No place for Duplessisme in Newfoundland and Labrador

By arguing against the rule of law, Peter Jackson's column in the Sunday Telegram gives Premier Danny Williams carte blanche to do as he pleases not merely with the offshore board but with anything and anyone else in the province.

Jackson must have hoped that his readers have not read Mr. Justice Halley's recent decision in Ruelokke v. Government of Newfoundland and Labrador and that they are generally ignorant of the issues involved in the offshore board. Certainly Jackson has not read the decision nor does he display much knowledge of the offshore board. (We'll leave aside his apparently naive view of governments and their actions being always in the best interests of the citizenry.)

Even a brief examination of its [the offshore board's] short-lived history unveils a litany of disappointments. The board has failed to show the same kind of vigilance in localizing job opportunities exhibited by its counterparts in the North Sea industry.

In the 20 year history of the Canada-Newfoundland and Labrador Offshore Petroleum Board, it has done exactly what it was intended to do in the Atlantic Accord (1985). That is, the board has regulated the offshore industry.

Jackson does not see fit to provide a litany of of these supposed disappointments. He mentions only one - engineering jobs on the Terra Nova project and recites the story of Andy Wells and the FOGO group. However, when Jackson - and others - talk of benefits they conveniently forget that the negotiation of offshore benefits lies solely where it should: at the feet of politicians. If they have a problem with Terra Nova or any other project then they should be looking to politicians to deal with it. The decision on the engineering jobs was made not by the chairman of the offshore board but by Premier Brian Tobin and his energy minister. Jackson's entire argument on this point is nothing short of a fiction.

In the current matter, Jackson finds Mr. Justice Halley's decision troubling in this respect:

A decision earlier this month by Justice Raymond Halley confirmed Ruelokke's appointment, but it contained highly contemptuous language in describing the province's stand. And by straying off course and attacking Wells' credentials, Halley's decision took on an almost personal tone.

However, Halley did not "stray off course". His comments on Wells' lack of qualification essentiallyally an aside, a comment. The core of Halley's decision focused on the central issue. It details the process involved in Max Ruelokke's appointment and Halley makes his decision based entirely on the facts presented to him.

Halley's characterization of the treatment Ruelokke received, while strong, is entirely justified. Anyone who has read the decision - Jackson evidently not being one of them - could hardly fault Halley for his conclusion or for the powerful words he used to condemn the arbitrary and contradictory nature of the provincial government's position.

As for his concern over Wells' hurt feelings, Jackson would do well to remember that it was not Mr. Justice Halley but rather the three-member arbitration panel which determined Andy Wells was not qualified for the job at hand. They made the decision based on criteria established by the provincial government.

Jackson has built no case here akin to Ghandi's India or the American south in the 1960s. In fact, basis of his argument is nothing more than a recitation of the mythology of the Upper Churchill contract. According to Jackson, Danny Williams would be justified in subverting due process - the rule of law - because of the Upper Churchill demon. (For the record, Jackson misstates the issues involved in the reference and the Supreme Court's decision.) Something drooling under the bed, though, is no justification for the fundamentally undemocratic notion Peter Jackson proposes.

Simply put, Jackson is fundamentally wrong. Politics should never trump the law. The rule of law is the bedrock on which our society - our democracy - is built. Each of us - especially politicians and the government - must be bound by the law. This is the underpinning of Mr. Justice Halley's decision and the Premier would do well to abide the decision as he committed to do.

To do otherwise - to succumb to the facile arguments offered by editor Jackson - would be to return our province to the very darkest of times, when a single politician could rule by decree and few, including the Telegram's editor at the time, would dare challenge his autocratic regime.

Not since Duplessis' Quebec has a newspaper editor written such a spirited endorsement of dictatorship as Peter jackson offers. He should only hope that his morally bankrupt argument does not come back to haunt him and his employer. Jackson should only hope that on Monday morning his boss does not ask him to explain why he shouldn't have won a lawsuit against the provincial government a decade ago when he too found the actions of a provincial government intolerable.

As for the rest of us, we should hope that Jackson's views are not widely held. If they are, then our province is in for a very difficult - and undemocratic - time of things.

For the record, here is Jackson's column in its entirety:

The law is not always right

There are many instances in Newfoundland and Labrador's history where the rule of law has not represented the best interests of the province's citizens. This is particularly true when it comes to federal rulings on matters of provincial concern.

Perhaps the most glaring example of this is the Churchill Falls contract signed by Joey Smallwood in 1969. The benefits have been pouring across the border to Quebec ever since.

In the early 1980s, the province was defending in federal Supreme Court a recently passed water reversion act which, in effect, would have returned water rights and benefits of Churchill Falls to the province.

The province's argument - a convincing one, by any standards - was that the hydro contract violated the basic constitutional right of provinces to maintain control over their own natural resources.

In 1984, the Supreme Court overturned the act. The judges ruled that the province overstepped its jurisdiction because the intent of the act was to nullify an interprovincial contract with a federally registered company.

That this was the intent of the act could hardly be surprising; governments tend to act in the best interests of their constituents. What was surprising, however, was that the Supreme Court concluded a commercial contract took precedence over the fundamental constitutional principle of resource ownership. (I'd be remiss not to point out, yet again, that former Newfoundland premier Clyde Wells was a lawyer arguing against this province in that case.)

People in this province know the Churchill Falls deal is morally and politically repugnant, and many still believe its constitutionality is dubious. But we have had to put up and shut up for almost 40 years because the federal courts insist we must.

There is a similar scent of court-imposed oppression in the current kerfuffle over Max Ruelokke and his supposed iron-clad right to take the helm of the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB).

I'm sure Ruelokke is an intelligent, honourable man, and his credentials - on the surface, at least - seem to back up his selection by a third-party panel to lead the board.

Crucial role

But the CNLOPB plays a crucial regulatory role in the development of offshore oil, and it is therefore an agency over which the provincial government wants to exert as much influence as possible.

If this sounds like political interference, it's not. The CNLOPB is the very embodiment of the Atlantic Accord, which grants joint management of the offshore resource between the federal and provincial governments. And for too long, it seems to have had very little teeth when it comes to ensuring that the spirit of the Atlantic Accord - according maximum benefits to this province - is upheld.

Even a brief examination of its short-lived history unveils a litany of disappointments. The board has failed to show the same kind of vigilance in localizing job opportunities exhibited by its counterparts in the North Sea industry.

Premier Danny Williams has steadfastly insisted he wants to see St. John's Mayor Andy Wells take the board's top job - or at least share the job by splitting the CEO and chairman positions.

His rationale is obvious. Back in the late 1990s, Wells founded a lobby group called Friends of Gas Offshore (FOGO) which fought the transferring of 250 engineering jobs to England by the Terra Nova developers.

Over the ensuing years, FOGO lobbied to prevent a floating platform design for the White Rose project, even going so far as to launch legal action.

Given the CNLOPB's apparent impotence in defending the province's interests, Williams can hardly be blamed for wanting someone outspoken at the helm rather than another scion of the oil industry. (Ruelokke's only involvement in provincial politics was a stint as deputy minister of energy.)

A decision earlier this month by Justice Raymond Halley confirmed Ruelokke's appointment, but it contained highly contemptuous language in describing the province's stand. And by straying off course and attacking Wells' credentials, Halley's decision took on an almost personal tone.

Nonetheless, the courts - barring an appeal - have had the last word. It appears the Williams government, like many administrations before it, has little choice but to bow before the unbendable will of judicial impulse.

Sometimes, politics should trump the law.

Peter Jackson is The Telegram's features editor. He can be reached by e-mail at pjackson@thetelegram.com.

Charities may be involved in political action

Despite a long-standing rule against involvement in direct or indirect political activity, some charities may be getting into politics and avoiding any sanction from Canada Revenue Agency.

