Change versus more of the same

While former Liberal cabinet minister Walter Noel does his part to support the victim mythology of Newfoundland nationalism, perhaps he should consider a new approach to economic development and Newfoundland and Labrador's economic place in the world.

Noel's problem appears to be with Newfoundland and Labrador's balance of trade.

He identifies the solution to a general economic problem as being more federal transfer payments. Right problem. Wrong solution.

All that Noel succeeds in doing is demonstrating how the current administration and the one Noel served in are fundamentally the same. Heck, the current administration offers the same answers that have never worked for administration after administration since Confederation.

Like that's worked.

The idea outlined in this op-ed piece from the Toronto Star is increased inter-provincial free trade. In other words, open up the opportunities for Newfoundland and Labrador companies to do business in the rest of Canada. Rather than building barriers, Newfoundland and Labrador needs to open the doors.

Since Confederation, Canadians have been hampered by an inter-provincial distrust of the power of free markets to produce economic and social benefits.

As a result, federalism has evolved into an inefficient system of provincial and municipal enclaves of economic autonomy. Provincial economic independence has created an interprovincial trading system that hampers productivity through barriers that curb the flow of goods and services.

These have impeded Canada's evolution from a middle to a modern power.

Canada cannot hope to compete globally when we have the kind of barriers to internal trade we have now.

There's a similar idea in this study by the Economist Intelligence Unit.

More of the same won't work.

It's time for Newfoundland and Labrador to change.

-30-

Caille as a Conservative candidate: interest and implications

Offal News hits apparently spiked Monday with a post on the possibility that former Hydro Quebec boss Andre Caille will run for the Conservatives in the next federal general election.

This prospect may have implications for Newfoundland and Labrador, as Simon Lono suggests. Some additional clues to the prospective candidacy may come from commentaries such as this one in l'actualite.

If nothing else, Lono has raised a provocative issue based on what appears to have been a passing reference by a noted Quebec journalist.

Laying the ground work for separation, one egg at a time

When he said anybody, Danny literally meant he'd take on anybody not acting in the best interests of Newfoundland and Labrador. [h/t to Offal News]

Headin' down the road, 2007 version

Greg Locke has been blogging his move to Alberta.

Find the latest entry here, which morphs quickly into a discussion about the high percentage of people leaving the province who hold university degrees and other specialized training. The chart, above, is from a slide presentation done in the mid 1990s. Note that university degree-holders have consistently been the largest proportion of migrants from Newfoundland and Labrador since the mid 1970s at least.

The slide was originally presented in this post on outmigration.

How much is enough?

1. Government of Newfoundland and Labrador, own source revenue, 1992: $1.7 billion
Government of Newfoundland and Labrador, own source revenue, 2006: $3.2 billion

2. Government of Canada transfers to Gov NL, 1992: $1.4 billion
Government of Canada transfers to Gov NL, 2006: $1.5 billion

3. Government of Newfoundland and Labrador, per capita expenditure, 1992: $5574
Government of Newfoundland and Labrador, per capita expenditure, 2006: $8675

Note: Population, 1991: 574,000
Population, 2006: 509,000

A humourous reminder

Sometimes it's easy to forget how many times we've heard the same old arguments from the provincial government, especially when it comes to Equalization and offshore revenues.

Like this post from last October.

Last year, Danny Williams was telling us that the O'Brien formula would cost the province cash compared to what was in place at the time.

Not compared to the Harper promise.

Compared to the status quo ante.

Turns out that wasn't true, at least if you accept Wade Locke's precis.

The status quo was worth $18 billion. The O'Brien deal was worth $24 billion.

But think about it: in 2005 we were told that Danny Williams had inked a deal which was bullet proof against changes in Equalization. He got it. He told us he got it.

Apparently not.

So when will Danny Williams be fighting Danny Williams?

St. Lawrence native among the dead

Kevin Kennedy, right [Photo: Canadian Forces Combat Camera] is among the six soldiers killed in Afghanistan by an improvised explosive device in Afghanistan.

Kennedy was a private soldier with Second Battalion, the Royal Canadian Regiment, based in Gagetown, New Brunswick.

Update: A second soldier from Newfoundland and Labrador has been identified among the six dead in Afghanistan.

Sergeant Donald Lucas, left, was originally from St. John's.

Six soldiers killed in Afghanistan

Six soldiers from the Royal Canadian Regiment battle group in Afghanistan were killed today and two were injured in a roadside bomb explosion.

Update: 2350 NDT. DND releases names of five of the six dead.

-30-

The king is dead

Cartoonist Johnny Hart, who created such strips as B.C. and The Wizard of Id, died Saturday at his home in New York state, of an apparent stroke.

He was 76.

Is the goal a 1948 do-over referendum?

The National Post this Easter weekend contains a little profile of Premier Danny Williams.

There are a few factual errors, but nothing that undermines the core point of the piece. Overall, there is a summary of the current state of the erstwhile nation of Dannyland. The picture isn't good. There's no way to make it good and it is the branding of this province as Dannyland that ultimately undermines whatever the triffid logo thing could possibly do.

A look at Newfoundland's history through a local lens explains why Mr. Williams' attacks on big business and Ottawa play so well around the kitchen tables of Gander and Corner Brook. Dragged into Confederation by the narrowest margin, the formerly independent colony has been rewarded with collapsed cod stocks, a hydro deal that virtually donates electricity to Quebec (which resells it to Americans for a tidy profit), two generations of talented young people decamping for work in Alberta and elsewhere, and the largest per capita debt and highest unemployment in Canada.

Cynics outside the province might suggest Newfoundlanders had something to do with bad economic planning, but locally, says Mr. [John] Crosbie, the feeling is "we're always being outsmarted and done in by mainlanders."

Since this piece was written by a mainlander, he can be forgiven for assuming every single person on what the Post calls The Rock - a word destined to join the other "n" word on the list of banned ethnic slurs - buys into the nationalist mythology on which the latest caudillo thrives.

Rick Mercer, no longer living here, can also be forgiven for mistaking the appearance of near-unanimity back home as a sign that there is, in fact, near unanimous agreement with the Premier's goals even if there is a quibble about tactics. If we define the goal as motherhood and blueberry duff, then that would be true.

But it isn't the goal and so there are growing questions that run deeper than the correctness of the Premier's rant-du-jour. What exactly is this "fair share" Williams keeps talking about? What would a better deal on oil or Confederation look like so we can help spot it when it shows up? Williams himself apparently has no idea and so Newfoundlanders and Labradorians increasingly wonder what he is up to.

Is he planning to create the climate in which the fall election will turn into a referendum on Confederation? Is the first townie premier to run the place since well before the townies put 'er up on the rocks in 1934 going to take give the nationalist townies a do-over on the 1948 referendum? Only his man in the Blue Line cab likely knows for sure.

