Equalization: the Experts Report; Williams reacts

Some months ago, we predicted a war among the province's over Equalization reform.

There have been some skirmishes as the forces gathered, most notably Ralph Klein's ludicrous claim that if Ottawa touched Alberta's natural resource revenues, then Alberta would leave the Equalization program. The only thing this bluster demonstrated was that Klein has no idea how Equalization works.

A few more shots were fired Monday with the release of the report by the Expert Panel on Equalization and Territorial Financing. Premier Danny Williams doesn't like the report at all, claiming Newfoundland and Labrador would lose $200 million annually in Equalization payments.

In an effort to discredit the report before Newfoundlanders and Labradorians had a chance to read it, Williams described the report as having "Ralph Goodale's fingerprints all over it". He called the report nonsense, and true to form, some commentators are backing Williams with nothing more than Williams condemnation.

Still, Williams insisted he was confident that Prime Minister Stephen Harper would do the right thing and not implement the report. He gave no reasons to justify his optimism.

The panel on Equalization and Territorial financing, appointed in 2005, comprised five experts in federal provincial fiscal relations. It was chaired by Al O'Brien, the former deputy finance minister in Alberta and included Fred Gorbet (Strategy Solutions), Robert Lacroix (CIRANO), Elizabeth Parr-Johnson (Parr Johnson Consultants) and Mike Percy (U of A Business School).

Their report is a comprehensive survey of the current issues in Equalization and includes recommendations based on almost two years of consultations. There is a simple description of the Equalization system itself and the basic objectives of the program. If nothing else, the comprehensive nature of the report reflects the considerable abilities and varied perspectives of the five panelists who authored it.

The Government of Newfoundland and Labrador did not make a submission to the panel during its consultations. New Brunswick and Saskatchewan did.

In the section on resources, the panel recommended two things in particular that are of interest to Newfoundland and Labrador.

First, the panel recommended using actual revenues to calculate entitlements, as opposed to the current estimating system. This creates a problem since it penalizes provinces who actually collect royalties below the national average and rewards those provinces taxing above the average.

Second, the panel recommended shielding half of resource revenues from the calculations, irrespective of whether those resources are renewable (like hydro power) or non-renewable (such as oil and gas). This was felt to be an acceptable compromise between total inclusion which was seen as not giving provinces benefit of the resource development and the unfairness of full exclusion which would create a situation in which some provinces had considerable revenues that were not being taken into consideration when calculating entitlements.

There are two specific sections of the report that will affect Newfoundland and Labrador. First, the panel recommends the inclusion of all resource revenues (renewable and non-renewable). There is also a specific recommendation on hydroelectric revenues which would collapse the existing approach into one using the actual revenues. The rationale is excerpted below.

13. All resource revenues should be treated in the same way.

The Panel sees no reason to distinguish between different types of resource revenues. Therefore, the treatment of all resource revenues should be the same whether those revenues arise from oil and gas, onshore or offshore resources, forestry, potash, other minerals, or hydroelectricity.

The measurement of fiscal capacity related to hydroelectricity deserves special mention. In most cases, provinces with substantial hydroelectricity resources have chosen to develop and distribute those resources through Crown corporations. For the most part, provinces have also chosen to provide electricity to their residents at low prices rather than charge full prices. Instead of capturing economic rent and generating government revenues, they give their residents the direct benefit of lower-priced electricity.

Under the current [Representative Tax System] RTS approach, a portion of provincial revenues from hydroelectricity is counted in one tax base (the water rentals base), while a portion of the profits of Crown corporations paid to provincial governments is considered in the same way as profits of private corporations. Some have suggested that this approach underestimates the revenue-generating capacity of provinces in cases where they charge less than the full economic value of the electricity.

The Panel considered a number of options for the treatment of hydroelectricity in the Equalization formula. Consistent with its position that all resource revenues should be treated in the same way, the current water power rentals base should be folded into a single resource revenue base and measured by actual revenues. In addition, the Panel recommends that the remittances from Crown corporations involved in resource extraction and development, including hydroelectricity Crown corporations, should be included as part of a province‚’s resource revenues and not as business income.

It is unclear what impact this change will have on Newfoundland and Labrador in the current situation or in a situation involving theLowerr Churchill development. Certainly the use of actual revenues, as opposed to estimates, eliminates the problem identified and resolved in the 1982 federal-provincial agreement on Upper Churchill revenues.

Second, the panel included a specific recommendation dealing with the offshore transfer agreements with Newfoundland and Labrador and Nova Scotia in 2005. There is also a sample calculation of how the cap would work. This is worth quoting in its entirety so there can be no confusion.

14. A cap should be implemented to ensure that, as a result of Equalization, no receiving province ends up with a fiscal capacity higher than that of the lowest non-receiving province.

Consistent with the Panel'’s principles, Equalization should provide equity among provinces. However, it should not result in less wealthy provinces having a greater fiscal capacity than provinces that do not receive Equalization.

The Panel'’s recommendations for including 50 percent of resource revenues in the Equalization formula will benefit receiving provinces with resource revenues. However, in some scenarios, a receiving province like British Columbia, Newfoundland and Labrador, or Saskatchewan could end up with a higher fiscal capacity after Equalization than a non-receiving province like Ontario. That runs counter to a fundamental principle of equity that should underlie any changes to the Equalization program.

Consequently, the Panel recommends that a fiscal capacity cap be implemented. To determine a province'’s post-Equalization fiscal capacity and whether or not it is entitled to Equalization, the Panel's view is that 100 percent of a province'’s resource revenues should be included in calculating a province'’s fiscal capacity for the purposes of the cap. If a province'’s resulting fiscal capacity is higher than that of the lowest non-receiving province, then its entitlement to Equalization would be capped. While some might suggest that less than 100 percent of resource revenues should be included in the cap for a variety of reasons, in the absence of reliable and comparable information, the Panel'’s view is that including 100 percent of resource revenues in determining a province'’s fiscal capacity for purposes of calculating the cap is appropriate.

The Panel understands that implementation of its recommended cap is complicated by the existence of separate Offshore Accords for Newfoundland and Labrador and Nova Scotia. In the case of Nova Scotia, its fiscal capacity continues to be lower than the lowest non-receiving province, so the cap does not apply. But in the case of Newfoundland and Labrador, the combination of resource developments in the province along with the Panel'’s proposed revisions to the Equalization formula mean that Newfoundland and Labrador'’s fiscal capacity (including own-source revenues, payments from Offshore Accords and Equalization) is expected to be higher than the lowest non-receiving province.

In the Panel'’s view, this contradicts a fundamental principle. It is not within the Panel'’s mandate to suggest that the Offshore Accords should be changed. However, we believe that the principle should be upheld. If Newfoundland and Labrador'’s fiscal capacity after Equalization is higher than the lowest non-receiving province, the cap should apply regardless of the Offshore Accords and the province should not receive Equalization payments that put them above the cap. The Panel understands that, under their 2005 Accord, Newfoundland and Labrador is protected from losses in Equalization payments. It'’s up to the federal government to determine how this should be resolved. In the Panel'’s view, the principles of Equalization should not be compromised nor should the Equalization program be adjusted to accommodate the Offshore Accords.

Would this approach cause a reduction in Newfoundland and Labrador's Equalization entitlements? The answer is almost certainly yes in the medium-term, once the Equalization system's transitional provisions come into force. Newfoundland and Labrador's entitlement in the next two to three years will decline in any event as its own source revenues grow from offshore oil, mining and other growth in the economy. This would likely amount to $100 to $200 million annually over the same time frame noted by Premier Williams on Monday, even without the expert panel's recommendations being implemented.

However, as the expert panel notes throughout the report, Equalization is supposed to decline as a province's own-source revenue grows and ultimately surpasses the national average to receive the federal transfer.

This notion is one of the fundamental premises contained in the 1985 Atlantic Accord and, to a large measure reaffirmed by the temporary nature of the transfers envisioned by the 2005 offshore accord. Premier Williams is simply wrong when he claims that there was a flaw in the 1985 accord on Equalization or that the accord was subsequently misapplied. He has been wrong before and the admission of one of his fundamental misrepresentations - that the province actually lost oil and gas revenues - is contained in the opening clause of the 2005 offshore deal.

There is no surprise that the Accord offsets were included in this panel report. The Bond Papers noted January 2006 that it would be difficult to keep these Equalization-related payments off the table.

