While the next general election is set for October 2007, Danny Williams started asking his caucus last fall to make a decision on whether or not they would be running next time around.
According to some reports, Williams wanted to get new members in well before the election ostensibly so they could have some experience before the big game coming in the fall.
Every time he's been asked about a spring election by reporters, Williams made up some cock and bull story - which everyone swallowed - about having to call the House back to change the legislation. Sometimes he used another tale - again with bells on it - about not want to change everyone's expectation of a fall election and therefore catching the opposition parties short.
Truth is, Williams wasn't planning on having a snap election.
Nope.
The Premier understood its actually far more useful to wear the enemy down before the big contest. Rather than let them get ready for an election at a predicted time, better to use every power he has to have the opposition tied up with candidate selections, fund-raising and all the other things that go with elections for the better part of a year.
If the plan holds, both the Liberals and the New Democrats will be so shagged out by the fall, Danny will have an easy time no matter what.
And in the meantime, he can tell as many nosepullers as he feels like, knowing no one will challenge his story of the moment.
23 January 2007
22 January 2007
Danny's ideal candidate
How many hockey players will seek the Tory nomination in districts around the province this year?
Bond Papers wonders if Danny will be making approaches to the guy who would be his ideal candidate: Big Bobby Clobber. [ram file]
His ideas on negotiating would fit right in with current government policy.
Bond Papers wonders if Danny will be making approaches to the guy who would be his ideal candidate: Big Bobby Clobber. [ram file]
His ideas on negotiating would fit right in with current government policy.
Monday Morning Quickies
1. Equalization: the view from Hill Times. Nothing Earth-shaking, but the view from north of the Queensway.
2. The Sun apparently doesn't shine on Harper's plan. Saying the Harper proposal would soak places like Saskatchewan and Newfoundland and Labrador merely shows that the Sun chain can't read English. It's odd for a Conservative newspaper chain to support hand-outs for everyone.
2. The Sun apparently doesn't shine on Harper's plan. Saying the Harper proposal would soak places like Saskatchewan and Newfoundland and Labrador merely shows that the Sun chain can't read English. It's odd for a Conservative newspaper chain to support hand-outs for everyone.
21 January 2007
Local Tory claims need closer scrutiny, too
Imagine the shock there'd be at finding a column like this one from the Halifax Daily News in a Newfoundland and Labrador newspaper.
Word came this week that Newfoundland and Labrador's Equalization entitlement would be down this year by $150 million or so.
Danny pronounced the budget would have to be redone. Local media dutifully reported each of the Premier's utterances.
Now the reason for the cut is the same here as in Nova Scotia. Don't expect any local media to make a point of correcting Danny in public or private on this one:
So Newfoundland and Labrador's entitlement to hand-outs is going down for the same reason Nova Scotians are getting less.
No plots. No shafting.
No greater a drop than it ought to be given the phenomenal growth in the economy.
Just fair treatment and, at the root of it, something we should be proud of: we need less from the national welfare system.
Many of Williams' claims need closer scrutiny.
Often, what Danny says simply isn't true. It's is factually incorrect. Wrong, even.
Other times, there is an upside he won't discuss but the rest of us might find important.
Sometimes there's a downside.
And sometimes - a lot of the time - people would prefer to know that than to get, say mindlessly backing The Leader on his latest jihad or writing an editorial that sounds so saccharine that his Mom - or talk radio's Tony or Minnie - could have written it:
"Oh my gracious, it's amazing our wonderful Danny has been able to do all the marvelous stuff he's done for the good of all us poor people, what wit' all that miserable crowd he got to work with. Now they are leaving him and he got to clean up d'ere messes. Danny, our saviour."
We paraphrase, but capture, the essence of the piece.
Word came this week that Newfoundland and Labrador's Equalization entitlement would be down this year by $150 million or so.
Danny pronounced the budget would have to be redone. Local media dutifully reported each of the Premier's utterances.
Now the reason for the cut is the same here as in Nova Scotia. Don't expect any local media to make a point of correcting Danny in public or private on this one:
The short answer is, Nova Scotia's per-capita fiscal capacity went up. That is, our ability to pay our own way has grown, so we need less from the national welfare system.In Danny-stan, we were treated to claims like this one:
"On a per-capita basis, there's nobody, no other province that takes a hit like we take," said Williams.Despite Williams' best efforts, the oil sector is producing windfalls for his treasury. It will keep doing so for a few more years before - as Danny's former finance minister knew - we take a tumble. Of course, Danny won't be around when the tumble comes, but I digress.
The Tory premier said it would mean recalculating his province's budget.
So Newfoundland and Labrador's entitlement to hand-outs is going down for the same reason Nova Scotians are getting less.
No plots. No shafting.
No greater a drop than it ought to be given the phenomenal growth in the economy.
Just fair treatment and, at the root of it, something we should be proud of: we need less from the national welfare system.
Many of Williams' claims need closer scrutiny.
Often, what Danny says simply isn't true. It's is factually incorrect. Wrong, even.
Other times, there is an upside he won't discuss but the rest of us might find important.
Sometimes there's a downside.
And sometimes - a lot of the time - people would prefer to know that than to get, say mindlessly backing The Leader on his latest jihad or writing an editorial that sounds so saccharine that his Mom - or talk radio's Tony or Minnie - could have written it:
"Oh my gracious, it's amazing our wonderful Danny has been able to do all the marvelous stuff he's done for the good of all us poor people, what wit' all that miserable crowd he got to work with. Now they are leaving him and he got to clean up d'ere messes. Danny, our saviour."