Since we are on the subject of wider goals, Offal News returns to that issue today. The cause is confirmation from the oil industry that there are no talks going on with the provincial government regarding Hebron. It isn't like Simon Lono has said that before, and been right. it is that Williams has suggsted there were talks going on - yet again - and yet again, the facts are something else.

Once you are done there, take a glance at nottawa. Mark Watton notes - riffing on the Post piece - that Williams makes much of the idea that he is on a self-less mission of good, that he doesn't need the job of Premier because he is independently wealthy.

nottawa points out that anywhere else in the a country a federal politician who tried the same sanctimonious, self-serving line on the press gallery, they would - to use a local phrase - have his guts for garters. He's absolutely correct.

What the Post doesn't say, though, likely because of their interview subjects, is that the demagogues of post-Confederation Newfoundland all wound up chased from office in some measure of public disrepute. At the risk of blasphemy, the same people who threw palm fronds to line the path of their newest saviour were among the first to line his via dolorosa and jeer.

Smallwood.

Peckford.

Tobin.

It is a short list, distinguished by nothing else if only by the volume of spittle ejected by anyone mentioning their name these days.

Danny Williams knows it.

That's one of the reasons why he reputedly detests the comparisons to people like Smallwood.

That's why - only three years into his mandate, Williams has already announced he'll be packing it in soon. That's why he is hunting for some sort of legacy, some sort of brand, other than the one he has already claimed for himself.

It's too late of course.

On this Easter weekend, and in the religion of Newfoundland politics, we need only wonder who will be playing the role of Barabas in the latest version of the pageant.

The Cult of the Individual, Dannyland version

Spend any time publicly criticising the current administration and its policies and at some point, you are bound to hear from the Premier's personal supporters.

Your humble e-scribbler gets them once in a while.

They are predictable. There's no discussion of the facts at hand, rather there is puzzlement at why there is any criticism of Danny.

In the radio call-in version there are direct personal attacks on the critic's integrity and motives and continued suggestions that so-and-so is in the pay of one of Dannyland's foreign demons.

Lately, correspondents have taken to suggesting that perhaps you should run office since you've apparently got it all figured out.

Maybe some of us will. Maybe some of us won't. Some of us have alternatives. Some of us are just not so quick to join the nearest parade condemning the supposed foreign oppressor of the moment.

That's the marvelous thing about democracy.

It's called free speech.

While some politicians and their supporters may find it uncomfortable, it's what helps to keep powerful interests in check. It's what helps to promote peaceful change as opposed to the sort of political instability, abuse of public freedoms, and in some cases political violence that is found all to often in many of the countries high on the current administration's list of oil jurisdictions to emulate.

Telegram managing editor Russell Wangersky is on the receiving end of a letter in this Saturday's edition of the province's largest circulation daily. It follows a fairly typical approach:

It makes you want to laugh at those critics. Passiveness in politics will get you nowhere. Williams is taking a much-needed strong stand, simply put. Those who are complaining, for the most part, seem to be those who want Williams to shut up and go away, accept the deal offered after the contract. Complain as they may, I doubt it will faze him one bit.

...

It makes you want to laugh at those critics. Passiveness in politics will get you nowhere. Williams is taking a much-needed strong stand, simply put. Those who are complaining, for the most part, seem to be those who want Williams to shut up and go away, accept the deal offered after the contract. Complain as they may, I doubt it will faze him one bit.

Wangersky responds in his own column in words that speak eloquently for themselves:

When it comes to premiers and prime ministers, I just don’t know who’s right at this point.

I honestly don’t know what’s right, and I’m pretty much sure that my grasp of the issue isn’t that much different from the 90 per cent of the people who have already made up their minds.

Now, I’m leery of bandwagons, especially the patriotic kind. Patriotism sells T-shirts and suppresses free thought.

I like to make up my own mind, and I don’t like the mindset that believes I should have my ideological windows smashed out for daring to not toe the provincial line.

So, what do I think?

I suspect, at this point, that Premier Williams may well have the clearest case — that he’s right in maintaining that a promise was broken.

At the same time, you have to ask yourself if it isn’t a mug’s game to believe the promise could be kept in the first place.

There is, more than anything else, the real politik [sic]of the situation.

This is a complicated little tangle: could a promise like the one Harper made ever, ever make its way through a minority government, tucked into a minority budget? Only the Bloc Quebecois supported the Conservative budget — would a promise made, and a government defeated, have served us any better than an equalization scheme that will apparently still give us more money than the restructured Atlantic Accord was going to?

Those are interesting questions, and ones that it is hard to find answers for — it’s easy enough if you just want to decide to back one side in the argument, but there has to be more to picking a side than just wearing your heart on your sleeve. That’s akin to voting for a particular party in an election because your father always voted for that party.

The Telegram's editorial this week praises economist Wade Locke for putting some factual information in the public view. More information is always good when looking at complex issues. More, accurate information promotes discussion which usually leads to a sensible decision.

The jingoism favoured by far too many in this province currently is, of course not a new approach at all. The revanchist undertones to arguments about the federal government may be a new flavour, but the jingoism is - by now - old hat.

The Churchill Falls deal was unanimously endorsed by the legislature at the time. That's the deal, you will recall, which brought a tremendous immediate benefit from construction jobs but which was built - ultimately - around the idea of deferred revenues. It was only later that the people of Newfoundland and Labrador heard about the details of the deal and just how long the benefits were to be deferred.

That Premier at that time, of course, liked it better when everybody just fell in line behind him. He, too, disliked criticism and his supporters made his displeasure clear in a variety of ways. The Premier at that time made it plain too, how much he hated his critics, telling a media scrum that the Telegram had been taken over by a gang of illiterates.

That Premier, like supporters of the current one, claimed that he wasn't fazed by the criticism, that he would carry on undaunted in his crusade to build the New Jerusalem.

How odd then, that the Premier and certainly his supporters spend so much time dealing with the critic. They never deal with the criticism.

-30-

Danny Gushue?

Olympic curler Brad Gushue dumped yet another member of his Olympic Gold medal team this past week, claiming there were "chemistry" problems.

But, as the Telegram is reporting, Jamie Korab wonders that he might have gotten the flick for questioning Gushue. The skip apparently took that as a "personal attack."

Following the end, Gushue reportedly told his team not to give up. Korab reminded his skip not to give up, either.

The two bantered back and forth with Korab calling Gushue a hypocrite.

All I’m saying, Korab apparently told his skip, is you’re telling us not to quit. I’m telling you not to quit.

Korab said Gushue then said something — he won’t say what it was— “snarky”.

“I said, ‘Brad, come here. Let’s talk about this.’ I said, in an assertive way if you want to call it that, ‘You say stuff like that to us all the time and it’s the first time I’ve ever said anything to you about it.’”

For the next couple of days, the two didn’t speak. Korab was waiting for an apology.

“But no, I was in the wrong for this because I had made a personal attack on him, which wasn’t the case,” Korab said.

A few weeks ago, rumours abounded that Danny Williams' crew was pitching the idea that Gushue should run for the Williams' party in the next provincial general election.