As well, Bond Papers noted in February 2006 that Danny Williams proposed a different approach to Equalization in late 2005 that was at odds with the Harper proposal to remove non-renewable resources from the calculation of entitlements.

In his letter to federal party leaders, Williams proposed that Equalization be based on a formula which includes all provincial sources of revenue in calculating per capita fiscal capacity based on a 10 province standard. As a result, Alberta's economic performance would produce a significant cash result for this province. Williams also proposed that debt servicing costs be considered when calculating entitlements.

There is no explanation as to why Premier Williams appears to have abandoned his own proposal which are essentially similar to the recommendation of the expert panel to include all resource revenues.

Good governance: goose and gander

The Canada-Newfoundland and Labrador Offshore Petroleum Board regulates the offshore oil and gas industry. The senior administrative position is chairman and chief executive officer.

The provincial government is refusing to issue an order in council appointing a new chairman and CEO arguing that the positions should be slit as a matter of "good corporate governance." A panel appointed under the legislation governing the offshore board recommended the appointment of a single individual to the combined position but added a recommendation that both the feds and the province consider splitting the job. The key thing to bear in mind is that the panel performed its function and, as the legislation provides, its appointment is binding on both the Government of Canada and the Government of Newfoundland and Labrador.

The Board of Commissioners of Public Utilities, commonly called the public utilities board regulates a variety of activities in the province including electricity prices.

The House of Assembly just passed legislation establishing that the senior administrative position at the PUB will be a chairman and chief executive officer. "The chairperson shall be the chief executive officer of the board and shall have full authority for the overall operation, management and financial administration of the board."

So why is it good governance to split the job at one regulatory board but combine the two jobs of chairman and chief executive officer at another?

Doug House's speech

For some reason the abstract of a speech given recently by Doug House has attracted some attention. The speech itself isn't available online, but an abstract - a summary - is to be found at Simon Fraser University's Centre for Coastal Studies.

I say "for some reason" since, on the face of it, this paper did little more than describe the reality of the province currently. It's hard to imagine what is controversial or contentious about saying that "the current government finds itself under enormous pressure to prop up hurting communities, households and individuals through make-work, income support and the further overexploitation of endangered fish stocks. This vies with and threatens to undermine genuine efforts at rural industrial diversification from both government and community-based agencies."

Is this not the case? Is the Williams government not under pressure to provide make-work projects and income support?

Since people might be interested in what Doug has to say about other subjects, check out the rest of the Simon Fraser Centre's studies on oil and gas, coastal societies and similar topics. You'll find that back in 2000, Doug and a number of others with great experience in the local offshore oil sector discussed events in Newfoundland and Labrador over the past 25 years.

In the meantime, here's the abstract of House's latest speech. See if you find anything problematic or controversial in it.

Update: An alert reader noted in an e-mail that the St. John's Census Metropolitan Area accounts for about 35% of the population and holds about 34% of the seats in the House of Assembly.

The knowledgeable correspondent notes that as such "rural" parts of the province don't hold a preponderance of seats in the provincial legislature that is in any ways out of whack with the population and the allotment of seats.

Maybe the issue for House isn't with the preponderance of seats but rather that the demands for various government supports works against other efforts at economic development and diversification. That's the last sentence of the abstract in slightly different words.

----------------------------

Oil, Fish and Social Change in Newfoundland and Labrador:
Lessons for British Columbia

Wednesday January 11, 2006

4:00 PM, Halpern Centre, Simon Fraser University

Abstract

During the past 20 years, the economy and society of Newfoundland and Labrador have been undergoing significant change. Oil, which has earlier been conceptualized as a "strong staple," has been in the ascendancy; while fish, a "weak staple," has been in decline. The places where the production of these two staples is centred have also changed significantly. Although exploration and production take place hundreds of kilometres offshore, oil company operations, most service and supply activities, research and development, education and training, and the public sector management and administration of this new industry occur almost exclusively within St. John'’s and the surrounding north east Avalon region of the province. The oil industry has also been a major catalyst for the growth of a marine technology cluster in St. John'’s, which also benefits from having Memorial University, the College of the North Atlantic, significant physical infrastructure, an airport, a harbour and the seat of government all located within a few square kilometres. Wealth, employment and population are becoming ever-more concentrated in this region.

At the same time, the decline in groundfish stocks, concern about shellfish stocks, and cut-backs to Employment Insurance payments for plant workers (but not fishers) have undermined the economic base of many fishing communities, the traditional outports of coastal Newfoundland and Labrador. People are leaving the outports, not just for mainland Canada but also for St. John'’s and the larger regional resource and service towns. Newfoundland and Labrador is rapidly becoming urbanized. Even the province'’s vibrant cultural industries - —music, drama, literature, film - —although drawing on a somewhat romanticized rural past are, with some notable exceptions, based in and contribute to the further growth of the city. More tourists flock to George Street than to Gros Morne or Twillingate.

What does all this mean for government decision-making and policy? Given the preponderance of rural seats in the legislature, the rhetoric continues to favour rural development. Although committed in principle to "real" economic growth in rural areas through better management of the fisheries and longterm industrial diversification, the current government finds itself under enormous pressure to prop up hurting communities, households and individuals through make-work, income support and the further overexploitation of endangered fish stocks. This vies with and threatens to undermine genuine efforts at rural industrial diversification from both government and community-based agencies.

Check out the Chicks

The Dixie Chicks new CD is great, and picks up on the spat from Natalie maines criticism of George Bush.

A good take on the PMO/news gallery flap

For those tripping over from RGL's latest ad hominem dodge, try this post on for size, from a fellow who styles himself Townie Bastard.

it's as simple and succinct a comment on the matter I have seen.

CNLOPB ups estimates of offshore gas and oil reserves

The federal-provincial board regulating the oil and gas industry offshore Newfoundland and Labrador today released revised estimates of the proven and probable reserves at two of the offshore fields that increase the total by about 700 million barrels.

The Canada-Newfoundland and Labrador Offshore Petroleum Board now estimates that Hibernia holds 1.244 billion barrels of oil, an increase of 379 million barrels. Hebron Ben Nevis now stands at 731 million barrels. That is 317 million barrels more than previously estimated.

Natural gas estimates for the offshore also increased. There are now estimated to be 10.234 trillion cubic feet of natural gas and 478 million barrels of natural gas liquids.

Among other implications, this means that the failed Hebron deal was likely worth twice as much to Newfoundland and Labrador as previously thought. Talks collapsed in early April over the provincial government's insistence on a 4.9% equity stake in the operating consortium and its rejection of $500 million in construction phase tax concessions.

Estimates in April were that the provincial government would have received over $10 billion in royalties and other income during the production phase of the project in addition to a considerable portion of the $3.0 to $5.0 billion to be spent in the construction phase.

It isn't clear if that revenue projection was based on the low-range estimate of Hebron at 400 million barrels or the upper part of the range - now confirmed - at over 700 million barrels. If the projection was based on the lower reserve estimate, then it would be safe to nearly double the provincial government revenue; that would have made provincial government revenues almost $20 billion, which is double the provincial accrual debt and approximately the same size as the annual gross domestic product. The tax concessions seem even more puny now than they did before.

The provincial revenue estimate apparently also did not include the 0.858 Tcf of natural gas or the 60 million barrels of natural gas liquids also present in the Hebron complex.

Placentia Bay no place for a tired ship's pilot

According to NTV News, the Atlantic Pilotage Authority (APA) is blaming crew fatigue for the accident that sent one of its two small boats (Left. Photo: APA) in Placentia Bay part way up the rocks on Buffett Island on Monday, injuring one crew member and causing an unspecified amount of damage to the $3.0 million aluminum hulled boat.

The APA pilots guide tankers laden with Iraqi and Grand Banks crude up the bay to moorings at the Come by Chance oil refinery or the Whiffen Head transshipment terminal. The picture at right shows the bows of Canship Ugland's tanker M.V. Mattea. (Photo: Canship Ugland)

Placentia Bay is no desolate place. There are bird colonies, rich fishing grounds and a host of other sensitive wildlife in the bay. A recent report supporting the establishment of an improved regional management system for the bay noted it is the most likely spot in Canada for a major oil spill.

So here's the thing: if the guys piloting their own small boat were so tired they put her up on the rocks on what appears to have been a calm, clear day, what's to prevent them from nodding off when they are guiding one of the tankers into or out of such a sensitive marine environment?

