Does that get bumped up ahead of taking ExxonMobil out or will Harper have to wait until last April's Big Promise is fulfilled?
Can anyone keep track of these unfulfilled promises?
-30-
01 April 2007
Taking out Harper
While it will take a check of the transcript to be certain, it sure sounded like Paul Oram, Premier Danny Williams' parliamentary secretary, told listeners to vocm.com's Night Line that the Newfoundland and Labrador government is working to see Stephen harper's government defeated at the polls in the next federal election.
Does that get bumped up ahead of taking ExxonMobil out or will Harper have to wait until last April's Big Promise is fulfilled?
Can anyone keep track of these unfulfilled promises?
Does that get bumped up ahead of taking ExxonMobil out or will Harper have to wait until last April's Big Promise is fulfilled?
Can anyone keep track of these unfulfilled promises?
The need for public discussion
Following is an opinion piece originally published in The Telegram during the offshore discussions in 2004. It is based on the longer piece of the same name, posted below in four parts.
The Government of Newfoundland and Labrador currently receives 100 per cent of provincial revenues. Under the 1985 Atlantic Accord, the provincial government gained the right to set its own revenue regime for offshore oil and gas developments and it has done so through legislation and development agreements with the companies that have brought Hibernia, Terra Nova and White Rose on stream. It collects every penny of the revenues defined in the Atlantic Accord, and set out in those development agreements. In addition, it collects revenues, mostly taxes, from the business that have grown up around oil production.
The Williams administration, like the Grimes administration before it, claims money is lost through an Equalization “clawback”. There is no clawback in the way that word would normally be used. Ordinarily, Equalization is a glorified top-up scheme. Any provincial government making less than a national standard from its own-source revenues gets a cheque from Ottawa to make up the difference. Make more money; get less of a top-up. If there was a sudden growth in high technology manufacturing – if the province became a Celtic Lynx – Equalization would be reduced accordingly.
The Atlantic Accord contains a provision than offsets any losses in Equalization transfers resulting from growing provincial government revenues, for a period of 12 years. The calculation is made on a 10 province standard, so it is no surprise that last year the province collected $123.8 million in oil royalties and received $178 million in offsets. The major problem with the offsets – if there is a problem - results from the fact the offset provisions are triggered by quantity of oil produced, not on their economic impact as such. Once triggered, they decline over time irrespective of how many oil fields have been developed or what their economic benefit has been to the province. Danny Williams’ current proposal is apparently aimed at changing the offset provisions of the Accord.
There are at least two major problems with the proposal from the Williams administration that would, as Danny Williams recently put it, “renegotiate the Atlantic Accord”. The most significant problem is that there is no plain English description of the problem or of the government’s proposed solution: it isn’t in writing. How can anyone judge the success or failure of upcoming negotiations between the federal and provincial governments if we do not know what the Williams administration is seeking?
The second problem is in the way the argument has been framed. The Williams administration claims that by changing the offsets, the provincial government can become the “principal beneficiary” of the offshore, as the Accord intended. Unfortunately, the Atlantic Accord does not say the provincial government will be the principal beneficiary nor is “principal beneficiary” defined as meaning provincial government revenues. The Atlantic Accord delivers significant benefits to the province as a whole. The provincial government gets the right to co-manage the offshore with Ottawa. The provincial government sets its own revenues, as if the resource was on land. The province as a whole gets industrial benefits, something Brian Mulroney considered to be a major aspect of the Accord. Those industrial benefits go against the spirit if not the letter of inter-provincial free trade agreements and the North American Free Trade Agreement, Right now, the Accord is exempt from NAFTA.
“Principal beneficiary” is central to the Accord; redefining it changes the Accord fundamentally. Change the Accord’s underlying principals and it may well become a new deal, one that would be subject to NAFTA. Of all the Accord provisions, the one that would clearly not fit NAFTA is the industrial benefits provision. We can’t be certain, in largest part because the Williams administration proposal has not be clearly stated and thoroughly examined. There is enough information, though, to encourage the provincial government to be cautious.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. There is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned. More important than mere contrariness though, the absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them. Getting more cash from Ottawa is one thing. If that comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. If nothing else, the people of the province have a right to know what is being talked about. They will either reap the reward of the proposed changes or bear the burden.
_______________________
Which is to be master?
Public discussion, more information needed on Atlantic Accord changes
Public discussion, more information needed on Atlantic Accord changes
“The absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them.”
The Government of Newfoundland and Labrador currently receives 100 per cent of provincial revenues. Under the 1985 Atlantic Accord, the provincial government gained the right to set its own revenue regime for offshore oil and gas developments and it has done so through legislation and development agreements with the companies that have brought Hibernia, Terra Nova and White Rose on stream. It collects every penny of the revenues defined in the Atlantic Accord, and set out in those development agreements. In addition, it collects revenues, mostly taxes, from the business that have grown up around oil production.
The Williams administration, like the Grimes administration before it, claims money is lost through an Equalization “clawback”. There is no clawback in the way that word would normally be used. Ordinarily, Equalization is a glorified top-up scheme. Any provincial government making less than a national standard from its own-source revenues gets a cheque from Ottawa to make up the difference. Make more money; get less of a top-up. If there was a sudden growth in high technology manufacturing – if the province became a Celtic Lynx – Equalization would be reduced accordingly.
The Atlantic Accord contains a provision than offsets any losses in Equalization transfers resulting from growing provincial government revenues, for a period of 12 years. The calculation is made on a 10 province standard, so it is no surprise that last year the province collected $123.8 million in oil royalties and received $178 million in offsets. The major problem with the offsets – if there is a problem - results from the fact the offset provisions are triggered by quantity of oil produced, not on their economic impact as such. Once triggered, they decline over time irrespective of how many oil fields have been developed or what their economic benefit has been to the province. Danny Williams’ current proposal is apparently aimed at changing the offset provisions of the Accord.
There are at least two major problems with the proposal from the Williams administration that would, as Danny Williams recently put it, “renegotiate the Atlantic Accord”. The most significant problem is that there is no plain English description of the problem or of the government’s proposed solution: it isn’t in writing. How can anyone judge the success or failure of upcoming negotiations between the federal and provincial governments if we do not know what the Williams administration is seeking?
The second problem is in the way the argument has been framed. The Williams administration claims that by changing the offsets, the provincial government can become the “principal beneficiary” of the offshore, as the Accord intended. Unfortunately, the Atlantic Accord does not say the provincial government will be the principal beneficiary nor is “principal beneficiary” defined as meaning provincial government revenues. The Atlantic Accord delivers significant benefits to the province as a whole. The provincial government gets the right to co-manage the offshore with Ottawa. The provincial government sets its own revenues, as if the resource was on land. The province as a whole gets industrial benefits, something Brian Mulroney considered to be a major aspect of the Accord. Those industrial benefits go against the spirit if not the letter of inter-provincial free trade agreements and the North American Free Trade Agreement, Right now, the Accord is exempt from NAFTA.
“Principal beneficiary” is central to the Accord; redefining it changes the Accord fundamentally. Change the Accord’s underlying principals and it may well become a new deal, one that would be subject to NAFTA. Of all the Accord provisions, the one that would clearly not fit NAFTA is the industrial benefits provision. We can’t be certain, in largest part because the Williams administration proposal has not be clearly stated and thoroughly examined. There is enough information, though, to encourage the provincial government to be cautious.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. There is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned. More important than mere contrariness though, the absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them. Getting more cash from Ottawa is one thing. If that comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. If nothing else, the people of the province have a right to know what is being talked about. They will either reap the reward of the proposed changes or bear the burden.
-30-
Which is to be Master? Part 1
Originally written in mid 2004, Which is to be master? was an attempt to dissect the Williams' administration's efforts to change the Atlantic Accord (1985).
The issue of offshore revenues and Equalization hasn't disappeared in the past three years. Since this paper contains some useful background information, Bond Papers offers it in sections.
A. Introduction
It is now commonplace for people to believe that neither Newfoundland and Labrador nor Nova Scotia is being treated fairly by the federal government with respect to revenues from offshore oil and gas resources. As the story goes, the federal government claws back upwards of 85% of revenues to the two east coast provinces under the Equalization program, contrary to the two Accords that govern development of the oil and gas fields. Both Premier Danny Williams of Newfoundland and Labrador and Premier John Hamm of Nova Scotia contend that this clawback hampers their provinces from developing fully and from realizing the full benefits of the oil and gas resources off their coastlines.
This paper examines the Williams administration’s proposal to amend the Atlantic Accord. The findings are based on publicly available documents including the Atlantic Accord, the implementation legislation, the Williams government’s overhead slide presentation released to news media as well as papers and public comments offered by supporters of the provincial government’s approach.
B. The Williams Administration and the offshore
There is no single, concise, public statement of the Williams government’s proposal to amend the Atlantic Accord. To date the provincial government has released only a copy of an overhead slide presentation, apparently made to federal officials on 04 March 2004. In addition, the Premier has made public statements and issued at least three news releases on the subject. No other correspondence between the Government of Canada and the Government of Newfoundland and Labrador is in the public domain.
The Blue Print, the Progressive Conservative election platform, contains several references to resources and revenues from the offshore. Since they are the party’s platform they must be taken as statements of policy for the new government, or at least a statement of intentions to guide the government’s overall policy. This assessment is based on these documents, statements by senior officials of the Williams administration published before October 2003 as well as comments by John Crosbie.
The Blue Print commits the Williams government to “seek jurisdictional control and ownership over petroleum and other economic resources in the offshore as a means to achieve greater prosperity for our Province and more opportunity for our people.”
With respect to oil and gas revenues and revenue sharing, the Blue Print commits the Progressive Conservative party to “press the federal government to remove all non-renewable resource revenues from the calculation of equalization payments. In exchange, we will commit, in a formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize economic infrastructure in the Province and to bring down the provincial debt, so that future generations of Canadians living in this Province will continue to benefit long after the resources are used up.”
The only specific reference to the Atlantic Accord is a commitment to use its industrial offset provisions to the fullest extent possible. The Blue print also commits the provincial government to seeking transfer to the provincial government of the 8.5% share of the Hibernia project held by the Government of Canada.
In early 2004, Premier Danny Williams began discussions with the province’s federal cabinet representative John Efford to ensure that the province received what Premier Williams described prior to a February meeting between the two as “100% of our offshore revenues.” According to Williams, Ottawa gave a bad deal to Newfoundland and Labrador in the Atlantic Accord. The proposal would change the Equalization offset provisions of the Atlantic Accord to “provide a payment equal to 100% of the net direct provincial offshore revenue”. Net direct revenue is defined as “Royalties and Corporate Income Tax which is generated in the NL offshore area, less the equalization clawback (currently at 70%)”.
The objective was described in similar terms by a March news release: “Premier Williams has been actively pursuing the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.” A similar statement was made in April: “Premier Danny Williams today reiterated his government’s position on the Atlantic Accord and reaffirmed the province will continue to aggressively pursue the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.”
Changes to the offset formula would end what both the Blue Print and Premier Williams have repeatedly described as a “clawback” of resource revenues by the federal government through reductions in the province’s Equalization entitlement. The notion of an Equalization clawback is clearly described in the Blue Print:
Similar arguments have been advanced by John Crosbie, who served as co-chair of the federal Conservative Party’s 2004 election campaign in Newfoundland and Labrador.
Continued in Part 2
The issue of offshore revenues and Equalization hasn't disappeared in the past three years. Since this paper contains some useful background information, Bond Papers offers it in sections.
__________________________________
Which is to be master?
An assessment of the Williams administration proposal to amend the Atlantic Accord
"When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means just what I choose it to mean - neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master - that's all."- Charles Ludwig Dodgson, (Lewis Carrol), Through the Looking Glass
A. Introduction
It is now commonplace for people to believe that neither Newfoundland and Labrador nor Nova Scotia is being treated fairly by the federal government with respect to revenues from offshore oil and gas resources. As the story goes, the federal government claws back upwards of 85% of revenues to the two east coast provinces under the Equalization program, contrary to the two Accords that govern development of the oil and gas fields. Both Premier Danny Williams of Newfoundland and Labrador and Premier John Hamm of Nova Scotia contend that this clawback hampers their provinces from developing fully and from realizing the full benefits of the oil and gas resources off their coastlines.
This paper examines the Williams administration’s proposal to amend the Atlantic Accord. The findings are based on publicly available documents including the Atlantic Accord, the implementation legislation, the Williams government’s overhead slide presentation released to news media as well as papers and public comments offered by supporters of the provincial government’s approach.
