Racket on the Edge

Expect to see much more bitching, moaning and complaining that ticket prices for the 2010 Juno award show will be $189 for individual tickets. Comments on the Telegram story - in that first link  - are already running pretty hotly negative.

Tickets for Vancouver in 2009 went for as low as $69. As the Telly reported, the tickets in 2002 were only $49.50.

The provincial government has $750,000 in the event.

Now it’s not like this all matters anyway since the event is not really for the great unwashed masses. It is a giant money-maker for the industry and for the local hospitality industry.  The tickets will sell or bums will be stuffed in the seats regardless.

Still, though.

There is a really good prospect this could become a very sensitive local political issue especially if the upcoming provincial budget – due around the same time as the Junos – doesn’t look all rosy and wonderful.

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As bad deals go…

Okay.

So like, let’s just make sure we are all clear on this.

First, there was the disastrous deal with Venezuela that was supposed to support cheap power in New Brunswick but wound up costing New Brunswick taxpayers hundreds of millions.

Then there was the deal to upgrade Point Lepreau that has gone so well the New Brunswick government has to look at suing AECL about cost overruns.

And now the people who helped bring you those fiascos think it is a bad idea to sell NB Power, improve New Brunswick’s business competitiveness, control electricity prices for consumers and generally retain provincial regulation of the energy industry while getting rid of a Crown-owned debt pig.

Hmmmm.

Well, as bad deals in New Brunswick go…

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Zombie TV

So Jay Leno is going back to late night television, thereby displacing Conan and Jimmy and undoing the great change that NBC brought to television last fall.

Globe television critic John Doyle puts it down to a guy thing.

maybe it’s much simpler.

Maybe NBC’s great cock-up is based on the mistaken idea held by the geniuses at NBC that people might find Jay Leno funny when they were awake.

It’s times like this that the words of Bobcat Goldthwaite must come back to people.  He was banned from the Tonight Show early in Leno’s tenure in the chair after setting the set alight.  Literally.

As Bobcat sarcastically joked about the incident afterward, it was the only time that the words “on fire” and “the Tonight Show” were used in the same sentence once Leno took over the spot once occupied by Johnny Carson.

Turns out he was right.

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Changes to pensions just tip of public sector fiscal iceberg

The provincial government is considering making some changes to public sector pensions, according to the Telegram.

Options include additional funding for the plans, reducing benefits, or increasing premiums, according to Finance Minister Tom Marshall.

The review includes not only the pension plans themselves, but also other financial liabilities associated with retired workers.

Anyone trying to figure out why pensions are under review need look no farther than advice from the guy who appeared to be the guru of financial policy in the Williams administration during its early days.  That would be a former deputy minister of finance during the 1980s, David Norris.

He wrote a paper for the Vic Young royal commission on the provincial government’s finances. What’s interesting is that what Norris identified as the major problems coming out of the grimes administration has actually turned out to be true for the crowd that replaced Roger Grimes and his crew:

Expenditure:

i)  Escalation in Health Care Costs associated with increased drug costs, service costs, increased demand, new diagnostic and other equipment, facilities upgrading, expansion and replacement.

ii) Salary and Wage Settlements over the past two to three years which are only now being fully reflected in the Budget.

iii) Relatively High Program Spending per capita which reflects the fact that as the population base has declined, program spending has not been reduced on a pro rata basis. Furthermore, new spending initiatives have been undertaken in successive budgets.

iv) Interest costs associated with funding the province’s annual deficits and new borrowings to retire obligations associated with the $3.4 billion unfunded pension liabilities.

Now while a lot has changed in the past six years, the period of abnormally high oil prices really has served to mask the underlying problems with the provincial government’s financial situation. For example, Norris projected  a cash deficit in 2003-04 of between $250 and $500 million on a cash basis;  that’s a figure he clearly found alarming since he suggested the need for a dramatic change of policy.

As it is, the provincial government maintained a policy of deficit budgeting.  The salvation came each year as abnormally high oil prices produced staggering cash windfalls.  This year is different.  There’s a $1.3 billion deficit forecast (on a cash basis) and that doesn’t looks pretty good to come true.