No one else seems to be thinking about that.

--------------------------------------------
Personal note: As indicated earlier my mother's family comes from Harbour Buffett, the harbour to which the wracked-up APA pilot boat was towed. She's a Collett and her father's family can trace back to Thomas who arrived in Buffett in the early 19th century. On her mother's side, the Marshall have an equally old - if not older - history in Newfoundland.

According to NTV, the guy who did the towing was named Stan Hollett. Stan is no relation to your humble e-scribbler, at least not for about five or six generations, but my mother recalled him from Buffett before the community was resettled. He apparently moved back some years ago and lives there pretty much year round. In itself, Stan's story is worth further investigation as is the history of the old community. It is picturesque, close to rich fishing grounds and once was a fairly prosperous little town.

In this instance, thankfully Stan and another fisherman were nearby to lend assistance to the APA. Otherwise this might have been a tragedy.

Another take on fastballs to the side of the head

Over at the blogspot site offalnews, Lono is feeling a bit smug.

He contends that Danny Williams "fastball to the side of John Risley's head comment is evidence that his comment about FPI is now proven. Essentially, Lono contends that John Risley should just have smiled quietly and gone on about FPI business rather than point out the obvious that Danny Williams changes to Fishery Products International's board and management won't have much of an impact other than drive up the company's costs.

He [Risley] stated the obvious truth: that these Act amendments are effectively meaningless. But now he's now left the door open for government to claim company resistance and impose real draconian measures. These comments can come back to haunt him.

The lesson here is that public communications is partly theatre and the players are actors on a public stage; play your role to best advantage to your side. If you respect the Fourth Wall, you can use it to your advantage to further your goals.

If you insist on breaching it you do so at your peril.

Here at Bond, there's a quandry. On the one hand Lono is dead right. On the other hand, we can also see an argument that Risley is merely belling the William's administration cat.

What will make the difference in these two interpretations is whether or not Danny Williams actually can take stronger measures against FPI without in the process either incurring legal challenges from the company or, worse still, cementing in place a reputation for being as anti-business and anti-investment as any political leader north of the Panama Canal.

Around here, the guess is that Williams and Risley are playing chicken and that this little tiff is just two capable leaders playing some game of "Mine is still bigger." It creates an interesting display for the on-lookers but ultimately it doesn't move FPI any closer to resolving its issues. Williams reaction is proof that Lono is right: i.e. that Risley was inviting a comment. What it doesn't show - yet(?) - is that Williams can actually fire a fastball at Risley's head and avoid a ricochet that will deliver a pretty solid smack to his own goolies in the process.

If you put your gear on the table and start passing out the hammers, at some point someone's tackle is gonna take a hard blow.

Update: John Risley did another interview today, this time an extended one-on-one with Fred Hutton at NTV for the supperhour news. He made a number of comments about how he personally and the current shareholders and directors of FPI have been vilified.

this little exchange with the Premier is likely to go on for a few days. Time will tell whether there is a big hammer the government will drop of if FPI has called the Premier's bluff on legislative changes to FPI.

Belling the cat

John Risley stated the obvious, namely that the government's changes to the Fishery Products International legislation won't have any significant impact on the direction the company will be taking.

Fish minister Tom Rideout (Left. Photo: CBC) couldn't say anything to contradict Risley because Risley is right. The section of the legislation dealing with how many board members FPI must have was stuck in there as a distraction from the real point of the bill. Rideout and Premier Danny Williams spent a lot of time talking about "fettering" the supposedly evil John Risley and another board member named George Armoyan.

For his part, Williams went so far as to brand Risley and Armoyan as being "hostile" to the best interests of Newfoundland and Labrador. In responding to Risley's comments Williams did his best to ramp up the trash talk, but ultimately he didn't say anything that was either relevant or convincing. Yep, as much as Williams tried to sound un-pussy-like, there's no question the noise we heard all through the little television clip was the dingling of the bell John Risley hung around the Premier's neck.

Now if Risley pointed out that Williams' legislation was really aimed at making it easier to break up FPI and sell off the bits - exactly the opposite of Williams' claims - then the noise would be a gonging so loud even the Premier's best jock bullshit trash talk wouldn't drown out the din.

Buffett back in the news

My mother comes from Harbour Buffett, resettled in the 1960s but once a prosperous fishing community on Long Island in Placentia Bay.

She was a bit surprised to hear this morning that a pilot boat had grounded on Buffett Island yesterday.

You can find some information and photographs about Buffett here at the Memorial University Maritime History Archive. The names and some of the people are all ones I recognized although I have no memories of Buffett myself. Masters, Butler, Wareham, Marshall, Upshall, Tulk, Hann and of course Collett, my mother's crowd.

Opposition Notes

Liberals: The party brass have anointed interim leader Gerry Reid as the new permanent leader.

Did Gerry have to pay the $10K required of Jim Bennett? Something tells me he didn't. In the meantime, check out the assessment at offalnews. I'd add to Lono's list that Gerry needs to punt Kel Parsons into the great beyond, but I doubt that will happen.

This is LCD politics at its finest. That's lowest common denominator, meaning that Reid is the guy who will make no changes to anything thereby making the entire caucus happy.

This sorry situation virtually guarantees the party will be lucky to hang on to four seats after the next election and many candidates will lose their deposits.

New Democrats: Lorraine Michael wins in as big a majority as can be imagined against a single opponent.

Jack Layton demonstrated this weekend that while he can sing, he does not have the grace and poise to learn how to pronounce the losing candidate's name properly.

Outgoing Dipper boss Jack Harris has been so cozy with his old law partner Danny Williams we may well see Harris' long-rumoured appoint coming through soon to something.

Given Jack's position lately, it was funny to hear him talk of presenting the Dippers as a "Principled Opposition". The party thus far has been neither principled nor has it offered much opposition. On two major pieces of legislation this past sitting, Jack Harris and Randy Collins voted to hand Danny Williams carte blanche to spend public money without any means of accountability. So much for principle, opposition or democracy for that matter.

Maybe the party will change its name to The New Party.

PJ Jazzy Jan

Alright, since none of you appear to be trivia nerds, here's the answer to the question about CTV reporter Janis Mackey Frayer's first television gig.

With a degree in international relations and French, CTV's journalist in Kandahar (Left. Photo: ctv.ca), started life on the Canadian cable channel YTV.


Under the name PJ Jazzy Jan (Right), she worked as a "Program Jockey" or PJ who filled the same role as a video jockey (VJ) on Much.





Janis carries on the fine tradition established by Canada's own J.D. Roberts (Left. Photo: ericaehm.com). J.D started life as a VJ on Much in the 1980s.


Today, John Roberts (Right. Photo: cnn.com) is a senior correspondent with CNN and was touted for a while as a potential replacement for Dan Rather on the CBS evening news.

So who did Workman piss off?

[Update. Original posting 26 May 2006]

In shuffling its overseas scribblers, CBC is sending Paul Workman to Kandahar for a year.

A year.

That is twice the deployment length of a Canadian soldier.

In Kandahar.

After spending a decade years in Paris, Paul's gonna have to do some serious attitude adjusting.

I mean this one is surely on the top CBC reporting gigs just like Alert is at the top of the list of places where Canadian Forces members are climbing over each other to get to.

Workman's replacement is Adrienne Arsenault who is heading to Paris having spent some time in the Middle East.

Nice reward.

Over at CTV, their reporter - Janis Mackey Frayer - in Kandahar did a stint in the Middle East. A bit less of an adjustment, to be sure.

(Friday trivia aside: Anyone remember Janis' early national TV gig? Her bio at the CTV site doesn't make mention of it.)

So inquiring minds will now be wondering:

who'd Paul piss off or otherwise annoy?

Update [27 May]: A couple of e-mails pointed out that this decision reflects a strong commitment by the Mother Corp to cover an important Canadian story.

Yep it does. It is also a marked difference between now and 13 years ago when the CBC sent its Moscow correspondent to cover Chechnya - alongside every other news outfit on the planet - rather than send anyone at all to cover Canadians in Somalia.

CBC's decision to send Workman out in the land of Caine and Connery also reflects a competitive issue - which I hinted at - what with CTV having a presence in theatre already and having deployed both Lisa LaFlamme and Janis to the country for some time. CBC's coverage has been good but sending in Workman reflects a commitment of resources.