B. The Williams Administration and the offshore
There is no single, concise, public statement of the Williams government’s proposal to amend the Atlantic Accord. To date the provincial government has released only a copy of an overhead slide presentation, apparently made to federal officials on 04 March 2004. In addition, the Premier has made public statements and issued at least three news releases on the subject. No other correspondence between the Government of Canada and the Government of Newfoundland and Labrador is in the public domain.
The Blue Print, the Progressive Conservative election platform, contains several references to resources and revenues from the offshore. Since they are the party’s platform they must be taken as statements of policy for the new government, or at least a statement of intentions to guide the government’s overall policy. This assessment is based on these documents, statements by senior officials of the Williams administration published before October 2003 as well as comments by John Crosbie.
The Blue Print commits the Williams government to “seek jurisdictional control and ownership over petroleum and other economic resources in the offshore as a means to achieve greater prosperity for our Province and more opportunity for our people.”
With respect to oil and gas revenues and revenue sharing, the Blue Print commits the Progressive Conservative party to “press the federal government to remove all non-renewable resource revenues from the calculation of equalization payments. In exchange, we will commit, in a formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize economic infrastructure in the Province and to bring down the provincial debt, so that future generations of Canadians living in this Province will continue to benefit long after the resources are used up.”
The only specific reference to the Atlantic Accord is a commitment to use its industrial offset provisions to the fullest extent possible. The Blue print also commits the provincial government to seeking transfer to the provincial government of the 8.5% share of the Hibernia project held by the Government of Canada.
In early 2004, Premier Danny Williams began discussions with the province’s federal cabinet representative John Efford to ensure that the province received what Premier Williams described prior to a February meeting between the two as “100% of our offshore revenues.” According to Williams, Ottawa gave a bad deal to Newfoundland and Labrador in the Atlantic Accord. The proposal would change the Equalization offset provisions of the Atlantic Accord to “provide a payment equal to 100% of the net direct provincial offshore revenue”. Net direct revenue is defined as “Royalties and Corporate Income Tax which is generated in the NL offshore area, less the equalization clawback (currently at 70%)”.
The objective was described in similar terms by a March news release: “Premier Williams has been actively pursuing the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.” A similar statement was made in April: “Premier Danny Williams today reiterated his government’s position on the Atlantic Accord and reaffirmed the province will continue to aggressively pursue the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.”
Changes to the offset formula would end what both the Blue Print and Premier Williams have repeatedly described as a “clawback” of resource revenues by the federal government through reductions in the province’s Equalization entitlement. The notion of an Equalization clawback is clearly described in the Blue Print:
A Better Deal on Oil and Gas RevenuesOf particular interest, both Premier Williams and other Conservative party commentators have linked provincial government offshore revenues with the concept of the province being the principal beneficiary of offshore development under the Atlantic Accord. In his news release of 12 March 2004, Premier Williams said:
The Government of Newfoundland and Labrador will collect billions of dollars in revenues over the next 20 to 30 years from oil, natural gas, and other minerals. Less than a quarter of the revenues will stay in the Province. Ottawa will simply deduct most of the increased revenues from equalization payments. This deduction is known as "the equalization clawback".
The clawback denies us the opportunity to build a better future for our children and grandchildren. We should not have to consume our non-renewable resources for current expenses and leave none of the inheritance for our children and grandchildren.
"Essentially, we are asking the federal government to live up to the spirit and intent of the "principal beneficiary" component of the Atlantic Accord. Currently, the federal government receives 86 per cent of the revenues of our offshore petroleum resources, while the province receives a meager 14 per cent," added the Premier. "This revenue sharing is completely contrary to the spirit and intent of the accord and must be addressed now before these non-renewable resources are gone forever. Our province is facing a very serious fiscal situation which must be addressed. We are making tough choices to manage our expenditures and to grow our revenues at the provincial level. We, as a province, are putting into place a long-term plan to grow our economy; however, Ottawa must also be a part of the solution."The overhead slide presentation describes the Atlantic Accord as being a ‘“Memorandum of Agreement between the Government of Canada and the Government of Newfoundland and Labrador on offshore oil and gas resource management and revenue sharing.”’ The paper includes several slides purporting to confirm that “[a]nalysis shows that Newfoundland and Labrador will not be the principal beneficiary of the revenues generated from oil and gas developments.”
Similar arguments have been advanced by John Crosbie, who served as co-chair of the federal Conservative Party’s 2004 election campaign in Newfoundland and Labrador.
9. Mr. Martin’s commitment is worth nothing unless he puts in writing that “principal beneficiary” means that Newfoundland and Labrador is to receive 100 per cent of all offshore revenues, including royalties, provincial corporation income taxes, all fees and bonuses etc. on a net basis with no clawback effect and to be received until we become a “have” province with agreed benchmarks as to when “have” status is achieved. [Run-on sentence in the original. ]Flowing from these statements of the provincial government position, four issues must be addressed. These are ownership of offshore resources, the origins of the Atlantic Accord and federal government intentions, the existence of a “clawback” in the Equalization program, and definition of the term “principal beneficiary”.
Continued in Part 2
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Which is to be Master? Part 2
C. Ownership of resources offshore Newfoundland and Labrador
The Blue Print does not define the phrase “jurisdictional control”, although it clear commits a Progressive Conservative government to seeking it. There term is not specific and there is no plain language interpretation of the words which can give any clue as to their meaning.
Jurisdictional control could mean co-management. If that is so, then the Atlantic Accord already establishes that right. Jurisdictional control could mean ownership. Ownership of offshore resources was resolved in the Supreme Court of Newfoundland (Court of Appeal) and the Supreme Court of Canada. While the reasoning of both courts was slightly different, both held that the Government of Canada held all rights to offshore oil and gas resources and any other mineral resources beyond the 12 mile territorial sea surrounding Newfoundland and off the coast of Labrador.
The Government of Newfoundland and Labrador did not establish any reservations or objections on resource ownership when it signed the Atlantic Accord in February 1985. As such, barring the ruminations of some clever lawyer or comments from the province’s pseudo-nationalist community, Newfoundland and Labrador’s legal claim to offshore resource ownership ended 20 years ago.
The only way this matter could be revisited is on the basis of a political agreement between the Government of Canada and the Government of Newfoundland and Labrador. It is beyond the scope of this paper to review in detail the likelihood of such an agreement. It should be instructive to observers, however, that the Government of Newfoundland and Labrador has not elected to pursue its current proposal on the basis that the offshore resources belong to this province as a matter of right.
D. Provincial Offshore Revenues
Brian Mulroney’s proposal on offshore oil and gas resources, dated 14 June 1984, provided that “Newfoundland will be entitled to establish and collect resource revenues as if these resources were on land.” Mulroney’s proposal contained 15 provisions covering the areas of management, revenue sharing, Crown share, local benefits, Equalization offset, entrenchment of the agreement in the Constitution and implementation.
That single sentence, however, contains the essence of the Mulroney proposal on revenue sharing: the provincial government gains the right to set its revenues as if the resources were within its jurisdiction. The Government of Newfoundland and Labrador determines its direct revenues by legislation and through specific development agreements for each of the three projects currently producing oil offshore Newfoundland and Labrador. There is no discussion in publicly available documents that indicates the Mulroney government intended the province to receive a defined percentage of revenues.
Sections 36, 37 and 38 of the Atlantic Accord define the basis of revenue sharing between the Government of Canada and the Government of Newfoundland and Labrador, establish a definition of revenues to be collected by the Government of Newfoundland and Labrador and set a mechanism as to how these revenues are to be collected. Section 37 states:
On the basis of the foregoing, Newfoundland shall receive the proceeds of the following revenues from petroleum related activity in the offshore area:
(a) royalties;
(b) a corporate income tax which is the same as the generally prevailing provincial corporate income tax in the province;
(c) a sales tax that is the same as the generally prevailing provincial sales tax in the province;
(d) any bonus payments;
(e) rentals and licence fees; and,
(f) other forms of resource revenue and provincial taxes of general application, consistent with the spirit of this Accord, as may be established from time to time.
While the Atlantic Accord (Section 38) provided that these revenues were to be collected by the Canada-Newfoundland Offshore Petroleum Board (CNOPB), these revenues are actually collected by Natural Resources Canada (NRCAN) with the consent of the Government of Newfoundland and Labrador. They are remitted by NRCAN in full to the provincial government.
The Government of Newfoundland has never released the full amount of direct revenues it receives under these provisions of the Atlantic Accord. The only figure to be made public is the royalty amount, which Premier Danny Williams stated was $123.8 million in 2003. No one has indicated that these revenues are reduced before the provincial government receives them or that the provincial government is required to remit any of these revenues to the federal government.
E. Equalization and the Accord’s offset provisions
The current provincial proposal to amend the Atlantic Accords focuses on its Equalization offset provisions. Brian Mulroney stated definitively in his letter of 14 June 1984 that the Government of Newfoundland and Labrador should not see a “dollar-for-dollar” decline in Equalization as revenues from offshore development increased. In light of the provincial government’s current argument it is interesting to note that Mr. Mulroney did not include the idea of Equalization offsets in the section of his proposal dealing with revenue sharing. Rather, it was contained as a separate provision in the original letter, in the Atlantic Accord and in the implementation legislation that followed.
From the outset of this discussion, it is important to appreciate the premise of Equalization and how the program operates. Officially, Equalization is a “[f]ederal transfer program that allows all provinces, regardless of their ability to raise revenue, to provide roughly comparable levels of services at roughly comparable levels of taxation. Eligibility to receive equalization funding is determined by a formula measuring each province's revenue-raising capacity against a five-province standard. Currently, eight provinces receive equalization: Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba, Saskatchewan and British Columbia.” Two provinces do not receive Equalization. No provincial government pays into Equalization since the program funds come out of the federal government’s general revenues.
Essentially, Equalization is a top-up scheme for provinces. The federal government determines a national standard amount each province should theoretically be able to raise from its own sources of revenues. These “own-source” revenues include royalties on resources, personal income tax, corporate tax, sales tax, park fees, vehicle licensing fees and so forth. The federal government then compares the provinces actual income against the per person standard. A provincial government falling below the average gets a cheque for the difference. Meet or exceed the standard and a province will get nothing.
It is also important to appreciate that there is no indication that the either the federal government or the provincial government intended that the Atlantic Accord would exempt Newfoundland and Labrador from the Equalization program. There is no provision which allows offshore oil and gas revenue to be treated differently in the calculation of Equalization entitlements. Rather, Brian Mulroney’s initial offer to the province is perfectly clear: “The Current [sic] Equalization provisions will apply”. The overhead slide presentation, in fact confirms that the Equalization program was understood to apply to oil and gas revenues.
Section 39 of the Atlantic Accord provides the Government of Newfoundland and Labrador with an Equalization offset payment in addition to its direct revenues. According to Brian Mulroney, for the first four years the province would receive an amount equal to “90% of a year’s reduction in equalization payments. Beginning in the fifth year of production, this offset rate would be reduced by 10% for each subsequent year.”
The trigger for the offsets was production of a specific quantity of oil, irrespective of the price per barrel of oil or the overall economic impact of the production. The offset was triggered in 1999/2000 and will expire in 2011/2012. In 2003, the federal government transferred $178.0 million to the Government of Newfoundland and Labrador under this provision of the Accord. The total of royalties plus offsets was $301 million in revenue to the Government of Newfoundland and Labrador in 2003. Since the Premier has only discussed specific figures for royalties in public, total direct revenues may be higher. Indirect revenues have not been made public.
Continued in Part 3
The Blue Print does not define the phrase “jurisdictional control”, although it clear commits a Progressive Conservative government to seeking it. There term is not specific and there is no plain language interpretation of the words which can give any clue as to their meaning.
Jurisdictional control could mean co-management. If that is so, then the Atlantic Accord already establishes that right. Jurisdictional control could mean ownership. Ownership of offshore resources was resolved in the Supreme Court of Newfoundland (Court of Appeal) and the Supreme Court of Canada. While the reasoning of both courts was slightly different, both held that the Government of Canada held all rights to offshore oil and gas resources and any other mineral resources beyond the 12 mile territorial sea surrounding Newfoundland and off the coast of Labrador.
The Government of Newfoundland and Labrador did not establish any reservations or objections on resource ownership when it signed the Atlantic Accord in February 1985. As such, barring the ruminations of some clever lawyer or comments from the province’s pseudo-nationalist community, Newfoundland and Labrador’s legal claim to offshore resource ownership ended 20 years ago.
The only way this matter could be revisited is on the basis of a political agreement between the Government of Canada and the Government of Newfoundland and Labrador. It is beyond the scope of this paper to review in detail the likelihood of such an agreement. It should be instructive to observers, however, that the Government of Newfoundland and Labrador has not elected to pursue its current proposal on the basis that the offshore resources belong to this province as a matter of right.
