Oil's dark secret

While Danny Williams boasts of battling big oil, he is tackling a small fry, according to The Economist.

The leading business magazine noted in its August 12th issue that of the 20 biggest oil firms in the world, 16 are nationally-owned companies (NOCs). ExxonMobil is the 14th largest company by oil reserves. The top 13 are all NOCs. [Note: the link is to a condensed version of the special feature on state-owned oil enterprises. The full edition is still available in some local bookstores or online at economist.com]

The editorial accompanying the article notes the cost paid for such a concentration of oil wealth and the warning is worth noting in light of plans to turn the province's own electricity company into an oil company or, as the legislation provides, a hydra corporation able to get into any business approved by cabinet.

As The Economist puts it (p.11):

Few of the princes, politicians and strongmen who wield ultimate authority over these firms can resist the urge to meddle. At best, that leads to the sort of inefficiencies found at most state-owned firms: overstaffing, underinvestment and so on. At worst, business of pumping and selling oil is totally subsumed by politics, as in the case of Petroleos de Venezuela, one of the biggest NOCs. In either case, NOCs produce less oil, more expensively, than they should.

The approach being taken by the Williams administration is exactly contrary to the one proposed by The Economist, namely to privatise state-owned oil companies in whole or in part and reap the benefit: "The less bureaucrats interfere, after all, the more money their oil companies will generate for them to spend".

In Norway - Williams' supposed model - Statoil and Norsk Hydro operate essentially as private sector companies with the state owning, respectively 71% and 43% of the company's shares. The companies also do not have any special advantage over private companies when it comes to land sales and government regulation. The three elements - policy and taxation, regulation, and business enterprise - are run separately from one another.

In Newfoundland and Labrador, the effort seems to be to bring all entities under one single umbrella directed from the provincial cabinet room or worse, the Premier's Office. The initiative to turn Hydro into an oil and gas company did not come from its board of directors. The role was imposed on it by politicians. The entire affair proceeds bereft of a strategic plan or a business plan, two of the fundamental elements of sound private-sector business operations.

The relationship between government and its wannabe oil company is also in a fundamental conflict of interest when it comes to taxation. Bond Papers put it this way, in May 2006:

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.

The third element to be joined into the morass is regulation. Danny Williams' efforts to appoint his own candidate to head the offshore regulatory board is hardly disguised. Williams' intention appears to be to gain effective control over the board or gain at the board an ally who will follow the general direction set by Williams.

Two of the three conflicts of interest have been realized. The third is being frustrated only by a handful of circumstances that we should hope and pray do not change.

As The Economist notes, the ultimate loser in this venture is the taxpayer. The publicly-owned oil and gas company will be run, as the electricity company is now, by bureaucrats and politicians. Even if, by some miracle, the current crop of politicians, bureaucrats and political-appointees do a half-decent job of running the Hydro corporation - and that would run contrary to experience locally and globally over decades - there is no guarantee the next crowd or the one after will be as good.

Even the current crowd have shown themselves likely to make dubious decisions. They have embarked on a Lower Churchill project without even the most basic business decision-making tools. If trends continue, Williams will commit the province to a project that has the potential to double the size of the provincial government debt.

In the same fashion, the Lower Churchill project office is run just as it has been since it was created when Brian Tobin was premier and Dean MacDonald sat as board chairman, just as he does now. The Hydro board voted the cash, the office reported to the premier and the entire affair was managed out of sight of any public scrutiny.

The Economist article is a timely warning, if one is inclined to heed it. If not, it should give more than a moment's pause. The decisions being taken today will have ramifications for generations to come.

They do not look good.

What do you do...

when you go from being a guy who liked to claim he fought The Man to being The Man himself?

Well, if you are Danny - The Manny - Williams, you bitch about the New Democrats for trying to fix up a selection process so their candidate could win.

Never mind that all Jack Harris and the New Democrats get to figure out here is when Jack will resign. Never mind that Jack already made it plain he will be resigning. Never mind that - contrary to what The Man said, it is routine for political parties to select candidates to run in a pending election even when the incumbent is still in place.

Meanwhile, The Man will decide the date of the by-election.

The Man will spend whatever public cash it takes to get The Man's man elected.

The Man will spend every waking minute knocking every door in the district to win because The Man wants every single seat.

The Man will send every one of his MHAs and cabinet ministers into the district to win.

Having The Man whine about some trying to rig a selection process is like Bill Gates moaning about someone with an abacus trying to muscle in on the high speed computer market.

To be quite frankly honest, the level of whining The Man is doing here is silly.

Quite honestly. Quite frankly. Frankly, Honestly. Quite honestly, frankly...

Suck it up there, Danny.

After all, you are The Man.

Act like it.

Mobile labour force adapts to local downturns

From the Globe and Mail comes an article on Newfoundlanders and Labradorians working in other provinces - like Alberta - and returning home periodically.

The phenomenon of mobile labour is not a new one in the province. It has been happening in various ways for centuries. However, anecdotal reports from some areas of the province suggest that the migrant labour is now coming from communities in which the population was once stable and involves older workers.