Still, though, it's gotta be tough to go from Paris for 10 years (albeit with overseas stints every once in a while) to living 24/7 in Kandahar.

No answers so far on the Janis Friday trivia question. What did this international relations and French language graduate do as her first gig in television?

Must be an English thing

Long-time readers of these e-scribbles will know that your not-so-humble scribbler is known to play the euphonium once in a while.

Before the format change, there was a link to euphonium.net, a site maintained by Steven Mead, a professional euphonium player in England. Any resemblance to yours truly is accidental, although he is a dead ringer for a cousin of mine.

All this is an excuse to post the picture at left, which is of a euphonium, specifically a Boosey & Hawkes model.

In the 33 years I have been torturing others playing, I have never seen the euphonium associated with anything even vaguely suggestive, let alone erotic.

I venture that my relatives who played generations before I was even on the planet never saw the horn as arousing in any way. They missed the obvious pun.

Popular culture reinforces that. Trumpets. Saxophones. Drums. Guitars. All manner of instruments and musicians seem to be associated with sex and sexiness in some way.

But not the lowly tenor tuba.

Until now.

This picture must have originated in England where the euphonium is popular.

So for a Friday afternoon in May, this is a post in a lighter mood.

Completely blind dorks Purists will note this lovely young woman is not holding the instrument correctly.

Every activity includes that sort.

Like the accountants at a party who listened as a fellow told an off-colour joke, the thrust of which involved the rhythmic movement of hips accompanied by chanting "nickel-dime-quarter-buck." The frustrated character in the joke tosses out the chant in favour of "dollar forty, dollar forty, dollar forty".

The guy telling the joke said "dollar thirty-five, dollar thirty-five, dollar thirty-five" at the punch line.

The accountants corrected his math and then laughed.

Ah well. It takes all sorts.

In the meantime, I'll just admire the raven-haired lovely, noting, of course that her embouchure is not bad and her fingers are in the right position.

Harper wants to be mayor of Vancouver

Apparently controlling street racing in a major Canadian city is the next big thing for Stephen Harper to tackle.

Stephen is the Prime Minister of Canada. If he wants to be Mayor of Vancouver or Premier of British Columbia he should quit and run for the job.

Talk about the federal government intruding on an area of provincial jurisdiction...

FPI not alone: Sanford affected by high dollar

New Zealand fishing company Sanford has been affected by the relatively high New Zealand dollar as well as international competition.

How the company is dealing with the situation is contained in the 2005 annual report, and in a story from the New Zealand Herald.

Sanford has also looked at innovative information management approaches to help reduce costs, control inventory and generate more revenue.

To listen to people in Newfoundland and Labrador, Fishery Products International is the victim of some plot.

Others, like federal fisheries minister Loyola Hearn subscribe to the view that there are no deep-seated problems in the fishery. There are just some difficulties with some companies which will be sorted out in due time.

Both are delusional, of course, albeit in different ways.

In the meantime, look at the fishery globally and then take another look at FPI and the local industry.

The bumpf that comes out of meetings like the one Wednesday just isn't as comforting any more, is it?

Another Sanford tidbit: closing areas of the offshore to trawling

Catch a Newfoundland and Labrador fishing enterprise taking this kind of stand on the environment:

The seafood industry announced today a proposal to close off Benthic Protection Areas (BPAs) to bottom trawl fishing, said the managing director of Sanford Limited, Eric Barratt. Mr Barratt was speaking on behalf of the New Zealand companies involved in deepwater bottom trawling. "This is by far the largest total closure to bottom trawl fishing within an EEZ [exclusive economic zone] ever undertaken in the world."

FPI viewed from down under

Sanford is an international fisheries business based in New Zealand. The company holds about 14.97% of FPI's outstanding shares.

In the ongoing political bumpf about Fishery Products International, people keep forgetting the presence of Sanford in the shareholder pool as well as the place its managing director, Eric Barratt, holds on the FPI board.

Purely for the sake of information, here's the FPI section from Sanford's 2005 annual report. Note two things in particular. First, the major shareholders cannot support the share price in the marketplace by increasing their investment because of the limitations in the FPI Act. After all, a good way of showing confidence in the company's medium- to long-term viability is for the major shareholders to increase their holdings.

Second, note reference to the problems Sanford is experiencing in its own primary division. What FPI is experiencing is a global problem and the problem is one best solved by the business owners, not government bureaucrats and politicians.

Check out the annual report, as well, for a discussion of Sanford's investment in Chinese processing. As a successful publicly-traded company, Sanford has been able to grow and diversify over the years. It does so as a New Zealand enterprise and a large part of its success must surely be attributable to the absence of the level of paranoia and political interference that is currently plaguing the Newfoundland and Labrador fishery.

The section of the Sanford annual report reproduced below might just provoke consideration in some minds that maybe investors were attracted to FPI in 2001 not because they could break it up and destroy the company, but because they saw greater potential in what the company could become. The post-2001 FPI leadership may well have made some mistakes, but since 2003 FPI has experienced a level of political interference in its business that would have it difficult for any leadership team to operate successfully.

As a successful, diversified private sector company, Sanford offers a good model for FPI. Unfortunately, in the Wednesday Great Gab-fest, few people floated the idea that maybe - just maybe - the way to move the fishery in the province from its current state to one of a successful locally-dominated industry would be to get guys like Premier Danny Williams, Tom Rideout and Loyola Hearn out of the process.

Instead, the three politicians seem hell-bent on doing the opposite, and in the event will be repeating the same fundamental mistake of virtually every government in this province since 1949.

With rare exceptions, Newfoundland and Labrador politicians are pathologically incapable of make sound business decisions. That is because, collectively, they cannot be interested in anything beyond their political personal survival. The election in October 2007 will be ever-present in the minds of Williams, Rideout and their fellows in the months ahead. As a result, the fundamental needs of the fishing industry will go untended as their political needs take precedence over all else.

What might the assembled throng have concluded if, for once, they took a look at the local fishery from another perspective, perhaps the perspective from down under?

Extract from the Sanford 2005 annual report:

In Canada income trusts dispose of their surplus operating cash flow usually on a monthly basis and the income trust holder is required to account for the income tax on that return. In the normal equity market there is no ability to pay imputed dividends so the income trust structure provides a more tax advantageous situation compared to equity investment. Over the past three years there have been many Canadian companies that have converted all or parts of their business into income trusts.

FPI proceeded on the basis that it would convert its mainly United States-based marketing and added-value business(Ocean Cuisine International) into a Canadian-based income trust and float income trust units for 40% of the business and retain ownership of the remaining 60%. The Government of Newfoundland and Labrador believed that such a float required their approval. Although the company did not believe that to be the case it sought the provincial government'’s approval. This process took over 12 months by which time the Canadian federal government'’s review of the tax status had been announced and a float was no longer viable.

Part of the proceeds of the float would have been used to repay some of the debt in the FPI primary fishing business. This business is suffering in much the same way as our fishing business. The increased value of the Canadian dollar compared to the United States dollar is threatening the viability of their operations.

Two fish processing plants have had to be closed down and written off in the past 12 months. With the poor underlying primary division results, the write-off of two plants and the write-off of the not insubstantial costs of preparing for the income trust, the Company results have been poor. As a consequence, the limited share trading that has taken place has seen the share price fall to a low of C$4.11 but which has since been trading at C$5 per share. The existing four major shareholder groups are prevented from purchasing additional shares and supporting the share price because they are up against the provincial government legislation restricting ownership to a maximum of 15%.

While the Ocean Cuisine operation has been expanding and has good prospects for the future, the FPI Directors are focused on actively restructuring the business and believe that with a net asset backing per share of C$11.00 per share that further value can be gained from Sanford'’s investment.

The Directors decided to write down Sanford'’s investment by NZ$2.2m as an expense in the current period. The shares are now valued at C$7 in our books which the Directors believe to be a fair value. Both Sanford and Ocean Cuisine continue to benefit from our marketing arrangement which has seen further growth in our trading business.

Status quo not an option: Williams

Predictably, Premier Danny Williams thinks huge progress was made at yesterday's summit/town hall/audience on the fishery.

This sort of meeting usually ends a process, capping off months if not years of private discussion, wrangling and hopefully agreement. If you're the guy calling the meeting at the start of the process, then you are usually either trying to pull a fast one or setting yourself up for a huge fall.

So what is the consensus coming from the meetings? Why that there is plenty of agreement on things that amount to PIFOs: penetrating insights into the obvious.