D. Provincial Offshore Revenues
Brian Mulroney’s proposal on offshore oil and gas resources, dated 14 June 1984, provided that “Newfoundland will be entitled to establish and collect resource revenues as if these resources were on land.” Mulroney’s proposal contained 15 provisions covering the areas of management, revenue sharing, Crown share, local benefits, Equalization offset, entrenchment of the agreement in the Constitution and implementation.
That single sentence, however, contains the essence of the Mulroney proposal on revenue sharing: the provincial government gains the right to set its revenues as if the resources were within its jurisdiction. The Government of Newfoundland and Labrador determines its direct revenues by legislation and through specific development agreements for each of the three projects currently producing oil offshore Newfoundland and Labrador. There is no discussion in publicly available documents that indicates the Mulroney government intended the province to receive a defined percentage of revenues.
Sections 36, 37 and 38 of the Atlantic Accord define the basis of revenue sharing between the Government of Canada and the Government of Newfoundland and Labrador, establish a definition of revenues to be collected by the Government of Newfoundland and Labrador and set a mechanism as to how these revenues are to be collected. Section 37 states:
On the basis of the foregoing, Newfoundland shall receive the proceeds of the following revenues from petroleum related activity in the offshore area:
(a) royalties;
(b) a corporate income tax which is the same as the generally prevailing provincial corporate income tax in the province;
(c) a sales tax that is the same as the generally prevailing provincial sales tax in the province;
(d) any bonus payments;
(e) rentals and licence fees; and,
(f) other forms of resource revenue and provincial taxes of general application, consistent with the spirit of this Accord, as may be established from time to time.
While the Atlantic Accord (Section 38) provided that these revenues were to be collected by the Canada-Newfoundland Offshore Petroleum Board (CNOPB), these revenues are actually collected by Natural Resources Canada (NRCAN) with the consent of the Government of Newfoundland and Labrador. They are remitted by NRCAN in full to the provincial government.
The Government of Newfoundland has never released the full amount of direct revenues it receives under these provisions of the Atlantic Accord. The only figure to be made public is the royalty amount, which Premier Danny Williams stated was $123.8 million in 2003. No one has indicated that these revenues are reduced before the provincial government receives them or that the provincial government is required to remit any of these revenues to the federal government.
E. Equalization and the Accord’s offset provisions
The current provincial proposal to amend the Atlantic Accords focuses on its Equalization offset provisions. Brian Mulroney stated definitively in his letter of 14 June 1984 that the Government of Newfoundland and Labrador should not see a “dollar-for-dollar” decline in Equalization as revenues from offshore development increased. In light of the provincial government’s current argument it is interesting to note that Mr. Mulroney did not include the idea of Equalization offsets in the section of his proposal dealing with revenue sharing. Rather, it was contained as a separate provision in the original letter, in the Atlantic Accord and in the implementation legislation that followed.
From the outset of this discussion, it is important to appreciate the premise of Equalization and how the program operates. Officially, Equalization is a “[f]ederal transfer program that allows all provinces, regardless of their ability to raise revenue, to provide roughly comparable levels of services at roughly comparable levels of taxation. Eligibility to receive equalization funding is determined by a formula measuring each province's revenue-raising capacity against a five-province standard. Currently, eight provinces receive equalization: Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba, Saskatchewan and British Columbia.” Two provinces do not receive Equalization. No provincial government pays into Equalization since the program funds come out of the federal government’s general revenues.
Essentially, Equalization is a top-up scheme for provinces. The federal government determines a national standard amount each province should theoretically be able to raise from its own sources of revenues. These “own-source” revenues include royalties on resources, personal income tax, corporate tax, sales tax, park fees, vehicle licensing fees and so forth. The federal government then compares the provinces actual income against the per person standard. A provincial government falling below the average gets a cheque for the difference. Meet or exceed the standard and a province will get nothing.
It is also important to appreciate that there is no indication that the either the federal government or the provincial government intended that the Atlantic Accord would exempt Newfoundland and Labrador from the Equalization program. There is no provision which allows offshore oil and gas revenue to be treated differently in the calculation of Equalization entitlements. Rather, Brian Mulroney’s initial offer to the province is perfectly clear: “The Current [sic] Equalization provisions will apply”. The overhead slide presentation, in fact confirms that the Equalization program was understood to apply to oil and gas revenues.
Section 39 of the Atlantic Accord provides the Government of Newfoundland and Labrador with an Equalization offset payment in addition to its direct revenues. According to Brian Mulroney, for the first four years the province would receive an amount equal to “90% of a year’s reduction in equalization payments. Beginning in the fifth year of production, this offset rate would be reduced by 10% for each subsequent year.”
The trigger for the offsets was production of a specific quantity of oil, irrespective of the price per barrel of oil or the overall economic impact of the production. The offset was triggered in 1999/2000 and will expire in 2011/2012. In 2003, the federal government transferred $178.0 million to the Government of Newfoundland and Labrador under this provision of the Accord. The total of royalties plus offsets was $301 million in revenue to the Government of Newfoundland and Labrador in 2003. Since the Premier has only discussed specific figures for royalties in public, total direct revenues may be higher. Indirect revenues have not been made public.
Continued in Part 3
Which is to be Master? Part 3
F. The Williams administration’s rationale for change
The Williams administration is seeking changes to the Equalization offset provisions of the Accord so that the province will receive both direct and indirect revenues and the maximum possible Equalization payments. The provincial government’s position is based on three contentions.
First, reductions in any Equalization payment attributable to increased non-renewable resource revenues amounts to a “clawback” since these resources are finite. Second, as David Norris has argued for example, declines in Equalization amount to added revenue for the Government of Canada and hence violate the commitment that Newfoundland and Labrador should be the principal beneficiary. Third, the existing offset mechanism will run out before the most significant revenue benefit can be realized. Let us examine these in order.
The non-renewable “clawback”: The Equalization program has consistently operated as a form of top-up for certain province’s revenues. Any increase in a province’s own-source revenues would mean a lowering of the top-up amount. If Newfoundland and Labrador experienced a growth in revenue from information technology, it could reasonably expect to see its Equalization entitlement reduced. Newfoundland and Labrador is treated like all other provinces when it comes to the application of the Equalization program.
Clawback is a simple concept and applies in many areas of individual and business life. A clawback is defined by the Concise Oxford Dictionary as meaning to “regain gradually or laboriously, to take back (allowance by added taxation, etc.)” WordNet and Dictionary.com similarly define clawback as “finding a way to take money back from people that they were given in another way; ‘the Treasury will find some clawback for the extra benefits members received’”.
Since the Government of Canada remits in full offshore revenues to the Government of Newfoundland and Labrador, and applies no special tax or levy on those revenues, there is no clawback of these revenues as the term would be generally understood. Since the Atlantic Accord contains specific provisions to offset losses in Equalization, there is also no clawback of direct offshore revenues in that sense either.
The “clawback” argument is based on the contention that non-renewable resources hold a special status among provincial revenue sources. As the argument goes, these resources are finite and hence the period of time in which a province can derive benefit from the resources is finite. A province cannot achieve maximum benefit from non-renewable resources if it loses Equalization as revenues grow from these non-renewable resources. Hence these revenues should be exempted in some fashion from the Equalization calculation.
Two aspects of the argument on non-renewable resource “clawback” approach are worth considering in greater detail.
First, no source of revenue will exist for all time. Non-resource enterprises that generate sales tax and corporate and personal income taxes succeed and fail based on many factors. Western countries, states and provinces, that a decade ago made substantial income from the information technology sector and call centres, are now watching these revenues migrate to India and other Asian countries.
Even supposedly renewable natural resources such as fish can be destroyed by folly or a fundamental misapprehension of the circumstances affecting the health of the stocks. The reasonable lifespan of a mine or oil field may be 50 to 100 years. It took a mere 50 years for human misadventure to decimate the supposedly renewable fish stocks that had fed most of the Western world for five centuries.
Second, the “clawback” argument is one most often advanced by advocates of increased federal Equalization transfers to provinces. No one should forget that the Equalization program is funded entirely through federal general revenues. In other words, a significant portion of federal revenues derive from the very same sources for which the provincial governments claim a theoretical exemption from Equalization. Logically, what is sauce for the provincial fiscal goose should be sauce for the federal gander. The federal government holds obligations to provide services to residents of Canada just as the provinces do. Therefore, if one accepts that some revenues come from “non-renewable” sources, it would be logical for the federal government to seek the same exemption for its revenues as the one demanded by some provinces.
It is beyond the scope of this paper to calculate the level of federal funding from “non-renewable” sources. Were the amount to reach $10 billion – approximately the total outlay for Equalization – it is conceivable that the federal government would seek to eliminate the Equalization program altogether, possibly transform the system to one of low-interest loans or seek to control how province’s spend the Equalization transfer.
The 85:15 revenue split: In the overhead slide presentation, the provincial government includes several colourful charts that purport to show that the federal government receives 85 per cent of revenues from the offshore with the Government of Newfoundland and Labrador receiving only 15 per cent. A similar argument and similar slides are also found in the report of the Royal Commission on Renewing and Strengthening Our Place in Canada and in two research papers completed for that Royal Commission, one by David Norris and the other by John Crosbie.
Sadly for those wishing to assess the argument, none of these documents contains the data used to compile the charts. Neither the provincial government overhead slides nor Mr. Crosbie’s paper contain any figures. Mr. Norris does provide some evidence of his calculations. David Norris was a member of the provincial government team that negotiated the Atlantic Accord. A former provincial deputy minister of finance, Mr. Norris is currently a senior advisor to Premier Danny Williams. In 2002/2003, Mr. Norris served as senior researcher for the Royal Commission on renewing and strengthening our place in Canada. Mr. Norris is also author of one of the research papers the Royal Commission released with its final report. The fiscal position of Newfoundland and Labrador is broad overview of the provincial government’s financial status. It includes prominent sections on offshore revenues that undoubtedly form much of the basis for current government policy. In it, Mr. Norris argues, among other things that “The revenue analysis concludes that the Government of Canada is the “principal beneficiary” of future offshore oil revenues.” Given the obvious connection between Mr. Norris and current government policy and the fact that his paper is reasonably detailed, the remainder of this section will discuss the revenue split argument as he presented it.
Mr. Norris’ conclusion follows a lengthy preamble in which he sets the bases for his remarks and his assumptions on revenues and relative amounts flowing to each of the provincial and federal governments. He also quotes from section 2 (c) of the Atlantic Accord, the now famous “principal beneficiary” clause and deduces that “[a]ccordingly, revenue offset provisions were incorporated in the Accord which were intended to protect the province against sharp downturns in equalization entitlements.” He produces a chart showing the revenue sharing based on his analysis.
[Table 3-1 ]
On the face of it, his argument is persuasive. It does not stand up to closer scrutiny, however.
One of the fundamental problems with any economist’s projections is that they are based on assumption. Adjust the assumptions and the outcomes change, sometimes dramatically. Aside from the traditional economist’s folly of assumption, there are at least five reasons to doubt the validity of Norris’ contention.
First, the “principal beneficiary” provisions of the Atlantic Accord are undefined. It is erroneous to conclude that the phrase is synonymous with provincial government revenues. As a member of the negotiating team for the Atlantic Accord, Mr. Norris may be privy to information that does not exist in the public domain. Until such time as his contention is properly documented, we must remain skeptical of it. The matter of principal beneficiary is dealt with in greater detail below.
Second, as discussed above, the Atlantic Accord is based in part on the premise that the Equalization program would continue to apply. Knowing the premises on which the Accord was based, it is ludicrous for Mr. Norris and others to argue now the opposite of what was said 20 years ago. That single point is sufficient to cause Mr. Norris to remove the Equalization adjustment from his revenue chart above. Eliminate that single contention and the revenue sharing split moves from being a 76:24 split favouring the federal government to a 62:38 split favouring the province.
Third, the Accord’s Equalization offset provisions were never included in any public statement as being part of the revenue sharing arrangement between the Government of Canada and the Government of Newfoundland and Labrador. Mr. Mulroney’s original proposal is absolutely clear on revenue sharing: “Newfoundland will be entitled to establish and collect resources revenues as if these resources were on land.” As such, it is ludicrous to now suggest that the Government of Canada and the Government of Newfoundland and Labrador intended Equalization to be used in the calculation of relative incomes. In fact, the Atlantic Accord makes no mention of how much revenue or what proportions of revenue are to flow to each order of government. The intention of the two parties, as evident from the signed agreement, is merely that the province may have the opportunity to raise such revenues as it can.
