Comment on the Provincial Government backgrounder

Following is taken from the backgrounder accompanying today's new release from the Government of Newfoundland and Labrador. I apologize for the length, but hey, it is a complex subject. I will leave aside the Premier's speech and the news release since he largely repeats the same misrepresentations and factual distortions on which the provincial government argument has been built.

Someone has asked for a more dteailed discussion of the deal, I suspect out of concern that Paul Martin has, in a phrase, "sold the shop". Although I'd hesitate to put it in these terms, I'll try and give a federal/provincial scoresheet tomorrow (01 Feb 05) that gives the objectives obtained by each government and at what cost, political or financial.

In general, this agreement represents the structure and principles of the December 22, 2004 offer from the Government of Canada with modifications typical of what is normally achieved in any negotiating process. In general, the principles of the October proposal carry forward into the December proposal; the major difference is the method used to calculate the offset.

In practice, the October formula should have produced the same financial result for the provincial government as this agreement does. The argument on the quantum produced was based solely on the price per barrel of oil, not on the method of calculation. The notion that the October deal was less lucrative than the December proposal is a completely erroneous interpretation by the Government of Newfoundland and Labrador, repeated without question by local news media.

Backgrounder

100% guarantee

Newfoundland and Labrador will receive 100 per cent of our offshore revenues, free from any clawbacks while we are an equalization-receiving province, for the full life of the agreement (subject to meeting conditions of the second eight-year renewal triggers). [Comment: As presented, the provincial government has accepted an offset in the first two years which is actually less than direct revenues. They key aspect of this section is that the offset continues only as long as he province qualifies to receive Equalization; this is definitely not what the province sought and therefore represents a significant gap between goal and result. While the province may resume offsets if it qualifies again for Equalization within the first eight years, this is highly unlikely to occur. If the province no longer qualifies for Equalization in the second eight-year phase, the offsets drop to zero within two years.]

Enhanced protection when off equalization

Newfoundland and Labrador will still receive the full benefits of the protection offered by the Atlantic Accord. The existing Accord's offset mechanism has been extended by one year to cover the full first eight-year term. During the second eight-year term, should the province no longer qualify for equalization in any year, it will receive 66 per cent of the previous year's offset payment in year one and 33 per cent in year two. Should the province requalify for equalization, the 100 per cent offset will be restored. If the province comes off of equalization again within that time frame, the transition is reset. [This is largely a theoretical protection. If the provincial government no longer qualifies for Equalization within the first eight years of this deal, then the declining offset provisions of the original Atlantic Accord apply. Getting rid of the declining offsets was the central part of the original provincial proposal in February 2004. In the most likely scenario, the province will not qualify for Equalization within the next three to five years and therefore will likely not qualify for the second eight-year offset period.]

$2 billion floor

Newfoundland and Labrador will receive an up-front payment of $2 billion (plus interest), which represents a floor on future additional offset payments above and beyond the existing Accord offset payments. This floor essentially protects the province from a decline in oil prices between $30-35US/barrel. In other words, offset payments for the first eight years will be no less than what they would be if the price of oil remains constant between $30-35US/barrel and the level of production remains at the forecasted levels. While minimizing risk to the province, this provision in no way restricts the province's ability to benefit from oil prices above this range. It will also minimize the risk of a steep decline in offset payments in years in which the province no longer qualifies for equalization. [Floor or ceiling? Take your pick. The $2.0 billion is a single amount. The interest noted in this paragraph results solely from an investment of the money received, not an additional transfer from the Government of Canada. If the province spends all $2.0 billion in a week, then it collects little or no interest. In the most likely scenario, oil prices will remain well above US$30 per barrel over the next five years and therefore the provincial government will cease to qualify for Equalization. If oil prices are well above that level, the claim that this in no way restricts the ability to benefit from high prices is misleading. High prices will push the province off Equalization. No offsets will flow under this agreement so the province reverts to the Atlantic Accord benefits (ability to set own revenues). This agreement did not enhance this situation - this is the situation that already exists! The province sets and collects its full share of direct revenues. In the ordinary course, the Equalization program protects provincial governments from steep declines in Equalization. Hence a rapid decline in offsets is simply the loss of one parachute from a two-parachute braking system.

Given the way Premier Williams has referred to this lump sum, it is not clear that the amount will actually be transferred to the provincial government in toto. It would appear that the provincial government is somehow restricted in what it can draw from a fund to be established. It may be that this amount will be deposited in the Canada Offshore Fund account already established to transfer oil revenues collected on behalf of the provincial government by Natural Resources Canada and that the province will be restricted in how much may be drawn down on an annual basis. Only the full text of the agreement and the implementation legislation will make this clear.]

All new projects are included

The benefits of this agreement will apply during the sixteen-year term to any new oil and gas discovery that is developed within its 16-year term, including Hebron-Ben Nevis and yet-to-be-discovered fields in the Orphan Basin, Laurentian Sub-Basin and offshore Labrador. [This provision applies only if the provincial government still qualifies for Equalization and qualifies for the second eight-year offset period. Otherwise, the projects are not covered. In the most likely scenario, they are not offset. This represents a loss from the June 5 agreement and from the December agreement which guaranteed a separate offset for Hebron-Ben Nevis. Bear in mind that the total amount of the cash advance is a little more than double anticipated direct revenues from White Rose. The initial goal was to double the revenues from all four projects. The post-June 10 goal was to double revenues from current and future discoveries.]

Guaranteed payments for 2004-05 and 2005-06

The equalization system is undergoing review on a national basis, with a new system to be established starting in 2006-07. As part of this review, equalization payments for 2004-05 and 2005-06 have already been determined. Therefore, it has also been possible to determine the value of the new offset payments under the Agreement in Principle. For the fiscal year 2004-05, the value of the additional offset payment to provide this 100 per cent offset will be $133.6 million. For the fiscal year 2005-06, the value of the additional offset payment to provide this 100 per cent offset will be $188.7 million. [The value of offset payments under this agreement for the first two years should not be dependent on the amounts already determined for Equalization. The offset is supposed to be based on actual revenues received and operates separate from the Equalization program. in fcat the Accord offsets in the original document are calculated on a 10 province standard. Given that oil prices are much higher and therefore revenues are much higher than forecast, these amounts fall far short of what a genuine 100% offset would be. In practice, though, this section is mooted by the lump sum payment of $2.0 billion. Therefore, it is curious that these specific amounts are highlight. Based on current estimates provincial direct revenues from oil production for Fiscal Year 2004 would be over $300 million, not the $133.6 million suggested here.]

Review mechanism for offset payment calculation

As part of the national review of equalization, the federal government will consider the recommendations of an independent panel and introduce changes to the equalization program starting in 2006-07. Given that the new offset arrangement between Newfoundland and Labrador and the federal government is dependent on the mechanics of the equalization system, our agreement contains a clearly-worded principle on how the 100 per cent obligation will be honoured, in light of any changes to equalization. As well, if the province disagrees with the federal government on how the offset payments have been calculated starting in 2006-07, the province can request that the federal calculations be audited to ensure they are consistent with the 100 per cent principle. [Without the actual wording of the clause, there is no way of assessing the accuracy of this claimed benefit.]

16-year agreement

This agreement ensures that Newfoundland and Labrador will continue to receive 100 per cent of our offshore revenues while we are an equalization-recipient province for 16 years, subject to meeting certain fiscal indicators after the first eight years. The province must receive equalization in 2010-11 or 2011-12, and our per capita debt servicing costs cannot become lower than that of at least four other provinces. These conditions only apply at the end of year eight, to determine whether the second eight-year period will be triggered. [As noted above and elsewhere, in the most likely scenario, the provincial government will cease to qualify for Equalization within the first eight year period. Theoretically, it is a 16 year deal. Theoretically, pigs can fly.]

Review mechanism after 16 years

This agreement provides for a review mechanism after sixteen years. The federal and provincial governments agree that no later than the beginning of the sixteenth year of the agreement, the two levels of government will jointly enter into a review of the agreement. [Any agreement would normally include a "re-opener" clause. Theoretically, as a matter of legal principle, the Upper Churchill contract can be re-opened based on the agreement of the signatories. If one party refuses to amend the agreement, then only a specific clause can force amendment under specified conditions. In practice, if a future Government of Newfoundland and Labrador or Government of Canada refuses to accept the results of a review, then this clause is completely meaningless.]