Take a gander at the CBC News story on the Big Meeting:

Premier Danny Williams says there was a consensus at Wednesday's fisheries summit that the industry is not in a complete crisis, but it does need major restructuring.

Knock me over with a feather. We need to restructure the fishery? Geez, these guys accomplished a lot in 11 hours of meetings at taxpayer expense.

"We have acknowledged collectively that status quo in the fishery in Newfoundland and Labrador is not an option," said Williams.

Yet more rocket scientist conclusions. This is like acknowledging that the sun came up this morning.

The premier said there was an agreement among participants that everyone has to do a better job of selling fish product on the international market and the size of the industry needs to be concentrated, with fewer plants and workers.

Now tell me you heard that conclusion somewhere before: fewer people need to be involved in the Newfoundland and Labrador fishery. This is pure gold. No one said anything like this before.

Yesterday's meeting did produce what some might consider an odd meeting of the minds. Earle McCurdy, head of the hunter-gatherers' guild, and Danny Williams, local corporatist political supremo, are in complete agreement on the need to take control of Fishery Product's marketing arm, possibly as a Crown corporation. The two guys who bitch about other people wanting to break up FPI are in fact the guys wanting to pull off the smash and grab.

Meanwhile, Fish, Food and Allied Workers union president Earle McCurdy said he is supportive of the premier's idea to create an industry co-op to take over the profitable marketing division of Fishery Products International.

There didn't appear to be much support for this sort of idea from anyone actually involved in marketing seafood, but that doesn't matter.

What matters is that the Big Giant Meeting with the Big Giant Head of Newfoundland and Labrador produced amazing results never before seen on the planet.

The official news release said so, in pre-approved, vacuous terms of bureaucrats and dissembling politicians.

Loyola Hearn trumpeted his government's capital gains tax break for fishermen as a way of helping with the crisis. Earle McCurdy wanted to see government money spent on his members. Ditto fish processors looking for cash to bail them out.

Yep all remarkably new and special and splendiferous.

And if you want to know how much wasn't accomplished yesterday?

Look at how hard the Premier and all his posse are trying to convince you that they split the fisheries atom over the course of 11 hours at a ritzy hotel. It's sadly very much the norm for Danny Williams: big flash; no delivery.

Too bad that status quo was not an option.

Ralph's idiotic last stand

Outgoing Alberta Premier has decided to make one last political stand, demonstrating he knows nothing about the Constitution in the process.

According to Canadian Press, Klein is threatening to pull Alberta out of Equalization if the feds include Alberta's resource revenues in the calculation for the federal-provincial transfer. Equalization.

Alberta is threatening to drop out of the federal government's revenue-sharing deal with other provinces if energy income is included in the equalization formula.

But you see, here's the problem. Alberta, i.e. the province Ralph runs, doesn't really have any say in the matter since the provincial government doesn't really participate in Equalization in the first place. The provincial government doesn't pay any special taxes to Ottawa to fund Equalization. The Government of Alberta
doesn't participate in this program in any way so that it could opt out.

What is under discussion here is the formula being used by the feds to figure out how much money recipient provinces should get. The money for Equalization comes from the federal government's general revenues.

The CP story makes a major-league factual error by calling Equalization "the federal government's revenue-sharing deal with other provinces", but that's another issue.

Basically in one fell swoop, Ralph is showing that he understands exactly squat about federal-provincial relations.

The whole thing sounds suspiciously like Danny Williams offshore nonsense in which he claimed provincial government revenues it collected directly were being taken away by evil Ottawa. In the final agreement Williams signed with then-prime minister Paul Martin, he admitted that the entire premise for his grandstanding the previous year was, in a word, nonsense.

In Williams' case, he got a couple of billion of federal dollars for his pouting.

What does Ralph get out of this little tirade, except further evidence of how much he doesn't know about the country?

St. John's City Garbage

New municipal trash regulations make it mandatory to cover trash put at the curbside for pick-up by council crews.

That is, you have to cover your trash unless you live on the growing list of streets that have bitched and moaned such that the weak-kneed council has granted an exemption to your street.

But in the meantime, the regulations require trash be placed in polyethylene bags of a minimum thickness of 1.5 mils.

Consumer trash bags - bin liners to U.K readers - typically come in a maximum thickness of 1.2 mils. That's the really heavy duty expensive ones. Most bags are under 1.0 mils.

Don't take my word for it. Look at glad.com and check the faq on trash bags.

There are 1.5 mil bags out there. Just don't think you'll get away cheaply. Bags to meet the regulations are available online and will cost between US$30 and US$50 per box depending on how many bags come in the box.

Count on this regulation being repealed pretty quickly.

FPI: Read this

If you read nothing else on Fishery Products International, read this commentary by business analyst Bruce Keating.

For those who can't get the link, it is found at atlanticbusinessmagazine.com.

Among Keating's other observations is this one:

Finally, government doesn'’t get off the hook. Both levels need to provide substantial funds to assist with the restructuring of the primary fishery. They must accept that the industry will be a smaller one -– less people working in it and fewer resources harvested from it -– and bear early retirement program and other major costs involved.

It's good advice if for no other reason than it is the sort of solid analysis Danny Williams is hell bent on ignoring in favour of fiddling with legislation and organizing stunts like to today's "Audience with the Premier."

Breaking up FPI

Curse Hansard for being unconscionably slow posting the transcripts of debates in the House of Assembly.

The stuff from last Thursday night and the debate on the Hydro bill is still not online. That yielded nuggets for blogging mostly because not a single member who spoke on the bill had a freakin' clue what it was about. Well, at least their comments didn't suggest any comprehension of the English language.

It is way too early therefore to expect anything from Tuesday and Danny Williams little slip of the tongue in which he revealed a bit of his "plan" for Fishery Products International (FPI). He said something to the effect that if a group of local stakeholders came forward with a plan to buy up the company, then he'd put government money behind them.

Couple that with the changes to the FPI Act currently in front of the House and you have the Williams' plan for FPI: break it up and sell off the bits. Sound familiar?

Remember the Rule of Opposites. In this corollary, take what he accuses someone else of plotting and apply to the Prem himself.

In the absence of any deeper plan for the fishery as a whole - let alone a deeper understanding of what the issues are - the provincial government is falling victim to the quick-fix bail out approach. That's why when fish minister Tom Rideout (right) spoke on the FPI Act amendments Tuesday, he referred to the current situation being like 20 years ago. FPI was created out of a massive bail-out scheme.

The bail-out scheme we may see applied in this instance would have the fish plants in the province sold off, most likely to the Barry Group.

Meanwhile, Ocean Cuisine and possibly the European division would be retained and run by a consortium of the smaller operators out there whose product it already flogs. The European division might also be a way of getting local shrimp under the European Union tariff barrier.

Remember Danny's comment about selling off FPI at fire-sale prices? Well, consider that the current bill in the legislature gives the cabinet control over the break-up: that's the goal of the legislation. The Premier was likely only concerned about someone else buying up the assets at a fire sale - one with flames fanned by his own government more often than not - not necessarily about the idea of a sale and a break up per se.

Of course, in the larger picture Rideout is dead wrong. He and Williams may well manage to cobble together a quick-fix here involving a bail-out and government money but they are really looking at a situation which is fundamentally different than the one 20 years ago. What Williams and Rideout will be doing - if the FPI break-up evolves out of the Great Wednesday Meeting with the Premier - is avoiding the tar-baby by taking the province headlong into the political and financial briar patch.

And just like 20 years ago, neither of them plans on being around when we find out how prickly the briar is.

Goose Bay battalion is crapola: I knew it!

While it may be premium content - i.e. they want you to pay for it - the Ottawa Citizen is reporting today as I contended for months now: the Connie defence "plan" developed by Gordon "Driver Advance" O'Connor is considered by the real defence planners to be pure shite.

For those of us in the Far East of the western World, the last two paragraphs are pure gold:

David Rudd, president of the Canadian Institute of Strategic Studies,
said the military leadership is also concerned about the government's
plans to station a rapid response battalion in Goose Bay and other
units in places like Comox, B.C. He noted there is ''absolutely no
military reason to station troops in Goose Bay.''

Rudd said some officers have suggested increasing reserve units in
Goose Bay and other locations to deal with the Harper government's
election promise.

Rudd is right. O'Connor's people know it too since they have already started to soften their commitment.