If Korab's story is accurate, now we know why.

Oh, an by the way, Gushue has been taking plenty of criticism on the local talk shows for the decision.

(Side note to Team Danny statistician: Further to your e-mail, that should put at 10,000 the number of times Bond Papers has mentioned the skip of your team. Thanks for keeping track.)

-30-

The view from here and there

Check out this posting on Craig Westcott's speech.

Small dead animals is a leading Conservative blog.

The real meat in this one can be found in the comments, especially those by Newfoundlanders and Labradorians not currently living in the province.

(h/t to labradore.)

-30-

Video Friday

Some video for Friday, the stuff that will set you thinking. Set you thinking that is, if you go here first.

Alanis' send-up of the Black Eyed Peas is funny.

But notice that you can really hear the lyrics and that is what will animate the link for you.

Queen's cowboys in another mess

This case will surely reach the Supreme Court of Canada.

Apparently the Mounted Police spokesperson is referring to this 1999 Supreme Court of Canada case, which on the face of it does not involve comparable circumstances.

The woman involved, who had mistakenly dialed 911 instead of 411 met officers on the front porch and while she denied them access to her private residence - as is her common law right - the attending could easily ascertain that there was nothing untoward occurring. Well, at least that's what the couple pursuing the lawsuit will contend.

The police will likely invoke the spectre of child porn and whatever other horrors might theoretically be going on in the residence in an effort to line up their actions with the reasoning laid out in the case law, including the 1999 SCC decision.

For a quickie summary of police detention powers, take a gander at this lucidity written piece.

Too bad the police didn't read this little summary provided by a law enforcement association in 2001 to British Columbia police officers.

Lawyers out there may wish to offer some insights.

R'uh R'oh

Premier Danny Williams may have given the Auditor General extra staff to shift the focus of his review of the House of Assembly spending scandal, but John Noseworthy is peeved about lack of access to documents to conduct a review of the fibreoptic deal.

In a scathing letter to Innovation, Trade and Rural Development Minister Trevor Taylor this week, auditor general John Noseworthy says his office still has not been provided with all necessary information.

Noseworthy said he has identified documentation that has not been turned over by the government, and as a result, “it is becoming increasingly difficult for me to have any confidence in this process.”

Good thing Danny's gone on vacation.

This story, on top of Wade Locke's assessment of the Equalization racket, would make for as uncomfortable a weekend as he's spent since taking office.

We can expect to hear the moaning when he gets back.

And for the record, there is no truth to the rumour that Williams has hired a former senior DND official with experience in shagging up the Somalia inquiry to liaise with Noseworthy on this and other files.

-30-

Wanted: big player with deep pockets

The new refinery proposed for the top of Placentia Bay needs at least one major backer with deep pockets.

The backers of a new refinery on the Newfoundland coast say the US$4.6-billion project will likely only succeed if a large international oil player steps up as a partner.

From the Financial Post.

Upodate: the original corporate news release.

-30-

A rejoinder to the local fisheries myth-mongers

From Offal News, with chunks from Jeffrey Simpson's column.

We have at our disposal the policies to correct problems in the fishery.

Local myth-mongers simply refuse to change.

-30-

Rejected license plate

The daily e-mails yeilded this mock-up of a rejected provincial license plate.

This one has a special meaning for your humble e-scribbler.

(h/t to Donny, via e-mail, whoever you are)

Update: The photograph of a sample license plate - HMV 049 - that accompanied the original news release has been replaced by the comms people at Confederation Building. It now leads to a drawing of the license plate.

Too late.

The license plate will be morphed as many times as the triffid logo was back when that fiasco was unveiled.

-30-

Another Dan-didate?

Walter Noel, left, is a former provincial Liberal cabinet minister and a former federal Liberal candidate.

On Open Line with Randy Simms this morning, Noel said he had written the Premier suggesting the province commission a report to look at the economics of Confederation and show how Newfoundland and Labrador hasn't been receiving its "fair share" or getting "fair treatment".

Noel claimed that the 2002 Airing of Grievances didn't produce such a report.

Well, not exactly.

There is a report titled "Newfoundland and Labrador: Towards an Assessment of the Benefits of the Canadian Economic Union."

Here's the executive summary:

This report was commissioned by the Royal Commission on Renewing and Strengthening our Place in Canada to provide information regarding the economic, fiscal and other benefits to Canada and to Newfoundland and Labrador of the province’s presence in the federation.

In 1949, Newfoundland and Labrador joined Canada to secure a brighter economic future for itself – and its new country. In the ensuing half century, Newfoundland and Labrador has certainly become wealthier but has struggled to keep pace economically with the rest of the country and with its trading partners. Perhaps unfairly, the province has too often been characterized as a place with no jobs and dependent upon the transfer payments it became entitled to upon Confederation.

A region’s growth involves at least four kinds of external relationships: (i) trade, or the import and export of goods and services; (ii) migration of people, both in their capacity as consumers and in their capacity as workers; (iii) interregional “migration” of other production factors, notably investment capital; and (iv) the national government’s revenue collection and expenditure in the region. This report examines the current state and evolution of each of these external relationships and in doing so provides information to help assess the benefits to Newfoundland and Labrador from the Canadian economic union.

Fiscal Benefits

This report finds that the federal government’s net spending in the province has not been a major factor in the overall national fiscal position. Newfoundland and Labrador’s size meant that more populous provinces receive substantially larger sums of federal money and have a larger impact on the federal government’s overall fiscal position.

Federal spending in Newfoundland and Labrador has declined over the last few years. In fact federal spending in Newfoundland and Labrador as a share of spending throughout the country has fallen 0.5% over the last decade – the largest decline of any province – while over the same period Ontario and British Columbia have seen their share of Federal spending rise.

Trade Benefits

The rest of Canada has and continues to benefit from the economic union by exporting goods and services to Newfoundland and Labrador. Companies in Ontario and Quebec have benefi ted the most from trade with Newfoundland and Labrador. While consumers in Newfoundland and Labrador have benefited from lower prices for imported goods and services since Confederation, it is only now that Newfoundland and Labrador businesses are starting to see a significant increase in their benefit from the domestic market.

Investment in the development of the province’s major oil projects will continue to support high levels of imports for a few years. The production from these projects will, however, start to generate substantial export revenue and help push the trade balance towards a surplus position.

Labour Benefits

People from Newfoundland and Labrador can be found across the country making significant contributions to their local economy. This study estimated that for every 10 current residents in Newfoundland and Labrador, there are 4 people born in the province that are now living elsewhere in Canada. By moving to fill jobs required in the rest of Canada, the Newfoundland and Labrador labour force has acted to reduce labour market disruptions caused by labour shortages in other provinces. The current study estimates that a flow of workers to other provinces the amount of which is equal in size to the number of people born in Newfoundland and Labrador but now resident in other provinces would reduce competitiveness and economic
performance leading to a $1.1 billion reduction in the federal government surplus. The latter amount is equal to about 40% of the current federal deficit in the province.