The workers include former employees of Abitibi Consolidated's operation in Stephenville. When Abitibi closed their mill last year, the workers have quickly sought work in the forestry and related industries in other parts of Canada.

Other workers have skills needed in the Alberta oil industry. Collapse of talks to develop the Hebron field offshore Newfoundland in April meant that thousands of highly skilled construction workers have had to look outside the province for work. Many had looked forward to Hebron construction ramping up, having finished the Voisey's Bay nickel mine last year.

Newfoundland and Labrador's oil industry is generating considerable cash for the provincial government but production is not labour intensive. Except for a limited level of exploration, the industry appears to be settling into pumping oil from the three fields already in production.

The Hebron failure has also forced the province's local supply and service sector to look overseas for contracts.

-srbp-

Deciphering government spin: Why the Portnoys?

1. We are in a polling period and government wants every boost in popularity it can get.

2. The Portnoy case has lots of support on Open Line, the major source of information for the Premier and the Premier's Office. Put it in the Telly, he might miss it. Crap on him on Open Line and Danny will come out of a cabinet meeting to attack you and he'll do it before you hang up the line.

3. The Portnoys are holed up in a church basement in Marystown, which means they are a big issue in an area where the Premier is especially politically vulnerable: Marystown because of his Hebron failure; Fishery Products International etc.

Add it all together and you get a provincial government intervening in an immigration case that has been hanging around for years and is no more crucial now than it was months or years ago.

But it isn't the provincial government.

Notice the number of times in every single interview that an otherwise perfectly competent minister - John Ottenheimer - mentions that the Premier will be doing this and that the Premier will be throwing his support behind it and that the Premier approved this message.

Sound odd?

It is.

Ottenheimer is just using talking points approved if not written by Danny's personal publicity department.

So we wind up with Ottenheimer saying things likes this to CBC:

"There is a political role I can play — I plan to play that role," said Ottenheimer, adding he has the full support of Premier Danny Williams to assist the Portnoy family, who have been living since last October in a church basement in Marystown.

And those talking points make it clear Danny is to get the credit.

But why only the Portnoys?

There may be other cases which are far more compelling than a couple who entered the country illegally, were deported, came back in illegally and then started having children, one of whom was delivered if not conceived after the family started living in a church basement.

Heck, there are more compelling cases than the Portnoys.

They don't meet the criteria listed above - too bad for them - and that's why Ottenheimer is also quick to add in every interview that he is intervening in this case but not others.

Strong language from judge okay

It depends on whose soul is being saved, obviously.

"Lawyer defends judge"
The Telegram (St. John's)
Thursday, October 14, 1999
Page: 1 / FRONT Section: News
Byline: Bonnie Belec The Telegram

A provincial court judge who was reprimanded by Newfoundland's Judicial Council shouldn't have had to go before the council in the first place, says veteran St. John's lawyer, Danny Williams.

Provincial Court Judge John Rorke appeared before the council in June to answer to a complaint concerning remarks he made during the sentencing of an armed robber last fall.

Newfoundland Supreme Court Justice Robert Wells filed his report recently and stated the council "is unanimously of the opinion that on the day in question Judge Rorke failed to meet the required standard of judicial expression."

Williams and Steve Marshall represented 18-year-old Jeffrey Aylward, who was sentenced to a 12-month conditional sentence for using a bat to rob a pizza from a delivery man. Williams said he was surprised to learn a complaint had been made to the council and that Rorke appeared at an inquiry concerning remarks he made during the sentencing.

"I sat there and I saw nothing way out of line that he did. As an experienced lawyer, I see absolutely no reason why he should have gone before the judicial council," said Williams, who has practiced law for almost 30 years.

He said while the public's view of the court is a concern, the emphasis should be on the person before the (judge), and the rehabilitation of the accused.

"And if he's able to save a soul by having to use words that might be a little bit beneath the dignity of the bench, if he accomplishes that rehabilitation, then I wish there were a lot more judges that would do it," Williams said.

The complaint was lodged with the council by a member of the public as a result of an article published in The Telegram Sept. 11, 1998.

The gist of the complaint was that the judge's remarks would cause public concern as to the fairness and impartiality of the judge and -- by implication -- the fairness and impartiality of the courts, read Wells' decision.

The complaint was spurred by a comment Rorke made to Aylward during his sentencing hearing: "I'm looking at a man who comes from the same strata of society that I do, whose friends come from the same strata of society as I do, and you're not supposed to be sitting there and I'm not supposed to be faced with the dilemma of dealing with a person who comes from an advantaged background."

Rorke continued: "Most of the people who get dragged through this particular courtroom haven't got a pot to piss in. They never had a chance, they never will have a chance, they're damaged goods, and they're acting in the way they are largely because they don't have any choice. The problem we got here, you see, is that this happens all the time. I had a guy here a couple of days ago, it was the second time he did it. I gave him seven years. Sentencing in this is normally three years."