Check this Canadian Press story at canoe.ca.

Pack rats of the world unite!

From the Globe and Mail comes the story of a lifelong pack rat who, after he'd died of old age, left behind stuff stacked all over the house including a comic book collection worth an estimated US$2.5 million.

"Yes!" I shout. Vindicated at last in my hoarding ways.

Then from beyond the door of your humble e-scribbler's pack rat nest comes the voice of She Who Must Be Obeyed:

"Yes, nothing. No one in their right mind will pay 25 cents for that stack of ten year old Telegrams around you, will they. And that collection of every term paper you wrote twenty years ago won't even start a good bonfire."

Suitably brought back to reality, it's time to go lug rocks around the garden.

*Sigh*

Gov't drops gas prices by 9.6 cents per litre

Official reason: market correction due to events in the Middle East.

Real reason: we are in a polling period.

Otherwise, why would the petroleum pricing control nazis have issued an "urgent" and "emergency" notice to drop prices less than 24 hours after saying they didn't have any plans to drop prices?

Of course, gas price "regulation" is a fraud anyway. But as much as "regulation" is a silly thing, government will keep it for just such a polling contingency.

Hydra Corp reinvents Lower Churchill wheel; markets want to talk price

The president and chief executive officer of Newfoundland and Labrador's Crown-owned Hydra corporation is in Toronto continuing work on the proposed Lower Churchill hydro-electric development by doing work that was already included in a proposal Premier Danny Williams rejected earlier this year.

Ed Martin is talking to Ontario officials about technical requirements of transmitting power from the Labrador site through Quebec and into Ontario. Under an application filed in July, Hydra corporation was seeking permission to ship power into Canada's largest province.

Under a proposal submitted by Quebec and Ontario in early 2005, cost of improving the connections between the two provinces would have been paid for by Ontario's Hydro One and Hydro Quebec. Martin's proposal would have the Newfoundland and Labrador Crown corporation pay for the upgrades. A similar requirement to expand the electricity grid in Quebec - also needed to get Lower Churchill power - was included in the Ontario/Quebec proposal but will now be paid for by Newfoundland and Labrador as part of what Danny Williams has termed the "go-it-alone" option.

In an interview with the Toronto Star [linked above] Martin said shipping power to market around Quebec is still under consideration by his company. Such a route would involve submarine cabling across the Strait of Belle Isle and the Gulf of St. Lawrence . The so-called Anglo-Saxon route has een estimated to add at least $1.5 to $2.0 billion to a Lower Churchill development already pegged in the $6.0 to $9.0 billion range. Every previous review of this option concluded that while it is technically feasible, the resulting cost of Lower Churchill power made it unsaleable.

A viable sale agreement for the Lower Churchill's estimated 3, 000 megawatts will be crucial to the project. Ontario energy minister Dwight Duncan told the Star:

"We are very interested in buying from them," Dwight Duncan, Ontario's energy minister, told the Star last week. "But I'm not going to put the ratepayers of Ontario at risk."

He said Newfoundland will have to get transmission guarantees from Quebec to make the deal possible, and ultimately any deal will come down to cost.

"The challenge Ontario has is we simply can't blindly enter into an agreement and pay whatever. You're looking at long-term arrangements that involve price-sensitivity. I don't want my grandchildren to look back in 20 years and say `what were they thinking.'"

In May 2006, Hydra vice-president Gilbert Bennett confirmed that financial issues will one of several major factors in determining whether the project is sanctioned.

Another factor will be competition from other projects already under development in Quebec, Ontario and Manitoba. The Lower Churchill project - about a year behind schedule - would require project sanction in 2009 with first power being generated in 2015. Martin is talking to Ontario officials several months after Hydro Quebec officials started talking potential purchase agreements, according to Globe and Mail's Konrad Yakabuski in a May 2006 column.

Ability to guarantee delivery will also influence any decision to buy power from a Lower Churchill project. As Yakabuski noted, "[t]he buyers will not choose their supplier based on price alone; since the contracts must be signed before the first shovel goes into the ground, the buyers must have the confidence, if not assurance, the seller can deliver the merchandise."

Martin's Hydra corporation has never completed a project as large, costly and complex as the Lower Churchill on its own, raising questions about the company's ability to deliver on time.

Concerns about completion plagued the now-infamous Upper Churchill development. Ultimately, investors' need for completion guarantees coupled with the weak financial position of proponent BRINCO led the Newfoundland and Labrador company to sign a deal that saw Quebec buy virtually all the power from the earlier project at rock-bottom prices for 65 years. In exchange, the Quebec Crown corporation guaranteed investors the project would be completed.

At $9.0 billion, the Lower Churchill project would double the size of Newfoundland and Labrador's provincial debt.

Premier thinks Halley is correct?

For all the puffing, posturing and self-massage, Danny Williams thinks that Mr. Justice William Halley made the correct ruling in Ruelokke v Government of Newfoundland and Labrador.

Or does he he?

In a scrum with CBC Wednesday - and played on CBC radio - Williams was asked about the ruling, his snide comments about the judge and about what he will do next. After saying at several points that he would appeal if there were legal grounds to do so, Williams said this:

"...if I have an opinion that says that in fact Judge Halley'’s judgment is correct, which it probably is, then we'’ll abide by that..."

Of course, that was in the midst of ranting about the decisions such that it is hard to believe the premier won't appeal and appeal again and possibly switch processes, yet again, just as he has done or caused ot be done on three occasions in the Ruelokke affair.

He has twice said he would abide by a decision of two separate processes and he has failed to live up to those commitments. Maybe this one is just smoke too.

Williams might also just drag this out as long as possible and then grudgingly acknowledge Ruelokke's appointment.

We'll know in mid-September.

The spectre of bad faith

There are a great many things troubling about Danny Williams and the Hebron/offshore board file.

As Williams continues to defy the law in his efforts to install St. John's mayor Andy Wells as the head of the board regulating the offshore, one of the most troubling things becomes concern that Williams may have been attempting to rig the entire Hebron negotiating process all along.

Williams accused the oil companies of negotiating in bad faith, back in April when the talks collapsed. He may have been referring to the slip-and-fall lawyer's definition of bad faith, namely an insurance company attempting to deny legitimate benefits detailed in a contract. He didn't state that, however, leaving only the accusation that the oil companies had acted dishonestly or had acted one way while intending to do something else.

But in the realm of contract negotiations, especially commercial contract negotiations, bad faith takes on another meaning, and that is a troubling implication. Article 2.15 of the Principles of International Commercial Contracts states that "[a] party is free to negotiate and is not liable for failure to reach an agreement."

Judge for yourself from Williams' own statements if the Hebron partners would not have been held liable for failing to reach an agreement on his terms, if Williams had his druthers. Judge for yourself - and this is the key implication - what legitimate company would do business with an administration under these circumstances.

We noted back in April the possibility that Williams' efforts to get Andy Wells at the offshore board may have been nothing more than an attempt to unduly stack the negotiating process in his favour.

Since Williams continues with his fight and since he is likely to launch a fight with the offshore board should it approve a recent development application at Hibernia, it is timely to revisit that earlier post, titled "Why Danny wanted Andy...At the offshore board."

The Premier and his supporters will insist that his motives are pure, that he only has the best interests of the province at heart. However, claims of being Robin Hood have long been rejected by courts as a defence for bad faith, for saying one thing and doing another.

In reality, such an argument, already offered up by Williams, is simply a trumped up version of the old argument that ends justifying means. That too has been widely rejected, especially for the when it is little more than an excuse for all manner of abuses of power against individuals and groups.

As often as Danny Williams trots out this defence of his noble intentions, it has surely worn through in the case of Max Ruelokke. Williams has publicly committed twice to abide by the results of a process. In late 2005, he committed to abide the decision of the panel he approved to select a new chairman and chief executive officer for the offshore board.

