Going it alone...with partners

While media reports are reflecting Danny Williams own "go-it-alone" words from today's announcement on the Lower Churchill hydro project, a closer look at the announcement today reveals a very different picture.

Williams didn't announce that discussions were beginning on project financing or that the project would begin within two to three years. Rather Williams announced today that there would be further study and analysis to determine the project's feasibility. Any decision on construction would be taken in 2009 with Hydro taking the "required time to complete due diligence on the feasibility of this project" in the meantime.

Williams key message is a simple one, repeated several times today in the House if Assembly:

- "The purpose of the announcement today was to indicate that the Government of Newfoundland and Labrador, and the people of Newfoundland and Labrador, are going to do this project themselves."

- "...but the big message here is that we are masters of our own destiny, that Newfoundlanders and Labradorians are in control of this project for the benefit of Newfoundlanders and Labradorians."

- "By taking the lead we are in full control of the project, unlike the circumstance with the last government; that project, basically, was going to be controlled by Quebec..."

The essence of Williams' comments - that the province will find markets, arrange financing and set the project in motion - essentially reflect the same position that Newfoundland and Labrador has always been in as the owner of the resource from which the electricity is produced. While the Upper Churchill was the product of negotiations between a private sector company - BRINCO - and Hydro Quebec, all subsequent negotiations for development of the Lower Churchill proceeded on the basis of development undertaken by the Lower Churchill Development Corporation, a subsidiary of Newfoundland and Labrador Hydro.

Control has always rested with the Government of Newfoundland and Labrador on whether or not to proceed with any development of the Lower Churchill.

The Premier's announcement today is a sign the province is likely looking closely at the second of two development options proposed by the Ontario provincial government and Hydro Quebec in March 2005:

The second option would see Ontario and Hydro-Quebec negotiate a power
purchase agreement for the output of the project. Ontario's share would be one-
third of the total output (945 megawatts). Newfoundland-Labrador Hydro [sic] would fund and construct the assets.

With a provincial debt of approximately $10 billion, Newfoundland and Labrador lacks the fiscal capacity to borrow the estimated CDN$6.0 to CDN$9.0 billion needed to develop Gull Island and Muskrat Falls on the Churchill River without federal backing and other partners to share the financial risks.

Williams noted that the project will require federal loan guarantees and likely will involve financial backing from corporate partners other than just Newfoundland and Labrador Hydro. In the House of Assembly today, Williams said:

Having said that, we are well away from the actual financing arrangements. As you do know, the federal government has indicated that they would be providing a guarantee in this particular matter. We are leaving our options open on this. We may look at inviting some equity partners. [Emphasis added]

Any company sharing financial risks would also expect a share of profits from the project, as in a proposal from local company Altius Minerals to establish an income trust with Altius taking revenues based on gross sales revenue.

While Williams said he felt confident the federal government would provide loan guarantees, the Harper administration has made no commitments publicly. Stephen Harper has only committed his party to support the project in principle and engage in discussions.

"We support this proposal in principle and believe it is important for Newfoundland and Labrador to have greater control of its energy mix. A Conservative government would welcome discussions on this initiative and would hope that the potential exists for it to proceed in the spirit of past successes as the Hibernia Project. [Emphasis added]"

Williams and natural resources minister Ed Byrne co-hosted a news conference linked by satellite link-up from two different parts of the province. In many respects, Williams' announcement today contained very little new information that would warrant the cost and production associated with it.

It is difficult to escape the conclusion that the announcement was intended to give the provincial government some positive news in the midst of a series of bad news announcements in the fishery, forestry and offshore oil and gas development.

Today's announcement will play well politically but the Lower Churchill is a long way from developed. It is also a long way from being shown to be in the best interest of the province, as a matter of public policy, to develop the Lower Churchill in the way the Premier proposed.

Liberal caucus charts course for oblivion

For those who may have missed the machinations within the provincial Liberal Party, Jim Bennett's idea of a two-tier minimum wage had nothing to do with his resignation today as party leader.

The minimum wage issue was just the pretext used by some Liberal members of the House of Assembly to get rid of the newly minted leader.

Let's get that out of the way up front.

So now Bennett is gone, although the Liberals did manage to get their hooks into Bennett's fund-raising ability with a promise he will still support the party.

Likely the only leader that will be acceptable to the caucus is one of their own and so it will turn out that one of the eleven who just three months ago couldn't work up the cajones or the cash to run in a proper race will have the job fall into their lap for free. Perhaps that was the real motive all along for some of the would be leaders.

One person who shouldn't party leader be is House leader Kelvin Parsons. Even by his own account, Parsons conversation with attorney general Tom Marshall was so far outside the bounds of acceptability that the only honourable recourse would be for Parsons to resign from the legislature.

At the very least, he should be wandering out the door of the Liberal caucus room and under no circumstances should he be continuing as House leader. No one should hold their breath waiting for that to happen, though; on the day the story broke, Opposition leader Gerry Reid rushed to defend Parsons, and by extension the patently indefensible.

No matter which one of the Caucus Eleven gets the job, the Liberal Party is headed for almost certain devastation in the next election. Short of cash, devoid of energy and so painfully short of any ideas - let alone fresh ones - this caucus will offer Newfoundlanders and Labradorians voters a choice between Danny Williams and a crowd of Parsons.

The choice will be obvious in all but perhaps four or five seats. In those cases, local candidates will hang on to their seat only by dint of their personal reputation or an especially nasty hatred for Danny Williams. No one can reasonably propose that Danny Williams, full of cash if nothing else, cannot spend enough oil cash to float into office with ease in October 2007.