Fourth, and flowing in the same vein, the Accord Equalization offset provisions are not structured to ensure that the flow of maximum financial benefits to the province, i.e. revenues plus offsets, are timed to coincide with the maximum level of revenues based on actual development of the offshore fields. Simply put, the offset provisions begin when oil reaches a defined level - irrespective of value. They decline until an arbitrary period has expired, in this case 12 years. As it turned out, and indeed as anyone may have reasonably expected in 1985, production from one discovery was sufficient to trigger the offset provisions. It would be ludicrous to suggest that anyone believed all four commercially-viable discoveries that existed in 1985 could have been fully developed and in production within four years. Hence it is virtually impossible for the existing offset provisions to have coincided with a period of maximum revenue for the province using both the provincial government’s revenues plus Equalization offsets.
Fifth, even if one allows that his contentions about revenue sharing are correct, Mr. Norris presents only a portion of the revenues flowing to the province. As noted in Section D of this paper, the province is entitled to collect revenues of no fewer than six general types. In addition, the provincial government receives indirect revenues from such sources as personal income tax, new business start-ups and revenues that come from the construction and development phase of each project.
In his chart, Mr. Norris includes only royalties, which the federal government does not claim and corporate taxes, which are in fact collected by both the federal and provincial governments. The total economic impact of offshore oil development is not considered in his argument. If these wider sources of revenue are included in the province’s claim or the paper by John Crosbie, sadly, we cannot tell since they have not made this information public.
The offset runs out too soon: Under the existing Atlantic Accord Equalization offset formula, the period of maximum potential benefit expired last year. The maximum offset existed only for the first four years after the oil production trigger was reached. Within that time, the provincial government received the largest type of Equalization offset. After four years, the level of offset declines, such that while provincial direct revenues may well grow as White Rose and later, Hebron/Ben Nevis, come on stream, the level of additional money received from the Equalization offset will diminish by 10% per year. On this point, proponents of an amendment to the Atlantic Accord are correct. That is what the Accord provides.
In assessing this argument, it is important to compare the intentions of the Trudeau and Mulroney governments on the revenue issue. The intention of the Mulroney government is clear: the Government of Newfoundland and Labrador would receive the right to set its own direct revenues for offshore resources, as if the resources were on land. Additionally, for a period of 12 years, the province would receive additional money in the form of an Equalization offset. The province would also receive local job and industrial spin-off benefits. That is what the Atlantic Accord provides; that is what has occurred.
The Trudeau government approach was different in one key respect. “The province will receive all provincial-type taxes and the largest remaining federal tax, the Petroleum and Gas Revenue Tax, the PGRT. No one can question the generosity of this proposal. When would the provincial government be expected to share some of these revenues with other Canadians? Not until the Newfoundland Government’s fiscal capacity reached 110 per cent of the national average, with an adjustment for regional unemployment that would now raise this to about 125%.”
More significantly, the Trudeau revenue sharing arrangements reflect the strategic policy commitment the Government of Canada was prepared to make prior to 1984. The federal proposal, made in September 1982, ‘ “recognizes the Government of Newfoundland and Labrador’s fundamental goal of attaining economic development and self-sufficiency by creating a strong and diversified provincial economy able to contribute fully to prosperity throughout Canada.” This goal is shared, the document states, by the Government of Canada.’
Therein lays the major flaw in the Atlantic Accord as it was originally proposed and signed: the duration of the province’s maximum potential revenues (direct revenues plus Equalization offsets) is determined by oil production levels, irrespective of the actual market value of the oil or the impact of oil development on overall fiscal capacity. Under the Trudeau proposal, it would have been linked to overall economic development.
Given the nature of industrial megaprojects of the type offshore Newfoundland and Labrador, it is not at all surprising that each project takes a considerable period of time to bring on stream. The Hibernia development agreement was signed in September 1990; first oil was achieved fully seven years later. It was fully two years after that date that Hibernia reached a sufficient level of production to trigger the Accord’s Equalization offset provisions.
Admittedly, the provincial government did not have the benefit of experience in making its calculations about the Atlantic Accord’s various benefits. However, as the overhead slide presentation indicates, the provincial government apparently anticipated rapid development of the existing fields, continued offshore discoveries at the pace experienced between 1979 and 1984/85, higher royalty regimes and oil prices remaining at then-prevalent levels.
It is beyond the scope of this paper to assess the validity of these assumptions in detail. Such an effort has not been undertaken to date and, in fact, much of the information required would be exempt from public disclosure since they were contained in documents submitted to cabinet. On the face of it, however, it would appear that the provincial government used optimistic projections when assessing the Mulroney offer. Any downward revision of their assumptions – for example, lower per barrel prices for oil – and the revenue impacts alter significantly.
Interestingly, according to slide 7, the provincial government expected that “have status” for Newfoundland and Labrador, i.e. that the province would no longer receive Equalization was “a foregone conclusion”. The one data table from 1985 that has been released (overhead slide 9) does not appear to support that contention, at least in so far as the chart might represent an anticipated worst case scenario. “Revenue and Equalization – 1985 Expectation” examines only royalties, instead of all revenue sources, and only from the Hibernia project. The graph clearly shows that royalties alone from Hibernia would not be sufficient to replace Equalization. In fact, anticipating the Accord offset provisions would begin in 1991, the graph shows the province expected Equalization transfer to climb beginning in 2004/05 and exceed pre-Hibernia levels by 2013.
That said, there can be no doubt that the Atlantic Accord Equalization offsets are working as intended by the Government of Canada and the Government of Newfoundland and Labrador. The provincial government expectations provided in the overhead slide presentation are not reflected in any aspect of the Atlantic Accord or the subsequent implementation legislation.
Given several years of experience and based on the intention of the federal government prior to 1984, it is possible to make a case for amending the Accord’s Equalization offsets. This will be addressed below.
Continued in Part 4
The Williams administration is seeking changes to the Equalization offset provisions of the Accord so that the province will receive both direct and indirect revenues and the maximum possible Equalization payments. The provincial government’s position is based on three contentions.
First, reductions in any Equalization payment attributable to increased non-renewable resource revenues amounts to a “clawback” since these resources are finite. Second, as David Norris has argued for example, declines in Equalization amount to added revenue for the Government of Canada and hence violate the commitment that Newfoundland and Labrador should be the principal beneficiary. Third, the existing offset mechanism will run out before the most significant revenue benefit can be realized. Let us examine these in order.
The non-renewable “clawback”: The Equalization program has consistently operated as a form of top-up for certain province’s revenues. Any increase in a province’s own-source revenues would mean a lowering of the top-up amount. If Newfoundland and Labrador experienced a growth in revenue from information technology, it could reasonably expect to see its Equalization entitlement reduced. Newfoundland and Labrador is treated like all other provinces when it comes to the application of the Equalization program.
Clawback is a simple concept and applies in many areas of individual and business life. A clawback is defined by the Concise Oxford Dictionary as meaning to “regain gradually or laboriously, to take back (allowance by added taxation, etc.)” WordNet and Dictionary.com similarly define clawback as “finding a way to take money back from people that they were given in another way; ‘the Treasury will find some clawback for the extra benefits members received’”.
Since the Government of Canada remits in full offshore revenues to the Government of Newfoundland and Labrador, and applies no special tax or levy on those revenues, there is no clawback of these revenues as the term would be generally understood. Since the Atlantic Accord contains specific provisions to offset losses in Equalization, there is also no clawback of direct offshore revenues in that sense either.
The “clawback” argument is based on the contention that non-renewable resources hold a special status among provincial revenue sources. As the argument goes, these resources are finite and hence the period of time in which a province can derive benefit from the resources is finite. A province cannot achieve maximum benefit from non-renewable resources if it loses Equalization as revenues grow from these non-renewable resources. Hence these revenues should be exempted in some fashion from the Equalization calculation.
Two aspects of the argument on non-renewable resource “clawback” approach are worth considering in greater detail.
First, no source of revenue will exist for all time. Non-resource enterprises that generate sales tax and corporate and personal income taxes succeed and fail based on many factors. Western countries, states and provinces, that a decade ago made substantial income from the information technology sector and call centres, are now watching these revenues migrate to India and other Asian countries.
Even supposedly renewable natural resources such as fish can be destroyed by folly or a fundamental misapprehension of the circumstances affecting the health of the stocks. The reasonable lifespan of a mine or oil field may be 50 to 100 years. It took a mere 50 years for human misadventure to decimate the supposedly renewable fish stocks that had fed most of the Western world for five centuries.
Second, the “clawback” argument is one most often advanced by advocates of increased federal Equalization transfers to provinces. No one should forget that the Equalization program is funded entirely through federal general revenues. In other words, a significant portion of federal revenues derive from the very same sources for which the provincial governments claim a theoretical exemption from Equalization. Logically, what is sauce for the provincial fiscal goose should be sauce for the federal gander. The federal government holds obligations to provide services to residents of Canada just as the provinces do. Therefore, if one accepts that some revenues come from “non-renewable” sources, it would be logical for the federal government to seek the same exemption for its revenues as the one demanded by some provinces.
It is beyond the scope of this paper to calculate the level of federal funding from “non-renewable” sources. Were the amount to reach $10 billion – approximately the total outlay for Equalization – it is conceivable that the federal government would seek to eliminate the Equalization program altogether, possibly transform the system to one of low-interest loans or seek to control how province’s spend the Equalization transfer.
The 85:15 revenue split: In the overhead slide presentation, the provincial government includes several colourful charts that purport to show that the federal government receives 85 per cent of revenues from the offshore with the Government of Newfoundland and Labrador receiving only 15 per cent. A similar argument and similar slides are also found in the report of the Royal Commission on Renewing and Strengthening Our Place in Canada and in two research papers completed for that Royal Commission, one by David Norris and the other by John Crosbie.
Sadly for those wishing to assess the argument, none of these documents contains the data used to compile the charts. Neither the provincial government overhead slides nor Mr. Crosbie’s paper contain any figures. Mr. Norris does provide some evidence of his calculations. David Norris was a member of the provincial government team that negotiated the Atlantic Accord. A former provincial deputy minister of finance, Mr. Norris is currently a senior advisor to Premier Danny Williams. In 2002/2003, Mr. Norris served as senior researcher for the Royal Commission on renewing and strengthening our place in Canada. Mr. Norris is also author of one of the research papers the Royal Commission released with its final report. The fiscal position of Newfoundland and Labrador is broad overview of the provincial government’s financial status. It includes prominent sections on offshore revenues that undoubtedly form much of the basis for current government policy. In it, Mr. Norris argues, among other things that “The revenue analysis concludes that the Government of Canada is the “principal beneficiary” of future offshore oil revenues.” Given the obvious connection between Mr. Norris and current government policy and the fact that his paper is reasonably detailed, the remainder of this section will discuss the revenue split argument as he presented it.
Mr. Norris’ conclusion follows a lengthy preamble in which he sets the bases for his remarks and his assumptions on revenues and relative amounts flowing to each of the provincial and federal governments. He also quotes from section 2 (c) of the Atlantic Accord, the now famous “principal beneficiary” clause and deduces that “[a]ccordingly, revenue offset provisions were incorporated in the Accord which were intended to protect the province against sharp downturns in equalization entitlements.” He produces a chart showing the revenue sharing based on his analysis.
[Table 3-1 ]
On the face of it, his argument is persuasive. It does not stand up to closer scrutiny, however.
One of the fundamental problems with any economist’s projections is that they are based on assumption. Adjust the assumptions and the outcomes change, sometimes dramatically. Aside from the traditional economist’s folly of assumption, there are at least five reasons to doubt the validity of Norris’ contention.
First, the “principal beneficiary” provisions of the Atlantic Accord are undefined. It is erroneous to conclude that the phrase is synonymous with provincial government revenues. As a member of the negotiating team for the Atlantic Accord, Mr. Norris may be privy to information that does not exist in the public domain. Until such time as his contention is properly documented, we must remain skeptical of it. The matter of principal beneficiary is dealt with in greater detail below.
Second, as discussed above, the Atlantic Accord is based in part on the premise that the Equalization program would continue to apply. Knowing the premises on which the Accord was based, it is ludicrous for Mr. Norris and others to argue now the opposite of what was said 20 years ago. That single point is sufficient to cause Mr. Norris to remove the Equalization adjustment from his revenue chart above. Eliminate that single contention and the revenue sharing split moves from being a 76:24 split favouring the federal government to a 62:38 split favouring the province.
Third, the Accord’s Equalization offset provisions were never included in any public statement as being part of the revenue sharing arrangement between the Government of Canada and the Government of Newfoundland and Labrador. Mr. Mulroney’s original proposal is absolutely clear on revenue sharing: “Newfoundland will be entitled to establish and collect resources revenues as if these resources were on land.” As such, it is ludicrous to now suggest that the Government of Canada and the Government of Newfoundland and Labrador intended Equalization to be used in the calculation of relative incomes. In fact, the Atlantic Accord makes no mention of how much revenue or what proportions of revenue are to flow to each order of government. The intention of the two parties, as evident from the signed agreement, is merely that the province may have the opportunity to raise such revenues as it can.
