The forest for the junk

There's something about woods work in central Newfoundland that brings a tendency in some to take junks of wood to the sides of heads.

We don't mean here the tragic case of Bill Moss, the Newfoundland Constabulary constable killed during the woodworkers strike that started 50 years ago this month.

We are speaking here of the junks of legal wood then Premier Joe Smallwood took to the heads of the woodworkers themselves to settle that strike.  Smallwood used the brute force of the legislature to legislate their union out of existence and impose on them a government-controlled crowd.

A half century later, the pretender to Smallwood's demagogue populist Crown used the brute force of the legislature to cancel rights and seize assets.

Then, as now, the wider issue was lost amid the noise of the moment.

In the current day, the noise is exemplified by two statements.

First, in Wednesday's Telegram, a letter writer lays out the case for the government to take action to ensure that - as many other voices have cried these past couple of weeks - AbitibiBowater cannot walk away and "take our resources" with them. 

The company would be able to generate power from its hydroelectric assets and make money from it, according to Sean Dyke.  He's right on that but the power wasn't about to leave the island any time soon. 

The company might take the wood it held in Newfoundland and ship it somewhere else to be made into paper or toothpicks, Dyke warns. 

Nothing could be further from the truth, to quote a well known public figure.

AbitibiBowater was planning to shut down everything, including its port and harvesting operations. The cost of exporting the timber to another mill would be prohibitive.  If no company in Newfoundland could do it profitably by bringing logs from nearby Labrador, there is little chance it could be done profitably by shipping central Newfoundland trees to England or the United States or China.

No assets were leaving the province, unlike in Stephenville where the provincial government allowed the company to remove its 30 year old Valmet machine from Stephenville and ship it off to Heaven knows where;  ship it out of the province instead of moving it to Grand Falls-Windsor where it was originally supposed to go to replace one of the ancient and slow machines that are still running out there in the papermaking museum on the Exploits.

Second, there's the claim by Premier Danny Williams that there is little likelihood of court action by the companies involved.  According to the Premier, the only issue is compensation since, the brute force of the legislature transfers the assets to the Crown and that's all there is to it.

If it is possible for something to be even further from the truth than anything else, then that contention by the Premier would be it.

The expropriation legislation is unprecedented, in the Premier's own words.  It is unprecedented in a situation where the company was party to legal agreements with the provincial government, where there were no allegations of bad faith or of failing to meet its legal obligations.

The Premier tried a supposedly failed moral obligation but even that one can't stand up to reasonable scrutiny.  Over a century of successful operation is hardly a failed obligation.  It's also hard to accuse the company of perfidy when it tried diligently over the better part of a decade to revamp the mill only to find that no deal could be done with its unions, not once but twice in the space of a year.  in tough economic times, hard decisions get made.  Forces beyond the company's control - those words will ring true for the Premier come budget time - make necessary a tough business decision.

So where exactly is the basis for seizing assets?

There isn't one, at least not one that stands up to the barest of scrutiny.  Sure, the usual suspects are crowding open line shows to praise their hero but it is hard to imagine that even the Premier's frail mother could show such unflinching devotion to her son as some of these characters do. They love him anyway.

And if there was a way for the Premier to smack AbitibiBowater in the side of the head with another junk, that crowd would gnaw down the trees with their own teeth to keep him supplied with weapons.

AbitibBowater clearly had no interest in the timber any more.  It held land and mineral rights but odds are the company was looking to get rid of those licenses and lands anyway.

No.

The only asset of any obvious and enduring value were the penstocks used to create electricity. Smacking the company in the head with a legal junk was, evidently, the easiest way to get that.

Far from being a case of merely settling compensation, though, AbitibiBowater can argue that it had an interest in continuing to operate those assets. It had every legal right to do so.  They can argue that there was no legitimate reason to seize those assets by brute force.

Nowhere is that more plain than at Star Lake.  While the rest of the company's generating capacity primarily supported the mill, Star Lake was a separate project.  Abitibi and a private sector consortium developed the 18 megawatt site in response to a call for proposals from Hydro a decade ago. The goal was to replace some of Holyrood's environmentally dirty production with cleaner hydro. Why did government seize that asset?

Maybe it won't wind up being a legal argument.  Maybe the Crown can get away with taking an axe to contracts.  Maybe the brute force of legislation, without due cause, due consideration and due process is enough.

It should certainly be a political argument, even if the rump opposition in the legislature can't seem to grasp the wider implications of what they supported yesterday.

It's certainly a policy argument worth considering when the province depends - as surely as it did in 1905 - on attracting foreign capital to develop local natural resources.  It's certainly an argument worth considering given that in 2006, this same administration argued for the power to expropriate oil and gas licenses merely because the companies involved and the government couldn't reach a development deal.

Sometimes, it seems, it is hard to focus on the forest of problems with the AbitibiBowater expropriation.

It's masked by the the thud from the junks of wood being laid up side heads.   

 

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Whistling past the graveyard: forestry version

Union and town politicians in Grand Falls-Windsor appear to be under the ludicrously mistaken impression that Tuesday's expropriation by the Government of Newfoundland and Labrador of AbitibiBowater's land, timber, mineral and water rights in central Newfoundland might lead to the contributed operations of the town's major private sector employer.

There was no indication that yesterday's legislation would prevent those losses [of hundreds of jobs when the mill closes in early 2009]. But Gary Healey, a Communications, Energy & Paperworkers representative at the mill, called it “an early Christmas gift.”