We paraphrase, but capture, the essence of the piece.
20 January 2007
The People's Paper for Leader Worship
Bad enough that the editor of a weekly paper in the province once a week pens a mash-note to Danny based on nothing other than his school boy hero-crush on The Leader.
They used to be the "But Danny, I adore you, why do you hate me, why won't you speak to me?" love-rent teenager kinda drivel. Lately - now that Danny will advertise in the paper and grant interviews - it's back to the public orations in honour of The Leader Who Gloriously Slayed the Mighty Ottawa Beast and Who Will Now Smite the Oil Bastards And Anyone Else Who Would Dare Oppress His Loyal Supplicants.
It's the sort of stuff you used to see pumped out by second-rate lute pickers. They'd chase after some knight, knocking off ditties to tell the local peasants and pissants how splendiferous their local demigod supposedly was. They did it all in hopes the leige lord might deign to give the lowly minstrels a meal, a mug of warm beer and a place sleep out of the elements.
Expect the upstart weekly to be up and starting a province-wide collection to build a gold statute to The Leader in front of their offices on Water Street. Pensioners and little children can send in their nickels. The rest can cough up big for the monument.
The only potential design problem will be to see who goes up The Leader's backside, and how far. Competition for the spot is at a state not seen even in Joe Smallwood's day. Heck some are even heading back out into the parking lot so they can get a good run at embedding themselves.
Perhaps they'll the potentate route and just design the statute with an oversized pair of cheeks, set at eye level. All the more area for osculating.
Or maybe like worshippers at some shrine in wherever-a-stan, the serfs can dutifully kiss the cheek as they go about their daily work. There you stroke the lingham for blessing. Here you'd buss the tukus to demonstrate loyalty and devotion.
All that is bad enough, but now the Telegram is starting in on the public fellation, as well.
Credit where credit is due. A needle poke when appropriate as well.
But puhleese: "It’s a tribute to Williams that his Conservatives are still doing so well in this province — and that they’ve managed to stick, for the most part, to their election agenda in the process."
No serving politician deserves that kind of derriere-smooch, especially since it simply isn't true.
The Telly has been doing such a fine job of getting its editorial chops back. This paean to the prem is a marked setback.
Did the boys in layout print Bill Rowe's column in the wrong spot?
Is this another editorial ordered up from the corner office?
It just makes you shrug in despair of thoughtful commentary in what once upon a time used to be a bastion of contrariness.
They used to be the "But Danny, I adore you, why do you hate me, why won't you speak to me?" love-rent teenager kinda drivel. Lately - now that Danny will advertise in the paper and grant interviews - it's back to the public orations in honour of The Leader Who Gloriously Slayed the Mighty Ottawa Beast and Who Will Now Smite the Oil Bastards And Anyone Else Who Would Dare Oppress His Loyal Supplicants.
It's the sort of stuff you used to see pumped out by second-rate lute pickers. They'd chase after some knight, knocking off ditties to tell the local peasants and pissants how splendiferous their local demigod supposedly was. They did it all in hopes the leige lord might deign to give the lowly minstrels a meal, a mug of warm beer and a place sleep out of the elements.
Expect the upstart weekly to be up and starting a province-wide collection to build a gold statute to The Leader in front of their offices on Water Street. Pensioners and little children can send in their nickels. The rest can cough up big for the monument.
The only potential design problem will be to see who goes up The Leader's backside, and how far. Competition for the spot is at a state not seen even in Joe Smallwood's day. Heck some are even heading back out into the parking lot so they can get a good run at embedding themselves.
Perhaps they'll the potentate route and just design the statute with an oversized pair of cheeks, set at eye level. All the more area for osculating.
Or maybe like worshippers at some shrine in wherever-a-stan, the serfs can dutifully kiss the cheek as they go about their daily work. There you stroke the lingham for blessing. Here you'd buss the tukus to demonstrate loyalty and devotion.
All that is bad enough, but now the Telegram is starting in on the public fellation, as well.
Credit where credit is due. A needle poke when appropriate as well.
But puhleese: "It’s a tribute to Williams that his Conservatives are still doing so well in this province — and that they’ve managed to stick, for the most part, to their election agenda in the process."
No serving politician deserves that kind of derriere-smooch, especially since it simply isn't true.
The Telly has been doing such a fine job of getting its editorial chops back. This paean to the prem is a marked setback.
Did the boys in layout print Bill Rowe's column in the wrong spot?
Is this another editorial ordered up from the corner office?
It just makes you shrug in despair of thoughtful commentary in what once upon a time used to be a bastion of contrariness.
19 January 2007
Will Danny kill Husky's expansion too?
When Premier Danny Williams killed plans to develop a 300 million barrel oil field within the Hibernia project, some wondered what might become of Husky Energy's plans to bring an additional 25 million barrels on stream from its White Rose field.
The development plan amendment containing the new project could be taken by some - like St. John's Mayor Andy Wells and Premier Danny Williams - as an excuse to force Husky and Petro-Canada to negotiate new local benefits.
Wells has long been a critic of floating production systems, favouring instead the short-term jobs that would come from expensive gravity-based concrete platforms. So-called GBS platforms would be unnecessary to develop fields like Terra Nova and White Rose on a successful commercial basis, but were an integral part of the make-work approach some within the Peckford administration took to oil and gas development 25 years ago.
An excellent backgrounder can be found at The Telegram, courtesy of Moira Baird.
Public consultation documents on the White Rose development plan amendment can be found at the offshore regulatory board's website.