In the meantime, though, the Liberal caucus has usurped the power of the executive and the members to chose a leader. In the same way that the absence of an energetic, effective Opposition undermines the democratic process in our province, the coup staged by the caucus undermines democracy within the Liberal Party. The caucus may sit smugly satisfied with itself today, but the course they have charted for the Liberal Party will almost certainly put the whole affair up on the rocks.

Perhaps after the next election, the hulk can be salvaged. Perhaps it can be rejuvenated in the best interests both of the Liberal Party and the electorate as a whole.

But in the meantime, there is likely nothing that can be done save brushing up on the words to "Nearer my God to Thee" while looking for a life ring.

Patricia Anne Cowan, 1943 -2006

I don't recall when I first met Pat Cowan. It was most likely April 20, 1989 at Hotel Newfoundland when she joined her fellow newly-elected Liberal members of the House of Assembly to celebrate their victory.

What I will always remember will be her cheerfulness, her positive disposition and her passionate commitment to the people of Newfoundland and Labrador. News of her passing today hit hard, much as it would when a member of the family dies. I haven't spoken to Pat in a few years but memories are as strong as they ever were.

Born in Ontario, Pat came to Newfoundland and Labrador in 1974 to teach. She was a school principal after 1980, elected to the executive of the Newfoundland Teachers' Association (NTA) in 1983 and served as the NTA's first woman president from 1987 to 1989. Cowan served as Minister of Employment and Labour Relations in the first Wells administration.

Others have remembered her commitment to saving greyhounds from being euthanised after their racing careers were over. God save us all if that is all people remember of a truly remarkable woman. While it is too easy to remember the dim-bulbs and the charlatans who infest public life in our province, Pat Cowan was a person who reminded us of the ability and compassion that is more common among public figures than the nay-sayers out there would admit.

In late 1994, Pat was appointed chair of a committee of the House of Assembly - the Select Committee in Childrens' Interests - to examine issues relating to children and youth of Newfoundland and Labrador. It's report, LISTENing & ACTing: A Plan for Child, Youth and Community Empowerment, recommended the creation of a child, youth and family secretariat within government and a child and youth advocate reporting to the legislature.

The work of that committee never went very far after the election of Brian Tobin but Pat did serve as a consultant on development of the strategic social plan consultation paper in 1996.

Pat's efforts on behalf of children and the young people of our province were rewarded with the election of Roger Grimes as leader of the Liberal party and Premier of Newfoundland and Labrador in 2001.

The work Pat completed along with Gerald Smith and Harvey Hodder, the other members of the committee, should be her legacy. It reflects not merely her lifelong concern for young people, but also of the commitment to the whole community in which she lived and to the province which became her home.

As the committee put it: "If society chooses to view a child with problems in isolation, then society has chosen to treat a symptom, not the root cause of the problem."

STATEMENT OF VALUES & PRINCIPLES

* We recognize children as human beings having their own rights and responsibilities;

* Children should have adequate access to the resources necessary for a healthy development;

* All children belong with families and need enduring relationships with adults. Children are uniquely dependent on their families for their survival, nurturing and development. This dependence implies that a child-centred approach is necessarily a family-centred approach;

* Bringing up children cannot be seen merely as a private matter, and therefore costs (financial and otherwise) of children should be shared between the family and society;

* Family/professional collaborations and partnerships are key to a child welfare system that is proactive, preventative and facilitative;

* The interdependence of social and economic development requires an integration of social and economic policies. Specifically, children should have a right to participate in the life and decision-making of society, directly or indirectly according to the child's age and development. (Newfoundland and Labrador Association of Social Workers, viii-ix).

The tragedy of Pat's death is that is is far too soon. She did so much good in her time on this Earth and while illness sometimes slowed her, she undoubtedly had more to accomplish. Those of us who knew her can be grateful for the blessing that came out of just being around Pat. Her family can be comforted knowing that she will not be forgotten; she did far more than most to make her world better than it was.

The world is a poorer place today, but Heaven is undoubtedly richer by far from Pat's being there.

When the world is in the crapper...

and it looks like no one loves you except your family and the people who get paid to love you, what's a guy to do?

Announce a Lower Churchill decision.

May 8, 2006 for Danny Williams.

January 1998 for Brian Tobin. The document is titled "The future is in our hands", which in itself is suspiciously close to Danny Williams' "master of our domain destiny."

Tobin's document is full of quotes familiar to anyone who paid attention to the recent Throne Speech and, indeed to anything Danny Williams has said in the past three years.

1998:

Two years ago, when I was given the privilege of taking up the duties of the Premier's Office and of shaping a government, I said that profound change in our society can never be legislated. It must come from the people themselves.

I believed then, as I believe now, that only when we change the way we see ourselves, and when we change the way others see us, will we realize our full potential - to live in a unique society second to none in this country.

We must never accept the seductive notion that someone else, somewhere else, has written the script for this province - a script of poverty and despair. We have to recognize that ultimately we are the authors of our own fortune or misfortune. Our future is in our hands.

If this is true of society, it is no less true of governments. It is not enough to talk about what could have been had the fishery not failed. It is not enough to note the costly mistakes of the past - Churchill Falls, Come By Chance, the Sprung Greenhouse or the dynamite blasts on either side of the Strait of Belle Isle.

Masters of our domain: the Danny Legacy Option wins Lower Churchill contract

Regular readers of Bond Papers will recall that in August 2005, we predicted that Newfoundland and Labrador Premier Danny Williams would chose the go-it-alone option on the Lower Churchill.

Today Williams confirmed the choice, in a vaguely worded news release. The release talks about the provincial government partnering with Newfoundland and Labrador Hydro; this is just a convenient bit of verbal fluff. Hydro is functionally a department of government. It doesn't partner with the provincial government: government tells it what to do.

