Kremlinology

Years ago, your humble e-scribbler studied Soviet politics.

The tightly controlled, secretive, autocratic society of Bolshevik politics, gave rise to a whole bunch of western academics who tried to figure out the workings inside the seat of power – the Kremlin – by studying all sorts of seemingly insignificant details.

They’d study photographs to see who was standing next to the acknowledged powerful in order to spot either the rise or fall of certain people within the leadership.  They’d study the wording of documents to see how things changed and see if that meant something.

There’s a pattern to regimes and so these Kremlinologists would look for changes in the patterns.  Then they’d try to figure out what the changes meant.

Sometimes it’s fun to play the old games again.

Like say studying a news release of government money for a project to see if there is anything that doesn’t fit the usual pattern.

Lookee here:  a news release announcing that a regional municipal service organization on the Northern Peninsula is getting an $232,000 of provincial money to help it fight fires and look after garbage disposal.

The money is called an “investment.”

Nothing strange there.  The current provincial administration doesn’t spend money.  It invests public cash in all sorts of things.

Taking out the town trash is called “waste management”.

Again, another classic piece of modern bureaucratese.

Given any government’s record of spending public cash on dubious projects, some wags would suggest that the act of government spending is itself really an exercise in “waste management”, but that’s another tale.

Back to the case at hand:

Things are actually looking pretty innocuous so far.

Quotes?

Yep.

Two.

One from the minister responsible for helping towns fight fires and haul away their refuse, the Honourable Diane Whelan, she of the multiple announcements of money she didn’t actually have.

Another one from the guy running the local crowd that are getting the “investment”.

Another couple of checks in the standard boxes.

Wait a second.

Where’s the quote from the member of the House of Assembly for the area?

If there’s one thing any government of any stripe does, it’s give the local boy credit for “investments” especially when said local boy is one of their own team.  Just this week alone, Harry Hunter got a quote added to spending on a school in his district.

Flower’s Cove and environs is in the district represented by Whelan’s cabinet mate ,Trevor Taylor.

Now, Trevor is no ordinary fellow.  He ran once for the New Democrats and then, in 2001, was elected for the provincial Conservatives in one of two by-elections on the Great Northern Peninsula. 

That two-fer was heralded by newly minted Conservative  leader Danny Williams as the first ripples of a Tory tsunami that would sweep the Liberals out and put the Tories back into power.

Trevor’s been in cabinet a while and has carried the can for a number of projects, good and bad.  He’s been a loyal soldier and right now he’s got a few thousand constituents up in arms over everything from the downturn in the forest industry to the downturn in the fishery.

The loggers blocked a road this week trying to get a meeting with Trevor.  The fisherman plan a protest aimed at the provincial government’s lack of help  this week now that they’ve already protested about the federal government’s lack of help.

And it’s not like lesser mortals than cabinet ministers don’t get to hand out the pork.

Tory backbencher Derrick Dalley  - a recently appointed parliamentary secretary to the education minister - turned up in the Lewisporte Pilot back in April handing out a cheque from the provincial government for money from a grant program to support sports initiatives.  The money was described as a “donation”, the new term for government program spending that isn’t an “investment”.

Derrick’s likely not alone, by the by.  Since the spending scandal dried up the slush fund that used to be constituency allowances, the government crowd seem to have discovered the political usefulness of letting the crowd on the back benches do some bacon-doling.  His colleagues are out there with cheques, too;  they just don’t always make the local paper.

Anyways…

No quote from the cabinet minister of some seniority about spending in his own district at a time when the guy could use the good coverage.

And it’s not like Trevor hasn’t had other shared announcements.

Hmmm.

It’s not like he’s Ray Hunter or something, either.

Ray’s the guy who showed up in the legislature this past sitting to find his desk and chair moved right next to the exit door.  He probably had to keep shifting to avoid getting the door in the head every time someone went out for a leak or a smoke.

Ray’s also had to defend himself publicly from accusations by angry constituents that he is not allowed to speak freely within his caucus.  Of course, that pretty much confirmed them.

Hmmm, indeed.

Now the thing about kremlinology is that it is one of the more dismal of dismal sciences.  Think of it as economics but without the accuracy.

This omission could be nothing at all.

Or it could be a sign.

A sign of something very important.

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Police investigate allegations in SK and ON party races

The Royal Canadian Mounted Police are investigating some aspect of the recent leadership race for the Saskatchewan New Democratic Party:

NDP CEO Deb McDonald said the Mounties requested 1,102 membership forms that were submitted in April by an overzealous volunteer from the Dwain Lingenfelter campaign that were later cancelled by the party.

"We immediately said we would absolutely co-operate in any way that we can," McDonald said.

"On Monday we turned over the memberships and today they informed me that they are starting a criminal investigation."

Lingenfelter won the party leadership on Saturday, capturing 55 per cent of the votes cast, compared to 45 per cent of the votes garnered by Saskatoon doctor Ryan Meili.

Meanwhile,  the Ontario Provincial Police are investigating allegations of voter intimidation in the race to replace John Tory as leader of the provincial Conservative party:

Progressive Conservative Party president Ken Zeise has asked the Ontario Provincial Police to investigate a letter that was mailed to some members of the party, warning them that the RCMP was conducting its own probe into allegations involving voter fraud in provincial party leadership contests.

The letter is clearly “bogus,” Mr. Zeise said in an interview on Thursday. And while the letter was sent by someone with access to the names and addresses of party members, Mr. Zeise said he has no evidence to suggest that a party member was behind it.

He said he called in the OPP after officials representing two of the leadership hopefuls – Christine Elliott and Frank Klees – formally complained to him and asked him to investigate the matter.

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And then there’s announcing money you haven’t even got…

That CBS bypass road extension seems to be a field of political landmines for Tories.

Not only did Fabian Manning blow off some bits of his political anatomy with promises for money that wasn’t approved, Manning’s former caucus mates seem to have spoken a wee bit out of turn as well.

In December 2007, Manning and federal cabinet representative Loyola Hearn talked about a federal transportation initiative that would cost-share some roads work with the province.

On January 10, 2008 a news release appeared issued by provincial transport minister Diane Whelan announced “$182 million in road improvements, the largest such funding in the province’s history.”  The release covered a raft of cost-shared projects involving the provincial and federal governments.

Included in the list of projects was – you guessed it - “$3.5 million for Conception Bay South (CBS) By-Pass Road Extension.”

According to a Telegram story this week (not online) on the whole mess:

But a provincial news release from January 2008 commits $3.5 million for the extension, and the letter from Baird confirms the province applied for the matching funds in September of that year.

Announced in January but no one applied for the funds until nine months later?

And then the funds weren’t approved until June 2009?

Wow.

It’s one thing to criticise someone else for announcing  projects time and time again over the span of several years, but what would you call it when your own government announces money it doesn’t even have and knows it doesn’t have because they hadn’t applied for it yet?