But fundamentally, the financial problems Norris identified have remained, hidden by the oil money.  That, too, is something Norris warned against, noting that oil revenues would decline within a decade as production dwindled.

In light of the news that the provincial government is taking a look at pensions and is starting to think about program cuts – think radiology review – it is rather interesting to look at Norris’ recommendations from eight years ago and compare them to what the current provincial administration actually did.

i) A comprehensive government-wide program review (including government agencies) to evaluate the effectiveness of the various programs, to reassess relative priorities, and to reduce/eliminate programs of low priority;

[BP: They started it but let it die quietly without producing any tangible results.]

ii)  A concentrated overhead reduction initiative aimed at reducing the overhead costs of government in recognition of the population decline of over 10 per cent in the last decade (and which is ongoing);

[BP:  They never even tried.]

iii)  A thorough assessment of those program areas where the cost of program delivery exceeds the national average and where the differential continues to grow. While it is to be expected that some of the differential will be attributed to demographic factors, the analysis should examine the potential areas where the method of program delivery might be modified and the cost structure reduced;

[BP:  Again, there’s no sign anything of this sort was even attempted.  program spending has grown apace and new programs have been introduced without eliminating any old ones.]

iv) Maximize the attrition opportunity. It is understood that the age profile of the public service indicates that a significant number of public servants will be retiring in the next three to five years. This could present a crucial opportunity to implement the cost reductions in a way that is less harsh than would otherwise be the case;

[BP:  Using Stephenville and Grand Falls as prime examples, the Williams administration has continued the trend of the post-1996 Liberals using public sector jobs as a substitute for private sector economic development.  There are more public servants in the province today than there were in 2003.  People think the boom on the Avalon is fuelled by the oil industry.  Guess again.  Hebron can’t be causing anything since Hebron doesn’t really exist yet. It’s all public money spent by public servants:  more people with big wage increases does wonders for local businesses.]

v) An assessment of the cost escalation associated with all the public sector pension plans. This would include a review of the benefit trends, the rate of escalation in the unfunded liability, and a reassessment of the province’s funding strategy to determine if modifications are required;

[BP:  Here’s the one the Telly uncovered.  Don’t expect the provincial government to opt for putting more cash into the pension plans.  The objective will be to cap what’s going in and reduce the financial burden over the medium- to long haul.  Think benefit reductions and higher premiums for those still working.]

vi) Consideration should be given to regular increase in various fees and certain taxes to preserve the revenue base on a go-forward basis. But, in so far as possible, increase in sales tax, personal tax and corporate income taxes should be avoided;

[BP:  Some fees went up but they came down again in 2007 as an election gimmick. Personal and corporate taxes went down.  ]

vii) The potential merits of privatizing various functions currently  provided by government and its crown agencies should be examined. In this regard it may be instructive to explore the experience of other provinces and any successes that have been recorded to date in this generally sensitive area;

[BP:  Consider that this one was laughed out of the room as cabinet voted to create an energy company funded through cash hand-outs from the treasury and permission to borrow over half a billion dollars.]

viii) Leadership from the top - a demonstration of commitment to the process through high profile expenditure reductions by the Premier and cabinet members.

[BP:  Anyone have any sign of anything that looks like a cut in the cost of cabinet?]

Changes are coming to the province’s public sector pensions.  Some of those changes will be very hard for some to swallow.

One thing you can count on, though, is a reference to the cost of the debt associated with those pensions.  David Norris’ paper was working with a figure of $3.4 billion in unfunded pension liabilities.

Guess what figure turned up in finance minister Tom Marshall’s briefing notes, as reported by the Telegram?

Combined, unfunded pension shortfalls and those other retirement benefits represent a $3.3 billion liability on the province's books.

Newfoundland and Labrador's total net debt in 2009 was a shade under $8 billion.

"These two unfunded liabilities are something that obviously we look at," Marshall said. [Emphasis added]

They be looking at it alright.

Count on it.

-srbp-

Related: 

• “Unsound financial management:  the stunning Oram admission.”
• “Budget 2007: a quick look at the numbers.”
• “The past in our present, once again.”

