1. Town hall meeting anywhere else in the civilized world:
- an open, democratic meeting of residents of a community in which all residents are entitled to voice their opinions freely.
Derives from the practice in New England communities of holding public meetings to discuss significant public issues in the seat of community government, namely the town hall.
2. Town hall meeting in Danny Williams' Newfoundland and Labrador:
- A closed meeting at an undisclosed location with only invited participants attending and the only reporting on the discussions coming from the Premier and designated political officials.
23 May 2006
20 May 2006
Enemy at the gates of the park
Ah yes, the Glorious Victoria Day weekend.
In Newfoundland, it is the time of the year when people who would never think of going camping in the winter race to the nearest provincial park of gravel pit to freeze their goolies off in the damp misery of the weather that hits like clockwork this time of year. There was some guy on CBC last night who has been going to Butterpot faithfully since the 1970s. He takes two hours to string up electric lights all around the camp site. He slings tarpaulin overhead in case it rains and strings other lengths of tarp across the gaps in the trees to keep the wind out. By the time he has done, the only thing missing from his great adventure "outdoors" is the brown velour couch with giant flowers all over. This guy is no more outdoors "roughing it" this weekend than he would be looking out his living room window.
Anyway.
People of desert cultures think hell is really hot. The Norse considered hell to be a cold place. Newfoundland mythology should have labeled hell a damp one in which you were doomed to an eternity spending the 24th of May weekend in a tent, with a Coleman stove but no way of lighting the friggin' thing because while you brought along enough beer to keep Ontario awash for a month and eight 40s of Lambs between the two of you, some rocket scientist in the group forgot the lighter.
My memories of this weekend revolve around fishing, but that's for another time.
Just so as to keep your sense of humour just think of Jude Law and Rachel Weisz in the 24th of May weekend scene from Enemy at the Gates.
Go on.
Wrack your brains wondering what a story about some Russian sniper at Stalingrad could possibly have to do with you huddled in a pup tent.
Stumped?
Think about the part in the bunker when young Vasili and his paramour struggle to copulate in among a pile of snoring, smelly bodies without waking their exhausted and likely inebriated companions.
If that isn't the definition of the 24th of May weekend in this province for many young couples, I don't know what is.
But don't worry. I know what threw you off. In Enemy at the Gates, they were in a concrete basement in the middle of winter...
but they were warm and dry.
In Newfoundland, it is the time of the year when people who would never think of going camping in the winter race to the nearest provincial park of gravel pit to freeze their goolies off in the damp misery of the weather that hits like clockwork this time of year. There was some guy on CBC last night who has been going to Butterpot faithfully since the 1970s. He takes two hours to string up electric lights all around the camp site. He slings tarpaulin overhead in case it rains and strings other lengths of tarp across the gaps in the trees to keep the wind out. By the time he has done, the only thing missing from his great adventure "outdoors" is the brown velour couch with giant flowers all over. This guy is no more outdoors "roughing it" this weekend than he would be looking out his living room window.
Anyway.
People of desert cultures think hell is really hot. The Norse considered hell to be a cold place. Newfoundland mythology should have labeled hell a damp one in which you were doomed to an eternity spending the 24th of May weekend in a tent, with a Coleman stove but no way of lighting the friggin' thing because while you brought along enough beer to keep Ontario awash for a month and eight 40s of Lambs between the two of you, some rocket scientist in the group forgot the lighter.
My memories of this weekend revolve around fishing, but that's for another time.
Just so as to keep your sense of humour just think of Jude Law and Rachel Weisz in the 24th of May weekend scene from Enemy at the Gates.
Go on.
Wrack your brains wondering what a story about some Russian sniper at Stalingrad could possibly have to do with you huddled in a pup tent.
Stumped?
Think about the part in the bunker when young Vasili and his paramour struggle to copulate in among a pile of snoring, smelly bodies without waking their exhausted and likely inebriated companions.
If that isn't the definition of the 24th of May weekend in this province for many young couples, I don't know what is.
But don't worry. I know what threw you off. In Enemy at the Gates, they were in a concrete basement in the middle of winter...
but they were warm and dry.
18 May 2006
Everything old is new again, part deux
Danny Williams is beseiged by problems with the fishery, for which he has no solutions. He is fighting, as he puts it, a lot of battles on a lot of fronts.
So, from out of no where he announces that there will be a fisheries summit - or as he just told talk show host Randy Simms, it will be a town hall style meeting. It sounds like something is being done while it is obvious nothing is happening. It will be a nice little show and, with any luck it will buy some time until the issue can slide off the radar screens or someone comes up with a brilliant solution.
It's a nice job of shifting the focus of the discussion from government's obvious impotence to its apparent ability to bring something off.
Sounds familiar.
1997.
Health care.
Brian Tobin, pounded day after day in the legislature about hospital bed closures, suddenly announces a health care forum. His cabinet colleagues and health department officials had never heard about it until Tobin announced it. People were pulled together to discuss "the issues" and work toward "solutions".
A brilliant shifting of the debate focus.
And a complete waste of time.
The whole thing was formally announced in the House of Assembly by then-health minister Lloyd Matthews but Tobin had blurted out the commitment in Question Period a few days before under pressure in the House. The episode stands out so clearly since I worked at the time for a health care group. We spent two days trying to find any information about the forum. Once it was announced, we were told we wouldn't be invited because there was a shortage of chairs - I kid you not. We offered to bring our own fold-outs.
Lloyd Matthews.
That's Liz's Dad, by the way. You know. Liz Matthews. Gerry Reid's comms director at fisheries under the Liberals. The one who late one Sunday night packed up her office and skulked to work for Danny Williams.
The similarities in these two fluffy forum ideas are just a bit too much for comfort.
The results are likely to be equally vacuous.
So, from out of no where he announces that there will be a fisheries summit - or as he just told talk show host Randy Simms, it will be a town hall style meeting. It sounds like something is being done while it is obvious nothing is happening. It will be a nice little show and, with any luck it will buy some time until the issue can slide off the radar screens or someone comes up with a brilliant solution.
It's a nice job of shifting the focus of the discussion from government's obvious impotence to its apparent ability to bring something off.
Sounds familiar.
1997.
Health care.
Brian Tobin, pounded day after day in the legislature about hospital bed closures, suddenly announces a health care forum. His cabinet colleagues and health department officials had never heard about it until Tobin announced it. People were pulled together to discuss "the issues" and work toward "solutions".
A brilliant shifting of the debate focus.
And a complete waste of time.
The whole thing was formally announced in the House of Assembly by then-health minister Lloyd Matthews but Tobin had blurted out the commitment in Question Period a few days before under pressure in the House. The episode stands out so clearly since I worked at the time for a health care group. We spent two days trying to find any information about the forum. Once it was announced, we were told we wouldn't be invited because there was a shortage of chairs - I kid you not. We offered to bring our own fold-outs.
Lloyd Matthews.
That's Liz's Dad, by the way. You know. Liz Matthews. Gerry Reid's comms director at fisheries under the Liberals. The one who late one Sunday night packed up her office and skulked to work for Danny Williams.
The similarities in these two fluffy forum ideas are just a bit too much for comfort.
The results are likely to be equally vacuous.
Pulling it out: Williams and the fishery
This week Newfoundlanders and Labradorians saw proof that Premier Danny Williams and his administration have no idea what to do with the fishery.
For one thing, Williams announced there will be a summit of key players to discuss what ought to be done. Whenever a politician organizes a meeting in this context and calls it a summit, you know right away this is a politician without a single desperate clue about what needs to be done. This isn't a meeting with a purpose. This isn't a "task force", as some groups like to call them, with a specific mission to sort out a special problem.
No.
Williams' "summit" is basically going to consist of a bunch of people trying to first of all agree on what is wrong so that they might then, possibly at some unforeseen point in the future, actually be able to start working on what might be done to fix the problem now that they have agreed on a definition. Consider this to be a form of collective bargaining. Odds are very high that in the divergent worlds of the union and the companies, there will be no agreement on the problem any more than the union has shown it grasps the scope of the fish problem already.
That said, there is a good chance the two parties (three if one considers the inherent conflict of interest in Earl McCurdy's outfit) will agree on what they have always been able to agree on in situations like this: shag figuring out the question. Public money is the answer. The government must pour hundreds of millions of dollars into their collective pockets to keep everything just as it is.
"Save us!", they will cry in unison, yet again, so that once this crisis has passed, the industry can resume the same wasteful, unproductive and ultimately destructive work it has been doing since the 1950s. Williams will then look at Loyola Hearn who will look back and shrug. There will then be further talks between Ottawa and St. John's and further shrugging.
We are in for a long summer and a painful fall.
For the second thing, there is Williams' plan to further interfere in the management of a private sector company, namely Fishery Products International. Williams' excuse for making this move is a concern that two of the directors are working against the "best interests" of Newfoundland and Labrador. He has nary a shred of evidence of anything evil here at all. There is no proof that John Risley and George Armoyan - wealthy Nova Scotians both and by definition evil to the townie brood from which Williams springs - are doing anything other than trying to keep the company going and restore it to financial health.
Williams claims he is afraid they will break up the company and sell it off. Therefore he must add a government agent to the board and making other unspecified changes to the legislation governing FPI. Of course, that legislation already prevents Risley and Armoyan from doing what Williams claims he is afraid of, so, as with so many thing, there is a huge gap between what Danny Williams says and the reality.
All this demonstrates that Williams is pulling his fish policy out of some convenient bodily orifice. In the absence of a sweet clue of what to do on any of these files, Williams is making it up on the fly. Check to see if he says, yet again that "all options are open". All options are open only to someone who has not or cannot make a decision. Think about it.
Made up on the fly? You better believe it. This summit was cooked up along with the FPI legislation in a mere two weeks. The fishery crisis has been looming for most of the two and more years Williams has been in office; the problems with FPI alone date from the very first moments of his administration. If Williams and his cabinet had a grip on the fishery, they would have pulled together the key players years ago, not so publicly but in private, to sort through the issues.
Where will it end? When will it end?
No one can say.
If we knew that, we'd know what government was up to.
But that is impossible since, as Danny is fond of saying, all options are open.
For one thing, Williams announced there will be a summit of key players to discuss what ought to be done. Whenever a politician organizes a meeting in this context and calls it a summit, you know right away this is a politician without a single desperate clue about what needs to be done. This isn't a meeting with a purpose. This isn't a "task force", as some groups like to call them, with a specific mission to sort out a special problem.
No.
Williams' "summit" is basically going to consist of a bunch of people trying to first of all agree on what is wrong so that they might then, possibly at some unforeseen point in the future, actually be able to start working on what might be done to fix the problem now that they have agreed on a definition. Consider this to be a form of collective bargaining. Odds are very high that in the divergent worlds of the union and the companies, there will be no agreement on the problem any more than the union has shown it grasps the scope of the fish problem already.