Most favoured agreement provision

Should the Government of Canada enter into a new offshore petroleum resource revenue agreement with another province or territory that is more beneficial to Newfoundland and Labrador, the province can opt to commence negotiations to revise this agreement. [Grammatically, this paragraph is a nonsense. It is almost impossible to conceive of a situation in which any provincial government would negotiate an agreement that actually proves more beneficial to another province than it does to itself. The Upper Churchill deal is an extremely rare exception, of course. If this clause applied in that instance it would actually apply to Quebec which, of course, wouldn't want to renegotiate a deal from which is all ready "more beneficial". hence the nonsense of the above paragraph. Throughout this entire year of Accord discussions, there is ample evidence that provincial government officials have difficulty communicating effectively in plain English. Either that or Humpty Dumpty works for the Government of Newfoundland and Labrador. 'A word shall mean...']

Paul Martin fixes the Accord, yet again

In the midst of all the Accord spin out there over the past year, it is easy to forget a few simple points:

1. When the provincial government approached John Crosbie on this Accord offset issue in 1990, it was told, in so many words, to "get stuffed". See Paul Wells blog from a couple of days ago for that story. Wells points out, quite rightly, that if any Paul Martin cabinet minister reacted the way Crosbie did, that minister would be on the backbenches so fast it would be unbelievable. It's a bit of a backhanded compliment, Paul, but coming from such an ardent Martin critic, I am sure the PMO would take it!

2. This is the SECOND time Paul Martin has enhanced Equalization offsets in the Atlantic Accord. He did it in 1993/94 and now that he has more cash available, he has delivered on his commitment yet again.

3. The PM has also committed to help the provincial government with other economic development projects, like the Lower Churchill. Go back to last April and you'll see that in local media clippings. All he is waiting on is a contact from the provincial government. He has been waiting for some contact since this time last year. That length of delay on that file is inexplicable. Sheesh, if any Newfoundland and Labrador government in the past had had the PM's personal commitment like that, they surely would not have let it sit untouched this long.

Maybe Bill Rowe could find some time in his cramped schedule and see if he can move that file along.

Don't step in the spin

Alright, let's get this much said right up front so there is no mistake:

There is a deal. It is a good deal. There is more than enough deserved credit to go around.

It's a good deal because it secures extra cash for the provincial treasury. It is a good deal because Danny Williams, unlike some recent politicians hereabouts - Peckford and Tobin to name two - knew when to take the money and run. He could have easily decided to overplay the political hand and, like Tobin and Peckford, cost the province dearly in delayed development.

For Tobin, it was his "teaspoon" crap that was designed solely to keep his personal polling numbers up. Voisey's Bay sat in the ground costing us millions in needed cash although a good deal was attainable before Grimes signed his agreement. For Peckford it was the "ownership" argument that he continued with long after he was advised, soundly advised, that it was a loser of a position. The oil sat in the ground and we lost money in the process, even though a new deal could have been struck to improve whatever could have been signed before 1984 once Mulroney or some other Prime Minister came to office.

Williams could have fallen into the same trap but he didn't. Good for him. He has elected to spend some political capital to sell this deal, even though you can bet your bottom dollar that the Open Line pundits and other negative Nellies will be lining up to point out the obvious - Danny did say yes to less than he sought after June 10. Spending political capital is the make of a serious politican.

Bear in mind, we heard the same sort of people wanting to leave Hibernia oil in the ground in 1990, as The Telegram did, simply because a "perfect" deal wasn't on the table. Politics is the art of the possible, and, as Don Jamieson's memoirs said, it is no place for fools. Fools, in this instance, are the people who struggle for the obviously unattainable and then whine and gripe when they don't get perfection. Danny Williams is no fool, thank God.

That said, there has been a supertanker load of spin spewing from the provincial government and its supporters over the past year about this whole issue. Spin, to put it bluntly, is nothing less than refined bullshit. Be careful you don't step in it.

The Sunday Telegram is brimming with spin today, both in its editorial and in the two front page stories. Undoubtedly there will be yet more this evening and tomorrow as the call-in shows crank back up. People will ignore the federal government's role - specifically Paul Martin's delivery on a commitment to help the province. They'll forget he has waited around for a year for the province to take him up on his offer to help with a project like the Lower Churchill. They'll also have to listen to the people lining up to take credit - unwarranted credit - for this agreement. I already have at least one e-mail of that latter sort.

Let's just take a sample of the spin from George Baker and Danny Williams and shovel it out the door right now.

George Baker, lately of what an old prof of mine used to call the Antechamber to the Kingdom of Heaven - claims Danny Williams is a non-politician. Spin! Williams is a typical local politician. He milked the sense of frustration in the province for all it was worth. He put on a great show for the past three months to earn accolades about being the "only fighting Newfoundlander". He created an artifical crisis - over the Accord and the province's fiscal position - so he could claim credit for fixing it. Alright, so let him enjoy the role of conquering hero led through the gates of the city.

Thereafter follows the second big pat of spin that ultimately makes this exercise a sham. Premier Williams is quoted in The Telegram today talking about restoring confidence in the people of the province, of turning a corner to "have" status. Spin!

What is producing the economic benefit is the very Atlantic Accord Premier Williams so energetically and needlessly trashed these past few months. We will attain "have" province status as a result of oil revenues already flowing as a direct result of the Atlantic Accord. What Danny brought back from Ottawa was some gravy and good on him for doing it.

What will restore confidence, though, is the understanding that this province is NOT poor, that our provincial finances are not in utter disarray. Confidence comes from realising that all the cuts and belt tightening in the early 1990s proved that we, collectively, can sort out our own financial mess and then reap the reward, just as the people of Saskatchewan have done. Confidence comes from realising that even though an old-fashioned spin shoveller can still take power, he didn't last very long once we caught on.

Confidence will be bolstered by looking around and seeing local entrepreneurs taking advantage of the oil industry, building new businesses and competing successfully around the globe for work. Confidence is easy to find in the other entrepreneurs in other industries who are responsible for growth in the economy and job creation apart from the oil business. Confidence comes from realising that while cod are gone - and they are gone, by the way - other fishing is producing new wealth in the province. Local companies are catching and processing local sea products and selling them around the world. FPI is the biggest but there are others.

No one man or woman can restore confidence in this province. As good a guy as Danny is, he is no saviour. We don't need one. Our economic salvation rests in the hands of each person in the province. Would that local news media focused on that for a change; maybe then Margaret Wente and Michale Bliss would have something better to write about. Maybe then, people in other provinces would see what is actually going on down here without having to send guys like Roy MacGregor on high-altitude survey missions in hopes of finding the Lost City of Atlantis.

Danny shouldn't be clamouring for saviour status and he should refuse the label if someone tries to stick a crown on his head. Just as surely as the Atlantic Accord was turned into someone's political give-away myth 20 years after the fact, Danny Williams should recognize that the same people weaving his raiment today for this great deal, have nails and hammer and tree out in the back yard for the next, inevitable phase of the "saviour" story.

It's a good deal Danny and congratulations. Just watch out for the spin.

He said yes to less (revised)

While Premier Danny Williams' supporters will be lauding the agreement on offshore revenues as a triumph, a closer examination reveals something very different.

The following comments are based on the position which Premier Williams stated in 10 June 2004 and which he has maintained as the provincial position until 28 January 2005.

Objective 1: A new offset mechanism delivering to the Government of Newfoundland and Labrador a transfer from the Government of Canada equal to 100% of direct offshore oil and gas revenues, continuing over the life of offshore oil and gas production, irrespective of the provincial government's Equalization entitlement. [Williams to Martin, 10 June 2004]

Note: By current estimates offshore oil and gas production will continue until 2025-2030, or a maximum of 25 years from the current date. This does not include any future discoveries and assumes that the Hebron field will be brought on stream within the next five years.

Shortfall 1: The deal reached with Ottawa is for eight years, with a possible further extension of eight years, for a maximum of 16 years.

Shortfall 2: There is no provision to cover future fields, nor for the extension to the full life of existing offshore oil and gas production. In the conversation with the Prime Minister on 5 June 2004, the Premier had secured "ongoing additional monies available as this goes on into the future and as new fields come on." [Premier Williams, House of Assembly, 7 June 2004]

Objective 2: End the "clawback" of oil and gas revenues under Equalization, for a period of at least eight years (Williams January to 5 June, 2004) and, as the Premier has argued since 05 June 2004, for the life of oil production since "why should we get less than 100% of our revenues after we're equalized?" [Interview with Carol MacNeil, CBC Sunday, 29 October 2004]

Shortfall 3: The current Equalization system continues to apply. If Newfoundland and Labrador no longer qualifies for Equalization within the initial eight year period it receives no added offsets beyond the cash advance, and particularly, if the province is not receiving Equalization between 2010 and 2012, it does not qualify for the second eight year offset period.

Shortfall 4: Under this agreement, once the provincial government no longer qualifies for Equalization, its oil and gas revenues are assessed under the Equalization program as they are currently using the generic solution. (30% shielded from Equalization)

Objective 3: Secure "principle beneficiary" status by amending the existing Atlantic Accord to contain new offset provisions.