The release is vague since it gave absolutely no indication of the business case supporting the decision. All we heard is that : "Today marks a turning point in our history as we acknowledge that we as a province are capable of leading and having full control of this process."

"We know that we are capable of executing this project in a way that will ensure we maximize the returns while mitigating the risks," the premier continued. "We have the experience, knowledge and capacity to take on a project of this magnitude and we are recognized as world leaders in hydroelectric operations and development. This is about doing it by ourselves, for ourselves. We are on a path to be masters of our own destiny and the successful development of this project will be a significant
step forward in reaching that ultimate objective for this province."

The release is also vague since it doesn't indicated where markets for the power will be. Under one option presented by Ontario and Quebec, Newfoundland and Labrador Hydro would develop the project on its own with Ontario and Quebec buying the power. (see below as well as the original Ontario/Quebec joint release from last year.) The timelines in the Ontario/Quebec proposal match those in the Williams new release today.

The biggest advantage of the go-it-alone option for the provincial government is that it gives the Premier total control of every aspect. As the Bond Papers noted last October (reprinted last week),

A genuine contradiction would exist if the [Progressive Conservative policy manual, the] Blue Book embraced the philosophies underpinning the Wells and Peckford approaches. It does not. Rather, Williams appears to be focused on control as an end in and of itself. For example, take this phrase dealing with prospective hydro development: "I'’d like to see us own the lion'’s share of the Lower Churchill...". The provincial government already owns the "lion's share" and can claim rents from electricity as a matter of owning it.

What Williams is talking about here is owning and controlling the company which generates the electricity.

Recent estimates put the project cost significantly above the CDN$3.5 billion originally suggested. In January 2006, CBC Radio used the figure CDN$ 9.0 billion or, put another way, approximately the same size as the current provincial debt. Since Hydro is a Crown corporation its debt is carried on the provincial government's books. The lower cost estimate is more than double Hydro's existing debt load (CDN$1.4 billion) while the higher estimate is over six times the current Hydro debt.

There is no indication in today's release of any possible role for Altius Minerals, a company that had proposed a financing option for the Lower Churchill construction and which is currently studying the feasibility of building a new oil refinery in the province. Premier Williams announced that private sector venture in February 2006. Altius proposal would see that company take a share of the project revenues.

According to a story in the Halifax Chronicle Herald, Danny Williams efforts to fund the Lower Churchill's non-Quebec route for transmitting power to markets other than Quebec was rejected by New York funders as being too costly and impractical.

In making today's announcement, Premier Williams appears to have discarded other proposals without indicating why. One, from Ontario, Quebec and SNC Lavelin offered two options. In one version the companies would fund construction and lease the generating facilities from Newfoundland and Labrador Hydro for a period of 50 years.

In the second option, Ontario and Quebec would sign a power purchase agreement with Newfoundland and Labrador Hydro for all the Lower Churchill's output for an unspecified period.

One of the major challenges in developing the Lower Churchill is finding a stable, long-term market for the power. The Ontario/Quebec second option would fit with the go-it-alone approach, or as we called it previously, the Pink White and Green Caribou Corporation. Long-term markets in Quebec and Ontario would help secure funding for building the Lower Churchill. Then only transmission infrastructure needed would be the additional lines needed to get the power from the Lower Churchill to Point A or some other location where the distribution system in Labrador meets the Quebec hydro grid.

Point A is the term in the Upper Churchill contract for the intersection of the Labrador and Quebec power lines. To avoid any references to the Labrador-Quebec border, the term "Point A" was inserted.

Williams doppleganger shows up in Corner Brook

Some guy delivered a speech in Corner Brook today claiming he was Premier Danny Williams.

Among other things, this guy said that government can't be using legislation to force companies to do things that aren't economically sustainable, like running fish plants when there isn't fish. If you go around threatening companies with expropriation, according to this guy, then you'd have a hard time attracting new investment.

This can't be the real Danny Williams.

Well, at least it isn't the guy who diddled around with Fishery Products' income trust proposal until it was useless. Of course, when that Danny Williams got around to putting legislation in front of the House of Assembly he tried to extort FPI into putting resources into plants that weren't economically viable.

It can't be the same guy who threatened to expropriate Abitibi's Stephenville mill if they shut it down.

[Speaking of Abitibi, check out this government page, last updated March 10, 2005 (!) that says Abitibi is reviewing the status of its Newfoundland operations, including Stephenville. That page is linked off the New England business development page that itself was last updated a year ago. Last August, Bond Papers drew attention to the public embarrassment of that website, complete with its picture of aircraft carrier deck crew supposedly being in Newfoundland and Labrador.]

It can't be the same Danny Williams who just a month ago was talking about getting legislation to take out ExxonMobil because government and the Hebron partners couldn't get a deal on developing that field.

And surely it isn't the same Premier Danny Williams who, on the same day that he was speaking against using political pressure against companies struggling with tough competition, found his deputy premier and fisheries minister (photo: left) on CBC Radio's Fisheries Broadcast warning the beleaguered Fishery Products International that it had better come up with plans for Fortune and other plants the company has closed if it ever expects to see government support for its current efforts at cutting costs and restoring profitability.

That last one could just be Tom Rideout riding on his own merry way. He's been known to say things that aren't backuppable and this might be another case of Rideout being out of sync with his boss.

But look at the other ones and you gotta wonder what Danny Williams is up to.

Supposedly Richard Nixon had a theory that if he acted insanely, then maybe his international opponents like Vietnam and China would be more co-operative at the negotiating table. They'd fear Dick might just go wacky one day and nuke them all. It was good cop/bad cop on a global scale with Henry Kissinger as the good cop.

Maybe Danny Williams is running the same little psychological ploy on the business sector.

Only problem is Danny is trying to play both parts at the same time, all by himself. At least Nixon had Henry the K.