That said, there is a good chance the two parties (three if one considers the inherent conflict of interest in Earl McCurdy's outfit) will agree on what they have always been able to agree on in situations like this: shag figuring out the question. Public money is the answer. The government must pour hundreds of millions of dollars into their collective pockets to keep everything just as it is.
"Save us!", they will cry in unison, yet again, so that once this crisis has passed, the industry can resume the same wasteful, unproductive and ultimately destructive work it has been doing since the 1950s. Williams will then look at Loyola Hearn who will look back and shrug. There will then be further talks between Ottawa and St. John's and further shrugging.
We are in for a long summer and a painful fall.
For the second thing, there is Williams' plan to further interfere in the management of a private sector company, namely Fishery Products International. Williams' excuse for making this move is a concern that two of the directors are working against the "best interests" of Newfoundland and Labrador. He has nary a shred of evidence of anything evil here at all. There is no proof that John Risley and George Armoyan - wealthy Nova Scotians both and by definition evil to the townie brood from which Williams springs - are doing anything other than trying to keep the company going and restore it to financial health.
Williams claims he is afraid they will break up the company and sell it off. Therefore he must add a government agent to the board and making other unspecified changes to the legislation governing FPI. Of course, that legislation already prevents Risley and Armoyan from doing what Williams claims he is afraid of, so, as with so many thing, there is a huge gap between what Danny Williams says and the reality.
All this demonstrates that Williams is pulling his fish policy out of some convenient bodily orifice. In the absence of a sweet clue of what to do on any of these files, Williams is making it up on the fly. Check to see if he says, yet again that "all options are open". All options are open only to someone who has not or cannot make a decision. Think about it.
Made up on the fly? You better believe it. This summit was cooked up along with the FPI legislation in a mere two weeks. The fishery crisis has been looming for most of the two and more years Williams has been in office; the problems with FPI alone date from the very first moments of his administration. If Williams and his cabinet had a grip on the fishery, they would have pulled together the key players years ago, not so publicly but in private, to sort through the issues.
Where will it end? When will it end?
No one can say.
If we knew that, we'd know what government was up to.
But that is impossible since, as Danny is fond of saying, all options are open.
17 May 2006
Newfoundland and Labrador Hydra
Trumpeted by the Williams administration as the key piece of legislation for this session of the House of Assembly, the amendments [Annex A, below] to the Hydro Corporation Act live up to their advance billing but not for the reasons offered by Premier Danny Williams and natural resources minister Ed Byrne.
The amendments to the Hydro Corporation Act go beyond what the Progressive Conservatives originally proposed. The new legislation will create a Crown corporation that will not only "engage in activities" related to hydrocarbons, it will do so in Newfoundland and Labrador and anywhere else on Earth. More importantly, the new Hydro corporation, will also be given responsibility for any other enterprise or activity based solely on the approval of cabinet.
Moreover, the cost of this new multi-headed venture will be borne in one fashion or another by the residents of Newfoundland and Labrador. As a Crown corporation owned entirely by the provincial government, Newfoundland and Labrador Hydro's [Hydro; Hydro corporation] debts are added to those of the provincial government and its other agencies even if its revenues do not necessarily count toward the provincial government's operating budget.
Additionally, though, the second clause of the new bill exempts the new Hydro corporation from a restriction in the Electrical Power Control Act, 1994 (EPCA) that an electricity producer or retailer is only involved in the production or sale of electricity. However, under the EPCA, the public utilities board is still required to set Hydro's electricity rates to provide the Crown corporation with "sufficient revenue" to achieve and maintain a sound credit rating from international lenders.
Williams' original plan
Danny Williams' expressed goal in October 2003 was to convert the Hydro corporation into a Crown corporation that would "retain equity in the province's oil and gas resources", "absorb all the expertise it can from the major oil companies, so that the province will have the capacity and expertise to participate in and benefit from decisions regarding exploration, production, and processing of oil and gas in the province", and, "work with the major oil companies to develop natural gas as a competitively priced alternative energy source for the province, and for transportation to Canadian and U.S. markets."
The Progressive Conservative 2003 campaign policy manual, called variously the Blue Book or "Danny Williams' plan", indicated that the new energy corporation, i.e. the one involved in oil and gas, might be established as a Crown corporation separate from Hydro. While the Bond Papers has previously pointed out the potential problems in resurrecting the Peckford-era petroleum corporation, the way this corporation is established is important: the provincial government has made a conscious decision in its new legislation to reject other options with their inherent advantages.
Statoil and Norsk Hydro, two examples often cited by Premier Williams 1, effectively operate as private sector companies despite being owned, respectively, 71% and 43% by the Norwegian Crown. This arrangement is important since the companies operate according to sound business principles and are accountable not only to the Norwegian legislature but also to the private sector shareholders.
By contrast the Hydro corporation in Newfoundland and Labrador is little more than a department of government answerable by law to the energy minister, but in practice to the Premier. So close is the relationship that Hydro's chief executive officer served as the lead provincial negotiator with the Hebron consortium. The obvious conflict of interest in this situation was ignored by government, but not by the private sector companies in the Hebron group.
Over the past decade and a half, these two Norwegian companies have ceased to serve as instruments of state petroleum policy on matters such as ownership, control and development. This is diametrically opposite to the Williams' administrations plans for the new Hydro corporation. The Blue Book clearly establishes a policy role for the new Hydro corporation by giving it responsibility for ensuring "the province will have the capacity and expertise" to participate in and benefit from" oil and gas development.
Strengthening the private sector
One of the challenges facing Newfoundland and Labrador in the past half century has been the growth of a strong private sector with access to local capital. Since 1949, the experience of the Smallwood, Moores and Peckford periods has been a heavy reliance on state intervention and state support for industrial development in most sectors. The legacy of this approach is mixed and in some cases downright sorry. Even in the fishery sector, successive governments have poured public money into private sector companies until, ultimately, both the provincial and federal governments created Fishery Products International out of the debt-ridden mess of failed processing companies. [On the relationship between the federal and provincial governments and the Newfoundland and Labrador fishing industry, see Miriam Wright, A fishery for modern times: the state and the industrialization of the Newfoundland fishery, 1934-1968, (Don Mills, ON: Oxford University Press, 2001)]
The Wells administration's 1992 Strategic Economic Plan, by contrast, emphasized government policy aimed at strengthening the private sector, diversifying the economy and increasing the ability of local companies, including in the oil and gas sector, to compete effectively on a global basis. Crown corporations were sold off or shut down. Peckford-era legislation to provide for a petroleum corporation was repealed since Peckford had never implemented it and the Wells administration saw no purpose in having the state operate in what was deemed best left to private business. The major exception to the divestiture of state-owned corporations was the effort to merge Newfoundland Power and Newfoundland and Labrador Hydro as a single private sector corporation.
Williams' new Hydro corporation returns to an older model based on government subsidy and government dependence. Beyond the attractiveness to some businesses of relying on whatever contracts they can secure from the new Hydro corporation, the political and financial muscle of the state-owned company will likely make it considerably more attractive an investment than a private sector venture, since it will always carry with it a government guarantee of its operations and expenditures. The end result will almost inevitably be a weakening of the local private sector.
Controlled by whom? Accountable to whom?
Simon Wong, an international expert in corporate governance at McKinsey and Company in Washington, D.C., has noted that state-owned enterprises have significant governance problems that impair their ability to perform effectively and efficiently. Conflicting missions, poor political guidance, lack of public scrutiny and a board lacking authority are among the weaknesses of state-owned enterprises, according to Wong.
These two latter points are especially obvious in the local example. Note the extent to which Premier Williams has effectively exercised total control of the Hydro board, appointing his confidants to positions of responsibility. Williams has also been able to continue the practice, established under Brian Tobin and Roger Grimes of controlling the Lower Churchill project office, with its funding coming from the Hydro corporation. The expenditures by this office are not scrutinized by the auditor general or the House of Assembly.
Beyond those issues, the third clause of the Hydro amendment bill creates a situation which is virtually unprecedented in local political history. It gives authority to cabinet to assign to the new Hydro corporation any activity which it approves. With passage of this bill, public expenditure may be made on any purpose with no disclosure to the public other than that coming with publication of an order-in-council or the minimal disclosure required in the Williams administration's accountability legislation.
Even in that respect, the Hydro corporation - and by extension the Williams administration - is not complying with provisions of the Transparency and Accountability Act. No strategic plan has been issued, despite significant changes having already been made to the corporation in the past three years. Hydro has not published an annual report on its website for 2005.2 As recently as Monday, May 15, 2006, Premier Williams confirmed to the House of Assembly that his government has committed to an expenditure of upwards of $9.0 billion on the Lower Churchill project without benefit of even the most basic of accountability tools: the business plan. One can only infer that there is likewise no business plan to accompany the development of the Hydro corporation as an oil and gas venture.
Unlimited public liability
Along with unlimited cabinet authority to spend what is effectively public money through the new Hydro corporation without much, if any, prior public disclosure and limited public accountability must go the obvious point that the residents of Newfoundland and Labrador hold an unlimited liability for Hydro operations, its successes and failures. Hydro is a Crown corporation owned entirely by the Government of Newfoundland and Labrador. As such its assets and liabilities are functionally those of the public at large.
At the same time, as a producer of electricity sold in the province, Newfoundland and Labrador Hydro's rates charged to customers is regulated by the public utilities board under the Electrical Power Control Act, 1994. [EPCA] The proposed amendment bill also includes giving the new Hydro corporation and exemption to that section of the act which currently provides that an electricity company can only be engaged in producing or retailing electricity in the province. However, in determining electricity rates, the PUB is directed by the EPCA to provide the Hydro corporation with sufficient revenues from its electricity sales to allow it to achieve and maintain a sound credit rating.
As an electricity producer, Hydro's financial picture would be easy to see and comparisons could easily be drawn with electricity producers across Canada. The PUB has been able to assess the accuracy and reasonableness of the income requirements of Hydro from its domestic sales and, where necessary vary a rate request to satisfy a broader public interest in the availability of affordable electrical power. As a multi-sectoral company only one portion of which is an electricity producer, the new Hydro may now be able to apply for electricity rate increases to fund or otherwise offset its non-electricity activities.
Conclusion
The current administration has already justified its activities in the energy sector on the basis of pride and self-reliance, distinctly emotional issues, as opposed to financial or other measurable criteria. One can expect that any issues related to the new Hydro corporation will be couched in similar terms. All else will be dismissed as irrelevant or speculative.
Had it been concerned only with creating involvement in the oil and gas industry, the Williams administration would have proposed legislation that permitted those easily defined and relatively limited set of activities for a company sub-ordinate to or separate from Hydro. One might expect such a company could involve a partnership between a Crown corporation and private sector companies in the fashion of Statoil or Norsk Hydro.
