14 August 2009

The Leprechaun Play

Oil is there on the island’s west coast but why is it that the provincial government has to exploit the potential for oil instead of a local private company either alone or in partnership with others?

In a province where the private sector is so notoriously underdeveloped, the single biggest argument against NALCO’s recent bailout of Leprechaun Resources is that it stunts the local private sector.

It’s not like there isn’t considerable private sector activity on the west coast already, much of it undertaken at great risk by small local companies.  They’ve  soldiered on, risked much and raised plenty of capital from many sources all in search of a commercially viable play.  Some of those local companies have far better plays on the go than Parson’s Pond.

It’s the epitome of what the provincial government should be encouraging in the province and it’s the kind of entrepreneurial spirit one would expect would get the unquestioned support from a Premier who told reporters recently that his heart is in the private sector.

The whole thing is even more incongruous when one considers that, in speaking with reporters yesterday, the Premier used Leduc (1947) as a point of comparison.  Leduc was the first major oil discovery and it was made by the private sector. 

In Newfoundland and Labrador, the first oil discoveries have already been made and they were made by the private sector.  The commercial finds on the west coast will come, and it should be the private sector doing the work.

Danny Williams may like to tell reporters he as “private sector guy” but his actions say something else.

This is a guy who has never really competed in the private sector in his life, outside of his law practice

But that’s not the private sector he likes to point to when he talks about being a private sector kinda guy. Nope, Williams likes to talk about running a cable company.  But that is nowhere near like running an oil company.  At Cable Atlantic, Williams had others doing the work in what was effectively a highly regulated monopoly.  That’s essentially the situation he’s been trying to recreate for NALCO.

By muscling into the local onshore oil sector, NALCO has set itself up as the biggest player in the room with all sorts of grossly unfair advantages.  It has the unlimited pockets of the taxpayer and therefore no problem pissing cash down hole after hole even if there is no sign and no possibility of a sign of oil.  There are no shareholders to answer to and, unlike all the private sector companies, NALCO is effectively unregulated.

NALCO’s minister and the minister who makes regulatory decisions about the oil industry are one and the same.   The department’s deputy minister sits on the board of NALCO Oil and Gas’s parent.  NALCO just bought into licenses that expire in six months.  Ordinarily an investor would have to struggle to justify an extension under the circumstances.  NALCO knows they’ll get an exemption, extension or anything else it needs because it has connections no private sector company can match.

Whatever is behind NALCO’s sudden interest in onshore oil plays, it isn’t about repeating the glorious success of Leduc. It’s not about strengthening the province’s oil and gas sector or just the local private sector, the people who really make jobs and exploit opportunities.


NALCO’s bailout  isn’t even the giant make-work scheme many of its supporters seem to think it is.  Government doesn’t create sustainable jobs and contrary to the baloney that comes from some mouths, economics shows that government doesn’t get the bulk of its spending back in taxes.

Whatever the motivation for sinking $20 million of public cash in this one venture, someone will have to dig deeper and ask more probing questions of the Premier to find out what’s really on the go.

In the meantime, let’s hope that the real private sector guys – the ones who’ve been looking for oil for years – hit oil before NALCO. 

There’d be another sweet irony in such a development as well.   You see if Danny Williams really was a private sector guy, he’d have never gotten into politics in the first place.  If he really wanted to create jobs, jobs, jobs – as he claimed in 200o3 -  he’d have taken his cable cash and invested in the private sector. 

He’d have taken risks,  been buoyed by a few successes, endured a few failures and then invested in new enterprises here and elsewhere.  He’d be pushing for government policies that support entrepreneurs and encourage the growth of a sustainable, diverse private sector built on daring and imagination.

Instead, the supposed “private sector guy” got into politics and built the existing government bureaucracy into an even larger behemoth backed by policies that discourage innovation and investment and hook private sector companies in the province on government cash.

There hasn’t been a new approach since 2003.  We’ve actually seen the same old approach in Newfoundland and Labrador that has consistently failed to deliver decade, after decade, after decade in a province led by saviour after genius after business success.

And, as we learned in Mount Pearl, Holyrood and elsewhere, there is no pot of gold at the end of that old rainbow of green cukes and red-soled rubbers, at least not for the people  - the taxpayers of the province – whose money goes out the door.