Province may lose big-time in Hebron royalty give-away

According to the Telegram, the Hebron partners won’t be filing their development application for the project until December 2010.

That’s a full year behind the original schedule but the companies claim it won’t impact anticipated first oil in 2017.

This is the second change to the project in two months.  The full implication of cancelling pre-drilling still hasn’t been determined.  It appears to have been dumped to avoid significant challenges posed by dropping the gravity base structure onto a pre-drilled template.

But the wider implications are still uncertain.  Pre-drilling would have allowed the project to get to full production very quickly.  As it is, production wells will now be drilled from the single derrick planned for the Hebron GBS. It took Hibernia five years to hit full production and that was using two derricks.

Delays in hitting full production will affect the timeline for the project to hit payout and that will affect the provincial government’s royalty take over the life of the project.

In signing the Hebron deal, the provincial government agreed to a flat one percent royalty until the project recovers its development costs (payout).  The generic royalty and the regime used for Hibernia and Terra Nova used a sliding scale that saw the provincial share increase steadily to a maximum of 7.5% based on cumulative production.

In 2007, natural resources minister Kathy Dunderdale said the flat royalty was a way of giving the companies insurance against low oil prices:

“The rationale behind these changes was the companies needed some downside protection if the price of oil went very, very low,” Natural Resources Minister Kathy Dunderdale said.

“So, that was the tradeoff [sic] for us — to give them protection if oil prices really plummeted, to get a gain if prices were high, above $50. So, we traded off some risk on the low end for significant gains on the other end.”

The provincial government’s entire assumption about the royalty give-away seems to have been based on the idea that payout would occur quickly.

But if oil prices remain high, the period during which the basic royalty remains at just one per cent shortens significantly.

“Normally, in terms of the basic royalty, even under generic, you go through those stages pretty quickly,” Dunderdale noted.

However, even at relatively high oil prices, lower production rates would drag out the time needed to pay off development costs.  And – looking at it logically -  the provincial government would lose significantly more in the process. That’s a point Dunderdale didn’t mention in 2007.

Dunderdale did mention the price of oil, which appears to have been a huge factor in provincial government thinking.  In exchange for the flat royalty give-away at the front end, the provincial government banked on recouping its losses if oil stayed above US$50 per barrel.  As Dunderdale told CBC in August 2007:

"You know, it's going to be a long time by anybody's estimates that we're ever going to see oil less than $50 a barrel," Dunderdale said. "We gave something on the downside which is low-risk to us to achieve a very high gain on the upside."

The “long time” turned out to be two years. [Time Travel Update:  or is Mathematically Challenged?  Oil hit 50 bucks a barrel within a year or so of her  great pronouncement.  it was less than 40 bucks a barrel a few months after that.]

The Hebron changes in December raise once more questions about the assumptions used by the provincial government in negotiating the royalty regime.    Slower time to full production could stretch payout to 10 years or more.  The provincial government appears to have operated on the assumption that oil would remain high throughout the initial production and post-payout phases.

A decade to payout is one one of the implications noted in Bond Paper’s preliminary look at the Hebron royalty.  The following chart used a relatively low price for oil and assumed high development costs.  It didn’t consider any delay in getting to full production but did anticipate taking a decade to hit payout.

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A statement of fact isn’t a criticism

Finance minister Tom Marshall told the Telegram’s Dave Bartlett a few interesting things in an interview that appeared in the Saturday print edition but hasn’t turned up on line yet.

Like this bit about the annual “consultation” farce:

He also said it's not true consultations are a waste of time or that he's made up his mind already on where he will spend taxpayers' money.

Marshall said every year someone raises that criticism.

"We're open minded. We're prepared to listen. But we're listening to a lot of people and the problem is ... everybody can't get what they want," he said.

Marshall said if he gets 100 proposals, 95 of them make sense, but there's simply not enough money to go around.

Okay well, the consultations aren’t a waste of time for Marshall since he uses them as a way of sending a message to people of the province.  He isn’t really looking for substantive input on how to spend public money.