The most obvious explanation for the Williams administrations approach is that it sought to create an entity which was controlled directly and entirely by cabinet, with limited requirements for public disclosure. The new Hydro corporation, as structured, will allow cabinet to direct Hydro expenditures much as it has done in the past, but over a wider range of activities, and based solely on an order-in-council.
In effect, Bill 1 will create out of Newfoundland and Labrador Hydro a hydra corporation. There is no limit to the range of activities in which it may engage with only the most rudimentary public scrutiny.
While the public will unquestionably bear the full financial risk of this venture, they have no information on which to assess the risk of the course on which their provincial government is already fully engaged.
However the notion of accountability is much broader than that whether one is talking of current political values or the scrutiny to which corporations have been subjected to in the wake of scandals such as Enron.
In Newfoundland and Labrador, we need only look to a litany of failed public ventures to see the folly of granting to any administration - irrespective of the talents of its leader - the unfettered right to commit public money without public debate or disclosure. Our political landscape is littered with rubber boots, eyeglasses, gloves and rotting cucumbers.
The Williams administration has offered no explanation of its failure to comply with its own legislation on transparency and accountability largely since no one has asked a cabinet minister about the issue. The usual reply has been that the government will be accountable to the public at election-time.
Newfoundlanders and Labradorians, as shareholders in - as the sole owners of - the new Hydra corporation, deserve no less a level of accountability than that held by shareholders in the private sector. They demand - and receive - information on the risks and rewards before endorsing any venture as fully-informed participants. At the very least, those shareholders can sell their interest and move their money elsewhere if they do not support management's decisions.
Residents of Newfoundland and Labrador have no such luxury. Prudence - the hard won caution of experience - dictates they look more cautiously at government plans, lest they find themselves facing a financial hydra, if not under this administration than under some other administration in the not-so-distant future.
______________________________
1 Premier Williams has also used Hydro Quebec as a model for the new Hydro corporation. Under s. 22 of the Hydro Quebec Act, the company's objects are "to supply power and to pursue endeavours in energy-related research and promotion, energy conversion and conservation, and any field connected with or related to power or energy."
Hydro Quebec has not statutory authority to assume responsibility for any activity which the Lieutenant Governor-in-Council may approve, as provided for the new Newfoundland and Labrador Hydro corporation. Rather, Hydro Quebec's mandate is to supply power and engage in energy-related activities.
2 This was written and originally posted on 16 May 2006. The 2005 Hydro annual report was tabled in the House of Assembly on 16 May 2006. As of 0533 hrs 17 May 2006, it was not available on the Hydro website. Hydro has still not produced either a three year strategic plan or a business plan for the Lower Churchill or the expansion of the company's book of business even though this is required by the Transparency and Accountability Act.
Annex A:
AN ACT TO AMEND THE HYDRO CORPORATION ACT AND THE ELECTRICAL POWER
CONTROL ACT, 1994
Analysis
HYDRO CORPORATION ACT
1. S.4 Amdt.
Supply of power
ELECTRICAL POWER CONTROL ACT, 1994
2. S.24 Amdt.
Restrictions on business
Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:
HYDRO CORPORATION ACT
RSNL1990 cH-16 as amended
1. Section 4 of the Hydro Corporation Act is amended by renumbering it as subsection (1) of section 4 and by adding immediately after subsection (1) the following:
(2) In addition to the objects referred to in subsection (1), the corporation may, in the province and elsewhere, engage in activities related to the exploration for, development, production, refining, marketing and transportation of, hydrocarbons and products from hydrocarbons.
(3) Notwithstanding subsections (1) and (2), the corporation may engage in those other activities that the Lieutenant-Governor may approve.
ELECTRICAL POWER CONTROL ACT, 1994
SNL1994 c E-5.1 as amended
2. Section 24 of the Electrical Power Control Act, 1994 is amended by adding immediately after subsection (2) the following:
(3) This section does not apply to Newfoundland and Labrador Hydro.
©Earl G. Tucker, Queen's Printer
The amendments to the Hydro Corporation Act go beyond what the Progressive Conservatives originally proposed. The new legislation will create a Crown corporation that will not only "engage in activities" related to hydrocarbons, it will do so in Newfoundland and Labrador and anywhere else on Earth. More importantly, the new Hydro corporation, will also be given responsibility for any other enterprise or activity based solely on the approval of cabinet.
Moreover, the cost of this new multi-headed venture will be borne in one fashion or another by the residents of Newfoundland and Labrador. As a Crown corporation owned entirely by the provincial government, Newfoundland and Labrador Hydro's [Hydro; Hydro corporation] debts are added to those of the provincial government and its other agencies even if its revenues do not necessarily count toward the provincial government's operating budget.
Additionally, though, the second clause of the new bill exempts the new Hydro corporation from a restriction in the Electrical Power Control Act, 1994 (EPCA) that an electricity producer or retailer is only involved in the production or sale of electricity. However, under the EPCA, the public utilities board is still required to set Hydro's electricity rates to provide the Crown corporation with "sufficient revenue" to achieve and maintain a sound credit rating from international lenders.
Williams' original plan
Danny Williams' expressed goal in October 2003 was to convert the Hydro corporation into a Crown corporation that would "retain equity in the province's oil and gas resources", "absorb all the expertise it can from the major oil companies, so that the province will have the capacity and expertise to participate in and benefit from decisions regarding exploration, production, and processing of oil and gas in the province", and, "work with the major oil companies to develop natural gas as a competitively priced alternative energy source for the province, and for transportation to Canadian and U.S. markets."
The Progressive Conservative 2003 campaign policy manual, called variously the Blue Book or "Danny Williams' plan", indicated that the new energy corporation, i.e. the one involved in oil and gas, might be established as a Crown corporation separate from Hydro. While the Bond Papers has previously pointed out the potential problems in resurrecting the Peckford-era petroleum corporation, the way this corporation is established is important: the provincial government has made a conscious decision in its new legislation to reject other options with their inherent advantages.
Statoil and Norsk Hydro, two examples often cited by Premier Williams 1, effectively operate as private sector companies despite being owned, respectively, 71% and 43% by the Norwegian Crown. This arrangement is important since the companies operate according to sound business principles and are accountable not only to the Norwegian legislature but also to the private sector shareholders.
By contrast the Hydro corporation in Newfoundland and Labrador is little more than a department of government answerable by law to the energy minister, but in practice to the Premier. So close is the relationship that Hydro's chief executive officer served as the lead provincial negotiator with the Hebron consortium. The obvious conflict of interest in this situation was ignored by government, but not by the private sector companies in the Hebron group.
Over the past decade and a half, these two Norwegian companies have ceased to serve as instruments of state petroleum policy on matters such as ownership, control and development. This is diametrically opposite to the Williams' administrations plans for the new Hydro corporation. The Blue Book clearly establishes a policy role for the new Hydro corporation by giving it responsibility for ensuring "the province will have the capacity and expertise" to participate in and benefit from" oil and gas development.
Strengthening the private sector
One of the challenges facing Newfoundland and Labrador in the past half century has been the growth of a strong private sector with access to local capital. Since 1949, the experience of the Smallwood, Moores and Peckford periods has been a heavy reliance on state intervention and state support for industrial development in most sectors. The legacy of this approach is mixed and in some cases downright sorry. Even in the fishery sector, successive governments have poured public money into private sector companies until, ultimately, both the provincial and federal governments created Fishery Products International out of the debt-ridden mess of failed processing companies. [On the relationship between the federal and provincial governments and the Newfoundland and Labrador fishing industry, see Miriam Wright, A fishery for modern times: the state and the industrialization of the Newfoundland fishery, 1934-1968, (Don Mills, ON: Oxford University Press, 2001)]
The Wells administration's 1992 Strategic Economic Plan, by contrast, emphasized government policy aimed at strengthening the private sector, diversifying the economy and increasing the ability of local companies, including in the oil and gas sector, to compete effectively on a global basis. Crown corporations were sold off or shut down. Peckford-era legislation to provide for a petroleum corporation was repealed since Peckford had never implemented it and the Wells administration saw no purpose in having the state operate in what was deemed best left to private business. The major exception to the divestiture of state-owned corporations was the effort to merge Newfoundland Power and Newfoundland and Labrador Hydro as a single private sector corporation.
Williams' new Hydro corporation returns to an older model based on government subsidy and government dependence. Beyond the attractiveness to some businesses of relying on whatever contracts they can secure from the new Hydro corporation, the political and financial muscle of the state-owned company will likely make it considerably more attractive an investment than a private sector venture, since it will always carry with it a government guarantee of its operations and expenditures. The end result will almost inevitably be a weakening of the local private sector.
Controlled by whom? Accountable to whom?
Simon Wong, an international expert in corporate governance at McKinsey and Company in Washington, D.C., has noted that state-owned enterprises have significant governance problems that impair their ability to perform effectively and efficiently. Conflicting missions, poor political guidance, lack of public scrutiny and a board lacking authority are among the weaknesses of state-owned enterprises, according to Wong.
These two latter points are especially obvious in the local example. Note the extent to which Premier Williams has effectively exercised total control of the Hydro board, appointing his confidants to positions of responsibility. Williams has also been able to continue the practice, established under Brian Tobin and Roger Grimes of controlling the Lower Churchill project office, with its funding coming from the Hydro corporation. The expenditures by this office are not scrutinized by the auditor general or the House of Assembly.
Beyond those issues, the third clause of the Hydro amendment bill creates a situation which is virtually unprecedented in local political history. It gives authority to cabinet to assign to the new Hydro corporation any activity which it approves. With passage of this bill, public expenditure may be made on any purpose with no disclosure to the public other than that coming with publication of an order-in-council or the minimal disclosure required in the Williams administration's accountability legislation.
Even in that respect, the Hydro corporation - and by extension the Williams administration - is not complying with provisions of the Transparency and Accountability Act. No strategic plan has been issued, despite significant changes having already been made to the corporation in the past three years. Hydro has not published an annual report on its website for 2005.2 As recently as Monday, May 15, 2006, Premier Williams confirmed to the House of Assembly that his government has committed to an expenditure of upwards of $9.0 billion on the Lower Churchill project without benefit of even the most basic of accountability tools: the business plan. One can only infer that there is likewise no business plan to accompany the development of the Hydro corporation as an oil and gas venture.
Unlimited public liability
Along with unlimited cabinet authority to spend what is effectively public money through the new Hydro corporation without much, if any, prior public disclosure and limited public accountability must go the obvious point that the residents of Newfoundland and Labrador hold an unlimited liability for Hydro operations, its successes and failures. Hydro is a Crown corporation owned entirely by the Government of Newfoundland and Labrador. As such its assets and liabilities are functionally those of the public at large.
