28 February 2005

The Stunnel is feasible! - updated

But only with government money. Which means it isn't really feasible at all.

You read it here first and NOT at a cost of a $100, 000 of public funds.

The pre-feasibility study is finally in the public domain, courtesy of a provincial government release today.

The highlights:

- The link can be built. (Engineers can reinstall the backside in a cat given enough time and money.)
- A bored tunnel running an electric train system (a variation on the Keirans Stunnel concept) is the one that can be built easily and most cheaply.
- The Stunnel would cost an estimated $1.7 billion to build.
- The Stunnel would take 11 years to bore.
- The annual operating cost would be $7.4 million dollars.
- The Stunnel would require a government investment of $1.4 billion to build. (That's 82% of the total project cost, in case your calculator is on the fritz.)

Now here are a couple of observations:

1. The Premier was pretty quick to dismiss the idea of going to Ottawa looking for cash for this project of tremendous significance. That's because he knows his approach to the Atlantic Accord burned a lot of previously fixed links to Ottawa that need to be rebuilt.

2. The consultants report (Chapter 7) makes it pretty clear that there is no business case to be made for the Stunnel, hence the requirement for public sector spending instead of a private sector initiative.

The consultants admittedly optimistic projections are based on an assumption that existing sea-based links to the mainland will continue and will retain a competitive advantage in some instances.

Surface ferries will still have to be used both at Port aux Basques and in the link to Labrador. Both services require provincial and federal government subsidies in order to operate.

Here's a great quote from the conclusions chapter (p. 127) couched in the very best bureaucratese:

"The analyses, developed by considering traffic diversion from existing services, growth in service and facility demands, the impact of both construction and operating jobs, and the inclusion of potential revenue from incorporating electrical transmission cables in the tunnel, showed that a fixed link would not attract private sector financing under normal economic and business case criteria. Using relatively optimistic diversion and growth assumptions resulted in negative rates of return and less than unity cost benefits ratios over the period of the study. This result, however, may be considered not atypical in the realm of public transportation infrastructure." [Emphasis added]

Pay close attention to those highlighted words.

- "Negative rates of return" is code for money loser.
- "Less than unity cost benefits ratios" means, in plain English, that there is no reason on God's green Earth to sink money into this idea - the costs outweigh the benefits.

Consider that the consultants apparently did not include subsidies to existing surface ferries in their calculation of annual Stunnel operating costs when they reached their conclusion.

For those who missed it, go back and have a look at my previous post on this issue. My version may not be as pretty, costly or lengthy, but it winds up in the same spot.

Outside the box: The Stunnel

And, as before with the Atlantic Accord, remember that you read it here first!


Here's the CBC story on the Premier's comments. Apparently, he thinks the price is reasonable.

Uh huh.


Try reading Chapter 7, Premier.

Surely your old business senses would cut in here and warn you that this project might just be feasible (in an engineering sense like arses back in domestic felines are "feasible") but that it might not be practical or even sensible.

Something tells me that if we were talking about the Premier investing his own cash in this venture the words "negative rates of return" would be enough to convince the Premier this entire scheme is anything but reasonably priced.

Perhaps the Premier used that phrase after looking at the chart the consultants provided in Chapter 8 on other similar projects. The Confederation Bridge for example only cost $1.0 billion dollars.

Sheesh. Ours isn't that bad by comparison.

Then there are a string of road construction projects - surface roads (!!!) - and a 152 metre bridge in Manitoba. That one only cost $15 million. Interestingly the cost per kilometre is the same as for the Stunnel, as proposed.

Then they mention the Chunnel between France and Great Britain. 21 kilometres long. Between two economic powerhouses. Estimated at one point to cost 7.5 billion pounds sterling; final cost more than 16 billion pounds sterling. (For those sans abacus that's more than double the original estimate. )

Now compared to that, the bored Stunnel would be reasonable and something worth pursuing. After all, we can surely learn the lesson from the Brits and the French.

Are there other projects?

Oh yes. But not in the consultants report.

Take for example, the Big Dig - Massachusetts Turnpike Authority's rebuilding of Boston commuter traffic for a mere $15 billion and a decade's worth of work.

Btter yet, here's a site for Bent Flyvbjerg, the Danish social scientist who examined megaprojects in a recent book.

Among his conclusions (surprise, surprise):

- Cost overruns for megaprojects of 50% are common and 100% are not uncommon.
- Claimed benefits never appear.
- Environmental and other problems are seldom as minor as proponents claim.

All I can do is point everyone back to Chapter 7 of the consultants' report on the Stunnel.

The provincial and federal governments just spent more than $100, 000 to buy the same conclusion reached in a book that could be bought at Chapters for the reasonable price of CDN$20.96.

The Independence of Dependence

This won't take long, but just follow the train of thought.

First, the whole Atlantic Accord deal was sold on the basis of making the province more independent and self-reliant. Here's the kick though: it was based entirely on getting more federal transfer payments, though, in the form of Equalization or something that looks a lot like Equalization. It wasn't about actually increasing provincial government revenue earned from offshore oil and gas.

Second, Term 45 of the Terms of Union was designed to help the new Province of Newfoundland overcome its lack of basic technical information on local resources by using federal expertise. In the years since Confederation, that expertise now exists in departments like Natural Resources (forestry, agriculture, mining, oil and gas) and Fisheries and Aquaculture.

Now Ed Byrne is waging war on Ottawa to force the feds to keep an agriculture research station in the province (in his district, incidentally) based on Term 45.

I am seeing a pattern here.

In order for the province to be independent and self-reliant, we have to get.... more and more cash and other help from Ottawa.

"A word shall mean what I want it to mean..."

I know you've heard it before.

What fiscal imbalance?

This weekend in the Globe, Andrew Coyne had a great column on federal spending including transfers to the provinces. Here's a link to it posted to his blog.

While you hunt that down, have a look at Paul Wells' blog entry on the same subject for Feb 26 "Je fais tout pour ne pas me souvenir". He is riffing on some comments from Le Devoir, a newspaper which I would highly recommend people in this province start reading.

This comment in particular had me rolling on the floor:

"One more thing. Courtemanche complains about the "maintenance at an unjust level of... equalization payments." And it's true that the total value of equalization payments hasn't particularly risen in the past decade. This would sort of make sense if you understood that the point of equalization payments isn't to increase provincial revenues from year to year, it's to bloody equalize their fiscal capacity from province to province."

This basic point would seem just...well...obvious. Apparently though the country is beset these days with a raft of provincialist politicians and journalists who have an ongoing struggle with basic principles.

Never before has there been such a powerful case for making every single university graduate in the country suffer through one basic introductory course in Canadian politics.

More defence-related quickies

The budget this week had some new capital acquisitions listed.

Here is a quick and dirty look at a couple of the proposed purchases.

1. New amphibious ships. The federal Conservatives got overly excited last summer talking about ships that were basically way more than Canada needed.

Canada needs ships that can carry about a battalion of soldiers plus equipment (700 soldiers plus wheeled vehicles) and get them ashore by helicopter and landing craft. This is part of a revamping of Canada's strategic lift capability.

The Royal Navy just finished buying a new Ocean and Albion class landing ships. These are too small for Canada's purposes and are not significantly better than the multi-purpose support ship being considered by the Canadian navy as a replacement for its existing fleet replenishment ships. They can't do the replenishment task, at least as built.

The Americans have the most sophisticated inventory of amphibious ships. While some of the smaller types fit the bill for transporting personnel and vehicles, they don't have the ability to serve as fleet replenishment ships for refueling and resupply at sea.

The solution here - short of a costly redesign and rebuild - might wind up being a purchase of two new vessels. The navy could buy off-the-shelf amphibious vessels and look at an existing or proposed commercial design adapted for the replenishment task.

2. Medium lift helicopters. The Canadian Forces (CF) lost a major helicopter lift capability in the early 1990s when the CF sold off its Chinooks to the Dutch. Now we are looking to regain the same capacity.

Options include:

- new or rebuilt Chinooks;
- the EH-101 already in service as the Cormorant;
- a military version of the S-92 just purchased for the navy;
- something Russian like the Mi-8 or Mi-17.

Is the Goose cooked?

Some quickie observations on Goose Bay:

1. VOCM is reporting an announcement coming up for Goose Bay. I smell pavement but not much more than some repairs and improvements to existing infrastructure. If there was anything substantive on the new training infrastructure (air maneuvering data collection systems) there'd have been a major announcement or some hint already.

2. The decision this week by the Government of Canada to pass on a chance to become involved in active missile defence means that Goose Bay has no prospect of becoming more involved in that project as an alternative to low altitude flight training.

3. There's still not much sign that the concerned citizens committee is producing any ideas outside the box. They may be talking about some new ideas but so far the only things in the public domain have been the sort of things that Goose has always done.

Ok. The headline was deliberately provocative. I am still optimistic that with some serious effort there is a military future for Goose Bay.

The Goose isn't cooked.