The loss of these people has, however, been at best a mixed blessing to Newfoundland and Labrador. The loss of productive workers and their associated demand depresses economic activity – but it does reduce competition for jobs for those that remain.

Natural Resource Benefits

For the last forty years investment capital has been concentrated in the development of the province’s natural resources. While these projects have brought jobs and income there are lingering questions about whether the province receives an appropriate return on its natural resource wealth.

The impact of the Churchill Falls hydro-electric power contract with Hydro Quebec is significant. The loss in real provincial GDP (1997 dollars) was estimated to be between $1,500 and $3,000 a person each year throughout the 1990s and – even at the lower end of the range – would be enough to pull Newfoundland and Labrador ahead of both Nova Scotia and New Brunswick in terms of per capita GDP. The benefits to Quebec’s economy have been equally large – supporting the development of a powerful manufacturing sector and providing windfall gains on their electricity exports. The situation has, up to now, stalled the development of hydro-electric resources that would reduce Canada’s dependence on fossil fuels and help us meet our greenhouse gas emissions targets.

The Government of Newfoundland and Labrador appears to collect, at best, a modest return on its natural resource assets.

• The high costs of development and exploration mean that the province collects about one eighth the revenue per barrel of oil that Alberta does. This low revenue rate, combined with a comparatively short lifespan for the projects, means that Newfoundland and Labrador will not benefit from this resource to the same extent that the other oil producing provinces have.

• Provincial revenues from other mining activity are similar to those in other provinces. The more critical issue for this sector is to process the minerals locally. The recent agreement on development at Voisey’s Bay should help the province benefi t in a more significant way from this resource.

• Provincial revenues from the forestry sector are the second lowest in the country. The benefit from this resource appears to accrue to the owners of the province’s pulp and paper mills.

Appropriate natural resources policies are extremely hard to define. Ideally, the province should capture a larger share of the economic rent from its natural resources to help ensure a more prosperous future. The analysis in this report, although limited in scope, would appear to support a review of the province’s natural resources policies.

Other Benefits

Confederation brought a host of other benefits to Canada. The new province helped “complete” the country from coast to coast to coast. While politically Confederation prevented Newfoundland and Labrador from slipping into the United States orbit it has not inhibited the province’s strategic importance to continental defence. By adding 406,000 square kilometres of land to the country, Canada gained a wealth of natural resources and dramatically extended its coastline. As a result, the adoption of the 200 nautical mile limit allowed Canada to add 1,826,000 square kilometers of offshore waters to its territory with access to all the riches of the Atlantic Ocean. This physical enlargement also provided a new shipping outlet on the Atlantic sea lanes with St. John’s harbour and Gander airport is an important waypoint for
international flights.

Finally, the people of Newfoundland and Labrador have not only contributed economically to the success of the rest of the country but have also enriched the culture of the nation through the work of its writers, artists, performers and politicians. The province also enriches our history as the site of the first European settlers in North America.

This report has explored some of the dimensions of the Canadian economic union and
Newfoundland and Labrador’s relationship with it. In 1949, a small economy became part of a larger economy. This action entailed the creation of a customs union for the movement of goods, services and capital; the removal of barriers to labour movement; and the reduction of non tariff barriers. The process of adjustment to these changes has defined economic development in the province since Confederation. With the tumultuous decade of the 1990s behind it, Newfoundland and Labrador can now look forward to a period of sustained growth. The process of adjustment and integration is still ongoing and the policy choices made in St. John’s, Ottawa and the other provincial capitals will help determine how the benefits of the economic union affect the people of Newfoundland and Labrador.

Maybe Wally didn't read the report since it doesn't conclusively demonstrate that his preconceptions are valid.

Maybe he is planning on running as a Dan-didate either provincially or federally next time out.

-30-

Equalization options, by the numbers

The link to Wade Locke's analysis, a Powerpoint slide show. [The link dispappeared.  Here's a text version from the Newfoundland Quarterly]

Read it carefully.

Enjoy all the nice graphs and charts.

This is a goldmine is useful information, including a clear indication that those who seek to poor-mouth the provincial government's revenues are dead wrong.

Update: Here's the cbc.ca story. Unfortunately, the equally solid Telegram article isn't available on line.

-srbp-

Bad names for groups

Maybe it's an age thing, but when this headline popped up on the screen, your humble e-scribbler thought it was a bit odd for the tongue that walks like a man to be upset about car seats.

Groups and companies need to think about their organizational names just a wee bit.

Mock Williams' promises ad circulates widely in NL

Bond Papers e-mail got bombed with this mock up of a print ad using Danny Williams' own "promises" approach against him.

Here it is.

Think we'll see more of these before October?

-30-

Wade Locke: the story running nationally

Here's what Canadian Press is running on Wade Locke's Equalization assessment.

Note the variance from the numbers cited in the earlier post.

In the first try at crunching the numbers, Memorial University economist Wade Locke -- one of the province's leading experts on offshore revenue deals -- has found if Newfoundland were to stick with the Atlantic Accord and the old equalization formula until 2020, it would receive $18.5 billion in combined revenues.

But if the province follows an optimal strategy -- where it would leave the accord in 2009 and opt into a formula where a fiscal cap is implemented and 50 per cent of non-renewable natural resource revenues are included -- it would receive $24.1 billion, Locke said.

While the 100% exclusion might be better, if it is politically impossible, then it really doesn't exist.

On the other hand, the O'Brien approach - trashed by the Premier and others - generates significant extra cash compared to the existing arrangement for Newfoundland and Labrador.

-30-

Locke on Equalization: Prelim views

Memorial University economist Wade Locke released his own assessment of the various Equalization options last night.

Danny-lovers will rush forward to back their man, irrespective of the facts.

The rest of us can approach the whole business a little more insightfully that the local jingoists.

When the presentation is available on line, Bond will link to it and do a more detailed assessment.

In the meantime, here is a thumbnail sketch courtesy of Bill Callahan's synopsis on Night Line and Simon Lono's debrief via telephone. Under the circumstances, details here may be off, so wait for the full report before jumping off a cliff.

1. The old Equalization system with the offshore deals - the one the province still has - will generate approximately $18 billion for the province over a period of time (to 2020 or thereabouts?).

2. If the province opted for the O'Brien formula (50% exclusion of all resource revenues with a cap), then it would gain $22.8 billion over the same period.

3. The Harper option (100% exclusion of non-renewables only) would come out at $28.6 billion over the same period.

A few preliminary observations:

- Danny Williams was dead wrong about O'Brien.

Like stone cold, in the ground, stake through the heart kinda dead wrong.

So wrong, that being wrong any other way would seem right in comparison.

He claimed it was going to cost the province money.

It does the opposite.

Big time opposite.

Makes ya wonder if Danny reads his briefing notes.

Makes ya wonder if he understands his briefing notes.

