Churchill Falls background

It's hard to find a concise summary of the facts surrounding the Churchill Falls development.

One of the best ones is in the Supreme Court of Canada decision Re Upper Churchill Water Rights Reversion Act, [1984] 1 S.C.R. 297.

This is a famous case among the nationalists, pseudo-nationalists and a few other assorted types hanging off the end of the bar at the Ship.

There's a really brief summary of the whole affair on the Wikipedia site, but the SCC summary is also pretty short and it is factual. It stands as one of the sorry results of the windmill tilting Brian Peckford did on a number of issues only to lose badly in the courts.

The financial summary from the judgment is interesting especially in light of the number of times people like to run around claiming that Quebec owns Churchill Falls or Quebec has control of our natural resources and wants control of the Lower Churchill as well. These people conveniently forget that when it appeared CFLCo would fall into bankruptcy, Hydro Quebec entered into the ongoing recall/resale of power agreements beginning in 1998 designed solely to forestall CFLCo from becoming 100% owned by Hydro Quebec. The political fall-out from such a development would have been disasterous.

Hydro Quebec with its technical knowledge and financial support - most importantly in the form of performance guarantees - was crucial to the overall successful completion of the project.

In light of what is going on these days, it is always useful to get some background information that is reliable. In that same light, I am eagerly awaiting the revision of a paper recently completed by Memorial economics prof Dr. Jim Feehan on the negotiation of the 1969 contract.

The issue should be the subject of a book, but the paper - when the revised version is released - should be an important contribution to our understanding of a controversial, but often misrepresented episode. In any event, the information contained in the SCC decision is a tidy summary until someone writes the definitive book on the entire Churchill Falls affairs.

Extract:

In order to finance the project CFLCo was required under the provisions of the Power Contract to raise $700 million out of an estimated total cost in excess of $900 million. In addition to bank loans of between $100 and $150 million, CFLCo borrowed $100 million by the issue of General Mortgage Bonds, pursuant to a Deed of Trust of which General Trust of Canada was Trustee, known as the General Mortgage Trust Deed, which was executed on September 1, 1968. It was amended by a supplemental Trust Deed dated May 15, 1969. Pursuant to the Trust Deeds CFLCo assigned and charged all its assets and rights under the Statutory Lease and the Crown leases to the Trustee. The Lieutenant Governor in Council for the Province of Newfoundland consented to this assignment on August 1, 1968.

The bulk of the financing came from the sale of First Mortgage Bonds. CFLCo borrowed $540 million on the security of Series A bonds and a further $50 million on the security of Series B bonds. These funds came from lenders outside the Province of Newfoundland and largely from the United States. The Royal Trust was constituted Trustee for the bondholders under a First Mortgage Trust Deed entered into by Royal Trust and CFLCo on May 15, 1969. As security, CFLCo assigned all its assets and rights under the Statutory Lease and Crown leases and all its rights under the Power Contract. General Trust intervened in the Trust Deed as Trustee under the General Mortgage Trust Deed, granting priority to

[Page 305]

the First Mortgage Bonds, Newfoundland also intervened in the Trust Deed confirming its consent to the assignment by CFLCo of its assets to the Royal Trust, which consent had been given on May 12, 1969 by an agreement, known as the Financial Agreement, between the Royal Trust, CFLCo, and the Province of Newfoundland. This agreement was made pursuant to and given the force and effect of law by The Churchill Falls (Labrador) Corporation Limited (Financing) Act, 1969 (Nfld.), c. 76, (the Financing Act).

At the time of the hearing of this appeal [early 1984], according to the statement of facts which forms part of the record, there remained owing by CFLCo in respect of the above-described borrowings $98 million in General Mortgage Bonds, $458,620,000 U.S. in Series A First Mortgage Bonds, and $45,804,000 Cdn. in Series B Bonds. It is against this background that the Power Contract between CFLCo and Hydro-Quebec was signed on May 15, 1969. It is a lengthy and detailed document. Under the contract CFLCo agreed to supply and Hydro-Quebec agreed to purchase virtually all of the power produced at Churchill Falls for a term of forty years, which was renewable at the option of Hydro-Quebec for a further term of twenty-five years. The price to be paid for the electricity was to be based on the final capital cost of the project. Provision was made for CFLCo to retain a fixed amount of power for use within Labrador by its subsidiary Twin Falls Power Corporation. In addition CFLCo could recall on three years' minimum notice up to 300 megawatts (MW) to meet the needs of the Province of Newfoundland.

The importance of the relationship between CFLCo and Hydro-Quebec to the success of the Churchill Falls development is made evident by a reading of the Power Contract. Each party was to be responsible for the construction of transmission lines on its side of the Quebec-Labrador boundary. To ensure compatibility of the two systems, the

[Page 306]

contract provided that transmission lines and related facilities were to be built according to Hydro-Quebec's specifications. Hydro-Quebec was given a supervisory role over CFLCo with respect to maintenance of the development and also acquired the right to operate the plant in the event of CFLCo's failure to do so. For its part Hydro-Quebec agreed to make funds available for the completion of the project over and above the $700 million to be raised by CFLCo in exchange for mortgage security. If CFLCo lacked the funds necessary to meet debt service payments, Hydro-Quebec agreed to advance the necessary monies in exchange for debentures and shares of CFLCo. The Quebec utility also agreed to pay the difference between six per cent and any greater rate of interest payable by CFLCo on its obligations. Although Hydro-Quebec owns only 34.2 per cent of the issued shares of CFLCo (the remaining 65.8 per cent owned by Newfoundland and Labrador Hydro, a Newfoundland Crown corporation), a voting trust arrangement provides that no substantial changes in the financial or other obligations of CFLCo can be made without the consent of 75 per cent of the shareholders. [Emphasis added]

Good advice likely unheeded.

Offal News has an interesting positive suggestion for Danny Williams to help him out of the self-imposed jam on the offshore board.

Too bad Williams doesn't get good advice.

Really too bad he never takes good advice.

This mill will not close!

"Expropriation is still an option for the provincial government if it finds another operator for Abitibi-Consolidated's soon-to-be-shuttered paper mill in Stephenville, Premier Danny Williams says."

That was the lede for a Rob Antle story in Telegram last December.

Here's the latest plan for the Stephenville mill, as announced today in the environmental assessment bulletin issued by the provincial government:

(2) Stephenville Paper Mill Site Decommissioning (Reg. 1281)
Proponent: Abitibi-Consolidated Company of Canada

The proponent proposes to decommission and rehabilitate the pulp and paper mill site in Stephenville. The infrastructure and physical features to be decommissioned include: the main pulp and paper mill building including steam plant, maintenance shops and administration offices; paper storage sheds; effluent treatment facilities and pipelines; wood yard; industrial landfill systems on the east side of Route 490; hydrocarbon bulk fuel storage facilities; fuel and process storage tanks; water and sewage systems; transformers and other electrical equipment, etc. A summary of the Environmental Site Assessment (ESA) Phase I work is also included. The decommissioning of the site is scheduled to commence in 2006 and is tentatively scheduled to be completed by 2008. The undertaking was registered on August 7, 2006; public comments are due by September 12, 2006: and, the minister's decision is due by September 21, 2006.

The minister encourages all interested parties to become involved and to make comments known. Comments on submitted documents are invited from the public, addressed in writing to the minister, and are welcome prior to the deadline date shown.

How quickly they forget.

Stuck in a decision loop?

Rule 1: The Boss is always right.

Rule 2: If the Boss is wrong, see Rule 1.

Amateur computer programmers Geeks and nerds many microchip-centuries ago used to like setting up loops in their programs and watch what happened.

or sometimes they'd make a loop by accident and wonder why their computer stalled.

Is the Williams decision-loop slowing response to the Halley decision on max Ruelokke?

It's well over 24 hours since the decision and no sign of a response from government yet.

Could it be the government is in a decision loop?

If they appeal the decision they are guaranteed to lose. This will only increase the criticism of the Premier for fighting a lost cause anyway. Note the only public support he has on this file is from people who get regular messages from his office telling them what to say.

If he accepts Max, as he should, then the Premier has to admit he lost....that maybe he was wrong.

At no point has Danny Williams ever admitted to making an error nor has he apparently ever lost. There's always been an ability to redefine the issue so he comes out smelling like a rose.

This isn't a question of ego.

Put that aside and the decision becomes easy. Let's move on and get to the bigger issues facing the province.

Make a decision and accept the judgment and the story is gone in less than 24 hours.

Delay a decision or worse - appeal it - and the bleeding will continue for weeks and weeks.

Then you can add this bleeding to the other bleeding on so many fronts and the regular CBC Radio political updates will be re-named "The Premier Has A Bad Week, Week 52".

We don't need it. Danny doesn't need it.

We need the Premier to get back to working on the files that have a promise of success for him and for the province as a whole.