The Rule of Opposites

Premier Danny Williams is one of those politicians who make it easy to understand what he is up to. Sometimes you just have to look at the opposite of what he says.

Take Fishery Products International (FPI), for example.

Williams said he is worried that the current board of directors and management of the company want to split it up and sell off the bits and pieces. He has expressed concern the company's quotas might be moved outside the province.

He has been somewhat cagey in his wording on occasion, referring to the directors taking decisions that are "contrary to the best interests of the people of the province." What those interests are and what would be contrary to them are left undefined. He has also said all options are on the table, including the sale of some FPI assets to the Barry Group. But make no doubt, when it comes to FPI, the Premier has identified individuals from outside Newfoundland and Labrador - foreign demons - as being a problem to be addressed only through legislation.

Therefore, he is pushing amendments through the House of Assembly which will change the way FPI is governed and managed.

But here's the thing. There isn't a shred of evidence that John Risley, George Armoyan or any of the directors of FPI are looking to do anything other than continue the company as a viable, profitable enterprise. The talk of plots to destroy FPI are just rumours pumped by the open line crowd and from time to time encouraged by Danny Williams' own remarks about decisions contrary to the province's best interests.

But even if there is some conspiracy, under the existing FPI Act, clause seven prevents the sale of all or substantially all of the assets of the company. That restriction is there in black and white.

If Premier Williams was genuinely worried about the breaking up of FPI and the sale of its assets he could have slept soundly knowing the only way that could have been done is with his consent and subsequent changes to the FPI Act in the House of Assembly for all to see. After all, the Premier used that very clause to stall allowing FPI to set up an income trust from its Ocean Cuisine marketing arm.

If the Premier still had qualms, he could ask his deputy premier and fisheries minister, Tom Rideout (left) who told the legislature in late March this year that: "[w]e believe we have plenty of legislative authority to make sure that the interests of the people of this Province are protected, and we will not be hesitant to use it, Mr. Speaker, if we have to."

Under the changes to the FPI Act now before the legislature, the break up of Fishery Products International goes from being very difficult to being very easy. The new clause seven allows for the sale, lease, exchange, mortgage or other disposal of the assets of the company with the approval of cabinet. If FPI presents two proposals to government for the sale of any of its processing plants, for example, it will be Danny Williams who chooses whether or not to accept either offer or who makes the choice between the two. A simple order-in-council will bless the deal.

What appears to have troubled Danny Williams is not that decisions would be made but rather who would make the decisions. In the changes to the FPI Act Williams has assured his personal control of FPI and, in the amendments, ensured that neither he nor government can be sued for any financial consequences of their actions.

Yet, in all of this, there is no requirement for Williams to bring his decision into public and justify it before the public, let alone seek approval of the elected representatives of the people of the province.

Under the old legislation, any sale or disposal of the company assets required amendments to the FPI Act, which inevitably meant a debate in the House of Assembly full public view. That is the route Williams took with the income trust proposal.

If anyone thinks the Danny Williams' administration is changing the FPI Act to make sure the company continues to exist as it is now, that he is preventing the break up of the company and the sale of its assets, they had better look again.

Applying the Rule of Opposites will reveal what is actually occurring. A careful reading of the proposed changes to the FPI Act also make it clear that the goal here is to ensure that the Williams administration will be making the decisions for FPI and they will be doing it with as little public scrutiny as possible.

Definition!

1. Town hall meeting anywhere else in the civilized world:


- an open, democratic meeting of residents of a community in which all residents are entitled to voice their opinions freely.

Derives from the practice in New England communities of holding public meetings to discuss significant public issues in the seat of community government, namely the town hall.

2. Town hall meeting in Danny Williams' Newfoundland and Labrador:

- A closed meeting at an undisclosed location with only invited participants attending and the only reporting on the discussions coming from the Premier and designated political officials.

Enemy at the gates of the park

Ah yes, the Glorious Victoria Day weekend.

In Newfoundland, it is the time of the year when people who would never think of going camping in the winter race to the nearest provincial park of gravel pit to freeze their goolies off in the damp misery of the weather that hits like clockwork this time of year. There was some guy on CBC last night who has been going to Butterpot faithfully since the 1970s. He takes two hours to string up electric lights all around the camp site. He slings tarpaulin overhead in case it rains and strings other lengths of tarp across the gaps in the trees to keep the wind out. By the time he has done, the only thing missing from his great adventure "outdoors" is the brown velour couch with giant flowers all over. This guy is no more outdoors "roughing it" this weekend than he would be looking out his living room window.

Anyway.

People of desert cultures think hell is really hot. The Norse considered hell to be a cold place. Newfoundland mythology should have labeled hell a damp one in which you were doomed to an eternity spending the 24th of May weekend in a tent, with a Coleman stove but no way of lighting the friggin' thing because while you brought along enough beer to keep Ontario awash for a month and eight 40s of Lambs between the two of you, some rocket scientist in the group forgot the lighter.

My memories of this weekend revolve around fishing, but that's for another time.

Just so as to keep your sense of humour just think of Jude Law and Rachel Weisz in the 24th of May weekend scene from Enemy at the Gates.

Go on.

Wrack your brains wondering what a story about some Russian sniper at Stalingrad could possibly have to do with you huddled in a pup tent.

Stumped?

Think about the part in the bunker when young Vasili and his paramour struggle to copulate in among a pile of snoring, smelly bodies without waking their exhausted and likely inebriated companions.

If that isn't the definition of the 24th of May weekend in this province for many young couples, I don't know what is.

But don't worry. I know what threw you off. In Enemy at the Gates, they were in a concrete basement in the middle of winter...

but they were warm and dry.

Everything old is new again, part deux

Danny Williams is beseiged by problems with the fishery, for which he has no solutions. He is fighting, as he puts it, a lot of battles on a lot of fronts.

So, from out of no where he announces that there will be a fisheries summit - or as he just told talk show host Randy Simms, it will be a town hall style meeting. It sounds like something is being done while it is obvious nothing is happening. It will be a nice little show and, with any luck it will buy some time until the issue can slide off the radar screens or someone comes up with a brilliant solution.

It's a nice job of shifting the focus of the discussion from government's obvious impotence to its apparent ability to bring something off.

Sounds familiar.

1997.

Health care.

Brian Tobin, pounded day after day in the legislature about hospital bed closures, suddenly announces a health care forum. His cabinet colleagues and health department officials had never heard about it until Tobin announced it. People were pulled together to discuss "the issues" and work toward "solutions".

A brilliant shifting of the debate focus.

And a complete waste of time.

The whole thing was formally announced in the House of Assembly by then-health minister Lloyd Matthews but Tobin had blurted out the commitment in Question Period a few days before under pressure in the House. The episode stands out so clearly since I worked at the time for a health care group. We spent two days trying to find any information about the forum. Once it was announced, we were told we wouldn't be invited because there was a shortage of chairs - I kid you not. We offered to bring our own fold-outs.

Lloyd Matthews.

That's Liz's Dad, by the way. You know. Liz Matthews. Gerry Reid's comms director at fisheries under the Liberals. The one who late one Sunday night packed up her office and skulked to work for Danny Williams.

The similarities in these two fluffy forum ideas are just a bit too much for comfort.

The results are likely to be equally vacuous.

Pulling it out: Williams and the fishery

This week Newfoundlanders and Labradorians saw proof that Premier Danny Williams and his administration have no idea what to do with the fishery.

For one thing, Williams announced there will be a summit of key players to discuss what ought to be done. Whenever a politician organizes a meeting in this context and calls it a summit, you know right away this is a politician without a single desperate clue about what needs to be done. This isn't a meeting with a purpose. This isn't a "task force", as some groups like to call them, with a specific mission to sort out a special problem.

No.

Williams' "summit" is basically going to consist of a bunch of people trying to first of all agree on what is wrong so that they might then, possibly at some unforeseen point in the future, actually be able to start working on what might be done to fix the problem now that they have agreed on a definition. Consider this to be a form of collective bargaining. Odds are very high that in the divergent worlds of the union and the companies, there will be no agreement on the problem any more than the union has shown it grasps the scope of the fish problem already.

That said, there is a good chance the two parties (three if one considers the inherent conflict of interest in Earl McCurdy's outfit) will agree on what they have always been able to agree on in situations like this: shag figuring out the question. Public money is the answer. The government must pour hundreds of millions of dollars into their collective pockets to keep everything just as it is.