That’s because – as your humble e-scribbler noted last year – the major decisions are already made. The same point turned up the year before, with an entirely different example of how the major spending decisions are already made long before the finance minister hits the road.

Not a waste of time for Marshall, but for anyone else looking to shift budget priorities via the consultations?  Yeah, pretty much an exercise in the utmost futility.  The people who show up for these things would have better chances of changing Marshall’s budget if they gathered around a kitchen table, held hands and stared at the magic blue spot from the National Enquirer all the while thinking nice thoughts.

And sure, Marshall listens.

But, as he noted, five percent are patently OTL.

And the other 95% of the ideas he listens to are sensible.

But Marshall can’t do anything about them because he just doesn’t have the money for them, as he told Dave Bartlett and the Telly.  A guy who has more money in temporary investments than his predecessors  had to spend in total some years doesn’t have the money for these great ideas for one simple reason:

By the time he gets to the “consultations” he’s already decided where the money is going.

And that’s why the whole exercise is a farce.

You see, a statement of fact is not a criticism.  It’s like unsustainable spending.  Marshall knows it’s a matter of fact.  He just won’t admit it until he has no choice.

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Budget 2010: Slowly the facts emerges

From an interview with the Telegram (not online) here’s a telling little statement from finance minister Tom Marshall:

He said corporate and personal income taxes may be "softer than originally anticipated."

That’s true.  Incidentally he meant the revenue coming from the taxes, not that there were plans to reduce taxation.

Corporate and personal income taxes may not be the only thing that is “softer than anticipated” this year.

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Jeff, the SCC and senate reform

Canada’s Ersatz George Will should learn to do that or at least take his own advice.
Jeff Simpson implores – presumably the prime minister and premiers – as follows:

Go right ahead, gentlemen. Climb into the sandbox of Senate reform and start playing. But before doing so, pause and read at least a summary of a Supreme Court of Canada ruling of 1979 that will complicate every game you might wish to play.

The ruling -  issued in 1980 – is readily available online and makes for easy reading for anyone with a rudimentary knowledge of only the English language.  It does not, as Simpson claims, mean that the federal parliament can “unilaterally do almost nothing to the Senate.”

The ruling came in response to a specific set of questions posed to the court.

But more importantly, the reference came at a time when any amendment to the constitution had to be done as an act of the British parliament.  If you read the SCC decision, you can see the extent to which that circumstance drove the reasoning, particularly the impact of a 1949 amendment to the section of the constitution which  defined how constitutional amendments were to be made.

The Supreme Court answered a specific question – in paraphrase: can the federal parliament unilaterally amend the constitution as it was in 1979 to eliminate the senate – with a resounding “No”.

The reasoning is simple:  the senate was created to represent the “sectional” interests of the country and to do so equally and nothing up to 1979 gave the federal parliament the power to alter so fundamental a notion.

Here’s what the learned justices said in the summary at the front of the decision and the same words are repeated throughout its lengthy explanation:

The apparent intention of the 1949 amendment to the Act which enacted s. 91(1) was to obviate the necessity for the enactment of a statute of the British Parliament to effect amendments to the Act which theretofore had been obtained through a joint resolution of both Houses of Parliament and without provincial consent. Legislation enacted under this subsection since 1949 has dealt with matters which, according to the practice existing before 1949, would have been referred to the British Parliament by way of a joint resolution of both Houses of Parliament, and without the consent of the provinces. It did not in any substantial way affect federal-provincial relationships. The legislation contemplated in the first question is of an entirely different character. While it does not directly affect the federal-provincial relationships in the sense of changing federal and provincial legislative powers, it does envisage the elimination of one of the two Houses of Parliament, and so would alter the structure of the federal Parliament to which the federal power to legislate is entrusted under s. 91 of the Act.

The Senate has a vital role as an institution forming part of the federal system: one of its primary purposes was to afford protection to the various sectional interests in Canada in relation to the enactment of federal legislation. The power to enact federal legislation was given to the Queen by and with the advice and consent of the Senate and the House of Commons. Thus, the body which had been created as a means of protecting sectional and provincial interests was made a participant in this legislative process.