Either that or the secret cloning experiments - the real work of the Department of Business - were successful and there are really two Danny's with maybe more to come.

There's a thought for the weekend.

Where is the PetroNewf bill?

In the current sitting of the House of Assembly, Bill No. 1 is an amendment to the Hydro Corporation Act which will set up the Crown-owned electricity company to tackle wind-power generation and get into the oil and gas business.

The amendment bill received first reading on March 22, 2006, right after the Throne Speech opening the new session of the legislature.

That is how important this bill was touted as being.

So far it hasn't proceeded to second reading. In the meantime, the budget bill has been passed along with an interim supply measure. Likewise, a raft of bills have gone to second reading since the House resumed sitting on Monday past after the Easter recess.

But still no Bill no. 1.

So what's the reason for the delay?

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

Update: Perhaps the delay has to do with the failed Hebron deal. Perhaps the Hydro Act amendments were supposed to give effect to the equity position and since the deal collapsed there is nothing else to bring forward.

It is noticeable that government set the Hydro bill as its first piece of legislation, before the interim supply act carried from the old session that ended the day before the Throne Speech. It preceded the supply motion and any of a number of bills that might be considered weightier.

It is also noticeable that this week, a series of modest pieces of legislation have received first reading and been posted to the House of Assembly website under the heading "progress of bills". Since 22 March, and having already passed first reading, the Hydro bill is a secret.

so where is it?

Secret Nation was a documentary after all?

The following originally appeared in the Montreal Gazette (Sept 26, 1993) when the local film Secret Nation hit theatre screens across the country.

In light of the appointment yesterday of John Fitzgerald as Danny Williams' emissary to what some seem to consider Mordor, it might be interesting to revisit some of the publicity surrounding a movie that I mistook to be fiction.

This piece is also interesting because in an interview with The Telegram today, Fitzgerald was quick to downplay his well-known anti-Confederate views. Perhaps his views have changed with reflection over time; perhaps his comment to the Telly on his 1998 public talk on the second referendum before Confederation is couched in equivocal terms so as not to alarm the forces of darkness into whose lair he will soon penetrate:

"I said it was no more or less rigged or corrupt than any other Newfoundland election had been."

Uh huh.

His apparent view in 1993, albeit relayed second-hand, is highlighted below.

Incidentally, for the mainlanders reading this, Secret Nation is a work of fiction. It's a smashingly funny movie that should be released on DVD...if only someone would get around to it.

Read on and enjoy.

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

Secret Nation is a conspiracy movie with a farcical twist
by John Griffin

Secret Nation is a film that asks a lot of hard questions and demands a lot of good answers.

The miracle of Michael Jones's controversial fiction feature about a McGill history student who returns home to Newfoundland to confront her past is that it's so enjoyable anyway.

The veteran St. John's film-maker and CODCO linchpin posits the persistent theory that Newfoundland was rooked out of its autonomous British dominion status and slung to Canada's stingy bosom by a rigged referendum in 1949.

It contends that confederation forces - in cahoots with a British government eager to be rid of a nation colony that had cost the mother country plenty during the economic rigor mortis of the Depression - cooked the vote in favor of annexation to Canada.

By today's standards, a voting margin so narrow that fully 48 per cent of the island nation rejected alliance, would have resulted in more debate, and more referendums, until a decisive majority could be established.

But on March 31, 1949, a highly questionable 4-per-cent spread was enough to snuff out a proud, distinctive country that had survived and thrived under the most arduous geopolitical conditions for 500 years.

The notion of a unique people under the cultural yoke of a larger majority played extremely well here in Quebec when Secret Nation screened during last year's World Film Festival.

It is safe to say Jones, the Newfoundland separatist, and Quebec nationalists locked in a love embrace.

Indeed, the film should have opened a commercial run at that time to capitalize on the barrage of media exposure that followed its tumultuous reception.

Canadian distribution being what it is however - which is to say, being what it isn't - Jones' distributor went fishbelly-up right after the festival, leaving the film in local theatrical limbo until last week, when it opened at Cinema Centre-Ville.

The happy coincidence of having a film about a referendum during an actual referendum might have netted Secret Nation pots of Canadian cash this time last year.

God! Anything to escape the terminally nod-inducing talk about constitutional reform, let alone something as smart, funny, tragic and scandalously juicy as Secret Nation.

Great art has legs, however, and conspiracy theories are forever. So Secret Nation feels as right now, during a no-name election campaign, as it did a year ago.

What's more, Jones has further hard evidence to back up the long- held Newfoundland contention that grievous injustice was done lo these 44 years ago.

"There's a general feeling in Newfoundland that there was a plot of some kind to railroad us into confederation and push us into the arms of Canada," said Jones over cold beverages and a chain of cigarettes in Old Montreal last week.

"It's always been in the air. Based on that, we did a certain amount of research, consulted with historians and that sort of thing before we made the film. "But it was only after the film was finished that I read a brilliant thesis by John Fitzgerald, a young historian in St. John's, that was very supportive of the conclusions of the film - even though the film was a piece of fiction. [Emphasis added]

"We had simplified a very complex time, and part of that fiction was the rigging of the vote itself.

"We made it clear that the vote had been rigged the very night of the vote."

According to Jones (and he's insistent on assuming full responsibility for his spin on events, in case of libel or history proving him wrong) Fitzgerald made it clear Jones and his screenwriter Edward Riche had willy-nilly touched all the elements of what he (Fitzgerald) believes to be an actual conspiracy. [Emphasis added]

"Furthermore, he says we were probably not that far off on the events of the actual night of the referendum. "He reports numerous election irregularities and reports that it's clear the Newfoundland confederates, with Canadian money, were totally in control of the referendum machine. "He says it's clear, by today's standards, that the whole referendum was a farce."