27 February 2005

Constitutional tomfoolery, Part 2

Expect to hear more guff this week about the supposed constitutional guarantee in Term 45 of the Terms of Union protecting the Brookfield Road agricultural research station.

The argument is pure horse manure, appropriately enough.

Term 45 provides as follows:

“Economic Survey

45. (1) Should the Government of the Province of Newfoundland institute an economic survey of the Province of Newfoundland with a view to determining what resources may profitably be developed and what new industries may be established or existing industries expanded, the Government of Canada will make available the services of its technical employees and agencies to assist in the work.

(2) As soon as may be practicable after the date of Union, the Government of Canada will make a special effort to collect and make available statistical and scientific data about the natural resources and economy of the Province of Newfoundland, in order to bring such information up to the standard attained for the other provinces of Canada. "

These paragraphs are pretty clear.

Prior to Confederation, Newfoundland had done very little to assess its own natural resource potential. Term 45 (1) commits the federal government to make available its technical staff to assist in the work. Since 1949, the federal government has both supported provincial government efforts and undertaken independent assessments of the type carried out anywhere in the country. The feds deployed the Dominion Geological Survey to accurately map the Churchill Falls area in support of that development in the 1960s.

Term 45 (2) was intended to commit the federal government to undertake data collection of a type simply not done by the Newfoundland government before 1949. Note the time frame: "as soon as may be practicable...". That certainly cannot be taken to mean an ongoing process.

It would take a monumental redrafting of history to stretch this section out to cover agricultural research of the type done on Brookfield Road. Perhaps using the constitutional guarantee argument is a sign the provincial government hasn't got another argument - that is, a convincing one - to bolster its case.

On the whole, the constitutional guarantee argument sounds as credible as the Great Aviation Giveaway myth.

Constitutional tomfoolery Part 1

Since it isn't available online, see if you can track down a story from the Saturday edition of the Telegram debunking the anti-confederate myth that claims Newfoundland and Labrador has lost billions in fees for use of the airspace over the province since 1949.

This is one of those fantasies claimed by anti-confederates like retired lawyer Jim Halley and others. The most recent version of the fable appeared in The Independent during its multi-part cost/benefit analysis of Confederation.

According to the Telegram, a provincial government assessment prepared for the Premier notes that until relatively recently, regulation of airspace was a money-loser for the federal government. Even today, the fess collected by aircraft traveling through Canadian airspace are used to support things like air navigation. Gee, what a big surprise.

The most important thing the anti-confederates missed in their analysis is that the Terms of Union generally provide that the British North America Act would apply to the new province of Newfoundland except as specifically provided in the Terms. That's pretty simple.

Therefore, regulation of airspace was and is a federal responsibility. There are no grounds on which the new province could have claimed this jurisdiction without altering the constitution for all provinces. More to the point, even had Newfoundland somehow managed to maintain control over airspace, it would have also been responsible for paying the cost of air navigation and associated regulations. That would hardly have been a windfall for the new province, which according to another opinion piece in Saturday's Telly was hard-done by the economic aspects of the Terms anyways. More on that piece in another post.

Some have gone so far as to claim that Newfoundland lost an economic powerhouse by surrendering control over Gander airport. I have heard an argument made that compares the economic potential of Gander with the potential of Malton (now Pearson) airport noting that the latter prospered while Gander has struggled.

On the face of it, an airport in the middle of the woods can hardly be compared to a national hub located next to the industrial heartland of the country. The whole "airspace" myth has been built around shoddy analysis and logical fallacies. Developments in aircraft technology quickly made post-war Gander much less important for international travel than it had been during the 1940s.

There's another anti-Confederate myth successfully debunked.

For those who wondered about the validity of the Independent's cost/benefit analysis, I think you now have cause to doubt all their conclusions and any further claims they make based on them.

25 February 2005

Before Mr. Byrne goes to Ottawa...

Ed might want to check this story from cbc.ca: (The link is actually to a longer story).

"Ottawa closing experimental farm
WebPosted Feb 25 2005 05:44 PM AST
CBC News

OTTAWA - The federal government says it's shutting down an experimental farming operation in Nova Scotia to save money.

The Crops and Livestock Research Centre in Nappan is closing this fall, as Ottawa gets out of the business of running experimental farms. Three others - in Ontario, Newfoundland and Manitoba - will also close.

Bruce Archibald, assistant deputy minister for Research, Agriculture and Agri-Foods Canada in Ottawa, said it would have cost $11 million to refurbish the Nappan centre.

He said some researchers will likely be offered work in a newly refurbished facility in Fredericton.

Nappan was one of the first five agricultural research stations set up by the federal government in 1886."

So far no one in Nova Scotia has decided to man the barricades.

Seems the aggy station in St. John's is not the only one in the country being shut down, with jobs transferred to other places. The closure of the four facilities across Canada will save Ottawa about $1.5 million, according to the CBC story and - get this - the Brookfield Road facility would cost $11 million to refurbish if it was maintained.

Now for all Ed Byrne's comments and the poking he is taking from the Opposition, I just want to see if this scenario makes any sense to anyone.

Consider that for its entire operating life, the cool crop centre on Brookfield Road was a joint facility operated by both the feds and the province. A few years ago when Brian Tobin decided to sprinkle a few provincial government salaries around the province just minutes before he returned to federal politics, he shifted the provincial aggy research out to Corner Brook.

Given that the feds weren't consulted on that and weren't interested - I gather - in a complete shift across the province of their own, they soldiered on with the Brookfield Road facility for a few more years. Now, in a round of re-organization, they are going to shift their efforts elsewhere and find another way to provide the research support to local farmers. If I could save $11.0 million under those circumstances, I'd probably shut down Brookfield Road too. After all, if the provincial government isn't interested in the place, and they decided to make intergovernmental research co-operation just a bit more difficult a few years ago, why should the feds keep a place they don't really need?

From what I have heard, the feds have been trying to offload the site since the relocation of provincial resources to Corner Brook. Makes you wonder what might have happened if Mr. Tobin hadn't wanted to go back to Ottawa in 2000. I certainly don't see Ed Byrne coming forward with some cash to subsidize the refurbishment.

Better yet, Ed should buy up the place with some of the January oil money, hire the guys about to be relocated and put provincial researchers to work there. He can even bring the crowd back from Corner Brook. I am sure Danny won't mind losing some of his voters.

Ed Byrne tossed up an argument this afternoon about this being the only province without an aggy research station. Ok, Ed. I accept your point. Now tell me why that matters. Last time I checked there wasn't a naval base in every province either yet somehow Saskatchewan still manages to turn out sailors. The galloping gimmes or "me too, me too" is an argument for five-year-olds. Tell me why I as a taxpayer should fork out $11.0 million of my cash on a building that may not be needed.

The Government of Canada: Working for you!

No, I am not being sarcastic.

Here's a release today from provincial health minister John Ottenheimer announcing $16.8 million in new money for early learning and child care.

Here's the lead sentence:

"Investing in the province’s children today will help them realize their promise for tomorrow," said Health and Community Services Minister John Ottenheimer as he today unveiled new investment plans for three areas in early learning and child care."

At last, a modest but very important investment by the provincial government in a social program that is much needed. Must be part of the big January offshore dividend.

Not frickin likely.

You have to get to the third paragraph before you realize this is all federal government money.

Three provincial cabinet ministers are quoted in the release praising the program.

Maybe the words Government of Canada are in some kind of invisible ink that you need a secret decoder ring to see.

As the last paragraph states:

"The $16.8 million supporting this initiative is Newfoundland and Labrador’s share of the 2003 federal-provincial and territorial framework for early learning and child care aimed at improving access to affordable, quality, regulated early learning and child care services for children under six years."

Never forget that federal politicians have been complaining for years through umpteen administrations of both red and blue stripe that Ottawa never gets credit for the money it spends.

Read this release and you will have no problem figuring out Ottawa's image problem.

With all the nationalist and separatist sentiment coursing through the province in the wake of the offshore deal, you would think the feds would be anxious to have a flag tattooed on every available rump in the province. An investment like this in our children solely by the Government of Canada surely warrants some acknowledge of the feds' role in it all.

It doesn't require a big advertising campaign, a bunch of neckties and some fridge magnets to get the word out that "Government of Canada" is not just a Figure 11 target.

Now here's a label to question

Never let it be said Paul Wells is not an eclectic sort of fellow. His Friday blog contribution is a discussion of a typology US political leaders. I'll let you wander over and read it.

He found a test and your dedicated electronic scribbler decided to take it. Well here are the results. I will leave it others to judge the accuracy of this test. My wife is just shaking her head - yet again, mind you; the last question on the test asks to pick a hero among Hilary Clinton, Steven Spielberg and Homer Simpson. I picked Spielberg. Guess which one she thinks is more appropriate for me?

I'm a Talent!

You're a risk-taker, and you follow your passions. You're determined to take on the world and succeed on your own terms. Whether in the arts, science, engineering, business, or politics, you fearlessly express your own vision of the world. You're not afraid of a fight, and you're not afraid to bet your future on your own abilities. If you find a job boring or stifling, you're already preparing your resume. You believe in doing what you love, and you're not willing to settle for an ordinary life.