Nowhere in that can one find anything that  - even vaguely - gives provincial premiers a function veto over all senate reform as Jeff Simpson contends.

Nor can it be found in the decision on some bits of the second question to which the court also said “No”.

The second question contained a daisy chain of changes, including giving new powers to the provincial governments. Not surprisingly the judges thought it a bad idea in a federal country to let Ottawa unilaterally change what a provincial legislature can and cannot do. The others were deemed to lack sufficient information to let the judges made a choice.

Jeff’s basically out to lunch if he thinks the 1980 decision gives the senate as it is currently constituted some sort of provincial protection.

They get that out of the 1982 repatriation and the subsequent amending formula:

42. (1) An amendment to the Constitution of Canada in relation to the following matters may be made only in accordance with subsection 38(1):
…
(b) the powers of the Senate and the method of selecting Senators;
(c) the number of members by which a province is entitled to be represented in the Senate and the residence qualifications of Senators;
…

Unfortunately, Canadians are stuck in a situation in which the provincial satraps must find agreement before anything can be done with the senate.   Don’t forget, this is the same gang that couldn’t even agree among themselves on how to keep the taps of federal Equalization cash flowing to them all.

The only difference is that in this case, there are more of them in favour of senate abolition than any other choice. The only result of abolition – supported as well by the federal New Democratic party – would be to cement the control Ontario members of parliament have on the federal legislature.  The sectional balancing effect that the senate is supposed to have from the original constitution would be gone.

That would adversely provinces like those in Atlantic Canada or in the west. The scary part of the abolition movement is that where it was once confined to those with a naked self-interest in such a move, the idea has now caught on in Nova Scotia and elsewhere.  Not only is Darrell Dexter hoodwinked into believing that the Lower Churchill exists but he has also been fooled into thinking no senate is better than senate reform when it comes to protecting his provinces interests in Canada, the federal country.

The only part of Jeff’s column where he seems to get it right is at the end and that’s really the easiest of all bits when it comes to assessing federal-provincial relations. Odds are that any move to reform the senate in a meaningful way will simply open the doors to more constitutional demands and the sort of indecision we have seen repeatedly on issues involving the 11 first ministers.

Aside from the normal, eternal divisions among the provincial premiers, Canada is also beset at this sad time in its history with three major federal party leaders neither of whom holds the vision necessary to counteract the premiers politically.

For the Prime Minister, senate reform is another of his tiny tactical manoeuvres to stay in power.  For Jack Layton, he’s already locked firmly in favour of Ontario with the NDP cry for abolition. Heck his party constitution doesn’t even believe in fairly representing the “sectional interests” of the country.

And Michael Ignatieff?  So far he has shown himself to have as sensitive and informed a view of Canada, the country, as he had of the ethics or efficacy of binding some poor sod to a board and then draping his face in wet towels until he suffocates. National support for the Liberals speaks rather clearly to Ig-man’s lack of appeal.

Senate reform could occur if there was any leadership in the country worthy of the description. Leadership could deal with the situation imposed by the 1982 constitution.The country needs leadership. 

Sadly, the people of Canada cannot find leadership among the 10 premiers, or the federal party leaders.

And that, Jeff Simpson ought to know, is the real political problem with senate reform.

-srbp-

Let me fish off Old Wyoming

You be the judge.

Otto Kelland is best known in Newfoundland as the writer of  the ballad “Let me fish off Cape St. Mary’s”, written in 1947.

 Now take a listen to this song - “The Hills of old Wyoming’ -  which dates from 1937 at the latest.

And if you really want to do a spit-take, try this sample of the song recorded in 2009.

Now that really isn’t the end of it. 

Same song?There’s a much older song – “Barbara Allen” – which has been documented from its first printing in 1750 and is mentioned in Samuel Pepys’ diary from 1666. There are a great many variations on both the lyrics and tune for this song but some of the more common tunes sound suspiciously familiar to Kelland’s work and to the Wyoming song.

