13 November 2014

Take a closer look #nlpoli

Premier Paul Davis hasn’t delivered any speeches, issued any news releases, or done anything else to explain who he is and what he wants to accomplish as Premier.

The guy has the job.

But he hasn’t told anyone anything about his plans.

On Wednesday, Davis had the perfect chance.  He delivered a luncheon speech to a few hundred people at the St. John’s Board of Trade.  

“Between now and next spring we’ll let our plans be known,” Davis told reporters after the speech.  “We’re planning as we’re moving along,” he added,  sounding suspiciously like an admission that they are making it up as they go along.

So what did he talk about in the speech?

Davis spent his entire speech telling people at the board of trade about all the wonderful things that he and his party have done since 2003.  It was basically the same speech that Danny Williams, Kathy Dunderdale, and Tom Marshall have delivered a thousand times on a thousand occasions to a thousand audiences over the years.

Yes,  the Conservatives have spent billions upon billions upon billions of dollars that will only come once from oil revenue without putting a cent of it away, but look at all the jobs that came as a result. 

We did it and we are proud of it, said Davis.  And give us a chance and we will do it again. 

Unlike those evil Liberals, Davis warned, without actually naming the Liberals and Dwight Ball.  They have no ideas of their own. they just make things up.  Danny and Kathy and Tom all said the same thing and still the Conservative Party drops in the polls and the Liberals rise.

You could almost hear Paul struggling not to yell “Take a Closer Look.”  follow that link.  It’s worth the time.  Back in 2003,  the government-leading fellow told us that – in Peter Boswell’s description for CBC -  “not only is the economic position of the province very strong, but that even better times are just around the corner. He almost sounds as though he’s got Joey Smallwood’s illusory optimism and Brian Peckford’s “have not will be no more” bravado rolled into one.”

Meanwhile, the not-government fellow whose party led every poll, “perhaps mindful of the budgetary deficits of recent years, is less enthusiastic about the province’s current finances and considerably more cautious about what the future may hold.”

The advertising agency that ran the government-leading fellow’s campaign back then went tits up, only to have huge chunks of itself absorbed into the current government-leading party’s advertising agency. Perhaps, that is just a coincidence.  

Davis’s people tweeted out some highlights of his speech as the boss read the thing, uncomfortably.  “We made it government policy that any further offshore development has at least a 10% royalty to Newfoundland and Labrador.”

Small problem.

The provincial government royalty regime, established when Paul was still  walking a beat as a constable on the local police force, never settled for as little as 10% royalties from offshore oil development.  They decided long ago that once the companies paid off their development costs,  the provincial government would get the better part of half the money the oil companies sold each barrel for.

Darin King, business minister, retweeted the quote about 10% royalties.

Your humble e-scribbler asked WTF the pair of them were talking about.

Neither replied.

Perhaps they were talking about the thing in the energy plan where the Conservatives promised to get 10% “equity” in every future project.  Equity and “royalty” are not the same thing.  The people of the province – who own the oil – let oil companies develop it in exchange for that royalty system that peaks out around 50%.  The people of the province don’t have to pay a cent for it because they own the oil already.

The Conservatives came up with a brilliant idea.  They would make the people of the province buy 10% of the oil they already owned and then fork over even more money to develop the projects as the very junior partner with multi-national oil companies.  Rather than take the money from oil sales and use it to pay down public debt or build schools and such,  the Conservatives gave it as a free gift to a company they made up out of the old hydroelectricity company the government owns.

Those folks at Nalcor would do what they wanted with the oil cash.  The most important thing was to use it to build a dam at Gull Island to sell electricity into the United States at a huge profit.  Along came the recession and then the explosion of shale gas and oil that dropped the price of electricity in the United States.  Gull Island was no longer profitable.  Unhindered by such petty annoyances, the Conservatives decided to build a much smaller dam at Muskrat falls and force the people who owned the oil and who just had to buy the oil they already owned and force them to pay the full price for this new, smaller dam.  They would also pay a handsome profit to the investors – all from outside the province – who put the government-guaranteed loans up to pay the cost of the construction.

The taxpayers would pay for their own project and then pay for it again, while others got the electricity at a huge subsidy.  “Hoover Dam”  says Paul Davis,  who like each of his predecessors has been forced to find yet another historic metaphor for the bit of insanity called Muskrat Falls.  The project is nothing like Hoover Dam at all, on any level.  The closest to the truth anyone came was Bay d’Espoir.

But the absolute truth is that Muskrat Falls is a project on its own.  There is nothing in recent memory like it and future generations will look and wonder what Paul and his buddies were ingesting to cloud their minds so badly.  After all,  the economist they all used to justify their decision recently looked at the drop of oil prices and admitted he had never considered it a possibility. Never saw that drop in prices coming.

It’s like his study of iron ore prices.  Those prices would spur the development of iron ore deposits in Labrador to be powered by that glorious Muskrat Falls project. The economist’s “low price” scenario for ore was US$85 a ton.  Current forecasts are for ore to hit an average of US$72 a ton next year with a low of US$60 in there somewhere.  One big mine in Labrador has already shut down after 60-odd years of operation.  A major new development is having trouble raising cash.  No one has asked The State Economist if he saw that coming, but we can guess the response and be dead on in our predictions.

If Darin and Paul were talking about those “equity” stakes and not “royalty”,  someone should ask the state-owned energy company, Nalcor.  They already made it clear they won’t be taking any equity in any future projects unless the thing looks pretty low in the risk department. The folks at Nalcor unilaterally dumped the 2007 energy policy a year ago October.

And in other news,  Nalcor is also busily rejecting any sort of outside investment to develop more renewable energy, this time from wind.  The energy plan is defunct but the Premier is still talking about it like it was real.

Paul may want to rethink that idea of telling people to take a closer look at his party and the other one before the next election.  If his speech to the board of trade is any sign,  the result might be like a Wade Locke economic forecast:  didn’t see that coming.