“If Abitibi's not interested in staying in the province, at least we have something to offer,” he said. “But losing the big employer in central Newfoundland is not what we want. I'm sure if Abitibi wanted to reconsider their plans, they'd be listened to.”

Grand Falls-Windsor Mayor Rex Barnes had a similar reaction.

“We would hope that Abitibi would reflect on what's just happened and come to a resolution with the unions to work this out,” he said.

Reconsidering the planned is not likely in AbitibiBowater's list of options.  The company is facing stiff competition in an industry that is under increasing pressure.  Two weeks ago the company announced plans to slash over 800,000 tons of production.  A major client, the Chicago Tribune, filed for bankruptcy protection and, overseas, the company is facing intense price competition from smaller rivals.

AbitibiBowater discussed possible bankruptcy protection for the company earlier this year during efforts to restructure its finances. That point seems to have been missed by provincial government and union officials during talks aimed at keeping the Grand Falls-Windsor mill operating.

Meanwhile, in Ottawa Tuesday a paper industry lobby group issued a list of five proposals for action by the federal and provincial governments, the group would help save the ailing forest industry across Canada.

He said the restrictions have left the industry weaker, with many small failing mills, at a time when bigger companies are needed to compete effectively in tight world markets.

Provinces have put restrictions on consolidation to keep mill towns open, but Lazar said most of the jobs in the future will come from large operations that are able to win markets in Asia and other emerging economies.

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Related: 

• "Abitibi: forest and trees" (2005)
• "Danny Williams: read the fine print" (2005)
• "The hard and the easy: Abitibi and government subsidies" (2005)
• "A trading nation - Newfoundland and Labrador trade with the world" (2005)
• "Kruger closes CB paper machine, other companies may follow suit" (2007)
• "Let's do the time warp" (2007) This post, on Fishery Products International, includes an excerpt from Hansard, March 2002:

Mr. Williams:...It did not have to happen. We have a black eye now on the business reputation of this Province. People do not like heavy-handed intervention. They do not like it, and that is what happened in the business community. The national media are looking at it and they now see our intervention as heavy-handed. If it had happened back in April of last year, back in May of last year, there would have been no problem.

The hon. Member for Lewisporte talked about his concern about a privitive clause. We all share that concern. There should be no need for a privitive clause. There should be no need to hide behind your mistakes, so that people who have a right to sue you can rightfully sue you. We have done it; it is out there. You have this unique legislation that talks about privity, so you cannot sue us because we made mistakes. That is wrong. That could have been prevented. The legal opinion that you had last spring said that you could change that legislation for public policy reasons, and you did not do it. [Emphasis added]

Brute force of law: Williams administration revokes Abitibi rights and expropriates assets

In a move Premier Danny Williams described as unprecedented, the Government of Newfoundland and Labrador introduced legislation in the House of Assembly Tuesday that canceled timber, land, mineral and water rights and expropriated title and rights to other lands and assets held by AbitibiBowater in Newfoundland and Labrador.

The bill moved through all three stages of debate and received royal assent in a single afternoon, thereby coming into immediate effect.

The move was explained as the "repatriation" of provincial resources from a company based on, in the Premier's words during Question Period, "the fact that the bargain was broken which had been established over a century ago." The bargain, as he described it, was the use of timber, land and hydroelectricity to produce pulp and paper.  AbitibiBowater announced two weeks ago that it would close its mill at Grand Falls-Windsor in the first quarter of 2009.

The bill provides no compensation and absolves the Crown from any legal action arising from the expropriation, except for the hydroelectric assets.  However, the manner and amount of that compensation is to be determined by the cabinet alone.

In Question Period, the Premier said that the government wrote the company last Friday seeking transfer of all assets to the Crown without any charge.  The company replied on Monday that it would not do so but wished to enter into discussions on transfer and compensation.

"At that point, of course, we felt that this was certainly an urgent matter that should be dealt with forthwith. As the House is moving towards the Christmas period, it is a closer time, a tighter time, and we felt the matter was of such importance that we should deal with it as soon as possible."

According to the Premier, the company as well as the company's partners and creditors in two hydro-electric developers, were notified 30 minutes before the House of Assembly opened for the afternoon sitting.

The move is in stark contrast to the orderly dismantling of Abitibi's Stephenville operation.  That closure included - for some unexplained reason - removing a paper machine from the province that had been originally destined for Grand Falls before a deal was struck between Abitibi and the Peckford administration to open a paper mill at Stephenville.

Included in the expropriation are two joint ventures between Abitibi and private sector companies to generate hydroelectricity.  One of them, at Star Lake, was developed entirely in response to a request for proposals from Newfoundland and Labrador Hydro to replace some of the power generated by Hydro's diesel generator at Holyrood.  It did not supply power to the mill.

As Bond Papers noted last week, "[e]xpect NL Hydro to purchase these assets from the private sector partners, one of which is Fortis, with the power being sold to Vale Inco."   That's pretty much what will happen except that cabinet will dictate the terms and conditions of the deal. The hydro assets will now be operated by Hydro directly or through another subsidiary of NALCO Reborn.

This whole move is not without some context and foreshadowing.

The most immediate context may be the prospect of AbitibiBowater declaring bankruptcy, a point raised in series of questions by the opposition.  That issue was raised in the the House of Assembly, interestingly enough at the time the Premier and natural resources minister Kathy Dunderdale were outside the legislature announcing Nalco Reborn.