The development plan amendment containing the new project could be taken by some - like St. John's Mayor Andy Wells and Premier Danny Williams - as an excuse to force Husky and Petro-Canada to negotiate new local benefits.
Wells has long been a critic of floating production systems, favouring instead the short-term jobs that would come from expensive gravity-based concrete platforms. So-called GBS platforms would be unnecessary to develop fields like Terra Nova and White Rose on a successful commercial basis, but were an integral part of the make-work approach some within the Peckford administration took to oil and gas development 25 years ago.
An excellent backgrounder can be found at The Telegram, courtesy of Moira Baird.
Public consultation documents on the White Rose development plan amendment can be found at the offshore regulatory board's website.
Williams' actions brand Canada badly?
Deborah Yedlin's column in the Globe and Mail business section Friday contain some observations on Danny Williams' rejection of a 300 million barrel oil project off the province's coast.
Some of the comments, especially the one about Loyola Sullivan, will be familiar to Bond readers.
Among other comments though there are ones like this:
Some of the comments, especially the one about Loyola Sullivan, will be familiar to Bond readers.
Among other comments though there are ones like this:
Energy companies around the world -- particularly those that are publicly traded and not national oil companies -- are challenged to invest capital and replace current production. And if they can do it in politically stable countries where there is a rule of law that can be relied on, so much the better. That's why they come to Canada.or this:
Because of what's at stake, they are unlikely to hold back on providing as much information as possible to decision makers in order to win the necessary approvals. The folks running The Rock don't seem to get it. Instead they persist in playing hardball.
With all this as backdrop, is it such a coincidence that the government's well-respected finance minister resigned some two weeks ago? The Newfoundland government now has to live with the likelihood that the companies that have been turned down twice are going to have a tough time giving Newfoundland a thumbs-up if others in the business ask whether it's a province that is friendly to investors.Many will reject Yedlin's comments out of hand, especially those who find it difficult to question Williams at all on anything. A few out there will see the larger implications of this week's gambit by the man who thinks it immensely flattering to be compared to Venezuela's Hugo Chavez.
Pull the other one, Kathy.
Fresh from killing a multi-million barrel oil project worth billions to the provincial treasury, natural resources minister Kathy Dunderdale today applauded her cabinet colleague the environment minister for approving a planned liquid natural gas terminal despite missing information.
The proponents of the project can take all the time they need to submit an employment equity plan, a risk assessment study (!!), and an environmental protection plan before starting construction.
Surely an environment minister doing a due diligence piece (to use Dunderdale's favourite bit of bureaucratese) would want to be assured there were no environmental risks associated with such a massive project before giving it the green light?
And double surely, the same duly diligent minister would want to see the environmental protection plan before telling the proponents their project was released from environmental review?
The proponents of the project can take all the time they need to submit an employment equity plan, a risk assessment study (!!), and an environmental protection plan before starting construction.
Surely an environment minister doing a due diligence piece (to use Dunderdale's favourite bit of bureaucratese) would want to be assured there were no environmental risks associated with such a massive project before giving it the green light?
And double surely, the same duly diligent minister would want to see the environmental protection plan before telling the proponents their project was released from environmental review?
Goudie checks out
Kathy Goudie, one of two Conservative members of the House of Assembly accused of double-billing for expenses has quit politics, effective immediately.
The Premier wasted no time in calling the by-election for February 12. News of one followed hot on the heels of the other.
Guess the rumours are true about him wanting her to go and go quickly.
The Premier wasted no time in calling the by-election for February 12. News of one followed hot on the heels of the other.
Guess the rumours are true about him wanting her to go and go quickly.
Cabinet shuffle at 11:00 AM
Let's see if Jerome Kennedy is appointed.
Bond Papers first raised the idea on December 29.
Jerome denied it, but then your humble e-scribbler clarified the point.
Update [1230 hrs]:
No Jerome.
A few people were moved around Shawn Skinner and Ross Wiseman were added to cabinet as, respectively the minister of human resources and health minister.
Tom Osborne moved from Health to Justice, while Tom Rideout [right:The province's new chief prosecutor] takes on the job of Attorney General in addition to his others jobs.
Paul Shelley announced his retirement from politics when the legislature is next dissolved for an election. In the way this sort of retirement would normally be handled, he was simply sent to the back benches, no harm, no foul. Note the difference between Shelley and Loyola Sullivan despite the apparent similarity in their situations and stories.
On the face of it, this is a minor shuffle to address the consequences of Sullivan's resignation. It certainly doesn't look like the sort of re-organization one might expect in advance of an election.
That shuffle - if it comes at all - will come after the budget, most likely.
Bond Papers first raised the idea on December 29.
Jerome denied it, but then your humble e-scribbler clarified the point.
Update [1230 hrs]:
No Jerome.
A few people were moved around Shawn Skinner and Ross Wiseman were added to cabinet as, respectively the minister of human resources and health minister.
Tom Osborne moved from Health to Justice, while Tom Rideout [right:The province's new chief prosecutor] takes on the job of Attorney General in addition to his others jobs.Paul Shelley announced his retirement from politics when the legislature is next dissolved for an election. In the way this sort of retirement would normally be handled, he was simply sent to the back benches, no harm, no foul. Note the difference between Shelley and Loyola Sullivan despite the apparent similarity in their situations and stories.
On the face of it, this is a minor shuffle to address the consequences of Sullivan's resignation. It certainly doesn't look like the sort of re-organization one might expect in advance of an election.