He did not.

Likewise in July, he committed to abide by a court decision that came about solely because Williams had failed to live up to his earlier commitment to abide by the first process.

He likely will not do so in this case either, claiming as he has that there is a process to be followed and that he is entitled to appeal to the Supreme Court of Canada if need be.

But truth be told even if the case finds itself in front of the learned nine in Ottawa and they too share Mr. Justice Halley's justifiably dim view of Danny Williams' actions respecting Ruelokke, no court can compel the Lieutenant Governor in Council to do anything. Ruelokke's appointment is made by the Council, after all and that is the black letter of the Atlantic Accord (1985).

Williams can simply fail to act for as long as he wants and that, sadly, is the process on which Williams may well ultimately rely. Williams may have mounted flimsy if not laughable arguments by proxy in front of Mr. Justice Halley but he is smart enough to know that ultimately his power on this matter is absolute.

That is a much larger spectre which hangs not merely over Max Ruelokke, but over us all.

Danny's claims don't match the facts, Part 2

The first process to select a chairman and chief executive officer for the offshore regulatory was a group of public servants appointed by the federal and provincial governments, with Robertson Surette's St. John's office co-ordinating a selection process.

They used criteria approved by both governments that, among other things:

- required a single individual for a single position of chairman and CEO;

- included the criterion that the ideal candidate would have "extensive experience in the operational aspects of offshore petroleum activities..."

This process was interrupted at the point where approximately five candidates were selected for detailed interviews. Andy Wells was not on that list and, based on public information, had never previously been considered for the job.

As revealed in July 2005, the first process was interrupted in June 2005 when Danny Williams proposed it be scrapped and that Andy Wells be appointed to the single, combined position.

When Danny Williams claims he supported Andy Wells from the outset and that he was opposed to industry experience from the outset, his claims are directly opposite to the facts.

The second selection process was a committee, provided in the Atlantic Accord that was appointed by both the federal and provincial governments and chaired by well-known businessman Harry Steele. As agreed by both governments, the panel was given the mandate to select a single person.

Danny Williams claimed in an interview on Wednesday that:

When the panel came back and made a recommendation of Mr. Ruelokke, it was assured to me by the panel that there would be in fact be the recommendation, which did occur, that these two roles would be split. So therefore that Mr. Ruelokke could be the CEO and then of course Mr. Wells could step in as chairman of the board. That recommendation was not followed and therefore then I felt you know basically the process through which the panel had made the recommendation was flawed.

This could not have occurred, since the panel made no such decision. The Premier's memory is false or he is deliberately misrepresenting the situation.

As indicated in the statement of fact in the decision on Ruelokke v. Government of Newfoundland and Labrador and consistent with the evidence presented by both parties to the judge, the Steele panel made the appointment of a single individual for chairman and CEO as directed by the terms of reference established by the federal government and the provincial government.

The Premier is simply wrong when he refers to the Steele panel's decision as a "recommendation." Under the Accord provisions, the panel made a decision which was binding on both parties on the issue of who would fill the single job. Anything else it offered was an unsolicited and non-binding comment.

The first indication that the provincial government, i.e. Premier Williams, wanted to split the single job into two was in late December 2005, two weeks after the Steele panel reached its conclusion and fully six months after the Wells nomination had first been proposed.

When the panel offered an additional suggestion on splitting the job in two, it exceeded its mandate under the Accord implementation act and the wording of their comments in that regard are revealing:

During its discussions regarding the operation of the Board and in interviews
with candidates, the Panel concluded that in accordance with current board governance practices, the roles of Chair and Chief Executive Officer should be separated, with the Chair becoming a non-executive, part-time position. While this matter is outside the mandate of the Panel, we recommend that both governments consider taking this action.

Note that the panel clearly understood it was making a suggestion that was outside its mandate and as such it is distinctly different from what the Premier claimed.

Second, the recommendation is that the two orders of government should consider the approach of creating two jobs where one now exists. This suggests it was not a position the panel felt strongly about.

Third, this is a recommendation or suggestion. Under the Accord implementation act, the panel's choice of Ruelokke is binding on government. Williams' argument on this point was summarily dismissed by Mr. Justice Halley.

Fourthly, and most importantly, the Steele panel suggested the chairman position be reduced to a part-time, non-executive position. In other words, the chairman position under such an arrangement would be the lesser of the two positions in terms of influencing the board's overall operations. The reduced role of the part-time job would also be reflected in the salary which, as in the Nova Scotia board would be less than $15, 000 per year.

Again, as in so many instances on so many matters, the Premier's claims are at odds with the facts as already established.

Danny's claims don't match facts

What Danny claimed on Wednesday in an interview with CBC:

I was adamant from the beginning that I would prefer to have somebody as chair of that board, a very, very important position to the province of Newfoundland and Labrador who did not have a background in the oil industry so that there would be no perception of any possible connection to the oil industry under any circumstances.

What Danny actually approved as the qualifications for the Chairman and Chief Executive Officer before he interrupted the first process with the idea of appointing Andy Wells to the job:

Candidates will have an in-depth knowledge of Newfoundland and Labrador’s offshore oil and gas activities, along with a demonstrated ability to manage an organization with diverse technical and regulatory responsibilities, and to work effectively with senior industry and government officials. Qualified individuals will also have a good understanding of the structure and operation of the Canadian and international petroleum industry. Applicants will have extensive experience in the operational aspects of offshore petroleum activities, including full knowledge of related business, financial, safety and environmental matters, and of federal and provincial government legislation and operations. In addition, candidates will have experience in dealing with industry associations and a wide range of non-government organizations. This position requires exceptional communication skills.

Jumping the shark, Danny style

How many times is the word "counterpart" used in this release that otherwise says absolutely nothing newsworthy?

Hint, Billy: It's called a news release because it is supposed to contain important information otherwise known as "news".

It isn't a rock song. There is no bridge.

You don't get points for repetition in the chorus or for changing key halfway through.

Of course, this thing issued from Tom Marshall's office is just part of the pap offensive to make the government look good during polling weeks.

You know polling week. It's like sweeps week on the networks or the PBS pledge drive.

Next week, Joan Burke will be appearing with Andre Rieux live from the soon-to-be demolished Stephenville Mill for a special farewell concert of classical music.

Tom Hedderson is lined up to do a spot on Danny-vision - otherwise known as Rogers - where Danny's brother-in-law has arranged for Tom to host a local version of the Antiques Roadshow featuring only sundials, clocks and other things you can watch.

So panicked is the government to keep its ratings polling numbers from dropping even an inch that even Shawn Skinner emerged from the nether regions of the government members' offices for the first time in months. He called Bill Rowe's Crap Talk to demonstrate more than anything else that Shawn is either full of crap or totally naive and out of the loop.

Never heard of packing bullshit releases when CRA is polling, Shawn? You obviously haven't been getting the memos sent furiously this week by Danny's personal publicist on her Crackberry.

If nothing else works, I am thinking we'll see Danny jump the shark.

Oops.

Too late.

Danny already jumped it. This morning in conversation with Randy Simms. His publicist pushed him on the phone to defend a flatulent release that veteran newsman Simms spotted as nine paragraphs of stale air with the faint smell of methane gas and rotten eggs tossed in for good measure. other reporters had serious things to talk about but Danny's personal popularity takes precedence.

So Danny starts in about how many meetings he has attended. Meetings are hard work, he assured us repeatedly. Blah. Blah. Blah.

Then Danny hit the ramp.

Heading the offshore board is the most important job in Newfoundland and Labrador, sez The Prem and dag-nab-it, Danny will stop at nothing to make sure that Andy Wells gets the most important job in the province.