Fourth, and flowing in the same vein, the Accord Equalization offset provisions are not structured to ensure that the flow of maximum financial benefits to the province, i.e. revenues plus offsets, are timed to coincide with the maximum level of revenues based on actual development of the offshore fields. Simply put, the offset provisions begin when oil reaches a defined level - irrespective of value. They decline until an arbitrary period has expired, in this case 12 years. As it turned out, and indeed as anyone may have reasonably expected in 1985, production from one discovery was sufficient to trigger the offset provisions. It would be ludicrous to suggest that anyone believed all four commercially-viable discoveries that existed in 1985 could have been fully developed and in production within four years. Hence it is virtually impossible for the existing offset provisions to have coincided with a period of maximum revenue for the province using both the provincial government’s revenues plus Equalization offsets.
Fifth, even if one allows that his contentions about revenue sharing are correct, Mr. Norris presents only a portion of the revenues flowing to the province. As noted in Section D of this paper, the province is entitled to collect revenues of no fewer than six general types. In addition, the provincial government receives indirect revenues from such sources as personal income tax, new business start-ups and revenues that come from the construction and development phase of each project.
In his chart, Mr. Norris includes only royalties, which the federal government does not claim and corporate taxes, which are in fact collected by both the federal and provincial governments. The total economic impact of offshore oil development is not considered in his argument. If these wider sources of revenue are included in the province’s claim or the paper by John Crosbie, sadly, we cannot tell since they have not made this information public.
The offset runs out too soon: Under the existing Atlantic Accord Equalization offset formula, the period of maximum potential benefit expired last year. The maximum offset existed only for the first four years after the oil production trigger was reached. Within that time, the provincial government received the largest type of Equalization offset. After four years, the level of offset declines, such that while provincial direct revenues may well grow as White Rose and later, Hebron/Ben Nevis, come on stream, the level of additional money received from the Equalization offset will diminish by 10% per year. On this point, proponents of an amendment to the Atlantic Accord are correct. That is what the Accord provides.
In assessing this argument, it is important to compare the intentions of the Trudeau and Mulroney governments on the revenue issue. The intention of the Mulroney government is clear: the Government of Newfoundland and Labrador would receive the right to set its own direct revenues for offshore resources, as if the resources were on land. Additionally, for a period of 12 years, the province would receive additional money in the form of an Equalization offset. The province would also receive local job and industrial spin-off benefits. That is what the Atlantic Accord provides; that is what has occurred.
The Trudeau government approach was different in one key respect. “The province will receive all provincial-type taxes and the largest remaining federal tax, the Petroleum and Gas Revenue Tax, the PGRT. No one can question the generosity of this proposal. When would the provincial government be expected to share some of these revenues with other Canadians? Not until the Newfoundland Government’s fiscal capacity reached 110 per cent of the national average, with an adjustment for regional unemployment that would now raise this to about 125%.”
More significantly, the Trudeau revenue sharing arrangements reflect the strategic policy commitment the Government of Canada was prepared to make prior to 1984. The federal proposal, made in September 1982, ‘ “recognizes the Government of Newfoundland and Labrador’s fundamental goal of attaining economic development and self-sufficiency by creating a strong and diversified provincial economy able to contribute fully to prosperity throughout Canada.” This goal is shared, the document states, by the Government of Canada.’
Therein lays the major flaw in the Atlantic Accord as it was originally proposed and signed: the duration of the province’s maximum potential revenues (direct revenues plus Equalization offsets) is determined by oil production levels, irrespective of the actual market value of the oil or the impact of oil development on overall fiscal capacity. Under the Trudeau proposal, it would have been linked to overall economic development.
Given the nature of industrial megaprojects of the type offshore Newfoundland and Labrador, it is not at all surprising that each project takes a considerable period of time to bring on stream. The Hibernia development agreement was signed in September 1990; first oil was achieved fully seven years later. It was fully two years after that date that Hibernia reached a sufficient level of production to trigger the Accord’s Equalization offset provisions.
Admittedly, the provincial government did not have the benefit of experience in making its calculations about the Atlantic Accord’s various benefits. However, as the overhead slide presentation indicates, the provincial government apparently anticipated rapid development of the existing fields, continued offshore discoveries at the pace experienced between 1979 and 1984/85, higher royalty regimes and oil prices remaining at then-prevalent levels.
It is beyond the scope of this paper to assess the validity of these assumptions in detail. Such an effort has not been undertaken to date and, in fact, much of the information required would be exempt from public disclosure since they were contained in documents submitted to cabinet. On the face of it, however, it would appear that the provincial government used optimistic projections when assessing the Mulroney offer. Any downward revision of their assumptions – for example, lower per barrel prices for oil – and the revenue impacts alter significantly.
Interestingly, according to slide 7, the provincial government expected that “have status” for Newfoundland and Labrador, i.e. that the province would no longer receive Equalization was “a foregone conclusion”. The one data table from 1985 that has been released (overhead slide 9) does not appear to support that contention, at least in so far as the chart might represent an anticipated worst case scenario. “Revenue and Equalization – 1985 Expectation” examines only royalties, instead of all revenue sources, and only from the Hibernia project. The graph clearly shows that royalties alone from Hibernia would not be sufficient to replace Equalization. In fact, anticipating the Accord offset provisions would begin in 1991, the graph shows the province expected Equalization transfer to climb beginning in 2004/05 and exceed pre-Hibernia levels by 2013.
That said, there can be no doubt that the Atlantic Accord Equalization offsets are working as intended by the Government of Canada and the Government of Newfoundland and Labrador. The provincial government expectations provided in the overhead slide presentation are not reflected in any aspect of the Atlantic Accord or the subsequent implementation legislation.
Given several years of experience and based on the intention of the federal government prior to 1984, it is possible to make a case for amending the Accord’s Equalization offsets. This will be addressed below.
Continued in Part 4
Which is to be Master? Part 4
G. Why is Alberta different from Newfoundland and Labrador?
This question has been asked many times in relation to oil and gas development. In some senses, it is like asking why a duck is different from a horse. Two significant differences are important to bear in mind when assessing oil and gas resources.
First, note that Alberta’s resources are on onshore. They are physically within the jurisdiction of the Government of Alberta. More importantly, however, and with the exception of the tar sands, Alberta’s oil and gas resources are relatively easy to develop. A small group of middle-class investors can raise the funds - scarcely more than $100, 000 - needed to drill an oil well in Alberta. Located as they several hundred kilometres out to sea in the North Atlantic, oil and gas resources offshore Newfoundland and Labrador can only be exploited by the combined efforts of multi-national oil companies able to invest the hundreds of millions needed for a comprehensive exploration and drilling program. A structure like Hebron/Ben Nevis which is fragmented and contains heavy oil demands even greater investment to bring to on stream.
Second, note that Alberta’s oil and gas resources have been exploited since the late 1940s. As such, Alberta is home to a well-established oil industry with secondary and tertiary development and a sophisticated, experienced support system of government and business. By comparison, the Newfoundland and Labrador offshore is scarcely seven years old if measured from the time of first oil production. It takes time to develop fully a mature oil and gas industry. Newfoundland and Labrador is still in the early years of its growth.
In that light, the Atlantic Accord offset provisions are also deficient. They fail to account for the relative underdevelopment of the offshore industry in this province. They also fail to consider the length of time which was likely required to bring existing fields on stream or that would be required to find any new, commercially-viable fields.
H. The federal share of Hibernia
When Brian Mulroney first proposed a deal on offshore oil and gas resources to Brian Peckford, it was done in the context of the National Energy Program. That program included significant federal revenues from oil and gas developments throughout the country and, at one point, anticipated the federal government would hold a 25% interest in every development on what was termed frontier lands. Mr. Mulroney proposed that “[i]f, on assuming office the new government decides to vest in itself the Crown carried shares offshore Newfoundland and Labrador, then these rights and shares will be shared equitably by both governments.”
This Crown share proposal survived in the Atlantic Accord as section 40, however, by the time the Accord implementation act was drafted and passed, the Mulroney government had eliminated federal shares in oil and gas fields except as may have been obtained through PetroCanada.
The Hibernia shares held by the federal government are not the type of shares anticipated by the Atlantic Accord. Hence, their disposition cannot be governed by any intentions signaled by the Accord. The Government of Canada invested in the Hibernia project as a means of salvaging it, at a time when one of the commercial partners withdrew. The federal government invested in Hibernia under very specific circumstances, not as part of a broader government policy on oil and gas resources. Moreover, these shares would not exist as Crown shares if the project had proceeded as originally proposed by the consortium of oil companies or had other commercial partners emerged who were willing to purchase the interest owned by Chevron in Hibernia. As a consequence, the federally-owned shares fall outside the scope of revenues to which the Government of Newfoundland and Labrador could reasonably have expected to have some portion.
It is interesting to note that the overhead slide presentation makes no reference to transferring the federal shares. The only publicly available reference to share transfer remains the Blue Print and letters to the three federal Conservative leadership candidates and the letter inadvertently sent to New Democratic Party leader Jack Leyton.
The Hibernia shares carry with them a prospect of immediate cash return either through their sale or through a transfer from the Government of Canada to the Government of Newfoundland and Labrador. They also carry with them liabilities; the owners of the shares must be prepared for the costs associated with closing the Hibernia field whenever it runs out. It would be foolhardy for any Government of Newfoundland and Labrador to acquire shares in Hibernia without considering, and disclosing publicly, all the implications of owning a portion of the Hibernia field.
I. Being the “Principal Beneficiary”
The Atlantic Accord is as much a child of politics as it is one of policy. Brian Mulroney was leader of the Progressive Conservative Party and Leader of the Opposition when he wrote to the premiers of Nova Scotia and Newfoundland and Labrador to propose an agreement that he believed would settle the ongoing negotiations on offshore resource development.
The Mulroney proposal “would recognize the right of Newfoundland and Labrador to be the principal beneficiary of the wealth of the oil and gas off its shore, consistent with a strong and united Canada.” This sentence appears in the second paragraph of Mulroney’s letter. It sets one of the basic principles underlying the Accord. This phrase is particularly interesting since the idea of “principal beneficiary” had not previously appeared in public discussions of offshore resources.
While the phrase “principal beneficiary” is undefined in Mulroney’s original correspondence, it is clear from a reading of the original proposal and the subsequent Atlantic Accord, that the province as a whole was to benefit in at least four significant ways.
First, the provincial government would gain the right to manage the offshore jointly with the federal government, particularly with respect to setting the mode of production. This had significant implications for local benefits, as evident from construction of the gravity-based system (GBS) for Hibernia. Second, the provincial government gained the right to collect revenues from the resources as if they were on land. This established that the provincial government would determine its own revenues to be collected from offshore oil and gas development and production just as a province like Alberta is able to do. These revenues would, de facto, be treated as “own source” revenues like income tax, sales tax and other similar levies.
Third, the province as a whole would benefit from the development of local jobs. Mulroney committed that oil-related infrastructure would be sited in the province, where possible. This was no small matter. Mulroney’s letter contains strong language and conveys a deliberate intent on the part of the future Prime Minister to provide this province with significant job and business benefits. “Local job creation and labour development would be of paramount concern.” Fourth, the province would benefit since the provincial government would not see a dollar-for-dollar loss of Equalization payments that would naturally result from growth in the government’s own-source revenues. The Government of Newfoundland and Labrador would receive all of its own-source revenue, potentially a portion of any federal shares in the offshore, and as well, additional payments to offset any losses from Equalization.
The same general approach was taken by the Liberal administrations which preceded Mr. Mulroney. For example, the comprehensive proposal made by the Government of Canada in 1982 stated that “it is recognized that Newfoundland should enjoy the major share of the revenue that offshore resources are expected to generate…” and that “the people of the province would realize the greatest and the most direct benefits from the development of offshore oil and gas resources in terms of growth and income, jobs, opportunities for new businesses, and significant new provincial government revenues.” The federal Liberal proposal on revenue sharing was linked inextricably to the overall performance of the provincial economy and hence may be taken as further evidence of the extent to which the federal government before 1984 viewed the benefits from the offshore to this province to be greater than just the sums flowing to the provincial government’s treasury.
While local job benefits merited two short paragraphs in the original Mulroney letter, both the Accord itself and the enabling legislation provide an elaborate structure aimed at managing local benefits. No one can underestimate the value of local industrial benefits to the province; nor can anyone easily dismiss the contention that the architects of the Atlantic Accord saw local industrial development as a significant factor in establishing this province as the principal beneficiary of offshore oil and gas development.