Makes ya wonder if he just makes stuff up as he goes along.

- 100% non-renewables out is the best of the three options (if you only look at how much cash it nets.). Never mind the fact, that it is politically unattainable. Contrary to Ken Boessenkool's 2001 assessment, this approach actually generates bags of cash for a province like Newfoundland and Labrador.

Again, never mind that it is politically unattainable.

Unreachable.

A pipe dream.

- Danny Williams will claim vindication. His fellow jingoists will now feel their cause is just. The rest of us will wonder why they are out in the cold screaming when what they want is unattainable.

- No one wants to recall that Williams' own policy was for 100% inclusion of all resource revenues.

There's that pesky wrong thing again.

- 100% inclusion plus the offshore offset deals is still a decent option. It generates cash in the bank to the tune of $18 billion. Nothing to sneeze at. All depends on whether you piss it out the door or actually invest money properly.

- Of course, Danny Williams doesn't want to talk about developing a debt management plan right now, i.e. running the province properly. He's too busy getting his mug on TV.

- Locke apparently didn't assess another option in front of the province, namely 100% exclusion of non-renewables with a cap. Forgotten in the Premier's irk-fest is the fact that the Harperites have actually put three different Equalization formulas in play.

- The province hasn't lost anything.

- The province isn't jammed up, as the Premier seems to suggest.

- The province can still play the choice game and come out with significant bags of cash ahead of where it is today.

- Why is Danny Williams persisting in his racket and committing provincial government policy to a partisan row at public expense?

-30-

Mid-week round-up

1. Even the nationalists are moving from Newfoundland and Labrador. Greg will be missed by many of us.

2. This piece on Scottish separatism has been getting plenty of hits over at Offal News.

3. Then there's this Offal News devastating critique of Danny Williams' comments on Tuesday about the offshore oil industry.

4. It only took a decade, but the federal government is finally building new offices and training facilities for the Canadian Forces at St. John's. The new facility will house CFS St. John's, as well as army, air force and communications reserve units and cadet units.

It's a$101 million capital project.

So why the delayed budget?

Normally, the provincial budget is tabled by the end of March.

This year it will come on April 26.

How come?

The decisions have certainly been made.

This and this are just the latest of a string of budget announcements for the new fiscal year.

Dulce et decorum est

From The Telegram:

"If there doesn't happen to be a job for someone in St. John's in an engineering firm, that's unfortunate. I'm not happy with that. But there has to be some price paid in the short term," [Premier Danny Williams] said.

Partisan abuse of AG even worse

The use of the AG's office for partisan purposes is worse than first thought.

Here's what Premier Danny Williams said to reporters, yesterday:

If three quarters of the people who were reported on happen to be Tory, then — if that was the case and there was some negativity — there then it would be disproportionate to the Tories," Williams said.

"If we do this over the complete period of time, it's a fair representation, because it's all relative."

Even though the problems in the House started after 1997 (by the AG's own reports), Danny Williams wants to use a whole bunch of other members of the House, mostly Liberal, to try and counterbalance what happened over the past decade.

Notice, by the way, that in the past decade, Danny Williams himself has been in the House of Assembly either as Leader of the Opposition or as Premier for six years.

60% of the key period.

Whatever the Auditor General was originally going to do was directly relevant to judging the behaviour of all people seeking re-election. It's especially relevant to use detailed information to balance what those individuals knew and did with what they promised to do.

The Premier also said this:

"If people are going to decide on what's right or wrong in regards of what [incumbents] did was appropriate or inappropriate, then they are in a position to measure what went on before and what went on with other governments, and what the standard was," Williams said.

That assumes that what voters see is a complete record, let alone one that is relevant to the goings-on in the House over the past decade.

Don't count on that level of disclosure.

After all, the Premier still hasn't come clean on what he knew about the the secret bonus cash, when.

And that's really the crux of the problem for the Premier.

He set the bar.

He should be judged against what undertakings he gave to the electorate.

What Clyde Wells did should be irrelevant. Danny Williams just made it germane.

He won't like the consequences of that comparison.

Weighed.

Measured.

Came up really short.

New Leo 2s for Canadian Army in Afghanistan

Canadian Forces will be leasing 20 Leopard 2A6Ms for service in Afghanistan.

The new tanks will replace a squadron of 30 year old Leopard 1 tanks currently deployed.

AG's office becomes partisan tool

Cabinet has decided to give Auditor General John Noseworthy double the staff so that he can conduct complete assessments of expense claims by every member of the legislature since 1989. The assessment will apparently be done before the general election in October.

Some are describing this as an extension of Noseworthy's mandate from cabinet from July 2006.

They are wrong.

Noseworthy was asked to assess claims to determine if their was overspending dating back to 1989.

He did that and found none.

The second phase of Noseworthy's mandate - at least according to the order-in-council issued last summer - was to conduct a comprehensive audit of the years from 1998 to the present. presumably that was to piece together the expense records for the entire legislature, given that the former financial director was fond of overwriting his spreadsheets.

Instead, Noseworthy is checking to see what members of the legislature claimed on their expense accounts. Premier Danny Williams says he wants the whole pile - over 120 current and former members - to be assessed so people can compare current sitting members of the legislature to those of the past.

This is a complete change of mandate, presumably with the full support of the cabinet. it's noticeable that the detail audit, which would have revealed far more about current members of the legislature on both sides of the House, has apparently been conveniently shelved.

Odd that Williams would do that.

Odd that is unless former members of the legislature, like say Danny Dumaresque, were planning to run again and Williams might be looking for more dirt to use during the campaign. He decries personal attacks when aimed at him, but loves to launch them against others.

Williams should release every single report, unedited to the public on every single expense by every single legislator.

That's the only way to be fair and non-partisan.

That way, we - the voters - can all see what happened.

Odds are though that Noseworthy will let the public see only measly dribs of information approved for disclosure and likely long after the information has been disclosed to cabinet.

Noseworthy's reports thus far have been grossly inadequate in virtually every respect. We should expect nothing better this time around.

Only full disclosure would be fair.

Anything else smells of dirty, old-fashioned partisan politics.

For some of us, the truly bizarre idea is that Williams would want to have himself compared to former members of the legislature.

For example, when it comes to accountability, transparency and accomplishment in a short time span compared to, say, a Premier 15 years ago, Danny Williams can be weighed, measured and found sadly wanting on every score.

Ditto for his deputy.

Williams: Just the facts, Ma'am

In the ongoing spittle contest with the federal government, Premier Danny Williams held a scrum today and issued a news release on the facts of Prime Minister Stephen Harper's broken promise.

Did Harper break a promise?

Yes.

Has anyone shown the financial impact on the province?

Nope.

That's a set of facts the provincial government isn't talking about.

Are there things the Premier isn't talking about besides that?

Yes. Take this excerpt:

The Premier also agrees that for now there is no cap on the Atlantic Accord. But the province will be forced in the near future to take the same alternative as Nova Scotia was forced to take in their budget last week which results in a cap on its accord revenues.

