21 August 2012

Not exactly, there, Tom, b’y #nlpoli

As part of the orchestrated campaign to attack the people making the comments instead of the comments themselves , finance minister Tom Marshall trotted out in front of the news media on Friday to lace into a group of five lawyers.

Marshall said comments by five lawyers opposed to Muskrat Falls were “nothing new” and had been addressed before. All true.

At the same time, though, Marshall quickly read through an obviously prepared diatribe in which he said that the “use of such inflammatory language in my view is irresponsible and borders on fear mongering.”

People should pay attention to Marshall’s comments, but not because of Tom’s laughable hypocrisy.

After all, it’s not like the provincial government hasn’t resorted to fear mongering of its own, what with unfounded claims about electricity shortages and ever-skyrocketing electricity prices without Muskrat Falls. 

Leave aside the foolishness Tom got on with, though. Instead, take a look at the way Marshall completely misrepresents comments by the Dominion Bond Rating Service about provincial government finances. 

Here’s what Tom said in the media scrum, as faithfully reported by the Telegram:

[Dominion Bond Rating Service] “…talked about one of the challenges we face, is we’re over-reliant on the oil and gas revenues, and we have to diversify the economy.”




As it turns out, DBRS said something else, just like others have warned Tom about his admitted overspending based on highly volatile and shrinking revenues from oil.  Here’s what DBRS said in its most recent public statement.  After increasing the size of the provincial deficit forecasts, DBRS warned that:

“In order to meet this target, spending restraint will be necessary as program expenditure growth averaging more than 8% over the last five years is incompatible with declining revenue.”

In other words, in order to even keep the deficits at current forecasts, Tom will have to do some chopping because his spending growth doesn’t with the reality of shrinking public income.

DBRS also said in its most recent public comments that unless “oil prices recover sharply, this represents a significant downside risk to [the government’s] fiscal projections. DBRS estimates that the DBRS-adjusted deficit [for 2012] could climb to over $1 billion under current oil prices.” 

And for good measure, “…, as with all of the Province’s fiscal forecasts, volatility in oil prices and production levels lend a degree of uncertainty to anticipated results.”

You’d have to do some creative writing to make DBRS’ comments look like what Tom said.  By the by, DBRS didn’t talk about economic diversification at all in their public statement in 2012.

But wait.

It gets worse for Tom.

If you go back, you will find DBRS has made similar comments before.  In 2008, for example, DBRS changed the province’s trending to stable one year after they had set it as positive.  They basically kept a positive outlook but noted the issues of oil prices and production.


Total revenues are expected to fall considerably from the previous year due to the impact of lower commodity prices on royalty revenues…

Should the recovery take longer to materialize and revenues fail to rebound as notably as anticipated, DBRS would expect the Province to exercise spending restraint to curb growth in debt as has been the case in the recent past.

By 2011, DBRS’ view was unmistakeable:

These numbers are somewhat volatile and are heavily influenced by the timing of expenditures on large projects and the vagaries of oil production and prices.


Not a good word in this context.

They started out being positive but with a minor reservation.  By 2012, they are getting much more blunt in their language. The warnings are stronger.

As for Muskrat Falls, what DBRS said and what Tom claims they said are really two different things.  Far from being enthusiastic cheerleaders as Tom suggests, DBRS has been sober and cautious.


…While DBRS views development of the lower Churchill as a net positive over the long term, the project’s substantial financing requirements, estimated to be between $6 billion and $9 billion, may place the Province’s rating under stress in the short to medium term, depending on the financing structure used and the level of recourse to the Province. [Emphasis added]


While Newfoundland’s current debt and fiscal profile are appropriate for the rating, the lower Churchill project introduces an element of uncertainty into the outlook. The Province is responsible for financing $4.4 billion of the $6.2 billion project. It is not clear how the Province intends to fund its portion and there are numerous financing options and scenarios that could be employed, including a guarantee from the federal government. However, if the Province elects to fund a large portion of the cost with taxpayer-supported debt, the current rating could come under pressure. [Emphasis added]

And in 2012:

Uncertainty remains with regard to the Province’s plan to develop the hydro potential of the lower Churchill River. Depending on the financing structure used and the level of recourse to provincial taxpayers, the rating could be materially affected, especially in the case of significant cost overruns. [Emphasis added]

You can see the change in DBRS’ view as word on this project has changed over time.

Not good.

Nor is it good that the province’s finance minister goes in front of the media and makes such grossly false statements. 

Surely that will pose a greater threat to the province’s financial health and a bunch of lawyers who held a news conference one day and said some things Tom and his friends didn’t like.