The Atlantic Accord and enabling legislation predate both the North American Free Trade Agreement and various inter-provincial accords on free trade. The Schedule of Canada, Annex 1, “Reservations for Existing Measures and Liberalization Commitments” of the North American Free Trade Agreement (NAFTA) specifically exempts the Atlantic Accord implementation legislation and its local benefits provisions from NAFTA.
It has long been the contention of those familiar with the Atlantic Accord that any substantive change would negate the reservation or, at least, give an interested party sufficient grounds to challenge the reservation established when NAFTA was signed. The Williams administration has not addressed the issue of the Accord and NAFTA, likely since it believes the changes to the Equalization offset section are not sufficient to trigger a NAFTA-related review of the Accord or jeopardize the Accord’s current NAFTA exemption. A simple change to the offset provisions would not normally constitute a significant change to the Accord itself and hence the NAFTA reservations would remain intact.
A change to the Accord’s fundamental principles would constitute a substantive change to the Accord. The objectives of the Accord are enumerated in Section 2 and include the commitment that Newfoundland and Labrador is to be the principal beneficiary of offshore resource development. Their ordering is no accident or whim; the words used are not selected by happenstance. They reflect the considered view of the signatories as to the major purposes the agreement is to achieve.
It appears that the Williams administration is seeking to alter a fundamental principal of the Atlantic Accord. By linking the argument on Equalization offsets to the objectives of the Accord, the provincial government may well open the industrial benefit provisions of the Accord will be lost and offshore Newfoundland and Labrador will be subject to international free trade for goods and services. If this is an objective of government policy, then it should be debated in full so that the general public can make an informed choice. If it is not, then the provincial government must make clear the scope and impact of the changes it is proposing. The overhead slides are not sufficient.
J. Amending the offset: an alternative approach
As presented by the Williams administration, the proposal to amend the Atlantic Accord Equalization offset provisions is founded on somewhat shaky ground. It relies primarily:
- on general confusion over what benefits currently are provided by the Accord;
- an argument about supposed “clawbacks” that is either flawed in theory or which ties the province to other logical arguments that would work against the province’s overall revenues;
- a re-definition of the concept of “principal beneficiary” that may jeopardize substantial benefits to the province as a whole;
- an approach that ignores the intentions of the Government of Canada through two administrations; and that,
- ignores the practical circumstances affecting development of resources offshore Newfoundland and Labrador.
The Atlantic Accord Equalization offset provisions are clearly deficient when viewed from the standpoint of development of the province’s economy. The existing Accord approach is built on a simple calculation that makes no allowance for issues affecting development of the fields or the overall impact which offshore oil and gas resources have had and will continue to have in developing and diversifying the economy of one of the country’s financially weakest provinces.
Based on the foregoing, the provincial government should reformulate its proposal to the federal government to produce an amendment that is simple, based on logical, practical and historical premises and which will have a definite termination. Disentangle the Accord proposal from other arguments and make it as straightforward as possible. What remains is a robust concept:
Amend the Atlantic Accord offset provisions to give the provincial government a full Equalization offset, as currently calculated by the Accord for the first four years, until such time as the province’s fiscal capacity reaches 110% of the national average and its employment rate meets or exceeds the national average or for a period of 25 years, which ever comes first.
It is hard to imagine that any Liberal administration in Ottawa could reject a proposal that is founded on the very ideas it predecessors advanced 20 years and more ago. The proposal leaves intact the broader benefits which two national governments have intended for this province to receive from oil and gas resources off its shores. It is a proposal that is divorced utterly from the extreme and often partisan rhetoric which has surrounded recent discussions of public policy in this province.
K. Conclusion
The commonplace conclusion mentioned at the outset of this paper is based on mistaken information or incomplete information. The provincial government sets its own revenues for offshore oil and receives its revenues in total. The Atlantic Accord is clear on this point and no one has publicly suggested that the Accord provisions on this point are not being followed. As for the supposed Equalization clawback, losses in Equalization are offset under the Atlantic Accord according to a formula agreed to by the provincial government in 1985. The formula appears to be working as intended. No one can make a thorough assessment of this matter however, since the provincial government has not released thorough, accurate information on revenues, on the Accord offset provisions nor on provincial government expectations in 1985.
In general, however, the following can be said with confidence:
1. The Government of Newfoundland and Labrador currently receives 100% of provincial revenues from offshore oil and gas resources.
2. The Equalization offset provisions of the Accord are functioning as intended, although amending the Equalization offset provisions is desirable for the provincial government. A better deal is attainable based on the stated intentions of the Trudeau administration before 1984.
3. Altering the definition of “principal beneficiary” to refer only to provincial government revenues may jeopardize other benefits the Accord provides to the province.
4. Disposition of the federal government’s share of the Hibernia project is outside the Atlantic Accord. Acquiring the shares must be examined in greater detail since they carry responsibilities and financial implications once the field is exhausted.
Brian Peckford’s phrase “One day the sun will shine and have not will be no more” is now part of our political vocabulary. That phrase, about sun and “have not” embodied for many people their hopes about the future of Newfoundland and Labrador and the unprecedented opportunity offered by oil and gas for ending our status as a people dependent on hand-outs from richer cousins in the rest of Canada. The very term “have not” derives from the Equalization program – receiving provinces are said to be “have nots”; the money comes from the “haves”.
Peckford’s goal was to use oil and gas wealth to end the indignity of a proud people living on a form of national dole. At the time he spoke, more than 60 per cent of the province’s annual budget came from federal transfers, much of that from Equalization. The Atlantic Accord may not be perfect, it may not cover all contingencies, but it is the deal that has produced tremendous economic and social benefit in Newfoundland and Labrador. We tinker with it at our peril. The percentage of provincial revenues coming from federal transfers has declined. This is due in part because of federal changes to transfer programs, but also in part because of growth in new industries like oil production. As Rob Strong wrote recently, though, it is important to remember that the East Coast oil and gas industry is still growing. There is much more to come.
The Williams administration is proposing to alter a landmark document in the province’s economic and political history, the net effect of which, at the very least, would increase federal transfers to the province. The Atlantic Accord is not holy writ, but it is a large part of the province’s current wealth. More importantly, it holds the prospect of providing considerably more wealth with future discoveries in the Orphan Basin and the Laurentian sub-basin. The Premier is proposing his changes, however, without an informed public discussion, without releasing a concise statement of the provincial government’s position and, as it would seem, without relying on the plain meaning of words. Given the importance of the Accord to the province, we should be careful in seeking adjustments to it.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. In fact, there is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned. The absence of debate or substantive discussion carries with it greater implications than the denial of contrariness. Without a clear understanding of what is being sought< how can anyone – politicians, reporters or the public at large - judge the government’s success or failure?
Getting more cash from Ottawa is one thing. If it comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. Newfoundlanders and Labradorians have a right to know what is being talked about because they are the ones who will either reap the reward of these changes or bear the burden.
This question has been asked many times in relation to oil and gas development. In some senses, it is like asking why a duck is different from a horse. Two significant differences are important to bear in mind when assessing oil and gas resources.
First, note that Alberta’s resources are on onshore. They are physically within the jurisdiction of the Government of Alberta. More importantly, however, and with the exception of the tar sands, Alberta’s oil and gas resources are relatively easy to develop. A small group of middle-class investors can raise the funds - scarcely more than $100, 000 - needed to drill an oil well in Alberta. Located as they several hundred kilometres out to sea in the North Atlantic, oil and gas resources offshore Newfoundland and Labrador can only be exploited by the combined efforts of multi-national oil companies able to invest the hundreds of millions needed for a comprehensive exploration and drilling program. A structure like Hebron/Ben Nevis which is fragmented and contains heavy oil demands even greater investment to bring to on stream.
Second, note that Alberta’s oil and gas resources have been exploited since the late 1940s. As such, Alberta is home to a well-established oil industry with secondary and tertiary development and a sophisticated, experienced support system of government and business. By comparison, the Newfoundland and Labrador offshore is scarcely seven years old if measured from the time of first oil production. It takes time to develop fully a mature oil and gas industry. Newfoundland and Labrador is still in the early years of its growth.
In that light, the Atlantic Accord offset provisions are also deficient. They fail to account for the relative underdevelopment of the offshore industry in this province. They also fail to consider the length of time which was likely required to bring existing fields on stream or that would be required to find any new, commercially-viable fields.
H. The federal share of Hibernia
When Brian Mulroney first proposed a deal on offshore oil and gas resources to Brian Peckford, it was done in the context of the National Energy Program. That program included significant federal revenues from oil and gas developments throughout the country and, at one point, anticipated the federal government would hold a 25% interest in every development on what was termed frontier lands. Mr. Mulroney proposed that “[i]f, on assuming office the new government decides to vest in itself the Crown carried shares offshore Newfoundland and Labrador, then these rights and shares will be shared equitably by both governments.”
This Crown share proposal survived in the Atlantic Accord as section 40, however, by the time the Accord implementation act was drafted and passed, the Mulroney government had eliminated federal shares in oil and gas fields except as may have been obtained through PetroCanada.
The Hibernia shares held by the federal government are not the type of shares anticipated by the Atlantic Accord. Hence, their disposition cannot be governed by any intentions signaled by the Accord. The Government of Canada invested in the Hibernia project as a means of salvaging it, at a time when one of the commercial partners withdrew. The federal government invested in Hibernia under very specific circumstances, not as part of a broader government policy on oil and gas resources. Moreover, these shares would not exist as Crown shares if the project had proceeded as originally proposed by the consortium of oil companies or had other commercial partners emerged who were willing to purchase the interest owned by Chevron in Hibernia. As a consequence, the federally-owned shares fall outside the scope of revenues to which the Government of Newfoundland and Labrador could reasonably have expected to have some portion.
It is interesting to note that the overhead slide presentation makes no reference to transferring the federal shares. The only publicly available reference to share transfer remains the Blue Print and letters to the three federal Conservative leadership candidates and the letter inadvertently sent to New Democratic Party leader Jack Leyton.
The Hibernia shares carry with them a prospect of immediate cash return either through their sale or through a transfer from the Government of Canada to the Government of Newfoundland and Labrador. They also carry with them liabilities; the owners of the shares must be prepared for the costs associated with closing the Hibernia field whenever it runs out. It would be foolhardy for any Government of Newfoundland and Labrador to acquire shares in Hibernia without considering, and disclosing publicly, all the implications of owning a portion of the Hibernia field.
I. Being the “Principal Beneficiary”
The Atlantic Accord is as much a child of politics as it is one of policy. Brian Mulroney was leader of the Progressive Conservative Party and Leader of the Opposition when he wrote to the premiers of Nova Scotia and Newfoundland and Labrador to propose an agreement that he believed would settle the ongoing negotiations on offshore resource development.
The Mulroney proposal “would recognize the right of Newfoundland and Labrador to be the principal beneficiary of the wealth of the oil and gas off its shore, consistent with a strong and united Canada.” This sentence appears in the second paragraph of Mulroney’s letter. It sets one of the basic principles underlying the Accord. This phrase is particularly interesting since the idea of “principal beneficiary” had not previously appeared in public discussions of offshore resources.
While the phrase “principal beneficiary” is undefined in Mulroney’s original correspondence, it is clear from a reading of the original proposal and the subsequent Atlantic Accord, that the province as a whole was to benefit in at least four significant ways.
First, the provincial government would gain the right to manage the offshore jointly with the federal government, particularly with respect to setting the mode of production. This had significant implications for local benefits, as evident from construction of the gravity-based system (GBS) for Hibernia. Second, the provincial government gained the right to collect revenues from the resources as if they were on land. This established that the provincial government would determine its own revenues to be collected from offshore oil and gas development and production just as a province like Alberta is able to do. These revenues would, de facto, be treated as “own source” revenues like income tax, sales tax and other similar levies.
Third, the province as a whole would benefit from the development of local jobs. Mulroney committed that oil-related infrastructure would be sited in the province, where possible. This was no small matter. Mulroney’s letter contains strong language and conveys a deliberate intent on the part of the future Prime Minister to provide this province with significant job and business benefits. “Local job creation and labour development would be of paramount concern.” Fourth, the province would benefit since the provincial government would not see a dollar-for-dollar loss of Equalization payments that would naturally result from growth in the government’s own-source revenues. The Government of Newfoundland and Labrador would receive all of its own-source revenue, potentially a portion of any federal shares in the offshore, and as well, additional payments to offset any losses from Equalization.