Gordo and the return of the Connie pork brigade

We've written before about the odd choice of Gord O'Connor, the former lobbyist for defence manufacturers and old-style retried general as Minister of National Defence.

Head to back to articles written in the late winter and early spring and you'll see comments on the obvious shortcomings O'Connor's defence policy which was designed to turn defence spending into pork.

Well, today's Globe has the story of the Stephen Harper administration invoking a national security clause in the Agreement on Internal Trade that allows the feds to micromanage where in the country $8.0 billion in defence spending will go.

There is a trough.

As much as the Connies used to criticize those with their nose supposedly in it, once in power, the Connies are following a long established Conservative tradition of wasting defence dollars and using defence spending as goodies to hand out for political gain.

How long will it be before Steve has the Gucci loafer closet filled, too?

Take all the time you need

The Ruelokke v. Government of Newfoundland and Labrador case ended yesterday before lunch.

The Williams administration knew the decision was coming and knew there were basically only two possibilities. Either they'd win or they'd lose. Since the Premier already committed to abide by Mr. Justice Halley's decision - whatever it was - then there really isn't much to ponder.

So why is the provincial government having such a hard time giving its official reaction - even a preliminary reaction - to the decision?

The Premier has been noticeably silent, indeed he's been all but invisible these past few weeks.

Word on the street is that the powers that be can't sort out who will speak: Will Danny Williams go out there and deal with it himself or will he send his proxy minister, Kathy Dunderdale?

Take all the time you need, gang.

The way government has handled this file tells us all a great deal about how this administration operates.

Their lack of a reaction on this file is just part of the bigger picture.

Ruelokke wins; government's actions called reprehensible, callous

Mr. Justice Raymond Halley handed down his ruling in the case Max Ruelokke was forced to bring against the Danny Williams government in an effort to have Williams and his cabinet live up to the law governing the offshore regulatory board.

Ruelokke won.

Halley's comments on the provincial cabinet's actions in the matter are scathing, calling Ruelokke's treatment at the hands of cabinet "reprehensible". Halley said "[o]n the whole, the Respondent has treated the Applicant with contempt
and disrespect." (p. 22)

Several new details of the case emerged in today's ruling, details that undermine the credibility of the government's campaign to install St. John's mayor Andy Wells in the job as head of the board regulating the offshore industry.

According to Mr. Justice Halley, before the hiring process was sent to a third party arbitration panel, federal natural resources minister John Efford offered to split the combined chairman of the board and chief executive officer job and send only the board chair position to the panel. Williams and the provincial government never took up Efford's offer despite subsequent claims they wanted to split the job in the interests of "good governance."

Minister Efford initially advised the Respondent that the federal government intended to submit only the position of Chair of the Board for mandatory arbitration.
It was at that point that the Respondent had an excellent opportunity to insist that both governments proceed under section 12 of the Act for the selection of the Chair and that Panel or another Panel be constituted under section 24 of the Act to select a different person to be the CEO of the Board. According to the Respondent, the good
governance of the Board was "“at stake"”.

Instead of proceeding with the selection of the Chair of the Board only as suggested by Minister Efford, the Respondent appears to have embraced the "“one person"” concept. In reply to Minister Efford'’s letter, the Respondent issued a press release on August 25, 2005 in which Minister Byrne announced that Dean MacDonald would be the province'’s representative on a Panel that would select one person to be both the Chair and CEO of the Board. (p. 9)

Halley also confirmed that the selection panel used Robertson Surette, the company hired to conduct the initial search for chairman/CEO to conduct the second arbitration panel. The initial approach by RobeSuretterrette was scuttled by Danny Williams bizarre and thus far unexplained efforts to foist Andy Wells on a process that was nearing completion.

Halley called Andy Wells unqualified and said "it was mischievous for the Respondent to continue to 'push' for his appointment [of Andy Wells] after the Panel had made its decision." Bond Papers reached the same conclusion on Wells' lack of qualification last July.

So far no one has been able to come up with a good explanation for the Premier's "mischief" beyond pique.

While Danny Williams said three weeks ago he would abide by Mr. Justice Halley's ruling, odds are good that Williams will opt to appeal this decision to the Supreme Court of Canada if need be.

The Premier was unavailable for comment today. Let's see what he does on this file next.

Anyone wanting a copy of the decision in pdf format can simply drop me an e-mail.

The Four York Harbourmen

Monty Python used to do a sketch in which four elderly gentlemen sat about inventing ever more outrageous stories about how tough it had been growing up in their little corner of Yorkshire.

It loses a lot without the broad Yorkie accent but there were a couple of gems like:

"There were hundred and fifty of us living in shoe box in middle of road."

The climax of the sketch is Eric Idle, as the fourth Yorkshireman, who finally launches into a tirade:

Right. I had to get up in the morning at ten o'clock at night half an hour before I went to bed, drink a cup of sulphuric acid, work twenty-nine hours a day down mill, and pay mill owner for permission to come to work, and when we got home, our Dad and our mother would kill us and dance about on our graves singing Hallelujah.

FIRST YORKSHIREMAN: 

And you try and tell the young people of today that ..... They won't believe you.

ALL: 

They won't!

It's like the Upper Churchill and the lengths some people go to "prove" just exactly how bad Hydro Quebec is screwing us. We already blogged this, but the whole subject is a goldmine of information.

Something under the bed is drooling

The agreement between Hydro Quebec and BRINCO for the development and operation of the Churchill Falls hydro-electric project stands as one of the most lop-sided agreements in Canadian history.

The provisions that garner the most attention are the ones requiring Churchill Falls Labrador Corporation (CFLCo)- the company managing the site, jointly owned by Hydro Quebec and Newfoundland and Labrador Hydro - to sell power to Hydro Quebec at a phenomenally low, fixed rate until 2016 and from 2016 to 2041 to sell the power at fixed rates that are lower again.

The Upper Churchill contract remains a touchstone for nationalist and other ire in Newfoundland and Labrador. Such is the emotion raised by the subject that it rivals the popular hatred in pre-1933 Germany of reparations under the Versailles Treaty that officially ended the Great War.

Much has been written in the past five years about the Upper Churchill contract with claims as to how much money Hydro Quebec makes from the project versus what accrues to Newfoundland and Labrador through the Crown-owned Newfoundland and Labrador Hydro.

In a December 2005 article, The Independent claimed that "[d]ue to the lopsided nature of the 1969 contract, Hydro-Quebec is currently earning an annual profit of close to $2 billion compared to Newfoundland and Labrador's $32 million." No source is cited for the statement. An August 2005 article in the same newspaper claimed "since 1972 [Hydro Quebec] has gathered an estimated $23.8 billion in revenues; Newfoundland and Labrador has made approximately $680 million." Again, no source is cited for the information.

The same information was cited by Memorial University professor Dr. Chris Dunn in a February 2005 article on the Atlantic Accord. Dunn cites The Independent's so-called balance sheet on Confederation since 1949.

Former Premier Brian Tobin told Toronto's Empire Club in 1996 that:

Hydro-Quebec is buying Churchill Falls power at 1969 prices and re- selling it at 1996 prices. Under the agreement, this will go on for another 45 years. The windfall profits for Hydro-Quebec are immense ... and unconscionable.

Since full power came on stream from Churchill Falls in 1976, Hydro- Quebec has received benefits averaging about $600 million a year. Newfoundland and Labrador has received benefits that averaged $23 million a year. Recently, that has slipped to $16 million a year.

From 1976 to 1996, Hydro-Quebec received 96 per cent of the benefits, while Newfoundland and Labrador got only 4 per cent. To put this in perspective, in 1995, while Hydro-Quebec received benefits of $1.4 million a day from Churchill Falls, Newfoundland and Labrador received just $45,000 a day.

His successor, Danny Williams has made much the same argument using much of the same language and the same figures.

At least two things are noteworthy in the examples provided above, examples that are consistent with virtually every single comment on the Upper Churchill project and alleged revenues gained by Hydro Quebec from what Brian Tobin clearly asserted was the practice of reselling Upper Churchill power at windfall prices.

First, not a single source - let alone a verifiable source - is cited for the figures.

Second, the figures vary widely and one might also note wildly. Brian Tobin's figure of $600 million annually is low, even allowing for electricity prices in the mid-1990s. Danny Williams claim of $1.0 billion is large but some of the more extreme claims, such as those of The Independent have put the figure as high as $2.0 billion annually.

There is one assessment that does provide some slightly more detailed information. A paper prepared by the Centre for Spatial Economics for the Royal Commission on renewing and strengthening our place in Canada reproduces analysis completed by the Newfoundland and Labrador Department of Finance. It is important to note, however that the figures represent theoretical losses for Newfoundland and Labrador as a result of the long-term, low-fixed-price power sale portions of the Upper Churchill Contract.

The Department of Finance estimated lost revenue for both CFLCo and for the Newfoundland and Labrador government for the period 1991 to 2001 based on several scenarios and assuming that power could have been sold for $20, $30 and $40 per megawatt hour above existing rates.