Shortfall 5: There will be no amendment to the existing Atlantic Accord under the new arrangement. This is actually not a shortfall, since it secures the agreement against challenges to its current exemption from the North American Free Trade Agreement arising from a redefinition of the strategic objectives of the Accord.

General comments:

* The cash advance of $2.0 billion represents a mid-point between the October estimated value of the offsets based on then-current oil prices and more recent assessments. Fluctuations in the price of oil will affect the cash value of the agreement. It is important to note that the quantum (amount of money) is not as important as the underlying principles on which the money is received. As the above assessment indicates the Premier did not secure any changes to principles but did secure added money, albeit with limitations and restrictions.

* The Telegram story by Rob Antle (Saturday 29 January 2005) contains the comment that this agreement has "no ceiling" on the offsets. This is incorrect. The offsets are very clearly capped based on the provincial government's Equalization status. If oil prices remain at high levels over the next eight years, the provincial government will no longer qualify for Equalization. Thus the total offset amount will remain at $2.0 billion and will not increase.

The cash advance effectively forestalls a cut-off of offsets that would likely occur as the province moves to the point where it no longer qualifies for Equalization.

* The cash advance represents approximately $500 million more than the total provincial direct revenues from the White Rose project alone. That is, based on current oil prices and extrapolating from the 2001 Strategic Concepts assessment, the provincial government direct revenues for White Rose will be approximately $1.5 billion. The cash advance actually doubles the total revenues from that single project plus a small amount in addition.

It does not achieve the original objective of doubling revenues from all projects.

Government of Canada Reaches Offshore Agreement

Prime Minister Paul Martin announced today that the Government of Canada has reached an agreement in principle with Newfoundland and Labrador that ensures the people of the province will continue to be the primary beneficiaries of offshore resource revenues.

“I am pleased to report that Premier Williams and I agree that the arrangements we have worked out today fully meet my commitment to address the province’s concerns about offshore resource revenues triggering reductions in Equalization payments,” stated the Prime Minister.

“This agreement delivers 100 per cent of the offshore revenues and 100 per cent protection of equalization. This deal is worth an estimated $2.6 billion to Newfoundland and Labrador between now and 2012, including an advance payment of $2.0 billion,” added John Efford, Minister of Natural Resources and Regional Minister for Newfoundland and Labrador.

Minister of Finance Ralph Goodale added, “I am delighted these intense negotiations have resulted in an arrangement that addresses the unique economic situation of Newfoundland and Labrador while being fair to all Canadians.”

No amendments to the Canada-Newfoundland Atlantic Accord or Equalization legislation will be required.

Payments under the offshore revenue agreement will be made separately from these accordss and the new Equalization-Territorial Formula Financing framework.

Details are provided in the attached backgrounder.

-30-

Backgrounder

Elements of the Agreement on Offshore Revenues between the Government of Canada and Newfoundland and Labrador

This agreement provides the following benefits to Newfoundland and Labrador.

100 per cent protection from equalization reductions or “clawbacks” for eight years – one year longer than the life of the offset provisions of the existing Atlantic Accord – as long as the province receives equalization payments;

***An up-front payment of $2.0 billion to provide the province with immediate flexibility to address its unique fiscal challenges.
This amount equals about three-quarters of the agreed-upon estimate of potential benefits from this agreement between now and 2012.

This payment will serve as a pre-payment of the new 100 per cent protection.

The existing offset provisions of the Atlantic Accord will be retained unaltered;

In addition, this agreement provides for a further eight-year extension as long as the province receives equalization in 2010-11 or 2011-12, and that its per capita debt servicing costs have not become lower than that of at least four other provinces;

During the second eight-year period, if the province no longer qualifies for equalization, it will receive transitional payments for two years: In the first year, the transitional payment would equal two-thirds of the offset payments it received the previous year. In the second year, the transitional payment would equal one-third of the offset payments the province was entitled to the last year it received equalization.

If Efford is an obstacle, Loyola, what would Crosbie be?

Check out Paul Wells' blog today - Inkless Wells.

He summarizes John Crosbie's position on the Atlantic Accord from 15 years ago. Surprisingly, Mr. Crosbie viewed the whole affair differently when he was the Mulroney government's chief representative in Newfoundland and Labrador.

Here's how the whole blog posting winds up, beginning with a quote from Crosbie:

""It's a mean-spirited, politically inspired attempt to regurgitate. They can't have this deal and then try to vomit the deal out at the same time."

I swear to you I am not making these astonishing quotations up. Two things are worth pointing out.

• I've been rather famously critical of Paul Martin's government. But I can guarantee you this much. Any minister in Martin's government who took this kind of hateful tone with any provincial official would be fired so fast his head would spin.

• The Martin government has twice offered deals that, in the minimal case, would be worth hundreds of millions of dollars more for Newfoundland and Labrador. Danny Williams argues that's not enough. Fine. Sure. Whatever. But can you begin to imagine the firestorm in Newfoundland and Labrador if Martin had simply refused to entertain any request at all?

Danny Williams should thank God, in other words, that nobody in Ottawa today has John Crosbie's attitude toward Newfoundland and Labrador.""

Paul Wells is no fan of Paul Martin, as he readily admits so another post slags the Pm on another matter. But hey. Everyone is entitled to their opinion. Some people even change them merely to suit the current fashion.

Roland Martin: Stop making things up!

Following is the text of a letter to the editor submitted to The Globe and Mail in response to a commentary by Roland Martin on the Atlantic Accord.

Mr. Martin is a former deputy minister of finance in Newfoundland and Labrador. He did not serve on the Newfoundland and Labrador negotiating team on the Atlantic Accord in 1984/85.

Text Begins

Dear Editor:

Roland Martin does a tremendous disservice to readers of the Globe and Mail with his repeated misstatements of fact related to the current discussions between the Government of Canada and the Government of Newfoundland and Labrador on the Atlantic Accord. (27 Jan, 05, p. A19, “Drum roll: a solution”)

First, Mr. Martin should be well aware that what Premier Williams proposed to the federal government almost one year ago is substantively different from the current provincial position. One year ago, Premier Williams merely asked that the existing Accord Equalization offset provisions be replaced by a new arrangement. Implicitly this would last until 2012, when the Accord offset arrangements expire. There is no evidence that he sought Equalization offsets lasting for the life of offshore oil production and irrespective of the province’s Equalization status until June 10 and afterward. Therefore, it is clear, and blatantly contrary to Mr. Martin’s assertion, that the federal government position is closer to the original Williams proposal rather than the current one.

Second, at no time has the Government of Newfoundland and Labrador ever publicly indicated that it sought a 16 year Equalization offset. This is a matter of public record.

Third, Mr. Martin persists in the completely false assertion that the principle beneficiary provisions of the offshore Accords relate solely to provincial government revenues. In the Atlantic Accord, it is clear from public comments by Prime Minister Mulroney and Premier Peckford at the time the Accord was signed that “principle beneficiary” included the province government’s right to set and collect provincial revenues as if the resources were on land (it does not specify a quantum), the provincial government’s right to co-manage development of the offshore resources, and the province’s right to have a guaranteed level of local industrial and other benefits.

Fourth, by his use of the “clawback’ argument, Mr. Martin leaves the impression that neither Nova Scotia nor Newfoundland and Labrador retains its offshore revenue. In fact, both provinces receive all the revenues to which they are entitled, in their entirety without reduction of any kind.

Fifth, Mr. Martin’s proposed solution actually conforms in general terms to the federal government’s December offer. What Mr. Martin does not state is that the Government of Newfoundland and Labrador has, to date, insisted on receiving Equalization offsets from the Government of Canada irrespective of its fiscal capacity. In other words, the Government of Newfoundland and Labrador wishes to continue receiving double its oil and gas revenues from offshore oil long after it might have passed the “sustainability” indicators Mr. Martin proposes.

Sixth, Mr. Martin invents provisions of the Atlantic Accord that do not exist when he claims that the Accord was designed to have updated revenue sharing arrangements. Such is not the case and there is no public statement of any kind to support his contention. To the contrary, the statement of revenue-sharing principles in the Accord explicitly provides that Newfoundland and Labrador would be treated the same as all other oil producing provinces; not better, not worse, but the same. There would be no need to revisit the Accord revenue-sharing provisions since they are inherently flexible. Since Mr. Martin did not serve on the provincial negotiating team in 1985, one is puzzled at the basis for his claim.

Seventh and flowing from this, Mr. Martin persists in the contention that the current discussion is about revenue sharing. It is not. It is about Equalization, which is treated consistently and separately from revenues in the original Mulroney letter of 14 June 1984, the Atlantic Accord itself and in the implementation legislation. This is only about revenue sharing for those who contend that Government of Newfoundland and Labrador should retain not only 100% of provincial government revenues, as it does already, but also a portion of federal government revenues through Equalization, contrary to the revenue sharing provisions of the Accord itself.