That shuffle - if it comes at all - will come after the budget, most likely.
Williams to Ottawa: More handouts please
There's something fundamentally wrong about any politician who is proud of walking away from billions in economic development (Hebron), applauds an incompetent minister who neglected to act on a major economic opportunity until after a decision was made and then cancelled the project altogether, but who focuses instead on getting more hand-outs from Ottawa.
Danny Williams is the first premier in Newfoundland and Labrador history who preferred increasing the provincial government's dependence on Ottawa in lieu of economic self-reliance.
Danny Williams' sole victory to date - by his own calculation - was in securing a $2.0 billion hand-out from Paul Martin.
Bond Papers discussed this already, in a post titled "Haec tibi dona fero". For those who don't know, the phrase is the motto taken from the old badge of Newfoundland. Before someone discovered the provincial government had right to the current coat of arms (originally granted in the 1620s), the official flag of Newfoundland was a red ensign with the Badge in the fly.
Translated, it means: "We bring you these gifts."
Danny Williams is the first premier in Newfoundland and Labrador history who preferred increasing the provincial government's dependence on Ottawa in lieu of economic self-reliance.
Danny Williams' sole victory to date - by his own calculation - was in securing a $2.0 billion hand-out from Paul Martin.
Bond Papers discussed this already, in a post titled "Haec tibi dona fero". For those who don't know, the phrase is the motto taken from the old badge of Newfoundland. Before someone discovered the provincial government had right to the current coat of arms (originally granted in the 1620s), the official flag of Newfoundland was a red ensign with the Badge in the fly.
Translated, it means: "We bring you these gifts."
18 January 2007
The cost of blunder and folly
For the first time in history, the provincial government has overturned a fundamental decision of the province's offshore regulatory board.
That's because for the first time in history, the provincial government failed to discuss important issues with oil companies before a project went to the board for decision.
Since the 1980s, every single provincial government - Progressive Conservative and Liberal alike - has negotiated with the oil companies on royalties and benefits. If there were questions or concerns they were raised at the outset and resolved.
Except, that is, in the recent case of Hibernia South.
And Newfoundlanders and Labradorians should wonder why.
In truth, there's no logical reason for it.
The provincial government was aware at least a year ago that the Hibernia partners were planning to develop the 300 million barrels in the southern extension of the massive Hibernia field. In her letter to the offshore board rejecting their decision, natural resources minister Kathy Dunderdale acknowledged that government knew a project was under consideration. She saw the expressions of interest calls for work related to the project. Officials in her department knew what everyone else in the oil industry locally knew.
Yet at no point until December 2006 - fully six months after public consultations closed on the development application - did Dunderdale go looking for information.
The result is that the Hibernia South project is shelved with no indication when it might come back for re-consideration. Provincial officials will meet with Hibernia representatives before the end of January. Maybe the provincial government can resolve its concerns.
Most likely it won't. Premier Danny Williams long ago declared his interest in seeing Hibernia South treated as a new project, separate from Hibernia. He wanted a new royalty and benefits deal, a new production platform and whatever else could be squeezed out of it.
Williams' negotiating track record is abysmal, at least when it comes to closing a deal. He's been all fight and no win, as one wag put it. Part of the problem is that he seems unwilling or unable to define his objectives. It's hard to know when you reach a goal if you don't know what the goal is. In interviews over the past two days both Williams and his natural resources minister haven't been able to give any indication of what their objectives are beyond vague platitudes.
Both Williams and Dunderdale did dangle the carrot of more work and jobs in front of the president of the offshore industry association and in front of the general public. Some fell for it, out of pollyannaish optimism as much as anything else.
But many fell for the simple palaver - experienced reporters included - because of what the y don't know and Premier is loathe to discuss: the potential cost of his gamble on a new production platform, even if the companies were willing to go along with his plans.
The cost would be - inevitably - reduced royalties for the provincial treasury. As with every project offshore, the companies would expect and would likely receive agreement that the province's royalties would be about 5% until the costs of development were recovered. In a project like Terra Nova, low costs and high oil prices allowed that project to pay off early. As a result, the provincial government receives 30% of the price of every barrel pumped.
On Hibernia, that same target is within sight. By 2011 - if current projections hold - the province will get those higher royalties. Those higher royalties will apply to at least half of the recoverable reserves, including Hibernia South, which the Premier rightly noted is now estimated to hold about 1.9 million barrels of proven, probable and possible reserves. Hibernia - with more oil than the other producing fields combined - could pump more cash into the province treasury after 2011 than anyone ever imagined.
Treat Hibernia South as some sort of new project - even by negotiating a new set of royalties and benefits in the context of the original development agreement - and that higher royalty target will likely slide back significantly. Someone will have to pay for the extras demanded solely by a politician's whims and that someone will be taxpayers.
Beyond that, though, the little game of chicken the Premier is playing sends a very bad message to the oil industry globally and to businesses generally. What they see is a place where the costs of doing business are completely undefined. In a world where there is far more oil to discover and develop than there is capital to develop it, competition is high. Uncertainty discourages investment. In Danny Williams' case, the potential costs can't even be guessed at. His demands are not only a constantly shifting target, the outermost edges of the target screen itself can't even be seen. Money doesn't get spent in places like that.
Now, on top of that, for companies looking to develop existing fields, there is the added likelihood that at the very end of the already long regulatory process, the provincial government will suddenly reset the clock to zero and start the whole thing over again.