Innovation minister Shawn Skinner fielded the questions on behalf of government that day:

We are aware of the challenges that AbitibiBowater as a company are facing. We are looking at the options and the alternatives that may come from the situation they find themselves in. They may be in a situation of bankruptcy or receivership, they may bounce back and maybe become a very profitable and productive company, but as it is right now, Mr. Speaker, they are a company that is open. It is operating. It has many operations throughout the world. They are still operating and we will monitor the situation as we have done to ensure that our rights as a government and the rights of the people who work with Abitibi, who are residents of this Province, are protected.

As it turned out, that was a day before the government issued its demand for transfer of the assets free of compensation.

The Premier dealt with similar questions on Tuesday, responding at one point:

Of course, the core reason for this particular action is because, in fact, there was, as I said before, back in 1905, a Charter Lease which was executed which very clearly tied the milling and logging operations to the waterways and the water power and the hydro power. So, as a result of their announcement that this particular mill in Newfoundland and Labrador is closing down, we feel, obviously, we have the right then to repatriate those assets and, in fact, expropriate the power assets, but we have no information before us right now that indicates that this company is going bankrupt. If it did go bankrupt, then there are other consequences.

The curious thing about that response is the reliance on the initial charter which established the mill in 1905during the administration of Sir Robert Bond.  Many of the timber, land and hydroelectric assets expropriated on Tuesday were acquired subsequent to the original charter.  The government also didn't expropriate the mill itself, perhaps due to potential environmental remediation costs associated with that asset.

The Premier told the legislature on December 8th that the government had been considering legal options with respect to the Grand Falls-Windsor operation for several years.  He said:

I can quite honestly say that this government has looked at the legal issues surrounding that mill for a considerable period of time - over several years since we have actually been in office - with regard to demands that Abitibi were making, based on previous agreements and previous rights that they assumed that we have. So we have been constantly reviewing this from a legal perspective and made sure that we protected the interests of the people of Newfoundland and Labrador.

From our own perspective, on an ongoing basis, we obviously are obtaining legal opinions. I think it is in the best interests of everybody involved that we not share those legal opinions because, obviously, we have a preferred advantage there and some leverage with the company and that is something that we would prefer to continue on with.

The first option is the best option. The company does the right thing, does the right thing for the people of Newfoundland and Labrador, and particularly Grand Falls and surrounding areas, after 100 years is that they pass these assets back over. That would be the timber assets - which actually, a month ago, we were actually prepared to pay for on the basis that we wanted that x number of dollars to go back into the mill and allow the mill to have some longevity, which is what the workers indicated.

The other remedy would be a court action, the other remedy would be an expropriation, and the other remedy would be an act of this Legislature which deals with the entire problem. [Emphasis added]

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"Solidarity, Reg", patronage appointment version

Somehow this slipped your humble e-scribbler's notice.

Provincial New Democratic Party leader Lorraine Michael knew back in September what most New Democrats would understand:  a conservative is a conservative is a conservative.  That's what she said back in September when the who Family Feud thingy was on the go during the federal election.

Well, for all those who think that labour is aligned with the New Democrats, think again.  Outgoing labour federation boss Reg Anstey stood four-square behind the Provincial Conservatives in September.

That's not the first time Reg showed his solidarity with the current administration.

Remember the Rally for Danny?  There was Reg.

How about attacking the Liberals and New Democrats last spring for daring to suggest pattern bargaining in the public service should go the way of the dodo?  Reg was there to slice into the government's political opponents.

He took his leave of the labour federation in the first week of November, telling reporters he didn't know what he was going to do with himself now that he'd retired.

Less than two weeks later he had a sinecure on the offshore regulatory board, courtesy of the Provincial Conservative cabinet.

Loyalty clearly has its rewards.

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Fowler missing in Niger

He was deputy minister at National Defence through the Somalia debacle.  Now he's gone missing in Niger while on a diplomatic mission.

How long before Scott Taylor turns up doing interviews about the missing man, Bob Fowler?

Notice that the Globe's update discusses everything in Fowler's career except what he is best known for.

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Floundering

Question:  In what year did Earle McCurdy and the fisheries union not go to the provincial government looking for cash to bail out the fishery?

The economy is booming.

Earle tells us the fishery is in trouble and needs a government bailout.

The economy is tanking.

Earle tells us the fishery is in trouble and needs a government bailout.

McCurdy's answer to problems in the fishery is - of course - more of the same sort of thinking that got everyone into this mess in the first place. He is to fisheries management what Taco was to 1980s popular music.

Too bad Earle makes the news while people who actually have a roadmap out of the mess get ignored again and again and again and again and again... .

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Local math prof stirs international economics controversy

Odds are no one heard of Antal Fekete.

The Hungarian-born emeritus professor of mathematics at Memorial University in St. John's isn't someone local media  look to for commentary on economic issues.

But through a series of articles published on his website - professorfekete.com - he's earned some measure of international notariety for his arguments about backwardation of gold, the problems of unsupported debt and the global economic crisis.

Backwardation is the phenomenon of spot gold prices being higher than futures prices.  That situation happens frequently in other commodities but seldom in gold.  The difference is that gold, once used as the ultimate support  for paper currency, is a monetary commodity.