A successful solution to the current offshore Accord impasse is possible. It merely requires that individuals like Mr. Martin refrain from their penchant for stating as facts things which are demonstrably and irrefutably false.

Text Ends

A deal may actually be possible

Following is the text of an extraordinary statement issued today by Premier Williams in response to comments reported today in The Telegram to the effect that a deal was unlikely on Friday in the meeting between the Premier and the Prime Minister. I have dropped some comments into the text, clearly marked in italics.

Text begins:

NLIS 9 January 26, 2005 (Executive Council)

The following statement was issued today by Premier Danny Williams:

At the beginning of this week, I made a decision that we, as a government, would not be speaking publicly leading up to the meeting with the Prime Minister on Friday. I made this decision because our absolute focus this week has been on working towards a successful conclusion to the discussions with the federal government on the Atlantic Accord.

We want to proceed in good faith which is why I have not spoken with the media this week and, in fact, even today will not speak directly to the issues of the ongoing discussions. I do, however, find myself this afternoon in the position of having to make a brief statement.

I was concerned this morning to read in our local paper a story which quoted an unnamed source at the Federal Liberal Caucus retreat out of Fredericton. That unnamed source essentially said that I, as premier of this province, was intentionally dragging my feet and that I was not interested in concluding this deal.

The story further indicated that I was stalling on the agreement because I was not interested in concluding a deal before our province brings down our Budget this spring. These statements are absolutely false, and I do not believe that they reflect the views of the Prime Minister.

Obviously, I do not know who this federal source is; however, I can assure you that I have been working very hard this week to finalize this agreement. Our officials have been working vigorously with federal officials to work out the details.

Additionally, contrary to what was reported, we have been extremely willing as a province to discuss compromises and to offer creative solutions that work to the satisfaction of both levels of government. I categorically deny dragging my feet or stalling this process. It is untrue and comments such as these do absolutely nothing to aid this process.

[Note: To date, the Premier has been adamant that there were no discussions or negotiations and that no compromises were either necessary or possible. Premier Williams insisted that the Prime Minister's commitment was simple and all that was required was for Ottawa to live up to that commitment, as stated in the Premier's letter of June 10. This statement today represents a radical and very public departure from the Premier's rhetoric of past six months.]

I can state also, unequivocally, that we are not impeding or stalling this process so as to avoid a deal ahead of our provincial spring Budget.

Quite the contrary, our government and the people of the province recognize the serious and urgent need for these additional financial resources. To suggest otherwise is simply wrong.

I sincerely believe that Prime Minister Martin joins me in hoping for a successful conclusion to this file. Our respective governments have spent an extraordinary amount of time working on the file so that a deal can be concluded as soon as possible - a deal that gives the people of Newfoundland and Labrador what they have asked for and what they expect.

Let me be very, very, clear. It is my fervent hope that the outcome of the meeting between myself and the Prime Minister is that this arrangement is concluded to the satisfaction of both levels of government. The people of the province have waited patiently, and we all hope for a successful conclusion on Friday.

[Note: Again, unlike previous meetings the Premier has not placed an ultimatum on this meeting nor has he deliberately heightened expectations. His comments in this statement are relatively modest - relatively.]

2005 01 26 3:15 p.m.

: Text ends

Of cliches, stereotypes and the Accord

Online at Macleans this week, you won't find the feature article on Newfoundland and Labrador, but you will find a column by Macleans editor Anthony Wilson-Smith. It's titled Beyond the old cliches.

Wilson-Smith notes, and I whole-heartedly agree, that "[t]he clicheés, in short, of Newfoundland as a poverty stricken, hardscrabble place from which all the best people rush to escape are now well past their expiry dates." Anyone who has been around this place over the past 20 years can't help but notice the changes, especially in St. John's. But the changes, economic, social and attitudinal, are also found in most of the major centres across the island and in Labrador.

A good sign that the cliches are stale is the reaction to Mary Walsh's latest television comedy. Back in the Codco days, the days of the infamous "newfie" joke books, the sort of stereotypes of Newfoundlanders seen in the Hatching pilot - hard-drinking to be sure, but variously scheming or lazy - were commonplace. They became, for the artistically challenged, a sort of low-rent local Punch and Judy show, filled with stock types to be trotted out for easy laughs. The humour was in their outrageous accents and for local audiences, there were "inside" jokes that only some would get. To make the entire spectacle of the 70s and 80s Newfoundland "nationalism" complete, at social gatherings, someone would inevitably don rain gear, and wield a codfish and rum bottle, like orb and sceptre, to bestow honorary "Newfie" status on mainlanders during "screech-in" ceremonies. The provincial government, under Brian Peckford, used to print up elaborate certificates for these little minstrel shows and give them a semi-official blessing in the process.

I may be exaggerating just a bit, but to be honest, as someone who grew up in that period in the 70s, I resented greatly what amounted to rendering down the varied local cultures across the province to a series of caricatures. To add to the injury, the caricatures were generated by townies, inevitably not by the people being parodied. Newfoundland and being a Newfoundlander was limited to what was presented by these Professional Baymen, with their "Lard t'underin' Dynamite" accent and colloquialisms buried behind a tongue-defying local "dialect".

What it seems many people have missed is that the place has changed. For most Newfoundlanders and Labradorians, their pride and self-respect is not found in these overt and exaggerated displays of their unique dialect. It is in the individual and collective successes. It comes from rejecting the sort of make-work schemes and grandiose megaproject failures of the old days in favour of sound planning and good financial management of government other provinces might envy.

Those who view the Accord money as our "last chance" are just bringing back yet another old cliche from Peckford and the League of Professional Newfoundlanders. Paul Wells tossed that "last chance" one at me, and as I said to him, if extra oil money really is our "last chance", then boys, it's just as well we plan to shut the place down now. The "last chancers" have given up on Newfoundland and Labrador. They have a cliche of the place locked in their heads and, like Peckford [circa 1979], they likely plan to spend the extra oil money on propping up their out-of-touch vision of our province and its people. They likely will wind up subsidizing industrial development ideas that make no economic sense, like the Stunnel - like we have done before - or otherwise fritter away a windfall. In the meantime, substantive changes to the fishery, encouraging new industries, decentralizing government and fostering individual initiative and entrepreneurship will all be ignored. Those are the things that would actually give this place a secure future, and ensure that there is never a "last chance" when it comes to make Newfoundland and Labrador a prosperous place.

In that sense, Wilson-Smith's view of Danny Williams is part of a cliche. Williams is supposedly fighting to preserve rural Newfoundland and Labrador. Wilson-Smith claims that "what's really at issue is the survival of rural Newfoundland, which is 'the crucible and cradle of its poetry, its songs, its stories, its tragedies, its passions, its beauties.' " The second part of the quote, about poetry and such, is from Richard Gwyn.

This cliche, that "rural" Newfoundland is the heart of the place is completely false; it is no more true than the idea that the Professional Bayman of the 1970s represented a genuine Newfoundlander. It may fit conveniently with some people's image of the place but it neither represents a deeper truth, as some cliches do, nor does it represent the face of this place now or in the future. It is, at best, one aspect of Newfoundland and Labrador but rural, i.e. cod fishing, is no more the defining characteristic of who "we" are than "wheat" or "oil" or "maple syrup" defines some part of the country. It is significant, it may even be a major part, but it is not all.

In a broader sense, the discussion over the Atlantic Accord has become little more than a series of old sayings. Premier Williams repeats the "masters of our destiny" line from Peckford or the "Newfoundlanders as victims" theme. The Premier becomes the latest embodiment of yet another cliche, "the fighting Newfoundlander". He trots out the Upper Churchill, yet again. His interview with Macleans last year was, as I have written elsewhere, something that could have been written from some reporters 1970s notebooks.

What gets lost in the process is a great deal, not the least of which is the substance embodied in the Premier personally and in the Blue Print. It is that loss, it is that sense that the Premier is reduced or is being reduced to a caricature of someone else, that fuels my own personal disappointment at the current Accord dispute.

There is so much more to my Newfoundland and Labrador than any cliche could ever express.

There is so much greater potential here, in the people and in the place itself, than is embodied in the stereotypes on which much public comment has been based, and to which we have been limited.

Nutty, nutty, nutbar

Paul Wells is a well known national journalist, now writing for Macleans. You remember Macleans, the staple of every coffee table in the land. Pretty to look at. Maybe read, if the Sears catalogue had had the print rubbed off its pages by endless flipping.