What the Premier didn't say is that he's referring to the point when the provincial government goes off Equalization, i.e. becomes a so-called "have" province.

That's a cap built in to the 2005 offshore Equalization offsets deal.

or consider this bit:

The Premier also pointed out that contrary to some commentaries recently Newfoundland and Labrador in fact contributes greatly to the Canadian federation, in particular as it relates to natural resource revenue.

“Over the life of our three existing offshore oil projects, projections indicate the federal government could take in approximately $20 billion on those projects, and several billions of dollars on the Voisey’s Bay project,” added Premier Williams. “These are just two examples of the contributions our province make to this federation; contributions which greatly assist the federal government in delivering important programs and services to the Canadian people.”

Note the conditional language; the federal government "could take in."

Ok. Well, over the life of the projects - upwards of two decades - it likely will hit that number.

What about the provincial take?

Well, you won't hear those figures from the provincial government.

Provincial government revenue from the offshore isn't convenient when you have been busily spreading the myth that that every single development deal ever done before October 2003 was bad, that we always gave away our resources.

And for the record, the federal revenue from economic activity in Newfoundland and Labrador ran at about $4700 per person in 2004. Federal transfers to the provincial government, to individuals and to companies ran at about double that in the same year.

The Premier is right. Newfoundland and Labrador does contribute tremendously to the country.

It also reaps tremendous benefits.

Just as well to acknowledge the facts.

The question is how the province can grow and thrive in the future.

People certainly can't support good policies if all they have is a selective presentation of "facts" in a government news release.

We sure won't get anywhere with a pointless war of words with the federal government.

-30-

Matthews packs it in

Federal member of parliament Bill Matthews (Lib., Random-Burin-St. George's) announced on Tuesday he will wind up his 25 year career in politics when the writ is dropped for the next federal election.

Matthews was first elected in 1982 as a provincial Progressive Conservative. He moved to federal politics in 1997 and crossed the floor to sit as a Liberal under Jean Chretien.

Speculation will now mount to see who might try to replace him.

Among the names likely to surface: former provincial Liberal cabinet minister Kevin Aylward, who represented a provincial seat in the western end of the riding. Current Liberal member of the House of Assembly Judy Foote's name will also likely be tossed around. Her provincial district is in the eastern end of the riding.

-30-

Defence report notes threat to oil refineries

According to CanWest's David Pugliese, an internal defence department report notes that oil refineries across Canada could become a target for terrorists aimed at crippling the North American economy.

A military exercise planned for the NorthWest Territories in April will apparently include a scenario involving threats against an oil refinery. Troops involved in the exercise will come from Western Canada and the Maritimes.

Offshore rig security is not a new issue. In February, a message posted to an al-Queda website called for attacks on energy infrastructure in North America, Venezuela and Saudi Arabia.

Canada's special operations unit, JTF 2, has trained for security incidents involving offshore oil rigs. [Photo: Department of National Defence]

Pugliese notes that some of the possible threats globally include attacks on choke points where tankers pass on the way to and from oil storage and refining facilities.

In Newfoundland and Labrador, such a choke point exists in Placentia Bay. Tankers laden with crude from the local offshore and from the Middle East regularly transit the Bay on the way to and from both the Come by Chance refinery and the Whiffen Head oil transshipment facility.

-30-

White Rose production increase approved

The provincial government has approved a production increase for the White Rose oil field, taking annual maximum production from 36.5 million barrels up to 50 million barrels.

The production increase will likely mean the project will achieve payout sooner. As a result provincial royalties will increase to 30% per barrel once payout is achieved.

According to the Globe and Mail, this production increase request was submitted at the same time as a proposal to bring additional oil on stream. That proposal hasn't been approved yet.

-30-

Keith Coombs: poseur future Dan-didate

Keith Coombs, the St. John's city councilor chiefly responsible for the public money pit called St. John's sports and entertainment should perhaps think about showing some concern for his miserable track record.

More attention to that, say, rather than engaging in a completely pointless little speech about boycotting a meeting with Loyola Hearn. Coombs lacks credibility on matters of public finance given his sorry track record at city hall.

Prediction: Coombs is sucking around the Premier to see if he might get a nod to tackle Hearn on behalf of the premier in the next federal election.

If there was a provincial seat open in a St. John's seat, Keith might run there, but since the place is already chock-a-block full he can look at earning the favour of his Fearless Leader and run as a Dan-didate for the Premier's federal political party, soon to be announced.

Prediction the Second: Coombs will get his money-wasting political butt smeared all over the electoral map.

Residents of St. John's know Coombs too well.

Residents of Mount Pearl, who make up a chunk of the riding of Keith's dreams, don't want him any more than the people of Southlands do.

Closely Related Prediction: Oh yeah, speaking of municipal politicians looking to upgrade. Word out of Mount pearl is that Mayor Steve Kent's campaign team is organized and the cash is in the bank.

Kent, who just a few short months ago was backing Liberals at a Liberal convention in Montreal, is lined up to replace Harvey Hodder when he packs it in a few short months from now.

Kent will be running as a Dan-didate, by the way. The only political party that hasn't received the ambitious mayor's political attention would seem to be the NDP.

A fair share of oil and gas revenues

It's the first anniversary of the death of the Hebron negotiations.

Following are three slides from a presentation by Memorial University economist Dr. Wade Locke tackling the question of whether or not the province is getting its "fair share" from oil and gas revenues.

The entire presentation and an article based on the slides can be found at links here.

Figure 1, above, compares the government "take" across several jurisdictions. Locke defines the government "take" as government revenues divided by net cash flows.

Figure 2, above, shows the change in government "take" as oil prices increase per barrel. Note where Newfoundland and Labrador falls in relations to the other jurisdictions, including Alberta.

Figure 3, above, compares net cash flows among the two orders of governments and the companies.

Reading the article and follow the slides one gets a very different impression than the one left by the provincial government on what is involved in the issue of offshore revenues and the provincial government's "fair share".

For example, as noted last year, Premier Danny Williams told the House of Assembly that the 4.9% equity position in Hebron was worth about $1.5 billion over the life of the project, compared to the estimated revenue to the treasury of $8.0 to $10.0 billion over the life of the project.

-30-

Feds take out radio, newspaper ads challenging NL Premier

OTTAWA - The federal Conservatives are hitting back at the premier of Newfoundland with radio and newspaper ads, The Canadian Press has learned.

The feds will respond to Danny Williams, who ran ads of his own last week accusing them of breaking a promise to his province with the recent federal budget.

The ads will begin running Tuesday, according to an internal government memo.

The memo includes talking points for Tory MPs when speaking about the federal-provincial imbroglio, including: Ottawa never broke its promise, Newfoundland and Labrador gets more money under the budget, and Danny Williams just wants a special deal which would be unfair to other provinces.