It's also a clue that the commodity is, or is perceived as being, or will be in short supply.  Logically, no one would buy gold today at a price higher than it could be purchased in as little as two weeks time.  The only reason to do that would be in a case where there was some doubt about delivery in the future.

Here's the way Professor Fekete describes the situation in his most recent article:

We are facing a pathology of the international monetary system based, as it is, on irredeemable promises to pay. People are enjoined through 'legal tender' legislation to use these irredeemable promises as if they were the ultimate means of payment, even though they are not, and the world would rather use gold and silver as the natural and ultimate extinguisher of debt. But gold and silver have been coercively eliminated from monetary circulation for the competition they offered to synthetic debt-liquidating devices.

Mainstream economics pretends that the issue has been settled for once and all. It asserts that liquidation of debt through the coercively maintained payments system has no threat to the national and world economy. Yet what is happening is that the government keeps kicking the toxic garbage upstairs which keeps accumulating unobtrusively in the attic, only to come crashing down in its own good time to cause untold amount of social damage.

In the real world it is natural law, rather than man-made coercive laws, that prevail. The pathology of the regime of irredeemable currency has not been attended to, and day of reckoning has dawned. Our pathological monetary system has allowed the burgeoning of debt beyond all rhyme and reason. It has no mechanism to extinguish debt. It pretends that transferring debt to the banks, and ultimately to the government, is tantamount to extinguishing it. However, the truth of the matter is that only gold circulation is able to extinguish debt. When it is stopped in its tracks, as it is under conditions of backwardation, debt explodes. [Italics in original]

Fekete's theories have attracted global attention since gold started backwardising in early December.  That's the first time such a situation has occurred since the early 1930s by some accounts, let alone lasted for more than 24 hours.  As The Australian columnist Robin Bromby put it:

It wasn't just the internet sites. London's Daily Telegraph was reporting the gold markets being in turmoil, with traders saying it was extremely hard to buy physical metal in the form of coins or bars, a problem the paper attributed to the emergence of backwardation.

Fekete said the development showed a drastic drop in the velocity of gold circulation and was a repeat of the situation in 1931 when, in the face of serial devaluations started by the British, gold circulation seized up. And we all know what happened after 1931 -- 1932, the worst year of the Great Depression.

It's not like Fekete hasn't been predicting this for a while.  In June - before the peak crude price and long before the credit meltdown - Fekete forecast gold backwardation.

There are plenty of people around who will tell you what everyone else says.  Sometimes it's the ones who go against the grain who are worthy of more attention than they get.  Sometimes they are a bit more clued in that people forecasting more of the same. 

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Separated at birth: the tag line version

"Never give up.  Never give in."

"Never give up.  Never surrender."

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Forget TORSTAR: Latest Harper/Ignatieff poll results

Plus other stuff of equal importance, because politics is such serious business.

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Purple Reign of Darkness

Danny Williams receives personal files on reporters who interview him.

He confirmed that fact, telling reporters the files are to help him prepare for those interviews.

"When I am provided with a personal file it's an information file to get me ready for an interview with the press," he told reporters at the news conference. "It is not the down and dirty on you or you or you or anybody else."

The Telegram learned of the files last December when one of its reporters received a government e-mail by mistake that asked a political staffer to prepare "purple files on both" that reporter and another who had also requested an interview with the Premier.

Not for both, as in for the interviews, but on both, clearly implying the files were to be prepared on the reporters.

Briefing notes and talking points are routine material prepared for interviews.  They include background information, suggested responses to questions and other similar information that focuses on the subject matter of the interview.

They typically don't focus on the reporter personally, unless the reporter has been following a particular - usually contentious -  issue for a while and hence has an understanding or interpretation of an issue that's already established. Even then, the clippings are only useful to get a perspective on how the issue has been approached, not on the reporter personally.

In the Telegram case, the interviews were for year-end wrap-ups. 

"A reporter basically came in the room one day and saw a purple file on the desk and assumed it was a purple file about that reporter... absolutely untrue," Williams said. "That insinuation, I've got to tell you, is really offensive."

What insinuation, you may ask?

As usual it's Williams who provided the sinister cast to the whole episode.  He suggested that the request by the Telegram for those purple files under the province's open records laws was based on the belief that the files contained personal profiles of the reporters.

The Telegram just went looking for the files, without specifying the contents.

The official response from the premier's department said that there were "no responsive records" meaning they had no such information or files.

Clearly that wasn't true, as the Premier admitted last week and as the Premier's communications director had already admitted to the Telegram via e-mail months ago.

Telegram editor Russell Wangersky focuses on this issue for his Saturday column, recounting much of what is presented above. He takes the cue from the notion of offensive to raise another point:

As offensive, say, as collecting files on political rivals to trot out in Question Period? "When the member opposite was minister, she bought two cases of wine." That sort of thing?

Indeed.

Nor hardly surprising from a politician who likes to talk about the amount of energy he spends on people who criticize his regime.

Or one who likes to call reporters to bitch about their columns and articles.  Like in this case where Williams called a reporter involved in the purple files controversy to complain that the reporter had appealed the case to the province's information commissioner.

Or a guy who calls ordinary citizens about their letters to the editor.

Politically, Danny Williams is in yet another hard spot on the subject of transparency and accountability, let alone free speech.

He likes to pat himself on the back for his supposed commitment to the virtues of open government, but whenever push comes to shove, his first response is to shove back hard and slam the doors shut on disclosure.