He spent the better part of last week In St. John's talking to just about anyone and everyone he could. He managed to land a one-on-one interview with Premier Williams all in aid of giving Macleans readers a better understanding of "what Danny wants".

There's no telling what the local reaction will be to his piece; I, for one am looking forward to it when it hits the newsstand here, likely on Wednesday.

In the meantime, check out his blog under the title "Inkless Wells". Todays' installment, is called "Danny Williams impeccable timing". Aside from pointing out that a raft of other issues are dominating the national agenda these days, Wells does take one of the Premier's pet issues and challenges it head on. Premier Williams (and his supporters like Rex Murphy) is fond of claiming that our grievances here in The Happy Province are ignored nationally.

Wells quotes the Premier from a Board of Trade speech:

"The big question we have to ask ourselves here is, why are we waiting so long to get our promise fulfilled? If this were Quebec or Ontario or any other province, this wouldn't be happening. We're now into our eighth month battling away at this. And it's been a battle. And it shouldn't be.”

Wells notes:

"This quote sums up the very strong sense of many Newfoundlanders that they are uniquely put upon in Confederation. It's also nutty-nutty-nutbar. You really have to have been in St. John's for the last couple of decades to believe that Newfoundland and Labrador's demands are the only ones that go unanswered." He then gives a listing.

My personal favourite is this one. Apparently the Premier complained that money given to the 2010 vancouver-Whistler Olympics represents a case of other provinces being treated better than Newfoundland and Labrador. Those of us who live here day in and day out are familiar with the Premier's rather ... ummm..... ahhhhh... unique view of the world in which we all live. He sees conspiracies everywhere. He thinks that it is great that Ottawa saves billions in Equalization because Quebec gains hundreds of millions from Churchill Falls, while it is apparently the greatest injustice since Versailles when the same thing happens here.

Oh yeah, Paul suffered through an evening chatting with me and a bunch of others and yes, he does give this blog a nice word and a link. So I am returning the favour.

The Persuasion Business

A buddy of mine used to be a lawyer; he's a judge now. But he said something once that really made me think. "Ed," he told me after sitting through one of my workshops on public relations, "you and I are in the same business, the persuasion business."

It took me a while to think that over and realize he was right. Public relations people like me and lawyers both try to persuade people of the case we are making. We present evidence, discuss what the evidence means , make an argument and then look to people to make a decision. In his business, his audience might be a judge or it might be a jury of 12 people, many of whom have never heard anything about his case before.

In my business, the judge and jury are the people interested in a particular company project and issue. They might know something about it. They might know a lot. They might know nothing at all. Basically, though, we have the same job.

In both a court room and the court of public opinion, you don't win any points for spin - that is, you don't get any points for being cute or trying to fill in with misrepresentation what you can't demonstrate with facts. Lawyers, judges and even juries are usually pretty good at spotting bull. The danger for politicians and others who like to "spin" is that while they might win a particular case, in the long run their deceptions will catch up with them.

That's because, fundamentally, people in Newfoundland and Labrador, like people all across the country, have some common characteristics. They hate being lied to, especially if the lie winds up costing them something. They have a belief in fairness. They want to hear all sides and points of view before making up their minds. They have a willingness to give people the benefit of a doubt and by and large they are pretty generous with their time, their money and , as we have seen during things like 9/11, they are amazingly open and welcoming to people in a hard spot. There is a also a profound sense of right and wrong and the reason they reject spin, when they discover it, is because spin is basically none of those things. At its heart, spin, takes away the power of ordinary people to make judgments about issues that affect them or their neighbours. They are democrats at heart in that they know that ultimately decisions made by government affect them personally and they want to have as much control over their lives as possible.

Some of the comments in a couple of my earlier posts might mislead you into believing that I think the people who submit material to the Fair Deal site aren't in that category of fair-minded people I just described. If I left that impression, then let me correct it now, then let me correct that now. The people I have come across there, like the people I come across every day in St. John's have every quality I described above. The ones who have made up their minds and back the Premier to the hilt are doing so out of a firm belief that something unfair is happening. They may be right, although I'd disagree. Their actions are motivated by a desire to right a wrong, to make fair what they feel is unfair. And there should be no doubt that, with one or two exceptions they are actually clamouring for more information on this whole Atlantic Accord thing. Most, I would venture, would even be willing to make some adjustments to their opinions based on solid evidence. They might even change their minds entirely.

That brings me to the provincial and federal governments.

The provincial government started this whole business back last year. Therefore, it has really been up to them to make a strong case for changing the Atlantic Accord. To date, they haven't done it. They have kept details and information on revenues to themselves or distorted what they have released. They have completed misrepresented the Atlantic Accord provisions and, in the latest version of the Premier's "offsets" they continue to reinvent plain English words in a way that seems designed to sow more confusion rather than state a simple case.

All that doesn't mean they don't have a good case to make. I just think they have buried the reality under mounds of distortions. Much of what has happened, like the flag flap, was also the result of one or another off-the-cuff decision by the Premier. In other cases, there has been a calculated effort to ramp up public expectations - the Premier is the only one who talked of deadlines and make-or-break meetings - and then slam the federal government when expectations weren't met.

On the federal government side, there really isn't much excuse either for the complete lack of information flowing from Ottawa. People have no idea what the federal position is. The federal government has made only half-hearted efforts to tell people about the Atlantic Accord and I would venture there are a raft of people who haven't seen the Prime Minister's letter to the Premier. Heck, they might not even know there was one.

What I have been looking for here is not the grandiose rhetoric we have been getting. Rather, a good example of what I have in mind came in the mid 1970s. As part of laying out its claim to the offshore, the provincial government sent every household a glossy brochure that laid out the case. History. A bit of law. The basic principals of the case. There was an active effort to engage public support, to persuade the public of the rightness of the provincial case and to win their support. Compare that to today.

The reason I'd expect some solid information from both sides is that I expect them to try and persuade me and others. I don't expect to be taken for granted, which is exactly what the provincial government in particular is doing.

I want them to try and persuade me. Only then will i know for sure that both governments get a fundamental point that has been mssing from this discussion to date: the money they are fighting over isn't theirs. It's mine.

And it's my call as to who to gets to spend it.

Equalization links

While Equalization remains at the heart of the current dispute between Ottawa and St. John's over changes to the Atlantic Accord, there is still a lot of misinformation about the federal government program out there.

Following are a few links to sites/documents on Equalization and recent issues. Personally, anything even vaguely like accounting bores me to death and there is no surer way to confusion than to listen to some "expert" explain Equaliation. These links are a mix of plain language and technical discussions but they all give a set of differing perspectives.

Government of Canada, Department of Finance. This is the start of the page on federal transfers to the provinces. Tables of data, summaries, definitons and links to more information.

Maple Leaf Web. A good site with lots of information in plain English. Good links.

Atlantic Institute for Market Studies. This Halifax-based group has produced a number of detailed research papers on Equalization and the Atlantic Canadian economies. Considerably more technical than other papers, the site has links to .pdf versions of some of the AIMS papers.

Background paper on Equalization. This is a web page prepared by CBC. It is not specifically about offshore oil and gas revenue issues, but there are some links to related CBC News stories.

An Open Letter on Equalization. Courtesy of the federal government, this open letter is a news release issued in July 2001. it describes the Equalization program and gives some responses to provincial government positions taken at the time on reforming the program.

Response to John Crosbie. John has been on his crusade for some time to re-write completely the history of the Atlantic Accord. This is a short, plain-language rebuttal to his major contentions. One starts to wonder if John Crosbie was actually there for any of the discussions in 1984 or 1985. The date on this is October 2001!!

Canadian Fiscal Arrangements conference, May 16-17, 2002, Winnipeg. Institute for Intergovernmental Relations, Queen's University, Kingston, ON. There's an excellent paper here by Jim Feehan from Memorial University.

Recent Issues in Equalization Payments as They Pertain to Atlantic Canada by David Murrell, University of New Brunswick. " Over the past three years a number of issues have cropped up, concerning equalization payments as they pertain to Atlantic Canada. This paper discusses the policy issues using confidential documents from the Department of Finance Canada under the federal Access-to-Information Act. These issues include: Premier John Hamm’s Campaign for Fairness and the treatment of off-shore royalties, the imposition of the equalization ceiling in 2000-01, sources of revisions to equalization payments, forecasts of equalization transfers to 2005-06, and the implications of the recent downward revisions in population, in the 2001 Census, on future payments. " August 19, 2002

What Danny wants, the condensed version

It is indeed amazing how many variations there are out there of the provincial government's Atlantic Accord position. That's why I originally posted a longer essay on this subject.