On the face of it, these assumptions are nothing short of fantastic. They are entirely devoid of any of the historical basis on which the original development took place. In and of themselves, the assumptions proceed from the very best case scenario in which the original contract negotiators were not only free of financial pressures but were also able to foresee subsequent developments in energy pricing such that they would provide the best possible power sales terms less than 20 years after the project achieved full power.

On top of that, the finance department estimates - at least as reproduced by the Royal Commission paper - that CFLCo would turn over all revenue to the shareholders and that, in turn, Newfoundland andLabradorr Hydro would have turned over all additional revenue to the provincial government.¹

If we accept all those assumptions, the province's Department of Finance projected that for the years between 1991 and 2001, the Government of Newfoundland and Labrador would have received the following amounts of revenue:

Year: Amount (pricing assumption per megawatt hour [mwh])

1991: $294.0 million (+$20/mwh) to $589.1 million (+$40/mwh)

2001: $315.0 million (+$20/mwh) to $630.0 million/mwh

This is a far cry from figures cited in any of the examples given above. Moreover, it must be borne in mind that these are theoretical losses of revenue. No evidence has been presented that Hydro Quebec actually sells Upper Churchill power at the highest possible prices and therebycollectss the windfalls Brian Tobin claimed. This is not to say of course that such a situation might not theoretically exist; but it is a long way between theory and proof or even between theory and a conclusion based on a balance of probabilities.

All we can say with certainty of these figures - the only ones from an identifiable source - is that they represent theoretical losses based entirely on the assumptions of the economists conducting the analysis. If they assume different can-openers, then the entire analysis heads for the ash can.

Some will undoubtedly wonder why this argument about amounts is important. After all, the nuclear winter theorists only confirmed that nuclear war would be an unmitigated disaster. Whether or not Quebec is reaping windfalls or the magnitude of the windfalls is irrelevant: the contract is still a disaster for Newfoundland and Labrador, some would argue.

This would be true except that it appears that entire argument is based on fantasy. it should go without saying that fantasy is no basis for public policy.

More importantly however, the Upper Churchill contract has become nothing more than a convenient tool which successive politicians have used to bludgeon their adversaries for more than three decades. Such is the impact of the Upper Churchill mythology that an otherwise viable agreement with Quebec in 1991 to develop the Lower Churchill fell apart in large measure due to fear in both Quebec and this province that references to the Upper Churchill agreement would cause a political and popular backlash in both provinces.²

In the same way that the Conservative Opposition attacked Wells on the matter in 1991, Progressive Conservative leader Danny Williams - aided by then-Hydro chairman Dean MacDonald - used Lower Churchill negotiations and the spectre of the Upper Churchill to bludgeon Roger Grimes a decade later. The only difference was that the 1991 Conservatives felt a deal ought to have been done.

Danny Williams has repeatedly exploited popular fears of the upper Churchill at every juncture.Hee repeats the pledge that he will not do a bad deal, as was done in the 1969 agreement. Williams repeated use of the Upper Churchill contract as a political device is more than mere partisan rhetoric.

At the very least, his enthusiasm for describing Newfoundlanders and Labradorians as victims of foreigners and corrupt or stupid local politicians serves only to undermine public confidence that they - individually or collectively - can ever negotiate a "good deal." So widespread is the self-doubt that has come from decades of the victim myth that in the recent film contrasting Newfoundland and Ireland, comedian Mary Walsh lambasted her fellow Newfoundlanders as too stunned to make a decent deal.

The "No bad deals" pledge may also lead Williams himself to poor decisions. There is good reason to believe that Williams walked away from the Hebron offshore oil deal, at least in part, for fear that some would argue - utterly without reason - that it was a repeat of the Upper Churchill give-away.

In the recent pursuit of the Lower Churchill development, Williams has also made questionable decisions. He tossed aside what appeared to be a viable and beneficial proposal from Ontario and Quebec in favour of the go-it-alone option. In making the announcement Williams made much of the psychological aspects of his decision with references to being master of our own destiny. Yet he made no mention of the financial impact of doubling the provincial debt in pursuing the $9.0 billion project solely on the credit of Newfoundland and Labrador taxpayers.

By the same token, Williams' option of avoiding sales to Quebec might also prove to be so difficult a feat that the project will not be built. Worse still, it might be built but under economic terms that will be far less beneficial to the province than ones that were already in front of his face. In hydro-electricity development, as in oil and gas, timing is the key and Williams may well have fouled the timing for the Lower Churchilldrivenn largely by a demon of his own invention.

The only way to get past this issue is to de-claw the Hydro-Quebec demon so carefully created by so many politicians and others for their own, often self-serving purposes. Only by understanding what actually occurred in 1969 or at any time in the past, can we expect to make sound public policy decisions and, in the process, come to appreciate that collectively, Newfoundlanders and Labradorians are already capable of mastering their own destiny. They can never do so on the basis of fantasy and fear.

By de-clawing the Hydro Quebec demon we do not ignore an ignominious contract; rather, we restore to ourselves collectively and individually the wisdom to succeed.

If we do not despatch the Hydro-Quebec bogeymann lurking underneath our political beds, we may find ourselves saddled with an enormous and entirely unnecessary financial burden from a genuinely bad deal, or worse still, left with a Lower Churchill project that failed for nothing other than a politican's fear of saying yes to a very good deal.



___________________________________________

¹ First we assume a can-opener redux. The authors of the report state the revenue was assumed to be turned over to the shareholders and then carry forward certain other assumptions about the theoretical impact of Equalization reductions on the resulting revenue. Unfortunately, this is yet another huge assumption which has equally huge implications for the rest of the analysis.

Until the early 1990s, the provincial government did not make a habit of claiming dividends from Newfoundland and Labrador Hydro. NLH is the shareholder in CFLCo, not the Government of Newfoundland and Labrador.

Since the theoretical assumptions were applied only to the decade before 2001, we have no way of knowing what would have occurred in the 1980s, and hence what the financial state of the provincial government would have been in the recession of the 1990s. This is what drove the claiming of dividends and therefore the assumption in the cited report that government would have ultimately received all added Newfoundland and Labrador revenues from the theoretical projections.

² See, for example, Jason Churchill, "Power politics and questions of political will: a history of hydroelectric development in Labrador's Churchill river basin, 1949-2002", prepared for the Royal Commission on renewing and strengthening our place in Canada, March 2003.

Specifically, the proposal called for a 30 year contract that would initially grant Hydro Quebec access to 2,400 MW of power but this amount would decline over time such that by the end of the contract in 2031, Newfoundland and Labrador would have had 3,200 MW available to either use, to export, or some combination thereof. Newfoundland and Labrador would also have provided energy security well into the twenty-fi rst century and access to 800 MW of power at 3 mills/KWH. This would have granted the province competitive energy rates in terms of the Canadian average and the province would have secured a $12 billion asset which would have generated income and employment into the subsequent century. The deal also included an escalation clause and stipulated that Hydro-Quebec would pay approximately between 73-74 mills for the energy. Additionally, the project would involve the Lower Churchill Development Corporation and the province served to receive upwards of $14 billion through its 51 per cent share in the company. This amount could have been increased if the province decided to buy out Ottawa's 49 per cent share. The deal was projected to be of far greater value than the Hibernia Project. In terms of personal income benefits it was expected, by 2001 to have yielded $2.7 billion in terms of personal income benefits as opposed to $2.1 billion for Hibernia and $710 million in gross government revenue as opposed to $610 million for Hibernia. (Briefing to cabinet, December 1991, cited as footnote 100, page 55.)

Annoying INCO?

Danny Williams said publicly that INCO and the striking union should go back to the table and see if they can settle their differences...

which is exactly - as in word for word exactly - what NOIA told Danny to do with the Hebron thing.

Two questions:

1. Should the president of INCO tell Danny to piss off because he is annoying?

After all, that's what Danny told NOIA to do.

2. Why is Danny treating INCO - and its supposed steal of a development deal differently from ExxonMobil?

Peace in Middle East at hand

Heading into a Liberal caucus meeting on Friday, Quebec premier Jean Charest called for a cease fire in southern Lebanon today, saying his position is "similar" to that of the G8 group of countries.

How nice.

I am sure the Israelis and Hezbollah will cave in to that pressure.

Paul Wells' take on the recent Premiers' meeting in St. John's couldn't have been more accurate.

What's next?

Danny Williams hops a plane to Jerusalem to see if his expert negotiating skills can work where everyone else has failed?

Bernard Lord promises to make Middle East peace an election issue in New Brunswick?

Ralph Klein delays opening the Alberta legislature so he can go fishing with the Israeli prime minister?

Provincial legislators lease office space from themselves

The Telegram is reporting today a story originally covered by The Independent, that some members of the House of Assembly operate offices in their constituency from buildings they own.

The Telly version is considerably better detailed.

