Fish minister Tom Rideout confirmed Wednesday that any sale of Fishery Products International Limited must include transfer of FPI's most valuable asset - fishing quotas - to the provincial government.Rideout gave no indication the provincial government was prepared to purchase the quota or any other assets. His comments suggest that the provincial government will use its power under the Fishery Products International Act to obtain the quotas for free. Under the Act, any sale of FPI assets must be approved by the Lieutenant Governor in Council.
As CBC News reports, the provincial government acquired fishing quotas as part of a deal to keep the Arnold's Cove fish plant from closing.
A 2005 review by the province's auditor general found substantive problems with the Arnold's Cove deal.
Auditor General John Noseworthy reported that the provincial government provided $3.5 million in financial assistance to Icewater Seafoods Inc. contrary to government policy that prohibits direct financial assistance and loan guarantees to primary fish processors.
Noseworthy said the allocations were acquired by Newfoundland and Labrador Industrial Development Corporation (NIDC) in order to avoid concerns raised by the federal government over transfering quotas to the provincial government directly. As part of this transaction, the provincial government, through NIDC, "received a groundfish quota from High Liner Foods Incorporated comprised of allocations for [nine] groundfish species totaling 3,676 metric tonnes for 2004-05. In addition, the company agreed to pay NIDC a minimum annual lease fee of $50,000 relating to this quota."
Noseworthy concluded the provincial government violated the Financial Administration Act by advnacing money from the Department of Finance to NIDC. Noseworthy said the pre-commitment "would not meet the requirement in the Financial Administration Act for 'an agreement to be entered into for the provision of goods or services to be delivered in a subsequent fiscal year.'"
Noseworthy said that while Ice Water Seafoods was required to pay $50,000 annually to lease the quotas, that amount did not cover the carrying costs of the $3.5 million, estimated at $200,000.
While the deal was presented to the public on the basis of retaining control over the right to fish in waters adjacent to the province, Noseworthy said that Icewater subsequently transferred 72 tonnes of its allocation to a Nova Scotia interest for processing in that province. An additional 300 tonnes was transferred from Icewater to an unnamed Newfoundland and Labrador processor.
While the provincial government invested $3.5 million in Icewater, there is no indication the provincial government is planning any investment in a future operator of FPI assets. However, acquiring a business interest with no capital investment is similar to a fear being expressed about the province's oil patch and the upcoming energy plan.
In a December 19, 2006 article in the Financial Post, bureau chief Claudia Cattaneo said "[t]he province is expected to unveil an energy plan early in the new year that will bring back government ownership and control of oil and gas resources in Canada for the first time since the 1980 National Energy Program. One the greatest fears is that the plan will mandate equity ownership in oil projects by the province without contributing capital...."