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For Everything There is a Season Update:  Hearn announced on or about December 18, 2007.

So did Diane Whelan, on December 18, 2007, almost a month before her January “for the first time ever” stroke-fest. 

In the release that coincided with Hearn’s, Whelan  announced that “planning is currently underway to identify further infrastructure priorities to be funded under the recently signed Federal-Provincial Infrastructure Framework Agreement.”

"We will be consulting with municipalities and other Provincial Government departments to identify infrastructure projects to be funded under this agreement, and we intend to start spending this spring." said Minister Whalen.

Minister Whelan says that while she is pleased the Federal Government agreed yesterday to cost-share hard-surfacing of the Trans Labrador Highway (TLH), improve the Argentia Access Road and extend the Conception Bay South (C.B.S.) By-Pass, she is requesting the Federal Government be ready to move the projects forward in the spring.

[Emphasis added]

So the planning was so good that while they intended “to start spending this spring”, the provincial transportation department didn’t even apply for funding until September 2008.

September would be the fall of 2008, for those noting the passing of the seasons.

And even then the project wasn’t approved by the feds until June, 2009.  That would be the second summer after the announcement and the second spring after.

Even if the tender is awarded sometime before September 2009 – tick tock, tick tock -  it’s going to be tough to get things geared up before next spring.

That would be more than two full years and the third spring after the thing was supposed to start.

Oh yes, while we are on the subject of planning, let’s all recall the words of Trevor Taylor - Whelan’s successor – a couple of weeks ago:

We had been proactive and our sound strategic planning allowed us to move forward with a series of significant projects very smoothly.

Proactive is a hideous corruption of a word but it is generally taken to mean getting things done in a timely way. 

Applying for cash ten months after an announcement would be pretty much the opposite of proactive.

And making an announcement without cash doesn’t suggest there is very much of anything that looks like planning, let alone planning that is strategic and definitely not planning that is both strategic and sound.

Then again, half the projects Taylor was talking about a couple of weeks ago  were old. 

Some of them dated back to 2005.

At least another one – besides the CBS bypass – was promised in 2007 with completion in 2009.

It just went to tender.

And those old projects had been announced time and time again.

Scuttling his own political future

Senator Fabian Manning went a long way this week to ensuring he won’t be able to make a comeback in elected politics any time soon.

The guy who beat him – Scott Andrews – revealed that Manning had committed the federal government to spend a couple of million or thereabouts on a road in the eastern end of the riding Manning used to represent. 

Only problem was the money wasn’t anything close to approved when manning made the announcement in late 2007.  Not only that but it wasn’t approved until this week and hastily announced the day Andrews scored a big political smack right in Manning’s possible future.

Manning did some media interviews on the affair.  In the process, he managed to come off looking like a guy scrambling to come up with excuses for his obvious blunder.

In the story printed by the Telegram (not online), writer Dave Bartlett attributes the following to the junior senator:

The senator then explained what happened.

He said the original project was funded under the Rails for Roads agreement, but the provincial Liberal government of Clyde Wells scuttled that program in 1988.

Neat trick that would be.

The federal and provincial governments signed the Roads for Rails agreement (see page 11 of the link) in 1988.  In exchange for money to upgrade roads across the island portion of the province, the federal government was relieved of its constitutional obligation under the 1948 Terms of Union to operate a rail service across Newfoundland.

In 1998, Brian Peckford sat in the Premier’s Office.  Clyde Wells was Leader of the opposition and didn’t get to the Eighth Floor until May, 1989.

But even then, Manning’s accusation that Wells scuttled the roads deal is completely out to lunch.  From 1988 until the program ended in 2003, the roads deal paid for a host of projects all of which were pretty well mapped out at the start, the year before Wells took office.

Not only did Fabe make the blunder of announcing money he didn’t have, he then made it infinitely worse by coming up with a completely bogus excuse once he got caught.

And it’s not like Manning wouldn’t know the rights of things.  He sat in the House of Assembly from 1993 until his local Tory buddies flicked him out of caucus.  Every year , Manning would have heard announcements about roadwork paid for by the Roads for Rails agreement.

Heck, even Loyola Hearn knew that the roads deal didn’t die in 1988.  CBC quoted Hearn on the very same announcement Manning was chatting up in December 2007:

Hearn, Newfoundland and Labrador's federal cabinet representative, said it's the biggest program of its kind since the roads-for-rails agreement hammered out in the late 1980s, when the Newfoundland Railway was closed down.

All things considered, Manning would be nuts to even consider taking another run at elected politics.  Better off  to sit in the Antechamber to the Kingdom of Heaven than blow holes in your own political hull the size of that one on the CBS bypass road.

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It’s not called Answer Period

And sometimes you wonder if the cabinet minister involved doesn’t want to answer or doesn’t know the answer.

Consider this exchange between opposition house leader Kelvin Parsons, natural resources minister Kathy Dunderdale and the future of Corner Brook’s Number 4 machine.

Dunderdale’s been known to be dodgy with the details before.  In late 2006, she actually told the House two completely different stories about the Joan Cleary fiasco all within the space of a week.  She may have just been stumbling at the time but she wound up – in effect – misleading the House about what was on the go with the hand-picked partisan head of the Bull Arm Corporation and the Public Tender Act.

In the case of Corner Brook, one suspects Dunderdale has avoided any potential embarrassment by learning that the session of the House is called Question Period.  No where does it say you have to give an answer.

On May 14, Parsons asked Dunderdale:

What, if any, discussions have been ongoing between government and the company with respect to number four and to ensure that it will re-operate in the future?

Dunderdale’s response:

Mr. Speaker, first of all I have to correct the Opposition House Leader. Thirty people were not laid off. Thirty people were affected. In fact, there has been no job loss. There has been hours of workers on the call-in list affected but there have been no layoffs permanent or temporary as a result of the shutdown of number four.

Now, Mr. Speaker, Corner Brook Pulp and Paper made it quite clear in their announcement yesterday that markets have not improved. In fact, one of their largest customers does not have the need and requires less paper.

SOME HON. MEMBERS: Oh, oh!

MR. SPEAKER: Order, please!

MS DUNDERDALE: So, because of those circumstances, number four will, from a month-to-month basis, continue to be shut down.

At least one paper machine at Corner Brook has been idled since 2007. Dunderdale said at the time the provincial government was pumping $20 million in subsidies into the Corner Brook mill.

Her predecessor, Ed Byrne, announced subsidies for Kruger in 2006 but didn’t reveal the dollar amount involved.

In the latest round of cuts at Kruger, the provincial government is already offering unspecified additional cash to keep the mill going.

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How not to win friends but influence people

Former New Democratic Party national director Gerald Caplan offers some insights into national politics in the Globe and Mail this week.