In this case, Williams' office has been caught both compiling personal files on reporters as interview preparation material.  Then his department has been caught denying the files exist, at least as far as the province's open records laws.  And let's be absolutely clear, under those laws, the contents of those files - irrespective of the colour of the folder - is accessible.

Now Williams' himself has compounded the problem by insisting on hiding the files he himself acknowledges exist based not on anything other than his own self-righteous indignation.

He will surely understand that a great many people are highly suspicious of his actions.

This is just the latest in a long string of secrecy issues for the Williams administration:

• A couple of weeks ago, the Telegram revealed the extent to which the premier's department - Executive Council - controls what is released to the public under the open records laws.
• Before that, we had the spectacle of the Premier making up excuses to keep the auditor general from reviewing files on a controversial business deal between the government and company's run or managed by his former business partners.  He subsequently relented, using the same discretionary power that many pointed out from the beginning that he held.
• Then there was a health facilities report, which the government sat on for three years until the health minister accidentally revealed confirmed it existed.
• And let's not forget the changes to the provincially- owned energy corporation's legislation that, in effect, shield the entire company from public scrutiny and limit the auditor general's ability to review the company's finances. Incidentally, that energy company unveiled its value statement this week alongside its grossly overpriced logo:  Accountability - Holding ourselves responsible for our actions and performance.  Yes, if you take the plain English meaning of those words, a public owned company will be accountable to nothing but itself.
• Then there are changes this week to the province's public records management laws.  Under the old approach public records were managed by a committee of public servants. There were only public records and that included cabinet ones. Under the new approach, the government is creating a special category of files called cabinet records that it alone defines and controls. Watch out for an up-tick in shredder activity.

In this case, as in all the other cases, including the numerous reports the administration sits on in spite of the pledge to release them within 30 days of being received, the Premier and his staff deliberately fight any attempt at disclosure.  They kick and scream when - if things are really as innocuous as they claim - the simplest thing to do would be to release the documents.

Russell Wangersky makes an eminently sensible point in that respect.

But when a politician and his staff try to conceal things - as they obviously are - and when other public servants make false statements - there are responsive records in this case - you have to wonder what they are trying to hide.

You don't have to wonder why they try to hide things:  the administration has demonstrated repeatedly it does not believe in openness, transparency and accountability. 

If it did, people within it - including the Premier himself - wouldn't spend so much time trying to hide things from the public.

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Fun with anagrams

Anagrams.

Take a word or words and mix up the letters to make new words or phrases.

Like, say, NALCOR ENERGY, the provincial government's new name for its old idea of state involvement in things best left to the entrepreneurial private sector.

Flip around the letters and you get, among others:

• General Crony
• Enlarge Crony

Add the letters corp on the end and you can end up with some other odd phrases:

• Cancer Prone Glory
• Clean Crony Groper
• Porn Recycle Groan

Those samples came from an online anagram generator.  Maybe the human brain can do something more creative than create random words.

For example, this all started with an e-mail that asserted that one anagram for NALCOR ENERGY CORPORATION was CRONY CAREER PROLONGATION.

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NALCO Reborn

If nothing else, the current provincial administration is good at naming  - branding - things.

Well  that is, if by "good" you mean willing to make some completely unimaginative or even risible choices.

The risible included a new provincial government logo, erroneously called a brand, which consisted of three flowers of a lazy carnivorous plant billed as symbolic of the proud people of Newfoundland and Labrador.

The latest example of a decided lack of imagination appeared on Thursday with the name of the holding company for the provincial government's energy corporation.

NALCOR.

As in Newfoundland and Labrador Corporation, the name of another Crown corporation in local history that went by  the acronym NALCO.

Created as a Crown corporation in 1951 by Joe Smallwood's first administration, NALCO held rights to all the province's undeveloped land resources.  As a Crown corporation at the time, the thing was exempt from federal taxation.

NALCO grew from the brain of Alfred Valdmanis, the Latvian economist with a dubious past who ingratiated himself with Smallwood with plans of turning Newfoundland and Labrador into a modern industrial powerhouse.  He had the odd habit of referring to Smallwood as "my premier", in much the same way as Germans referred to Hitler as "my Leader", a point not lost on Smallwood's critics.

By 1954, NALCO was in the hands of John C. Doyle and Canadian Javelin.

The new NALCO, with a R added to the end, is the parent of Newfoundland and Labrador Hydro, Churchill Falls Labrador Corporation (CFLCo), the unimaginatively named Oil and Gas Corporation and may well become the parent of others under the legislation that gave it life.

Interesting that CFLCo is now known as Churchill Falls.  The entry in the registry of corporatrions for the province shows, as of mid afternoon on Thursday that the registered name is still Churchill Falls (Labrador) Corporation and that the company last filed a return in may 2007.  It isn't in good standing, according to the online registry record, meaning the CF or CFLCo or whatever it will be called now hasn't paid its annual registration fee.

The new company name hasn't been registered yet.  Instead - as of last Thursday -  Newfoundland and Labrador Hydro has reserved the name "NALCOR Energy Oil and Gas Inc". They have less than a year to get the thing properly registered.

The web domain  - nalcorenergy.com - was registered in November, though, by M5i, a division of M5, a local  marketing communications firm. They also registered "nalco.ca" at the same time.  Craig Tucker, one of M5's senior executives, was a Williams administration appointee to the Newfoundland and Labrador Hydro board of directors.