Aylward had been attending a party on Paddy Dobbin Drive when the offence occurred. He and two other young men ordered a pizza but none of them had any money, so they stole it from the delivery man when he arrived, using wooden bats.

At the time of sentencing, Rorke said they did it because they were drunk.

"You say you had a dozen beer ... I've had a dozen beer in me, a good many times. When you got a dozen beer in you, you don't know what you're doing, and it's more good luck than good management if you don't get into a jam, but the fact of the matter is you took it upon yourself to rob a man with a club," Rorke said.

"And when a bunch of young fellas on a drunk in an executive house in a good part of town take it upon themselves to flog one of those people, it's a despicable act," said the judge.

"Now we got a situation here, where a bunch of rich boys did this. You may not think you're rich but I guarantee you compared to most of the guys that come through that door there, you are rich. Not just in money but in family and friends," Rorke said.

"So, the next guy I got to look at and say three years is going to throw back at me, 'Oh yeah, you let the rich boys go because they are your buddies, they are your friends. There's no justice here.' That's the jam you put me in. That's the jam you put the Crown in," he said.

In his 10-page decision, Wells wrote that the words used in the sentencing were "unfortunate and inappropriate and should not have been said."

Inappropriateness occurred at two levels, Wells wrote. "Firstly, a judge should not use unacceptable language in the course of judicial duties. Expressions such as 'haven't got a pot to piss in' are simply unacceptable when coming from a presiding judge, as are personal references such as 'I've had a dozen beer in me, a good many times.'"

Wells stated such language lowers the court in the eyes of the public generally, and by implication damages public perception of the administration of justice.

"We are also of the opinion that references to social classes and strata of society are inappropriate to the sentencing process ... the emphasis must be on law, justice and fairness in each case," read the decision.

During the inquiry, Rorke apologized and acknowledged the public had a right to be concerned about some of his remarks and the way in which he expressed them.

Wells noted Rorke's work in provincial court involves trying to "do justice in the face of hopelessness, belligerence, alcoholism, drug addiction, psychopathy and mental disorder."

Rorke told the council, "under these pressures, I lost my patience and became candid about the frustrations of modern judging. Much of what I said was irrelevant, and easily capable of being misunderstood.

"In approaching the situation as I did, I focused entirely on the dynamic in the courtroom, and overlooked for a moment that my words, intended for the ears of the accused and the lawyers present, were being placed on the public record," he told the inquiry.

"In today's pluralistic society, a judge is expected to strive always to speak only in terms incapable of confusing or offending anyone. On this occasion, I fell below that demanding standard. I have profoundly regretted this inappropriate loss of control since the moment it occurred," he said.

As far as Williams is concerned, Rorke presented an emotional judgement in a particular case to a young man who made a stupid mistake. Williams said if the council decided Rorke chose his words poorly, then in the eyes of council Rorke made a mistake, but in his eyes Rorke handled the case commendably.

"If he's able to get through to a young man and prevent him from being a recidivist, then I think he's accomplished something marvelous. And at the end of the day he had a major impact on that young man," Williams said.

Considering Rorke's 11 years of unblemished service, council concluded a reprimand is the appropriate course of action and no further sanction is necessary. The council also ordered that Rorke be compensated for his legal costs arising from the inquiry, to be taxed on a solicitor-and-client basis.

Bloglett's Familiar Quotations

Government should be accountable to the law, and to the people.

Danny Williams
April 7, 2001

No place for Duplessisme in Newfoundland and Labrador

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The law is not always right

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

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

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

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

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

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

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

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

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

Crucial role

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

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

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

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

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

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

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

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

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

Sometimes, politics should trump the law.

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

Charities may be involved in political action

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

Check this Canadian Press story at canoe.ca.

Pack rats of the world unite!

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

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

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

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

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

*Sigh*

Gov't drops gas prices by 9.6 cents per litre

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

Real reason: we are in a polling period.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Premier thinks Halley is correct?

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

Or does he he?

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

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

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

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

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

We'll know in mid-September.

The spectre of bad faith

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

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

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

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

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

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

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

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

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

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

He did not.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Danny Williams claimed in an interview on Wednesday that:

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

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

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

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

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

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

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

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

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

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

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

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

Danny's claims don't match facts

What Danny claimed on Wednesday in an interview with CBC:

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

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

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

Jumping the shark, Danny style

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

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

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

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

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

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

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

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

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

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

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

Oops.

Too late.

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

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

Then Danny hit the ramp.

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

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

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

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

If Danny was Max's lawyer?

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

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

Legislature financial scandal bigger than previously revealed

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

[Update: See explanatory note at end]

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

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

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

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

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

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

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

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

Government likely knew of problems earlier than previously admitted

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

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

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

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

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

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

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

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

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

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

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

___________________________

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

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

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

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

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

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

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

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

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

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

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

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

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

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

House of Assembly overspending known and approved?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A quickie rejoinder to Ron Penney

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

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

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

Ok.

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

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

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

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

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

Now, that's not just my opinion.

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

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

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

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

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

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

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

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

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

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

Just like Danny.

Right down to the self-massage.