Unlike the Fonz, at that point Danny dropped of the edge of the ramp into the shark-pool.

The government is so desperate to avoid any drop at all in Danny's approval numbers, it'll be fun watching them squirm.

The only question is how many sharks will Danny try to jump in the next three weeks?

If Danny was Max's lawyer?

What would the Premier be saying if he were a lawyer in private practice, representing a client who is legally entitled to a position but whose entire life is being held up - without a steady paycheque - by a Premier who is fighting tooth and nail to resist abiding by the law he said he would follow not once but twice publicly?

Unconscionable is likely the nicest word Danny would use if the shoe was on the other foot.

Legislature financial scandal bigger than previously revealed

MHAs overspent constituency allowances by more than half million in '05 alone

[Update: See explanatory note at end]

Financial statements released on Monday by the provincial finance department showed that the House of Assembly overspent member's allowances - the subject of a current scandal - by more than $550,000 in Fiscal Year (FY) 2005 even though Budget 2006 released in March, 2006 reported the expenditures were exactly on the budgeted amounts approved by the legislature.

Fiscal Year 2005 ran from 01 April 2005 to 31 March 2006.

Expenditure in FY 2005 for the line item "Allowances and Assistance" under the House of Assembly operations was budgeted at $5, 090, 800 with actual spending reported at the end of the fiscal year (31 Mar 06) as the same number.

Revised figures released Monday by the finance department show the actual expenditure for members' constituency and other allowances was actually $5, 648, 119, a difference of $557,319. (page 41)

Monday's revised financial statement contains a line called "amended estimates" but the figure given under that column - approximately $5.4 million - is not contained in the Budget 2006 estimates. ¹

The "amended" figures have apparently not been released before. Government's website contains only the Budget 2006 documents, including the estimates, as originally released.

The Budget 2006 Estimates figures for the House of Assembly in virtually every line show expenditures matching budget forecasts to the penny, a circumstance that never occurs. The only variation is an additional $375, 000 for unspecified "Professional Services" under revised spending for FY 2005. In the Estimates, "revised" is supposed to mean the year-end actual spending.

In Monday's financial statement, the professional services amount is shown as actually having been about $374, 000 but no indication is given as to what professional services were purchased.

Government likely knew of problems earlier than previously admitted

The unusual way of reporting House of Assembly spending in the 2006 estimates suggests very strongly that the provincial government was aware of financial problems in the House of Assembly for FY 2005 at least as early as March 2006 and possibly weeks or months earlier.

The House of Assembly spending scandal was revealed in June, 2006 with the premier's announcement that Government House Leader and natural resources minister Ed Byrne had resigned as a result of an audit conducted by John Noseworthy, the province's auditor general.

The original news release makes no mention of the date when Noseworthy began working, but in subsequent media interviews Premier Danny Williams appeared surprised that financial problems existed until advised of the allegations against Byrne.

Auditor General's first reports left hundreds of thousands in spending missed or unexplained

Noseworthy's reports on certain suppliers and on two current members (Wally Anderson and Randy Collins) of the legislature show questionable payments totaling $769, 058 for FY 2005. However, Noseworthy reported only $116, 765 in overpayments on members' allowances for that year before announcing his review was completed, the first time. Monday's new financial statements show an additional $440, 554 in constituency allowance spending that was completely unaccounted for or unexplained by Noseworthy's previous work.

In a surprise announcement in late July, government announced that Noseworthy would conduct a new review of some House of Assembly spending, despite his earlier claim that his work was completed. His revised mandate does not include any period after 31 March 2004, however.

Monday's financial statements may be evidence that Noseworthy is getting a second chance to review some spending, but only on year's that do not call into question claims by the premier and others that the House of Assembly financial problems do not extend past the end of FY 2003.

Order-in-Council 2006-295, dated 19 Jul 06, invites the Auditor General John Noseworthy to carry out:

- annual audits of the accounts of the House of Assembly from Fiscal Years 1999/2000 to 2003/2004; and

- a review of constituency allowances between 1989 and 2004 further to the Morgan Commission Report, to determine whether overspending occurred at the constituency level beyond funds which were approved, authorized or provided through the Internal Economy Commission policy.

Budget 2006 estimates also cast increased doubt on repeated claims by the Speaker of the House of Assembly, the Auditor General, the finance minister and the Premier that financial problems in the House of Assembly did not continue past March/April 2004.

___________________________

¹ Explanatory Note: The Public Accounts are the statements of provincial government financial accounts. These account statements are required to be made public under the Financial Administration Act and must be auditted by the Auditor General.

Typically they are compiled after 31 March and tabled in the legislature, as required by the FAA, by the fall of the same year. The publication contains several volumes of figures and explanatory notes. For example, Fiscal Year 2004 ended on 31 March 2005. By Fall 2005, the Public Accounts for FY 2004 were produced and made made public.

The Public Accounts reflect the complete and accurate record of the previous fiscal year based on a detailed review and allocation.

Keeping of the public accounts is vested under the FAA in the Comptroller General.

Estimates are the annual budget estimates compiled by the government and laid before the House of Assembly for approval each year. They contain, among other things, a report of the previous fiscal year's budget and actual performance at the end of the fiscal year.

The column labelled "amended estimates" or "amended in Volume III of the Public Accounts should be the same number contained in the budget and presented as "revised" for the previous fiscal year.

For example, a line item in Budget 2004 Estimates may have ben given as 1,000 to be spent in FY 2004. In the Estimates presented for 2005, the 2004 results would have shown "Budget" as $1, 000 and a figure labelled "Revised" that would be the actual amount spent under that line item.

The "revised" from the Estimates is the spending at the end of the fiscal year as shown by all government financial records including those maintained by the Comptroller General.

The "Amended" figure contained in Volume III of the Public Accounts should be the "revised" figure from the most recent budget. Volume II will provide an accurate figure in addition to this which shows what the final financial position of the province is with respect to that line item. It is the result of a detailed calculation by the Comptroller General as reviewed and approved by the Auditor General.

In the past two budgets, FY 2005 and FY 2006, the line item for House of Assembly allowances and assistance is consistently misreported. However, the figures were known or ought to have been known to the Comptroller General and the finance minister at the time the budget estimates were tabled in the legislature for approval.

In previous fiscal years, the variation between the Estimates and the Public Accounts is comparatively small, including for the allowances and assistance item. In FY 2005 and FY 2006, the results are under reported by $450,000 and $550, 000 respectively and inexplicably.

Both the Estimates and the Public Accounts are compiled by the same officials using the same information databases. Both documents are made public since approval of spending by the Crown is a fundamental way the elected representatives of the people of Newfoundland and Labrador hold government accountable on behalf of electors.

Minor variations occur, however, the misreporting of the accounts and estimates - advertent or inadvertent - for the past two fiscal years is of such a magnitude (10% of the line time total amount) that the discrepancy and the consistency of the misreporting are cause to raise serious questions.

The report released on Monday is described in a way that suggest they are intended to replace Volume II of the Public Accounts. However, Monday's report has not been auditted. Volumes I and II of the Public Accounts will apparently be published at a later date.

House of Assembly overspending known and approved?

Budget documents and reports on the provincial government's public accounts contain glaring discrepancies, a review of financial statements revealed.

Beginning in Fiscal year 2004, members of the House of Assembly had their constituency and similar allowances capped at a total of $5, 090, 800.

However, Volume III of the Public Accounts, an annual compilation by the Comptroller General shows the account was overspent that year by more than $479, 000. (page 43) The next year, the accounts were overspent by over $550, 000 according to a new report introduced by finance minister Loyola Sullivan purportedly to improve budgeting and accountability of government spending.

"This government is committed to accountability and transparency and this is just another mechanism to keep the people of the province in tune with our province's financial picture," Sullivan said in a news release.