Talent: 78%
Lifer: 11%
Mandarin: 41%

Take the Talent, Lifer, or Mandarin quiz.

The backstory on Flo

In any news story there is the obvious detail about what happened.

In the case of Florence Delaney's resignation, we have the basic elements of what occurred.

The former treasury board secretary was told she was being moved to Environment. Rightly considering the move a demotion, she elected to resign apparently less than two years short of her pension.

That's the frontstory.

Government has dutifully denied this will have any impact on anything and in their version of things, Delaney had differences of opinion with the Premier on budget priorities. They have stuck with this media line - one of their series of statements about an event - as the story now enters day three.

In handling the frontstory, government is trying to kill it off quickly, end any inquiry into the matter and move on to something else. Their whole media line is the equivalent of the English bobby from the movies: "Alright then. Move it along. Nothing to see here."

Problem is the foot of the corpse is sticking out from under the white sheet and people just can't help but peek.

As noted a couple of days ago, differences of opinion don't normally spark this sort of situation - either the demotion or the resignation. So that alone makes the government's media line a little suspicious and largely ineffective as far as those who know government would be concerned. The news media may drop the issue but reporters won't necessarily forget; nor will senior public servants.

More importantly, if you could strip off that white sheet from the medical examiner's office, you'd likely see a lot more than the tragic and unnecessary end of an otherwise exemplary public service career. The real story here isn't even the ease with which the Premier dismisses those who disagree with him, apparently.

The substantive story lurking under the covers is the apparent difference of opinion in the upper reaches of government on government financial plans for the next few years.

In the e.e. cummings tribute speech on January 5 and in the subsequent budget, the Premier made it quite clear that the province's financial state made it necessary to embark on a process to fix it that would take years. Aside from the layoffs and the wage freezes, government embarked on a program review to restructure government and make it more efficient.

From the events this week, it seems that some within government, including some cabinet ministers - Loyola Sullivan maybe? - want to continue with those reform initiatives. They want to hold the line on spending. They want to take the measures recommended by the Gourley report from PriceClubWaterHouseCoopers and by David Norris in his paper to the Vic Young Royal Commission.

Would that mean we are in for a Dark Age lasting until 2012 or so? Not at all. But it does mean that there will be the kind of calls to Open Line shows we haven't heard since last year. The calls are ones that are a lot less enthusiastic in the praise of the Premier than he has seen now for the past six months. Those are the kind of calls that lead the Premier to joke about quitting politics or to tell reporters, as he did last year at the peak of the budget flap, that he regretted entering politics every single day. In a less personal sense, though, that approach is a lot less flashy, a lot less massaged than the one we have seen in recent weeks.

The alternative in this cabinet disagreement is likely something akin to the Tobin pattern from the 1990s. Recall that Tobin entered the Premier's Office, brought in a budget that laid off 1500 people and consequently fell drastically in the polls and popularity. He grabbed an issue that boosted his popularity and thereafter worked to find every nickel he could in one-time payments to make sure that he never again had to say anything that was vaguely unpleasant. Tobin also started living on the Open Line shows all as part of a program aimed at keeping his personal polling numbers up as high as possible. Every issue was tackled as a one-off and slowly the government lost any sense of strategic direction.

The financial circumstances are different this time though. Even without the January Deal, the provincial government was actually in good revenue shape nd will be for some time. As it turned out, high oil prices helped push the province along like an ice boat in a hurricane.

Here's the thing: there are some long-term issues that need to be tackled. The time to do it is now. The Voice of Doom speech may have been as grossly overblown as it was grossly delivered but at its core was a streak of fiscal commonsense that people bought into. Take a look at the reaction to the ad campaign among the Fair Deal crowd to get a glimpse of that commonsense. And not tackling those long-term issues - unfunded pension liability, for example - now while we have the cash would be as unforgivable as a Tobinesque spending spree.

What seems to emerge from the backstory of the Delaney departure is a government that lacks a coherent strategic vision; it seems to lack a Plan. The January Deal simply isn't big enough to cause a fundamental shift in government fiscal strategy in light of the "reality" Loyola Sullivan has been relentlessly pushing since last year. Yet here we have a huge racket on a fundamental strategic issue fully 18 months into this administration.

The government could only now be locked in some fundamental disagreements of the type mentioned in the government's own media line if it was moving from issue to issue without an underlying plan or philosophy.

If the disagreements are deep enough to cause the untimely demise of a top civil servant, then we on the outside must indeed wonder what lies under the sheet.

24 February 2005

Never NeverLand

Two other little Peter Pan things:

1. The dog in the original story was a Newfoundland called nana. The first link is to the online version of the book Peter Pan; the second link is to a United Kingdom club for owners of the breed. For some inexplicable reason, Disney decided to turn nana into a Saint Bernard for the animated movie.

Please note, the Newfoundland dog is the only living creature than can acceptably be called a newf or newfie. While the matter may be debated in some circles, most people I know consider that applying either of these terms to humans born in Newfoundland is akin to using the other n-word.

2. A regular reader of these electronic scribbles has already pointed me to obvious proof that Peter Pan is a matter of public policy. The sound you hear is my head pounding against a nearby wall at the extent of things that are legislated. The intent of this section of legislation is noble however it is limited or appears to be limited to proceeds from the stage play. Could one argue that an adaptation of the book is exempt from the provisions of the statute quoted below? Second year law students and those with way too much time on their hands may now begin the search for relevant case law.

Under the Copyright, designs and patents Act, 1988, c. 48, the United Kingdom Parliament has provided as follows in Part VII Miscellaneous and General, paragraph 301:

"The provisions of Schedule 6 have effect for conferring on trustees for the benefit of the Hospital for Sick Children, Great Ormond Street, London, a right to a royalty in respect of the public performance, commercial publication, broadcasting or inclusion in a cable programme service of the play 'Peter Pan' by Sir James Matthew Barrie, or of any adaptation of that work, notwithstanding that copyright in the work expired on 31st December 1987."



Strictly speaking, Peter Pan is not a public policy issue.

Politics sometimes resembles a fantasy world and yes, there are more than a few male politicians who seem like boys who never grew up but that is a digression.

Over on John Gushue's blog he noted that today is the anniversary of the sinking of the S.S. Florizel in 1918. For people not from here, the Florizel was a steamer running between New York and St. John's. Due to an error in navigation the ship went onto the rocks at a place called Cappahayden with a loss of 94 lives.

Shortly after the sinking a statue of Peter Pan was erected at Bowring Park in St. John's as a memorial to a girl who was drowned on the Florizel.

Anyways, John mentions that the statue is one of several in the world. There are at least five. The original is in Kensington Gardens, London. There's another in Bruxelles (Brussels), one in Camden New Jersey, another in Liverpool and then there's the one in St. John's. Check this link.

More than a few local children went to see the movie Hook a few years ago and wondered when Robin Williams had been here filming at Bowring Park. Older children, like say...me... have been wondering lately how we might possible persuade Kate Winslet to visit here but that would be an entirely different story.

A closer look at the defence increase

The federal government's budget news releases correctly highlighted the increase in defence spending as being the largest injection of new money into the Canadian Forces in two decades.

It is interesting, though, to take a closer look at what was mentioned in the budget announcements and what wasn't mentioned. Here are a few from a quick reading -


- $3.0 billion to permit expanding the Regular Force by 5, 000 members and the Reserve Force by 3, 000. This commits money to fulfill a long-standing government promise to reduce the burden on an already heavily burdened force. Several problems have been identified in meeting this requirement beyond available cash. They include lingering problems in the recruiting system and in the reserve force some ongoing difficulties with retention.

There is a marketing and human resource management problem underneath this all. DND needs to have a closer look at who they want to recruit, especially in the Reserve component, and then design a set of HR policies and a promotional campaign to reach those people. There was a pretty clever recruiting program a few years ago, the first in decades, but something just didn't click with target audiences. I'd venture that DND needs to look again at the issue and strengthen its advertising and public affairs teams to keep DND in the public eye.

In all of Newfoundland and Labrador, for example, there is not a single military public affairs officer (MOC 66), either in the Regular or Reserve component. The one full-time PA position is located in Goose Bay and that was recently turned into a civilian job. That is in a province where DND recruits a huge chunks of its annual quota, where it has an operational and training presence and where there is a strong likelihood DND will be involved in local civilian emergency response.

Here's a thought - either contract out the work to civilian agencies, even on a local basis. If there is a problem in hiring people to wear a uniform, there is enough expertise in the civilian community to fill the gaps at home.

In the interests of full disclosure, I am a PR consultant and I served as a DND reserve PAO for six years. If they want to tender the work, I'll gladly bid. As much as I'd love the work, as long as the process is fair, I really don't care who gets the job.

Meeting the recruiting targets will take more than cash.

- $3.2 billion for readiness including training, ammunition, spares and repairs. One of the hardest hit areas of the defence budget in the past decade has been available stocks of ammunition for training and operational uses. There has been some innovative use of simulators but for soldiers, there is nothing quite like the experience of tossing a hand grenade or firing a live round from a howitzer.