Plenty of that farcical spirit finds its way into Secret Nation.

This is, after all, a film with roots in the insidious CODCO comedy troupe, and its emotions torn between dyed-in-the-sea Newfoundland and the hip artistic generation that both loves home and leaves it.

The movie plays as a thoroughly contemporary piece, despite its historical content and a brilliant mix of archival footage, uncanny recreations, documented fact, domestic tragi-comic fracas, and the sweet unalloyed whimsy that is pure Newfoundland.

It's the kind of thing the Brits do so well in series they then sell to PBS.

CBC would be exhibiting nerve and intelligence to pick up on the trend and show Secret Nation in prime time this winter, when everyone can use a good conspiracy, and better entertainment.

Houston offshore oil and gas show: No Danny. No Ed. No John either?

From the Halifax Chronicle-Herald comes the news that no Newfoundland and Labrador government officials were present for the international news conference promoting Canada's oil and gas industry to reporters attending the Houston Offshore Technology Conference (OTC).

Business reporter Judy Myrden writes:

American reporters following the oil and gas industry noticed [Nova Scotia energy minister Bill] Dooks was the only Canadian government official present at the international news conference on the country'’s resource potential.

Newfoundland and Labrador Premier Danny Williams and Natural Resources Minister Ed Byrne were unable to attend due to "scheduling," and Newfoundland had no government representatives at the conference, which they usually attend.

One oil and gas reporter asked: "Do I understand your message - we're Nova Scotia, we're not that other place that doesn't like the oil and gas sector?" Mr. Dooks shifted awkwardly and said: "I'm here to speak about Nova Scotia. I really can'’t answer a lot of questions about Newfoundland. The Newfoundland industry will have to work out their own situation." Hosting the news conference was Jean-Michel Roy, consul general of Canada in Dallas, who gave a brief overview of Canada'’s potential, mentioning only Alberta. On his last slide, he mentioned the possibility of LNG terminals being built in Canada. Nor did he jump to the microphone to explain Newfoundland.

The Newfoundland booth at the huge trade show, which is part of the annual Offshore Technology Conference, was displaying an industry magazine with the cover of an old, rusty oil drum with oil coming out of a spout. The headline: NO DEAL! Hebron Project Going Down the Drain? The magazine dedicated its issue to the failure of the negotiations.

Apparently, the Premier couldn't go because he was busy with Fishery Products International. Ed Byrne, who is the government house leader, had to stay home to shepherd the budget bill through the legislature.

Instead, Premier Danny Williams told the House of Assembly that intergovernmental affairs minister John Ottenheimer would lead the provincial delegation.

The news release on this seems to have vanished from the provincial government website.

Mr. Fitz goes to Ottawa

John FitzGerald will be replacing Bill Rowe as Danny Williams' personal plenipotentiary to Disneyland on the Rideau, affectionately known to some as Ottawa.

Aside from trips to the national archives once in a while, Fitz last spent time in Ottawa working on his doctoral thesis in history.

The subject you may ask?

In announcing the appointment, Premier Danny Williams referred to Fitz's "astute knowledge of federal-provincial constitutional issues." The giant bio attached to the news release doesn't really give any hint of the experience Fitz has which would lead the Premier to make such a pronouncement.

Perhaps the Premier is impressed by Fitz's knowledge of Renaissance Italian political theory.

So what did Dr. Fitz occupy his time with to earn the degree?

Conflict and Culture in Irish-Newfoundland Roman Catholicism, 1829-1850. Ph. D. Thesis. University of Ottawa. 1997.

While this is no doubt the subject is a fine one worthy of academic inquiry, it is difficult to see anything in the new high commissioner's background that matches Danny Williams praise.

Perhaps some further digging will reveal more.

Anyway, in the meantime, congratulations to John FitzGerald. We at the Bond Papers wish him all the best in the new job.

Now where did I put my DVD copy of Secret Nation, again?

Harper's real view of the 2005 offshore deals

From the federal budget document Restoring fiscal balance in Canada: focusing on priorities :

Concerns Over Funding Arrangements
Targeted to Address Specific Regional Needs

The confidence of Canadians in the overall fairness of federal programs has been undermined in recent years as the result of federal actions that were seen to be departing from the principle of comparable treatment of all Canadians and their provincial and territorial governments. In particular:

* The February 2005 agreements to provide Nova Scotia and Newfoundland and Labrador additional fiscal Equalization offset payments sought to address the severe fiscal challenges faced by those two provinces as a result of their high public debt, but were widely criticized as undermining the principles on which the Equalization program is based. ... [p.43]

The current federal administration makes it plain that the 2005 offshore deals were outside the normal pattern of federal transfers to provinces. There is no indication of how the federal government will address the anomaly caused by the deals, but there should be no mistake that it is on their radar screen.

Loyola Sullivan likes to assure us all that the provincial treasury will be protected by the proposed Harper changes to Equalization. Those changes have to happen first and we have to see what they will look like before anyone can make a judgment about whether the 2005 deal was worth $2.0 billion or whether it will be worth more.

The differences between Danny Williams' views and those of Loyola Sullivan were assessed in February 2006 by the Bond Papers.

Danny and Loyola are not on the same page.

Williams' oil and gas corporation: institutionalizing dependence (reprint)

The House of Assembly will soon turn to debating the only major piece of legislation on the current agenda: amendments to the Newfoundland and Labrador Hydro act. In light of the imminent passage of that legislation and recent events during the Hebron fiasco, it is timely to reprint an article originally posted last October on Danny Williams' vision of a state-owned oil and gas company in Newfoundland and Labrador.

Note: The Antle story is no longer available online owing in large measure to the abysmal website maintained by The Telegram.