Ed Joyce (Lib. - Bay of Islands) and Kelvin Parsons (Lib. - Burgeo-La Poile) own the rental properties in which their offices. According to the Telegram story, both charge $350 per month to their House of Assembly accounts as rent on the office space.

When contacted by the Telegram, both MHAs noted that the price they charge government is less than they were charging previous tenents. Both were also quick to point out that they were within the rules established by the Assembly's Internal Economy Commission. Both also claimed to have written permission from Clerk of the House to rent their own property to themselves and bill the cost to the House.

With all due respect the savings - if any - are irrelevent. Both members of the legislature are personally benefitting from public money. The decision on which space to lease was made solely by the legislators themselves.

It's about as clear-cut a case of conflict of interest as one can get.

As for the rest of their excuses, both Joyce and Parsons point to the need for a public inquiry into the entire House of Assembly mess. The legislators themselves set up rules both on constituency allowances and the management of the House accoutns that allowed this sort of conflict of interest to take place over several years. The same group - the Internal Economy Commission - also set up the system that allegedly allowed for the missappropriation and misspending of over $4.0 million between 1999 and 2006.

The current review by Chief Justice Derek Green will propose new rules, but without a more detailed - and entirely public - examination, Green's recommendations will likely have the value of the sensible rules proposed in 1989 by former MUN president Dr. M.O. Morgan and followed until June 1996.

Green's review will be conducted entirely behind closed doors and has no mandate to delve into the previous misspending. In June 1996, the House of Assembly's internal management board voted to change the way constituency accounts were handled and in 1999/2000 changed other rules which the members knew or ought to have known would leave the Assembly's accounts rife for the sort of abuse that has recently come to light.

Politically, a public inquiry would be unpalatable to the Williams administration: in addition to the former Liberal government member's of the IEC would be examined, two current and one former senior minister in the current administration would also likely be examined on their decisions.

Deputy Premier Tom Rideout, finance minister Loyola Sullivan and former House leader Ed byrne sat on the IEC during the period after 1999 when crucial decisions were taken and much of the alleged abuse occured.

At least half of the alleged misspending/misappropriation took place after April 2004. When the scandal broke in June, Premier Danny Williams and other senior officials maintained that administrative changes made in the House of Assembly in April 2004 would make it difficult for abuse to occur after that date. Having agreed with those comments initially, subsequent reports by the Auditor General revealed sizeable financial irregularities occured up to at least December 2005.

Only a public inquiry will have the necessary legal powers to root out the truth of what has been going on with public money for the past decade.

Everything else is obfuscation.

Shameless fan-ism second installment

Yes, you've read it here before.

It's true.

I am a fan of Lynda Calvert (left).

And we are overdue for the annual "It's nice to have Lynda anchoring the local news" post.


and it is great to have her back, even if it is just another summer fill-in job while the regular anchor takes a vacation.

Just like it's great to have someone other than Karl Wells doing the weather. As solid as Karl is, the guy has just grown kinda dull in the job. His replacement created a buzz because she is funky and unconventional in her approach. Once she got over a few distracting visual tics - like the need to bend at the knees when she moved her arms - her delivery got better.

There's a tendency in news anchoring to stick with the tried and true. With its new format, though, the revamped Here and Now supperhour news can mix things up a bit in the search for a format and content that draws more viewers.

Let's consider some shake-ups, like leaving Kris in weather and sending Karl off to do quirkier, human interest stories. The guy is probably crying for a break after centuries of pointing at the bloody blue screen.

Sometimes a change is as good as a rest.

Williams' Hebron folly more plain

While The Telegram editorial today softpedals the issue, let's make it clear:

By rejecting the Hebron development last spring, Premier Danny Williams gambled with a major public policy issue and lost.

Badly.

Predictably.

Williams gave up upwards of $10 billion in oil royalties, plus considerably more in related construction and job benefits because the deal didn't include his last-minute add-on of an "equity position" that he valued at a mere $1.5 billion over the life of the Hebron project.

Williams has never explained what was so important about the "equity position".

The United States Senate voted on Tuesday to open 8.3 million acres of offshore land in the Gulf of Mexico for exploration and development. Reserves in the land parcels are estimated to be 5.8 trillion cubic feet of natural gas and 1.3 billion barrels of oil.

To put that in perspective, the oil reserves are the size of the Hibernia field and more than double the size of Hebron. The gas reserves are more than the total reserves and resources offshore Newfoundland and about two thirds of the total offshore gas when Labrador is included.

A congressional conference committee will now reconcile differences between bills on the offshore lands policies passed separately by the House of Representatives and the Senate.

The Telegram notes that stability - one of the main attractions of the local offshore - has just been undermined by the opening of oil and gas resources in American waters. The Telly-torialist is right.

What they didn't note is that this week's development is further evidence that there are plenty of oil and gas development opportunities around the world and that the Premier's gambit was foolish as a consequence. The Telly also didn't admit that this same point was made previously by the Globe and Mail in articles and editorials the Telly criticized previously.

There are two consequences for Newfoundland and Labrador from this week's developments in the United States.

If - and that is a big if - Williams could theoretically re-start negotiations on Hebron, he will have to give up considerable revenues or forego considerable guaranteed local benefits to make Hebron attractive. The Gulf of Mexico is a well-established area and with its considerable infrastructure, any discoveries in the new parcels can be brought on line far more quickly and at much lower cost than anything offshore Newfoundland and Labrador. They are also far closer to refining and to markets.

If Williams could even get ExxonMobil to return his telephone calls any time soon, getting $10 billion in royalties and thousands of jobs for a mere $500 million in short-term tax concessions will seem like a fantasy.

The other consequence, a far more likely consequence, is that interest in the Newfoundland and Labrador offshore will diminish significantly for the remainder of Williams' tenure as Premier. The oil companies have better plays than Newfoundland and Labrador. Even if Williams lives up to his promise (threat?) to stay in office longer than Joe Smallwood, the oil companies won't be expressing too much interest in Newfoundland and Labrador.

Williams can't develop the resources himself because even if by some miracle he persuades Steve Harper to hand him the legal hammer to beat a field into production, Williams lacks the cash to go-it-alone through the newly minted Hydra oil and gas, hydro electricity and everything else under the sun corporation. Middle-eastern money or Asian money wouldn't change that situation much either, since those investors all have better plays elsewhere.

It's painful to be pessimistic about offshore oil and gas that only a few short months ago was finally becoming the cash cow it had been so long been heralded as being.

But now, after a few rash decisions, the oil and gas industry in the province in well and truly in the slings.

Premier Williams may like to talk tough and puff up his chest when talking of taking big risks.

Perhaps he would do well to remember that he is taking risks with our money, public money.

Perhaps we would do well to remember the same when he comes courting our votes next year. After all, if we want to know who is ultimately responsible for the state our province is in, we need only look in the mirror.

Worth the cash: Paul Wells on the Premier's meeting

It's been a while since Paul Wells' columns at Macleans gained a link from here.

Long overdue sez many and I'd agree.

So here's a link to his most recent online column (at macleans.ca) in which Paul points out that the Premiers' recent meeting in St. John's was a dismal failure.

Oh no. I fear I have fallen into the mocking tone that sometimes provokes a letter of rebuke from Benoit Pelletier, the Quebec intergovernmental-affairs minister, who plays the same role in the Council of the Federation that the former Cardinal Ratzinger once played in the Vatican: stern-eyed guardian of doctrine and lecturer of apostates. How could you take glee from the provinces' hardship? How does Canada benefit when the provinces lose? Doo-dah, doo-dah. But in fact, the provinces, understood as places where Canadians live and consent to be governed, are fine. Eight of them are in budget surplus. All enjoy near-record low interest rates and unemployment. It's the "provinces" -- understood as jumped-up satrapies whose potentates get to tell the governments of Brazil and China how to trade, as a break from telling the government of Canada how to budget -- that had a bad couple of days in St. John's.

Good thing Paul didn't say something about Danny. Then it wouldn't be an ersatz Ratzinger sending e-mails.

Nope.

The Premier's personal publicist might pick up the phone or, if the slight was grievous enough, the thin-skinned Prem himself would give you a ring.

It's another thing Danny picked up from Brian one day when they were playing golf together.

There'd be no chance of spoofing one of those calls.

Nosirreee.

BTW, speaking of spoofing e-mails: if any one of the eighty people or so who got e-mails purportedly from the Premier's e-mail address actually thought that an address saying "premier@gov.nl.ca" was the real thing, then none of those 80 people ever got an e-mail from the real account. Apparently, they also completely missed that the content defamed the Premier hisself.

lookit, people. A spoof has to mimic not merely the address of the sender but the content typically sent from that address. A real spoof is one of those supposedly from your bank or eBay asking for your account number and password. People get fooled because they look real.

If people actually though this fake e-mail came from The Danny, then they likely had never seen a real one.