- $2.7 billion for new equipment. There is a need for new wheeled logistic vehicles, in addition to the Iltis light trucks that are currently being replaced. There is also a need for new light aircraft to replace the Buffalo, a Hercules replacement, as well as new logistics ships.

Typically, DND major procurement decisions fall victim to political concerns:

- Chretien cancelled the EH-101 purchase purely for political expediency, hamstrung the military for a decade and then wound up spending more money keeping the old aircraft flying and ultimately buying fewer new aircraft.

- In advance of the 1993 election, the outgoing Tory government acquired an Italian-designed knock-off known in the Canadian Forces as the LSVW. A high centre of gravity and constantly squealing brakes are just a few of the problems with the vehicle.

- The Griffon helicopter was acquired in an untendered contract worth about $1.2 billion under a minister of national defence fond of classical music and wearing capes. The decision was made solely for political purposes since the helicopter has repeatedly shown it can't do the jobs it was supposed to do. Don't take my word for that one; ask the Auditor General.

Military procurement needs to be based on a few simple requirements:

1. It must be the right piece of kit for the task.
2. It must allow for the maximum compatibility with our major allies, thereby reducing acquisition and operating costs. Simplest way to do that is buy stuff they use.
3. It must represent value for money. Canadian Forces members deserve the best equipment at the most reasonable price regardless of where it is made.
4. It must be acquired in sufficient numbers to meet immediate training and operational requirements as well as provide a surge capacity for international crises.
5. It must be as flexible and adaptable as possible.
6. Buy it quickly. No procurement should take 15 years unless we are inventing some whole new technology. Off-the-shelf means just that.

Overall, procurement needs to be driven by operations. What do the people need? How fast can we get it to them? If it doesn't work, get rid of it and find something that does.

Personally, I don't think most soldiers would care if their rifle was made in Burlington or Bhutan as long as they knew it was the best thing available and could do the job they need.

Defence Policy 1994 committed to buying more off-the-shelf items although this hasn't really been followed. Sure the army bought some camping equipment and multi-purpose tools but major items like weapons effects simulators, combat clothing, helmets and most major capital purchases have gone through lengthy (decades long) processes that are inherently inefficient and costly. Weapons effects simulators are one of my favourite examples - the project started when Chretien came into office and final delivery is anticipated this year. WES gear has been in wide use among our allies for almost 25 years.

DND history is replete with examples of poor procurement decisions. An opportunity to acquire 5 ton logistics vehicles from the US would have ensured compatibility with a major ally, tons of available and cheap spares and a lower unit cost based on the much larger US acquisition. DND passed on the chance. Likewise, in 1990 an offer of free armoured vehicles - brand new tanks and personnel carriers was nixed, reportedly by treasury board based on anticipated life-cycle costs.

When time came to replace the Iltis light utility truck, DND decided to acquire two different vehicles for the Reserve and Regular component. The Regular Force got a German-built truck known colloquially as the G-wagen. The Reserve Component got a bunch of civilian Silverado pick-ups trucks that really shouldn't be deployed outside Canada. Repeated opportunities to acquire HUMMVs have simply slipped by.

I could go on and on, but the stories are getting tired and old.

As I noted in another post the Canadian Forces has changed. Under General Hillier I would expect to see some smart decisions that focus on what his soldiers, sailors and airmen need to do their jobs.

Let's hope the politicians can stay out of his way. If you pay the guy big bucks, then let Hillier deliver results like we know he can.

Otherwise, Canadian taxpayers will see further billions wasted because the politicians really wanted a monkey as Chief of Defence Staff rather than an accomplished professional.

Bill Graham never struck me as an organ grinder.

23 February 2005

Rule Number 3?

Remember this one?
Rule Number One: The Boss is always right.
Rule Number Two: If the Boss is wrong, see Rule Number One.
Right now, you should have a look at a CBC Radio story today on the departure of the secretary of treasury board a month before the budget comes down. Florence Delaney has resigned in what is described by CBC Radio as a difference of opinion with the Premier over budget priorities.

Incidentally, the official government news release, issued at 3:00 pm today, goes into a whole raft of other things. There is the appointment of a new assistant deputy minister who brings bags of potential with him. There is the appointment of Len Simms to a patronage job as head of the housing corporation - why not just absorb the corporation into something else as a cost cutting measure? It is hard to fight the drive to note that there are very few former Peckford cabinet ministers who are still alive who haven't received a patronage job in the new administration. (Yes I know, three are in Ottawa; one is reputedly sitting as a Liberal to boot.)

Then there is also an inexplicable game of musical chairs involving the deputy ministers of transportation and works and municipal and provincial affairs. Almost at the last bit, there are some confirmations of assistant deputy ministers (ADM) who have been "acting" until now.

Then lastly there is news that a treasury board ADM will oversee the budget process through the end of the fiscal year. That's all there is.

Now back to the story:

Public servants don't usually toss their teddy in the corner over minor issues or "differences of opinion".

Senior public servants don't usually get demoted unless they have really screwed up badly. In the ordinary course of things, unless Ms. Delaney had flat-out, blatantly refused to follow cabinet direction on the budget there really wouldn't be much cause to shift her to a new job; cause that is, unless there was a larger reorganization of assignments among the deputy ministers.

If Delaney refused direction then it would be cause to demand her resignation or simply fire her for insubordination.

Inherent in the job of being a senior public servant or a senior political staffer is the responsibility - the duty - to state considered opinions forcefully, even if those opinions run contrary to what The Boss wants. Bosses should tolerate some dissent for the health of the government and the decision-making process.

Once the decision gets made, then it is the duty of said staffer or public servant to carry out the orders, irrespective of their own views. Voluntary resignation is something that happens only in the most extreme circumstances, that is, "extreme" in the ordinary workings of government.

That's why this story is likely to unfold in interesting ways over the next 24 hours.

The last paragraph of the CBC story is a bit of a joke, by the way. Premiers are not in the habit of requesting people to do something. "Request" is a polite way of putting it. It suggests one can refuse with impunity: "No thanks, I kinda like it here and my office has a nice view." Uh huh. Sure.

The truth is that the premier assigns people to jobs and from the looks of it, that is what was done here.

For some reason, Ms. Delaney decided to exercise her option under Rule Three: Hand in your resignation.

Therein lies the real story: why did she go?

In closing, here's a poser:

Trivia question: Name the last deputy minister of the provincial government who resigned voluntarily in similar circumstances?

Answer: Truthfully, I can't think of anyone, although, undoubtedly, there have been. Any faithful readers who can come up with a verifiable answer will win my eternal gratitude.

Boosting the military

Media reports on budget day all include the leaks that military spending is expected to be boosted by a total of $12 or $13 billion over the next five years.

Bravo, Paul Martin.

Anyone vaguely familiar with the Canadian Forces knows of need to replace worn-out equipment and develop new capabilities. The complaint of "rust-out" is a common one in Canada, but in the current situation, Canadian soldiers, sailors and aircrew can't be shortchanged.

Just put this into a larger context.

Since taking office in 1993, the Liberal government has cashed in the post-Cold War peace dividend, cutting military spending even though at times the overall operational commitments - troops deployed - increased compared to Cold War days. Pressure has been mounting from NATO generally, not just the United States, for Canada to match its pious words of internationalism with the sinews of a robust military that can take on peace-keeping, and peace-making operations. None of this goes against our foreign policy traditions; rather, since the Second World War, Canada has been an active interventionist in one form or another.

In the relatively lean times, the Canadian Forces has gone through a rebirth of sorts. I experienced some of that as a reservist through the 1990s. The Canadian Forces isn't perfect, but in everything from leadership to pay and benefits the Canadian military today is in many ways a stronger force than it was when there were more people in uniform and they had more equipment.

Expect to see more from the Chief of Defence Staff, General Rick Hillier. He is typical of the leaders the Canadian Forces turns out these days. He is practical and aggressive and his practicality likely contributed to the decision to absorb the new cash in stages rather than flood a bunch of money into the military all at once. Hillier is also less likely to be bound by bureaucratic issues and focus more on relating Canada's military forces to national policy objectives. For example, he is unlikely to support new fighter aircraft just because it's the air force's turn to buy something and they like fighters, if the national need is for transport planes.

The context I mentioned above also includes missile defence. Canada is already participating in some ways already though passive things like detection of missiles just as we have done since NORAD was formed in 1958. Ambassador Frank McKenna was right, incidentally. What the Prime Minister will likely announce later this week is that we won't be buying into active missile defence.

But in that overall context Canada could not opt out of missile defence, continue to neglect its own defence forces and continue to expect some influence in the world, particularly NATO. We have been able to do that sort of things at times in the past, but these days, if Canadians actually want to be the "Stern Daughter of the Voice of God" in international affairs, they need to buy a seat at the table. Otherwise, we would be reduced to shrieking through the closed door while someone else makes decisions directly affecting our interests.