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

When Danny Williams released his Blue Book, it appeared to contain a contradiction. Thanks to Rob Antle's story in yesterday's Telegram, the contradiction is now more apparent.

The first chapter of the Blue Book copied almost word for word the Wells' administration Strategic Economic Plan (SEP). The SEP aimed to correct two fundamental weaknesses in the Newfoundland and Labrador economy, namely excessive dependence on a handful of major resource industries on the one hand and a shortage of local, accessible capital to support economic activity on the other. Since Confederation, the latter weakness had been addressed by federal transfer payments which had resulted in another form of dependence.

In some respects, these twin dependencies were historic issues. The pre-Confederation economy depended on the fishery, forestry and mining with the former being prominent. Local manufacturing was dependent as well, although before 1949, it relied on protectionist tariffs to keep Canadian manufactured goods out. Such was its level of dependence that within three months of Confederation, most of those manufacturing enterprises collapsed in the face of more robust and efficient business elsewhere.

The SEP identified entrepreneurship - the growth and development of the private sector - as the mechanism by which the Newfoundland and Labrador economy could be strengthened and the twin dependencies eliminated.

By contrast, the second chapter of William's Blue Book dusted off industrial development policies from the 1970s and 1980s with its focus on oil and gas as the means of generating cash for the provincial government. The Peckford administration viewed oil and gas as the sole means of financial salvation for both the Newfoundland government and for its society.

Peckford passed legislation to create the Petroleum Corporation of Newfoundland and Labrador, with its legislated share of each offshore development. Coupled with that, the legislation mandated that companies involved in the local offshore would be local companies. Through these legislated requirements the province would develop an oil industry that would ensure, in the words of both Peckford then and Williams now, that maximum benefits would flow locally from local resources.

The fundamental contradiction between these two approaches is that while the SEP is based on private sector entrepreneurship and increasing international trade for local products, the Peckford and now Williams approach is focused on state ownership of industry and on local markets.

A genuine contradiction would exist if the Blue Book embraced the philosophies underpinning the Wells and Peckford approaches. It does not. Rather, Williams appears to be focused on control as an end in and of itself. For example, take this phrase dealing with prospective hydro development: "I'’d like to see us own the lion'’s share of the Lower Churchill...". The provincial government already owns the "lion's share" and can claim rents from electricity as a matter of owning it.

What Williams is talking about here is owning and controlling the company which generates the electricity.

Consider as well, the rest of that section of Antle's story: natural gas should be brought ashore in Newfoundland and Labrador by pipeline so that "we have control of the pipeline so that it'’s not being compressed or liquefied and going in a God damn boat and going on down the coast somewhere."

In the absence of any demand for natural gas within the province or any demonstrable advantage to converting the province to gas, an entrepreneurial approach would support selling it to someone who wants it. Better to ship it to the United States in whatever way produces the best price than to spend money bringing it to a place that has no use for it. Revenue from that sale can support public services like health care. Privately owned local companies can own the ships that move the gas to market. Expertise in gas production and shipping, potentially using new technology, can give the local private sector a competitive advantage such that it can gain even more business around the globe than can be obtained purely within Newfoundland and Labrador.

A government dedicated to developing the private sector would create a climate in which local companies can exploit local resources thereby generating wealth. Government's share of that wealth through economic rents and other taxation would give sufficient revenue to deliver government programs and services.

In the Williams approach, the state - the provincial government - is merely a corporate entity with all the tools necessary to achieve local, i.e. provincial government, control.

The struggle for the Williams government is the struggle for control. He acknowledges that his supposed opponents are larger than government: "if you go up against Hydro Quebec, if you go up against Inco, if you go up against ExxonMobil, they'’re a lot bigger than our government is. That'’s the grim reality of all of this." His next comments identify the solution - build the hydro corporation such that it can "take on" the biggest out there.

The result of the Williams approach is difficult to predict. Certainly, in the short run, he may achieve considerable political success. He may be able to turn the energy corporation into a Mother Hen that will wrest a portion of economic developments for itself and then distribute these among local companies. The resulting jobs may carry with them votes.

In the medium- to long- term, though, the Williams approach cannot address the chronic, historic problems in the local economy. Over the past 25 years, Western economies have disposed of state-owned enterprises since they are notoriously unable to produce wealth as effectively and efficiently as the private sector. The ones that survive, such as Quebec's hydro corporation may be models for the Premier, but they are models from the past. They are models which are limited to very specific and primarily local activities. In short, they are expensive and ultimately wasteful of what in Newfoundland and Labrador are scarce cash resources.

The Williams Mother Hen approach - if that indeed is what emerges - will simply promote
dependence of local companies on state subsidies, either directly or indirectly.

The Premier's plan may not succeed simply because the hydro corporation is actually not the entity Premier Williams describes. Newfoundland and Labrador Hydro remains a government department in all but name and is almost the antithesis of a private sector corporation in which the board of directors would have the authority to run the company and set its own lines of business.

On the face of it this is obvious: the impetus to change hydro to an energy corporation did not come from its own board, complete with a business plan. It is entirely the plan of this particular administration. The board will not resist. The Premier alone holds the de facto power to appoint or remove directors and he has shown repeatedly his willingness to replace dissenters with his own personal retinue.

As such, the new energy corporation will likely be quickly recognized as an anomaly in the developed world and surely one which violates the Organization of Economic Co-operation and Development's guidelines for the governance of state-owned enterprises. Even if one leaves aside for the moment the nagging and very serious question of how the new energy corporation will find the cash to support the Premier's ambitions, one can readily see how companies such as Chevron may be very reluctant to enter into any arrangements that would see its long awaited return on investment siphoned off into a provincially owned company with no experience in oil and gas and no capital at risk. These companies are not Fishery Products International.