-srbp-

Updated with new video links:  June 2016

Senate reform, again

One glaring point the Globe and Mail front pager on senate reform missed is blatantly obvious.

The Globe claimed that:

Analysts say that provincial opposition in smaller provinces could stem from premiers' fear that their already weak national voice will be further limited if newly influential senators appear on the scene.

That’s crap.

All provincial premiers oppose any reform of the senate that would give it real power and political legitimacy.

All premiers are afraid that they will be eclipsed by a group of politicians representing Canadians in Ottawa elected on the basis of geography.  They all fear being reduced to the status of American state governors.

Frankly, that would be the best thing for Canadians as a whole.  The federal parliament should be comprised of two houses, one elected by population and the other representing the provinces equally.

No provincial government should control in any way shape or form the second chamber in the national parliament.

Elect senators directly, with equal numbers from each province.

It’s that simple, but if we let the premiers get involved we will do nothing but reinforce the anti-democratic, paternalistic attitude some of them have and the anti-democratic executive federalism they love to practice.

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There’s even a local version…

of the Canadians Against Proroguing Parliament.

Facebook sez.

And they have a rally scheduled for January 23rd in St. John’s.

Presumably more details will follow because there’s precious little on the Facebook group right now.

-srbp-

Mr. Walsh goes to jail

Former Liberal cabinet minister Jim Walsh will be spending a few months behind bars for his part in the House of Assembly spending scandal.

Judge David Orr sentenced Walsh to 22 months for fraud and 12 months for breach of trust.  The sentences will be served concurrently.

By contrast, former provincial Conservative leader, natural resources minister and government leader in the House of Assembly Ed Byrne got two years less a day for fraud and 18 months for breach of trust, also served concurrently, for his part in the affair.

Walsh is the only one of the politicians charged thus far who opted to plead not guilty and face a trial.  That likely had something to do with the sentence. The Crown recommended 18 months while the defence suggested no more than half that time to be served conditionally.

Former Liberal cabinet minister Wally Anderson was sentenced last year to 15 months for forgery and none months for breach of trust.

Former New Democrat member Randy Collins will be sentenced January 15.

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Alberta poll in question

Ye, verily, lo and behold, good citizens:

There are problems with reports coming from Alberta about the Wild Rose party and polling.

Sounds very familiar.

One thing leaped out in particular and this had to do with the reliability of online surveys:

Unbeknownst to most Albertans – even many politically savvy ones and apparently to most political journalists, too – was the import of this statement.

First, this is an on-line survey, based on interviews with a group of Albertans, obviously interested in politics and quite possibly committed to a political party, who selected themselves for the job.

The advantage of on-line panels of this type is that they’re inexpensive to conduct. The disadvantage is that their results cannot be called scientific and they are not particularly credible.

Also unknown to most Albertans following this story is the fact that the phrase “margin of error is 3 per cent” is highly controversial in professional polling circles when applied to this kind of survey.

The implication is that the survey was based on sound scientific methodology and can be counted on to be accurate within a margin of 3 per cent.

The fact is the survey is based on the opinions of people who selected themselves to join the panel and answered questions on-line. In other words, this is not necessarily a particularly trustworthy poll.

That probably refers to issues like the ones raised in this businessweek.com article in 2008.

And it points out again why reporters need to ask more questions about polls and pollsters before they report the results.

Lie say this little gem from an American association of polling firms giving 20 questions journalists should ask about polls:

6. Are the results based on the answers of all the people interviewed?

One of the easiest ways to misrepresent the results of a poll is to report the answers of only a subgroup. For example, there is usually a substantial difference between the opinions of Democrats and Republicans on campaign-related matters. Reporting the opinions of only Democrats in a poll purported to be of all adults would substantially misrepresent the results.

Poll results based on Democrats must be identified as such and should be reported as representing only Democratic opinions.

Of course, reporting on just one subgroup can be exactly the right course. In polling on a primary contest, it is the opinions of those who can vote in the primary that count – not those who cannot vote in that contest. Primary polls should include only eligible primary voters.

Yes, ladies and gentlemen, reporting poll results as a percentage of “decideds“ is “one of the easiest ways to misrepresent the results of a poll…”. Some people won’t be shocked by that nugget.