The Premier's actions have costs that can be readily seen. In the short- and medium- term , the oil industry isn't investing locally, certainly not at the levels we'd expected. House prices are slumping and over the next year and more, the economy in St. John's will contract. Even locally-owned supply and service companies have scaled back their local investments since they have no idea when a new project might actually be approved. Optimism a year ago is replaced with caution and skepticism today.
.JPG)
In the medium to long term, there are other costs. Provincial government forecasts show that without Hebron and more production at Hibernia, oil revenues will drop suddenly before climbing back up. But after that, there's a pretty rapid drop-off, as Wade Locke's estimate [left] shows.
The longer Hebron sits in the ground, the long Hibernia South remains undeveloped, the more money the provincial treasury loses. Sometimes you don't need to make a deal to make a giveaway.
Interestingly enough, that's what Loyola Sullivan talked about just before his Christmas resignation. Sullivan told vocm.com that it is very important for the province to see orderly development of its offshore industry. He said there will be three years of good revenues but after that, the money drops off.
Sullivan's right.
Too bad his wise words were drowned out by his resignation the same day those comments were published. Too bad that Sullivan's colleagues didn't heed his good advice.
Instead, we had an unconscionable, let alone unfathomable failure by a government that can ill afford political mistakes in a province that - in a few short years - will be hard pressed to pay the bills for blunder and folly in 2006 and early 2007.
That's because for the first time in history, the provincial government failed to discuss important issues with oil companies before a project went to the board for decision.
Since the 1980s, every single provincial government - Progressive Conservative and Liberal alike - has negotiated with the oil companies on royalties and benefits. If there were questions or concerns they were raised at the outset and resolved.
Except, that is, in the recent case of Hibernia South.
And Newfoundlanders and Labradorians should wonder why.
In truth, there's no logical reason for it.
The provincial government was aware at least a year ago that the Hibernia partners were planning to develop the 300 million barrels in the southern extension of the massive Hibernia field. In her letter to the offshore board rejecting their decision, natural resources minister Kathy Dunderdale acknowledged that government knew a project was under consideration. She saw the expressions of interest calls for work related to the project. Officials in her department knew what everyone else in the oil industry locally knew.
Yet at no point until December 2006 - fully six months after public consultations closed on the development application - did Dunderdale go looking for information.
The result is that the Hibernia South project is shelved with no indication when it might come back for re-consideration. Provincial officials will meet with Hibernia representatives before the end of January. Maybe the provincial government can resolve its concerns.
Most likely it won't. Premier Danny Williams long ago declared his interest in seeing Hibernia South treated as a new project, separate from Hibernia. He wanted a new royalty and benefits deal, a new production platform and whatever else could be squeezed out of it.
Williams' negotiating track record is abysmal, at least when it comes to closing a deal. He's been all fight and no win, as one wag put it. Part of the problem is that he seems unwilling or unable to define his objectives. It's hard to know when you reach a goal if you don't know what the goal is. In interviews over the past two days both Williams and his natural resources minister haven't been able to give any indication of what their objectives are beyond vague platitudes.
Both Williams and Dunderdale did dangle the carrot of more work and jobs in front of the president of the offshore industry association and in front of the general public. Some fell for it, out of pollyannaish optimism as much as anything else.
But many fell for the simple palaver - experienced reporters included - because of what the y don't know and Premier is loathe to discuss: the potential cost of his gamble on a new production platform, even if the companies were willing to go along with his plans.
The cost would be - inevitably - reduced royalties for the provincial treasury. As with every project offshore, the companies would expect and would likely receive agreement that the province's royalties would be about 5% until the costs of development were recovered. In a project like Terra Nova, low costs and high oil prices allowed that project to pay off early. As a result, the provincial government receives 30% of the price of every barrel pumped.
On Hibernia, that same target is within sight. By 2011 - if current projections hold - the province will get those higher royalties. Those higher royalties will apply to at least half of the recoverable reserves, including Hibernia South, which the Premier rightly noted is now estimated to hold about 1.9 million barrels of proven, probable and possible reserves. Hibernia - with more oil than the other producing fields combined - could pump more cash into the province treasury after 2011 than anyone ever imagined.
Treat Hibernia South as some sort of new project - even by negotiating a new set of royalties and benefits in the context of the original development agreement - and that higher royalty target will likely slide back significantly. Someone will have to pay for the extras demanded solely by a politician's whims and that someone will be taxpayers.
Beyond that, though, the little game of chicken the Premier is playing sends a very bad message to the oil industry globally and to businesses generally. What they see is a place where the costs of doing business are completely undefined. In a world where there is far more oil to discover and develop than there is capital to develop it, competition is high. Uncertainty discourages investment. In Danny Williams' case, the potential costs can't even be guessed at. His demands are not only a constantly shifting target, the outermost edges of the target screen itself can't even be seen. Money doesn't get spent in places like that.
Now, on top of that, for companies looking to develop existing fields, there is the added likelihood that at the very end of the already long regulatory process, the provincial government will suddenly reset the clock to zero and start the whole thing over again.
The Premier's actions have costs that can be readily seen. In the short- and medium- term , the oil industry isn't investing locally, certainly not at the levels we'd expected. House prices are slumping and over the next year and more, the economy in St. John's will contract. Even locally-owned supply and service companies have scaled back their local investments since they have no idea when a new project might actually be approved. Optimism a year ago is replaced with caution and skepticism today.
.JPG)
In the medium to long term, there are other costs. Provincial government forecasts show that without Hebron and more production at Hibernia, oil revenues will drop suddenly before climbing back up. But after that, there's a pretty rapid drop-off, as Wade Locke's estimate [left] shows.The longer Hebron sits in the ground, the long Hibernia South remains undeveloped, the more money the provincial treasury loses. Sometimes you don't need to make a deal to make a giveaway.