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Facing oblivion

From the guy the insiders picked to run the Liberal Party:

I’m not looking for a road to 24 Sussex. I'm looking for a road that takes us out of crisis towards a stable, responsible government with the national interest in mind. Mr. Harper has to understand the extent and depth of the anger -- the justified and righteous anger among the opposition parties at the way we've been treated in this Parliament. He seems to misunderstand the very nature of Parliamentary government, and he better start understanding quickly

The political problem facing Canada, as Michael Ignatieff now states it,  is not that Stephen Harper is running the country but rather that he isn't running it properly.

According to Mr. Ignatieff, Stephen Harper simply needs to listen a bit, to "understand".

So why exactly is the new Liberal leader looking for volunteers, ideas and  - what was that other thing? oh yeah  - money out of your pocket to accomplish this goal?

Not clear.

Not clear at all, especially considering that Mr. Ignatieff states flatly that he is not looking for a road to power.

He defines the goal here in a way that does not mean - as a matter of simple fact - that the only possible "stable, responsible government with the national interest in mind" the Liberal Party backs is a Liberal government.

The Prime Minister doesn't have to do very much of anything to hang on to power in that scenario.  He can just remind everyone that he has already moved on the major irritants that caused the proroguing kerfuffle.

Things should be peachy in Ottawa over the holidays. Mark your cards right now that there is no way the Liberal caucus in Ottawa will continue with the coalition and bring down the government. The Conservatives know they have the government firmly in their grip and with Michael Ignatieff safely fronting the Liberals, they know nothing will threaten that in the near future.

This would be pretty much what your humble e-scribbler concluded days ago.

In fact, there really isn't very much of anything that Mr. Harper could do to compel the Liberal insiders who picked this guy to run the party to bring him down and force an election.

If you thought that the old Liberal caucus was feverishly trying avoid an election, just wait 'til you see this crowd. If you want to clear out the Liberal caucus room next year just walk into the place and yell "division!" They'll be out the door and headed down the 416 faster before the "n" leaves your lips.

That's because the Liberal Party under Michael Ignatieff will be too busy looking for the road that takes you away from the centre of national political power in this country.

Sure, they will be looking for people to join a conversation, as Mr. Ignatieff puts it on his blog.  All very much the look and feel of what someone thinks a political bloggy thingy is supposed to look like.

And yes, Mr. Ignatieff does practice the Dale Carnegie crapperific approach to speechifying.  Mention people by their first name a lot and you can imitate what a politician is supposed to sound like, at least to some people's way of thinking.

What you don't get, though, is what a leader and a political party is supposed to act like, what is supposed to be.

You don't get people looking for the road to 24 Sussex.

That's where power is and if the political party isn't lead by a guy looking for that goal, he isn't facing the future.

He's facing oblivion.

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True or false

One of these statements is true.

The other is not.

The only question is which one is which.

Natural resources minister Kathy Dunderdale, in the House of Assembly, December 2, 2008:

IOC informed me on Friday morning, Mr. Speaker, that they were going to delay Phase 1 and Phase 2 of their expansion program,...

Natural resources minister Kathy Dunderdale, in the House of Assembly, December 10, 2008:

I have met with Terry Bowles, the CEO for IOC, within the last six weeks. I have had a number of telephone conversations with him, Mr. Speaker. I will have another one today. The last communications we had around this piece, which I reported in the House, was that they were going to complete the work that was already started in Phase I and Phase II of their expansion but otherwise, plans were on hold.

Interestingly enough this is not the first time in the House, in December, that Kathy Dunderdale said two completely contradictory things about exactly the same subject.

Anyone remember Joan Cleary?

The government suddenly closed a short session of the House in 2006 when Dunderdale was caught at this sort of misstatement.

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And a week later everywhere else...

IOCC ices expansion plans.

December 2 at Bond Papers, thanks to Kathy Dunderdale's loose lips in the House.

December 10 everywhere else.

It's not like the conventional media don't cover the legislature.

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The economics of Snuffleupagus

Funny thing how people miss stuff.

Like a Bank of Montreal economist who offered this view of the provincial financial state:

"The commodity boom has lined the province's coffers," he said. "Meantime, a reversal in migration flows has sprung population growth back into positive territory after three years of outright declines - an important development given that a lack of skilled labour could be a constraint on the province as offshore development picks up speed and major construction projects come online."

If "lining the coffers" means supported spending way beyond what is sustainable then he's right, but look at that migration comment.

You'll see similar views coming from the provincial government, not surprisingly.  There's lots of talk about the growing population as another sign that the fiscal messiahs are now in charge and that their "plan" is working.

That would be the plan, by the way, that Barack Obama is following.  No, gentle reader, that isn't some effort at humour.  It's a real quote and yes, he believes every word of it.  That's just how brilliant this crowd are.  This plan  - which consists of nothing more grand than spending everything that comes in through the door - must come from all those books, well not books really but articles and magazines the Premier reads 24/7 on a go forward basis to try and keep track of what's going on out there.  

But we digress.

This migration thing.

Three years, eh.

Only goes to show how much these bank economists don't know.

The outmigration problem - and net population decline - goes back to the cod moratorium of the early 1990s. 

It hit some new records in the best years of Danny Williams economic miracle.  That's right.  At a time when the economic miracle was taking hold people were flooding out of the Happy Province in near record numbers. The chart at left gives an idea of how big the problem has been.

There are parts of the province that are almost entirely dependent on migrant labour and remittance workers.