If the computer nerds shut down the e-mail system on the off-chance these were real, then those guys need to re-evaluate the security system of the government computers.

Seriously.

The shareware obviously ain't cutting it.

But I digress.

As for Paul Wells, when all is done, head over to Inkless Wells, Paul's blog. It is - as usual - an eclectic mix of comments on everything from failing printers to Iggy the erstwhile Liberal leader to a devastating - but brief - review of the Miami Vice movie.

Biting. Funny. Worldly. Thoughtful.

Paul Wells.

What every blogger wants to be when they grow up.

Canadians in Afghanistan

Via youtube.com comes this video of Canadians in action in Afghanistan.

According to the title plate, the video was shot by Canadian Force Combat Camera 8-9 July about 25 km west of Kandahar. The segment opens with a short clip of junior officers or senior non-commissioned officers discussing the operation. At one point, one of the soldiers refers to "niner", radio short-hand for the boss.

You can find other Canadian Forces still and video imagery from operations at the combnat camera website.

The Premier's e-mail address

In the story running around today about someone spoofing the Premier's e-mail address, there seems to be some confusion - or at least a lack of clarity - about what went on.

When the provincial government's information technology czar refers to "the Premier's e-mail" he seems to be referring to the generic address "premier@gov.nl.ca". This is a general address that Danny Williams doesn't use or damn well shouldn't be using.

That address is there for show. It's like info@xyz.com. If this is the address that started turning up at 0100 hrs, it should have been possible to determine the e-mails were fraudulent immediately.

According to the IT czar it took upwards of 20 minutes to confirm there wasn't a security breach.

Hmmm.

If the unidentified individual has the Premier's real e-mail address - that is the one Danny actually uses - then there was possibly a much more significant security breach at the Confederation Building.

Conflict of interest you say, Danny?

[Updated - 1400 hrs 02 Aug 06, as noted]

CBC radio is running a story [link added] this Regatta Day focusing on Liberal party allegations that Danny Williams took a large donation from INCO to help cover the costs of the recent Premier's meeting yet criticized the Liberals for taking a political donation from INCO while it was the government party.

Danny Williams was unavailable for comment, according to CBC, but his personal publicist said the whole concern Williams had had applied only during the negotiations over the Voisey's Bay contract. That's when Williams was concerned about a conflict of interest apparently.  Now?  No problem.

According to CBC, Williams' publicist acknowledged the Premiers' political party had accepted donations from INCO at other times including in 2003 during the provincial general election. As CBC's web story reports,

Williams also banned the company from Tory fundraisers in 2002.

"We didn't want to be in a conflict of interest position, or be perceived as being compromised, quite frankly," Williams said in 2002. [quote added]

Apparently, the fact that INCO is trying to negotiate with the province over the smelter/refinery complex location wasn't in the publicist's notes.

Chevron exploration not linked to Williams

The Globe's Dave Ebner missed some important context when discussing the exploration drilling being conducted by Chevron in the orphan basin this summer. ("Chevron's east coast gamble: $140 million well Canada's most expensive", 31 July 06 print edition)

Some industry players have said Mr. Williams' tactics are discouraging investment, but [natural resources minister Kathy] Dunderdale believes the Great Barasway well indicates that the major oil companies still see good prospects offshore. "Exploration is always very good for the province," she said. "This is pretty significant."

Ebner missed the point - and Dunderdale wouldn't want to acknowledge - the simple fact that Chevron's exploration program pre-dates Danny Williams' term as Premier. The blocks involved were won in December 2003 but the bids for the parcels were based on estimates made before Williams was elected and certainly long before Williams' bizarre negotiating style became widely known.

Dunderdale is right in that the exploration does reflect a certain level of interest among major oil companies in the prospect of large oil and gas discoveries offshore Newfoundland and Labrador. That's a good thing.

But let's not mistake this for anything beyond what it is. Chevron and its partners made certain commitments in 2003 and they have to live up to those commitments or face losing the parcels and forking over unspent cash. Chevron is merely keeping its options open.

This exploration certainly doesn't mean that if the oil companies find commercially viable fields offshore they'll be lining up to meet again with Danny Williams too soon. The fall-out from last spring's spat and Williams' ongoing war of words with ExxonMobil have created an atmosphere of heightened emotion on both sides that will take time to settle down to a point where rational discussion can take place.

So when Ebner says exploration is picking up offshore Newfoundland and Labrador, he is talking about decisions taken three years ago. The full impact of the Hebron failure may only be known when new land offerings come up.

In the meantime, Ebner's article also highlights some of the realities of the local offshore that are missing from the self-excited rhetoric uttered by Premier Williams and his supporters. First, wells offshore are incredibly expensive compared to wells elsewhere. Each of up to 12 Orphan Basin holes that Chevron may drill will cost $140 million each and at best, odds are that only one of those holes will produce oil in commercial quantities.

Second, if there is a commercially viable find, then further wells will be drilled, at $140 million or more a pop, until the field can be well-delineated and its holdings properly estimated. Add to that the other costs of getting an offshore field into production and the risks that oil prices won't stay at US$70 a barrel for the full 20 years some of these fields will be in operation and one can see the magnitude of the financial risks involved.

Taken altogether, we must bear in mind that fallowfield legislation - Danny's latest darling - won't overcome the huge costs of developing oil and gas offshore Newfoundland and Labrador and it certain won't replace the reasoned bargaining that was needed, but sadly absent, from the massive Hebron project.

We must also recall that Williams' other pet project - turning the Crown-owned hydroelectric corporation into an oil and gas company takes cash and a willingness to take risks. Thus far Williams has been unable to show the money or even willingness to take the risks involved in being an oil and gas company. With the cash and risk-taking would come at least some of the rewards he claims would come from the Crown corporation having an "equity" position offshore Newfoundland and Labrador.

Everything else is hot air.

The lure of soft money

In the wake of the Watergate scandal over 30 years ago, the United States Congress implemented the first of many reforms that set limits the amounts of money that can be donated for and spent on elections and that required disclosure of the names of who gave money to candidates in federal elections.

The most recent round of reforms, in 2002 aimed at restricting access to so-called "soft money". This is money that was spent on purposes which were political in nature but which fell outside the rules on election financing. Unlike "hard money" that fell within the rules, soft money is often never disclosed in any way. Donors are invisible to the public. How the money is spent is also hidden or at least partially obscured from public view.

In the relentless pressure of American elections, both candidates and incumbents have become crafty in finding and using soft money. The most recent tactic is for incumbents to establish private charities that are legal, above-board and aimed at a specific purpose within the incumbents own electoral district. Armed with charitable status, the politician's private organization can now receive donations and issue tax receipts. It can spend money, giving the politician full credit - and all the associated publicity - for good work. In some instances, campaign staffers can find employment in between elections with the politician's charitable organization. Perhaps the most well-known of these soft money charities is the Ted Stevens Foundation, "an Alaska non-profit corporation created by Alaskans to recognize and honor the career and public service" of the senator from the most northern state.

Seen in that context, recent revelations that members of the House of Assembly use public money to make private gifts and donations around the province take on a decidedly different colour.

Newfoundland and Labrador has relatively few restrictions on election financing compared to other jurisdictions in Canada. However, the 1991 election reforms did restrict how much may be spent on campaigns during election periods. The spending cap is not high by modern standards but it is based - among other things - on the understanding that in a small place where turn-out on polling day is relatively small, a handful of votes can swing an election in a given district one way or another.

While it may not have been the intention, local politicians have created a particularly pernicious form of soft money spending through their perversion of the House of Assembly constituency accounts. Like all soft money, the gifts and donations are essentially invisible. While they may be backed by receipts, the details of who received money, how much money they got and when they got is not available for public scrutiny. The system set by the members of the legislature themselves is the epitome of unaccountability and opaqueness, no matter how many times politicians insisted otherwise.

And with all due respect to the commissioner for members' interests, our political society is long past the naive, almost child-like view that all politicians are honourable and must be presumed to be so until proven otherwise. For one thing, there is ample evidence from many jurisdictions, including our own, that while the majority of politicians are upstanding and ethical, there are always a few who will skirt the edges of propriety and, in some instances, the law.

For another thing, if the entire system of spending is as comfortably hidden from public scrutiny as the constituency allowances have been, there simply is no opportunity for anyone to demonstrate impropriety. The argument may be convenient, but it doesn't pass the most cursory scrutiny.

In the soft money context, the Williams Family Foundation (WFF) also takes on an interesting cast as well. From every perspective it is legally established, hands out money only to identified and worthy charitable purposes and complies with all the legal requirements; but these are the legal requirements for a charity.

This is no ordinary charity, however. It is intimately tied to an active politician. As the Premier and his staff have demonstrated repeatedly since 2001, they are not above drawing very loud, public attention to the generosity of politician Danny Williams.