The budget has angered Newfoundland and Nova Scotia because it says they can only access a newer, more generous equalization program if they give up the Atlantic Accord.

That accord, signed with the previous Liberal government, excluded offshore oil revenues from equalization calculations.

Update: The Canadian Press version here.

-30-

Ont. links Lower Churchill support to feds and Quebec

Ontario energy minister Dwight Duncan told reporters in St. John's on Monday that his province won't be purchasing any Lower Churchill power unless Quebec and the federal government back the project.

Duncan spoke to reporters following a meeting with Newfoundland and Labrador natural resources minister Kathy Dunderdale.

The vocm.com story is based on comments by Premier Danny Williams, comments made before Duncan met with reporters. Obviously what Williams described as "a serious look" by Ontario at the project, doesn't match up with the reality.

As Bond Papers has noted before, the Lower Churchill project may not proceed. The current war between Williams and the federal government makes it extremely unlikely that the federal government will invest in the project in order to meet the 2009 timeline for project sanction.

Williams has also criticised Quebec for its supposedly unstable political climate.

In this cbc.ca story, the Dunderdale correctly describes the federal government's commitment to the project, saying: "Right now, we've got a commitment from Prime Minister Harper that he would consider financing for the project...". Premier Danny Williams consistently misrepresents Prime Minister Stephen Harper's commitment as being a loan guarantee.

Duncan's comments make it clear that potential customers will want to see the financials on the project before they consider buying. So far, the province's hydroenergy corporation hasn't been able to start purchase talks since the financials of the project are still being finalized.

-30-

Oram confirms government is aiming to defeat Harper at polls

The transcript confirms it.

Paul Oram, Premier Danny Williams' parliamentary assistant told radio listeners across Newfoundland and Labrador that the provincial government is aiming to see Stephen Harper's Conservatives defeated at the polls in the next federal general election.

As Oram put it:

You know people have the right to vote anyway they want and sure we right now as a government feel that he [we?] would really like to see Stephen Harper gone but the fact of the matter is the people will vote, its their voice that will vote and it's the same here. [Emphasis added]

-30-

Danny Williams: "My solution is to get rid of Harper."

From ctv.ca, based on Premier Danny Williams appearance on CTV's Question Period and reports from local affiliate NTV.

Williams told a vocm.com radio call-in show this morning that criticism of his efforts across the country are coming from or are influenced by the "communications spin" coming from the Prime Minister's Office.

Williams made the same claim during the 2004/05 flag flap. Polling conducted for Williams office showed that 60% of those surveyed were "not supportive at all" of Williams' decision to remove Canadian flags from any provincial government buildings in Newfoundland and Labrador.

Meanwhile, Williams' campaign to defeat Stephen Harper at the polls is causing rifts not only between the provincial Progressive Conservative Party and its federal cousin, but reportedly within the provincial party as well. Williams' branded federal Conservatives, saying anyone who supports the federal government has betrayed his or her province. In doing so, Williams also labelled three federal Conservative members of parliament, all of whom are very popular with local voters.

Update

Danny Williams saidon vocm.com's Open Line with Randy Simms:

But what's happening is you're being influenced by the PMO spin. I mean, you know, the Prime Minister's Office has a huge, huge communications network and, so, you know, this is where the letters to the Globe and Mail are coming from and all of that and they'll, they'll fight that.

-30-

Taking out Harper

While it will take a check of the transcript to be certain, it sure sounded like Paul Oram, Premier Danny Williams' parliamentary secretary, told listeners to vocm.com's Night Line that the Newfoundland and Labrador government is working to see Stephen harper's government defeated at the polls in the next federal election.

Does that get bumped up ahead of taking ExxonMobil out or will Harper have to wait until last April's Big Promise is fulfilled?

Can anyone keep track of these unfulfilled promises?

-30-

The need for public discussion

Following is an opinion piece originally published in The Telegram during the offshore discussions in 2004. It is based on the longer piece of the same name, posted below in four parts.

_______________________

Which is to be master?
Public discussion, more information needed on Atlantic Accord changes

“The absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them.”

The Government of Newfoundland and Labrador currently receives 100 per cent of provincial revenues. Under the 1985 Atlantic Accord, the provincial government gained the right to set its own revenue regime for offshore oil and gas developments and it has done so through legislation and development agreements with the companies that have brought Hibernia, Terra Nova and White Rose on stream. It collects every penny of the revenues defined in the Atlantic Accord, and set out in those development agreements. In addition, it collects revenues, mostly taxes, from the business that have grown up around oil production.

The Williams administration, like the Grimes administration before it, claims money is lost through an Equalization “clawback”. There is no clawback in the way that word would normally be used. Ordinarily, Equalization is a glorified top-up scheme. Any provincial government making less than a national standard from its own-source revenues gets a cheque from Ottawa to make up the difference. Make more money; get less of a top-up. If there was a sudden growth in high technology manufacturing – if the province became a Celtic Lynx – Equalization would be reduced accordingly.

The Atlantic Accord contains a provision than offsets any losses in Equalization transfers resulting from growing provincial government revenues, for a period of 12 years. The calculation is made on a 10 province standard, so it is no surprise that last year the province collected $123.8 million in oil royalties and received $178 million in offsets. The major problem with the offsets – if there is a problem - results from the fact the offset provisions are triggered by quantity of oil produced, not on their economic impact as such. Once triggered, they decline over time irrespective of how many oil fields have been developed or what their economic benefit has been to the province. Danny Williams’ current proposal is apparently aimed at changing the offset provisions of the Accord.

There are at least two major problems with the proposal from the Williams administration that would, as Danny Williams recently put it, “renegotiate the Atlantic Accord”. The most significant problem is that there is no plain English description of the problem or of the government’s proposed solution: it isn’t in writing. How can anyone judge the success or failure of upcoming negotiations between the federal and provincial governments if we do not know what the Williams administration is seeking?

The second problem is in the way the argument has been framed. The Williams administration claims that by changing the offsets, the provincial government can become the “principal beneficiary” of the offshore, as the Accord intended. Unfortunately, the Atlantic Accord does not say the provincial government will be the principal beneficiary nor is “principal beneficiary” defined as meaning provincial government revenues. The Atlantic Accord delivers significant benefits to the province as a whole. The provincial government gets the right to co-manage the offshore with Ottawa. The provincial government sets its own revenues, as if the resource was on land. The province as a whole gets industrial benefits, something Brian Mulroney considered to be a major aspect of the Accord. Those industrial benefits go against the spirit if not the letter of inter-provincial free trade agreements and the North American Free Trade Agreement, Right now, the Accord is exempt from NAFTA.

“Principal beneficiary” is central to the Accord; redefining it changes the Accord fundamentally. Change the Accord’s underlying principals and it may well become a new deal, one that would be subject to NAFTA. Of all the Accord provisions, the one that would clearly not fit NAFTA is the industrial benefits provision. We can’t be certain, in largest part because the Williams administration proposal has not be clearly stated and thoroughly examined. There is enough information, though, to encourage the provincial government to be cautious.