In others - like Stephenville - the economic disaster of losing a pulp and paper mill on the Premier's watch didn't materialize solely because the workers there could find jobs in Alberta.

But yes, you say, there has been more people coming back to the province since 2007, you say.

And yes, that's true, but it isn't because of great economic opportunities in this province.  Look around, especially outside the overpass.  All those enormous, job-creating projects that were supposedly luring people back don't actually exist.

Even though he mentioned them in his financial statement, finance minister Jerome Kennedy told CBC Radio this morning that - in fact - the big projects that supposedly exist to keep the fire going in the economy, stuff like the Lower Churchill, don't actually exist right at the moment.  These are projects Kennedy and his boss are "trying to get money for", according to his own words.

People started coming back to Newfoundland and Labrador, just as they have done previously, in advance of a major downturn in Ontario and Alberta.  Only the stupid came back for jobs that - as Jerome Kennedy knows - don't exist.  The housing boom in St. John's is driven largely by the movement of people within the province toward St. John's where there is at least the chance of decent work. The open taps on those public coffers don't hurt either. You'll find detailed discussions of the whole population thing over at labradore.

It really is funny how people miss stuff. Really obvious stuff that is readily available in the public domain.  People who - presumably - actually keep track of these things like bird-watchers scanning the trees for this winged thing or that.

Evidently not.

Evidently, great big yellow birds get missed a lot.

Aloysius Snuffleupagus would understand.

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An accountability problem for Jerome

Aside from being one of the most arrogant and condescending finance ministers in a long time, Jerome Kennedy might need to brush up on his math a bit.

Here's a sample of the arrogant and condescending finance minister in action first:

It is important, and whether or not the – I understand that the Leader of the Opposition does not understand. Nor would I necessarily expect her to. The reality is that this is not artificial spending here. We are not borrowing to spend on infrastructure. We are taking $1 billion and putting into infrastructure.

Everyday Jerome is on his feet there's at least one of those sort of slimy comments. Totally unnecessary, but he makes them every day.  Too bad there's no one like Antonio around to teach the poor fellow some manners.

But that's not the problem.

Here's the problem:

In Question Period, Jerome revealed that the province's unfunded pension liabilities have grown, according to the finance minister, by $1.5 billion as a result of the downturn in the world economy.  Here's what he told the House:

As the Leader of the Opposition is aware, in 2006 we paid $1.953 billion into the Teachers’ Pension Plan, and a further $982 million into the Public Service Pension Plan 2007, trying to bring these pension plans up to the funding levels of 80 per cent to 85 per cent, which is suggested.

The recent downturn in the economy and what has happened, Mr. Speaker, has resulted in approximately, right now, a shortfall of $1.5 billion in terms of our pension funds. That is not unexpected in light of everything that has gone on, and some of the figures I think I gave last night in terms of losses by the banks.

One figure, though, that becomes important, Mr. Speaker, although we have decreased our debt servicing charges by approximately $200 million, there could be a result in the pension cost next year of an extra $180 million.

That last figure is only somewhat important.

It is only important to the extent that in his financial statement on Tuesday Jerome patted himself on the back for reducing the debt servicing charges.

In the House, he revealed that - all things considered - those charges will grow by roughly the same amount as the decrease this year.  That is important considering that expenditures are going up while revenue is going down.  Not a good position.

But look again at the front end and the middle bit of that quote because that's where the big problem comes in.

The $1.9 billion is the Accord 2005 money received in a lump in 2005 and already spent.  The $982 million - if memory serves - was borrowed.

But all that doesn't matter since the pension fund has lost $1.5 billion in value in the space of a few months.  Apparently those shopping malls mortgaged in Ontario and British Columbia to Great-West Life, among others, aren't pulling in the expected bucks.

The inconsistencies among Jerome's comments at different times gives the old boy a basic problem:  an accountability problem.  He just can't seem to give a straight account of the province's financial state.

That's a pretty bad thing for a finance minister because if anyone needs to be able to keep his accounts straight,  it would be him.

Bottom line?

We won't know the real financial position of the province until sometime after March 31, 2009 and even then we'll likely have to take Jerome's words with a grain of salt.

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The Last King of Chicago

From the Canadian Press:

“You know what I like the most is Barack Obama is listening to what we're doing here,” Mr. Williams said during question period to roars of applause from his Conservative caucus.

“That's a great compliment to this province because I have a lot of respect for that person.”

Here's the rest of it from Hansard:

Premier Williams:...Obama outlines initiatives to create 2.5 million jobs; make public buildings more efficient; repair roads and bridges; modernize schools; increase broadband access –

Some Hon Members: Oh, oh!

Mr. Speaker: Order, please!

Premier Williams: He will do it right because we did it right and he can have our (inaudible) any day of the week.

You just cannot make this stuff up.

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Poll goosing harder than ever

The provincial government's pollster released the results of its most recent work on Tuesday. The graph with the orange line shows the party support numbers for the Provincial Conservatives for the past year and a bit as reported by Corporate Research Associates.

Interestingly enough the polling period included a bunch of hype at the front end about aluminum smelters in Labrador in addition to the usual poll goosing goodies.

The Premier rushed out the story of "Have" province status a couple of days before the surveying started.  There was more than a bit of media coverage for that and the associated video and the great party he was planning.

Of course, he knew at the time that the province might opt for the O'Brien Equalization formula and thereby become a "have Not" province again before the fiscal year was out, but that never stood in the way of a good goose.