The increase in defence spending is a sign Canada is starting to act like a major international player again.

22 February 2005

Ed Byrne redux

Having had a bit of fun with Ed Byrne over a couple of posts, let's take a closer look at the minister and his portfolio.

At the outset, let me say I have known Ed Byrne for about 20 years. We aren't close buddies by any stretch but when we meet, there's no problem in stopping and having a chat about the goings-on around the district in which I live, and he represents, or in general in the province.

Ed Byrne was first elected to the House of Assembly in the early 1990s and served as leader of the Progressive Conservative opposition through the 1999 general election. Despite what was rumoured to be a difficult term as leader, Byrne led his party to a credit-worthy showing against Brian Tobin. The PC s managed to make it a race in 18 seats and in six, it was touch and go right up until the end for the Liberals. By the end, Byrne and the PCs managed to knock off three Liberal incumbents.

Under Danny Williams, Byrne rose to a more prominent profile, if that was possible and quickly established himself as a strong spokesman for his party. He served, as I jokingly said once, as a better leader after he left the job.

Byrne's reward was a large and important portfolio. Natural Resources encompasses onshore and offshore energy, forestry and agriculture all of which continue to make strong contributions to the provincial economy. Byrne has been publicly acknowledged for his strong support of agriculture, a good thing since Kilbride district has a strong agricultural sector.

Taking all that into consideration, it has been surprising to see Byrne have such a low profile on the offshore discussions, a slightly higher profile on aspects of the Lower Churchill, and, as noted in another post putting out a release soliciting bids for a strategy to explore the prospect of wind power as an alternative energy source.

This latter one is particularly strange because it seems to be an announcement of something already in train. At the same time, the province's long overdue energy strategy - a policy to encompass all energy resources would naturally incorporate a component on alternative sources like wind power.

What's up with that?

Speculation is easy. There is a general impression out there that the Premier has taken the big files - Lower Churchill and offshore - because they are big and have a high profile. That doesn't explain, though, why Loyola Sullivan got a higher profile as a spokesperson on offshore revenues than Byrne did, especially since Byrne's Nova Scotia counterpart was a key player in that province's campaign. There is a logical structure to these things and it seemed natural that Byrne should be part of a team approach and be seen to be part of the team.

There is also a view in the political community that Byrne has been tasked with focusing on his role as government House leader. In that job, Byrne's main effort has been on dealing with the Opposition parties and certainly this interpretation seems to be confirmed by the prominent and largely successful job Byrne has done in counter-attacking and attacking the government's political Opposition.

There has also been growing rumours that Byrne is keeping an eye on federal politics. In one scenario painted by the local speculators, Byrne will run in St. John's South-Mount Pearl once Loyola Hearn either retires or takes on a weakened John Efford in the Avalon riding where Hearn's home is and where he maintains his strongest support.

If that comes true, then Byrne would be a formidable opponent. He is young, experienced, articulate and has a strong political organization. Byrne also matches the demographic profile of the riding making him a natural fit.

But all that is speculation.

In the meantime, there are some major policy issues Byrne could tackle in his current job.

First, he could announce development of a comprehensive energy and energy development strategy for the province. The high profile projects like the offshore and the Lower Churchill need to be put into a larger context. That's been missing for a while now and Byrne could be setting out a policy that relate energy development to other factors rather than just talking about a few windmills. For example, future offshore development and encouraging greater exploration will require an examination of economic, labour, environment and safety policies as well as and tax incentives.

Second, Byrne could clear up policy regarding the province's hydro-electric corporation. In the last election, all three provincial parties talked about turning Hydro into something more than it is now. Now 18 months after being sworn in, the Williams administration hasn't done anything on this policy plank other than switch out some of the directors on the corporation's board.

Maybe it's time to re-examine the idea of privatizing Hydro, thereby strengthening the province's private sector and reducing the debt burden on the treasury. Maybe Hydro can be a productive energy Crown mega-corporation with interests in offshore development. Maybe Hydro can use some of its retained earnings to fund environmental projects of the type the provincial government can't fund directly. There are plenty of options but it seems more productive to engage the public in a debate over the future of Hydro in the Big Picture sense rather than in just a chat about wind power.

Third, Byrne could raise the profile of discussions about ending marketing supports for agriculture. This is an industry worth hundreds of millions of dollars annually to the province. Current international negotiations could see an end to market supports to farms across the province and raise the prospect of the industry being swamped by mainland competition. Byrne doesn't have to take one side or the other but he could open up the discussion in the broader public good - better to have participation than to spring something on people. Other provinces have concerns about this issue as well and Byrne could increase the province's visibility on a file most people wouldn't naturally association with Newfoundland and Labrador.

Fourth, Byrne could become a spokesperson for the province's offshore supply industry. They were noticeably invisible during the recent offshore talks except for NOIA's interventions already noted. But the industry needs to be recognized publicly and Byrne is a logical minister to help raise the profile of companies that are helping to make the province the principle beneficiary of offshore development.

Since taking office in November 2003, the Progressive Conservative government has seemed to operate on issues taken in series; first the budget, then the strike, then the offshore, next the Lower Churchill. Given the number of government issues out there, it will take forever to deal with them with government seemingly focused on just one issue after the other.

With capable ministers, it should be possible to manage some files in parallel and get more done in a shorter space of time.

There could be more to Ed Byrne than parrying Liberal and NDP thrusts in the House and in the media.

20 February 2005

A tale of two cities, Part Three

Ponder, if you will, the President and CEO of NOIA, one Leslie Galway, walking along the St. John's waterfront musing with Peter Walsh of CBC television on the need to increase exploration for oil and gas offshore Newfoundland and Labrador.

A problem was identified, yet no solutions were discussed.

Now ponder an agreement signed on Friday between the Government of Nova Scotia and the Government of Canada to streamline regulations in the Nova Scotia offshore area. Reducing the regulatory burden without lessening environmental and other needed controls has been a concern for the oil industry for some time. Nova Scotia managed to get it done in time for this weekend's Atlantic Energy Forum, held this weekend in Halifax. Here's a link to a news release from the Nova Scotia government on the results of the forum.

Go visit the Newfoundland and Labrador government website and find any mention last week of the forum. It is possible I just missed it.

It does seem odd, though, that this week - in oil and gas week - the whole business of promoting exploration and streamlining the regulatory process has not been played up more by local industry representatives, like NOIA, and the provincial natural resources minister, Ed Byrne.

Incidentally, who is the guest speaker at NOIA's Oil and Gas Week Lunch this year? Loyola Sullivan, provincial minister of finance and president of treasury board.

19 February 2005

A brief musical interlude

Two things prompted this post.

First is the entry on Paul Wells' blog on the issue of applause between movements of a concerto or symphony. Contentious issue this, especially here where you you will sometimes find people applauding vigorously whenever the music stops (even after a long pause) and other times when the audience seems lukewarm in its response.

I still recall the rather odd experience of having an entire church congregation spring to its feet during a performance of the Hallelujah chorus from The Messiah. If memory serves this tradition dates from the inaugural performance when the King, (George III ??) stood during that piece simply because he needed to stretch his legs. Somehow the idea worked its way far and wide including to that performance in - as I recall - Twillingate.

This is a musical place and by and large audiences are extremely enthusiastic and extremely supportive. What else could a composer or musician seek?

The second motive for this post is that tomorrow marks the start of the Kiwanis Music Festival in St. John's. Your faithful blog-scribe will be performing on the evening of 26 February at 8:20 pm along with the other members of the Gower Community Band. That's all I'll say about that.

As a bonus for having suffered through this post to arrive at this point, I am including a link to a collection of musician jokes. Some of these would be funny even to non-musicians. Others might be a bit more obtuse unless one has experienced it.

For example, non-percussionists will instantly enjoy this one, and with good reason:

Q: How do you know there's a drummer at your door?
A: The knocking slows down. (Variation: The knocking speeds up.)

However, those who have never worked with a drummer may have some difficulty getting the full flavour of it.

Since I play the euphonium, I always liked this one:

Q: How do you make a euphonium sound like a french horn?
A: Put your hand in the bell and miss a lot of notes.

Or another favourite:

Q: What's an oboe?
A: Kindling for a bassoon.

Just for the curious, here's a link to one of the leading professional euphonium players in the world, a chap named Steven Mead from the United Kingdom. Those who know me claim there is a resemblance between me and this fellow, but only in the facial features, I can assure you. Those who know me would never suggest for a moment I play like Mead.

Check his recordings (discography) page and you'll get some mp3 links like this one - a well-known television theme in which Mead plays all the parts - or this one, although I doubt it would be considered for a remake of Apocalypse Now. Ditto on all the parts.

Gotta love multi-track recording.

Now we return you to our regularly scheduled programming

Much ado about...

Interesting to see the reaction to a news story on Friday from CBC about the costs of advertising done by the province for the new deal. Some of the tab was picked up by the federal government.

In the interests of full disclosure, it must be noted that I used to work for a subsidiary of M5.

But here's my take on it, anyway, for what it's worth.

