30 March 2007

Flags of our fathers

Dean MacDonald is a fine example of his generation of Newfoundlanders and Labradorians.

Bright and articulate, he has made a reputation for himself as a success in the private sector.

He's a fine choice as chairman of the province's Crown-owned Hydro Corporation.

If he can deliver a Lower Churchill project that delivers economic and other benefits to the project over its entire lifespan, then he will have done something no one else has been able to do in 40 years. It will be good for him and there will be no one, save for a few cranks who oppose shipping anything out of the province at all, who will hesitate to stand up and cheer.

However, his remarks to the St. John's Rotary club, as reported by the Telegram, miss the point of current issues about Equalization, the Lower Churchill project and how the province can move forward.

Of the subsea transmission route for Lower Churchill power, MacDonald is quoted as saying this:
"It's not poppycock. It's fact," he said of the much-maligned subsea route.

MacDonald said there are examples "all over the world" of more power being transmitted over longer distances under the sea.

He said it may cost more to build, but the people of this province will reap the rewards in the end.

"The cost is such a damn good cost to not have to depend on anybody. To maybe pay a little more to build it, but when you sell it, we don't have to pay a toll charge on the way," he said.
Well, sort of.

No one questions the technical feasibility of undersea transmission. Since the Churchill Falls project was first considered in the 1950s and early 1960s, one option for transmitting Labrador power to market involved underwater transmission either over short or long distances. MacDonald is right when he says that more power is transmitted over longer distances elsewhere on the planet.

The undersea approach is definitely more costly than hooking into existing land lines and that's really the crux of the decision on transmission route: money.

Every analysis of the undersea approach to date has concluded that while it is technically feasible, it hasn't been possible to get the power to market at a cost that is competitive, let alone profitable. At one point, even a land line route to the United States couldn't deliver power to market at a price the customer would pay. Times change and maybe times have changed on the undersea option.

But given the back end of MacDonald's remarks on this issue, though, it doesn't look like the undersea route is any better financially today than it was 35 years ago. MacDonald frames the cost as being good - not in terms of profitability - but in terms of not having to deal with Quebec.

Saving toll costs would be good since, if the price is the same at the point of delivery, Lower Churchill power would be more profitable for Hydro using the undersea route. Unfortunately for MacDonald, his boss, Premier Danny Williams, has talked about deferring revenues on the underwater route. That suggests that the toll costs wouldn't wind up as profit in Hydro coffers. Rather, Hydro would wind up in that scenario selling its power at cost or at a much lower profit or Heaven forbid below cost - than if it used the land route and paid the wheeling charges for running lines through Quebec.

[Now let's leave this option open. If Dean MacDonald wants to give some better information than what the Telegram offered, if he wants to put accurate information on the cost issues in the underwater route in the public domain available, this space is his to use. MacDonald has the e-mail address. He can fire off a submission and Bond will carry it, unedited and in its entirety. Bond readers include most of Hydro's target audiences.]

If the reward is pride, thanks very much but no thanks. But if the reward of MacDonald's approach is more cash, then more power to him, puns aside.

On the current Equalization fracas, there's no surprise that MacDonald unequivocally backs his former business partner Danny Williams:
"I'm mad as a Newfoundlander and Labradorian about what's gone on here. There may be a price to pay in the short term, but we have to draw a line in the sand," MacDonald said.
There's also no surprise that MacDonald couldn't put a value on the price. His boss hasn't been able to do it. There's no surprise also that MacDonald offers up nothing more than Danny-esque rhetoric of drawing lines in sand and getting ready for "war". Danny Williams' latest war may be justified, however, as with every other war he has raged, Williams has been unwilling or unable to provide any substantive evidence to back his ire.

Rather he, and apparently MacDonald, can do nothing but wave the flags of our forefathers. those flags are the time-honoured cry of previous generations having been hoodwinked by foreigners, of rolling over, of falling into traps and of having generally and always having signed bad deals.

MacDonald decries our collective insecurity, yet the very words that he and his boss use repeatedly do nothing except reinforce the old insecurities.

In the final remarks in the Telegram article, MacDonald returns to another of the old flags of our post-Confederation forefathers:
"Why is it when Newfoundland and Labrador asks for it, it's something that we don't deserve or it's something we shouldn't get? Well, it's so important that we don't roll over on it."
Fortunately for us, his other remarks on this point were carried by CBC radio's On the go. MacDonald referred to Alberta's oil royalty regime. No one has opposed that since the 1985 Atlantic Accord. Newfoundland and Labrador today is in exactly the same position with respect to oil and gas royalties as any province in the country. In some respects, for example in comparison to the tar sands, our existing royalty regime is infinitely better than the Alberta regime.

MacDonald also mentioned fallow field legislation. Of course, what he did not say is that the circumstances offshore Newfoundland and Labrador do not offer up examples of kind found elsewhere where fallow field legislation actually makes field management or financial sense.

At the end though, this is yet another of the flags of our fathers, namely that some foreign oppressor is trying to keep us down.

Poppycock, to borrow MacDonald's word.

Politicians and others wave those flags because they believe them, but as time passes, they have become threadbare. Those flags have served as nothing but a distraction, as a means of keeping people in the province from looking more closely at decisions made by our own politicians irrespective of partisan stripe.

Unfortunately for MacDonald, people are increasingly looking through the tattered strands to see what is behind. in the business community, if nowhere else, we have learned that lines in the sand and "deferred revenue" are red flags, not banners to rally behind.

If MacDonald can produce a profitable project on the Lower Churchill, then he will be lauded.

If at the end, MacDonald produces nothing at all, or worse, a deal that delivers nothing but the benefits of the "deferred revenue" Churchill Falls project, they will understand that while MacDonald is a fine example of the current generation, he can be all too easily distracted by the flags of old.

That would be the shame of this entire Hydro exercise.

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