At the same time, as a producer of electricity sold in the province, Newfoundland and Labrador Hydro's rates charged to customers is regulated by the public utilities board under the Electrical Power Control Act, 1994. [EPCA] The proposed amendment bill also includes giving the new Hydro corporation and exemption to that section of the act which currently provides that an electricity company can only be engaged in producing or retailing electricity in the province. However, in determining electricity rates, the PUB is directed by the EPCA to provide the Hydro corporation with sufficient revenues from its electricity sales to allow it to achieve and maintain a sound credit rating.
As an electricity producer, Hydro's financial picture would be easy to see and comparisons could easily be drawn with electricity producers across Canada. The PUB has been able to assess the accuracy and reasonableness of the income requirements of Hydro from its domestic sales and, where necessary vary a rate request to satisfy a broader public interest in the availability of affordable electrical power. As a multi-sectoral company only one portion of which is an electricity producer, the new Hydro may now be able to apply for electricity rate increases to fund or otherwise offset its non-electricity activities.
Conclusion
The current administration has already justified its activities in the energy sector on the basis of pride and self-reliance, distinctly emotional issues, as opposed to financial or other measurable criteria. One can expect that any issues related to the new Hydro corporation will be couched in similar terms. All else will be dismissed as irrelevant or speculative.
Had it been concerned only with creating involvement in the oil and gas industry, the Williams administration would have proposed legislation that permitted those easily defined and relatively limited set of activities for a company sub-ordinate to or separate from Hydro. One might expect such a company could involve a partnership between a Crown corporation and private sector companies in the fashion of Statoil or Norsk Hydro.
The most obvious explanation for the Williams administrations approach is that it sought to create an entity which was controlled directly and entirely by cabinet, with limited requirements for public disclosure. The new Hydro corporation, as structured, will allow cabinet to direct Hydro expenditures much as it has done in the past, but over a wider range of activities, and based solely on an order-in-council.
In effect, Bill 1 will create out of Newfoundland and Labrador Hydro a hydra corporation. There is no limit to the range of activities in which it may engage with only the most rudimentary public scrutiny.While the public will unquestionably bear the full financial risk of this venture, they have no information on which to assess the risk of the course on which their provincial government is already fully engaged.
However the notion of accountability is much broader than that whether one is talking of current political values or the scrutiny to which corporations have been subjected to in the wake of scandals such as Enron.
In Newfoundland and Labrador, we need only look to a litany of failed public ventures to see the folly of granting to any administration - irrespective of the talents of its leader - the unfettered right to commit public money without public debate or disclosure. Our political landscape is littered with rubber boots, eyeglasses, gloves and rotting cucumbers.
The Williams administration has offered no explanation of its failure to comply with its own legislation on transparency and accountability largely since no one has asked a cabinet minister about the issue. The usual reply has been that the government will be accountable to the public at election-time.
Newfoundlanders and Labradorians, as shareholders in - as the sole owners of - the new Hydra corporation, deserve no less a level of accountability than that held by shareholders in the private sector. They demand - and receive - information on the risks and rewards before endorsing any venture as fully-informed participants. At the very least, those shareholders can sell their interest and move their money elsewhere if they do not support management's decisions.
Residents of Newfoundland and Labrador have no such luxury. Prudence - the hard won caution of experience - dictates they look more cautiously at government plans, lest they find themselves facing a financial hydra, if not under this administration than under some other administration in the not-so-distant future.
______________________________
1 Premier Williams has also used Hydro Quebec as a model for the new Hydro corporation. Under s. 22 of the Hydro Quebec Act, the company's objects are "to supply power and to pursue endeavours in energy-related research and promotion, energy conversion and conservation, and any field connected with or related to power or energy."
Hydro Quebec has not statutory authority to assume responsibility for any activity which the Lieutenant Governor-in-Council may approve, as provided for the new Newfoundland and Labrador Hydro corporation. Rather, Hydro Quebec's mandate is to supply power and engage in energy-related activities.
2 This was written and originally posted on 16 May 2006. The 2005 Hydro annual report was tabled in the House of Assembly on 16 May 2006. As of 0533 hrs 17 May 2006, it was not available on the Hydro website. Hydro has still not produced either a three year strategic plan or a business plan for the Lower Churchill or the expansion of the company's book of business even though this is required by the Transparency and Accountability Act.
Annex A:
AN ACT TO AMEND THE HYDRO CORPORATION ACT AND THE ELECTRICAL POWER
CONTROL ACT, 1994
Analysis
HYDRO CORPORATION ACT
1. S.4 Amdt.
Supply of power
ELECTRICAL POWER CONTROL ACT, 1994
2. S.24 Amdt.
Restrictions on business
Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:
HYDRO CORPORATION ACT
RSNL1990 cH-16 as amended
1. Section 4 of the Hydro Corporation Act is amended by renumbering it as subsection (1) of section 4 and by adding immediately after subsection (1) the following:
(2) In addition to the objects referred to in subsection (1), the corporation may, in the province and elsewhere, engage in activities related to the exploration for, development, production, refining, marketing and transportation of, hydrocarbons and products from hydrocarbons.
(3) Notwithstanding subsections (1) and (2), the corporation may engage in those other activities that the Lieutenant-Governor may approve.
ELECTRICAL POWER CONTROL ACT, 1994
SNL1994 c E-5.1 as amended
2. Section 24 of the Electrical Power Control Act, 1994 is amended by adding immediately after subsection (2) the following:
(3) This section does not apply to Newfoundland and Labrador Hydro.
©Earl G. Tucker, Queen's Printer
Screw you. Screw me?
There's childish and pissy.
Then there's the Prime Minister's reaction to having one of his nominees rejected by a parliamentary committee.
When the committee rejected his nominee to head the public appointments commission, Stephen Harper scrapped the commission.
As CanWest reported:
So much for sticking with the election platform.
Then there's the Prime Minister's reaction to having one of his nominees rejected by a parliamentary committee.
When the committee rejected his nominee to head the public appointments commission, Stephen Harper scrapped the commission.
As CanWest reported:
Later in the day, Harper abandoned the commission, which was supposed to establish a process to reduce patronage in government appointments by more widely advertising openings and setting merit-based criteria for selecting appointees. Harper said he disbanded the commission because he didn'’t expect other people to step forward to take the commission job for which Morgan was rejected.The traditional matter would be, of course, the sort of patronage that the PM and his colleagues in the Conservative party railed against when someone else doled out political largesse.
He added the government now would proceed with appointments "in the traditional manner."
So much for sticking with the election platform.
16 May 2006
The old in-out, in-out
Census day has prompted some public discussion in Newfoundland and Labrador of out-migration.
Some think the province's population will be down owing to some economic problems in rural areas. The provincial government claims there will be a slight decline from last year.
Flip to the provincial government's economics and statistics website (www.stats.gov.nl.ca)and you'll find a population projection to about 2020. It shows a small but steady decline based on:
- In/out migration
- Mortality rates
- Birth rates
The provincial government position is based on the assessment of the population trends.
But...
If one wanted to get a sense of the population effects of economic issues, one might look at this chart. It is an assessment of in-migration and out-migration for Newfoundland and Labrador, by fiscal quarter for the period from 1993 and 2005.
The net figures give a wider view of trends in migration over the past decade, but particularly highlight the dramatic increase in departures from 2005 compared to 2004.
A summary of the net figures (in- migration less out-migration) is presented below:
Year (Premier): net
2005 (DW): - 3442
2004 (DW): -1807
2003 (RG/DWilliams): -1103
2002 (RG): -3187
2001 (BTulk/RGrimes): -3914
2000 (BT/BTulk): -4884
1999 (BT) : -3916
1998 (BT): -7971
1997 (BT): -8522
1996 (CW/BTobin): -9026
1995 (CW): -6566
1994 (CWells): - 6204
Declines from 1994 to 1998 can be attributed in largest part to the aftermath of the cod moratorium announced by the Government of Canada in 1992. Federal support programs delayed some people from making a decision to seek employment in other parts of Canada.
Some think the province's population will be down owing to some economic problems in rural areas. The provincial government claims there will be a slight decline from last year.
Flip to the provincial government's economics and statistics website (www.stats.gov.nl.ca)and you'll find a population projection to about 2020. It shows a small but steady decline based on:
- In/out migration
- Mortality rates
- Birth rates
The provincial government position is based on the assessment of the population trends.
But...
If one wanted to get a sense of the population effects of economic issues, one might look at this chart. It is an assessment of in-migration and out-migration for Newfoundland and Labrador, by fiscal quarter for the period from 1993 and 2005.
The net figures give a wider view of trends in migration over the past decade, but particularly highlight the dramatic increase in departures from 2005 compared to 2004.
A summary of the net figures (in- migration less out-migration) is presented below:
Year (Premier): net
2005 (DW): - 3442
2004 (DW): -1807
2003 (RG/DWilliams): -1103
2002 (RG): -3187
2001 (BTulk/RGrimes): -3914
2000 (BT/BTulk): -4884
1999 (BT) : -3916
1998 (BT): -7971
1997 (BT): -8522
1996 (CW/BTobin): -9026
1995 (CW): -6566
1994 (CWells): - 6204
Declines from 1994 to 1998 can be attributed in largest part to the aftermath of the cod moratorium announced by the Government of Canada in 1992. Federal support programs delayed some people from making a decision to seek employment in other parts of Canada.
Don't mention the war
John Cleese is doing his bit to bring peace to the World, being held this year in Germany.
Among other things, he's helped pen a song encouraging Britons to focus on football in the upcoming matches and forget the events of half a century ago. (lyrics below)
The title of the song is taken from a famous episode of Cleese's Fawlty Towers series. Cleese and Monty Python used the war and Germans in several sketches, including The North Minehead By-election and The funniest joke in the world.*
Cleese fans will also appreciate his new website, thejohncleese.com.
* Trivia question: Name the Python episode in which The funniest joke in the world first appeared?
It was originally planned as the first episode of the series but was aired third.
E-mail your answers.
Among other things, he's helped pen a song encouraging Britons to focus on football in the upcoming matches and forget the events of half a century ago. (lyrics below)
The title of the song is taken from a famous episode of Cleese's Fawlty Towers series. Cleese and Monty Python used the war and Germans in several sketches, including The North Minehead By-election and The funniest joke in the world.*
Cleese fans will also appreciate his new website, thejohncleese.com.
Don'’t Mention The War
Don'’t mention the war
That'’s what football is for!
In 1966 we were the winning team
We'’d rather not discuss what happened in-between
Don'’t mention the war
Just get out there and score
At the glorious moment
When the lions roar
Don'’t mention the war
Don'’t mention the war
That'’s what football is for!
They might have bombed our chipshop 60 years ago
But a billion pints of lager later, here we go (come on then!)
Don'’t call them rude names
It'’s such a beautiful game
At the glorious moment
When the lions roar
Don'’t mention the war
Don'’t mention the war
Bend that ball round the wall
Instead of saving Poland
we are scoring goals
After 40 years of extra time and bacon rolls (bacon rolls!)
copyright The First Eleven
* Trivia question: Name the Python episode in which The funniest joke in the world first appeared?
