14 August 2015

Diversity #nlpoli

Labrador economy must diversify to survive, say opposition parties.

There is a CBC headline to conjure with.

Pure political magic for the two parties promising something different from what has gone on before.

Liberal leader Dwight Ball told CBC that we “must look at the other advantages that we would have available to us, things like power.” 

"This government talks a lot about the export of power. I want to talk about using that power as a competitive advantage for us."

Lorraine Michael, for the New Democratic Party,  said that "Government has to have long term plans that will deal with helping communities and workers when the issues arise."   Michael thinks that we have been too dependent on private sector corporations in Labrador.

No one has ever heard those ideas before

Subsidies for private sector business

Take that last one, for example. Government must step in to help communities and people when industries close. This is NDP policy.  It is, also, what the Conservatives did in Stephenville and Grand Falls-Windsor when the mills there closed.  That is why the NDP have enthusiastically supported the provincial Conservatives since 2003.

Private sector leaves.

Public sector steps in.

We are $2.0 billion short this year on the budget.  We are spending massively beyond our means. Huge chunks of the province are dependent on unsustainable public sector spending and that spending is built on oil which is, itself, an unsteady income source.  Lorraine Michael and the public sector unions – d.b.a. the provincial NDP – would have us, at the very least, keep spending at the current rate.

There is a reason why some people called the Williams Tories the first NDP government we ever had in this province. There is a reason why Loraine Michael and the public sector unions never seriously opposed the Tories.  In truth, they still don’t.

We’ll get back to that.

Bay d’Espoir

Let us not lose sight of the Liberals. Surely, no one has ever thought before of using cheap electricity to lure industry to the province, as the Liberals propose.

Bay d’Espoir in the 1960s.

One massive power plant.

Eight new industries.

Everything from a phosphorus plant to a place to make hockey sticks.

Cheaper electricity than from Churchill Falls.

Kid you not.

Four mils to Hydro-Quebec.

About two mils from Bay d’Espoir.

Fast forward 40 years, past all the industries that never happened, speed by the bankruptcy of one of the projects at Come by Chance and the closure of the phosphorus plant at Long Harbour, and come to a stop in the early 21st century.

Power plant at Muskrat Falls.

Conservatives tout the new dam at Muskrat Falls as the key to all sorts of new industries in Labrador using cheap electricity. They actually pointed to Bay d’Espoir as the model for what they were doing.  Well, they pointed to everything at anything at different times as justification for Muskrat Falls, but that is besides the point.

The point is we have heard this all before, repeatedly.

The Lower Churchill development has usually been touted as a combination of export and import.  We’d build the lucrative Gull Island project for export.  We’d use the money from that development to get power to use inside the province for domestic use, including industrial development.  Basically, we’d get the folks in Quebec, Ontario, and anywhere else to pay for it.

What we got in 2010 was Muskrat Falls supported by the Liberals and the New Democrats.  This project will force local taxpayers to cover the full cost, plus profit, so that we can provide huge amounts of discount electricity to everyone else.

There’s no chance of Gull Island happening any time soon.  Economic developments everywhere else have dropped the cost of electricity in the northeastern part of North America to the point where Gull Island is just the most ridiculously expensive electricity available.

Old habits.  Really.  Old.  Habits.

Basically, what Ball is talking about there is not just something the Conservatives have said before.  It is the novel economic idea of having taxpayers subsidise private industry that virtually every Newfoundland government has promoted since they started trying to diversify the local economy in the 1880s.

The 18.



The public debt that destroyed self-government in Newfoundland in 1934 was caused, in part, by the practice of giving private sector businesses all sorts of access to natural resources at hugely discounted rates.

In the last session of the House of Assembly, as the debt-riddled government presided over the session that would vote democracy out of existence in Newfoundland,  the government introduced legislation to provide industrial concessions to private businesses in the province.

You cannot possibly make this stuff up.

And in the commission days, the government argued against British advice to limit the terms of leases and to increase rents and royalties to the sort of levels the British were getting in places like Tanganyika.  The reason was the advice from government officials that no one would come here unless we provided all sorts of discounts and subsidies.


At this point, the New Democratic faithful out there are nodding up and down, tweeting “Liberal, Tory, same old story” and feeling way smugger than their typical smug.

Hang on there, sunshine.

Not so fast.

The problem for the New Democrats isn’t just that they propose spending enormous sums of public money on things no one can afford and then – on top of that – oppose any idea that might involve spending what people can actually afford.


That’s just the tip of the idiotic-policy-iceberg from the local Dippers.

According to Lorraine Michael,  the current problems in Labrador show the “dangers of relying on a handful of private companies for the economic viability of Labrador.”  Those are CBC’s words paraphrasing Lorraine but they have the ring of complete accuracy to them so let us treat it like it is what Lorraine actually said, word for word. 

Go ahead and laugh.

When did Lorraine oppose any subsidy to the private sector corporations?


Well, she certainly didn’t oppose the Conservative plan in 2008 that let Abitibi get out of all of its environmental liabilities in this province. 


Biggest cheerleader for the Conservatives – after the two Liberals in the House – was Lorraine.

And then the Tories went a step further and covered pensions for the workers from the Abitibi mill.

Kick those evil corporations, said Lorraine.  Make them pay for shirking their responsibilities.

Hooray, cheered the union leaders in Grand Fall-Windsor.

Sadly for the rest of us, though, it was less a kick and more like a good-bye kiss. What the NDP, Conservatives, and Liberals loved in 2008 was a $30 million gift from the taxpayers of Newfoundland and Labrador to a multi-national corporation that arguably didn’t need it and certainly didn’t deserve it.   We covered the company’s pension obligations.  The company never had to pay a cent.