We would be naive in the extreme - we would be willfully blind - if we did not understand that news media coverage of a cheque being handed from the "Danny Williams Foundation" did not produce a considerable political effect for politician Williams. It is the same effect, albeit on a much smaller scale, that public money has brought for politician Gerry Reid or a host of other politicians spending public money on gifts and donations.

Danny Williams apparently sustains the WFF with his political salary. Canada Revenue Agency documents appear to confirm this, although there are some questions that arise from the public information that is available. For example, even though WFF obtained charitable status in February 2003, it lists the total contributions for the year as being only $20, 000. It also appears to be missing several donations made after that date and in advance of the election.

Some of the Premier's defenders - many of them no doubt organized by the Premier's Office - have held the view that what the Premier does with his salary is his own business. This would be true were it not for two over-riding factors.

First, the Premier could claim his salary is private if he were a private citizen. He is not. Williams is an active politician and as much as he may whine about the goldfish bowl of scrutiny in which he lives, that scrutiny he finds so burdensome is the heart of the transparency and accountability he claims to embody.

Second, the Premier could claim his salary is private had he not made such a huge public issue of the fact that his overwhelming personal wealth has enabled him to donate his personal salary to charity. Danny Williams himself made the salary a public issue. Williams can scarcely claim privacy now when people are asking where the money goes any more than Brian Tobin, amid accusations Tobin was trying to finagle a job for his wife, could whine about his wife being a private person when Tobin used her as a political prop at every opportunity. One cannot have ones cake and eat it too.

Ultimately though, none of this is to suggest that the WFF is anything more than a well-intentioned charity, funded by Williams himself. He has gained and will continue to gain an undeniable personal advantage from spending public money - his salary - as gifts and donations through the family foundation. But the political and ethical issues raised by the WFF can be addressed by some simple administrative arrangements.

The real problem with this local version of soft money is the precedent Williams and his colleagues in the House of Assembly have set. Even if Chief Justice Derek Greene proposes to ban gifts and donations of public money for incumbetn legislators, Danny Williams and the WFF have given future wiley and unscrupulous politicians a model to use for purposes that may prove to be far less virtuous than those of Danny Williams.

The lure of soft money is a powerful one indeed. If all people were saints, as Chuck Furey assumes of politicians, then we would need no laws at all. However, all men and women are not as pure as we might wish and as virtuous as a single politician and his family charity might be, we cannot ignore the potential that others of much lower ethical standards will not take advantage of the precedent.

After all, it's not like we haven't seen a set of rules for constituency allowances set tightly and appropriately at one point only to find the rules tossed out the window by a later crowd of politicians.

Another Danny nose-puller

CBC news reports that Danny Williams is off to do battle with Ottawa over Equalization and Hebron.

Good luck, sez you on the Equalization thing since the provincial premiers couldn't agree. If that wasn't bad enough the federal government has been scrambling to get away from its promise to pony up more cash to the provinces by excluding non-renewable natural resources from the Equalization scheme.

But the real nose puller in the CBC story is the bit where Danny Williams claims:
a. that he had the support of the provincial premiers for his Atlantic Accord thing; and,

b. that he has the endorsement of the premiers for his plans to get legislation that would give Danny Williams the sole power to force companies to develop oil fields offshore Newfoundland and Labrador.

Let's start by reminding everyone that at no point did Danny Williams have the support of the other provincial premiers on the Atlantic Accord. Sure Danny told us he did, but he has said a lot of things without evidence that turned out to be of dubious veracity.

Williams claimed he had letters.

He produced not a one.

So that makes Danny Williams' second claim suspect anyway even if we didn't have the actual wording of the "endorsement".

Given today's energy demands and markets, Premiers noted that economically viable energy projects should not be permitted to remain fallow but should be moved towards commercial production.

Now what that says - all it says - is that the premiers agree that commercially viable oil and gas fields should be developed.

At no point does the communique state that the provincial premiers believe Danny Williams deserves the power to force a field into development. The premiers' words could just as easily be taken as an endorsement of NOIA's position that Danny and the companies need to get back to the table and hammer out a fair deal.

So here we go again. There's another claim by Danny Williams that has no evidence to back it up.

We already know Stephen Harper has no intention of handing Danny Williams the powers of a low-rent Hugo Chavez.

So what do we have here? Well, aside from another piece of empty Danny-speak, we have the makings of a fine summer and fall entertainment.

Let's see Danny Williams go toe-to-toe with Harper on anything. Personally, I don't think we'll see Williams do squat to Steve. But heck, if he does, it will be fun to watch the fireworks.

And if Williams doesn't live up to his promise, it will be fun to watch Williams as he rationalizes his lack of action.

Wouldn't it be nice - for a change - to have a politician who just does something rather than talk about doing it, or reminding us of something that happened years ago?

A horse, a horse...

If a camel is a horse designed by a committee, then what is a Telegram editorial?

In the bad old days, Telly-torials were simply a precis of events related to a given topic followed by the inevitable conclusion that, all things being considered, something was likely to happen.

These days, there are editorials that make a sharp point - once in a while - but all too often editorials are like the series some time ago criticizing the Globe and Mail. On those occasions, the Telly editorial writer of the moment finds it more convenient to park higher brain functioning and fall back on whatever the 8th Floor's call-in organizers have approved as the official thought-du-jour.

With that background then,consider the recent Telegram editorial on Sanford's interim director's report ("Not just another annual report", Wednesday, July 26, 2006).

The Telly-torialist excerpts the report, one portion of which took issue with claims the company was being managed against the best interests of the province.

While these suggestions are totally false and cannot be substantiated, the government has chosen to strengthen the FPI Act by requiring the company to increase the number of directors from seven to 13 and requiring the board and all committees of the board have a majority of Newfoundland based directors.

The government has also introduced a requirement that the board must seek government approval for the sale of any assets of the business no matter
where they are in the world. Clearly this and other changes to the FPI Act go against normal business principles and practices and are a total invasion of shareholder rights.

Here we have an assessment of the current FPI situation from a credible source that, just coincidentally, happens to demonstrate that the Premier's comments on FPI and John Risley are something other than factual and accurate.

Rather than add to the commentary, the Telegram first tries to lampoon the Sanford comment. Then it advises we should consider Sanford's comments but only with large grains of salt.

It is disheartening when an influential media outlet such as the Telegram can do no better on its editorial pages than to offer up this intellectual version of rock soup on an issue as important as the continued Fishery Products International mess.

The Telegram, moreso than most news media in the province, has churned out editorials lately on the current administration's resource policy that make Tony the Tory from Open Line sound like one of the Premier's staunchest political opponents.

It would more useful to Telly readers if the editorials became once more horses designed by committee. It would be a damned sight better than seeing - as we have - only the stuff that falls from underneath the horses tail.

Jeff Simpson on Danny Williams

Jeffrey Simpson's Globe column for a Friday morning is worth the read.

Danny Williams and Hebron.

"The bottom line: Newfoundland needs Hebron, if not now, then reasonably soon. That prospect does not appear likely."

The only bit where Simpson is off-base: his claim that there is no one criticizing the Premier for his decisions. It used to be that way, but with all that has gone on, there are more people questioning Williams and doing so openly. There's nothing wrong with that - except in Danny's own mind.

The thing Danny needs to watch for is when the question becomes: "How do we get rid of this guy?"

Will Noseworthy Dicks this up too?

As noted here recently, Auditor General John Noseworthy's review of constituency accounts in the House of Assembly dating back to 1989 may prove to be much ado about nothing that he can criticize.

That isn't to say there wasn't bags of inappropriate spending after 1996 when the Internal Economy Commission changed the rules governing spending of these accounts.

Rather, as former finance minister Paul Dicks noted in his recent news release, the spending was approved, receipted, within budget and in keeping with the guidelines.

The guidelines were - and are - set by the House of Assembly's Internal Economy Commission. That's the very group the cabinet appears to want to shield from scrutiny by avoiding a public inquiry into the whole financial mess.

John Noseworthy increasingly appears hell-bent on getting Paul Dicks as pay-back for having the AG's office shut out of the legislature back in 1999/2000.

Why hell bent? Well, despite the admission of two current and one former cabinet minister and the Speaker of the legislature that all have engaged in appropriate spending of their accounts over a considerable period of time, Noseworthy singles out Dicks alleged purchases of wine and artwork as what he wants to uncover.

Here's the condundrum though:

If Noseworthy tries to nail Dicks, then he has to nail every other single example of inappropriate spending.

Otherwise, he'll be tagged as being on a vendetta, not an audit.

If he spreads out to cover inappropriate spending generally, then he'll be exceeding the brief handed to him by the cabinet - at least if we are to accept the version of the brief given by Speaker Harvey Hodder and the abysmal news release he issued last week.

That brief was limited to a hunt for over-spending, pure and simple and it certainly didn't even hint at the power to criticize the Internal Economy Commission. After all, the IEC is technically Noseworthy's employer and he'd be in a spot of bother were he to take them on.