Despite the details contained in the Public Accounts, both Budget 2005 and Budget 2006, the estimates - which contain reported actual spending for the previous year - the House of Assembly spending is shown as being exactly on budget.

The Public Accounts are released some time after the budget period, however, the figures should match since the data used comes from the same sets of records in the Department of Finance, including records maintained by the Comptroller General.

The discrepancy is too great for two years in a row to suggest mere coincidence or problems in addition.

Under section 58 of the Financial Administration Act, the Comptroller General is required to maintain the records of the Consolidated Revenue Fund and under s. 29, to ensure no payments are made in excess of appropriations by the House of Assembly. The Comptroller General is also required under that section to report instances of overpayments to the treasury board for action. Treasury board is an executive committee of the cabinet responsible for the financial administration of government.

One of the continuing mysteries of the current scandal is how $3.9 million of public money could be disbursed by the Comptroller General over a five year period without being noticed.

Details contained in the Public Accounts suggest that some individuals were aware of the discrepancies and that the overspending was sanctioned either by treasury board, the House of Assembly's Internal Economy Commission or both. The Internal Economy Commission is the executive committee of the legislature that, like treasury board for government, handles the financial administration of the legislature itself.

The Comptroller General obviously was aware of significant budget overpayments since they are reported faithfully for FY 2004 and FY 2005. The finance minister and president of treasury board would ordinarily also be aware of the overpayments since he or she typically sits on both IEC and treasury board.Itt would beunusuall - especially under the current circumstances - if the finance minister was not briefed on these specific discrepancies.

None of the reviews approved by cabinet will examine the operations of treasury board, the Comptroller General and the Internal Economy Commission to determine what, if anyapprovalss were given during FY 2004 and FY 2005 for overspending.

The Auditor General's previous reports suggest that at least half of the $3.9 million in questionable spending took place after April 2004. Under Order in Council 2006-295, Auditor General John Noseworthy's second review will not examine accounts after March 2004. The order in council directs Noseworthy "to determine whether overspendingoccurredd at the constituency level beyond funds which were approved, authorized or provided for through Internal Economy Commission policy." [emphasis added]

If overspending was approved by IEC , treasury board or both, then the spending is legal unless other criminal acts took place such as fraud or forgery.

A quickie rejoinder to Ron Penney

So Ron Penney thinks Andy Wells - Ron's boss - is qualified to head the offshore regulatory board.

Then he says two things that are odd, if not contradictory. First he says that all the heads of the board to date haven't had a background in regulatory agencies - or for that matter oil and gas. Therefore, the chairman doesn't need to have an oil and gas background, or indeed any knowledge of the industry at all.

Second, Penney says there's a need to make a change in the board's leadership because the board hasn't been doing a good job, led as it has been, by guys who don't know the industry.

Ok.

Well, the stated qualifications - agreed to by Danny Williams from the outset - called for a change in direction for the board's leadership by specifying that the new chairman and chief executive officer would need extensive knowledge of the oil and gas industry, as well as technical knowledge given that the board is a technical regulatory body.

So the critieria used to judge Andy's candidacy already reflect Ron's supposed desire for change.

Here's the specific set of criteria since Ron clearly hadn't read them before he made his comments:

Candidates will have an in-depth knowledge of Newfoundland and Labrador'’s offshore oil and gas activities, along with a demonstrated ability to manage an organization with diverse technical and regulatory responsibilities, and to work effectively with senior industry and government officials. Qualified individuals will also have a good understanding of the structure and operation of the Canadian and international petroleum industry. Applicants will have extensive experience in the operational aspects of offshore petroleum activities, including full knowledge of related business, financial, safety and environmental matters, and of federal and provincial government legislation and operations. In addition, candidates will have experience in dealing with industry associations and a wide range of non-government organizations. This position requires exceptional communication skills.

On that basis, Wells is not qualified for the job.

Now, that's not just my opinion.

It's not just the opinion of Mr. Justice Halley.

Danny Williams said it when he signed off on the qualifications listed above long before he decided Andy Wells was the guy for the job.

Danny Williams said he when he endorsed these or similar criteria to be used by the binding arbitration panel.

Using Danny Williams' own criteria, the arbitration panel decided Andy Wells isn't qualified for the job: Max Ruelokke is.

For a guy who supposedly played a key role negotiating the Atlantic Accord (195) - the real Accord - Penney doesn't seem to know the document very well. Penney told the Telegram the board needs a shakeup because it hasn't done a good job of delivering benefits to the province.

As Ron knows - or ought to know - that is not the offshore board's job.

It never was. Not even when Ron was inking the deal in 1985.

The job of setting and delivering benefits to the province rests with people like Danny Williams, on whose behalf Ron was obviously speaking.

On that basis, and given the internal contradictions in his comments, Ron Penney is wrong both on the background to the offshore board and on Andy Wells.

After all, Ron's "rationale" was almost exactly the same one Danny's been offering, contradictions, serious factual errors and all.

Just like Danny.

Right down to the self-massage.

Mainland drivel

Only a reporter not from Newfoundland and Labrador could write the drivel found in a recent Macleans profile of Premier Danny Williams.

If Macleans has laid off the fact-checkers that helped to keep the magazine on the top of the reporting pile, they might want to reconsider and get them back on the job pronto.

Among the dubious - in some cases laughable - claims:

- that Danny Williams is likely the only Premier of the province to suffer a lower quality of life as Premier;

- that Williams' personal popularity has gone up since he lost a deal on Hebron in April;

- an unquestioning repetion of Williams' ludicrous claim that Hebron meant $10 billion to the federal government. It meant at least that much to Williams but nothing even close to that to the federal government;

- that Williams came out on top during his Larry King Live appearance with the Maccartney's over the seal hunt. Even some of his staunchest supporters have come to udnerstand the poor boy got snookered into the appearance and then got screwed at every turn by a show that was skewed to Heather and Paul; and

- that brinksmanship with Paul Martin "allowed Williams to drag Newfoundland from the edge of bankruptcy". High oil prices did that, not Danny Williams. Macleans' business reporters might want to take a look at Williams spend-happy government to get a more accurate take on this one.

It would almost make one believe that Williams negotiated on-going flatulent coverage from Macleans as part of his deal to sell Cable Atlantic to Ted Rogers. Rogers owns Macleans..

Oh well, since Williams has started to blacklist local reporters who ask him tough but fair questions, the poor guy will have to take the ego-stroking he apparently craves wherever he can get it.

"We're lovers and we're fighters," Williams says. "Newfoundlanders and Labradorians like to be loved."

L'etat c'est moi, indeed.

This week's Spindy

1. Front page article on some ministers' helicopter rental expenses. Not much detail, missing consideration of ministers' overall travel expenses, but still a cute little story.

My favourite is the 5K spent by one minister - Paul Shelly - to get to a career fair in Harbour Breton, the Town the Premier Forgot.

2. Column by Ryan Cleary in which he advises that the Premier has put the Indy on a blacklist. The crime: asking questions the thin-skinned petulant former hero of the Indy thought were "inappropriate" and a "personal attack".

The Premier's personal publicist - she who communicates only via Crackberry e-mail - either agrees with the bullshit decree or lacks the professional judgment and business stones to talk some sense into her client. (As an aside, between the comments from the Telly this week about government's directors of mis-"communication" and the vapid letter co-authored by several of my colleagues taking the Telly to task, I gotta admit I am with the Telly.)

Cleary's best line is the one where he notes - for Danny the Wonder Pony's benefit, no doubt - that the come-out-swinging at everyone all the time thing gets a bit old after a while.

Ryan is right. Problem is, Ryan, when you are a one trick pony, taking away your trick doesn't improve the show. He doesn't have time to learn a new trick as he orders his personal publicist to blacklist you, blackball you and other wise try to bollocks you up for daring to do your job.

