydney and Louisburg Railway Company, Scotia Rolling Stock Company and the Cumberland Railway Company.

Clause 7 would amend section 3 of the Act by substituting "Chairperson" for "Chairman" and by incorporating the words "a maximum of," thereby potentially reducing the size of the Board of Directors to fewer than the seven members currently required.

In addition to adding gender-neutral wording, clause 8 would amend section 4 of the Act by eliminating the requirement that the Lieutenant Governor in Council of Nova Scotia be consulted regarding the appointment of the Chairperson and the President and should also recommend the appointment of two directors to DEVCO’s Board. This clause would also repeal subsections 4(5) and (6) of the Act. The former subsection requires the appointment of a director to cease when he or she reaches 70 years of age, while the latter permits the Board to continue its business despite having a vacancy, though also requiring that vacancies be filled as soon as practicable.

Clause 9 would amend section 5 of the English version of the Act by incorporating gender-neutral wording.

Clause 10 would amend section 7(1) of the English version of the Act by incorporating gender-neutral terms and other minor wording changes.

Clause 11 would eliminate sections 8 through 14 of the Act, apart from subsections 8(3) and (4), which would be subject to minor wording and renumbering changes. The contents of sections 8 to 14 refer primarily to the establishment and governance of the Coal Division and the authority to acquire land and property that constituted or formed part of the works and undertakings conducted on or after 15 June 1967 and also extend authority to provide compensation for these acquisitions. As previously noted, while the Act provides for the establishment of a Coal Division, this entity no longer exists. Furthermore, the current position of Vice-President relates to the Corporation as a whole and not to the Coal Division mentioned in current section 8(1).

Clause 12 would replace the headings before section 15 (i.e. Coal Division, and Objects, Powers and Duties) and sections 15 to 17 of the Act. It would amend section 15 of the Act by restricting the objects of the Corporation to conducting coal mining and related operations in the Sydney coal field on a basis consistent with efficient mining practices and mine safety. Deleted from this section of the Act would be references to the Coal Division, the reorganization and rehabilitation of coal mining related to works and undertakings that were operated prior to their acquisition by DEVCO, and the plan submitted by the Corporation pursuant to section 17 of the Act. Clause 12 would also amend section 16 of the Act by deleting subsection 16(a), which refers to assuming the rights of coal sales contracts held by the Dominion Coal Company at the time of acquisition. Other amendments to section 16 would eliminate references to the Coal Division, make minor wording changes and re-letter the remaining subsections. Finally, clause 12 would delete section 17 of the Act, which seems to be another carryover from earlier days, since it refers to the original plan. Although a lack of consensus appears to exist with respect to DEVCO’s current mandate, its recent Corporate Plans have not conveyed a responsibility for providing employment outside the coal-producing industry or broadening the base of the economy of Cape Breton. Rather, this mandate has been extended to the Enterprise Cape Breton Corporation, which was established in 1988.

Clause 13 would replace sections 18 to 21 of the Act. The reference in section 18 to pensioners formerly employed by the companies subsumed by DEVCO would be eliminated, as would be subsection 18(2), which pertains to the provision of lump-sum or other benefit payments to individuals who are laid off or retired at an earlier than usual age. According to DEVCO, the latter benefit is now provided by way of collective agreements. By retaining section 19(3) of the Act, clause 13 would maintain the authority of the Minister of Finance to authorize working capital advances. In addition, clause 13 would eliminate sections 20 and 21 of the Act, which refer to financial matters pertaining to the former Coal Division.

Despite the elimination (under clause 14) of section 26 of the Act, DEVCO would have to continue to submit operating and capital budgets pursuant to sections 123 and 124 of the Financial Administration Act, at least until clause 19 came into force. Clause 14 would, in addition to some minor wording changes, amend section 27 of the Act by replacing the reference to "at Sydney" as the location of the Corporation’s headquarters with the words "on the Island of Cape Breton." Although it is uncertain whether DEVCO’s headquarters have ever been located in Sydney, this is certainly not the case today.

Clause 15 would amend section 28(e) of the Act by deleting the reference to pensions "for whom provision is made by any by-law made pursuant to section 18" of the Act. This amendment follows from the amendment to section 18 of the Act as discussed under clause 13.

Clause 16 would amend section 30(1) of the Act to ensure continuity with the renumbering of section 8(1), a consequence of clause 11.

Sections 33 (submitting an annual report), 34 (winding up the affairs of DEVCO) and 35 (works and undertakings declared to be for the general advantage of Canada, to be covered in clause 5) of the Act would be eliminated under clause 17. Clause 17 would also provide for the repeal of the Cape Breton Development Corporation Act or any of its provisions on a day or days to be fixed by order of the Governor in Council. In other words, if this clause were to become law, the Cape Breton Development Corporation Act would be repealed in the absence of further parliamentary approval.

Clauses 18 to 22 contain consequential amendments to Schedule 1 of the Federal-Provincial Fiscal Arrangements Act, Part I of Schedule III of the Financial Administration Act, Schedules I and III of the Municipal Grants Act, and Part I of the Public Service Superannuation Act. In all cases, these consequential amendments would remove references to the Cape Breton Development Corporation.

Under clause 23, clauses 7(2) and 8(2) and clauses 18 to 22 of the bill would come into force on a day or days to be fixed by order of the Governor in Council. The remaining portions of the bill would come into force on Royal Assent.

Probably the most contentious aspect of Bill C-11 – aside from the policy decision to privatize DEVCO – appears to be related to clause 12. Among other changes, this clause would eliminate section 17 of the Cape Breton Development Corporation Act. This section requires DEVCO to submit a plan for the approval of the Governor in Council by 1 October 1968. This plan had to include an outline of how DEVCO intended to conduct coal mining operations, phase-out coal mining production and discontinue coal production in mines that were not economically viable. As well, however, the plan was to take into account the provision of employment outside the coal-producing industry and broadening the base of the economy of Cape Breton. In addition, section 17 of the present Act requires DEVCO to adopt, in conjunction with the Government of Canada and/or Nova Scotia and their agencies, all reasonable measures to reduce unemployment and hardship that can be expected in response to a shutdown or a reduction in coal production.

Opponents of the bill would like to see this social obligation to Cape Breton maintained by being incorporated in the bill. In contrast to this view, others point out that section 17 of the Act is a throwback to the days when DEVCO was composed of both a Coal Division and an Industrial Development Division, an organizational structure that ceased when the Industrial Development Division was removed from the Act and the mandate for economic development on Cape Breton Island was transferred to the Enterprise Cape Breton Corporation (ECBC) in 1988. In this context, the Enterprise Cape Breton Corporation Act states that "[t]he objects of the Corporation are to promote and assist, either alone or in conjunction with any person or the Government of Canada or of Nova Scotia or any agency of either of those governments, the financing and development of industry on Cape Breton Island to provide employment outside the coal producing industry and to broaden the base of the economy of Cape Breton Island." Notwithstanding this mandate of the ECBC, the federal government’s decision to privatize DEVCO was accompanied by an announcement that it would spend $68 million to promote new and long-term economic development opportunities for Cape Breton. The Government of Nova Scotia has recently decided to contribute $12 million for the same purpose.