It was originally planned as the first episode of the series but was aired third.
E-mail your answers.
Distraction
In the House of Assembly yesterday, Premier Danny Williams talked about changes to the legislation governing Fishery Products International to tackle, among other things, ensuring that a majority of the board of directors at FPI are from Newfoundland and Labrador.
The Premier also expressed concern that two of the directors were planning to chop up the company and sell off its bits and pieces.
Anyone passing familiar with the FPI Act knows that:
1. There is already a requirement that a majority of corporate directors come from this province; and that,
2. There is already a provision that prevents the sale of all or substantially all of the assets of the company. This was the section Danny used to screw around with the income trust proposal. It's there. He knows it works.
So why the puffing and posturing yesterday?
Could be that he wanted to appear to tackling an issue despite having no plan to address FPI.
Could be that Danny was responding to political pressure by throwing out some ideas.
Could be, as well, that he wanted to create another FPI controversy to distract everyone from the changes to the Hydro Corporation Act, Bill No. 1, which was revealed yesterday on the House of Assembly website. The implications of this small piece of legislation are far greater than FPI could ever be.
The Premier also expressed concern that two of the directors were planning to chop up the company and sell off its bits and pieces.
Anyone passing familiar with the FPI Act knows that:
1. There is already a requirement that a majority of corporate directors come from this province; and that,
2. There is already a provision that prevents the sale of all or substantially all of the assets of the company. This was the section Danny used to screw around with the income trust proposal. It's there. He knows it works.
So why the puffing and posturing yesterday?
Could be that he wanted to appear to tackling an issue despite having no plan to address FPI.
Could be that Danny was responding to political pressure by throwing out some ideas.
Could be, as well, that he wanted to create another FPI controversy to distract everyone from the changes to the Hydro Corporation Act, Bill No. 1, which was revealed yesterday on the House of Assembly website. The implications of this small piece of legislation are far greater than FPI could ever be.
15 May 2006
Everything old is new again
Smallwood was not known as a "team player" during his two decades as Premier and he habitually initiated policy on his own without consulting his cabinet ministers.
Miriam Wright, A fishery for modern times: the state and the industrialization of the Newfoundland fishery, 1934-1968, (Don Mills ON: Oxford University Press, 2001), p. 85.
Lower Churchill: CBC News in depth
Check out this little piece on the announcement of the go-it-alone option for the Lower Churchill.
14 May 2006
Where's the rest of it?
Last November, Memorial University's Harris Centre released a report on federal government presence in Newfoundland and Labrador.
The report became an issue in the federal election among local candidates, some of whom took to criticizing their own party based on what was essentially only a portion of the Harris Centre's analysis. The November report contained numbers without an explanation of why federal government jobs in the province had apparently declined.
According to the Harris Centre, the second report with the reasons behind the supposed cuts was due in February 2006.
That month has come and gone. Now it is mid-May and there is not a peep from the Harris Centre.
So where's the rest of the much-ballyhooed report?
The report became an issue in the federal election among local candidates, some of whom took to criticizing their own party based on what was essentially only a portion of the Harris Centre's analysis. The November report contained numbers without an explanation of why federal government jobs in the province had apparently declined.
According to the Harris Centre, the second report with the reasons behind the supposed cuts was due in February 2006.
That month has come and gone. Now it is mid-May and there is not a peep from the Harris Centre.
So where's the rest of the much-ballyhooed report?
12 May 2006
Andy, Terra Nova and the problem of a little knowledge
Interviewed on the St. John's CBC Radio Morning Show on Thursday, St. John's mayor Andy Wells made it clear that his opening remarks - "I am not an expert..." were likely the truest words he has ever uttered, at least when it comes to offshore oil and gas issues.
Wells was discussing recent problems with the Terra Nova field's floating production, storage and offloading (FPSO) vessel that will see production at Terra Nova halted a month in advance of a planned three-month shutdown for a refit and refurbishment of the FPSO. [Left: Terra Nova FPSO. Photo: Petro-Canada]
In the interview, Wells maintained among other things:
1. That a "proper debate" never took place on the decision to use an FPSO in preference to a revised gravity-based structure (GBS);
2. That the proponents will not be paying for the shutdown and that instead the people of Newfoundland and Labrador will be paying the cost, i.e. "taking a big hit"; and,
3. That he has no problems with use of an FPSO at White Rose, the field developed after Terra Nova.
Let's deal with these in order.
1. The debate issue. Wells never defines what would constitute a "proper debate". As a result, it is difficult to understand the basis on which he makes this assertion other than that the viewpoint of some individuals that a GBS ought to have been used did not win out.
Some proponents of the GBS-only approach were senior officials of the Peckford administration. Their views appear to be related to maximizing local industrial spinoffs, not necessarily on the safety, effectiveness and efficiency of using an FPSO as the mode of production for an offshore oil field. It would appear that these views are the ones Wells is championing.
There can be no doubt, however, that a debate did take place at the time and that it was quite lively. The Canada-Newfoundland and Labrador Offshore Board (CNLOPB) and the project proponents conducted public meetings and provided considerable opportunity to public input into all aspects of the development proposal before CNLOPB issued a decision. Morning Show host Jeff Gilhooley commented during the interview with Wells on the stories he covered related to the Terra Nova development and issues surrounding use of the FPSO.
It is important to recall that the FPSO was selected over a GBS as the Terra Nova production mode for three reasons, namely "more extreme weather conditions, more numerous icebergs, and deeper water at the Terra Nova location" than at Hibernia.
Developed for use in deep waters, FPSO designs moor the FPSO hull to a submerged riser-buoy that brings together the production pipes from seabed wells.
For most considerations, the FPSO is a ship of a general type and design which has operated on the Grand Banks for decades. Its overall design was certified by the government authorities after thorough review and to date there is no indication of a fundamental problem with the design that would cause it to operate unsafely either for human life or for the environment.
In the event of emergency, the ship can be detached from the buoy and moved off-station as the FPSO was relocated during the 2005 Titan missile scare. Its design as a ship allows the FPSO to ride with the ocean, as does any ship, thereby reducing the cost of developing a GBS that must fight against natural elements.
The most recent problem with the FPSO has been the result of a design decision taken at a time when oil prices were less than one third their current levels. As Petro-Canada spokesperson John Downton noted recently, the development proceeded at a time when oil was at a price per barrel on the order of US$20 or less. As a consequence, the FPSO at Terra Nova carries essential equipment only with only the redundancy in its equipment required for human and environmental safety.
In other words, there is nothing - absolutely nothing - inherent in the FPSO design that makes it inferior to the GBS in any way. There is an issue with the design of this specific FPSO, however that can be dealt with in the course of the planned refit.
2. Who pays? Wells apparently has some difficulty understanding this issue in the same fashion that he misunderstand the production mode issues.
The estimated $100 million revenue loss which Wells mentions is the amount of royalty that the Government of Newfoundland and Labrador will not be receiving in April/May 2005 as a result of this shutdown.
There are three things to note on this point. First, This is not a loss in the sense of income that will never be received. Rather, given that Terra Nova production will resume following the refit, the April/May revenues have merely been deferred. While this may cause some problems in the short-term for a government which has budgeted to spend all revenue received, there really is only a notional loss of revenue for the provincial government in the short-term that will be balanced out in the medium-to long- term.
Second, if Wells' GBS contention had held sway in 1996/997, one of three circumstances would have occurred. Either the high cost of building a GBS would have rendered the project not commercially viable based on projections at the time or, the project would not have achieved pay-out of costs after only three years of production as the FPSO approach has done or, had the GBS been foisted on the companies by government, taxpayers would have born the added costs in the form of royalty concessions. This is exactly what occurred with Hibernia.
This is no small matter. The provincial government revenues today from Terra Nova are higher than at first oil simply because the initial costs of development were kept under tight control. Early pay-off has moved the project into a higher royalty payment to the provincial government.
Had the Terra Nova project not begun in 1996/97, it is likely that White Rose too would have been delayed. As a result we might only today be looking at development prospects for Terra Nova fully 10 years after the project was first advanced.
Proponents for both projects are virtually the same and much of the knowledge gained from Terra Nova was transferred directly to White Rose. It is not small point, either, that Wells ignores White Rose entirely even though Terra Nova and White Rose are intimately connected. This effectively deals with Wells' third contention since, if there was a problem with the Terra Nova FPSO then there should be equal criticism of White Rose's production mode.
To close the matter of costs, however, the proponents are paying the entire costs of the refit and refurbishment as well as suffering a loss of revenue considerably greater than the provincial royalties. This is patently obvious.
On this third financing point, though, had government insisted on a GBS with its added - and essentially unnecessary - costs, there is no question that the proponents would have sought to recover those costs from government directly. This was one lesson from Hibernia.
To put it another way, if Andy Wells had been in a position to force his views on the Terra Nova project proponents, he would likely have reproduced the abysmal government revenue stream from Hibernia rather than the lucrative ones coming from Terra Nova and White Rose. He would have learned nothing at all from the recent past, instead preferring a few years of jobs pouring concrete to the hundreds of millions of dollars in provincial revenues which his new patron Danny Williams can now spend freely. He would have ensured that taxpayers took a big hit in the wallet, the very situation he claims now exists at Terra Nova.
Andy Wells has made a name for himself as an outspoken critic of the offshore oil and gas industry as it has developed in the past 10 years. However, in his most recent comments he demonstrates a fundamental lack of understanding for the issues involved both for the industry and for the province as a whole.
A little information can indeed be a dangerous thing. However, as long as Andy Wells sits in the mayor's chair and not in a position of responsibility related to the offshore oil and gas industry, his general lack of understanding cannot cause the province and its people any significant harm.
That said, if Danny Williams still thinks Andy can offer some worthwhile input at the offshore regulatory board, he need only appoint Wells to the Newfoundland and Labrador position that is open on the board and over which Mr. Williams holds complete authority to make the appointment as he sees fit. That option has been open to him for his term of office; that he has failed to take action on it suggests that Mr. Williams is less enamoured of Andy Wells than it appears.
Wells' own recent comments would suggest the Premier's caution is well founded.
Wells was discussing recent problems with the Terra Nova field's floating production, storage and offloading (FPSO) vessel that will see production at Terra Nova halted a month in advance of a planned three-month shutdown for a refit and refurbishment of the FPSO. [Left: Terra Nova FPSO. Photo: Petro-Canada]In the interview, Wells maintained among other things:
1. That a "proper debate" never took place on the decision to use an FPSO in preference to a revised gravity-based structure (GBS);
2. That the proponents will not be paying for the shutdown and that instead the people of Newfoundland and Labrador will be paying the cost, i.e. "taking a big hit"; and,
3. That he has no problems with use of an FPSO at White Rose, the field developed after Terra Nova.
Let's deal with these in order.