His comments are biting and their wisdom clear. These are not the remarks of someone who feels the need to sugar-coat his views in order to curry favour.

New Democrats and Liberals should therefore consider his advice seriously.  They should heed his counsel if for no other reason than he clearly is not bent on winning friends.

He should win them nonetheless and influence people in the process.

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Kruger slashes 130 jobs in Corner Brook

Corner Brook Pulp and Paper Limited announced Wednesday the company will not re-start the Corner Brook  mill’s idled Number 4 paper-making machine.  The move will result in the loss of 130 jobs.

The move is blamed on deteriorating markets.

The Premier and other members of cabinet met with union officials on Wednesday afternoon at the government’s main office building in Corner Brook.

"There's no numbers put on the table from a perspective of … 'government, give us a cheque for this amount of money.' But [what] we have said is that we're prepared to play our part quite simply as we always have in any of these situations," [Premier Danny] Williams said.

"Our primary concern at these times is always the workers, the workers who are affected right now. And this mill needs to stay viable and competitive and needs to stay alive. And that's what we're discussing."

That tone compares markedly to the confrontational one that characterized government discussions with AbitibiBowater in Grand Falls-Windsor before that mill closed earlier this year.

Corner Brook is represented in the House of Assembly by the Premier and justice minister Tom Marshall.

In a related story, loggers are protesting on the Great Northern Peninsula to draw attention to their plight.

The forestry industry employs between 400 and 500 people on the peninsula.

The protest was called off around midday [Tuesday] to give politicians time to respond to the loggers. [Spokesman Ralph]Payne said Transportation and Works Minister Trevor Taylor, who is the Tory legislature member for The Straits and White Bay North, did call Tuesday afternoon and agreed to meet with the association Thursday, but Payne wants more than that.

“We want to meet with all four of them and that includes Trevor Taylor, Natural Resources Minister Kathy Dunderdale and the two other MHAs from the area, Wally Young (Tory legislature member for St. Barbe) and Darryl Kelly (the Tory legislature member for Humber Valley),” said Payne.

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The sins of the father…

From yet another public comment on the trivial Danny right/Randy wrong thing:

On its face, this question reminds me of the pushy, unappreciative parent who says, "Fine, you got 90% on the test. What happened to the other 10%?"

A rather curious way of looking at things, even allowing the letter – found at NL Press – started out by referring to Randy Simms comments as an “appalling display of spite.”

Apparently, Randy Simms is the province’s  - or Danny’s  - unappreciative parent.

Let’s leave aside the idea embodied in that comment that the fishery and the 10,000 or more people in it amount to a mere 10% of the overall consideration of the province when a Great Announcement is in play.

Nope.  Political commentary in the province is now down to some bizarre psycho-drama built around a really creepy metaphor.

Incidentally, at no point does the author of those words actually discuss the Great Announcement from last week.  In itself that is further proof that the Premier’s tirade was way off base and that his Fan Club  - now labelled Kool-Aid Kids by Simms - need to get their heads realigned.   [Hint:  even Danny says it isn’t about Danny.]

Anytime you unleash your bladder and drown your own story, you can be pretty much assured it was a better idea to hold it until later.  When you manage to divert attention away from such a great set of announcements  - there were at least four phenomenal pieces of news in one speech – then you really need to suspect you have a problem with verbal incontinence.

And this guy is not alone.  There were columns in the weekend Telegram on the meltdown, two letters to the editor on Tuesday and countless comments on the Internet.

All about the tussle.

Not the Great News.

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No fed funding approved for roadwork, despite 2007 announcement

Avalon member of parliament Scott Andrews said today that a federal contribution for roadwork in Conception Bay South has not been approved despite an announcement of the funding in 2007 by then Conservative member of parliament Fabian Manning.

Andrews posed a series of questions to federal officials in April:

With regard to funding from the government, through the Department of Transport, Infrastructure and Communities, for an extension of Conception Bay South By-Pass Road, from Legion Road to Seal Cove, in Newfoundland and Labrador:

(a) was there an official approval of this project by the government on or before December 17, 2007 and, if so, (i) what amount of funding was approved, (ii) what date was it approved, (iii) why was it not included in a news release issued by the Minister of Transport, Infrastructure and Communities on December 17, 2007;

(b) if no formal approval was given for this project by the government prior to December 17, 2007, has there been any formal project approval given for an extension to the Conception Bay South By-Pass Road since December 17, 2007 and, if so, on what date; and

(c) is the project to extend the Conception Bay South By-Pass Road, from Legion to Seal Cove, currently being reviewed or recommended for approval within the Department of Transport, Infrastructure and Communities?

There’s a short news story and a video clip at vocm.com.

The provincial government included the CBS by-pass road work in a list of stimulus projects released earlier in June. The project is indicated as scheduled to go to tender this fall.

The same project was also listed in a 10 January 2008 news release from the provincial public works department. Terry French, CBS member of the House of Assembly also mentioned the project in a speech in the legislature on March 13, 2008:

I am delighted actually to say that our Cabinet and our government have decided that the CBS Bypass would be a priority under the roads program and that they would commit the $3.5 million to $4 million. I am delighted with that, Mr. Chair. Actually the provincial share is ready. The Minister, Diane Whalen, was at the announcement and assured the residents that the provincial share of the money is there and we are ready, we would call tenders this spring. Mr. Chair, we are ready to go and I certainly hope that our federal counterparts are as eager and as willing as we are because we have the check [sic] written, if you will, and ready to go with that announcement.

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H1N1 case in Eastern School District

A note to parents of children in Eastern School District indicates that a case of H1N1 was identified in a school “in a rural area” of the district.

The note from district chief executive Ford Ride includes advice from Dr. David Allison, the region’s medical officer of health, on H1N1 and what to do in the event someone displays symptoms.

The note is dated June 19.

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Hibernia clarification clarification

The provincial natural resources department issued a “clarification” today on some figures contained in its news release last week.

Seems they gave incorrect figures for production from the existing Hibernia field.

The original release quoted the Premier himself as saying that:

“The original Hibernia field has produced 670 million barrels to date and the provincial treasury has seen $3.9 billion from that production.”

The exact same phrase turned up in the Premier’s speaking notes for NOIA, by the way.

The “clarified” version is:

The correct figures are approximately 630 million barrels with revenue valued at $1.9 billion.

Both figures are supposed to represent cumulative oil production from first oil in 1997 up to the end of March 2009. The mistake is described as a “transcription error”.

According to the “clarification” – not a correction – this is the only error and “does not affect any other numbers in the news release or any other publications.”

Here’s the real number: up to the end of April, 2009, the Hibernia/Avalon field had produced 636,957, 170 barrels of oil. Hibernia produced a little over 605 million barrels p to the end of April 2009.

That figure was readily available - at the time the release was issued last week - from the Canada-Newfoundland and Labrador Offshore Petroleum Board.