We expropriated the assets and the liabilities.  Abitibi didn’t have to pay a cent for clean-up.  Some of you will say this was because of a simple mistake.  Nobody wanted to keep all the liabilities.  If you believe that, then you’d be wrong. 

Danny Williams briefed the Liberals and the New Democrats on the scheme he’d cooked up in order to get the hydro-electric assets he wanted for Nalcor.  The House would expropriate the assets.  The company would be left with the liabilities. The company would want compensation for losing its property. The government would set the asset value at an agreed value for the liabilities so the whole thing would be a wash. No money would change hands and the liabilities and the land they were on would come back to the government  when the company went under.

In other words, the scheme assumed – from the outset – that taxpayers would get stuck with the environmental liability for all of Abitibi’s sites.. The mistaken seizure of the contaminated land at Grand Falls-Windsor cocked up a part of the scheme, but it basically just looked bad.  What happened when all was said and done, was pretty much what the government plan entailed.

On the pensions issue, by stepping in as they did, at the behest of the unions, the Conservatives just relieved Abitibi of yet more of its financial obligations to the people of the province.

Taxpayers of Newfoundland and Labrador got the bill for the whole thing.

And that’s all they got for their troubles.

But wait.

It gets better.

Muskrat Falls

Lorraine and her colleagues loved up Muskrat Falls only shades less than the Conservatives and only slightly more than the Liberals.  A key part of the deal is the block of electricity that will go to the private sector company in Nova Scotia that runs the power system in that province.

Evil private sector company,  according to Lorraine and her friends, surely.

Politicians from Newfoundland and Labrador, including the new Democrats, forced Emera to pay through the nose for their piece of Muskrat falls. 

No more give-aways.


Well, no more give-aways, if by no more give-aways you mean letting Emera have a block of electricity at no cost.

For 35 years.

Not a frigging penny.

They get the block of power for free.


Block of electricity goes to Emera.

The bill reads “zero dollars and zero cents.  Have a nice day!.  Love,  Joe and Sally Fixed-Income Earner,  Flower Hill, St. John’s.” 

No money comes to Newfoundland and Labrador.

This was not good enough for our politicians, though.

No more give-aways.

That’s why in addition to the free electricity Emera gets to make a profit on the transmission of electricity within Newfoundland and Labrador. Part of the Muskrat Falls deal turns a part of the provincial transmission system over to the private sector.

Supposedly progressive Lorraine Michael and the New Democratic Party support turning a chunk of the power distribution system over to the private sector not for 35 years but until the 2080s.

Shit. You. Not.

Fundamentally, the provincial New Democrats are the same as the Conservatives who, in 2003 promised a New Approach, but who, once elected, delivered the same policies and same practices we have had for the past 60-odd years.

More subsidies for private business

On Wednesday,  NDP leader Earle McCurdy turned up in the news to tell us all how much he was going to stick it to the companies that want to come here and use our resources for their shareholders to profit from.

Damn frigging shareholders.

Earle says that a key New Democratic Party policy in this election will be to charge companies one tax rate when prices for commodities are high and a much lower one when prices are low.  On the surface, that sounds like a sensible idea.  We own the resources after all, so we will get a bigger share when times are good.

This sounds familiar.

It is, essentially, the Conservative policy for Hebron. The private companies get a break when prices are low and the taxpayers get a bit extra when times are relatively good.

The problem with this idea is the notion that we have to accept a low tax rate  - royalty and or rental rate actually -  when commodity prices go down.  Earle is going to have to explain why he wants to give private sector companies such a generous break.  After all, if we kept the rate the same,  we’d make more money when times are good and we’d make less money when times are not so good.

But when you lower the rate, you are actually giving up extra money when prices dip.  That doesn’t make any sense.  The best royalty regime in the province is the one we set for oil.  The government developed it based on experience and lots of research on how to balance the public interest and the corporate interest. It ensures that we don’t penalise the companies who are bringing their cash to the table and taking big risks of their own. At the same time, the regime makes sure that the people who own the resources – you and me – get a proper payment for our resources.

Except at Hebron.

Regular readers will understand why the Hebron royalty deal disadvantages local taxpayers and needlessly benefits the oil companies.  What McCurdy is proposing looks like exactly the same kind of deal.  It’s fundamentally a bad idea.

Wanted:  new ideas

Make no mistake:  we need to change the resource royalty scheme in the province.  We’ve needed to do it for decades.  Government after government didn’t change the royalty scheme because the Equalization formula actually created a perverse disincentive for the provincial government to set its royalty rates artificially low. 

Government after government, especially the Conservative ones, claimed we had no control over our resources.  They waged gigantic battles with Ottawa for resource control or for extra hand-outs based on the premise someone other than the provincial government controlled resources in the province.  We needed compensation supposedly for all the resources controlled by Ottawa.

In reality, the provincial government had the legal powers to control its own resources before 1949 and after 1949.  Nothing changed with Confederation. The only difference was the offshore, which wasn’t actually inside provincial borders and still isn’t.  The 1985 Atlantic Accord made that point moot. The provincial government alone sets the royalties it receives and, the 2004 provincial government fraudulent political claims notwithstanding, has always collected every penny of the money it was owed.

We should be able to develop a royalty and rental scheme for minerals,  trees, and other resources that is the equal of what we have done with minerals.  What McCurdy seems to be talking about is worse.  It is, however,consistent with the ideas we have heard from the Liberals, Conservatives, and New Democrats for years. When it comes right down to it, you often can’t slide a sheet of paper between any of them.