1. The debate issue. Wells never defines what would constitute a "proper debate". As a result, it is difficult to understand the basis on which he makes this assertion other than that the viewpoint of some individuals that a GBS ought to have been used did not win out.
Some proponents of the GBS-only approach were senior officials of the Peckford administration. Their views appear to be related to maximizing local industrial spinoffs, not necessarily on the safety, effectiveness and efficiency of using an FPSO as the mode of production for an offshore oil field. It would appear that these views are the ones Wells is championing.
There can be no doubt, however, that a debate did take place at the time and that it was quite lively. The Canada-Newfoundland and Labrador Offshore Board (CNLOPB) and the project proponents conducted public meetings and provided considerable opportunity to public input into all aspects of the development proposal before CNLOPB issued a decision. Morning Show host Jeff Gilhooley commented during the interview with Wells on the stories he covered related to the Terra Nova development and issues surrounding use of the FPSO.
It is important to recall that the FPSO was selected over a GBS as the Terra Nova production mode for three reasons, namely "more extreme weather conditions, more numerous icebergs, and deeper water at the Terra Nova location" than at Hibernia.
Developed for use in deep waters, FPSO designs moor the FPSO hull to a submerged riser-buoy that brings together the production pipes from seabed wells.
For most considerations, the FPSO is a ship of a general type and design which has operated on the Grand Banks for decades. Its overall design was certified by the government authorities after thorough review and to date there is no indication of a fundamental problem with the design that would cause it to operate unsafely either for human life or for the environment.
In the event of emergency, the ship can be detached from the buoy and moved off-station as the FPSO was relocated during the 2005 Titan missile scare. Its design as a ship allows the FPSO to ride with the ocean, as does any ship, thereby reducing the cost of developing a GBS that must fight against natural elements.
The most recent problem with the FPSO has been the result of a design decision taken at a time when oil prices were less than one third their current levels. As Petro-Canada spokesperson John Downton noted recently, the development proceeded at a time when oil was at a price per barrel on the order of US$20 or less. As a consequence, the FPSO at Terra Nova carries essential equipment only with only the redundancy in its equipment required for human and environmental safety.
In other words, there is nothing - absolutely nothing - inherent in the FPSO design that makes it inferior to the GBS in any way. There is an issue with the design of this specific FPSO, however that can be dealt with in the course of the planned refit.
2. Who pays? Wells apparently has some difficulty understanding this issue in the same fashion that he misunderstand the production mode issues.
The estimated $100 million revenue loss which Wells mentions is the amount of royalty that the Government of Newfoundland and Labrador will not be receiving in April/May 2005 as a result of this shutdown.
There are three things to note on this point. First, This is not a loss in the sense of income that will never be received. Rather, given that Terra Nova production will resume following the refit, the April/May revenues have merely been deferred. While this may cause some problems in the short-term for a government which has budgeted to spend all revenue received, there really is only a notional loss of revenue for the provincial government in the short-term that will be balanced out in the medium-to long- term.
Second, if Wells' GBS contention had held sway in 1996/997, one of three circumstances would have occurred. Either the high cost of building a GBS would have rendered the project not commercially viable based on projections at the time or, the project would not have achieved pay-out of costs after only three years of production as the FPSO approach has done or, had the GBS been foisted on the companies by government, taxpayers would have born the added costs in the form of royalty concessions. This is exactly what occurred with Hibernia.
This is no small matter. The provincial government revenues today from Terra Nova are higher than at first oil simply because the initial costs of development were kept under tight control. Early pay-off has moved the project into a higher royalty payment to the provincial government.
Had the Terra Nova project not begun in 1996/97, it is likely that White Rose too would have been delayed. As a result we might only today be looking at development prospects for Terra Nova fully 10 years after the project was first advanced.
Proponents for both projects are virtually the same and much of the knowledge gained from Terra Nova was transferred directly to White Rose. It is not small point, either, that Wells ignores White Rose entirely even though Terra Nova and White Rose are intimately connected. This effectively deals with Wells' third contention since, if there was a problem with the Terra Nova FPSO then there should be equal criticism of White Rose's production mode.
To close the matter of costs, however, the proponents are paying the entire costs of the refit and refurbishment as well as suffering a loss of revenue considerably greater than the provincial royalties. This is patently obvious.
On this third financing point, though, had government insisted on a GBS with its added - and essentially unnecessary - costs, there is no question that the proponents would have sought to recover those costs from government directly. This was one lesson from Hibernia.
To put it another way, if Andy Wells had been in a position to force his views on the Terra Nova project proponents, he would likely have reproduced the abysmal government revenue stream from Hibernia rather than the lucrative ones coming from Terra Nova and White Rose. He would have learned nothing at all from the recent past, instead preferring a few years of jobs pouring concrete to the hundreds of millions of dollars in provincial revenues which his new patron Danny Williams can now spend freely. He would have ensured that taxpayers took a big hit in the wallet, the very situation he claims now exists at Terra Nova.
Andy Wells has made a name for himself as an outspoken critic of the offshore oil and gas industry as it has developed in the past 10 years. However, in his most recent comments he demonstrates a fundamental lack of understanding for the issues involved both for the industry and for the province as a whole.
A little information can indeed be a dangerous thing. However, as long as Andy Wells sits in the mayor's chair and not in a position of responsibility related to the offshore oil and gas industry, his general lack of understanding cannot cause the province and its people any significant harm.
That said, if Danny Williams still thinks Andy can offer some worthwhile input at the offshore regulatory board, he need only appoint Wells to the Newfoundland and Labrador position that is open on the board and over which Mr. Williams holds complete authority to make the appointment as he sees fit. That option has been open to him for his term of office; that he has failed to take action on it suggests that Mr. Williams is less enamoured of Andy Wells than it appears.
Wells' own recent comments would suggest the Premier's caution is well founded.
This is Ottawa, Loyola
For months now Newfoundlanders and Labradorians have witnessed the provincial fish minister, Tom Rideout, effectively working without a political net. The guy has been screwing up the Fisheries Products file at every juncture and just in the past couple of days has decided he will interfere in any successful fisheries business out there with no greater objective than flexing his political power regardless of the consequences.
Rideout, like his boss Danny Williams, is definitely not seen as being business friendly, especially after he revealed confidential business dealings that he was only advised of as a courtesy.
Now it seems federal fish minister Loyola Hearn is practicing the same sort of bullshit politics of his former boss Rideout.
Yesterday, Loyola Hearn's office tossed out a news release claiming that his office had been instrumental in getting Air Canada to restore a flight from St. John's to London. They had details of the aircraft type and frequency of the flight.
What Hearn got instead was embarrassed when Air Canada denied any such deal. They said they were looking at possibilities but no final decisions had been made. Seems there were discussions, but Hearn's office got information in confidence, i.e. not for public disclosure.
You see, companies don't like having confidential information - sensitive information - that is theirs to release bandied about by every trumped up, pumped up petty pol for his or her own ego stroking. Air Canada put Hearn exactly in the place where he belonged and late yesterday afternoon we had the pathetic spectacle of a federal cabinet minister on local CBC Radio explaining, very unconvincingly, how what he and his staff had done was actually correct.
It was a needless embarrassment and, to be frank, a surprising one from a cunning old political fox like Hearn. He might be a political hypocrite of the old school in saying one thing to get elected and doing another once in the job, but Hearn is a wiley guy.
For their part, businesses will be touchy about dealing with Hearn - just like they are shying away from Williams' local crew - for fear that their confidential business will be splashed across Open Line if it suits the politician's purpose of the moment. If Hearn suddenly dons a toque for speeches, then he will be blacklisted right along with Williams and his crew; if Hearn keeps his nose clean, then they will go back to talking with him in full.
Meanwhile over at Langevin, for their part, the Prime Minister's media control Gestapo will be tightening up the reigns on even Loyola. He's been treated like an experienced pol so far and had a bit of a free reign in a world where some of Hearn's colleagues have to get Harper's gang to "ok" notes home to the spouse that said minister will be late for dinner.
Still other cabinet ministers apparently have to ask to go to the head, for fear they'll blurt something out to the guy in the next stall. But Loyola has been given credit for his experience at the provincial level.
Until yesterday, that is, when Loyola and his staff showed they are still an amateur operation too closely tied to provincial politics.
You can almost hear the call from the PMO: "This is Ottawa, Loyola. No one here gives a shit about what people say about you or Danny to Bill Rowe."
Rideout, like his boss Danny Williams, is definitely not seen as being business friendly, especially after he revealed confidential business dealings that he was only advised of as a courtesy.
Now it seems federal fish minister Loyola Hearn is practicing the same sort of bullshit politics of his former boss Rideout.
Yesterday, Loyola Hearn's office tossed out a news release claiming that his office had been instrumental in getting Air Canada to restore a flight from St. John's to London. They had details of the aircraft type and frequency of the flight.
What Hearn got instead was embarrassed when Air Canada denied any such deal. They said they were looking at possibilities but no final decisions had been made. Seems there were discussions, but Hearn's office got information in confidence, i.e. not for public disclosure.
You see, companies don't like having confidential information - sensitive information - that is theirs to release bandied about by every trumped up, pumped up petty pol for his or her own ego stroking. Air Canada put Hearn exactly in the place where he belonged and late yesterday afternoon we had the pathetic spectacle of a federal cabinet minister on local CBC Radio explaining, very unconvincingly, how what he and his staff had done was actually correct.
It was a needless embarrassment and, to be frank, a surprising one from a cunning old political fox like Hearn. He might be a political hypocrite of the old school in saying one thing to get elected and doing another once in the job, but Hearn is a wiley guy.
For their part, businesses will be touchy about dealing with Hearn - just like they are shying away from Williams' local crew - for fear that their confidential business will be splashed across Open Line if it suits the politician's purpose of the moment. If Hearn suddenly dons a toque for speeches, then he will be blacklisted right along with Williams and his crew; if Hearn keeps his nose clean, then they will go back to talking with him in full.
Meanwhile over at Langevin, for their part, the Prime Minister's media control Gestapo will be tightening up the reigns on even Loyola. He's been treated like an experienced pol so far and had a bit of a free reign in a world where some of Hearn's colleagues have to get Harper's gang to "ok" notes home to the spouse that said minister will be late for dinner.
Still other cabinet ministers apparently have to ask to go to the head, for fear they'll blurt something out to the guy in the next stall. But Loyola has been given credit for his experience at the provincial level.
Until yesterday, that is, when Loyola and his staff showed they are still an amateur operation too closely tied to provincial politics.
You can almost hear the call from the PMO: "This is Ottawa, Loyola. No one here gives a shit about what people say about you or Danny to Bill Rowe."
10 May 2006
The last remake of beau risque: la fruit n'est pas mur
Action democratique (ADQ) leader Mario Dumont thinks it is time to open the constitutional file again, with talk of renewing Rene Levesque's failed beau risque of the 1980s.