Remember, if he tackles the IEC, the Noseworthy will be criticizing none other than the current Minister of Finance. Loyola Sullivan has been on the IEC through most of the period under detailed review and he is the guy Noseworthy has been reporting to on all the problems he has found to date.

For all his protests about impartiality and being unmoved by outside influences, we'd all be rightfully suspicious that AG Noseworthy won't come within a seven column pad of even hinting at that Sullivan even sat in the legislature during the period under review.

Basically, AG Noseworthy is screwed no matter what he does.

If anyone was genuinely interested in getting to the bottom of the entire scandal and avoiding the constraints and conflicts the AG is obviously operating under, then government would have long ago appointed a public inquiry into the whole mess and called in outside auditors to do the grunt work.

One wonders whose interest is served by the unproductive grunting of Noseworthy and others instead?

It certainly isn't the taxpayers of Newfoundland and Labrador.

Do they make this up as they go along?

Some weeks ago, Derek Greene, Chief Justice of the Trials Division of the Supreme Court was appointed by the Executive Council to conduct a review of parliamentary salaries and other budgets.

Appointed by cabinet.

So why is he now presenting his report to the Internal Economy Commission of the House of Assembly?

Strictly speaking, Greene's report has no more standing than one presented by the MoonMan since Greene was appointed by an extra-parliamentary body. Harvey Hodder could just ingore it if he wanted to; that is if he wasn't taking all his orders from the Premier's Office.

The Greene report was apparently never authorized by the IEC and it certainly wasn't established legally to conduct its review under s. 13 of the Internal Economy Commission Act.

That requires a resolution of the House of Assembly.

The House hasn't been called into session to deal with the scandal as a deliberate part of the cabinet's obvious efforts to maintain political control of what happens in response to the scandal.
A key part of that strategy effort has been avoiding a public inquiry to determine what happened.

No matter what it might appear, Chief Justice Greene simply doesn't have the mandate to find out what happened and he certainly lacks the legal powers to compel testimony from people.

That is unless there has been yet another order in council changing Greene's mandate.

The word strategy is struck out above since, on reflection, it appears the Williams administration doesn't have a strategy for dealing with this financial mess just as it lacks a strategy for most things it does "Strategy" implies a plan. It suggests thoughtful analysis and a consistent application of certain measures to achieve a defined goal.

What has been going on with the House of Assembly - more obviously with each passing - is more like someone ruling by whim of the moment.

Or, to use a local political comparison - we are back to the days of the Premier pulling decisions out of an available bodily orifice.

Can a health care "Future of the People's House" public town hall meeting forum be far behind?

This sure ain't Denmark, but...

So there's a scandal in the House of Assembly in which it is alleged that about $4.0 million in public money has been spent improperly and in some cases illegally.

The group that oversees the House expenditures - its executive committee - is called the Internal Economy Commission.

The IEC made decisions in 2000, 2002 and 2004 that both facilitated the scandal to one extent or another and, in April 2004 created a situation where the Auditor General was somehow constrained in his actions that revealed said spending scandal.

There is also the hint of a problem within the Department of Finance involving the Comptroller General either being asleep at the switch or having his hands tied.

One name that runs through the IEC for the entire period?

Loyola Sullivan.

Former Opposition House leader, finance critic and lately the minister of finance and member of the IEC for the enitre period of the detailed audit being conducted by John Noseworthy.

The guy who sided with the Liberals in 2002 against Danny Williams over giving the Auditor General access to the House accounts.

Taken altogether, Loyola Sullivan's work on the IEC would make him a major person of interest to a public inquiry trying to figure out how the scandal occurred and why the response by government has been disjointed, to say the least.

That is, if there was a public inquiry.

Taken altogether, it makes one wonder why the cabinet is adamantly opposed to any public inquiry, the AG is being sent on a snipe hunt...and Loyola Sullivan is suddenly appointed Government House Leader.

and therefore the senior cabinet representative on the IEC.

by the Premier himself, no less. Complete with words of high praise for Sullivan from Danny Williams.

It's enough to make one look about on the parapets for a ghost, eh Marcellus?

The Rule of Opposites, AG style

Regular readers of the e-scribbles will know the Rule of Opposites.

Richard Nixon says: "I am not a crook." Brian Tobin says you can't make up public policy on the fly right after he announces a major policy initiative he pulled out of some unmentionable bodily orifice even cops hate to search for illicit stuff. Toronto insists it is a world-class city.

It's the stuff where the real meaning lies in the opposite of what's being said.

Consider Auditor General John Noseworthy's latest newser. Think of the number of times he insisted that he was not being influenced by anyone, that his audit was his own work, that he had all the resources to do a proper job and that he would call it like he saw it.

Then consider that in this latest scandal Noseworthy has spouted talking points that were remarkably similar to the ones being spouted by the Premier's office and its legion of organized supporters.

Consider the number of times Noseworthy has made some bold statements only to admit later that he didn't have much to base it on.

And consider that he is headed back to re-do work he supposedly already finished and insists it will take him months to do it.

Consider too that he used the words "invited" to do his recent audit and that he answers to no one, even though, as the law clearly states he was ordered back to do this very audit by the cabinet.

John Noseworthy joins an impressive list of people who live by the Rule of Opposites.

He forgets of course, that if he has to tell us what he is, odds are he isn't anything of the sort.

Sheila Fraser never has to tell us how impartial she is.

Think about it.

Has anyone seen Hedley Lamarr?

Not even two weeks ago, the planted callers on radio call-in shows were reading from their prepared lines and telling us that the province did not need to waste untold millions on a public inquiry into the financial mess at the House of Assembly.

Now this week, Auditor General John Noseworthy told the people of Newfoundland and Labrador on Monday that his mulligan/snipe hunt at the House of Assembly will require his hiring new staff.

He also said that to repeat what appears to be the same work he has largely already done will take an unknown number of months beyond November of this year.

Some people seem to want to cast the local auditor general as some sort of hero from a Western, like a character from the Hollywood version of the Seven Samurai. What we have instead - apparently from script-writers employed by government - has been more like The Magnificent Seven Column Pad.

Following the latest script from on high, Noseworthy gave nothing at his news conference if not further reason for the government to appoint a Royal Commission of inquiry into the spending scandal itself.

Noseworthy also gives an excellent reason to have the Royal Commission review the entire government response to the scandal over the past month or so.

As for Noseworthy, let's give him a rest while Sheila Fraser - the real "best auditor general in the land" - takes a look at both the House of Assembly and at Noseworthy's office. As The Telegram editorial noted last week, the sort of audits needed in this case are considerably more complex than merely adding up numbers and dealing only with overspending, as appears to be the case for Noseworthy's work.

The House of Assembly scandal involves more than mere overspending. It involves considerably more mis-spending than the grudge match Noseworthy likes to mention, especially in light of public admissions of dubious spending of parliamentary accounts by two current and one former cabinet minister and the Speaker of the House himself.

The people of Newfoundland and Labrador deserve considerably better than they have been offered these past four weeks by the elected members of the House of Assembly. They deserve justice of the kind handed down by a pale rider or a preacher.

Instead, they seem to be getting endless repetitions of the campfire scene from Blazing Saddles.

The fruits of the poisonous tree

"We've released any constraints that would apply to the Auditor General being able to complete his audits...there are no more constraints."

Speaker of the House of Assembly Harvey Hodder, The Telegram, 20 July 2006

This is a noble sentiment except for one problem:

We never knew the Auditor General's previous reports completed within the past month were in any way constrained. To the contrary, we were assured that they were complete and thorough and that the AG was acting with full approval of the appropriate authorities.

So now we have to ask:

What were the constraints?

Who applied the constraints?

Why were they applied?

Hodders comments merely raise more questions that go to the heart not only of the financial scandal itself but now to the Keystone Kops-like way in which government and the House of Assembly have responded.

Hodder's interview with CBC radio Morning Show on Thursday just adds to the questions.

According to Hodder, the Internal Economy Commission met on Monday, July 17, 2006 and rescinded a decision of the IEC from 2000 which had the effect of barring the Auditor General from auditing the House accounts.

Nice enough, except that we ere told some time ago that this decision to let the AG back into the House was taken in April 2004. That's how the AG got back into the House and do the audits he just reported on.

Supposedly.

There isn't a technicality here since the recent reports cover periods before, during and after the IEC decision in 2000. So if the IEC has now lifted the previous order, what did it do in April 2004 and in what way was the AG's work over the past couple of months constrained?

Hodder also indicated that after the IEC meeting, there were "consultations" with the executive - that is, the cabinet - on Tuesday and the cabinet then issued the order for the AG to start his snipe hunt. That's all well and good except that the order should have come from the House of Assembly itself. The only reason to use a cabinet order is to avoid having the House called together to pass the necessary resolutions and thereby expose all the members to media questions on their business.