The same general approach was taken by the Liberal administrations which preceded Mr. Mulroney. For example, the comprehensive proposal made by the Government of Canada in 1982 stated that “it is recognized that Newfoundland should enjoy the major share of the revenue that offshore resources are expected to generate…” and that “the people of the province would realize the greatest and the most direct benefits from the development of offshore oil and gas resources in terms of growth and income, jobs, opportunities for new businesses, and significant new provincial government revenues.” The federal Liberal proposal on revenue sharing was linked inextricably to the overall performance of the provincial economy and hence may be taken as further evidence of the extent to which the federal government before 1984 viewed the benefits from the offshore to this province to be greater than just the sums flowing to the provincial government’s treasury.
While local job benefits merited two short paragraphs in the original Mulroney letter, both the Accord itself and the enabling legislation provide an elaborate structure aimed at managing local benefits. No one can underestimate the value of local industrial benefits to the province; nor can anyone easily dismiss the contention that the architects of the Atlantic Accord saw local industrial development as a significant factor in establishing this province as the principal beneficiary of offshore oil and gas development.
The Atlantic Accord and enabling legislation predate both the North American Free Trade Agreement and various inter-provincial accords on free trade. The Schedule of Canada, Annex 1, “Reservations for Existing Measures and Liberalization Commitments” of the North American Free Trade Agreement (NAFTA) specifically exempts the Atlantic Accord implementation legislation and its local benefits provisions from NAFTA.
It has long been the contention of those familiar with the Atlantic Accord that any substantive change would negate the reservation or, at least, give an interested party sufficient grounds to challenge the reservation established when NAFTA was signed. The Williams administration has not addressed the issue of the Accord and NAFTA, likely since it believes the changes to the Equalization offset section are not sufficient to trigger a NAFTA-related review of the Accord or jeopardize the Accord’s current NAFTA exemption. A simple change to the offset provisions would not normally constitute a significant change to the Accord itself and hence the NAFTA reservations would remain intact.
A change to the Accord’s fundamental principles would constitute a substantive change to the Accord. The objectives of the Accord are enumerated in Section 2 and include the commitment that Newfoundland and Labrador is to be the principal beneficiary of offshore resource development. Their ordering is no accident or whim; the words used are not selected by happenstance. They reflect the considered view of the signatories as to the major purposes the agreement is to achieve.
It appears that the Williams administration is seeking to alter a fundamental principal of the Atlantic Accord. By linking the argument on Equalization offsets to the objectives of the Accord, the provincial government may well open the industrial benefit provisions of the Accord will be lost and offshore Newfoundland and Labrador will be subject to international free trade for goods and services. If this is an objective of government policy, then it should be debated in full so that the general public can make an informed choice. If it is not, then the provincial government must make clear the scope and impact of the changes it is proposing. The overhead slides are not sufficient.
J. Amending the offset: an alternative approach
As presented by the Williams administration, the proposal to amend the Atlantic Accord Equalization offset provisions is founded on somewhat shaky ground. It relies primarily:
- on general confusion over what benefits currently are provided by the Accord;
- an argument about supposed “clawbacks” that is either flawed in theory or which ties the province to other logical arguments that would work against the province’s overall revenues;
- a re-definition of the concept of “principal beneficiary” that may jeopardize substantial benefits to the province as a whole;
- an approach that ignores the intentions of the Government of Canada through two administrations; and that,
- ignores the practical circumstances affecting development of resources offshore Newfoundland and Labrador.
The Atlantic Accord Equalization offset provisions are clearly deficient when viewed from the standpoint of development of the province’s economy. The existing Accord approach is built on a simple calculation that makes no allowance for issues affecting development of the fields or the overall impact which offshore oil and gas resources have had and will continue to have in developing and diversifying the economy of one of the country’s financially weakest provinces.
Based on the foregoing, the provincial government should reformulate its proposal to the federal government to produce an amendment that is simple, based on logical, practical and historical premises and which will have a definite termination. Disentangle the Accord proposal from other arguments and make it as straightforward as possible. What remains is a robust concept:
Amend the Atlantic Accord offset provisions to give the provincial government a full Equalization offset, as currently calculated by the Accord for the first four years, until such time as the province’s fiscal capacity reaches 110% of the national average and its employment rate meets or exceeds the national average or for a period of 25 years, which ever comes first.
It is hard to imagine that any Liberal administration in Ottawa could reject a proposal that is founded on the very ideas it predecessors advanced 20 years and more ago. The proposal leaves intact the broader benefits which two national governments have intended for this province to receive from oil and gas resources off its shores. It is a proposal that is divorced utterly from the extreme and often partisan rhetoric which has surrounded recent discussions of public policy in this province.
K. Conclusion
The commonplace conclusion mentioned at the outset of this paper is based on mistaken information or incomplete information. The provincial government sets its own revenues for offshore oil and receives its revenues in total. The Atlantic Accord is clear on this point and no one has publicly suggested that the Accord provisions on this point are not being followed. As for the supposed Equalization clawback, losses in Equalization are offset under the Atlantic Accord according to a formula agreed to by the provincial government in 1985. The formula appears to be working as intended. No one can make a thorough assessment of this matter however, since the provincial government has not released thorough, accurate information on revenues, on the Accord offset provisions nor on provincial government expectations in 1985.
In general, however, the following can be said with confidence:
1. The Government of Newfoundland and Labrador currently receives 100% of provincial revenues from offshore oil and gas resources.
2. The Equalization offset provisions of the Accord are functioning as intended, although amending the Equalization offset provisions is desirable for the provincial government. A better deal is attainable based on the stated intentions of the Trudeau administration before 1984.
3. Altering the definition of “principal beneficiary” to refer only to provincial government revenues may jeopardize other benefits the Accord provides to the province.
4. Disposition of the federal government’s share of the Hibernia project is outside the Atlantic Accord. Acquiring the shares must be examined in greater detail since they carry responsibilities and financial implications once the field is exhausted.
Brian Peckford’s phrase “One day the sun will shine and have not will be no more” is now part of our political vocabulary. That phrase, about sun and “have not” embodied for many people their hopes about the future of Newfoundland and Labrador and the unprecedented opportunity offered by oil and gas for ending our status as a people dependent on hand-outs from richer cousins in the rest of Canada. The very term “have not” derives from the Equalization program – receiving provinces are said to be “have nots”; the money comes from the “haves”.
Peckford’s goal was to use oil and gas wealth to end the indignity of a proud people living on a form of national dole. At the time he spoke, more than 60 per cent of the province’s annual budget came from federal transfers, much of that from Equalization. The Atlantic Accord may not be perfect, it may not cover all contingencies, but it is the deal that has produced tremendous economic and social benefit in Newfoundland and Labrador. We tinker with it at our peril. The percentage of provincial revenues coming from federal transfers has declined. This is due in part because of federal changes to transfer programs, but also in part because of growth in new industries like oil production. As Rob Strong wrote recently, though, it is important to remember that the East Coast oil and gas industry is still growing. There is much more to come.
The Williams administration is proposing to alter a landmark document in the province’s economic and political history, the net effect of which, at the very least, would increase federal transfers to the province. The Atlantic Accord is not holy writ, but it is a large part of the province’s current wealth. More importantly, it holds the prospect of providing considerably more wealth with future discoveries in the Orphan Basin and the Laurentian sub-basin. The Premier is proposing his changes, however, without an informed public discussion, without releasing a concise statement of the provincial government’s position and, as it would seem, without relying on the plain meaning of words. Given the importance of the Accord to the province, we should be careful in seeking adjustments to it.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. In fact, there is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned. The absence of debate or substantive discussion carries with it greater implications than the denial of contrariness. Without a clear understanding of what is being sought< how can anyone – politicians, reporters or the public at large - judge the government’s success or failure?
Getting more cash from Ottawa is one thing. If it comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. Newfoundlanders and Labradorians have a right to know what is being talked about because they are the ones who will either reap the reward of these changes or bear the burden.
Rex gets it right
Rex Murphy points out that the ADQ is actually not a federalist party.
The local sovereignists didn't miss it, that's for sure.
The rise of the ADQ is not a funeral for separatism. It is a refashioning of the quest, a more beguiling referendum-free path to that fractious future.How did that really simple point slip past so many in this country?
The local sovereignists didn't miss it, that's for sure.
-30-
New X Files movie in '08?
It's been in development for a while, but it looks like production of a new X Files movie will begin shortly, with release in 2008.
According to some reports, Gillian Anderson, left [Photo: gilliananderson.ws] has bowed out of the deal.
Her replacement?
Julianne Moore, right.
According to some reports, Gillian Anderson, left [Photo: gilliananderson.ws] has bowed out of the deal.Her replacement?
Julianne Moore, right.-30-
31 March 2007
Wade Locke on public policy discussions
Part 2 of Geoff Meeker's series on local media reporting of current events includes some prescient comments by Memorial University economist Wade Locke.
Check it out, especially the bit about emotion and logic.
Check it out, especially the bit about emotion and logic.
-30-
58 years of Confederation
Yes, ladies and gentlemen, it has been almost six decades since Canada decided to join with the people of Newfoundland and Labrador in a bold experiment.Negotiations were long and difficult but ultimately the feisty Canadians realised it was better to give in to what The Fates had long since ordained.
The dream of Newfoundland visionaries - their own manifest destiny that one day Canada would come out of the self-imposed isolation and be embraced by Newfoundlanders and Labradorians with welcoming familial arms - was at last realized.
Sure there are those in Newfoundland and Labrador who can only imagine Newfoundland as a puny, subsidiarist enclave, but there are others who dream bigger dreams, who think bolder thoughts.
Today, there will be those who wear black armbands, who pop Secret Nation into the VCR and watch the bootleg edition of what they still insist is a documentary.
Well it is sort of.
Its author lives in Ottawa these days doing something other than meeting with federal ministers and officials like he gets paid to do. His boss has just about put him out of a job, it would seem.
I digress.
But there are others, numbering now in the millions across Canada, who will have a tot of rum or down a cold Black Horse and smile.
Grin a marvelous grin as we consider how much a great nation has become even greater.
And it all started, one a chilly March night 58 years ago.
-30-
NL only province to see capital investment drop in 07/08
RBC Economics is the latest to forecast that the Newfoundland and Labrador economy will trail the country in growth in 2008, at 1.5%.
The decline will be led by what RBC calls a "retreat by capital investment".
In fact, according to RBC, Newfoundland and Labrador will be the only province in Canada to experience a decline in capital investment.
Nova Scotia is the province with the smallest forecast growth, at around 2.5%.
Newfoundland and Labrador's capital investment is expected to shrink by 7.5%.
The decline will be led by what RBC calls a "retreat by capital investment".
In fact, according to RBC, Newfoundland and Labrador will be the only province in Canada to experience a decline in capital investment.
Nova Scotia is the province with the smallest forecast growth, at around 2.5%.
Newfoundland and Labrador's capital investment is expected to shrink by 7.5%.
With all three oilfields now operational and the labour disputes at Voisey’s Bay in the past, we expect the province to post above-average growth of 4% this year. Beyond 2007, growth will be much weaker as dwindling oil production and a decline in capital spending — led by a retreat in private investment — drag growth to a 1.5% pace in 2008. The weakness in construction markets is expected to span both non-residential and housing markets. Newfoundland is the only province reporting a decline in overall 2007 capital spending intentions. Broadbased weakness in housing markets has also emerged with several indicators down this year compared to year ago levels.
Unlike last year, this year’s federal budget will have little effect on Newfoundland other than a new transfer funding formula that requires provinces to include 50% of resource revenues in the equalization formula. But, since the Offshore Accord shields offshore resource wealth in Nova Scotia and Newfoundland from clawbacks, they now both have the option of sticking with the existing system until the accord expires or opting into the new formula.
-30-
30 March 2007
Local remittance economy picks up speed
Fish plants in the Maritimes are increasing offers in the hopes of luring Newfoundland and Labrador workers to their companies as migrant labour.
-30-
Great Quotes: Yes, he actually said it
The only way to deal with a bully is to confront him.
Premier Danny Williams, VOCM Back Talk with Bill Rowe, 30 March 2007
-30-
Hydro boss all wet: Offal
From Simon Lono at Offal News, a different take on Dean MacDonald's Rotary speech.
This one challenges the technical and financial viability of the subsea transmission route idea.
Warning: contains pesky facts.
This one challenges the technical and financial viability of the subsea transmission route idea.
Warning: contains pesky facts.
-30-
Flags of our fathers
Dean MacDonald is a fine example of his generation of Newfoundlanders and Labradorians.
Bright and articulate, he has made a reputation for himself as a success in the private sector.
He's a fine choice as chairman of the province's Crown-owned Hydro Corporation.
If he can deliver a Lower Churchill project that delivers economic and other benefits to the project over its entire lifespan, then he will have done something no one else has been able to do in 40 years. It will be good for him and there will be no one, save for a few cranks who oppose shipping anything out of the province at all, who will hesitate to stand up and cheer.