Hmmmm.

Makes you wonder though if some of the other numbers might be off just a wee bit.

Like say this one from the same quoted attributed to the Premier:

“We expect a further $13 billion from the remaining main field production…”.

That was based on an assumed price of oil of US$80 a barrel, as the Premier indicated in subsequent interviews.

Okay.

The offshore board gives three estimates of the reserves at Hibernia: proven; prove and probable; and proven, probable and possible. Let’s call them P1, P2 and P3 for simplicity sake. We’ll also knock off the Hibernia South Extension oil since that is apparently included in the totals for Hibernia.

Here’s the way it works out. The figures are in millions of barrels:

	P1	P2	P3
	782	1244	1916
Less production to end Apr 09	636	636	636
Sub-total	46	608	1280
Less Hibernia South Extension*	46	220	220
Total remaining	0	388	1060
Low royalty (30%)		$ 9.312 billion	$25.44 billion
High royalty (42.5%)*	$1.56 billion	$13.192 billion	$36.04 billion

* Note - Approximately 50 million barrels of the extension come from the original Hibernia production license. That corresponds roughly to what remains in Hibernia based on CNLOPB figures and allowing that the provincial figures are a month older than the CNLOPB ones. Since the government news release indicated the 50 million was being produced at the 42.5% royalty, it’s pretty clearly working under the original Hibernia Tier 2 royalty regime.

Here’s where things get a wee bit interesting.

Once you do a little simple math, it’s pretty clear the provincial government news release deliberately chose the least volume of remaining oil when calculating the potential return from Hibernia now that pay-out is achieved. They put that together with the Tier 1 and Tier 2 super-royalty from the original Hibernia agreement (1990/2000) since that is what oil at US$80 a barrel would deliver.

That’s not bad for a project that wasn’t supposed to pay-out - ever - and that Danny Williams and others have trashed as one of the great give-aways of the past.

Even without going a step farther, those figures pretty much demolish the idea that Hibernia was a give-away. Not only will Hibernia deliver in spades from here on out but the royalty regime developed in 1990 and amended in 2000 is the basis for the Hibernia South agreement. There can’t be much higher an endorsement than to have the old deal used as the basis for the new one negotiated by the guy who, supposedly, is fighting relentlessly against any more give-aways.

Incidentally, using the same oil price assumption, the Hibernia South extension would deliver $8.8 billion in royalties (at the high end assumption of 50%). The oil company share would produce $1.7 billion, without accounting for any development, production or decommissioning costs.

Just scan across to those P3 figures, though, and try not to let your eyes pop out. The figure can’t be discounted. In fact, when natural resources minister Kathy Dunderdale vetoed the Hibernia South extension plan in January 2007, she cited that high-end reserve estimate in her letter to the offshore board:

That P3 figure would mean that what remains of the original Hibernia deal would yield more in royalty alone than the “White Rose extension, Hebron and Hibernia South” in royalty and “revenue”.

Now there are a few more curious or questionable statements from the speech and news release last week, besides that one about Hibernia production.

For example, in the Premier’s NOIA speech we get this pair of paragraphs that came back-to-back just as they are presented here:

I am also extremely pleased to confirm today that after nearly 12 years of production, the Hibernia project is now in "payout" meaning the province is now receiving a royalty of 30 per cent.

When you consider the agreements reached by our government in terms of oil and gas development I think you will agree that although we had some critics and skeptics along the way, we have delivered for the people and for the industry in this province.

As the release makes plain – if you go back and check the facts - Hibernia in payout delivers 42.5% from the original royalty deal not 30%.

The second paragraph, though, appears to take credit for both Hibernia hitting pay-out and for delivering the massive royalties. Both those are a direct result of a deal negotiated almost 20 years ago.

It all makes you wonder when might we expect some further “clarifications” – they should really be corrections to factual mistakes and misleading claims - from last week’s announcement?

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There’s no pleasing some people

That’s the thing about being a political saviour.

People expect you to save them.

There’s no good complaining, as Danny Williams did last week with the host of a local talk radio show.

Not only do you manage to overshadow your own good-news announcement less than an hour after you made it, people don’t really care any more about the umpteenth round of good news.

In central Newfoundland, people are not happy since the major private-sector employer left Grand Falls-Windsor and the provincial government stepped in to scoop up the most lucrative asset, the hydro-electric generators owned by three companies.

The provincial government resisted calls for financial assistance before finally coughing up $35 million for some. Others have gone looking for a bit of provincial help and have been told  - as some of them might see it - to sod off. The local chamber of commerce and the town aren’t happy either since, as the chamber put it, the whole thing looks like the region has lost while the province – read provincial government  - has gained.

And if all that wasn’t bad enough, CBC’s Here and Now is reporting that people the Premier’s own district are worrying that their mill – the last paper-making operation in the province – might also be in jeopardy.

Then there are the 10,000 or so in the fishery reeling under the downturn in markets for their products.  Ask talk show host Randy Simms about them.

Then there’s health care.  On another radio call-in show last week, this time on CBC, Danny Williams made it plain he hasn’t been thrilled with the string of strings about problems in health care.

Compared to previous administrations of any political stripe,  Danny Williams and his administration have had a relatively easy time of things.  The usual local political demands have either never materialised or were met with the cash.  No one got a “no” unless there was a good reason.

Those days appear to be over.  The global recession is producing economic problems and political demands, that seem fairly typical for anyone watching local politics for more than the past few minutes, are surfacing with unsettling regularity.

As much as it is pretty simple to criticize Danny Williams’ for his public tirade last week, that litany of problems recited above is probably the view from his office.  As much as he claims to be an optimist, and as much as Williams talks about the bright future, the view from his office window must seem pretty bleak.  before the current stuff there was breast cancer and before that there was the House of Assembly scandal.  Neither of those is over and, given some media, it seems like it might never go away.

Inside the office, things must surely be stressful.  Government is a tough place to work at the best of times.  There are all manner of problems and issues that crop up.   Cabinet government is designed to manage that by distributing the power to make decisions among different people.  Pull everything together into the Premier’s Office and it can seem to the few people on the end where the spray comes out like  the three inch fire hose of demands is always running on high and that someone has secretly replaced the line with a six inch gusher. 

On top of that, consider that the provincial Tory administration can no longer blame everything on the crowd that went before.  They are now in control and everything is theirs to manage.  That’s a normal transition for every government to make:  after a certain period, every government hits the point where they have effectively taken ownership of government and they see themselves as indistinguishable from it.  

The current administration has been able to work through the past few years thanks to oil money and the lack of any coherent political demands from the province as a whole. They wandered through the first six months and whatever they set in place back them has largely become the pattern. They gained control of the political agenda by inertia and default.