In Quebec, as la presse reported, Dumont is being slammed by both the Charest administration and the Parti Quebecois.
From Ottawa, the official government position is that the time is not ripe for formal constitutional discussions. Labour minister Jean-Pierre Blackburn said "[i]l n'y a rien que j'aimerais plus que de voir le Quebec signer la Constitution comme on l'a tant souhaite, mais je crois que le fruit n'est pas mur pour avoir des negociations constitutionnelles formelles."
Bloc Quebecois leader Gilles Duceppe was as succinct as possible:
Given that the whole issue appears to be little more than a gamble by Dumont to boost his party's popularity in the upcoming provincial election, this may well be nothing more than the last remake of beau risque.
In Quebec, as la presse reported, Dumont is being slammed by both the Charest administration and the Parti Quebecois.
From Ottawa, the official government position is that the time is not ripe for formal constitutional discussions. Labour minister Jean-Pierre Blackburn said "[i]l n'y a rien que j'aimerais plus que de voir le Quebec signer la Constitution comme on l'a tant souhaite, mais je crois que le fruit n'est pas mur pour avoir des negociations constitutionnelles formelles."
Bloc Quebecois leader Gilles Duceppe was as succinct as possible:
"I think constitutional negotiations are over," he said. "It's very clear there are no other solutions. Either Quebec is a province like the others in Canada and in the world of globalization, which means shrinking slowly but surely, or Quebec becomes sovereign. There's no third way."Dumont's ADQ is in third place among voters provincially in what is likely to be a tight race between the PQ and Charest's Liberals.
Given that the whole issue appears to be little more than a gamble by Dumont to boost his party's popularity in the upcoming provincial election, this may well be nothing more than the last remake of beau risque.
Lower Churchill solo act could end in shock
Konrad Yakabuski has an interesting column in today's Globe and Mail on Danny Williams' plans to got it alone on the Lower Churchill.
It's "premium" content for the Globe but if you go to google news and search "lower churchill" the thing will pop up.
Yakabuski says the best option for Newfoundland and Labrador remains a deal involving Hydro Quebec:
As with the Upper Churchill, one of the issues for both financiers and prospective customers will remain the same: can the proponent deliver? Yakabuski describes it this way:
It's "premium" content for the Globe but if you go to google news and search "lower churchill" the thing will pop up.
Yakabuski says the best option for Newfoundland and Labrador remains a deal involving Hydro Quebec:
Developing Lower Churchill with a partner and letting Newfoundlanders determine their own economic destiny are not mutually exclusive propositions. Indeed, joint development of the project with Quebec still makes the most economic sense for Newfoundland, if only because, if Hydro-Quebec is not a partner, it necessarily becomes a competitor.He notes that Quebec is fast-tracking development of its own hydro-electric potential that would arrive on the market at the same time as the Lower Churchill, if development begins in 2009. In the meantime, Quebec has already committed hundreds of millions of dollars in environmental studies and is moving quickly to negotiate power purchase deals with Ontario.
As with the Upper Churchill, one of the issues for both financiers and prospective customers will remain the same: can the proponent deliver? Yakabuski describes it this way:
Those are the same customers [Ontario and the United States northeast states] Mr. Williams must court to sell power from the Lower Churchill project. The buyers will not choose their supplier based on price alone; since the contracts must be signed before the first shovel goes into the ground, the buyers must have the confidence, if not assurance, the seller can deliver the merchandise.Undoubtedly, the Premier will dismiss these observations out-of-hand as will local commentators who have built a notoriety around all things electric. It is still food for thought as we contemplate doubling the provincial debt, with or without loan guarantees from the federal government and other investors in the Premier's supposed go it alone approach.
More Lower Churchill information
A couple of weeks ago, Craig Westcott published an interesting summary of a talk by Newfoundland and Labrador Hydro vice president Gilbert Bennett. Bennett was speaking at a public meeting at Memorial University.
It appeared on the front page of the resurrected Independent under the head "Growing interest: solving interest rate riddle critical to Lower Churchill project." The piece isn't on the Indy website for some reason.
Following is the bulk of the article since it relates directly to the recent announcement by the provincial government that it is starting from scratch - yet again - to develop a proposal to put the Lower Churchill into production. There are several points worth noting, not the least of which is the section in which Cy Abery, a former Hydro president and chief executive officer scoffs at the prospect of shipping power to the Maritimes.
This part took on an extra significance since Ed Martin, Abery's successor under Danny Williams, told CBC Radio this morning that Hydro will be studying the feasibility of shipping power via an underwater cable to the Maritimes and then south to the United States.
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It appeared on the front page of the resurrected Independent under the head "Growing interest: solving interest rate riddle critical to Lower Churchill project." The piece isn't on the Indy website for some reason.
Following is the bulk of the article since it relates directly to the recent announcement by the provincial government that it is starting from scratch - yet again - to develop a proposal to put the Lower Churchill into production. There are several points worth noting, not the least of which is the section in which Cy Abery, a former Hydro president and chief executive officer scoffs at the prospect of shipping power to the Maritimes.
This part took on an extra significance since Ed Martin, Abery's successor under Danny Williams, told CBC Radio this morning that Hydro will be studying the feasibility of shipping power via an underwater cable to the Maritimes and then south to the United States.
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Then came one of the toughest questions to answer, but one that is critical to the viability of the $6-billion to $9-billion project that Hydro is hoping to have on stream by 2015....
"The surprise for me tonight," said one man, "was that this project, to get off the ground, is going to take as much as 10 years. Interest rates are starting to rise. Isn't there a risk in taking this project so far out?"
Bennett allowed there is. "I'm with you in that interest rates are going to be essential," he admitted.
And that was putting it mildly.
As Bennett himself pointed out, there are a number of key factors that have to be resolved before the Lower Churchill hydro project can get sanctioned for construction. A land claim and impact benefits agreements must be negotiated with the Innu Nation. The federal and provincial governments have to agree on the form the environmental impact statement will take and who will head the review. And the province must decide who will develop the power plants at Gull Island and Muskrat Falls, who will get the power from them, how they will get it and how the whole thing will be financed.
"As you can see, we have a lot of work to do," Bennett told the gathering.
But among all the challenges and risks, perhaps none is more important than the matter of interest rates. If the Upper Churchill was a boondoggle because of Brinco'’s inability to negotiate a re-opener clause to cover inflation, the killer for any Lower Churchill project could be interest rates. And that'’s because just like the man in the lecture room observed, this project is going to take a long time to develop.
The problem is that while interest rates may be low now, nobody knows what they will be in 15 years time, if the project is even completed by then. Nobody even knows what they will be next year. And once the project is sanctioned, the developer will be borrowing money every year until it gets built.[sub-head deleted]
"You're borrowing, borrowing, borrowing, spending, spending, spending (until 2015)," explains [former Hydro chief executive officer Bill] Wells. "Somebody's got to lend you that and that interest cost during the period of construction, that just adds on to the principle because you'’re not paying anything back. So at the end of the day you've got this lump sum of money that you owe and when you close out your financial agreement going forward for 30 years or 40 years financing, what you're going to pay in interest is determined at that time, it's not determined now. So interest rates in 2016, who knows? They may be up, they may be down. And one of the things is, who takes the risk on interest? That used to come up in previous negotiations. It'‘s a critical factor."
Wells says the province, or Hydro, could try at the outset of the construction project to get a lender to agree to a range of future interest rates, as some measure of protection, but that would cost a lot of money.
"Interest is a big factor and then it depends on how you're financing it," Wells says.
One of the ways the province is looking at raising money to build the project is on the strength of a power purchase agreement with a future customer of the power. That's how Brinco financed the Upper Churchill deal in the 1960s. Back then, the only customer Brinco could get to sign a guarantee that it would buy the electricity was Hydro Quebec. With Ontario and some United States utilities facing the prospect of energy shortages, it may be easier to find other buyers this time around. There will be enough electricity from Lower Churchill to power 1.5 million homes.
But the power will still have to go through Quebec.
"You can't get the power out of Labrador without going through Quebec," says [Cyril] Abery, [who was Hydro chief executive officer from 1985 to 1991].
Williams has raised the prospect of building a transmission line through the Maritimes.
Abery is sceptical.
"We always put that out there to make it sound like we had options," Abery says. "But everybody in the business knows that'’s foolishness. It sounds good in the newspaper. Joe Smallwood started that back in the 1960s calling it the Anglo-Saxon route. It was crazy then and it's crazy now."
Abery says any talk of a Maritimes route doesn't fool Hydro Quebec.
"They just smile," he says. "I mean you're in the middle of Labrador. The only border we've got is with Quebec. So you've either got to sell it to Quebec, or go through Quebec. And there's no reason you wouldn't sell it to Quebec. Their money is just as good as anybody else's money as long as you got enough of it."
Abery says Newfoundland could sell the power to another customer, in Ontario say, and simply pay Hydro Quebec to wheel it across its transmission lines. The fee for doing it wouldn't be unreasonable, he notes.
"But the farther you sell it, the more transmission lines you've got to build and the costlier it is," he points out. "The simpler thing is to just sell it to Quebec and let them deal with it. But if you'’re getting enough money out of Ontario, then sell it to them. If you're getting enough money out of Manitoba, I suppose you'd sell it to them. But it would be expensive power. The further you go, the more expensive it is. Transmission lines are not cheap. And you lose energy on the transmission line. That's why you can only go so far with the transmission line, otherwise there'’s no energy at the end of it."
Wells, meanwhile, sees one way around a purchase power contract with Hydro Quebec or any other customer as the main way of financing the project. But it'’s one that didn'’t get anywhere in the past.
"If the federal government said 'We'll back the project,' well nobody is going to argue the federal government is going to go broke over (it)," says Wells.
Bennett says obtaining federal backing is an area the utility is going to explore very carefully. He notes Premier Williams raised the idea with all three parties during the last federal election. Stephen Harper, then the Conservative Party Leader, now the Prime Minister, said his party supported the idea of a project "in principle."
Whether that includes a financial commitment remains to be seen.
09 May 2006
Ready for a better tomorrow
If the past is used by politicians like Danny Williams as a demon to frighten small children and the politically naive, the future is the great hope that will deliver the answer to all our prayers.
In the political religion of Newfoundland and Labrador, Tomorrow fills the role of Heaven: it is the place when all will be milk and honey and the travails of living in this place will be gone. Salvation cannot be achieved today - in this life - but we can be prepared for the time when we are taken up to Heaven and our great reward.
Yesterday's announcement on the Lower Churchill fits the bill perfectly.
Danny Williams and natural resources minister Ed Byrne invariably trotted out the spectre of the Upper Churchill "give-away" - the hardships of this life - as a contrast with the promise of riches and peace Tomorrow will bring now that Newfoundland and Labrador has decided to "go-it-alone" on an energy megaproject that would effectively double our provincial debt.