However, his remarks to the St. John's Rotary club, as reported by the Telegram, miss the point of current issues about Equalization, the Lower Churchill project and how the province can move forward.
Of the subsea transmission route for Lower Churchill power, MacDonald is quoted as saying this:
No one questions the technical feasibility of undersea transmission. Since the Churchill Falls project was first considered in the 1950s and early 1960s, one option for transmitting Labrador power to market involved underwater transmission either over short or long distances. MacDonald is right when he says that more power is transmitted over longer distances elsewhere on the planet.
The undersea approach is definitely more costly than hooking into existing land lines and that's really the crux of the decision on transmission route: money.
Every analysis of the undersea approach to date has concluded that while it is technically feasible, it hasn't been possible to get the power to market at a cost that is competitive, let alone profitable. At one point, even a land line route to the United States couldn't deliver power to market at a price the customer would pay. Times change and maybe times have changed on the undersea option.
But given the back end of MacDonald's remarks on this issue, though, it doesn't look like the undersea route is any better financially today than it was 35 years ago. MacDonald frames the cost as being good - not in terms of profitability - but in terms of not having to deal with Quebec.
Saving toll costs would be good since, if the price is the same at the point of delivery, Lower Churchill power would be more profitable for Hydro using the undersea route. Unfortunately for MacDonald, his boss, Premier Danny Williams, has talked about deferring revenues on the underwater route. That suggests that the toll costs wouldn't wind up as profit in Hydro coffers. Rather, Hydro would wind up in that scenario selling its power at cost or at a much lower profit or Heaven forbid below cost - than if it used the land route and paid the wheeling charges for running lines through Quebec.
[Now let's leave this option open. If Dean MacDonald wants to give some better information than what the Telegram offered, if he wants to put accurate information on the cost issues in the underwater route in the public domain available, this space is his to use. MacDonald has the e-mail address. He can fire off a submission and Bond will carry it, unedited and in its entirety. Bond readers include most of Hydro's target audiences.]
If the reward is pride, thanks very much but no thanks. But if the reward of MacDonald's approach is more cash, then more power to him, puns aside.
On the current Equalization fracas, there's no surprise that MacDonald unequivocally backs his former business partner Danny Williams:
Rather he, and apparently MacDonald, can do nothing but wave the flags of our forefathers. those flags are the time-honoured cry of previous generations having been hoodwinked by foreigners, of rolling over, of falling into traps and of having generally and always having signed bad deals.
MacDonald decries our collective insecurity, yet the very words that he and his boss use repeatedly do nothing except reinforce the old insecurities.
In the final remarks in the Telegram article, MacDonald returns to another of the old flags of our post-Confederation forefathers:
MacDonald also mentioned fallow field legislation. Of course, what he did not say is that the circumstances offshore Newfoundland and Labrador do not offer up examples of kind found elsewhere where fallow field legislation actually makes field management or financial sense.
At the end though, this is yet another of the flags of our fathers, namely that some foreign oppressor is trying to keep us down.
Poppycock, to borrow MacDonald's word.
Politicians and others wave those flags because they believe them, but as time passes, they have become threadbare. Those flags have served as nothing but a distraction, as a means of keeping people in the province from looking more closely at decisions made by our own politicians irrespective of partisan stripe.
Unfortunately for MacDonald, people are increasingly looking through the tattered strands to see what is behind. in the business community, if nowhere else, we have learned that lines in the sand and "deferred revenue" are red flags, not banners to rally behind.
If MacDonald can produce a profitable project on the Lower Churchill, then he will be lauded.
If at the end, MacDonald produces nothing at all, or worse, a deal that delivers nothing but the benefits of the "deferred revenue" Churchill Falls project, they will understand that while MacDonald is a fine example of the current generation, he can be all too easily distracted by the flags of old.
That would be the shame of this entire Hydro exercise.
Bright and articulate, he has made a reputation for himself as a success in the private sector.
He's a fine choice as chairman of the province's Crown-owned Hydro Corporation.
If he can deliver a Lower Churchill project that delivers economic and other benefits to the project over its entire lifespan, then he will have done something no one else has been able to do in 40 years. It will be good for him and there will be no one, save for a few cranks who oppose shipping anything out of the province at all, who will hesitate to stand up and cheer.
However, his remarks to the St. John's Rotary club, as reported by the Telegram, miss the point of current issues about Equalization, the Lower Churchill project and how the province can move forward.
Of the subsea transmission route for Lower Churchill power, MacDonald is quoted as saying this:
"It's not poppycock. It's fact," he said of the much-maligned subsea route.Well, sort of.
MacDonald said there are examples "all over the world" of more power being transmitted over longer distances under the sea.
He said it may cost more to build, but the people of this province will reap the rewards in the end.
"The cost is such a damn good cost to not have to depend on anybody. To maybe pay a little more to build it, but when you sell it, we don't have to pay a toll charge on the way," he said.
No one questions the technical feasibility of undersea transmission. Since the Churchill Falls project was first considered in the 1950s and early 1960s, one option for transmitting Labrador power to market involved underwater transmission either over short or long distances. MacDonald is right when he says that more power is transmitted over longer distances elsewhere on the planet.
The undersea approach is definitely more costly than hooking into existing land lines and that's really the crux of the decision on transmission route: money.
Every analysis of the undersea approach to date has concluded that while it is technically feasible, it hasn't been possible to get the power to market at a cost that is competitive, let alone profitable. At one point, even a land line route to the United States couldn't deliver power to market at a price the customer would pay. Times change and maybe times have changed on the undersea option.
But given the back end of MacDonald's remarks on this issue, though, it doesn't look like the undersea route is any better financially today than it was 35 years ago. MacDonald frames the cost as being good - not in terms of profitability - but in terms of not having to deal with Quebec.
Saving toll costs would be good since, if the price is the same at the point of delivery, Lower Churchill power would be more profitable for Hydro using the undersea route. Unfortunately for MacDonald, his boss, Premier Danny Williams, has talked about deferring revenues on the underwater route. That suggests that the toll costs wouldn't wind up as profit in Hydro coffers. Rather, Hydro would wind up in that scenario selling its power at cost or at a much lower profit or Heaven forbid below cost - than if it used the land route and paid the wheeling charges for running lines through Quebec.
[Now let's leave this option open. If Dean MacDonald wants to give some better information than what the Telegram offered, if he wants to put accurate information on the cost issues in the underwater route in the public domain available, this space is his to use. MacDonald has the e-mail address. He can fire off a submission and Bond will carry it, unedited and in its entirety. Bond readers include most of Hydro's target audiences.]
If the reward is pride, thanks very much but no thanks. But if the reward of MacDonald's approach is more cash, then more power to him, puns aside.
On the current Equalization fracas, there's no surprise that MacDonald unequivocally backs his former business partner Danny Williams:
"I'm mad as a Newfoundlander and Labradorian about what's gone on here. There may be a price to pay in the short term, but we have to draw a line in the sand," MacDonald said.There's also no surprise that MacDonald couldn't put a value on the price. His boss hasn't been able to do it. There's no surprise also that MacDonald offers up nothing more than Danny-esque rhetoric of drawing lines in sand and getting ready for "war". Danny Williams' latest war may be justified, however, as with every other war he has raged, Williams has been unwilling or unable to provide any substantive evidence to back his ire.
Rather he, and apparently MacDonald, can do nothing but wave the flags of our forefathers. those flags are the time-honoured cry of previous generations having been hoodwinked by foreigners, of rolling over, of falling into traps and of having generally and always having signed bad deals.
MacDonald decries our collective insecurity, yet the very words that he and his boss use repeatedly do nothing except reinforce the old insecurities.
In the final remarks in the Telegram article, MacDonald returns to another of the old flags of our post-Confederation forefathers:
"Why is it when Newfoundland and Labrador asks for it, it's something that we don't deserve or it's something we shouldn't get? Well, it's so important that we don't roll over on it."Fortunately for us, his other remarks on this point were carried by CBC radio's On the go. MacDonald referred to Alberta's oil royalty regime. No one has opposed that since the 1985 Atlantic Accord. Newfoundland and Labrador today is in exactly the same position with respect to oil and gas royalties as any province in the country. In some respects, for example in comparison to the tar sands, our existing royalty regime is infinitely better than the Alberta regime.
MacDonald also mentioned fallow field legislation. Of course, what he did not say is that the circumstances offshore Newfoundland and Labrador do not offer up examples of kind found elsewhere where fallow field legislation actually makes field management or financial sense.
At the end though, this is yet another of the flags of our fathers, namely that some foreign oppressor is trying to keep us down.
Poppycock, to borrow MacDonald's word.
Politicians and others wave those flags because they believe them, but as time passes, they have become threadbare. Those flags have served as nothing but a distraction, as a means of keeping people in the province from looking more closely at decisions made by our own politicians irrespective of partisan stripe.
Unfortunately for MacDonald, people are increasingly looking through the tattered strands to see what is behind. in the business community, if nowhere else, we have learned that lines in the sand and "deferred revenue" are red flags, not banners to rally behind.
If MacDonald can produce a profitable project on the Lower Churchill, then he will be lauded.
If at the end, MacDonald produces nothing at all, or worse, a deal that delivers nothing but the benefits of the "deferred revenue" Churchill Falls project, they will understand that while MacDonald is a fine example of the current generation, he can be all too easily distracted by the flags of old.
That would be the shame of this entire Hydro exercise.
-30-
Another sign of the Apocalypse?
Federal Conservatives tackling Danny Williams.
Provincial Progressive Conservatives lambasting their federal breathren.
John Crosbie once lamented having to deal with Brian Peckford and his constant attacks.
Well, just to reinforce the extent to which Danny Williams marks a return to exactly the kind of government (and the economy?) this province had in the 1980s, take a gander at this CBC online story.
If you see four guys on horses, hear trumpets and people start breaking seals, you know something is up.
Provincial Progressive Conservatives lambasting their federal breathren.
John Crosbie once lamented having to deal with Brian Peckford and his constant attacks.
Well, just to reinforce the extent to which Danny Williams marks a return to exactly the kind of government (and the economy?) this province had in the 1980s, take a gander at this CBC online story.
If you see four guys on horses, hear trumpets and people start breaking seals, you know something is up.
29 March 2007
QC or NL?
Their deep insecurity and old fears force them to shut the doors and barricade the frontiers. They attempt to drag us along in their withdrawal by giving their misadventure the allure of a crusade, as if rage could be known as courage and bitterness could replace spunk.
Comment by a well known contrarian, Nov 10, 1968
Sign of the decline: offshore trade show cancelled
dmg World Media announced on Thursday it was cancelling the 2007 offshore trade show.
The show is still listed on the company website but a spokesman for dmg's Calgary office said the show wasn't drawing enough interest this year.
He said the show may also be cancelled next year as well.
Never fear, though, NOIA's annual conference is still going ahead full steam.
Danny Williams should take up NOIA's long-standing invitation and address a NOIA function. So far - after three years and long before Hebron died - he's been giving the event and the organization a cold shoulder.
Bond Papers will now officially start the rumour that if Williams doesn't take a keynote slot this year, NOIA will invite your humble e-scribbler to speak.
Danny.
Paisan.
Tovarisch.
That's something you really don't want, is it?
Leave the gun, Danny.
Take the NOIA offer.
The show is still listed on the company website but a spokesman for dmg's Calgary office said the show wasn't drawing enough interest this year.
He said the show may also be cancelled next year as well.
Never fear, though, NOIA's annual conference is still going ahead full steam.
Danny Williams should take up NOIA's long-standing invitation and address a NOIA function. So far - after three years and long before Hebron died - he's been giving the event and the organization a cold shoulder.
Bond Papers will now officially start the rumour that if Williams doesn't take a keynote slot this year, NOIA will invite your humble e-scribbler to speak.
Danny.
Paisan.
Tovarisch.
That's something you really don't want, is it?
Leave the gun, Danny.
Take the NOIA offer.
Westcott on lost opportunities
Business Post publisher Craig Westcott's take on the oil industry and Danny Williams, subtitled, as Craig put it "Stuck in the middle with you."
The reaction to the speech has already been strong.
Undoubtedly it will be stronger.
The reaction to the speech has already been strong.
Undoubtedly it will be stronger.
Inkless Wells on the Williams fracas
Paul Wells offers two thoughts on the issue:
1. His question of the day on what possible issues Stephen Harper might use to "hurt" Danny Williams.
2. A follow-on post listing the rest of the stuff the pugnacious Premier wants from Ottawa or needs help on from the feds.
Paul will get nasty e-mails.
1. His question of the day on what possible issues Stephen Harper might use to "hurt" Danny Williams.
2. A follow-on post listing the rest of the stuff the pugnacious Premier wants from Ottawa or needs help on from the feds.
Paul will get nasty e-mails.
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