Interestingly enough, that's what Loyola Sullivan talked about just before his Christmas resignation. Sullivan told vocm.com that it is very important for the province to see orderly development of its offshore industry. He said there will be three years of good revenues but after that, the money drops off.
Sullivan's right.
Too bad his wise words were drowned out by his resignation the same day those comments were published. Too bad that Sullivan's colleagues didn't heed his good advice.
Instead, we had an unconscionable, let alone unfathomable failure by a government that can ill afford political mistakes in a province that - in a few short years - will be hard pressed to pay the bills for blunder and folly in 2006 and early 2007.
17 January 2007
Lab West mine deal: Did Danny screw the chances?
Consolidated Thompson announced on Tuesday that its exclusivity agreement with Wabush Mines had expired and no agreement had been reached on the sale of Wabush Mines.
CT is developing a mine in Quebec, close to the Labrador border and reportedly had been examining a possible consolidation of the two operations.
CT's announcement on Tuesday was a surprise to most people in Labrador West. The company said that, among other things, unexpected - and unspecified - liabilities had nixed the possibility of the deal. CT will now proceed with its development at Bloom Lake in Quebec.
In a teleconference Wednesday with investors and news media, board chairman Brian Tobin wouldn't be any more specific about liabilities issue or other reasons why CT had abandoned its plans for Wabush Mines.
Well here's a theory.
Unexpected liabilities = unforeseen costs.
Unforeseen costs? Maybe not unforeseen so much as "we couldn't cut a deal."
Consider that Wabush Mines and Iron Ore Company of Canada are co-owners, along with Newfoundland and Labrador Hydro of a little outfit called Twin Falls Hydroelectric Corporation. The Twin Falls generating station was built in the 1950s to meet the power needs of the two companys operations in Labrador West.
Hydro's shares used to belong to BRINCO and were acquired along with other BRINCO assets in the 1970s. Anyway, IOC and Wabush Mines agreed to mothball the Twin Falls generating plant to ensure that it wouldn't interfere with the adjacent Upper Churchill development.
Part of the deal, struck after long and difficult negotiations, was that IOC - and presumably Wabush - would have access to a block of power at low prices from the Upper Churchill as a trade for shutting down Twin Falls. After all, had the companies continued to operate their own generating plants, they'd have electricity available for the cost of maintaining the plant.
Enter Danny Williams.
In early October, the fiesty Premier warned Iron Ore Company of Canada - owners of the other mine in Labrador West - that they could expect to pay commercial rates for electricity once the current agreement ended. Williams likened the IOC/Wabush Mines power purchase deal to the Hydro Quebec giveaway on the Upper Churchill presumably knowing full-well that his comparison and the truth were two completely different things.
Presumably the same thing applied to Wabush Mines. You can imagine the talk: Forget the low cost power, boys, sez Danny. No more give aways. Maximum benefits to the province or take a hike.
And since Williams had flatly rejected a power deal in public, there was no way he would back down.
About a month later, Consolidated Thompson signed the exclusivity agreement with Wabush Mines. It wouldn't be too much of a stretch for the company to have figured that Danny's old buddy Brian Tobin could cut a deal on power, former Prem to current Prem. But after a few months of wrangling, in which the current Prem was likely a little more dyspeptic than usual, they just couldn't get Danny to a fair deal, namely ensuring the company could expect low cost power to flow just as it would have if they'd told BRINCO to shove off back in the 1960s.
By January, CT decides to head across the border, focus on Bloom Lake and talk to a much friendlier government in Quebec. Jean Charest and his Hydro Quebec team would certainly be willing to supply low-cost power from their own existing operations or from their new projects, like the Romaine.
Now this is a little bit of creative speculation, and there's no way either Brian or Danny will ever say just exactly what did happen. But the story is plausible. If Danny added all sorts of demands for costs on top of his electricity pricing, he might just have priced the whole deal right off the table.
And Danny is good at talking good deals right out the door with his Bela Oxmyx impersonation.
Just ask the local companies who had planned on Hebron work.
or Hibernia South work.
or White Rose expansion work.
Oops.
That last one hasn't been killed yet.
Still, it does give you something to think about.
______________________
Update [19 Jan 07]:
Speculation is fun.
But with any large industrial project like a mine, there are always environmental liabilities and with mines in operation for any length of time there are big ones.
The Consolidated Thompson decision is most likely based on an overall assessment of the downstream implications of buying the existing Wabush Mines based on - as the company - said - the liabilities, both known and unknown or unexpected.
Discussions with the provincial government about electricity may never have taken place. We don't know and likely neither party would be able to discuss them if they did.
That said, CT will still have to look at issues about their Bloom Lake site such as how to get the ore to market once it's been mined. That may have some implications for Labrador West. Let's hope the provincial natural resources department doesn't let that one go sliding by until - as with Hibernia - they wait until a decision is made to go looking for information they should have sought long beforehand.
CT is developing a mine in Quebec, close to the Labrador border and reportedly had been examining a possible consolidation of the two operations.
CT's announcement on Tuesday was a surprise to most people in Labrador West. The company said that, among other things, unexpected - and unspecified - liabilities had nixed the possibility of the deal. CT will now proceed with its development at Bloom Lake in Quebec.
In a teleconference Wednesday with investors and news media, board chairman Brian Tobin wouldn't be any more specific about liabilities issue or other reasons why CT had abandoned its plans for Wabush Mines.