International companies may well become increasingly reluctant to invest in this province as the Williams' approach becomes better understood. International capital seeks stability and predictability as well as a fair and transparent regulatory regime. In the case of the offshore, it appears from the Premier's interview yesterday and his previous comments on the offshore board that he intends to change the rules as he sees fit, when he sees fit.

Premier Williams may succeed in creating some measure of the control that he finds satisfying personally. On another level, however, all he may succeed in doing is ensuring the chronic problems in the Newfoundland and Labrador economy continue into the future, at best unaltered and at worst supported by the very mechanisms of control which he is seeking.

In reforming the hydro corporation, he may well be using the elements of plans laid by previous administrations to cement in place the very circumstance they sought to change.

Chavezism spreads: Bolivia nationalizes gas fields

Under a May Day decree, Bolivian president Evo Morales has seized control of at least one refinery in the South American country and ordered oil and gas companies operating in Bolivia to sell at least 51% interest in the each company in Bolivia.

Soldiers seized some property and hung banners that read "Nationalized: property of Bolivians". [Photo: Agence France Press]

Government auditors will assess the value of the majority equity position.

As well under the decree, Bolivian state royalties on two of the largest fields will rise from 50% to 82% while the government will claim 60% royalties on the remaining fields.

During his speech announcing the decree, Morales said the newly nationalized oil and gas companies will provide jobs for indigenous people. Morales said: "This is the end of the looting of our natural resources by multinational oil companies."

Bolivia holds South America's second largest gas reserves. Morales swept to power in recent elections on a promise to "recover" natural resources for Bolivians.

Bolivia exports gas primarily to Brazil and Argentina.

High dollar affects us too

Ontario Premier Dalton McGuinty is concerned that having the Canadian dollar trading at near par with the American dollar plus any measures taken by the Bank of Canada to curb inflation will hurt the Ontario economy. He singled out interest rate hikes by the Bank of Canada as being one of the counter-inflationary measures that will take its toll on the Ontario economy.

McGuinty is right.

But when was the last time anyone heard a representative of the Government of Newfoundland and Labrador pointing out that a high dollar and counter-inflationary measures will hurt the provincial economy in Canada's eastern-most province?

Anyone?

Anyone?

Buehler?

Buehler?

No one has said a peep about it.

The high exchange rate for the Canadian dollar is one of the factors contributing to Fishery Products International's financial problems. It also affects the profitability of other fisheries and just about any of the goods and services our trading economy produces. In short, a high dollar hurts our economy.

The oil sector will dumps wads of cash into provincial coffers but other sectors of the economy like mining, forestry, and manufacturing will have to cope with the impacts of reduced exports and/or higher costs.

Of course, Dalton McGuinty is linking his concern about the dollar with his demand for greater transfers from Ottawa. But still, since Premier Danny Williams has skipped his trip to the offshore conference in Houston supposedly to deal with the fishery, he might actually start talking about the wider economic issues affecting that industry.

The rubbish tip of history

A self-congratulatory column in the Toronto Star this weekend by Independent editor in chief Ryan Cleary included some curious comments, among them the claim that Hydro Quebec made $2.0 billion in profit from the Upper Churchill last year compared to $34 million for Newfoundland and Labrador Hydro.

"With that in mind," wrote Cleary, "The Independent took a strong Newfoundland and Labrador focus from the start. Most of our investigations delve into motherhood issues. From the 'negotiations' that led to the Terms of Union to the infamous upper Churchill contract - which saw Quebec rake in an estimated $2 billion in profit last year alone, compared to this province's $34-million take - most projects have a distinct local flavour."

According to Hydro Quebec's 2005 annual report, the company had a net income of $1.87 billion in 2005. That's analogous to profit, in that it is the money left over from revenues after all the bills are paid.

Perhaps, Quebec made more in profit than it actually made.

Unlikely.

But the financial statements also report an income from operations of $2.249 billion.

So if Cleary is right, then the Upper Churchill is responsible for 88% of Hydro Quebec's net income. That doesn't seem right since the Upper Churchill, as large as it is, doesn't constitute 88% of Hydro Quebec's generating capacity.

Something tells me Cleary's numbers are not correct.

But let's take it a step further; Cleary claims Newfoundland and Labrador earned $34 million from the Upper Churchill. The 2004 recall power purchase agreement with Quebec on a $130 megawatt block of power yields the province about $46 million each year over its five-year term. That isn't counting the revenues that flow from the sale of the rest of the Upper Churchill's 5, 800 megawatts of power to Quebec.

Clearly, something is missing in Cleary's numbers.

This doesn't mean the Upper Churchill contract is a fine and wonderful thing. Rather Cleary's column points yet again to the fundamental misunderstandings and misrepresentations that are the bedrock of so much discussions of the Upper Churchill contract. Since that contract is the fuel for so much political rhetoric about ending give-aways of our resources, it doesn't take long for fundamental errors - like Cleary's - to become the basis for public policy goals that are out of whack with what can be realistically achieved.

We wind up with a case of policy GIGO. Computer programmers will recognize that acronym: garbage in, garbage out.

"With that in mind", referred to the idea that Confederation was a giant con job, what I like to call the idea that the fiction yarn Secret Nation was actually a documentary:

There have been whispers of conspiracies and plots, treason and treachery ever since, based on the theory that Newfoundland didn't so much join Canada as was manoeuvred into it.

What was also in mind was everything from mainlanders referring to the province as "have-not" to the jokes about "newfies".

The distinct local flavour Cleary mentioned, though, is that GIGO business and the mythology that goes with it.

It is a flavour we can do without.