It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. There is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned. More important than mere contrariness though, the absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them. Getting more cash from Ottawa is one thing. If that comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. If nothing else, the people of the province have a right to know what is being talked about. They will either reap the reward of the proposed changes or bear the burden.

-30-

Which is to be Master? Part 1

Originally written in mid 2004, Which is to be master? was an attempt to dissect the Williams' administration's efforts to change the Atlantic Accord (1985).

The issue of offshore revenues and Equalization hasn't disappeared in the past three years. Since this paper contains some useful background information, Bond Papers offers it in sections.

__________________________________

Which is to be master?

An assessment of the Williams administration proposal to amend the Atlantic Accord

"When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means just what I choose it to mean - neither more nor less."

"The question is," said Alice, "whether you can make words mean so many different things."

"The question is," said Humpty Dumpty, "which is to be master - that's all."

- Charles Ludwig Dodgson, (Lewis Carrol), Through the Looking Glass

A. Introduction

It is now commonplace for people to believe that neither Newfoundland and Labrador nor Nova Scotia is being treated fairly by the federal government with respect to revenues from offshore oil and gas resources. As the story goes, the federal government claws back upwards of 85% of revenues to the two east coast provinces under the Equalization program, contrary to the two Accords that govern development of the oil and gas fields. Both Premier Danny Williams of Newfoundland and Labrador and Premier John Hamm of Nova Scotia contend that this clawback hampers their provinces from developing fully and from realizing the full benefits of the oil and gas resources off their coastlines.

This paper examines the Williams administration’s proposal to amend the Atlantic Accord. The findings are based on publicly available documents including the Atlantic Accord, the implementation legislation, the Williams government’s overhead slide presentation released to news media as well as papers and public comments offered by supporters of the provincial government’s approach.


B. The Williams Administration and the offshore

There is no single, concise, public statement of the Williams government’s proposal to amend the Atlantic Accord. To date the provincial government has released only a copy of an overhead slide presentation, apparently made to federal officials on 04 March 2004. In addition, the Premier has made public statements and issued at least three news releases on the subject. No other correspondence between the Government of Canada and the Government of Newfoundland and Labrador is in the public domain.

The Blue Print, the Progressive Conservative election platform, contains several references to resources and revenues from the offshore. Since they are the party’s platform they must be taken as statements of policy for the new government, or at least a statement of intentions to guide the government’s overall policy. This assessment is based on these documents, statements by senior officials of the Williams administration published before October 2003 as well as comments by John Crosbie.

The Blue Print commits the Williams government to “seek jurisdictional control and ownership over petroleum and other economic resources in the offshore as a means to achieve greater prosperity for our Province and more opportunity for our people.”

With respect to oil and gas revenues and revenue sharing, the Blue Print commits the Progressive Conservative party to “press the federal government to remove all non-renewable resource revenues from the calculation of equalization payments. In exchange, we will commit, in a formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize economic infrastructure in the Province and to bring down the provincial debt, so that future generations of Canadians living in this Province will continue to benefit long after the resources are used up.”

The only specific reference to the Atlantic Accord is a commitment to use its industrial offset provisions to the fullest extent possible. The Blue print also commits the provincial government to seeking transfer to the provincial government of the 8.5% share of the Hibernia project held by the Government of Canada.

In early 2004, Premier Danny Williams began discussions with the province’s federal cabinet representative John Efford to ensure that the province received what Premier Williams described prior to a February meeting between the two as “100% of our offshore revenues.” According to Williams, Ottawa gave a bad deal to Newfoundland and Labrador in the Atlantic Accord. The proposal would change the Equalization offset provisions of the Atlantic Accord to “provide a payment equal to 100% of the net direct provincial offshore revenue”. Net direct revenue is defined as “Royalties and Corporate Income Tax which is generated in the NL offshore area, less the equalization clawback (currently at 70%)”.

The objective was described in similar terms by a March news release: “Premier Williams has been actively pursuing the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.” A similar statement was made in April: “Premier Danny Williams today reiterated his government’s position on the Atlantic Accord and reaffirmed the province will continue to aggressively pursue the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.”

Changes to the offset formula would end what both the Blue Print and Premier Williams have repeatedly described as a “clawback” of resource revenues by the federal government through reductions in the province’s Equalization entitlement. The notion of an Equalization clawback is clearly described in the Blue Print:

A Better Deal on Oil and Gas Revenues

The Government of Newfoundland and Labrador will collect billions of dollars in revenues over the next 20 to 30 years from oil, natural gas, and other minerals. Less than a quarter of the revenues will stay in the Province. Ottawa will simply deduct most of the increased revenues from equalization payments. This deduction is known as "the equalization clawback".

The clawback denies us the opportunity to build a better future for our children and grandchildren. We should not have to consume our non-renewable resources for current expenses and leave none of the inheritance for our children and grandchildren.

Of particular interest, both Premier Williams and other Conservative party commentators have linked provincial government offshore revenues with the concept of the province being the principal beneficiary of offshore development under the Atlantic Accord. In his news release of 12 March 2004, Premier Williams said:

"Essentially, we are asking the federal government to live up to the spirit and intent of the "principal beneficiary" component of the Atlantic Accord. Currently, the federal government receives 86 per cent of the revenues of our offshore petroleum resources, while the province receives a meager 14 per cent," added the Premier. "This revenue sharing is completely contrary to the spirit and intent of the accord and must be addressed now before these non-renewable resources are gone forever. Our province is facing a very serious fiscal situation which must be addressed. We are making tough choices to manage our expenditures and to grow our revenues at the provincial level. We, as a province, are putting into place a long-term plan to grow our economy; however, Ottawa must also be a part of the solution."

The overhead slide presentation describes the Atlantic Accord as being a ‘“Memorandum of Agreement between the Government of Canada and the Government of Newfoundland and Labrador on offshore oil and gas resource management and revenue sharing.”’ The paper includes several slides purporting to confirm that “[a]nalysis shows that Newfoundland and Labrador will not be the principal beneficiary of the revenues generated from oil and gas developments.”

Similar arguments have been advanced by John Crosbie, who served as co-chair of the federal Conservative Party’s 2004 election campaign in Newfoundland and Labrador.

9. Mr. Martin’s commitment is worth nothing unless he puts in writing that “principal beneficiary” means that Newfoundland and Labrador is to receive 100 per cent of all offshore revenues, including royalties, provincial corporation income taxes, all fees and bonuses etc. on a net basis with no clawback effect and to be received until we become a “have” province with agreed benchmarks as to when “have” status is achieved. [Run-on sentence in the original. ]

Flowing from these statements of the provincial government position, four issues must be addressed. These are ownership of offshore resources, the origins of the Atlantic Accord and federal government intentions, the existence of a “clawback” in the Equalization program, and definition of the term “principal beneficiary”.

Continued in Part 2

-30-