"Save us!", they will cry in unison, yet again, so that once this crisis has passed, the industry can resume the same wasteful, unproductive and ultimately destructive work it has been doing since the 1950s. Williams will then look at Loyola Hearn who will look back and shrug. There will then be further talks between Ottawa and St. John's and further shrugging.

We are in for a long summer and a painful fall.


For the second thing, there is Williams' plan to further interfere in the management of a private sector company, namely Fishery Products International. Williams' excuse for making this move is a concern that two of the directors are working against the "best interests" of Newfoundland and Labrador. He has nary a shred of evidence of anything evil here at all. There is no proof that John Risley and George Armoyan - wealthy Nova Scotians both and by definition evil to the townie brood from which Williams springs - are doing anything other than trying to keep the company going and restore it to financial health.

Williams claims he is afraid they will break up the company and sell it off. Therefore he must add a government agent to the board and making other unspecified changes to the legislation governing FPI. Of course, that legislation already prevents Risley and Armoyan from doing what Williams claims he is afraid of, so, as with so many thing, there is a huge gap between what Danny Williams says and the reality.

All this demonstrates that Williams is pulling his fish policy out of some convenient bodily orifice. In the absence of a sweet clue of what to do on any of these files, Williams is making it up on the fly. Check to see if he says, yet again that "all options are open". All options are open only to someone who has not or cannot make a decision. Think about it.

Made up on the fly? You better believe it. This summit was cooked up along with the FPI legislation in a mere two weeks. The fishery crisis has been looming for most of the two and more years Williams has been in office; the problems with FPI alone date from the very first moments of his administration. If Williams and his cabinet had a grip on the fishery, they would have pulled together the key players years ago, not so publicly but in private, to sort through the issues.

Where will it end? When will it end?

No one can say.

If we knew that, we'd know what government was up to.

But that is impossible since, as Danny is fond of saying, all options are open.

Newfoundland and Labrador Hydra

Trumpeted by the Williams administration as the key piece of legislation for this session of the House of Assembly, the amendments [Annex A, below] to the Hydro Corporation Act live up to their advance billing but not for the reasons offered by Premier Danny Williams and natural resources minister Ed Byrne.

The amendments to the Hydro Corporation Act go beyond what the Progressive Conservatives originally proposed. The new legislation will create a Crown corporation that will not only "engage in activities" related to hydrocarbons, it will do so in Newfoundland and Labrador and anywhere else on Earth. More importantly, the new Hydro corporation, will also be given responsibility for any other enterprise or activity based solely on the approval of cabinet.

Moreover, the cost of this new multi-headed venture will be borne in one fashion or another by the residents of Newfoundland and Labrador. As a Crown corporation owned entirely by the provincial government, Newfoundland and Labrador Hydro's [Hydro; Hydro corporation] debts are added to those of the provincial government and its other agencies even if its revenues do not necessarily count toward the provincial government's operating budget.

Additionally, though, the second clause of the new bill exempts the new Hydro corporation from a restriction in the Electrical Power Control Act, 1994 (EPCA) that an electricity producer or retailer is only involved in the production or sale of electricity. However, under the EPCA, the public utilities board is still required to set Hydro's electricity rates to provide the Crown corporation with "sufficient revenue" to achieve and maintain a sound credit rating from international lenders.

Williams' original plan

Danny Williams' expressed goal in October 2003 was to convert the Hydro corporation into a Crown corporation that would "retain equity in the province's oil and gas resources", "absorb all the expertise it can from the major oil companies, so that the province will have the capacity and expertise to participate in and benefit from decisions regarding exploration, production, and processing of oil and gas in the province", and, "work with the major oil companies to develop natural gas as a competitively priced alternative energy source for the province, and for transportation to Canadian and U.S. markets."

The Progressive Conservative 2003 campaign policy manual, called variously the Blue Book or "Danny Williams' plan", indicated that the new energy corporation, i.e. the one involved in oil and gas, might be established as a Crown corporation separate from Hydro. While the Bond Papers has previously pointed out the potential problems in resurrecting the Peckford-era petroleum corporation, the way this corporation is established is important: the provincial government has made a conscious decision in its new legislation to reject other options with their inherent advantages.

Statoil and Norsk Hydro, two examples often cited by Premier Williams ¹, effectively operate as private sector companies despite being owned, respectively, 71% and 43% by the Norwegian Crown. This arrangement is important since the companies operate according to sound business principles and are accountable not only to the Norwegian legislature but also to the private sector shareholders.

By contrast the Hydro corporation in Newfoundland and Labrador is little more than a department of government answerable by law to the energy minister, but in practice to the Premier. So close is the relationship that Hydro's chief executive officer served as the lead provincial negotiator with the Hebron consortium. The obvious conflict of interest in this situation was ignored by government, but not by the private sector companies in the Hebron group.

Over the past decade and a half, these two Norwegian companies have ceased to serve as instruments of state petroleum policy on matters such as ownership, control and development. This is diametrically opposite to the Williams' administrations plans for the new Hydro corporation. The Blue Book clearly establishes a policy role for the new Hydro corporation by giving it responsibility for ensuring "the province will have the capacity and expertise" to participate in and benefit from" oil and gas development.

Strengthening the private sector

One of the challenges facing Newfoundland and Labrador in the past half century has been the growth of a strong private sector with access to local capital. Since 1949, the experience of the Smallwood, Moores and Peckford periods has been a heavy reliance on state intervention and state support for industrial development in most sectors. The legacy of this approach is mixed and in some cases downright sorry. Even in the fishery sector, successive governments have poured public money into private sector companies until, ultimately, both the provincial and federal governments created Fishery Products International out of the debt-ridden mess of failed processing companies. [On the relationship between the federal and provincial governments and the Newfoundland and Labrador fishing industry, see Miriam Wright, A fishery for modern times: the state and the industrialization of the Newfoundland fishery, 1934-1968, (Don Mills, ON: Oxford University Press, 2001)]

The Wells administration's 1992 Strategic Economic Plan, by contrast, emphasized government policy aimed at strengthening the private sector, diversifying the economy and increasing the ability of local companies, including in the oil and gas sector, to compete effectively on a global basis. Crown corporations were sold off or shut down. Peckford-era legislation to provide for a petroleum corporation was repealed since Peckford had never implemented it and the Wells administration saw no purpose in having the state operate in what was deemed best left to private business. The major exception to the divestiture of state-owned corporations was the effort to merge Newfoundland Power and Newfoundland and Labrador Hydro as a single private sector corporation.

Williams' new Hydro corporation returns to an older model based on government subsidy and government dependence. Beyond the attractiveness to some businesses of relying on whatever contracts they can secure from the new Hydro corporation, the political and financial muscle of the state-owned company will likely make it considerably more attractive an investment than a private sector venture, since it will always carry with it a government guarantee of its operations and expenditures. The end result will almost inevitably be a weakening of the local private sector.

Controlled by whom? Accountable to whom?

Simon Wong, an international expert in corporate governance at McKinsey and Company in Washington, D.C., has noted that state-owned enterprises have significant governance problems that impair their ability to perform effectively and efficiently. Conflicting missions, poor political guidance, lack of public scrutiny and a board lacking authority are among the weaknesses of state-owned enterprises, according to Wong.

These two latter points are especially obvious in the local example. Note the extent to which Premier Williams has effectively exercised total control of the Hydro board, appointing his confidants to positions of responsibility. Williams has also been able to continue the practice, established under Brian Tobin and Roger Grimes of controlling the Lower Churchill project office, with its funding coming from the Hydro corporation. The expenditures by this office are not scrutinized by the auditor general or the House of Assembly.

Beyond those issues, the third clause of the Hydro amendment bill creates a situation which is virtually unprecedented in local political history. It gives authority to cabinet to assign to the new Hydro corporation any activity which it approves. With passage of this bill, public expenditure may be made on any purpose with no disclosure to the public other than that coming with publication of an order-in-council or the minimal disclosure required in the Williams administration's accountability legislation.

Even in that respect, the Hydro corporation - and by extension the Williams administration - is not complying with provisions of the Transparency and Accountability Act. No strategic plan has been issued, despite significant changes having already been made to the corporation in the past three years. Hydro has not published an annual report on its website for 2005.² As recently as Monday, May 15, 2006, Premier Williams confirmed to the House of Assembly that his government has committed to an expenditure of upwards of $9.0 billion on the Lower Churchill project without benefit of even the most basic of accountability tools: the business plan. One can only infer that there is likewise no business plan to accompany the development of the Hydro corporation as an oil and gas venture.