Odd that he rushed that story out there wasn't it?  Almost like he knew the pollster was about to start calling people.

The polling period cut off before AbitibiBowater made its announcement.

In any event, it's interest to look at the party support numbers, adjusted as a percentage of all respondents.

That's very different from giving it as a percentage of decideds.  That number fluctuates a bit.  When you report as a percentage of decideds you inflate the apparent level of support for one option or another.  Like in this case:  the Provincial Conservatives have these wildly stratospheric numbers which feed into the myth of political infallibility and invincibility.

So hang on a second now.  In the blue graph, we have the same figures adjusted to take into account the undecideds. 

You still wind up with the climb at the front and the drop in the past quarter.  In between, though, you don't have the same steady state.  Instead you get a gradual decline.

But then there's that bit at the end.  A drop of 11 points since this time last year, six of which came in the past three months. That's an oil-price-like decline.

The numbers themselves aren't all that stratospheric.  In fact,  one suspects that people might have an easier time accepting the blue numbers these days given the state of the economy and the recent troubles in public sector bargaining.

Either way there's a precipitous decline over the last quarter that is surely causing a few people to sit up and take notice.  Consider the amount of fairly obviously orchestrated poll goosing that went on - including the smelter and the "Have" province crap - all of which still added up to a decline.

Now given the huge gap between the Conservatives and the other two parties, it's not like people around here are going to start seizing airports or anything.  They aren't migrating across the border to find water and medical care. 

Still, though, if local media are going to report poll results - even as sparsely as some did on Tuesday - they should apply a little analysis.  Episodes like the "Have province" should be put in a context that is, to be brutally frank about it, so damned obvious after four years of relentless poll goosing that it's pretty hard to miss it.

The government may have put has happy a face on the financial situation as possible but it certainly looks like something is changing in the political landscape.  Let's see what the next couple of quarters bring.

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The provincial budget update: six points

1.   The long and short of it:  Some revenues are higher than projected.  Spending  remains the same.  The update runs six pages.  Four of them are devoted to a rehash of things we already know and a heck of a low of stroking for supposed prudent fiscal management.  What’s left is pretty thin, at least for anyone who wants to get a handle on.


2.   Missing revenue numbers:  Interestingly the provincial government only mentioned three specific revenue sources which are performing above budget estimates from last spring. Unmentioned was revenue from mineral revenues other than oil.  Last year it was big enough to warrant a mention.  This year:  zip.  Either mineral revenues are on par or down or the government is saving that for the spring to offset some bad news.

3. The political value of lowballing:  Underestimating revenues and overestimating costs is an old trick to make your budget performance look better than it really is.  This year – for the first time in three years – the provincial government’s practice of lowballing oil revenues didn’t really work out as planned.

In prior years they could forecast deficit spending and be reasonably assured oil would perform beyond the expectations.  At the end of the year planned borrowing was replaced with cash spending.  That’s how deficits never really appeared.  It’s also how the Premier could keep claiming that surpluses were being directed to debt reduction and that – as this update claims – there is a magical plan at work which delivers even in relatively bad times.  The faithful sop it up They even go so far as to claim the Premier can’t be blamed for the downturn even though they give him all the credit for the cash rolling in when it rolled in. 

This update gives an excellent example of how to inflate performance by lowballing.  There’s $70 million missing from the spring budget projection for oil royalties.

Okay.  He can’t.  But he also can’t claim the credit for the great times in the past couple of years since he didn’t deliver those either.  The faithful can be spotted by the purple freshie stains on the corners of their mouths.

4.  The extras cash revenues (corrected):   Note that the budget update gives the budget estimate for oil royalties $70 million below the actual number from the Estimates.

	Forecast	Revised forecast	Difference
Oil Royalties	$1.789 billion	$2.202 billion	$413 million
Personal income tax	$674.8 million	$831.8 million	$157 million
Sales tax	$631.589 million	$664.589 million	$33 million
Total variance			$603 million

5.  Surplus or deficit?  This all goes back to an issue raised here last September. Given that the accrual surplus is now revised to be $722 million higher than forecast, there are a few bucks missing from the update.  Even at $722 million in additional revenue, the budget would still be short on a cash basis by $72 million.  Given recent practices, and given that this year there are no anticipated savings through spending cuts, the cash deficit could easily run to upwards of $200 million by the year end.

6.   Prophetic words from last June: 

In order to produce a surplus of the size predicted  - but predicted only in political statements - oil prices would have to continue at double the figure of  $87 a barrel used to come up with the budget.  So far, it looks pretty good for oil to be somewhere over $130 on through the end of this year, but you never know what will happen with oil prices, especially after the American elections in November and the new president is sworn in late in January 2009.

Okay, so at the time, it looked like oil was going to stay high.  And in making the comments, your humble e-scribbler was also pointing to the difference between an accrual surplus – including cash that really isn’t there – and the cash situation which might under certain circumstances require new public debt to make things balance.

The key point, though, is that you never know with oil prices.  Shortly after that post, oil peaked at $147;  incidentally that’s not $145 or $150 as reported in a couple of spots in the news release and update document issued by the provincial finance minister today.  As it turned out, oil prices started falling in late summer and with the credit crunch, the drop accelerated. In the end the provincial government can report an accrual surplus that looks amazing but on a cash basis, they’ll likely wind up having to borrow cash to settle all the accounts.

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