Well, here's the condensed version, again based entirely on official documents:

Danny Williams, Blue Print, October 2003

1. No mention of Accord changes.
2. Remove all non-renewable resources from Equalization formula.
3. Sign a written commitment, “if necessary”, to invest the new money in debt reduction and economic infrastructure

Danny Williams, January –June 5, 2004

1. A new offset mechanism that provides the provincial government an amount equal to 100% of direct revenues in addition to direct revenues. (Williams to Martin, Jan 6, 04)

2. Direct revenues are defined as royalties and corporate income tax. [Note that under the Atlantic Accord, provincial government direct revenues comprise six separate types, including royalties and corporate income tax. There is no explanation for this apparent mistake on the part of the provincial government.] (Slide presentation to John Efford, Feb 27, 04)

3. The money would be used for debt reduction and infrastructure development. (Letter, Jan 06, letter May 26 04)

4. The time frame is unclear, at best. The slide presentation to Efford can be read as meaning seven years (replacing the existing offset) since the time frames match and the doubling up of revenues replaces the Accord's original offset with a concept that "benefits over a longer period" (12 years total of full offset versus four years in original Accord).



Danny Williams, June 5-June 9, 2004 (Hansard, June 7, 2004)

[Note: In the agreement of June 5, (Cell Phone Accord), the PM and the Premier agreed to something. The only public description of it was by the Premier in the House of Assembly on June 7]

“$700 million commitment for the next four years with ongoing additional monies available as this goes on into the future and as new fields come on.”

This could mean literally anythign since the existing Accord gives ongoing additional monies. It may mean that they agreed to have spearate offset arrangements for each new discovery, based on the conditions at the time. It doesn’t matter since, on June 10, the Premier changed his original proposal dramatically.

Danny Williams, June 10 to current

“The proposal my government made to you and your Minister of Natural Resources provides for 100% of direct provincial revenues generated by petroleum resources in Newfoundland and Labrador Offshore Area [sic], to accrue to the government of Newfoundland and Labrador and be sheltered from the clawback provisions of the Equalization formula, (currently at 70%). Direct provincial revenues include royalties, provincial corporate income tax, and fees, forfeitures and bonuses. Our proposal is for the current time limited and declining offset provisions in the Atlantic Accord to be replaced by a new offset provision continuing over the life of the offshore petroleum production which would provide a payment equal to 100% of the amount of the annual direct provincial revenues which are clawed back by the equalization program.” [Williams to Martin, June 10, 2004]

This may be summarized as follows, with the changes being obvious:

1. The offset is in addition to provincial direct revenues, as previously proposed.

2. Direct revenues are defined more accurately.

3. The commitment to direct the added revenues to specific purposes has been removed.

4. The duration of the offset is clearly stated as being for the life of production. [In fact, the Equalization offset ceases to be an Equalization offset according to some statements by Premier Williams]

In simplest terms the current position is that the provincial government should receive 100% of direct rvenues, as it currently does, plus another transfer from the federal government of an equal amount (+ 100%) for as long as oil and gas is produced offshore. [100% + 100% = 200%] This would not be affected by Equalization in any way.

Outside the Box - "Experience counts"

When Greg Locke was editing The Independent, I wound up writing a column there for a few months. It was a rich time with the change of government and the early steps of a new administration.

Margaret Wente's column stuck me in a bunch of ways, not the least being a recollection that her comments sounded all too familiar. On a snowy Saturday morning, I have found the comments - at least a description of the original - in a column I did for The old Indy. Maybe now you'll understand why I chuckled a bit at Danny Williams "defence" after Margaret's little diatribe. There is a karma in politics and those with experience understand it. Your actions today will influence what happens later.

For those of you who can't recall, this Macleans fiasco came right in the middle of Danny's pitch on the offshore last February/March.

Here's the whole piece:

Experience counts

For those who don’t know, I have been in the public relations business for the past 15 years. That includes seven years in politics and another eight in the public and private sectors. It’s an interesting field, if for no other reason than you keep running into people who think that because they read the papers, listen to the radio and watch television, they can do a PR job easily.

Sadly for those people, the news is filled each day with stories a buddy of mine used to call Homer Simpson moments – you see the story and the only thing to say is “D’Oh!” because the gaffs are easy to spot. They were predictable. They are damaging. They were avoidable.

Danny Williams’ interview with Macleans this week was a big Homer Simpson moment. The drunk comment came in response to a leading question from someone who hasn’t worked in the province since the scotch-soaked salad days of Frank Moores. The premier fell into an old trap and joked that now the House is completely drunk. D’oh!

Understand that the editor’s question came after the Premier volunteered the opinion that the House of Assembly was “unproductive” and joked that if he had his way he would probably never call it in session. D’oh! That question came after the Macleans crowd asked the Premier why the provincial deficit was so big. His response was mismanagement over the past 10 years. There was a lengthy bit about the Stunnel; two sentences on the fishery. D’oh! The last question had the Premier calling for a seal cull. D’oh! The Premier made some misstatements of fact, for good measure (D’oh!) and a couple of big ideas got a handful of words, without explanation. D’oh! Take the whole interview and you have a bunch of poor, laughing drunks, complaining about having no money, who apparently can’t manage their own affairs, and yet who want to build grandiose megaprojects and kill seals.

That interpretation is a bit facetious, but it fits rather nicely with the condescending view some central Canadian editors hold of Newfoundland and Labrador. What was missing from the interview? Overall, the premier needed to put our issues into terms that would be meaningful to his audience. There could have been a frank explanation of how developing the Lower Churchill benefits the whole country. The Premier could have talked at length about the local companies competing successfully around the globe in the energy, manufacturing and high tech sectors. For another, he could talk about how diversifying the provincial economy gets us off the equalization rolls. The Premier could have showed how offshore oil and gas can provide Canadians with a secure supply of vital energy and give Newfoundland and Labrador economic benefits like those in Alberta. That’s the Blue Book, Danny’s supposed plan.

Talk that way and you get a feature article, at least, not a cheesy question and answer session following a reporter’s agenda. You might even get the cover. Instead, readers got a piece that Michael Benedict, the 70s cub reporter and now Macleans executive editor, could have written from his old notes. Danny made the front page of the National Post, alright, but only because someone took offence at his jokes. D’oh!

Since the interview was so far off the Blue Book, this all happened for one of two reasons. Either Danny Williams’ advisors, the people he derisively referred to as handlers, are not doing their jobs or, taking his own advice, Danny is ignoring them because he feels they are trying to turn him into something he is not. If they aren’t doing their jobs or giving dumb advice, then Danny needs new advisors ASAP. If Danny is ignoring their good advice, then he needs to take a look in the mirror.

Public relations is not a job anyone can do. It takes skill and experience. Good advisors don’t change people into flavourless mush. They knock off the rough edges and help focus thinking so someone like the premier gets his point across. They are crucial to success. In PR, like in law, the guy who acts as his own counsel has a fool for a client.

By the way, who made the cover of Macleans last week? Rick Mercer – a Newfoundlander who gets paid to be funny.

Link to "Which is to be master?"

As I noted when I started this blog, in July I released a research paper on the Williams administration proposal which discusses the Atlantic Accord, what had been discussed in public to that time and suggested another way of structuring the province's proposal that might work.

It can be found on Greg Locke's blog. Greg is a local photographer and journalist - he's more than just the word photojournalist suggests. Greg and I disagree on the Accord and a bunch of other things but he did post this paper when it first came out. Follow the link and click on the paperclip marking an attachment and you'll be able to download the original paper. Since the hits on my blog have shot up in the past few days, I thought it would be a good idea to remind people of the original research paper.

Which is to be master? (http://blog.greglocke.com/blog/_archives/2004/7)

Since July I have been able to obtain what seems to be the complete set of official correspondence to and from the Prime Minister, including both copies of the slide presentations made in February and March. Those documents make for interesting reading and are the basis of my recent posts, including the description of the three different versions of what Premier Williams has been seeking. There is actually a fourth version - a sort of Williams 2.1 - described very generally by the Premier in answer to a question in the House of Assembly on 7 June 2004. That version is what was agreed to on June 5 in the Saturday Cell Phone Accord and that seems to be different from both the pre-June 5 provincial position and the June 10 position. If I had more detail on what it contained, I'd give it to you.

Something tells Danny wouldn't return my phone call or answer my mail.

Meanwhile on the "Blame Canada" website...

it has been interesting exchanging some views on the "Fair Deal" website with some people who seem to support Danny Williams more than his own family does. For the past couple of days, the site owner hasn't had to update since the entire site has been focused on a discussion related to some of my posts.

True to form, in some cases the responses to my points have largely been little more than name calling - "s*** disturber" - but that surely pales compared to "wimp capitalist petty bourgeois suburbanite" for inventiveness. Some others have pointed out my work background and political affiliation as if that had any bearing on the matter except in the truly most narrow and seemingly non-functioning of minds. Again, sadly true to form, those sorts of irrelevant points come from people who use only their first name to post or hide behind a pseudonym. Too bad they can't Marshall the courage to stand behind their convictions.