The work done by M5 is of the high calibre anyone would expect from one of the major advertising companies in the province and one that holds major accounts in Atlantic Canada. The overall price doesn't seem outrageous or even questionable in light of what was done. It seems to be pretty fair.

By contrast, I could discuss at some length the outrageous charges for some work done for the Hydro project under the Tobin administration or at least billed against the communications account - note I did not include not the stuff done for Grimes.

Was it necessary to do the advertising? Probably not and certainly not in the warm fuzzy approach taken but that is really a matter of choice. If it is what the client asked for and it doesn't cause them any difficulties, why fight about it? I've had clients hell bent on disregarding best advice and those are things consultants have to deal with. Some people over at Fair Deal didn't like it. Ok. That's fair enough.

As for how the work was awarded, there are some constraining factors such as timing that need to be considered. The process of getting quotes might well have taken too long; some companies may not have been able to pick the job up quickly and finish it on time. The real test of the procurement process will be for things like the "branding" project.

I can tell you from experience that government and other agencies and companies often go through all sorts of internal wrangling to ensure big contracts are awarded fairly. Sometimes the suspected preferred bidder gets the work; sometimes it doesn't. But I emphasize the word "suspected" - word on the street isn't always accurate; it is sometimes sheer speculation.

In a properly run competition, there are so many factors to be weighed and government does need some flexibility to ensure that it doesn't fall victim to the low-cost, low-quality trap that sometimes results from a misapplication of the public tendering process. We all know the joke about soldiers commenting that their rifles and helmets were made by the lowest bidder - implicitly suggesting they are therefore of the lowest quality. Well, the same is true for services like marketing, advertising and public relations. Cheapest isn't always best.

So the ads are done, the TV spots have been aired and hopefully the cheque will be cut and the account closed.

Roger Grimes has noted the difference between Danny Williams, Opposition Leader and Danny Williams, Premier when it comes to tendering contracts. It's a fair comment, but again, it wouldn't be the first time attitudes changed in moving from one side of the House to the other for nothing more than a sudden appreciation of the complexity and difficulty of doing things on the inside that appear obvious and simple only from the outside.

Comparisons with the federal sponsorship business are equally overblown. Then again, the whole Gomery inquiry has drawn way too much attention to a raft of relatively minor purchases in the greater scheme of government procurement. It's $100 million against a federal budget of umpteen billion. If the law was broken, the RCMP investigation can sort that out. If administrative procedures were bent or broken, then the internal administrative system of the federal public service should be able to sort that out. Let's move on past the golf balls and neckties. Let's hope that Gomery inquiry doesn't wind up hamstringing the federal government or make it shy to inform Canadians accurately about what it does on their behalf.

There are a bunch of other things to get more excited about in the province and in the country than this particular contract.

18 February 2005

Moving CHHC offices: all that is solid melts into air

"Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air. " Karl Marx and Frederich Engels, The Communist Manifesto

Purists will rightly point out that Marx and Engels are talking about the impact of bourgeois economies in producing the conditions necessary for the political awakening of the proletariat.

However, the notion can be applied in another context, namely that constantly disrupting established relationships - whether of people to work, or ideas to the material world - produces the effect of unsettling the foundations on which human society functions.

Political dialogue is no exception.

Modern political discussion, especially as we have seen locally in recent months, often relies on pure emotion divorced from history and any other meaningful context.

Newfoundland nationalists and many others can be easily roused by the symbol of the Upper Churchill without most of them ever appreciating the long history and the particular context in which the Upper Churchill hydroelectric project was developed. Similarly, the Real Atlantic Accord can be assailed on the basis of myth and misrepresentation and even those who authored the agreement can simply discard established fact in the face of current expediency. On this point see anything written or said by John Crosbie in the past five years.

There is more to this than the abuse of history. It removes events from a human context which can be appreciated and assessed and in the process serve as a guide to deeper understanding of current problems or issues. As some wit once remarked, history is not so much what occurred as what we remember. In Newfoundland and Labrador, our memories are exceedingly dim. In a place where so much of our history remains unexplored, the record of what occurred transmogrifies into mythology and in some instances it is deliberately transmogrified by those wishing to influence wider public opinion in favour of or against one cause or another.

Ours is largely an oral culture, as it has been for centuries. There is a well-known communications exercise of whispering a message to one person who whispers it to the next in a long series. The humour comes in hearing first what was said at the beginning and then what emerges at the end after the message has passed through umpteen "listening and repeating" iterations. Such is oral history and oral culture.

Recall how easily Brian Tobin evoked the Upper Churchill in his sham-fight with INCO, or how readily Danny Williams whispered the same words during his recent offsets campaign against the federal government.

All this may overload a simple news release with too much political theorizing but I will take the risk.

Consider the second news release in two days from Liberal Opposition leader Roger Grimes on the federal shares in Hibernia. Grimes states:

"I call upon government to update the people of the province as to what actions have been taken to ensure this important asset is secured. Lobbying efforts should also continue to have the headquarters of the Canadian Hibernia Holdings Corporation (CHHC), the crown corporation that operates this 8.5 per cent share, moved to this province from Calgary. It is an insult that a federally run corporation that makes their profits from our resource is based in Alberta, not Newfoundland and Labrador. This is not acceptable and government should fight to have this office, and the jobs that go with it, transferred to the province."

Grimes is continuing his pseudo-nationalist posturing from his days as Premier. It was Grimes, after all, who funded the expensive and largely vacuous Royal Commission on Renewing and Strengthening Our Place in Canada. The Royal Commission's final report is, in many respects, merely a summary of the standard nationalist complaints about what former Tory cabinet minister Bill Marshall called "the rack of Confederation". Little effort was expended to provide a deeper understanding of this province in its current context or to offer a richer understanding of events like the Upper Churchill contract negotiations. The Accord offset section of the final report is a particularly odious example of fact being twisted and distorted for a purpose other than the furtherance of understanding.

That said, Grimes' releases on the federal Hibernia shares pander to the misunderstanding of a simple subject. Grimes transmogrifies the location of an office, of all things, into an insult, into yet another wound on the scarred psyche of Newfoundlanders (but not necessarily Labradorians) The reality of the Canada Hibernia Holding Corporation (CHHC) office becomes air for Grimes' purposes.

CHHC staff comprise a handful of people, four of whom are traders who, to the best of my knowledge, are engaged in the business of selling oil to generate the revenue from the federal shares of Hibernia production. They work on the Calgary exchange, again as far as I know, but even if that were not true, they are simply located in a city which is the centre of the country's oil and gas industry. Pretentions by Halifax and St. John's are obviously to the contrary.

So what value, beyond the purely symbolic, comes from relocating this tiny office? The answer, in short, is none. The office may bring a handful of new salaries to an already prosperous city and the office itself may generate some modest rental revenue. It would bring no great economic benefit and may well disrupt the simple - and cost-effective - functioning of the office where it is.
As a rule, government salaries produce no substantive economic benefit, as the Tobin experiment of dispersing provincial government offices around the province showed. Relocation was a symbol, but merely of the government's inability to foster economic development outside the metropolitan St. John's region. The expansion of government - as advocated in the revamped Independent - merely serves to increase the taxation burden on the whole society and, more often than not, stifles the imperative to deliver needed services effectively. After all, if the mere presence of the salary is the valuable commodity, then that is all the government need produce. What incentive exists to do something actually?

As for Grimes other issue, acquisition of the federal shares themselves, the overall context needs greater examination to determine if the idea is even feasible. The corporate partners may not be willing to see the simple transfer take place. They might insist that it be transferred but at fair market value. This is something which the provincial government simply cannot afford - without using the new offset money and given that the Hibernia project is halfway through its productive life the chance of recovering the purchase cost plus produce a real profit is slim. Were we somehow to engineer the transfer for a token sum, one can only imagine the national repulsion at such a generous gift on top of what is widely perceived as an already overly generous gift in the January deal.

What we might find, in a detailed analysis, is that acquisition of the shares would produce no substantive financial benefit. In the last scenario mentioned above, it might come at a more significant political price in the long term. Such is the history of this place: long on symbols, short on the practical.

Then we wonder why we are not more prosperous than we are, either economically, or politically.

The simple answer is that we reduce everything to air.

Air is free.

17 February 2005

The Life of Brian...

or more particularly the perspective of former premier Brian Peckford has been a curious one indeed.

Take his letter in today's National Post. His defence of the January offset deal reveals an interesting take on recent events and those of his own era as Premier. It also reveals some curious twists of the English language but that is another matter.

Let's take his letter and look more closely at it's contentions:

"It should come as no surprise to the provinces and those interested in federal/provincial relations that equalization payments have been tabulated differently for some time, as they relate to Newfoundland and Labrador offshore oil and gas revenues."

Comment: Peckford begins with a surprising misrepresentation of the deal he signed in 1985. The Real Atlantic Accord actually provides that Equalization entitlement for Newfoundland and Labrador is calculated according to the formula extant in any given year, taking into account offshore revenues under the Real Accord as provincial own-source revenues.