Countless items got left behind in the meantime, a sure sign of a government that took office without the plan of action it claimed to have.  major projects get tackled one at a time, in serial fashion.    Even if this administration isn’t run entirely from one office on the eighth floor of the East Block, it gets pretty hard for cabinet to form a cohesive team if half the people aren’t working every day in the same place (or even the same town) and get together only every week or so for a few hours of cabinet.  That doesn’t get any better when there are large numbers of people within the administration shifting jobs or being appointed only on an acting basis. 

If you stop and think about it for a second, if you put yourself in Danny Williams’ place, it’s not hard to see why he blew up at Randy Simms or even he’s been known to get a bit testy on a fairly regular basis.  He’s in a hard spot.

In 2007, voters gave Danny Williams what he asked for.  They voted for him because they’d learned the way to get anything done was with a Blue member in the legislature.

They performed the rituals of the local political doctrine and now they are looking to get into the Kingdom.

And here’s the thing:  if people think Danny Williams was testy, wait until they see a pack of voters who feels condemned to perdition.

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Chamber concerned seized central hydro assets gain for provincial government, loss for region

The Exploits Regional Chamber of Commerce is very concerned about the benefits from seized hydroelectric assets going somewhere other than the region of the province in which they are located, according to the Grand Falls-Windsor Advertiser.

The chamber estimates that based on electricity used by AbitibiBowater (54 megawatts), savings to Newfoundland and Labrador Hydro in excess of $70 million annually are being realized.

The chamber wrote the CEO of Nalcor in May to try and meet to discuss how the Exploits region could benefit from being adjacent to the source of the power. While the letter was copied to local MHAs and members of the provincial Ministerial Task Force set up to deal with the closure of the mill, Nalcor has not responded.

NALCOR is the provincial government energy company which took control of the assets earlier this year.  They were seized by the government from three companies:  AbitibiBowater, ENEL and St. John’s-based Fortis.

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Darrell Dexter’s Dipper Dozen

Nova Scotia Premier Darrell Dexter’s cabinet comprises a mere 12 members including himself.

Interestingly, the news release is written in the style of what has come to be called a “social media” release.

The new cabinet includes 38.7% of the government caucus and only 23% of the members of the legislature.

Wonder what the comparative numbers for Newfoundland and Labrador would be?

43% and 39.5%.

There are 19 members in the current Newfoundland and Labrador cabinet, including the Premier.  Notice that the Premier is not included in the list of cabinet members even though he is President of the Executive Council.

There are 44 Progressive Conservatives in a legislature of 48 seats.

The new Nova Scotia cabinet is considerably leaner than any cabinet in Newfoundland and Labrador in the past 40 years or so. 

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On confusion and ignorance

From Thursday’s editorial in the Halifax Chronicle-Herald, the newspaper’s editorial crew noted the blow-up at Randy Simms and then penned this:

What’s more, the tentative deal with the consortium of oil companies represents yet another vindication for Mr. Williams’ brand of hardball.

…

By comparison, the Hibernia South expansion is the mother of all sweet deals. Exxon Mobil, Chevron and Petro-Canada have ceded a 10 per cent stake to the province for $30 million. The tentative deal also gives the province a 30 per cent royalty rate, as well as a "super royalty" rate that could climb to 50 per cent on some aspects of the project.

Hmmm.

Guess the confusing government news release served to confuse even the Chronicle-Herald into believing that the bulk of the Hibernia South royalty regime wasn’t actually negotiated in 1990 without that magical “brand of hardball.”

Odd.

Given that the editorialist did note that the Hibernia project hit payout – and hence the royalty regime was running at 30% - they could have actually checked the royalty regime online and discovered something really interesting.

Oh well.

It’s not like anyone writing anything for the Herald would ever get a phone call from a certain Premier a little miffed over something he saw in that newspaper.

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‘Ethics and accountability’ report card

More than half not done despite 2003 commitment “to deal with them and begin to restore the public's confidence”

Of the 23 commitments made by the Progressive Conservative opposition on what a February 2003 news release termed “ethics and accountability”, 11 remain unfilled and in two instances, the action taken went against the stated commitment.

Amendments to the energy corporation act in 2008 and the research and development corporation act in 2009 both increased the restrictions on disclosure.

No action has been taken to impose six new, tougher restrictions on campaign financing.

No action has been taken to reduce restrictions on disclosure of cabinet confidences and no amendments that would “enhance the transparency of government actions and decisions.”

Of the 10 commitments actually met, one to impose significant penalties for breaches of the lobbyist registration act turned out to be nothing more than a potential one year de-registration.

At least two significant lobbying efforts were never registered.  One involved a multi-million dollar fibre-optic deal.  in another instance, officials of a tourist project now in bankruptcy protection claimed publicly to have been lobbying but never registered their activities.

In two others where action was taken, nothing appears to have been done to implement the commitment until the House of Assembly spending scandal became public.  The commitments – for a code of conduct for members of the legislature and  new administrative procedures on allowances  - were implemented in 2007 as a result of recommendations by Chief Justice Derek Green following his inquiry.

The policy commitments were made by then-opposition leader Danny Williams.  Ironically, Williams was accompanied at the announcement by Ed Byrne, currently serving a prison sentence for fraud and corruption.
Williams’ words at the time proved to be prophetic:

We've invited you here today to address what I see as one of the greatest challenges facing elected governments today. As a result of recent developments at both the provincial and national level, I firmly believe that the public is losing confidence in their elected officials. 

We've seen blatant abuse of office and taxpayers' money, allegations concerning conflict of interest, questions of fundraising contributions, and suggestions of impropriety during leadership conventions. These are very serious issues that are eroding the people's confidence in government.

Now, we can either choose to ignore these issues and continue with the status quo or we can attempt to deal with them and restore the public's confidence. I'm saying that it's time to deal with them and begin to restore the public's confidence.

Public confidence likely took a further dip with the revelations of what occurred in the legislature between 1997 and 2006.

Here’s a list of the commitments and notes on the actions taken or not taken.  The complete news release is at the bottom of this post.