That is, we can do without it unless we want to keep going back to the rubbish tip for another whiff or, God forbid, another taste of the myths that have hobbled Newfoundland and Labrador and its people for too long.

Fish and oil

People are wondering if the provincial government will try and take an equity position in the fishery, in the same way they are trying to do in the oil and gas sector.

The answer is already in front of us.

In the spectacular - unprecedented? - government assistance given to Bill Barry's efforts to buy chunks of Fishery Products International (FPI) last week, both Premier Danny Williams and fish minister Tom Rideout indicated that their preferred approach would be to have government purchase the fish harvesting quotas currently held by FPI while an unspecified, but fairly obvious, private sector enterprise would lease those assets from the government to operate however many fish plants they want.

The question isn't whether or not the provincial government will take some ownership stake in the fishery in the near future. It's pretty clear that Danny and Tom want to own the fishery indirectly even if they legally don't set quotas.

In order to get the oil and gas analogy correct, the real question is whether or not the provincial government will seek an equity position in the Barry Group's operation of FPI plants comparable to its demand for an ownership stake in the oil and gas operations offshore.

Something tells me they won't. The Premier has already said he has no interest in getting into the fishing business, i.e. the processing business, believing that is best left to the private sector.

So what's the difference between the oil processing business and the fish processing business?

Great minds think alike

Former Mulroney chief of staff Norman Spector's column in Monday's Globe and Mail tackled the issue of the Harper administration's efforts to control media access to cabinet ministers.

Limiting reporting of the return of fallen soldiers, on the other hand, smacks of a government that is nervous about public opinion. While the decision not to fly the flag at half-mast on Parliament Hill is defensible in light of precedent, restricting access to military bases will increase the anxiety of Canadians, many of whom feel we slipped into the Afghanistan war without adequate parliamentary debate or media coverage.

The opposition parties and political cartoonists were licking their chops last week at the prospect of being able to portray Mr. Harper as George Bush-lite. The greater risk for Mr. Harper is that he will re-awaken fears that he harbours a hidden agenda. Heading into an election in which the ballot question will be whether he can be trusted with a majority government, that's a perception that Stephen Harper would be wise not to encourage.

The Bond Papers came to a similar conclusion some time ago:

In the short term, though, the gag order also sends a powerfully negative message about the Harper government. Gagging your own team tells the world that you are not in control, that you are afraid. If Stephen Harper and his ministers can't deal with a few scraggly reporters, how in the name of heavens will they cope with the real challenges every prime minister will face?

Spector is right about the issue of Afghanistan, but his conclusion applies in a broader sense to the entire Harper ministry. Gag orders and media control smack of insecurity. They speak to a level of nervousness about public opinion, not just on dead soldiers but on virtually every file, that ultimately is a perception of Stephen Harper that the prime minister would not wish to encourage.

Unfortunately for him, the reaction to the recent case of soldiers killed in Afghanistan was enhanced because of all the other gag orders and control issues out there. Spector's warning might be a bit too late.

The scripted zinger for a scripted question

It may be an overly technical point but natural resources minister Ed Byrne sounded just a little too scripted in the House of Assembly at one point on Monday.

Byrne was trying to pull his usual routine of late, trying to convince people that there are no consequences for the local oil and gas sector from the Hebron fiasco. So after a long-winded answer in which Byrne said there are no consequences but if there are, then any slowdowns at Hibernia are due to a lost drill bit and that there can't be any slowdowns since the project doesn't exist at Hibernia South because there is no development application anyway.

Then, Ed threw out this comment:

"But to say or make an allegation, or even to leave an impression that as a result of the breakdown in Hebron discussions now Exxon Mobil and Hibernia South is all off the rails, Mr. Speaker, would be equivalent to Chicken Little saying the sky is falling or Eeyore saying: Oh, hum, we are expecting rain tomorrow."

It's that Eeyore thing that was just a bit much. Now I could take Byrne running all over the place isn't we should remain calm and that all is well. But, for some reason, I just don't think that your average middle-aged man will toss out Eeyore into a conversation as an example of someone who is saying things that aren't true. Doesn't matter how heated the moment.

The Hundred Acre Wood just isn't the sort of place adults go to naturally to illustrate points of high government policy. Sure, being born in the Year of the Tiger, I'll sometimes after striking my head on a low-hanging shelf in my daughter's bedroom, I'll lament that my top isn't made of "da rubber" like Tigger's. But she's eight years old and she'll get it.

But if I am discussing the way this government throws out policy options, I am not really going to tell other adults that it's like they were playing Pooh-sticks.

Byrne's comment sounded an awful lot like a scripted zinger. That is, a line developed by Byrne's staff for use in answer to the highly predictable Opposition questions. Chicken Little is a common enough popular reference. A.A. Milne is not either in the original or the Disney incarnation.

The question Byrne was answering was recycled from before Easter and was, in fact, no better delivered the other day than it was before everyone in the legislature took off for a couple of weeks vacation.

Questions that are badly constructed and badly delivered tend to elicit the sort of nonsensical answers Ed Byrne has been throwing out lately.

John Kenneth Galbraith, 1908-2006

Internationally acclaimed economist John Kenneth Galbraith has died at the age of 97.

The Canadian-born Galbraith received an honorary doctorate from Memorial University in 1999. Here is a link to his biography that occasion, the oration delivered by Dr, Shane O'Dea and the text of Dr. Galbraith's remarks.

Remain calm. All is well.

Hebron is but one project in an exciting industry. We have three oil and gas projects that are proceeding, natural gas development in front of us and we'’re excited about the future of the industry.

Natural resources minister Ed Byrne, quoted in The Telegram, Friday, April 28, 2006

There's optimism.

There's seeing the glass half full.

Then there's Ed Byrne.

Ed Byrne makes a pollyanna look suicidal.