Let's face it people: if Danny has turned on the Indy - and does it in such a chickensh*t way - odds are good, other media in town have been or will be getting similar treatment. That is they'll be blacklisted unless they conform to Danny's idea that their role is to be cheerleading for him.

Anyone remember when Danny explained that cheerleading was everyone's job in the province? He makes the decisions. We stand behind him and tell him how wonderful he is.

Ryan must have missed that memo.

3. Missing this week: a column from Radio Hydro Queen. The ramblings seem to have taken their toll on Ryan Cleary's time and patience. Instead, note the letter to the editor from former CBC producer Bill Kelly in which he lambaste's the former columnist for her lack of credibility.

Bill just recites a bunch of well-known stuff about the woman who built her name on radio call-in shows but seems to have abandoned them in a snit. Well, at least the VOCM ones. No talk-balk line at CBC is safe from her rantings these days. Would somebody at VOCM apologize to her? Puhleese.

Bill can expect a string of e-mails from said Hydro Queen, most of which will be incoherent strings of phrases. Don't bother deciphering them. Just delete them, Bill. It saves time.

4. Best piece of all: Ivan Morgan's piece on a former Canadian army sniper from Newfoundland. Doesn't need description. Just read the piece.

Canadians in Afghanistan, yet more

This video clip is additional footage to the 02 Aug 06 post on operations on or about 08 Jul 06 by 2 PPCLI.

This footage is considerably more rough and shows both the Canadian fighting alongside Afghan forces and footage from the next day showing Canadians inspecting the Taliban/insurgent position they were attacking.

Note the Afghan soldiers firing RPGs (rocket propelled grenades) and mention of an airburst, along with the sound of the incoming round and explosion.

Again, this footage shows the very close quarters in which fights take place.

This is not work or family-friendly due to language and violence.

Canadians in Afghanistan, still more video

Video of elements of 2 PPCLI ambushed by Taliban forces, Sangin, Helmand province, 15 Jul 06.

This not family or work friendly due to language and violence. Note at one point, a grenade being tossed less than 50 metres from Canadian positions.

This video and others posted demonstrate the close-in nature of the Canadian operations, with action occurring in very confined spaces. Grenades are commonly used.

At one point toward the end of this clip, notice a heavy thumping bang coming from the left of the Canadians' position as they advance. This appears to be the 25 mm canon on the LAV-III providing covering fire.

RPG is a Russian-made rocket propelled grenade; it was designed originally as an anti-armour weapon but has come to be used as a form of light artillery. in Chechnya, anti-Russian forces have been known to fire the rocket upward like a mortar. In Somalia, local fighters found them to be useful anti-helicopter weapons.

Frag refers to a fragmentation grenade. Soldiers will shout "frag in" or "grenade" to warn nearby comrades that a grenade has been thrown.

Canadians in Afghanistan, more video

Footage of a dawn assault by soldiers of Alpha Company, 2 Princess Patricia's Canadian Light Infantry, 13 Jul 06. Location given as Hydarabad, Helmand province.

Note this is rough footage and is neither family nor work-friendly owing to language and violence.

At one point in this video, soldiers are warned to take cover as an air-burst is coming. Listen for the whistling noise as the round (artillery?) approaches, followed by a small explosion and a puff of black smoke in the air. This shell has sprayed the area immediately underneath with small pieces of metal.

Of course, I think my boss is the greatest guy in the universe

City solicitor Ron Penney is in the Telegram today insisting, among other things that Andy Wells is more qualified than anyone to head the board regulating the province's offshore industry.

We'll deal with the serious shortcomings of Penney's analysis over the weekend.

In the meantime, at left is a photograph of the group that negotiated the Atlantic Accord (1985) along with the provincial and federal ministers involved. The crowd standing are a mix of federal and provincial officials. Seated, left to right, are: Bill Marshall (provincial energy minister), Brian Peckford, Brian Mulroney and Pat Carney (Marshall's federal counterpart).

Ron Penney is the second from the right, standing. Andy Wells other chief advisor on oil and gas matters - besides Penney - is the fellow in the beige suit standing with his hand on Brian Peckford's chair. That's Cabot Martin, for those who don't recognize him.

The best quote of the entire piece comes right at the end:

"This is an important public policy debate. It's important that people have the views of somebody who is knowledgeable about this issue."

The first sentence is absolutely correct. That's why the debate has been raging for a year now. It's also why we'll deal with the substance of Penney's views in a later (and sadly longer) post.

If Penney's assessment of his current boss' sterling qualifications had merit, Penney wouldn't need to swell himself with the gratuitous self-massage of the second sentence.

Federally-funded rugby centre doesn't fit program specs

A new $6.3 million recreation complex attached to a privately owned rugby club doesn't seem to fit the criteria for the federal-provincial program from which most of the funding will come.

Loyola Hearn, Newfoundland and Labrador's federal cabinet representative announced $4.0 million will be spent on the project by Ottawa and St. John's out of the Canada-Newfoundland and Labrador Municipal Rural Infrastructure Fund.

Established in 2005, the municipal infrastructure fund was intended to support development of infrastructure in rural parts of Canada, with an emphasis in Newfoundland and Labrador on so-called "green" projects.

Touted as a provincial recreation centre, the new complex will include additions to an existing privately-owned rugby club facility in the heart of the province's largest city and within easy commuting distance of several publicly owned or publicly-accessible sports facilities.

The national programs main website shows just how unusual it is to see funding for an urban sports complex under the rural fund, particularly one closely associated with a private sports venture.

The majority of projects already announced in other parts of Canada cover water and sewer installation and upgrading, fire service improvements, and road and bridge work. In March, the Governments of Canada and New Brunswick announced two ice skating complexes costing a total of $30 million for Fredericton, the province's capital city, based an application by the city council. That appears to be the only project of its type.

The provincial government isn't listed as one of the eligible applicants on the Newfoundland and Labrador program website. According to the information there, eligible applicants include:

Local governments including towns, regions, or local service districts; Inuit Community Councils; and non-governmental organizations whose application is supported by a resolution from a local government.

Read the actual agreement though and you see that the provincial government can apply and own the infrastructure, even though the provincial government sits on the joint management committee that approves applications.

Today's announcement contained no details of the management arrangement for the new complex even though it will include privately-owned space. Nor has it been revealed which organization applied for the federal and provincial funding.

Hearn doles out pork; soldiers still waiting - Updated

Loyola Hearn will announce today that the federal government will pump cash into a new "provincial" recreation centre being built on Crosbie Road in St. John's to replace a facility at the former Torbay air base.

[Update: According to the news release, the provincial and federal governments will contribute a total of $4.0 million from a jointly funded rural infrastructure agreement. Another $1.3 million will come from the City of St. John's and another $1.0 million will be raised by Sport Newfoundland and Labrador, a local rugby club and other fundraising. The provincial recreation centre project will apparently include a major addition to a privately-owned rugby club facility.]

The City of St. John's has already committed cash to the new building.

Meanwhile, Hearn ignores - as his predecessors have ignored - the need for a new headquarters and offices for the Regular Force presence in St. John's, cadets and four of the army and communications reserve units in the province sit in buildings slated for disposal.

Estimated cost of the project is $68 million to house Canadian Forces Station St. John's, cadet headquarters, The Royal Newfoundland Regiment, 56 Field Engineer Squadron, 36 Service Battalion and 728 Communications Squadron.

It's hard to understand why the federal government would pump cash into a building that is entirely the provincial government's responsibility to build yet a much larger and more important project that is entirely a federal responsibility sits stalled somewhere in the depths of the federal bureaucracy.

What's worse, the reserve units and CFS St. John's are responsible for considerable economic activity in the St. John's area, far more direct economic activity and benefit than the provincially-owned and operated facility will create.