"The equalization formula was first established in the Atlantic Accord, Section 39, which was signed in February 1985."

Comment: Well, to be honest, Brian, the Equalization formula was established in 1957 and has been amended from time to time thereafter. The Real Accord does not provide a formula for calculating Equalization entitlements.

The section referred to here establishes a series of declining offsets - that is supplementary payments - made in addition to revenues and Equalization per se. The offsets in the Real Accord expire in 2011, as Mr. Peckford accepted in 1985, thereby leaving the provincial government with whatever offshore revenues that existed at the time plus any Equalization entitlement and other federal transfers.

"Under that section of the accord, Newfoundland and Labrador received $522.1-million in equalization offset payments -- in addition to offshore revenues -- in the period from 2000 to 2005."

Comment: Since 2005 isn't over yet, and actually the 2005 fiscal year isn't even here yet, Mr. Peckford can't say what the Equalization offset payments under the Real Accord will be for the period he cites. Let's say they are at least that high. Let's also say that they reflect offsets almost equal to revenues collected. In some years, in fact, offsets have exceeded actual revenues.

"What is happening now is an increase in the amount of the equalization the province can keep. No new precedent is being set."

Comment: Well, yes and no, Brian. Let's do the "no" part first. Fundamentally, the new deal theoretically allows the province to gain extra federal transfers. On that basis, it is an increase in the amount that can be obtained by the province but it would be purely a matter of semantics to say the province retains - or keeps - anything at all. Since no province sends money to the federal government, and the federal government does not reduce provincial government revenues, it really isn't a matter of retention or keeping. After all, Equalization si not a right of each province.

As for the precedent, I'd agree this doesn't set a precedent as far as the notion of an offset payment is concerned. Equalization offset payments that were transitional - i.e., fixed term and declining - for offshore petroleum revenues were first established in the 1982 Nova Scotia Accord. They were carried forward into the Real Atlantic Accord.

The structure of this deal, though introduces a whole new concept in offset payments. Rather than being transitional, this deal - on paper - provides a full offset for a particular category of revenue for an extended period. In the case of Newfoundland and Labrador, the total period of offsets will be 20 years if the province qualifies for the second eight-year phase in the new deal.

It also creates a precedent in that a category of revenue held by one province alone is exempted. Previously, the generic solution provided the comparable benefit. In this instance it is hard to argue that a province which derives revenue from a unique source or where it holds the preponderance of a particular type of revenue should not attain a comparable Equalization offset based on local circumstances. The rules should apply fairly across the country, so it is possible that this agreement can be used by other provinces to justify comparable treatment.

"This is necessary given the collapse of the federally managed ground fishery collapsed and the loss of 40,000 jobs (which would be equivalent to 800,000 jobs in Ontario), the doubling of oil prices, the need to catch up to standards near the national average and to fulfill the constitutional provision (Section 36) that states that "Parliament and the Government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." "

Comment: Blame Canada is a famous sport, but this revenue deal can hardly be considered reparations for the collapse of the fishery. No one has actually fixed blame and Mr. Peckford avoids looking in the mirror to find someone equally responsible for mismanagement of the fishery.

Doubling oil prices is not a reason to increase offsets, either. The higher the price of oil, the more cash flowing to the province under the Real Accord. This is what would truly make the sunshine and have not be no more.

"Without this recently announced improvement, levels of service and levels of taxation in Newfoundland and Labrador would have no chance of being "reasonably comparable." "

Comment: If a province squanders it revenues, no matter how large the revenues might be, then it will have difficulty having sufficient resources to provide services comparable to those available in other provinces. Newfoundland and Labrador history since Confederation is full of examples of provincial government mismanagement, including several notorious examples under the Peckford administration.

The constitutional obligation to provide Equalization to the provinces has been met by the original program, not by the offset payments of either the Real Accord or the January deal. Mr. Peckford knows the rights of this since he helped include Equalization in the 1982 revision of the constitution.

In general, given that Mr. Peckford was originally opposed to any attempts to modify the Real Atlantic Accord, his support of the Williams' deal seems almost hypocritical. His rationale provided in the Post today is more specious than specific.

Ah well, he is writing from the Wet Coast, after all.

Canada Hibernia Holding Corporation

Here is some additional information on the Canada Hibernia Holding Corporation, for those who want to dig a little deeper into this.

The Hibernia Management and Development Corporation website gives some general information on overall ownership of the Hibernia field.

Background information is harder to come by online, although there is plenty in old newspaper files from the early 1990s.

In developing the Hibernia field neither the Government of Newfoundland and Labrador nor the Government of Canada initially took a direct interest. The federal National Energy Program (NEP) and provincial legislation from the early 1980s anticipated that government would legislate a share of any offshore development. The Peckford administration passed legislation in 1980 to create a provincial petroleum corporation that was supposed to provide the provincial government with a means of accessing considerable revenues from offshore development.

The federal Mulroney administration repealed the NEP although it retained Petro-Canada, the federal Crown corporation for a number of years.

While the Real Atlantic Accord does refer to Crown shares, this clause refers to potential shares of the type envisaged under the NEP. In the event, the dismantling of the NEP rendered this clause irrelevant and the federal interest in Hibernia does not fall under the provisions of the Real Atlantic Accord.

In 1992 the federal government acquired an 8.5% interest in Hibernia following the withdrawal of Gulf Canada Resources, one of the original partners. Since no other private sector partners could be found to take up the shares, the project would have collapsed without the federal investment.

CHHC is a small federal Crown corporation which administers the federal shares. It is located in Calgary

As an aside, if you read the NOIA website, apparently only the intervention of NOIA members (one a former advisor to Brian Peckford) and federal Tory ministers like John Crosbie saved the day in 1992. Apparently, the provincial minister of energy at the time, Rex Gibbons, later a chairman of NOIA (!!!!), had nothing at all to do with it. Perhaps NOIA's partisan leanings go back much further than events of the past few months. The link is to an overview prepared for the association's 25th anniversary, less than three years after Gibbons' term as chairman.

Hibernia: No Sale!

Check The Telegram today and the feature story in the business section by Moira Baird.

Baird, known for solid, dependable reporting demolishes the story in The National Post yesterday that Ottawa planned to sell its 8.5% share in the Hibernia project. Next time the Post wants to do a story on the east coast offshore, they might want to make a call to Moira to find out what is going on.

“There’s no plans to sell the shares of Hibernia. Where that story came from in the (National) Post I have no idea, the minister of finance (Ralph Goodale) has no idea whatsoever about it,” [Efford] said Wednesday evening. That's a quote from Baird's story.

Provincial natural resources minister Ed Byrne is quoted as saying he believes the shares should be transferred to the provincial government without going to sale. Again, I would refer Minister Byrne to the position taken by his national leader, Stephen Harper on this point just for the sake of information. The Martin government has made no comment on potential sale or transfer of the shares, other than the comments by federal natural resources minister John Efford in today's Telegram.

Just to give some accurate background on the Hibernia shares, here's a story Moira Baird wrote last year on the Canada Hibernia Holding Company. Bear in mind these figures are for 2003 and before; we will have to wait until later in the year to find out what the current revenue profile looks like with higher oil prices.

The Hibernia shares held by Ottawa have become a source of controversy and a great deal of misunderstanding and misinformation, some of it deliberate, much of it inadvertent. No matter what you hear, put faith in Moira Baird's story before you accept anything to the contrary.

Jan. 20, 2004

Headline: Hibernia means millions to feds
By Moira Baird
The Telegram

The Canada Hibernia Holding Corp. - the company that minds Ottawa's 8.5 per cent stake in the Hibernia joint venture - has been earning profits for the federal government since 2002.

You won't easily find the company's annual financial statements in federal documents, though.

By Dec. 31, 2002, the Canada Hibernia Holding Corp. (CHHC) repaid Ottawa's investment in Hibernia - a total of almost $431 million spent between 1993 and late
1997, when first oil flowed from the field.

Ever since, Ottawa's share of the Hibernia revenue has been in the black, earning profits for the federal government.

Just how much profit isn't clear because CHHC's financial statements for 2003 aren't yet available. Since then, the price of oil has risen and Hibernia's annual production limit has been raised almost 23 per cent to 80.4 million barrels of oil.

$237 million in sales

In 2002, CHHC generated $237 million in crude oil sales revenue, according to the company's annual financial statements obtained by The Telegram.

The corporation repaid the remaining $127-million federal investment in the Hibernia joint venture - and also earned a profit of $99.8 million in 2002.

Since Hibernia began producing oil in 1997 until Aug. 31, 2003, the project has generated $180 million in royalties for the Newfoundland government.

On the expense side of the ledger, the Canada Hibernia Holding Corp. paid out $89.6 million in 2002. Those expenses included:

* $56.8 million in depletion and depreciation of the resource;
* $21.9 million in operating costs;
* $5.9 million set aside for future costs of abandoning the gravity-base structure, an environmental liability for six Hibernia partners;
* and more than $1 million in administrative costs.

CHHC is a four-person operation based in Calgary.