Serial	Commitment	Action
1	“We will legislate maximum donations to candidates in Party leadership contests, nominees in Party candidacy races, and candidates in general elections and by-elections.”	No action taken.
2	“We will set out in legislation that the cash contribution to the party from an individual or corporation shall not exceed $10,000.”	No action taken.
3	“We will also legislate maximum expenditures by candidates in Party leadership contests, nominees in Party candidacy races, and candidates in general elections and by-elections.”	No action taken.
4	“Furthermore, we will require the full public disclosure of all donations to, and expenditures by, candidates in Party leadership contests, nominees in Party candidacy races, and candidates in general elections and by-elections.”	No action taken.
5	“With respect to Party leadership races, we will require that donations must be disclosed when they occur, and all expenditures must be independently audited and fully disclosed within three months after the election of a new leader.”	No action taken.
6	“We will also enact provisions governing the ownership of unused contributions donated to candidates in leadership races. These legislative provisions will ensure that all unused donations are returned to the donors”.	No action taken.
7	“We will amend the Elections Act to require that provincial elections be held on a fixed date every four years, or immediately if a government loses a confidence vote in the House of Assembly.”	House of Assembly Act amendment, 2004
8	“The legislation will ensure that, if the Premier resigns or the Premier's office is vacated within the first three years of a term, an extraordinary election will be held within twelve months and a new government will be elected to a fixed four-year term.”	House of Assembly Act amendment, 2004
9	“We will also amend the Elections Act to require a by-election to be called within 60 days of a vacancy and held within 90 days of a vacancy, so as to ensure that all Newfoundlanders and Labradorians are appropriately represented in the legislature.”	House of Assembly Act amendment, 2004
10	“We will establish a new procedure to provide for the proper auditing and disclosure of the expenses of Members of the House of Assembly.”	Significant new procedures were not implemented until after the disclosure of the spending scandal and not until passage of the House of Assembly Accountability, Integrity and Administration Act in 2007.
11	“We will amend the Access to Information legislation to enhance the transparency of government actions and decisions.”	Amendments to the Energy Corporation Act in 2008 and the research and development corporation act 2009 significantly reduced access to information related to these two bodies.  There have been no amendments to the ATIPPA to “enhance the transparency of government actions.”
12	“The Access to Information legislation proposed and passed by the Grimes government in 2001 (though it has not yet been proclaimed) allows the government to exclude a great deal of information from release to the public under the umbrella of "cabinet confidences". We will limit that exemption so more information that rightly belongs in the public domain will be accessible to the public.”	No action to limit the exemption. A request for disclosure of polling (specifically listed in the 2002 legislation as not being exempt from disclosure) was denied initially on the grounds it may disclose cabinet confidences.
13	“Also, the legislation will be changed so any information that continues to fall under the umbrella of "cabinet confidences" will be released earlier.”	No action taken
14	“We will enact changes to tighten up the exceptions to the release of information.”	Amendments to two other acts in 2008 and 2009 created new mandatory exemptions.
15	“We will remove provisions that allow the cabinet to override the legislative provisions of the Act by regulation at their discretion.”	No action taken.
16	“Finally, we will shorten the time lines for the release of information so information that rightly belongs in the public domain is available to the people of the province on a timely basis. Access delayed is sometimes access denied.”	No action taken.
17	“A Progressive Conservative government will commission a process of public consultation directly or through a special committee of the House of Assembly to develop appropriate and strict legislation for the registration of lobbyists operating in this province.”	Consultation took place in 2004.
18	“The primary objective of the legislation will be to establish a registry so the public can see by whom their Members and their government are being lobbied.”	Lobbyist Registration Act, 2004.
19	“The legislation will require that lobbyists report their activities. It may also require those who hold public office to disclose circumstances in which they have been lobbied.”	Lobbyist Registration Act, 2004. Public office holders are not required to disclose circumstances in which they have been lobbied.
20	“The legislation may require lobbyists to file their general objectives and/or their specific lobbying activities.”	Lobbyist Registration Act, 2004.
21	“The legislation may differentiate between those who are paid to lobby government and those who represent volunteer or non-profit agencies.”	Lobbyist Registration Act, 2004.
22	“The legislation will impose significant penalties for those who violate these provisions.”	The only penalty that may be imposed is the cancellation of a registration or the refusal to register a lobbyist for period not to exceed one year in duration.
23	“We will also ask the legislature to adopt a strict code of conduct for all Members, to be enforced by the Commissioner of Members' Interests, emphasizing their accountability to the wider public interest and to their constituents, and the need for openness, honesty and integrity in their dealings with the public, constituents and lobbying organizations.”	A code of conduct for members of the House of Assembly was included in the House accountability act in 2007 on the recommendation of Chief Justice Derek Green. Prior to the disclosure of the House of Assembly spending scandal, no action appears to have been taken on this.

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Williams announces policies regarding
ethics and government reform

ST. JOHN'S, February 5, 2003 — Danny Williams, Leader of the Opposition and MHA for Humber West, today announced a number of policies regarding ethics and government reform. His speaking notes follow:


Good afternoon, and thank you everyone for coming out today. Joining me is Ed Byrne, our House Leader, and Harvey Hodder, one of our longest-serving MHAs.

We've invited you here today to address what I see as one of the greatest challenges facing elected governments today. As a result of recent developments at both the provincial and national level, I firmly believe that the public is losing confidence in their elected officials.

We've seen blatant abuse of office and taxpayers' money, allegations concerning conflict of interest, questions of fundraising contributions, and suggestions of impropriety during leadership conventions. These are very serious issues that are eroding the people's confidence in government.

Now, we can either choose to ignore these issues and continue with the status quo or we can attempt to deal with them and restore the public's confidence. I'm saying that it's time to deal with them and begin to restore the public's confidence.

To that effect, I am today announcing several policies to help modernize the electoral process and the day-to-day operations of the government in Newfoundland and Labrador. These policies concern three separate areas that can be classified under the following general headings: transparency in political fundraising, effective government, and regulation of lobbyists.

Each policy area was developed under the basic philosophy that the public has a legitimate right to be informed of their government's activities.

A. Transparency in Political Fundraising

Let's first look at transparency in political fundraising.

The Elections Act limits election campaign contributions and spending, and attempts to promote electoral fairness by allowing candidates to recover part of their campaign expenses from public funds.

However, the intent of the Act is undermined by loopholes that allow political parties to raise and spend unlimited amounts of money before an election is called, and permit unlimited contributions and spending on leadership contests.

A Progressive Conservative Government will amend the Elections Act to close those loopholes.

• We will legislate maximum donations to candidates in Party leadership contests, nominees in Party candidacy races, and candidates in general elections and by-elections.
• We will set out in legislation that the cash contribution to the party from an individual or corporation shall not exceed $10,000.
• We will also legislate maximum expenditures by candidates in Party leadership contests, nominees in Party candidacy races, and candidates in general elections and by-elections.
• Furthermore, we will require the full public disclosure of all donations to, and expenditures by, candidates in Party leadership contests, nominees in Party candidacy races, and candidates in general elections and by-elections.
• With respect to Party leadership races, we will require that donations must be disclosed when they occur, and all expenditures must be independently audited and fully disclosed within three months after the election of a new leader.
• We will also enact provisions governing the ownership of unused contributions donated to candidates in leadership races. These legislative provisions will ensure that all unused donations are returned to the donors.

The public is demanding transparency in the raising and spending of all funds related to the election of Party leaders, Party candidates and Members of the House of Assembly. It is our obligation and our commitment to deliver the transparency and accountability that the public is demanding.