So after all the double-talk and contradictions from Harvey Hodder here's a plausible explanation for the recent IEC dance that still causes problems but doesn't make the AG's new work a snipe hunt.

If there was no decision taken in 2004 by the IEC to give the AG access to the House, there might well be a legal basis for challenging the information he turned up. He's getting a mulligan to forestall a legal challenge to any prosecution based on the fruits of the poisonous tree.

That's a simple concept that holds that anything resulting from an illegal or improper search can be tossed out of court and never presented as evidence in a prosecution. It would also mean that the police can't delve into things that they would not have been aware of were it not for improper or illegal investigations in the first place. it also means that any statements provided by any of the people interviewed thus far, if not given under oath and with the right to counsel waived would be inadmissible.

One big difference in this second go 'round and in any police investigation: everyone possibly implicated will lawyer-up faster than you can say "soft money".

Now this is a legal hypothesis offered up by a non-lawyer. Take it for what it's worth. But if it is accurate, then we have yet another reason for a public inquiry.

And yet another reason for genuine openness and transparency from the people who now appear to have knowingly provided information that was less than accurate.

A mulligan or a snipe hunt?

Some two weeks after telling the people of Newfoundland and Labrador that he had finished his audit work at the House of Assembly, Auditor General John Noseworthy apparently asked for and received direction from cabinet to go back to the House of Assembly and conduct further audit work.

This is just the latest turn in a sordid tale of inappropriate spending, alleged criminal activity and alleged overpayments to members of the provincial legislature that has already seen numerous contradictory comments from the Auditor General and members of the House on the scope of the scandal and on measures that have supposedly been taken to prevent further impropriety.

That is, it is a further twist if the latest news release from Speaker Harvey Hodder is to be taken at face value.

The only thing that can be said with certainty about this latest news release is the the extent of public outrage at the scandal, dissatisfaction with efforts by politicians to contain the fall-out and growing support for a public inquiry prompted someone in Confederation Building and the House of Assembly to order up some further action.

But that's where the story becomes murky.

According to the news release, AG Noseworthy will be conducting "comprehensive annual audits of accounts of the House of Assembly for fiscal years 1999/2000 to 2003/04." [Note: in common government usage this would be FY 1999 to FY 2003.]

Noseworthy's one page "report" on alleged payments to former cabinet minister Ed Byrne covered FY 2002 and FY 2003, although Noseworthy mis-indentified the years involved. At the time he released the report on Byrne, AG Noseworthy indicated he had some unspecified indications of additional overpayments to Byrne for two previous fiscal years. That would take the review already conducted back to FY 2000, at least for Byrne.

When he met with news media in June to discuss the Byrne report, Noseworthy said:

"What we're seeing here is an end of an era and I don't think this sort of era will come again," Noseworthy said.

"This is over, I think."

He also stated unequivocally that changes made to the House administration by the new Internal Economy Commission (IEC) would prevent further misspending past April 2004.

That was before he released four further reports.

Reports on Randy Collins, Wally Andersen and former legislator Jim Walsh covered the periods FY 2002 to FY 2005, although once again AG Noseworthy misidentified the years involved. Another report, on payments made to four companies, covered the period from FY 1998 to FY 2005. Again, Noseworthy's reports mis-identify the years.

The total amount of dubious spending from FY 1998 to FY 2005 was almost $4.0 million.

All this is to point out not merely the inconsistencies in Noseworthy's comments but the discrepancies among the periods already auditted and the extent of the audits already conducted.

Presumably, if Noseworthy had focused on four current and former members of the House and then announced his work was done, he had looked at all the accounts and pronounced clean all but the problems he announced.

But if those inconsistencies were not enough to give pause, Speaker Harvey Hodder told The Telegram, the province's largest daily newspaper, that in fact he had received no reports from the Auditor General despite the news conferences and the release of reports that included letters of transmittal addressed to Hodder.

And so we are told on Wednesday that AG Noseworthy" has asked for and received cabinet direction" to do work that covers, in largest part, work he supposedly had already done.

It is possible that Nosworthy is being given a mulligan, a do-over. That would mean the first audits and reports were incomplete and so Noseworthy is being given the chance to go back and get it right. That would also have an impact on the police investiagtions resulting fcrom his first reports although whether his mulligan would forestall or widen the police investigation is unclear.

It is also possible Noseworthy is being sent on a snipe hunt, or its Newfoundland equivalent the search for The Wild Baloney. [Left: erstwhile snipe hunter displays proper posture]

Noseworthy will look at how money was spent but, since he already eliminated all but four for overspending, he will find little else. After all, as long as members of the House of Assembly did not overspend their accounts, a great many dubious expenditures seem to have been approved by the Internal Economy Commission after the legislature's administrative rules were changed in June 1996.

Noseworthy has mentioned his suspicion that one former member purchased wine and art from his constituency allowance. Criticism of this alleged spending is based on the rules for this allowances which Noseworthy has quoted as being:

the payment of expenditures incurred in the performance of constituency business and may cover such items as office rental, equipment, supplies, secretarial and other support services, information material such as newspapers, advertising, purchase of flags, pins, etc..

However, what is the difference between those alleged purchases and the admission by the current Speaker, two current cabinet ministers and one former minister that they had spent their district budgets on everything from personal advertising, outfitting sports teams with new shirts, gifts to seniors homes, supporting volunteer firefighters to making donations to the Royal Canadian Legion?

Since all those expenditures fell within the spending approved by the IEC, Noseworthy will have difficulty reporting negatively on them unless the members involved overspent their accounts. After all, since Noseworthy is aware or ought to have been aware of these expenditures in the course of his recent audits, he already ha dplenty of opportunity to comment on them.

The likelihood Noseworthy is on a snipe hunt is reinforced by the charge he has been apparently given to review constituency allowances from 1989 to 2004. Firstly, there is no evidence whatsoever to suggest ther were any impriorieties with their accounts before the IEc changed the rules on this spending in June 1996.

Estimates 1994, for example, shows clearly that these allowances were underspent in 1993 by a significant amount. This was in a year when Noseworthy's predecessor had full access to the House accounts. By contrast, forthe years Noseworthy has already covered, the annual estimates show at least two years of significant budget overruns. In another year, the estimates show the accounts as being exactly - miraculously on budget, even though Noseworthy's reports allege that at two members received signifcant amounts more than they were entitled to in the same fiscal year. These were years when the Auditor General was not allowed access to the House accounts.

Secondly, this looks like a snipe hunt since Noseworthy is going over old ground and can't look any more recently than March 2003. Even though his previous work showed significant mis-spending continued until as recently as December 2005, the Auditor General's latest audit will simply stop dead almost two full years short of when evidence already suggests accounts were being fiddled.

Thirdly, Noseworthy's task looks like a snipe hunt since he is specifically being sent back to the past to "determine whether overspending occured at the constituency allowance level beyond which [sic] was approved, authorized or provided through the Internal Economy Commission policies."

He isn't looking for inappropriate spending. Noseworthy is just looking for people who got too much money. If a members were allowed by the IEc to buy art or pay their mortgages with constituency money, there won't be much Noseworthy can say about it since that is beyond his limited mandate. Noseworthy can judge whether or not the rules were followed but he can't tell us if he thinks the rules were wrong in the first place.

There is an outside chance that Noseworthy is actually being sent to do solid work. His "comprehensive" audits might actually include a full review of IEC policies. His work this time might actually call to account the various memebrs of the IEC including the two current senior cabinet ministers who sat on the IEC in 2000 and afterward when it apparently made some of the most significant decisions related to the current scandal.

Don't count it though. The members of the legislature, the Speaker and the cabinet have worked diligently to prevent a public inquiry which is the only way to get to the bottom of the entire House of Assembly mess. There is a police investigation to be sure, but the police will not look at the House administrative practices. There is a judge looking at allowances but he has been specifically told not to look at what occured in the past and can offer no opinion on whether or not what happened before June 2006 was right or wrong: it's beyond his very carefully limited brief.

Those in authority have also structured this latest mission of the Auditor General to look at only a portion of the issue, leaving out the bits that will likely involve many of the people in positions of responsibility having to account for their actions. They have sent him to look like he is looking for something.

Public pressure does seems to be having an effect, though. Perhaps the embarrassment of having this scandal dominate the news while provincial premiers are in St. John's next week will prompt a complete inquiry.

Wonder what would happen if premier after premier was asked if he and his fellow legislators could make gifts out of their office budget to ringette teams just like Danny Williams and his colleagues can do?

We might just get a public inquiry after all.

National CBC Radio copy written by Premier's spin machine?

How many facts can one reporter get not only wrong but wrong in a way that sounds like the story was written by Liz Matthews?

Check Vic Adopia's piece on CBC national radio this morning on the House of Assembly spending scandal.

As soon as I can get a transcript, I'll go through it in detail.

In the meantime, just realize that while local reporters are past the bullshit, some people can obviously still get taken in.

Too bad an erroneous report gets carried across the country.