22 January 2005

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.