A few have tried to toss some "facts" on the table, usually the ones put forward by the provincial government. My rejoinders have earned the previously mentioned responses.

As a final effort, a couple of the posts have suggested that I must be afraid of Danny Williams' succeeding. This is a curious idea for a number of reasons, not the least of which is that I have actually been afraid that because of his amateurish approach and histrionic tactics, the Premier keeps making it harder to negotiate properly. I am also afraid that by raising public expectations so high in pursuit of a virtually impossible objective (200% forever), Premier Williams could end up walking away from a good deal for no legitimate reason other than to claim a moral victory.

Show me a moral victor and I'll show you a loser. Unfortunately, the loser in this case won't be the Premier. Look in the mirror to find the answer.

Perhaps my most favourite comment came from a chap named "cyril" - that's all he posted as a handle- who advised that I should leave the negotiating to Danny and Loyola because they were doing a good job. I should learn from his succinctness. His comment is curious since much of the irk on the Fair Deal page centres on the Upper Churchill. We got that contract because nobody questioned the Premier of the day who was "the only one fighting for Newfoundland". We never questioned him because, as Ambrose Peddle said, "it wasn't fashionable". cyril's attitude is a time honoured one.

Unfortunately, it is the same one that keeps costing us money over and over again and it is the same one we pursue often being left to wonder how we possibly could be still broke.

The answer that always leaps to mind is that it was the Mainlanders fault. That answer is usually associated with the next "only" Premier to ever fight for "us".

Just visit the "Fair Deal" site. Too bad there wasn't a public internet in 1982 or I could link you back to old Brian Peckford sites.

Res ipsa loquitur

Is there anyone here who understands English?

In a media scrum today, Danny Williams commented on the Prime Minister's recent letter.

One of the Premier's remarks just leaped through the radio speakers as CBC Radio's On the Go played a clip of his response to a question from a local reporter.

The Atlantic Accord offsets, according to Danny Williams, apparently have nothing to do with Equalization. They are outside Equalization, says Danny Williams, since they are under the Atlantic Accord.

There's no need to get into a long-winded rebuttal. Following are excerpts from the Atlantic Accord and the provincial government's own documents issued since last January. It's pretty clear that the Premier knows full well that what he said today isn't what he used to say.

Exhibit A. Atlantic Accord, February 1985:

EQUALIZATION OFFSET PAYMENTS

39. The two governments recognize that there should not be a dollar for dollar loss of equalization payments as a result of offshore revenues flowing to the Province. To achieve this, the Government of Canada shall establish equalization offset payments.

Exhibit B. Danny Williams to John Efford, March 5, 2004, Attachment - Proposal for a New Atlantic Accord Offset Mechanism [dated 27 February 2004]

Slide 9

- Replace existing offset mechanisms [Emphasis added]

Slide 10

- Federal equalization savings would equal the cost of the revised offset payments [Emphasis added]

Exhibit C. Danny Williams to Paul Martin, June 10, 2004.

"The proposal...provides for 100% of direct provincial revenues... to accrue to the government of Newfoundland and Labrador and be sheltered from the clawback provisions of the equalization [sic] formula..." (p.1)

Exhibit D. Danny Williams to Paul Martin, August 5, 2004

"This letter is further to our telephone conversation of 10 July 2004, during which we reaffirmed our agreement that Newfoundland and Labrador would retain 100% of the benefit of the offshore petroleum revenues it receives, notwithstanding the treatment of those revenues under the equalization program." [p.1]

Exhibit E. Loyola Sullivan to John Efford, August 24, 2004

"The position advanced by the Province,... calls for replacement of the existing offset mechanism with a new offset mechanism that would provide the province with an amount equal to the equalization loss it incurs as a result of its provincial offshore petroleum revenues being included in the calculation of its equalization entitlement." [p. 2]

In courtrooms around the western world, lawyers usually rely on a simple Latin phrase to describe this kind of evidence. In fact, the phrase covers an awful lot of things Premier Williams utters about the Atlantic Accord.

That phrase is res ipsa loquitur. The thing speaks for itself.

With all due respect, Premier Williams, it has always been about Equalization, as you well know.

Struggling against reality

FRANCES: It is symbolic of our struggle against oppression.

REG: It's symbolic of his struggle against reality.

In Monty Python's The Life of Brian, one of the numerous Judean independence groups gets locked into a pointless discussion about how Stan should have the right to want to bear children even if he obviously can't. The two comments quoted above end the scene.

It's funny stuff.

The editorial in today's Globe and Mail puts the Upper Churchill contract into a proper historical context. Local "nationalists" will likely find in the editorial further cause for grievance against our supposed Canadian "oppressors", but then again, what topic can they not turn into further evidence of the conspiracy to crush our province? It will likely be funny watching them exercising their irk yet again.

The Globe leaves out the financial aspects but it is a useful and factual rejoinder to the ludicrous drivel being foisted on editorial boards across the country by the likes of John Crosbie. Too bad a great many people in this province will not see the editorial.

Had the Globe included the financial information, they would have gone a long way to correcting much of the misinformation about the contract being spread most recently by Premier Danny Williams and The Independent.

In its "balance sheet" series, the Indy staff claimed the cumulative benefit to Quebec of the Upper Churchill contract has been $23 billion or more. I'll let an economist tackle that one in detail, but on the face of it there is no basis to claim, as they do, that one megawatt of power produces one job.

Last October, the Premier told CBC's Carol MacNeil that Hydro Quebec makes about $800 million a year from the Upper Churchill and that as a result the federal government saves billions in Equalization. Curiously, that same situation - Equalization goes down as a province's own revenues climb - is a bonus in Quebec but here it is a travesty.

Last year Hydro Quebec earned about $1.9 billion in net revenues. It has about 33, 000 megawatts of generating capacity of which Churchill falls represents about 14%. At current market prices, that means Churchill Falls power was worth about $275 million to Hydro Quebec - that's only one third of what the Premier claimed. Newfoundland and Labrador Hydro earned $65 million. That's disproportionate but it isn't extortionate and it is a heck of a lot less than the local aggrieved claim.

For the sake of argument, let's assume that the total value of Upper Churchill power was $300 million last year and has hovered around that level for the last 10 years. Let's also assume that the revenue was split evenly between Quebec and this province; after all both province's own the Churchill Falls company though their respect Crown energy companies. There are a couple of conclusions you can draw.

First, that means the provincial hydro company would earn $150 million from Upper Churchill power. That's it. This year's oil revenues will be higher - closer to double that amount. Factor in the Equalization offsets under the existing Accord and you see that the Upper Churchill is more of a mythical cash cow.

Second, since Equalization would drop on a dollar-for-dollar basis, Upper Churchill revenue would never have amounted to any sort of windfall of cash. The provincial government would have had much the same amount of money, even if we "fixed" the shortcomings of the Upper Churchill deal, as it actually had anyway.

Therefore, the real solution to our financial problems is not likely to be found in getting excited about supposed past injustices. The energy we waste in getting irked would be better spent on managing our provincial budget in a smarter way and developing and diversifying the economy.

Everything else seems to be an ongoing struggle against reality.

Another take on Margaret Wente

While everyone has been getting pretty hot about Margaret Wente's column, I always suspected there were a few people out there like me, who found within her column some substance.

And cough cough, I guess she managed to find my blog for the bits on Crosbie.

Well, here's a link to Damien Penny, a blogger from Corner Brook. http://www.damianpenny.com/archived/003726.html This is the Wente column plus his comments and those of his readers.

I have never met the guy but his blog is an eclectic collection of comment on topics from the Middle East to local politics. Add it to your bookmarks and go back and check it out. I know I'll be doing that.

The Prime Minister responds to Premier Williams

Dear Premier:

I have read your letter of January 3, 2005, with respect to our discussions on the treatment of offshore revenues. This is an issue of great importance to me as it is to you as Premier of Newfoundland and Labrador. I want to take this opportunity to lay out the principles that guide the Government of Canada in these discussions.

I have been clear from the very beginning of our discussions that I fully acknowledge the importance of offshore revenues to Newfoundland and Labrador. This reflects my recognition of the province’s proud history and of the determination of its people to seize the offshore opportunity to enhance their economic and fiscal prosperity. The short-term gains are substantial, but the lasting and real reward for future generations is the opportunity for Newfoundland and Labrador to become a more prosperous province no longer dependent on Equalization. It was against this backdrop that I made the commitment last June and since then, through my Ministers, I tabled a federal offer which fully respects that undertaking.