If you scroll down you’ll also find a good section that points out methodological problems with online poll results.

And that’s before people misread news reports that seemed to suggest Danny Williams scored a 70% approval rating with all Canadians surveyed by Angus Reid last fall during the local poll goosing month of November.

At some points, local news organizations will either stop reporting obviously unreliable poll results or hold off until they get answers to some tough questions from the people flogging the polling fodder.

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Brent Price Comparisons

For those who have been following along with the discussion of oil prices and provincial government revenue, it’s interesting to compare the price of crude oil at comparable parts of the fiscal year.

On Monday, as you may recall, we took a look at production.  As the chart showed, offshore oil production in 2009 is well below production last.  It’s so far down in fact that the provincial finance department’s predictions for 2009 might prove to be as accurate as the work of some late-night television psychic.

Well, prices are not doing much better.

Here’s a rough look at daily spot prices for Brent crude for the period 01 April to 30 June in both 2008 (blue) and 2009 (red).

Basically prices in the first three months of 2009 were running about 50% below the same period in 2008.

So prices were down by something on the order of 40 to about 50% and production was down by 14% in April, 39% in May, and 18% in June.  That pretty much guarantees that revenues would be off as well compared to the previous year. 

Sure enough,  figures obtained from Natural Resources Canada confirm that. Figures for September confirmed the general pattern for the first half of the fiscal year. Oil revenues are running about 15% below the provincial government’s budget forecast.

Not 15% below the December fiscal update that talked about bringing in something like $1.8 billion in oil royalties but 15% below the budget forecast of $1.26 billion.

Provincial government oil royalties are a function of  production, the royalty formula and the exchange rate for the Canadian dollar.  In the front end of the fiscal year there was a bit of a premium for a cheap Canadian dollar.  But as the Canadian dollar has climbed against the American greenback during the past six months, any premium that resulted from selling oil in U.S. funds and then converting to Canadian dollars vanished. 

And if you look at the actual royalty figures it’s pretty clear that the improved royalty rate coming from Hibernia in payout couldn’t offset the drop in production, the drop in price and the shifting exchange rate.  That’s a clue to the magnitude of the change in oil revenues.  Even with all three fields in the optimum royalty condition, royalties are well down in 2009.

Just to keep close track of all this, your humble e-scribbler will have to go looking for the October and November royalty figures later this month  That way it will be much more clear if the trends established in the front end of the year are continuing. Odds are they have carried on, despite the claims from the finance department in December.

As a last point, consider that a forecast by the Canadian Association of Petroleum Producers in 2009 showed offshore oil production declining in Newfoundland and Labrador over the next five to seven years.  There’s a bit of a peak close to 2020 and then things trail off again as some of the older fields dry up.

 

That’s the sort of information that should be guiding provincial government budgeting. Revenues aren’t going to be climbing ever higher.  Demands for essentially services will, however, and the costs associated with that will rapidly escalate. This is an old refrain around these parts as regular readers well know.

That doesn’t mean there have to be spending cuts;  it just means there has to be greater fiscal discipline, consistent and prudent planning and some serious attention paid to reducing the province’s debt load. In other words, the provincial government needs to be doing exactly the opposite of what it has been doing for the past three years.

There is hope.

Until last fall, you’d never have heard a cabinet minister admit what your humble e-scribbler and others have been saying for years.

But first Paul Oram and then others admitted the provincial government’s fiscal plan  is unsustainable.

Acknowledging there is a problem is the first step toward doing something about it.

Let’s see what happens.

-srbp-

Sikorsky settles with NL S-92 families/survivor

There’s a settlement in the lawsuit launched by the sole survivor and the families of passengers and crew who died in the crash last march of a Sikorsky S-92 operated by Cougar helicopters.

A spokesperson for Sikorsky told Canadian Press:

"All of the claims in regard to the Cougar Flight 491 crew and passengers have been resolved…The settlement agreements are private and confidential, so I must decline to provide any details."