B. Effective Government


We also have seen problems arise over timely elected representation. There have been numerous situations over the last few years in which the electorate has gone unreasonable periods of time without elected representatives. In fact, one district did not have representation for the entire Voisey's Bay debate, which was one of the most important debates that occurred in this province last year. We have an ongoing situation in which the Premier has governed the province for two full years despite the fact that the people of Newfoundland and Labrador did not have the opportunity to elect him. And we have situations in which individuals are not able to obtain information from their government because of countless restrictions and excessive wait periods. This is wrong.

A Progressive Conservative Government will address these issues decisively.

• We will amend the Elections Act to require that provincial elections be held on a fixed date every four years, or immediately if a government loses a confidence vote in the House of Assembly.
• The legislation will ensure that, if the Premier resigns or the Premier's office is vacated within the first three years of a term, an extraordinary election will be held within twelve months and a new government will be elected to a fixed four-year term.
• We will also amend the Elections Act to require a by-election to be called within 60 days of a vacancy and held within 90 days of a vacancy, so as to ensure that all Newfoundlanders and Labradorians are appropriately represented in the legislature.
• We will establish a new procedure to provide for the proper auditing and disclosure of the expenses of Members of the House of Assembly.
• We will amend the Access to Information legislation to enhance the transparency of government actions and decisions.
• Our legislative changes will clearly identify information that should be in the public domain, and will require full and prompt disclosure of the information to the public. The Access to Information legislation proposed and passed by the Grimes government in 2001 (though it has not yet been proclaimed) allows the government to exclude a great deal of information from release to the public under the umbrella of "cabinet confidences". We will limit that exemption so more information that rightly belongs in the public domain will be accessible to the public.
• Also, the legislation will be changed so any information that continues to fall under the umbrella of "cabinet confidences" will be released earlier.
• We will enact changes to tighten up the exceptions to the release of information.
• We will remove provisions that allow the cabinet to override the legislative provisions of the Act by regulation at their discretion.
• Finally, we will shorten the time lines for the release of information so information that rightly belongs in the public domain is available to the people of the province on a timely basis. Access delayed is sometimes access denied.

C. Regulation of Lobbyists


Another activity which must be brought forward for public review involves government lobbying. The governments of Canada and four provinces have enacted legislation requiring lobbyists to disclose their identities, their intentions and their activities. Since there is no such legislation in this province, the people of Newfoundland and Labrador do not know which individuals and groups are lobbying their government to make decisions that will benefit the lobbyists or those they represent. Disclosure reassures the public that their representatives' arms are not being twisted behind the scenes.

• A Progressive Conservative government will commission a process of public consultation directly or through a special committee of the House of Assembly to develop appropriate and strict legislation for the registration of lobbyists operating in this province.
• The primary objective of the legislation will be to establish a registry so the public can see by whom their Members and their government are being lobbied. It will not be our intention to impede free and open access to government by individuals and groups, but we will strike the proper balance through transparency and disclosure.
• The legislation will require that lobbyists report their activities. It may also require those who hold public office to disclose circumstances in which they have been lobbied.
• The legislation may require lobbyists to file their general objectives and/or their specific lobbying activities.
• The legislation may differentiate between those who are paid to lobby government and those who represent volunteer or non-profit agencies.
• The legislation will impose significant penalties for those who violate these provisions.
• We will also ask the legislature to adopt a strict code of conduct for all Members, to be enforced by the Commissioner of Members' Interests, emphasizing their accountability to the wider public interest and to their constituents, and the need for openness, honesty and integrity in their dealings with the public, constituents and lobbying organizations.

Conclusion


In conclusion, I firmly believe that people are losing their confidence and trust in elected government, and that must change. Our Party is committed to that. It is our intention to begin to address these issues and restore public confidence with these policies.

Today in history…

On this date in 2006, then natural resources minister Ed Byrne left the annual NOIA conference and went off to discuss with Premier Danny Williams the auditor general’s review of the House of Assembly accounts and specifically some problems discovered in the records for Byrne.

It was a Tuesday.

The next day – over 24 hours after that chat with Byrne – Williams told the rest of the province about what became the House of Assembly spending scandal.

How much had changed from a little over five years before when Williams took the reins of the Tory party from Byrne at a convention in St. John’s (left).

Byrne remained a major force within the party up to his resignation on June 21.

To mark the third anniversary of the scandal, Bond Papers has collected together links to the posts on the spending scandal.  You’ll find them if you scroll down the right hand column.  There are a lot since the scandal is huge and continues to reverberate to this day.  The are so many, we’ve had to break them down by year.  The first couple of months worth are ready as this post goes live.  The rest will follow in short order.  Unlike the last link list on the scandal, this one will be a permanent sidebar feature.  Interest in the issue hasn’t abated.

The are arranged chronologically beginning with the first one, posted the evening the Premier told the rest of us some of what he already knew.

The story has gone through a number of twists and turns as more information came to light.  Still, three years later, the people of Newfoundland and Labrador do not have a complete tally of how much cash went out the door nor do they have any idea where most of it went.

Along the way there have been some moments of personal satisfaction for your humble e-scribbler. 

In a post in August 2006 – two months into the scandal -  Bond Papers pointed out how much of that the Auditor General missed in his reports.  Chief Justice Derek Green confirmed it in his report in mid 2007. The Auditor general has never corrected his figures or explained his glaring oversights.

While the Green report turned out to be a significant turning point in the whole affair, the response was less edifying.  As Bond Papers reported first in “One last trip to the trough?” the members of the legislature adopted the Green bill quickly but made sure they didn’t have to live with the chief justice’s spending rules until after the fall election. 

Then- government House leader Tom Rideout proved a source of great entertainment as he tried to explain how in June the legislature had decided to implement the legislation “tomorrow” but in the language of parliament “tomorrow” was not the next day but a day five months later.  Only a title lifted from Get Smart – “Chaos in Control” -  could cover such a piece of hilarity.

Then there was a moment of unease.  In reviewing the posts, you will find one written early on about the use of public money for partisan purposes.  At that point it was only a suspicion. The suspicion was confirmed when Ed Byrne pleaded guilty to the charges levelled against him.

Only five individuals were charged in the scandal.  One pleaded guilty.  Another case is currently before the courts and three more are due to start over the summer and into the fall.

Since the scandal broke in the Bow Wow parliament, other similar stories have emerged elsewhere.  In Britain, the scandal of account mismanagement in the House of Commons has ended political careers sparked numerous investigations and may ultimately topple the Labour government.  The public has received details of the spending and reacted with appropriate anger.

Yet, three years later, and despite a series of investigations, there has not been a full public accounting of the money or where it all went.

There may never be.

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Meanwhile across the border…

The Government of Quebec is advancing plans to develop the Petit Mecatina river, according to a government news release issued Thursday. The project feasibility study is expected this year.

Media reports in early June indicated that the project had been modified to involve two generating stations from the original four.  This would accelerate the development but it is unclear if the other stations could be developed subsequently in order to maximise the power flow.  The headwaters of the river are in Labrador.