Other premiers have held out the Lower Churchill nirvana to distract from their short-term political hells. Frank Moores started the pattern. It was taken up more recently by Brian Tobin and Roger Grimes and always set against the pledge that what will be done tomorrow will not be as bad as what happened yesterday.
When Danny Williams announced the start of the Lower Churchill development process in early 2005, he predicted that right now would be Phase Three. This would be the time when the short-list of development options would be turned into detailed negotiations that would lead to Phase Four, more negotiations and finally Phase Five, that is the signing of a development deal and the start of work. Option 1 of the proposal submitted by Ontario, Quebec Hydro and SNC Lavelin followed that timescale. It anticipated construction would start in 2006 or 2007 with first power flowing to market by 2011.
But what Danny Williams announced yesterday was really the resetting of the clock to the beginning again. Now we will not see a decision about the viability of the chosen option until 2009 and first power will be achieved in 2015 at the earliest. Tomorrow is a day that apparently is hard to reach.
What is most remarkable about the most recent Lower Churchill promise is that the provincial government clearly does not have have a business case or a business plan to carry it forward. Most of the preparatory work on the Lower Churchill is done. Some work needs to be done to bring those older plans up to date, but what needs to be sorted is the financing. There must be a power purchase agreement, the consequent decision on delivery methods and then the negotiation of the considerable borrowing - likely double or more than double the provincial accrual debt load - that will let digging start on the first hole.
But there is no business plan to move this project forward. The go-it-alone option was inserted into the overall process in August 2005, at the last minute and apparently by the Premier himself. In the meantime, it has never been discussed publicly so that we can see the evident advantages, assess the risks and see why doing the Lower Churchill the Danny Williams way, in which the provincial government assumes the lion's share of the risk, is actually better - demonstrably better - than any other approach.
If there was a provincial government business plan, Williams and his minister would be speaking to it. They would be able to map out exactly the basis on which they have made their decisions. Yesterday's announcement would have been about getting into the heart of the challenge of developing the Lower Churchill's considerable hydro potential. Danny Williams, the self-described successful businessman would be talking like a businessman; that is, he'd about the "metrics" by which risk and reward are assessed in the real world where results and money count.
Instead, we got the usual rhetoric of Danny Williams the politician: masters of our domain, of the virtues of "going-it-alone", righting the wrongs of the Upper Churchill and how this decision confirms the Premier's previous judgments that the province is not afraid to be self-reliant:
The reality of Newfoundland politics is typically very different from the promises of its clergy. The Lower Churchill announcement is no different. Newfoundland and Labrador has always been in total control over development of the Lower Churchill. In the early 1990s, when a deal was close, the provincial government was not prepared to accept a key condition of the project partner, Quebec Hydro. The Wells administration would not accept an extension of the Upper Churchill deal as a condition of signing a Lower Churchill agreement.
More importantly, though in every single discussion - bar none - Quebec Hydro was seen as a partner in the development, bringing its deep financial pockets and expertise in hydro megaprojects. This is exactly the same position Danny Williams mapped yesterday. Newfoundland and Labrador is seeking partners for its supposedly go-it-alone project:
- The federal government must provide loan guarantees. Danny Williams believes he has those already. Prime Minister Stephen Harper has made no such commitment publicly. Loyola Hearn, Harper's Newfoundland and Labrador representative, made no such commitment.
- Equity partners - that is co-owners of the project - are welcome to join in. Williams needs their deep pockets. Of course, in exchange for risking their capital and their credit, these equity partners will demand a return. Altius talked of a share of gross sales; others will put similar conditions on their investment. That too is identical to every other proposal, even the Upper Churchill contract. The party that puts its cash at risk expects to reap the financial rewards.
So what is different about the Danny Williams Lower Churchill compared to all that has gone before?
Precious little, in the final analysis. The outstanding issues are the same issues facing every other Lower Churchill negotiation. The financial issues are still to be settled. The project hinges on firm markets, guaranteed sales and the ability to raise huge amounts of capital. It depends on a balancing of risk and reward for all those involved. This is a project that we simply will not be doing on our own, no matter what Danny Williams claims. If it happens at all, there will be many partners. The rewards for Newfoundland and Labrador will obviously be very different from the Upper Churchill contract but they will not be - they can likely never be - as phantasmagorically wonderful as the vision Danny William laid before us.
And that, most of all though, is the key to understanding Danny Williams latest version of the Lower Churchill. At the very least, and like Brian Tobin before him, Williams has attacked past deals of any kind so vigorously and relentlessly that only a perfect Lower Churchill deal could survive political attack. Perfection is impossible in this life and so Williams' Lower Churchill is a deal he can never sign.
The function of the Lower Churchill is to serve as a distraction from the very real and very difficult problems in front of government. It is supposed to take our minds - and our media coverage - off the hardships of this life and fix them instead on the promise of our reward manana.
In the meantime, as preacher Tobin used to say, we must be ready for that better tomorrow when the rapture comes.
In the political religion of Newfoundland and Labrador, Tomorrow fills the role of Heaven: it is the place when all will be milk and honey and the travails of living in this place will be gone. Salvation cannot be achieved today - in this life - but we can be prepared for the time when we are taken up to Heaven and our great reward.
Yesterday's announcement on the Lower Churchill fits the bill perfectly.
Danny Williams and natural resources minister Ed Byrne invariably trotted out the spectre of the Upper Churchill "give-away" - the hardships of this life - as a contrast with the promise of riches and peace Tomorrow will bring now that Newfoundland and Labrador has decided to "go-it-alone" on an energy megaproject that would effectively double our provincial debt.
Other premiers have held out the Lower Churchill nirvana to distract from their short-term political hells. Frank Moores started the pattern. It was taken up more recently by Brian Tobin and Roger Grimes and always set against the pledge that what will be done tomorrow will not be as bad as what happened yesterday.
When Danny Williams announced the start of the Lower Churchill development process in early 2005, he predicted that right now would be Phase Three. This would be the time when the short-list of development options would be turned into detailed negotiations that would lead to Phase Four, more negotiations and finally Phase Five, that is the signing of a development deal and the start of work. Option 1 of the proposal submitted by Ontario, Quebec Hydro and SNC Lavelin followed that timescale. It anticipated construction would start in 2006 or 2007 with first power flowing to market by 2011.
But what Danny Williams announced yesterday was really the resetting of the clock to the beginning again. Now we will not see a decision about the viability of the chosen option until 2009 and first power will be achieved in 2015 at the earliest. Tomorrow is a day that apparently is hard to reach.
What is most remarkable about the most recent Lower Churchill promise is that the provincial government clearly does not have have a business case or a business plan to carry it forward. Most of the preparatory work on the Lower Churchill is done. Some work needs to be done to bring those older plans up to date, but what needs to be sorted is the financing. There must be a power purchase agreement, the consequent decision on delivery methods and then the negotiation of the considerable borrowing - likely double or more than double the provincial accrual debt load - that will let digging start on the first hole.
But there is no business plan to move this project forward. The go-it-alone option was inserted into the overall process in August 2005, at the last minute and apparently by the Premier himself. In the meantime, it has never been discussed publicly so that we can see the evident advantages, assess the risks and see why doing the Lower Churchill the Danny Williams way, in which the provincial government assumes the lion's share of the risk, is actually better - demonstrably better - than any other approach.
If there was a provincial government business plan, Williams and his minister would be speaking to it. They would be able to map out exactly the basis on which they have made their decisions. Yesterday's announcement would have been about getting into the heart of the challenge of developing the Lower Churchill's considerable hydro potential. Danny Williams, the self-described successful businessman would be talking like a businessman; that is, he'd about the "metrics" by which risk and reward are assessed in the real world where results and money count.
Instead, we got the usual rhetoric of Danny Williams the politician: masters of our domain, of the virtues of "going-it-alone", righting the wrongs of the Upper Churchill and how this decision confirms the Premier's previous judgments that the province is not afraid to be self-reliant:
- "...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."Hydro president and chief executive officer Ed Martin talked about the next steps for what they are: Hydro will take three years - 36 months! - to develop the go-it-alone option that we have already been told is better. Something we have not seen yet is better? How can anyone make such a judgment?
- "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 reality of Newfoundland politics is typically very different from the promises of its clergy. The Lower Churchill announcement is no different. Newfoundland and Labrador has always been in total control over development of the Lower Churchill. In the early 1990s, when a deal was close, the provincial government was not prepared to accept a key condition of the project partner, Quebec Hydro. The Wells administration would not accept an extension of the Upper Churchill deal as a condition of signing a Lower Churchill agreement.
More importantly, though in every single discussion - bar none - Quebec Hydro was seen as a partner in the development, bringing its deep financial pockets and expertise in hydro megaprojects. This is exactly the same position Danny Williams mapped yesterday. Newfoundland and Labrador is seeking partners for its supposedly go-it-alone project:
- The federal government must provide loan guarantees. Danny Williams believes he has those already. Prime Minister Stephen Harper has made no such commitment publicly. Loyola Hearn, Harper's Newfoundland and Labrador representative, made no such commitment.
- Equity partners - that is co-owners of the project - are welcome to join in. Williams needs their deep pockets. Of course, in exchange for risking their capital and their credit, these equity partners will demand a return. Altius talked of a share of gross sales; others will put similar conditions on their investment. That too is identical to every other proposal, even the Upper Churchill contract. The party that puts its cash at risk expects to reap the financial rewards.
So what is different about the Danny Williams Lower Churchill compared to all that has gone before?
Precious little, in the final analysis. The outstanding issues are the same issues facing every other Lower Churchill negotiation. The financial issues are still to be settled. The project hinges on firm markets, guaranteed sales and the ability to raise huge amounts of capital. It depends on a balancing of risk and reward for all those involved. This is a project that we simply will not be doing on our own, no matter what Danny Williams claims. If it happens at all, there will be many partners. The rewards for Newfoundland and Labrador will obviously be very different from the Upper Churchill contract but they will not be - they can likely never be - as phantasmagorically wonderful as the vision Danny William laid before us.
And that, most of all though, is the key to understanding Danny Williams latest version of the Lower Churchill. At the very least, and like Brian Tobin before him, Williams has attacked past deals of any kind so vigorously and relentlessly that only a perfect Lower Churchill deal could survive political attack. Perfection is impossible in this life and so Williams' Lower Churchill is a deal he can never sign.
The function of the Lower Churchill is to serve as a distraction from the very real and very difficult problems in front of government. It is supposed to take our minds - and our media coverage - off the hardships of this life and fix them instead on the promise of our reward manana.
In the meantime, as preacher Tobin used to say, we must be ready for that better tomorrow when the rapture comes.
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:
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:
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.
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.
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 powerWith 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.
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.
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.
08 May 2006
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.
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.
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