17 April 2006

Avoiding ruts on the information highway

On April 8, Telegram managing editor Russell Wangersky warned that the Internet is a valuable tool but one for which we collectively need to develop a way of separating valuable information from the mounds of inaccurate or wrong information contained on its electronic pages.

This is not a new issue and to those who use the Internet regularly, the warning contained in Wangersky's column rears its head daily.

Of course, the Internet was originally called the information superhighway reflecting the speed with which information - good and bad - can be spread. Humans have always had an information pathway of some kind and in the last century the arrival of first radio and later television news created a true information highway that matched the growth of automobile highways across the developed world.

Sophisticated information users - people who look to print and electronic media for information - have always known they need to be careful of what they see. Not all information in all media is accurate; sometimes it is completely false. Those sophisticated travelers developed their own ways of figuring out which media could be relied upon to portray the world around us accurately while others, either through carelessness or conscious manipulation, were closer to fiction than not.

In Newfoundland and Labrador lately, we have been well served by professional news organizations on our own information highways. Even while some short-lived publications have often resembled a cow path that ended in the rubbish tip of myth, outfits like the Telegram continue to pump out both factual information and commentary that is reliable and provocative, as need be.

That's why it is so odd that the Telegram editorial on Saturday April 15 seems to have gotten stuck in a rut of misperception and delivered its readers straight into a virtual pothole that makes Dotties Potties or Andy's Canyons look small in comparison.

"Globe puts us in our place - again" argues against an editorial in the Globe and Mail from the previous Thursday. According to the Telegram
[t]he overriding tone of almost all the criticism of Williams has taken the same general theme - that the premier who used a federal Liberal minority government to get a new resources deal is now just too big for his eastern britches.

The argument, unfortunately, is that Williams has no right to refuse to knuckle under in negotiations, and that he has no right to suggest that businesses should not be allowed to hold onto a public resource indefinitely, just because they aren't getting the deal they want.
The Telegram concludes:
But the endless argument that the government of a weak province has no right to stand up for itself wears particularly thin, especially coming from centrist media in a province whose huge economy has always ridden roughshod over its poorer cousins.

"Why, this is not how we do business," the Globe seems to want to harrumph.
That isn't what the Globe was talking about.

There was no suggestion anywhere in the Globe editorial that in negotiating Hebron, "Williams has gotten too uppity for his own good." That's the Telegram's interpretation and it seems to come from the rut of a mindset that has seen the Telegram backing the Premier wholeheartedly on this issue without actually knowing most of the details of the Hebron negotiation or even subjecting the Premier's comments to even the briefest of scrutiny.

What the Globe did note is that while Williams has a well-deserved reputation for fighting for what he believes in, including during his celebrated row with Paul Martin a year or so ago. But:
[h]aving ridden that particular horse to victory so many times before, Mr. Williams couldn't seem to resist saddling up and galloping into battle with the oil companies, too. ... The only problem, of course, is that Ottawa can't walk away from Newfoundland, while Chevron and its partners can, and apparently are.
The Globe editorialist makes the valid observation that by ramping up the rhetoric about forcing companies to develop fields, by talking about finding various ways to take a company out of a legitimate negotiation with government for nothing more than bargaining forcefully, "a response like the one from Mr. Williams (or Mr. Chavez) is almost certain to push a project down the list [of projects to be developed], if not off it completely."

"Wanting a fair share of the province's resources is a laudable goal. It would be a shame to see that put at risk because the Premier doesn't know when to climb down off his horse."

Perhaps the Globe's point was a bit too subtle for the Telegram editorialist to pick up. Perhaps he or she was looking for yet another Crosbie-esque warning against hand-biting of the kind we saw in 1990. That rut led to a completely erroneous set of comments and an equally faulty conclusion.

Don't just accept what is written here or in the Telegram, by the way; read the Globe editorial for oneself in its entirety and see the clear warning that this time, Premier Williams rhetoric may be entirely the wrong approach.

If we are to take Premier Williams' comments at face value he is prepared to leave a project undeveloped for a prize - the equity stake - that contained limited management rights and a cash value of only about 10% of the total value of the Hebron development to the provincial treasury and the province's oil and gas industry.

At the same time, the Premier insists that he is not prepared to leave the project undeveloped and is busily exploring all sorts of options to force the project into development on his own terms. He is actively pursuing purchase of ExxonMobil's 38% interest in the project, for example, either by the other Hebron partners or by the provincial government itself. Williams hasn't talked about taking over the project entirely but his remarks can easily be seen as being as close to that conclusion as one might get. After all, in another context he continues to pursue the Lower Churchill and appears prepared to "go it alone" there as well on a project the construction costs for which could be double the cost of putting Hebron into production.

Stuck in its perceptual rut, the Telegram misses a few couple of important questions of public policy brought to light by the Hebron failure. For starters, we might ask to see the plan on which the Premier's goal of transforming the hydro corporation into an oil and gas company is based. He has talked about this idea consistently since taking office yet going on three years later there is not a single policy document in the public domain that outlines the goals as well as the costs and the risks. It is public money in play here and public resources. Surely we have a right to know what is up. If nothing else, we surely have a right to know exactly why it was so important for the premier to have an equity stake that he was prepared to turn his back on a project worth 10 times what his equity position would have yielded.

Second, we might ask if having the provincial government invest in the capital-intensive oil and gas business is actually the best way to spend scarce public dollars. Our public debt remains at around $10 billion. While the Premier has speculated in the Financial Post he might be able to borrow money at good interest rates, this surely involves a level of risk about which the public has a right to be informed and about which its approval should be sought.

If oil revenues from the existing projects dwindle in five or so years, as some are predicting, it may be folly to borrow further billions - even at favourable interest rates - to spend on exploration or the development of a complex and challenging project like Hebron. The potential rewards are great, but as the Globe pointed out and the Telegram ignored, the risks are high as well.

Oil companies drill wells - offshore Newfoundland at a cost of $100 million a shot - without a guarantee of finding anything, let alone find oil or gas in commercially viable quantities. Even when they do find oil, as at Hebron-Ben Nevis, the oil may be commercially unviable. Some may speak of the companies sitting on this field for the better part of a quarter century; what they seem too willing to ignore is that for much of that time, the complexity of the fields and the relatively low price for oil rendered the project commercially non-viable.

Oil prices are projected to rise today, as they were when Hebron was discovered, but as we saw two decades ago, markets can change downward as easily as upward. For a province like Newfoundland and Labrador, its own financial position may make such high stakes gambling as offshore exploration and development completely foolish.

The Globe pointed to the Come by Chance refinery as an example of a supposedly good idea that wound up being a disaster. Heralded as another economic saviour of the province, complete with extensive public guarantees, the refinery ended up as one of the most spectacular bankruptcies in Canadian history. The refinery may be operating today - as the Telegram notes - but it might just as easily wound up as scrap metal; more to the point though, a goodly chunk of the $10 billion we carry on our collective books today came from that earlier fiasco. Not all risks pay off with the reward expected.

There are plenty of ruts along the information highway. Sometimes they appear in the most unlikely of places, in this instance, the Telegram's editorial page. Fortunately, there are more sources of information these days than its pages alone. Information seekers can take a look; they might just see the signs along the highway warning of danger ahead even if another traveler has his windscreen obscured.