Unlimited public liability

Along with unlimited cabinet authority to spend what is effectively public money through the new Hydro corporation without much, if any, prior public disclosure and limited public accountability must go the obvious point that the residents of Newfoundland and Labrador hold an unlimited liability for Hydro operations, its successes and failures. Hydro is a Crown corporation owned entirely by the Government of Newfoundland and Labrador. As such its assets and liabilities are functionally those of the public at large.

At the same time, as a producer of electricity sold in the province, Newfoundland and Labrador Hydro's rates charged to customers is regulated by the public utilities board under the Electrical Power Control Act, 1994. [EPCA] The proposed amendment bill also includes giving the new Hydro corporation and exemption to that section of the act which currently provides that an electricity company can only be engaged in producing or retailing electricity in the province. However, in determining electricity rates, the PUB is directed by the EPCA to provide the Hydro corporation with sufficient revenues from its electricity sales to allow it to achieve and maintain a sound credit rating.

As an electricity producer, Hydro's financial picture would be easy to see and comparisons could easily be drawn with electricity producers across Canada. The PUB has been able to assess the accuracy and reasonableness of the income requirements of Hydro from its domestic sales and, where necessary vary a rate request to satisfy a broader public interest in the availability of affordable electrical power. As a multi-sectoral company only one portion of which is an electricity producer, the new Hydro may now be able to apply for electricity rate increases to fund or otherwise offset its non-electricity activities.

Conclusion

The current administration has already justified its activities in the energy sector on the basis of pride and self-reliance, distinctly emotional issues, as opposed to financial or other measurable criteria. One can expect that any issues related to the new Hydro corporation will be couched in similar terms. All else will be dismissed as irrelevant or speculative.

Had it been concerned only with creating involvement in the oil and gas industry, the Williams administration would have proposed legislation that permitted those easily defined and relatively limited set of activities for a company sub-ordinate to or separate from Hydro. One might expect such a company could involve a partnership between a Crown corporation and private sector companies in the fashion of Statoil or Norsk Hydro.

The most obvious explanation for the Williams administrations approach is that it sought to create an entity which was controlled directly and entirely by cabinet, with limited requirements for public disclosure. The new Hydro corporation, as structured, will allow cabinet to direct Hydro expenditures much as it has done in the past, but over a wider range of activities, and based solely on an order-in-council.

In effect, Bill 1 will create out of Newfoundland and Labrador Hydro a hydra corporation. There is no limit to the range of activities in which it may engage with only the most rudimentary public scrutiny.

While the public will unquestionably bear the full financial risk of this venture, they have no information on which to assess the risk of the course on which their provincial government is already fully engaged.

However the notion of accountability is much broader than that whether one is talking of current political values or the scrutiny to which corporations have been subjected to in the wake of scandals such as Enron.

In Newfoundland and Labrador, we need only look to a litany of failed public ventures to see the folly of granting to any administration - irrespective of the talents of its leader - the unfettered right to commit public money without public debate or disclosure. Our political landscape is littered with rubber boots, eyeglasses, gloves and rotting cucumbers.

The Williams administration has offered no explanation of its failure to comply with its own legislation on transparency and accountability largely since no one has asked a cabinet minister about the issue. The usual reply has been that the government will be accountable to the public at election-time.

Newfoundlanders and Labradorians, as shareholders in - as the sole owners of - the new Hydra corporation, deserve no less a level of accountability than that held by shareholders in the private sector. They demand - and receive - information on the risks and rewards before endorsing any venture as fully-informed participants. At the very least, those shareholders can sell their interest and move their money elsewhere if they do not support management's decisions.

Residents of Newfoundland and Labrador have no such luxury. Prudence - the hard won caution of experience - dictates they look more cautiously at government plans, lest they find themselves facing a financial hydra, if not under this administration than under some other administration in the not-so-distant future.

______________________________

¹ Premier Williams has also used Hydro Quebec as a model for the new Hydro corporation. Under s. 22 of the Hydro Quebec Act, the company's objects are "to supply power and to pursue endeavours in energy-related research and promotion, energy conversion and conservation, and any field connected with or related to power or energy."

Hydro Quebec has not statutory authority to assume responsibility for any activity which the Lieutenant Governor-in-Council may approve, as provided for the new Newfoundland and Labrador Hydro corporation. Rather, Hydro Quebec's mandate is to supply power and engage in energy-related activities.

² This was written and originally posted on 16 May 2006. The 2005 Hydro annual report was tabled in the House of Assembly on 16 May 2006. As of 0533 hrs 17 May 2006, it was not available on the Hydro website. Hydro has still not produced either a three year strategic plan or a business plan for the Lower Churchill or the expansion of the company's book of business even though this is required by the Transparency and Accountability Act.

Annex A:

AN ACT TO AMEND THE HYDRO CORPORATION ACT AND THE ELECTRICAL POWER
CONTROL ACT, 1994

Analysis

HYDRO CORPORATION ACT

1. S.4 Amdt.
Supply of power

ELECTRICAL POWER CONTROL ACT, 1994

2. S.24 Amdt.
Restrictions on business

Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:

HYDRO CORPORATION ACT

RSNL1990 cH-16 as amended

1. Section 4 of the Hydro Corporation Act is amended by renumbering it as subsection (1) of section 4 and by adding immediately after subsection (1) the following:

(2) In addition to the objects referred to in subsection (1), the corporation may, in the province and elsewhere, engage in activities related to the exploration for, development, production, refining, marketing and transportation of, hydrocarbons and products from hydrocarbons.

(3) Notwithstanding subsections (1) and (2), the corporation may engage in those other activities that the Lieutenant-Governor may approve.

ELECTRICAL POWER CONTROL ACT, 1994

SNL1994 c E-5.1 as amended

2. Section 24 of the Electrical Power Control Act, 1994 is amended by adding immediately after subsection (2) the following:

(3) This section does not apply to Newfoundland and Labrador Hydro.

©Earl G. Tucker, Queen's Printer

Screw you. Screw me?

There's childish and pissy.

Then there's the Prime Minister's reaction to having one of his nominees rejected by a parliamentary committee.

When the committee rejected his nominee to head the public appointments commission, Stephen Harper scrapped the commission.

As CanWest reported:

Later in the day, Harper abandoned the commission, which was supposed to establish a process to reduce patronage in government appointments by more widely advertising openings and setting merit-based criteria for selecting appointees. Harper said he disbanded the commission because he didn'’t expect other people to step forward to take the commission job for which Morgan was rejected.

He added the government now would proceed with appointments "in the traditional manner."

The traditional matter would be, of course, the sort of patronage that the PM and his colleagues in the Conservative party railed against when someone else doled out political largesse.

So much for sticking with the election platform.

The old in-out, in-out

Census day has prompted some public discussion in Newfoundland and Labrador of out-migration.

Some think the province's population will be down owing to some economic problems in rural areas. The provincial government claims there will be a slight decline from last year.

Flip to the provincial government's economics and statistics website (www.stats.gov.nl.ca)and you'll find a population projection to about 2020. It shows a small but steady decline based on:

- In/out migration
- Mortality rates
- Birth rates

The provincial government position is based on the assessment of the population trends.

But...

If one wanted to get a sense of the population effects of economic issues, one might look at this chart. It is an assessment of in-migration and out-migration for Newfoundland and Labrador, by fiscal quarter for the period from 1993 and 2005.

The net figures give a wider view of trends in migration over the past decade, but particularly highlight the dramatic increase in departures from 2005 compared to 2004.

A summary of the net figures (in- migration less out-migration) is presented below:

Year (Premier): net

2005 (DW): - 3442
2004 (DW): -1807
2003 (RG/DWilliams): -1103
2002 (RG): -3187
2001 (BTulk/RGrimes): -3914
2000 (BT/BTulk): -4884
1999 (BT) : -3916
1998 (BT): -7971
1997 (BT): -8522
1996 (CW/BTobin): -9026
1995 (CW): -6566
1994 (CWells): - 6204

Declines from 1994 to 1998 can be attributed in largest part to the aftermath of the cod moratorium announced by the Government of Canada in 1992. Federal support programs delayed some people from making a decision to seek employment in other parts of Canada.