06 July 2005

The price of the premiership

The Premier took the time at the White Rose launch in Marystown and at the lame cheque stunt yesterday to do two things:

1. In Marystown, the Premier acknowledged publicly that the revenue and benefits deal on White Rose was damned good. The Premier likes to kick the crap out of any deal he didn't sign, but in this instance, he was giving due praise.

2. In St. John's, he threw out some tough words in order to posture publicly for the upcoming negotiations with the Hebron consortium.

Well, as noted here before, the Premier really needs to tell the public what he is thinking when he talks about refineries and pipelines and petrochemical plants. He needs to tell the people of the province plainly what he will be seeking in any discussions with oil companies and he has to tell us what price he is prepared to pay (with our cash) for these oil industry add-ons.

The single defining characteristic of Premier Williams thus far is that he is long on rhetoric and extremely short on details for anything he does. The big cheque from John Efford yesterday is a classic example of how the Premier can talk his way through things and ultimately deliver something that really was a heck of a lot less than what he promised.

He changes positions as fast as any politician we have seen locally with the exception of maybe Brian Tobin. Some are starting to think he is driven by polls; that remains to be seen. Friday's post will be an assessment of the January polls recently released by government, coupled with a timeline on the Premier's positions on the flag lowering and mnegotiations with the federal government.

All that can be said right now is that the Bond Papers were borne out of the Premier's penchant for saying things that were at odds with the facts. There is good reason for continuing to watch carefully what he says and does.

The offshore revenue deal, for example, is pretty good in that it adds $2.0 billion in free federal money to the provincial coffers. However, what the Premier started out to do was double our revenues, which he claimed were being taken away from us.

At least two major things flowed out of the February deal. First, the Premier acknowledged in the very first clause that not a single nickel of provincial revenues was taken away. Second, and most importantly, he settled for a couple of billions in cash and a deal that may well cut out this year.

Before anyone jumps at me, take a look at the facts.

The offshore add-on from January applies only as long as the province is receiving Equalization. That was already forecast to happen next year, but high crude oil prices will likely put about $700 million into provincial coffers from offshore royalties alone. Equalization this year is only forecast to be slightly more than that; it's hard to figure exactly since the government fiddled around with the presentation of its figures in the last budget.

It really wouldn't take too much economic growth to push the province that final bit over the Equalization edge and into the realm of the so-called "have" provinces. Once that happens, there is no more extra money flowing to the province from the January deal, unless of course, the economy all but implodes.

Certainly we have the two billion dollars, as some will quickly point out. But that isn't what the premier was looking for. He started out seeking a doubling of revenues for at least a total of eight more years. As it stands right now, the $2.0 billion will be less than what the province will get directly from oil this year and next year, let alone the total over the next eight.

It's pretty easy to see the gap between the promise and the delivery. We have a bag of cash but we were promised a bag that was twice to three times the size of what was delivered.

When it comes to royalties and refineries, we need to look very carefully to make sure the Premier isn't talking about repeating Hibernia, even as he promises something else. The Hibernia deal was based on a trade-off between short-term construction jobs and long-term royalties. While Hibernia was the lead projected that started the local oil industry, there are at least two problems with the Hibernia model.

First, the construction jobs were short-term and admittedly so. If they can come, then fine. But when they are linked to royalties and other government revenues, then we have the second, bigger problem. Royalties are the money we collect as the original owners of a resource for our ownership. When we give up some of that economic rent, we are really giving away the core cash value of the resource. We undervalue our resource and actually beggar ourselves collectively while putting a few sheckels into the pockets of local builders like say the Dobbins.

Let's not do that again.

There is no need.

And as we know from looking around, there is no reason to try and force the Hebron consortium to build a refinery, petrochemical plant and/or pipeline here when they evidently did not factor it into their business plans. If there is an economic reason to build one of these things here, then let the industry decide.

The alternative, that is, building something which is not economically viable, is for the government to pay for it through royalty and tax concessions. It is easy for Premier Williams to talk tough when he is flush with my cash both from offshore oil and from Ottawa's taxes. However, it is my money he is now gambling with yet again.

It is again long past due for the Premier to explain to me and every other voter in the province what he is up to. If he were my slip-and-fall lawyer behaving as he does by not telling me relevant information, I'd cut him a cheque and send him on his merry way.

The thing is, he isn't a slip-and-fall lawyer; he's the Premier.

There's a big difference.