Well here's a theory.
Unexpected liabilities = unforeseen costs.
Unforeseen costs? Maybe not unforeseen so much as "we couldn't cut a deal."
Consider that Wabush Mines and Iron Ore Company of Canada are co-owners, along with Newfoundland and Labrador Hydro of a little outfit called Twin Falls Hydroelectric Corporation. The Twin Falls generating station was built in the 1950s to meet the power needs of the two companys operations in Labrador West.
Hydro's shares used to belong to BRINCO and were acquired along with other BRINCO assets in the 1970s. Anyway, IOC and Wabush Mines agreed to mothball the Twin Falls generating plant to ensure that it wouldn't interfere with the adjacent Upper Churchill development.
Part of the deal, struck after long and difficult negotiations, was that IOC - and presumably Wabush - would have access to a block of power at low prices from the Upper Churchill as a trade for shutting down Twin Falls. After all, had the companies continued to operate their own generating plants, they'd have electricity available for the cost of maintaining the plant.
Enter Danny Williams.
In early October, the fiesty Premier warned Iron Ore Company of Canada - owners of the other mine in Labrador West - that they could expect to pay commercial rates for electricity once the current agreement ended. Williams likened the IOC/Wabush Mines power purchase deal to the Hydro Quebec giveaway on the Upper Churchill presumably knowing full-well that his comparison and the truth were two completely different things.
Presumably the same thing applied to Wabush Mines. You can imagine the talk: Forget the low cost power, boys, sez Danny. No more give aways. Maximum benefits to the province or take a hike.
And since Williams had flatly rejected a power deal in public, there was no way he would back down.
About a month later, Consolidated Thompson signed the exclusivity agreement with Wabush Mines. It wouldn't be too much of a stretch for the company to have figured that Danny's old buddy Brian Tobin could cut a deal on power, former Prem to current Prem. But after a few months of wrangling, in which the current Prem was likely a little more dyspeptic than usual, they just couldn't get Danny to a fair deal, namely ensuring the company could expect low cost power to flow just as it would have if they'd told BRINCO to shove off back in the 1960s.
By January, CT decides to head across the border, focus on Bloom Lake and talk to a much friendlier government in Quebec. Jean Charest and his Hydro Quebec team would certainly be willing to supply low-cost power from their own existing operations or from their new projects, like the Romaine.
Now this is a little bit of creative speculation, and there's no way either Brian or Danny will ever say just exactly what did happen. But the story is plausible. If Danny added all sorts of demands for costs on top of his electricity pricing, he might just have priced the whole deal right off the table.
And Danny is good at talking good deals right out the door with his Bela Oxmyx impersonation.
Just ask the local companies who had planned on Hebron work.
or Hibernia South work.
or White Rose expansion work.
Oops.
That last one hasn't been killed yet.
Still, it does give you something to think about.
______________________
Update [19 Jan 07]:
Speculation is fun.
But with any large industrial project like a mine, there are always environmental liabilities and with mines in operation for any length of time there are big ones.
The Consolidated Thompson decision is most likely based on an overall assessment of the downstream implications of buying the existing Wabush Mines based on - as the company - said - the liabilities, both known and unknown or unexpected.
Discussions with the provincial government about electricity may never have taken place. We don't know and likely neither party would be able to discuss them if they did.
That said, CT will still have to look at issues about their Bloom Lake site such as how to get the ore to market once it's been mined. That may have some implications for Labrador West. Let's hope the provincial natural resources department doesn't let that one go sliding by until - as with Hibernia - they wait until a decision is made to go looking for information they should have sought long beforehand.
By-election date set
Voters in Kilbride, Ferryland and Port au Port will go to the polls February 8.
That just about clinches it that the province won't be seeing an early election this year.
Interestingly enough, Chief Justice Derek Green is due to release his report on the House of Assembly scandal on January 31. Will the Premier release it right away?
That just about clinches it that the province won't be seeing an early election this year.
Interestingly enough, Chief Justice Derek Green is due to release his report on the House of Assembly scandal on January 31. Will the Premier release it right away?
Predictable but still disheartening
With the stunning success of the Hebron shag-up under his belt, Danny Williams decided to shelve the Hibernia South development application.
The news was delivered by his shadow natural resources minister Kathy Dunderdale.
More to follow.
The news was delivered by his shadow natural resources minister Kathy Dunderdale.
More to follow.
Equalization: some thoughts and background
Since Equalization is back on the national agenda, it's useful to review what's been said before.At the outset, let's make one thing clear: the position taken by Premier Danny Williams has been predictably devoid of many facts. In place of facts, we have seen hyperbole and other forms of exaggeration akin to what we saw in the previous offshore transfer discussions.
It's hard to have a sensible public discussion of such an important issue if the guy right at the top spends more time spinning both his wheels and the perspective on the issue.
Let's see if we can correct that with some facts and some contrary opinion:
1. Bond Papers summary of some points in the Expert Panel report. This focuses on a couple of the aspects related to Newfoundland and Labrador. Most importantly, though, the post contains links to the original Expert Panel report. Take the time to check that out. It's in plain English so most people should be able to grasp the issues, the analysis and the recommendations.