We are both aware that the province already receives 100 per cent of the revenues flowing from offshore production. Existing provisions in the Atlantic Accord ensure that the province will receive all of these revenues over the full life of offshore petroleum production. In this respect, Newfoundland and Labrador’s offshore resources are already treated in the same way as if they were onshore. Our discussions have always been about the impacts of increased offshore revenues on Newfoundland and Labrador’s Equalization payments.

For other provinces, Equalization usually declines by one dollar for each dollar increase in own-source revenues, but this is not the case for Newfoundland and Labrador’s offshore revenues due to the Accord. However, the problem is that under the terms of the Accord, the protection Newfoundland and Labrador receives will decline to less than 100 per cent between now and the end of the offset provisions in the Atlantic Accord, that is up to 2011. This would mean a loss of revenues for Newfoundland and Labrador while the province is still in receipt of Equalization. That is the issue I wanted to tackle in our discussions in June. In short, my commitment was that as long as the province was in Equalization, and for the duration of the Accord’s offset provisions, your province would receive 100 per cent protection against declines in Equalization as a result of the province’s receipt of offshore resource revenues.

In this context, the offer the Government of Canada has put on the table delivers exactly what I committed to in June. It confirms the guarantee that Newfoundland and Labrador will receive 100 per cent of revenues from its offshore oil and gas production. It provides the new guarantee that as long as Newfoundland and Labrador is in Equalization, it will receive 100 per cent protection from declines in Equalization flowing from these revenues for the period of the offset provisions in the Accord. In addition, we are retaining all of the existing benefits of the Accord. This entirely honours my 100 per cent commitment and will provide considerable additional payments to the province. Indeed, based on your own price and production forecasts, it could represent an additional $2.6 billion between today and 2012 over the benefits you currently receive from the Accord. This is also over and above the significantly increased benefits of the new Equalization framework agreed to in October.

My approach to a new arrangement for the treatment of Newfoundland and Labrador’s offshore revenues has been guided by two fundamental principles. First, I am committed to providing needed financial support to Newfoundland and Labrador in recognition of the unique economic and fiscal challenges your province faces. Second, any arrangement worked out with Newfoundland and Labrador to provide new assistance with respect to the offshore has to be undertaken in the context of ensuring fairness for all Canadians. Since the Atlantic Accord was originally signed over 20 years ago, I am the first Prime Minister that has been willing to make such a commitment to your province and I have honoured it in the proposal that we have provided.

Since June, you have raised additional issues. One of them is that while the Accord’s offset provisions end in 2011, you want the clawback protection to continue. You expressed concern that the duration of the agreement would be too short to address the difficult fiscal situation that you face, a situation unique to Newfoundland and Labrador. This was not part of our agreement in June, but I have indicated that we are prepared to consider an extension of offset payments to 2020. You acknowledged in discussions with Minister Goodale that, in order for an extension to be fair to the rest of the country, continuation of offset payments should be linked to fiscal indicators. As our Deputy Minister of Finance stated to you in Winnipeg during the discussions, “we are open to consider indicators that work for Newfoundland and Labrador”.

You also raised the issue of enhanced protection if Newfoundland and Labrador went off Equalization within the next eight years. This was not something that we discussed last June. The fact is that the existing Accord already provides for unique and generous benefits even if the province no longer qualifies for Equalization, ensuring that the offset payments are at least 85 per cent of those in the previous year. The existing benefits under the Accord will thus provide for substantial payments well after the province is no longer eligible for Equalization. Therefore, any assertion that Newfoundland and Labrador would “fall off a cliff” once it becomes a “have” province is not correct.

This last issue has emerged as the fundamental point of difference in our discussions. You now are asking the Government of Canada to make additional and continuing 100 per cent offset payments even if the province no longer qualifies for Equalization. This would mean that Newfoundland and Labrador would be out of Equalization because of the strength of its own revenues, thus meeting the key objective of the Accord, but continue to receive additional offset payments, in practice indistinguishable from Equalization payments, from the Government of Canada. This is inconsistent with your public statements, for instance “once we get to the equalization standard, we are saying we don’t want any more equalization. All we want after that, forever, is 100 per cent of our provincial revenues, no different to Alberta or anyone else” (G&M, A1, Nov. 18).

Let me close in saying that I have approached our discussions in good faith, as have my Ministers and officials. The proposal we put forward honours the commitment I made to the residents of Newfoundland and Labrador. We have consistently, over the past months, shown flexibility in our negotiations with you.

Of course, I am prepared to meet with you. Ministers Goodale and Efford will continue to lead discussions with your representatives. I have asked them to respond to the specific technical points raised in your letter.

I look forward to further discussions between the Governments of Canada and Newfoundland and Labrador to arrive at an agreement on new offshore arrangements.

-30-

When first ministers meet...

They sometimes come up with a deal.

Sometimes they don't.

Sometimes the deal they make is one they repudiate later. Does anyone remember the 1971 constitutional conference in Victoria?

Vic Young, former chair of the Royal Commission on renewing and strengthening our place in Canada writes in today's Globe and Mail that only a "summit" meeting of the Premier and the Prime Minister can now resolve this matter and get the Prime Minister to meet his commitment from June 5, 2004. Young takes up a familiar line that anonymous "federal bureaucrats" have been frustrating this process with their resistance.

Let us take this second proposition first. It is an old excuse for those, like Young, who have argued in the past that the federal government likes to keep this province in a cycle of dependence on federal handouts. There isn't much of substance to this argument; it is offered up as fact without a shred of proof other than that, as in this case, Newfoundland and Labrador isn't getting what it wants and/or deserves.

This argument assumes that this province or, more particularly, the provincial government is somehow cowed by its financial dependence on federal transfers into accepting federal dictation on issues. Any federal deputy minister over the past 55 years has the scars on his head, backside and undoubtedly other places from battles with the Newfoundland and Labrador government on everything from Equalization to the fishery to the Constitution. Cabinet ministers and Prime Ministers have bigger gouges in their hides. The ones not put there by Newfoundlanders and Labradorians have been put there by politicians from the other "have not", so-called dependent provinces.

Yet, if one looks at the record, the Newfoundland and Labrador government has never slavishly followed federal diktats since Confederation. For all the rhetoric about our supposedly colonial status in Canada, there isn't a single case that rivals the pre-Confederation willingness of Newfoundland governments not only to accept British orders meekly but also to volunteer control over huge aspects of Newfoundland's interests to the British without so much as a whimper.

I am not talking about Commission government. I am referring to our international relations after the Great War, including our failure to act on the ability to direct our foreign relations granted by the Statute of Westminster, 1931.

That is not to say that some people haven't pushed a position here based on the fear of federal retribution. Those familiar with Meech Lake will recall the provincial politicians and prominent local business people who wanted the provincial government to sign that Accord out of the fear that the federal government would punish the province. But fear and action are two different things.

As for the first proposition, Young may well be right. It is possible that the first ministers can find an agreement by meeting face-to-face. After all, the Accord is a political deal and any changes have to be accepted by politicians.

Young is wrong, though, if he believes for one moment that what the Prime Minister accepted on June 5, 2004 was the version of the provincial proposal that emerged on June 10, 2004. That isn't even what Danny Williams accepted in the five-minute telephone chat with the Prime Minister that Saturday morning.

As the Premier told the House of Assembly on June 7, he accepted an agreement that would provide "$700 million commitment for the next four years with ongoing additional monies available as this goes on into the future and as new fields come on." That isn't what the province had proposed even in February, as evident from an earlier posting to this blog. What is clear, though, is that between that Saturday and June 10, 2004, the Premier withdrew his own agreement to the Saturday Cell Phone Accord.

That happens, but Mr. Young misleads the public if he claims something other than what the public record clearly shows.

One of the major problems facing both the provincial and federal government is the level to which public expectations have been raised about changes to the Accord. The expectations are based on a consistent, and likely deliberate, misrepresentation of the facts that began in the Young Royal Commission final report and which the current provincial government has transmogrified. The revenues being sought are not provincial government revenues and no measure of Dumpty-esque verbal gymnastics and Stalin-esque revision of history can make Young's claims in the Royal Commission valid ones. Myth is not fact and the upcoming meeting might come to resemble what happens when worlds collide.

The consequence of that pattern of misinformation, coupled with the Premier's commitment that he "will not say yes, to less" makes it almost impossible for the two leaders to achieve an agreement. To meet the current provincial position, the federal government would be forced to established a precedent it simply cannot afford. To accept what might well be an amazingly generous agreement that achieves Young's goals, the Premier would have to admit, even if it is an oblique admission, that his argument to date has been a fallacy. He would have to say yes to less and be convincing.

The price in both cases may well be too high. It may be beyond what two politicians can pay, as able and as well meaning as they might be.

"Summits" make great news, but they don't always produce meaningful results.