The company pays the bills, makes operating decisions with Hibernia partners, sells its share of the oil to the highest bidder, arranges for transportation of that oil to market, and collects the revenue from the sale of the oil.

Although CHHC operates as a private company, it is not required to report quarterly financial statements because it is not publicly traded.

Dividends are paid to the Canada Development and Investment Corp., CHHC's parent company. In turn, it remits the money to the federal government.

New use for old corporation

The Canada Development and Investment Corp. is a little-known Crown corporation that has just one other subsidiary, Canada Eldor Inc. This second subsidiary is responsible for the federal government's liability for nuclear waste and the cost of decommissioning and cleaning up old uranium mine sites.

Other Canada Development Investment Corp. subsidiaries, such as de Havilland Corp., Cameco Corp. and Fishery Products International, have been privatized.

The federal government has five partners in the Hibernia joint venture - ExxonMobil, Chevron Canada Resources, Petro-Canada, Murphy Oil and Norsk Hydro.


Hydro minister shocked

In the newsrooms of North America, reporters usually fall on the floor laughing when they hear some official say they were "shocked". It's an overused phrase. It is usually closely followed by "appalled" as in "I was shocked and appalled". It's never "dismayed and appalled" or "shocked and bothered". Nope. It's always "shocked and appalled".

In the world of overused and lazy phrases, it stands next to"...and then something went horribly wrong..." in the tool bag of the demons of Reporters' Hell. People who use the phrases too often will get to hear it in the afterlife for a really long time.

VOCM posted this story to their website yesterday, in which the local Natural Resources minister expressed his "shock" at hearing the federal government planned to sll its interest in Hibernia on the open market. He also wanted the shares "returned" to Newfoundland and Labrador, but more on that knee-slapper (<-- another horrible cliche) later.

Anyway, don't bother looking for this story at the VOCM site. It has since disappeared.

"VOCM Province Still Wants Hibernia Shares - Feb 16, 2005

Natural Resources Minister Ed Byrne says he was shocked to learn that Ottawa may be getting ready to sell its 8.5 per cent stake in Hibernia. The National Post is reporting that details of the sale could be announced in next Wednesday's federal budget. Byrne says government has not swayed in its position that the Hibernia shares should be returned to Newfoundland and Labrador. Byrne says he has made a call to federal cabinet minister John Efford looking for answers. Opposition Leader Roger Grimes says those shares would be very valuable to Newfoundland and Labrador. "

More detail on this issue will follow later in the day.

I just have two questions:

1. Has Ed Byrne read the letter from Stephen Harper in which Harper pledges to sell the Hibernia shares for the benefit of all Canadians, if Harper is ever elected Prime Minister? I don't seem tor ecall anyone in the Progressive Conservative party provincially noticing that the national leader wasn't onside with one of the local party's big offshore issues.

In fact, come to think of it, Harper didn't support any version of Danny Williams' offset proposals last year. Harper just criticised the Prime Minister for not living up to the Prime Minister's commitment. (Clue: Harper learned his politics from Penn and Teller - big thing: misdirection)

2. Just who is this guy Ed Byrne and why is he speaking about oil and gas? The Accord file, which is in Byrne's department, was stripped from him and handed to Loyola Sullivan. Byrne couldn't even get a seat at negotiating table, nor could he get a prominent spot in the signing ceremony, as his predecessor Bill Marshall had 20 years earlier. Ed spends more time announcing a strategy to develop a strategy to develop wind generation of electricity than he does talking about one of the biggest files in government.

Byrne has been almost invisible in the past year on major issues like this, except as the government's counter-attack force or as commentator on trivial issues raised by the Opposition.
Hmmm. Maybe that's the answer. Since Roger Grimes has put out a release on the Hibernia shares story and Byrne is commenting on it, maybe it is an issue the provincial government isn't really concerned about. But it is enough to have the minister responsible for hydroelectric power being "shocked" by something.

16 February 2005

Sphincter tightening moment

Party house leaders in the Commons are likely looking askance at the action by the federal Conservatives last night in blocking a bill that would divide Foreign Affairs and International Trade into two distinct departments. Bits of their anatomy are tighter today than they were this time yesterday.

Only last week, the Conservative industry critic, Belinda Stronach, had indicated that of course her party would vote for the bill.

From the outside looking in, there isn't any obvious reason for the switcheroo, especially since minority parliaments thrive on some co-operation and predictability.

Swinging back in time to 1979/80, though, we have to recall that sometimes Opposition parties in minority parliaments like to be unpredictable when it comes to budget bills. Elections follow and the incumbent government doesn't always win, let alone win big.

As I busily check my notes, I see a comment by Loyola Hearn telling local media in St. John's that of course the Conservatives will be voting in favour of the new offsets bill.

While normally I am not a pessimist, I won't be trying to cash Loyola Hearn's assurance cheque at any bank. A letter from Ralph Goodale to Loyola Sullivan also doesn't allay my concerns since it reveals bags of loose wording still left in the deal signed on Monday, which, by the way, Premier Williams' has dismissed as having no legal weight.

I will feel a whole lot better when the Governor General nods at the end of the session and signs the enabling legislation.

Until then, I shall remain vigilant to the likelihood that where it can, excrement will occur.

15 February 2005

You read it here first! - Amended

Regular readers of this blog will notice the stunning similarity between the agreement signed in St. John's today and the revised version of the December deal posted here a few weeks ago under the title "First we assume a can opener". The language is somewhat simpler but the deal is largely the same.

[Note 15 Feb 05 - There are two additional points I have added. As noted below, one of my sharp-eyed readers caught a mistake of mine in the initial review - in paragraph four and five the province can go on and off the 100% offsets. The Premier's claim is intact, although this arrangement is still less than he wanted and its actual performance depends on the cirucmstances as they occur.

As a second point, Premier Williams apparently dismissed the document signed on Monday as having no legal weight. I am not sure why he would make this comment since it is supposed to represent the agreement he reached. If it has no weight, i.e. no meaning, then why did he bother having anyone sign it and why is he posting it to the government website. ]

Let's take a closer look:

A. The provincial government already collects 100% of offshore revenues.

"2. This document reflects an understanding between the Government of Canada and the Government of Newfoundland and Labrador that:

- Newfoundland and Labrador already receives and will continue to receive 100 per cent of offshore resource revenues as if these resources were on land;

- the Government of Canada intends to provide additional offset payments to the province in respect of offshore-related Equalization reductions, effectively allowing it to retain the benefit of 100 per cent of its offshore resource revenues. "

The first bullet point is an admission for those who doubted it that the provincial government already receives its full share of revenues as provided under the real Atlantic Accord. For all those who argued something else - including Danny Williams - this is a huge admission

B. Once the province is off Equalization it loses the new offsets.

[Note 15 Feb 05: See the appended comments for more on this. One of my sharper-eyed readers picked up a point I missed. Apparently this agreement does make it possible to go on and off the 100% offsets. As I note in the response comment, though, the actual performance of this section in delivering bags of cash to this province depends on the actual performance. I still feel like Emily Litella - 'Oh, never mind."]

In some initial media interviews, Premier Williams suggested that under this agreement, Newfoundland and Labrador could qualify and not qualify for Equalization. If it re-qualified during the agreement, the offsets would be restored to 100%.

Scan the deal and find a single sentence that says that. You won't find it.

Paragraphs four and five provide that once the province ceases to qualify for Equalization in the first eight year period, the original declining Atlantic Accord offsets apply and that for the eighth year, only Part 1 offsets are applicable.

There no provision to restore this new agreement's offsets if the province fails to qualify for Equalization in any year up to and including 2012.

C. The money must be used for debt reduction.

Consistent with Premier Williams' original proposal (not the post-June 7 version), the provincial government commits to using the new revenue to reduce its debt. From paragraph six: "This payment [ of $2.0 billion] will allow the province to reduce its outstanding debt."

D. The only hope for additional revenue under this agreement lies in the second eight year phase.

Paragraph six governs the lump sum payment and provides that no new money is due and payable until such time as the total value of offsets exceeds $2.0 billion. The Accord offsets were already negotiated and do not count as new money under this arrangement. Draw-down against the lump sum does not include the original offsets since it is specifically linked to new payments made under paragraphs three and four.

E. Qualifying for the second eight-year phase is harder.

As noted in earlier posts, in order to qualify for the second eight-year phase, the Government of Newfoundland and Labrador must qualify for Equalization in either year between 2010 and 2012. In addition, its per capita debt servicing costs must not be lower than that of four other provinces.

This two-step provision will be harder to meet than the December proposal's one step qualification criterion.

In addition, the current detailed discussions noted in the post "Counting Chickens" take on a greater significance. Meeting the second condition will depend entirely on the calculation of per capita debt servicing costs. Hence, the wrangling on the definition of that term.

This is a preliminary review of the agreement as released during the signing ceremony.

Having seen this document, it is harder to understand Dalton McGuinty's concerns. It likely also explains the overwhelming emphasis on pride today as opposed to the value of the deal itself.