Hearn might toss up the O'Connor defence plan to drop a new reserve unit in St. John's as a reason for the delay. That is just an excuse. None of O'Connor's pork-spending has been costed or approved and it may well take years before we see the first soldier of that unit in uniform, if we ever see him or her.

[Update II: As Back Talk host Denis Molloy noted, Hearn apparently assured everyone that the new DND headquarters is under active consideration. The problem is that it has been under "active" consideration for the better part of a decade through administrations both Liberal and Conservative. The hang-up in approval for such a necessary project remains inexplicable.]

In the meantime, the members of our Canadian Forces work away in buildings left over from the Second World War that are slated for disposal and that should have been demolished years.

Hearn should show a bit of interest in this project rather than gaining some publicity for himself pumping cash to support a provincial government the feds shouldn't be supporting and announcing millions for communities from a program put in place by the previous Liberal administration - and needlessly delayed by the provincial government.

Insights into the Premier's mindset

From the decision of an Ontario judge on a lawsuit filed by Henley Capital against Cable Atlantic, Inc. in a dispute over fees owed to Henley for advice and support provided Danny Williams and Dean MacDonald in selling Cable Atlantic to GT Group Telecom and Rogers in 2000:

"We are adamant that your client is not entitled to any additional compensation and will only pay same if ordered to do so by the Supreme Court of Canada.

Judge yourself accordingly!"

Danny Williams to solicitor for Henley Capital, January 5, 2001.

At that point, Cable Atlantic had paid Henley slightly more than $65,000 against an invoice for services rendered that eventually totaled almost $400,000.

Williams, who apparently had not seen the agreement between Henley and Cable Atlantic until after the sales were concluded, contended in the letter that the fees agreed upon were considerably less than Henley billed and that Cable Atlantic hadn't really needed Henley's assistance since the company principals - Williams, MacDonald and other senior officers - knew enough to conduct the sale themselves without Henley.

At several points in the decision, the judge notes that Williams and MacDonald considered Henley's work to have been a "hobble", local slang for a small, inconsequential job.

The pattern in this case is interesting on several points.

Firstly, Henley's work is diminished by Williams and MacDonald to the point of near insignificance despite evidence that Henley's work and his advice garnered significant financial benefit to Williams and MacDonald. The court was told and repeats the characterization that Henley's contract was considered a hobble.

Secondly, Williams is described in the decision as going "ballistic" when seeing Henley's invoice. Williams' temper is legendary.

It is almost incomprehensible that MacDonald did not show the Henley contract to Williams . Since the court has accepted this as fact, there is nothing to do but marvel at the notion that such a failure would occur. Perhaps Williams never paid the final settlement and the legal costs out of his own pocket, requiring instead that MacDonald foot the bill.

Thirdly, as in the quote above, Williams is prepared to take firm positions - perhaps in the heat of the moment - and then to sustain that position despite the costs.

In this instance, had Williams as majority shareholder decided to settle the account at the outset, the total outlay would have been around $400, 000 on a gross profit of close to $300 million in cash and stocks.

Even if Williams had settled this matter after trial - the decision was rendered on 31 May 2004 - the total costs would have been considerably less than the final tally.

Instead, Williams expended considerably more than that over a five year period in legal fees and associated costs including giving evidence in a Toronto courtroom. The case went through a first hearing and a subsequent appeal to the Ontario Court of Appeal that rendered judgment in a succinct four paragraph judgment in late June 2006.

There is holding to a position on principle; then there is holding to a position despite the financial and other rationales in favour of settlement.

This entire court case is odd since Williams' law firm based its insurance business on the simple premise that, in almost all instances, insurance companies are prepared to settle for a quantity of cash based on a rational cost/benefit assessment. In Williams' case, he apparently operates on the basis of never changing a position and never settling under any circumstances until there are simply no alternatives.

Fourthly, there is an interesting comment on Williams' memory of events or his account of events. At one point, henley gave evidence, supported by testimony from John Tory, then heading Rogers, that Tory had contacted Williams on a particular date to make another offer on cable Atlantic. Williams denied having spoken to anyone from Rogers on that date.

Fifth, MacDonald is described in the 2004 decision as having amended his testimony or altered his testimony as evidence was presented contradicting his statements during discovery.

Sixth, overall, it is interesting to note that at no point did Williams or MacDonald attend to negotiating a final version of the initial contract, addressing performance bonuses or, after the deals were concluded to achieve a resolution of the dispute other than through court.

The initial decision notes that MacDonald's response to an e-mail from Henley containing a draft services contract was "bantering", but apparently not substantive. Subsequently, and despite repeated efforts by Henley to talk cash with MacDonald on additional fees and charges, no discussions took place. Finally, when the dispute arose over the invoice, neither Williams nor MacDonald ever met with Henley face-to-face in an effort to resolve the dispute short of court.

This fits the seat-of-the-pants approach taken to the federal government in 2004/05. At that point, no firm proposals were presented to the federal government until November 2004.

It also suggests that similarly slap-dash negotiating style that would have contributed ultimately to the collapse of the Hebron talks. Poor communication could easily have led to both parties misunderstanding what had been agreed upon. Ultimately, Williams tendency to take firm decisions and not back off them - irrespective of the consequences - can easily be seen to parallel the experience with Hebron. Once he had decided on an equity position, he would easily sacrifice $10 billion for a mere $1.5 billion in the same way that in Henley v. Cable Atlantic he was prepared to pay out twice or three times the disputed invoice in total costs only to ultimately wind up losing the battle.

For Max Ruelokke, the implication here is that we may well see the matter headed to a higher court. We may also see the appeal period played out and an announcement made settling the matter as quietly as possible. The only thing certain is that Williams is unlikely to comply with the recent Supreme Court decision unless he absolutely has no alternative.

For Hebron, it's hard to know what henley might indicate other than giving a better understanding of how the supposedly masterful negotiator could fail, without a good reason. Once he locked his mind into a position, there simply is no shifting him, no matter how irrational the consequences are.

Lord doomed in NB?

Bernard Lord will ask the Lieutenant Governor to send New Brunswickers to the polls on September 18 as the boy-king of Canada's only bilingual province seeks a third term as premier.

Given that he only won last time by a single seat, let's say the fight will be close this time.

Good money would be on Lord heading for the Opposition benches.

What he said

Offal News on Kathy Dunderdale, Danny Williams and the delay on the Max Ruelokke file.

It's called negligent discharge

Accidental discharge in a case like this is like describing a suicide as "killed while cleaning his weapon".

It doesn't describe what happened. In order for the weapon to fire, there had to be a round in the chamber. That's risky enough considering that even if the safety was on, it can easily become dislodged in an vehicle accident.

That's when bad things happen.

Like in this case.

Let's get a board of inquiry going right away and make sure the weapon doesn't have a problem and the battalion standard operating procedures are the right ones.

Radio Free Terra Nova

One man's take on a local media outlet and its presentation of news from The Hill.

For sale: one tiny mental box

"If an interested buyer for the mill does come forward, government will do what it can to facilitate a negotiation with Abitibi," said [natural resources minister Kathy] Dunderdale.

"At this point, however, no one has expressed an interest given the state of the pulp and paper industry globally."

That's a section from a CBC news story on reaction to the application by Abitibi Consolidated to tear down the former papermaking mill at Stephenville.

Now a minister might be forgiven for such a statement if it wasn't for the fact that Dunderdale just finished up a tour in a department supposedly devoted to eceonomic development in the province and for the past year or so she has been part of a committee looking to diversify the Stephenville economy in the wake of the mill closure.

For all Dunderdale's love of vapid business-school cliches like "doing the due diligence piece", here's one that isn't meaningless: paradigm shift.