The La Romaine project recently received the go ahead.  Both are part of a plan to make Quebec the key source of hydro-electric power in North America. Some 4500 megawatts of power are expected to flow from a series of new projects started by Hydro-Quebec in its 2006-2010 plan.

The La Romaine project caused a political stir in Newfoundland and Labrador over claims by some in the province that the project would lead to a re-drawing of the border between the two provinces and that the La Romaine would adversely affect portions of Labrador.

While it initially dismissed concerns, the Government of Newfoundland and Labrador submitted a brief to the environmental panel detailing its concerns.

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S-92 crash – TSB report – tail rotor, MGB, “run dry”, flotation system

From the Transportation Safety Board report on Thursday:

• Flight data recorder stopped working at approximately 800 feet ASL
• The aircraft was in a controlled, powered-down descent at the time.
• At approximately 500 ft ASL, the tail rotor drive power was lost (Cause unknown).

 

Photo of 491’s tail rotor, showing damaged teeth.

• The tail rotor appears to be directly implicated in the crash, a point previously unknown.  At the time of the crash, there was no apparent loss of power to the main gearbox and it was rotating.  This suggests that it had not seized as would be expected if zero oil state had been attained due to leak and the gearbox had failed entirely.  Without oil, it would seize and stop turning.  Initial reports identified this as the main issue and the whole idea of a run dry capability served as the basis for public comment.  it also appears to be a factor in a lawsuit in the United States, launched Thursday.

Left:  tail rotor take off gear, new

Right:  tail rotor take off gear recovered from  Cougar 491

• The TSB report notes suggest another issue (not the MGB) led to the crash:

“Examination of the MGB indicates that there was no loss of main rotor drive and that the main rotor blades were rotating at the time of the impact. The examination of the MGB also revealed that the tail rotor drive gears had been severely damaged, resulting in a loss of drive, causing it to stop producing thrust. Further examination is being carried out by the TSB Engineering Laboratory to determine the cause and sequence of this loss of tail rotor drive.

The metallurgical examination of the titanium oil filter attachment studs revealed fatigue cracking in the studs as well as evidence of thread damage. A detailed metallurgical examination of the studs, nuts, and filter bowl is under way to identify the origin of the fatigue cracks and to determine the fracture mechanism.” [Emphasis added]

 

• Pilots initiated a main power shut down, immediately  (Time stamps show three seconds), which is standard procedure according to TSB.
• “The helicopter struck the water at approximately 1226 in a slight right-banked, nose-high attitude at an approximate location of 47°26'03" N, 051°56'34.8" W, with moderate speed and a high rate of descent.”
• TSB considers the nose-high attitude consistent with a flared landing approach.  With zero power, the descent would have been spiralling due to loss of the tail rotor.
• The aircraft flotation system did not deploy on impact. “The Sikorsky S-92A flotation system activation switch was found in the armed position after recovery.”
• The investigation revealed an issue with the S-92A flight manual:
• “…there is a perception in some areas of the aviation community that the MGB can be run in a dry state - that is, without lubricating oil - for 30 minutes. FAR 29 does not require run-dry operation of a gearbox to meet the 30-minute”.
• “The Sikorsky S-92A Rotorcraft Flight Manual (RFM) has been reviewed regarding MGB oil pressure loss below 5 pounds per square inch (psi) and the need for pilots to land immediately. An RFM revision has been approved by the FAA and Transport Canada.”
• Other issues are under investigation, as would be expected in an investigation of this type:

“A number of issues regarding survivability such as passenger immersion suit and crew flight suit effectiveness, use of underwater breathing devices, adequacy of survival training, adequacy of general ditching procedures, personal locator beacons, weather/sea state flight limitations, and Sikorsky S-92A flotation system are currently under investigation.”

Lack of royalty regime hampers further oil development

Not surprisingly, some people attending the NOIA conference in St. John’s are wondering what is next on the horizon.

As CBC reports, there is much talk of developing smaller fields in the Jeanne d’Arc basin.

There is also the recent announcement by StatoilHydro of a significant oil find at its Mizzen property, farther offshore than the three existing projects and Hibernia South and Hebron both under development.

Regardless of its size, Mizzen poses a number of challenges, not the least of which is the cost and technical issues of developing a field – even one of upwards of three billion barrels of oil – in deep water.

There are at least two others.

One is the impact of the United Nations Convention on the Law of the Sea (UNCLOS). Mizzen is well outside the 200 mile exclusive economic zone but may not lie outside the definition of the continental shelf.   If this is the case, the coastal state – namely Canada – would be required to set aside a portion of the revenue (maximum seven percent) from any development for distribution to the other states which are party to the convention.

Article 82

…

2. The payments and contributions shall be made annually with respect to all production at a site after the first five years of production at that site. For the sixth year, the rate of payment or contribution shall be 1 per cent of the value or volume of production at the site. The rate shall increase by 1 per cent for each subsequent year until the twelfth year and shall remain at 7 per cent thereafter. Production does not include resources used in connection with exploitation.

That’s potentially a significant cost to both Newfoundland and Labrador and to the companies.

That links to the other problem, namely the absence of an oil or gas royalty regime in the province.  Hibernia, Terra Nova, White Rose and Hebron all have royalty regimes.

The 2007 energy plan wiped out the existing generic oil regime. While the plan promised to replace it and issue a new gas regime, neither has emerged in the intervening years. There is no sign of either coming in the near future.

Even the development of smaller fields on the Jeanne d’Arc basin not associated with the existing projects is affected by the lack of a royalty regime.  The Hibernia South agreement is proposed using the Hibernia royalty regime developed in 1990 and amended in 2000, with some minor amendments.  Other projects would not have that as a basis, nor would it have the Terra Nova, the generic regime used at White Rose or the amended generic regime used for Hebron.

As Danny Williams said in 2005, oil companies don’t like risk.  Really though it isn’t that they dislike risk as much as they prefer predictability.  Even a volatile political climate is manageable, but when it comes to money, the companies like to have a good picture of what their costs will look like over time. That’s where an established royalty regime comes in handy.

In the meantime, some exploration will continue.  Seismic is pretty straightforward.  But when it comes to drilling holes and maybe looking at production, the lack of a predictable financial regime tends to make oil companies skittish.

The situation today is much the same as it was three or four years ago.  There are more exploration and development prospects for Big Oil than there is available capital.  They will put their money where they can figure out the financials.  Anything they can’t calculate  at all will go to the bottom of the pile in favour something somewhere else, even in a part of the world where the politicians in charge change with the sound of gunfire.

Now that Hebron and Hibernia South are pretty much done, the provincial government should turn its attention to restoring stability in the offshore financial regimes.

Above all else, that is what will determine the location of the next project or if there is a project at all.

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