2. A comparison of Danny Williams' idea of including all resource revenues in entitlement calculations and the version proposed initially by Stephen Harper, backed by former finance minister Loyola Sullivan [left]. This is one of the most significant aspects of the entire discussion yet it is also one completely ignored by local news media.3. War of the Pee. One of your humble e-scribbler's favourite titles, which plays on the title of classic treatise on guerrilla war as well as Premier Williams' apparent penchant for urinating on people's shoes. Big plus: links to a raft of other posts on Equalization. There's also a reference to the problem John Crosbie highlighted recently, although Crosbie discusses the problem with Danny's approach in a far more eloquent way than we did here at Bond Papers.
16 January 2007
Hunter-gatherers support dismemberment
Since the fish union now backs breaking up Fishery Products International and selling off the bits and pieces to the highest bidders, there's nothing to stop the company from being dismantled.
The hypocrisy in Earle McCurdy's comments should be obvious; his union has had a hand in bringing about the chaos, controversy, disorder and poor results FPI has seen since the board of directors changes in 2001.
Of course, going back to May of 2006, McCurdy has been in favour of dismantling FPI.
The hypocrisy in Earle McCurdy's comments should be obvious; his union has had a hand in bringing about the chaos, controversy, disorder and poor results FPI has seen since the board of directors changes in 2001.
Of course, going back to May of 2006, McCurdy has been in favour of dismantling FPI.
NL productivity up; oil a major driver
A new Statistics Canada report on labour productivity shows Newfoundland and Labrador's productivity grew at twice the national rate between 1997 and 2005.
The story is covered by the Globe. As the Globe explains:
That said, Byrne's success at D.F. Barnes is indeed remarkable. It has come about through some smart deal-making and a good measure of competence and ability. Local offshore companies have been known to compete successfully around the globe based on their experience in local offshore and Barnes is certainly one of the prime examples of successful local entrepreneurship.
Unfortunately, local companies have to look overseas for work these days. They had been planning on the Hebron project but that project has now been shelved indefinitely.
At the same time, though, D.F. Barnes has had its share of financial help from the provincial government.
In June, Byrne announced a major contract for launch and recovery systems for remotely-operated vehicle. The work is being done through a Barnes subsidiary, Orphan Industries.
In December, 2006 - six months after the launch and recovery system contract was announced - the provincial government provided Orphan with $970,000 "to expand the manufacturing facilities of Orphan Industries Limited to become the preferred supplier of Launch and Recovery Systems (LARS)."
Notice that the provincial government release doesn't mention D.F. Barnes once and - very unusually - doesn't include a quote from the company.
Nope.
It just has comments from Kevin O'Brien,the logo guy the business minister, and Kathy Dunderdale, the Premier's natural resources minister.
The story is covered by the Globe. As the Globe explains:
Labour productivity, measured as the amount of gross domestic product in constant dollars per hour worked, is considered an underpinning of a prosperous economy, which should bode well for Canada's most eastern province.The Globe story opens with a quote from Jerry Byrne, president of D.F. Barnes, a company that has prospered in recent years in the offshore oil supply sector.
Since leading a 2002 management buyout of the 74-year-old company, Mr. Byrne has guided it to a 30-fold increase in annual revenue in just four years -- and he expects to hit a threshold of about 50 times 2002 revenue some time in the next year.At the same time, the story also quotes Trevor Adey, president of high-tech firm Consilient. Adey notes that the gains from the oil sector haven't necessarily filtered down in a province where workers are still leaving in large numbers to find work elsewhere. Adey's right, of course. The oil and gas sector is such a capital intensive business that the apparent good news in the labour productivity numbers masks productivity shortcomings in other sectors of the economy.
That said, Byrne's success at D.F. Barnes is indeed remarkable. It has come about through some smart deal-making and a good measure of competence and ability. Local offshore companies have been known to compete successfully around the globe based on their experience in local offshore and Barnes is certainly one of the prime examples of successful local entrepreneurship.
Unfortunately, local companies have to look overseas for work these days. They had been planning on the Hebron project but that project has now been shelved indefinitely.
At the same time, though, D.F. Barnes has had its share of financial help from the provincial government.
In June, Byrne announced a major contract for launch and recovery systems for remotely-operated vehicle. The work is being done through a Barnes subsidiary, Orphan Industries.
In December, 2006 - six months after the launch and recovery system contract was announced - the provincial government provided Orphan with $970,000 "to expand the manufacturing facilities of Orphan Industries Limited to become the preferred supplier of Launch and Recovery Systems (LARS)."
Notice that the provincial government release doesn't mention D.F. Barnes once and - very unusually - doesn't include a quote from the company.
Nope.
It just has comments from Kevin O'Brien,
Harper moving on fiscal imbalance
Radio Canada is reporting that the plan will include half of natural resources in Equalization calculation. Newfoundland and Labrador premier Danny Williams wanted all resource revenues included.
Ottawa will also boost transfer for post-secondary education and infrastructure, according to Radio Canada. The federal Conservatives will reduce federal taxes, as well, thereby opening up room for provinces to increase their rates of taxation. The Conservatives will also introduce a bill in parliament to limit federal spending power. Each of these elements has been discussed for months.
This news comes in advance of a meeting of provincial premiers, scheduled for February 7 to discuss Equalization, among other things.
Quebec will receive $2.0 billion according to la presse.
Ottawa will also boost transfer for post-secondary education and infrastructure, according to Radio Canada. The federal Conservatives will reduce federal taxes, as well, thereby opening up room for provinces to increase their rates of taxation. The Conservatives will also introduce a bill in parliament to limit federal spending power. Each of these elements has been discussed for months.
This news comes in advance of a meeting of provincial premiers, scheduled for February 7 to discuss Equalization, among other things.
Quebec will receive $2.0 billion according to la presse.
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