In plain English it means getting your head out of the same rut you've been stuck in. Or, as seems to be the case here, getting one's head out of one's posterior.

The reason the Abitibi mill closed in the first place was because of the very reasons the twenty or so companies government approached gave for not wanting the mill.

So why in the name of merciful heaven, would Dunderdale and her colleagues think they could find a papermaking company interested in taking over the Stephenville mill?

Let's not even mention the business un-friendly climate her boss has created with pointless row after needless racket with people who do nothing other than refuse to bow to his latest demand.

Dunderdale and her colleagues need to show they can see some future for the former Stephenville mill other than papermaking. (They really need to show they actually read and understand the briefing books their long-suffering officials keep handing them.)

Rather than giving permission to demolish the Abitibi mill, maybe Dunderdale can assess the impact of demolishing the exceedingly small mental box in which she and her colleagues apparently keep their collective imagination.

Until Dunderdale starts thinking outside the box, there's precious hope for anything new economically to happen in Stephenville - much less the province as a whole - any time soon .

Watching Tom Hedderson

The Department of Tourism, Culture, Recreation and Personal Promotion for the Minister is running a series of cheesy televisions spots on Rogers Cable in the St. John's area and likely on Rogers cable outlets across the province.

In the St. John's area, the spots are running in support of a summer replacement show for Out of the Fog that is similar in format and which has sucked up so much of the local Rogers budget that the usual broadcasts of the annual regatta were scrapped this year.

The spots don't appear to be part of the usual tourism promotion; heck, they wouldn't be part of any credible promotion designed to get people to travel around the province and see the sights.

You won't find reference to these spots in the tourism marketing strategy. The in-province approach lists these objectives:

- to increase resident in-province travel and expenditures by motivating residents to vacation in-province.

- to increase resident knowledge of activities and attractions that occur during all, spring, and winter seasons as well as the summer period.

- to increase frequency of travel by motivating residents to take additional and more frequent short trips during the shoulder seasons as well as their annual summer vacation. Increase focus on the shoulder seasons.

- to provide value-oriented advertising opportunities for tourism operators.

The spots feature cabinet minister Tom "The Watch" Hedderson purportedly kayaking and doing other stuff he clearly doesn't do in his real life.

As much as the marketing gurus are likely to come up with a bunch of excuses for wasting the money explanations for this particular advertising concept, I doubt very much ordinary people would accept the idea that seeing a politician most of them barely know looking incredibly stiff and uncomfortable would support these objectives.

The reality is that these spots just don't fit into the professional ad campaigns we've come to expect from our tourism marketing campaigns. No one should blame the agency of record (AOR). The new AOR has turned out some decent spots and worked to apply the marketing strategy. Their stuff can be found a Tourism Newfoundland and Labrador under the title "Beauty on Film" in the "Sights and Sounds" section.

The "Watch Tom Hedderson Float in a Kayak and Pray to God it Doesn't Flip Over" campaign isn't on film and it is far from beautiful.

Bad enough that the Williams administration has been wasting a great deal of its advertising dollars over the past couple years on this kind of bumpf, just like the Grimes and Tobin crowd before them. Surely everyone has heard - and then quickly started to ignore - certain ministers appearing on VOCM talking about summer driving season, as part of VOCM's usual summer advertising, moreso than doing anything substantive for the public and the government.

Bad enough that over the past 10 years all members of the House of Assembly and cabinet ministers have gone back to the hideous Peckford era practice of spending tax dollars to send messages of greeting to this and that group featuring little more than their smiling mugshot.

Basically, what we have running on Rogers is nothing more useful than some personal promotion for the minister at taxpayers expense. Since it's television, we have to ad in the production costs of the different spots and the ad time to see it is one of the most useless and at the same time most costly of these personal promotion for politicians.

The spots should stop immediately since they represent an entirely inappropriate way to spend public money.

Over the past few weeks, Newfoundlanders and Labradorians have been treated to one too many stories of politicians - Liberal and Conservative alike - who, over the past decade have spent public money to their own individual benefit. They've watched the stories spill out and the politicians fumble with excuses and inadequate responses. Now they can share Tom's "watch" fetish.

Tom and his colleagues should know that the public are watching closely.

They shouldn't assume the public is liking what they are seeing.

48 hours

And still no word from the provincial government in response to Monday's ruling on Ruelokke v. Government of Newfoundland and Labrador.

In the meantime, it seems the rest of us are just supposed to sit around listening to Roxanne on the iPod.

No interest, indeed

There is something oddly appropriate about the headline on a release from natural resources minister Kathy Dunderdale advising that the Stephenville Mill will be scrapped but assuring us that she and her colleagues are still working dilligently on a "strategy".

The headline: "No interest expressed in Stephenville mill".

The confirmation of government's position is in a quote from Joan Burke, education minister and the member of the legislature representing Stephenville: "Perhaps now that this matter is settled, we can all fully concentrate our efforts on diversifying and strengthening our economy..."

The only problem with Burke's position is that it is exactly the opposite of what she and the Premier told the people of Stephenville repeatedly over the past couple of years. From Williams election pledge that the mill would not close right down to the prospect of expropriating the property, Williams and his minister made great promises.

They talked of having a fall-back position, a so-called Plan B.

Turns out there was no Plan B, except perhaps as expressed in the quote from Burke, above.

With this news release, the Williams administration is accepting Abitibi's proposal to demolish the entire Stephenville mill structure and restore the site as near as possible to its original state before the mill was built in the 1970s.

What this means is that government is unwilling to purchase or otherwise acquire the building and have it available for alternative uses besides papermaking. Government has deemed it better to obliterate completely any sign of the mill than to look at any form of industrial development in place of the Abitibi mill.

So what are we to make of the talk over the past few years?

Not much, apparently.

In the release, we are not even given the courtesy of some hard, factual information. We are not told that a thorough engineering and financial assessment have shown it is actually better to let Abitibi clean up the site and let someone start from scratch.

We are not told very much of anything actually.

Nope.

All we get in the news release are hoary cliches about diversification and a commitment to doing something. Accountability, transparency, openness - genuine communication - all are missing.

The one thing we can be thankful for is that Stephenville is not being handled like Harbour Breton, at least at this point. There, people have been kept hanging for two years with glowing promises and commitments, none of which have come true. At least in Stephenville, people know the thing is over and those that have not already gotten on with their lives can do so now.

It is oddly appropriate, therefore, that the release title mentions a lack of interest. The headline refers to the lack of intereest of other parties in operating the plant as a papermaking mill.

Given the content of the release, though, it would seem the headline also refers to a certain lack of interest on the part of the current administration in any of a number of things. Not the least of these would be any role the mill site itself might play in the future "economic diversification" of the area supposedly being developed by the committee of ministers that leads a task force of officials - that lives in the house that Jack built? - as they set about "exploring a number of value-added options that have been identified for the region, with technical support being provided by staff of the Department of Natural Resources."

No interest, we are told.

No interest, indeed.

Pressure mounts to appoint Ruelokke

vocm.com's question of the Day feature yesterday focused on the provincial government's refusal to obey the law and acknowledge Max Ruelokke as chairman and chief executive officer of the province's offshore regulatory board.

The numbers were running heavily against government all day, including at one point hitting 76% in favour.

The Premier's Office e-mail tree mustn't be working very well these days. Their ability to fill up call-in lines is weakening and in this case, even a last minute deployment - after 9:00 PM - couldn't swing the votes in their favour.

The final vote remains 54% in favour of Ruelokke.

Danny got 28%.

It's not the only such vote Danny has lost and believe when you are told that Williams pays serious attention to these things. Why is incomprehensible, but he takes this sort of rigged voting very seriously. Gets kinda annoyed when he is beaten at his own game.

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

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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

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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.