Last June, the families and the sole survivor filed a lawsuit against Sikorsky and related companies in Pennsylvania.  The case was withdrawn in July in an effort to reach a settlement.

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In your wildest dreams…

You likely never imagined a popular revolt at the idea that parliament would not be sitting for about the same number of days that Tom Rideout was Premier of Newfoundland and Labrador.

[Okay, well, it would actually be longer than that but just go with it for now.]

But revolting the people are.

Well, at least a chunk of them.

Susan Delacourt surveyed some of the online efforts, including this tee being flogged by the crowd at rabble.ca. 

Click and you’ll get the rabble.ca Cafepress store.  Go ahead.  Click it. Your humble e-scribbler doesn’t get a cut.

Meanwhile in Newfoundland and Labrador, does anyone care that the provincial legislature only sits  - in total  - for the same number of  days Tom was Premier?

-srbp-

Oil production remains lower than forecast

Provincial government oil production forecast remains way off track.

Budget 2009 predicted oil production would total 98 million barrels in 2009.  In December, the financial update raised the forecast to 101 million barrels.

But as of the end of November the offshore had produced only 59 million barrels and with only four months left in the fiscal year, it would take a miracle to hit the spring projection let alone the December number forecast by the provincial finance department.

Offshore oil production in October 2009 was 32% below the same month in 2008 and November production was down by 28.4%, according to actual production figures from the offshore regulatory board.  BP presented earlier figures in November.

To give a sense of of how far down current oil production is compared to previous years, take a look at this chart that compares April to November for each of the past three fiscal years.  The grey bars are 2007.  The back is 2008 and the red is 2009.

In order to meet the provincial government’s Budget 2009 target, oil production in the last four months of the current fiscal year would have to run higher than April 2009 in each month.

To hit the December projection, production would have to run at levels of about 10.5 million barrels a month, and that’s a figure the offshore hasn’t hit this fiscal year at all. 

Overall, if production is running below forecasts, it will be that much harder for the provincial government to hit its revenue forecasts. After all, even the finance minister admitted in a year end interview that virtually every major sector of the provincial economy – he didn’t really mention oil - was in decline.

“The recession, particularly the way it hit the U.S., impacted their ability to buy products from us and that hurt the fishing industry, that hurt the pulp and paper industry in a major way, and it hurt the mining industry,” the MHA for Humber East told The Western Star.

He said the major losses of revenue from those sectors, combined with losses of personal income tax and sales tax, impacts government’s ability to spend in other areas such as education and health care.

Of course, regular BP readers have a better sense of what’s going on with oil production than the anything the finance minister has said.

And just think about it for a second:  if the finance department’s offshore production forecasts are so far out of whack with actual production, what else in the December forecast was off in a bad way as well?

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ARC Silly Week

As a bit of a diversion, here are some local contributions to what is known as Silly Week at Aircraft Resource Center, a website devoted to scale modelling.

The concept is pretty simple:  contributors send in something off the wall. 

It could be an unusual subject, like say a one-holer outhouse with working front door and a roll of toilet paper.

Most contributors take an existing subject and invent a story to go with the new version.

Like say Dave Bailey from Newfoundland and Labrador who offered up a couple of new subjects.

The one below takes a real-world aircraft – the Convair Tradewind from the 1950s  - and invents a whole story about it being re-engined for the Canadian Forces and eventually winding up fighting forest fires in Newfoundland and Labrador.

After the expected fiddling to fit the new engines, successful ground tests and taxi trials indicated that the idea was eminently workable, and on May 19 1960 the aircraft left the water and performed a 45 minute flight. Over the next few weeks the trials proved the concept beyond question, and procurement of the two on option was finalised. Service with the Royal Canadian Navy commenced in 1961 and they went on to perform sterling service in the search and rescue, resupply, and evacuation roles.

As they neared the end of their military careers Canadair once again investigated further uses, and firebombing was an obvious choice. The Government of Newfoundland and Labrador bought one example as a high-speed responder to attack outbreaks ahead of the arrival of the purpose built but slower CL-215 fleet. Its bulbous nose contours meant that it was immediately saddled with the nickname Moose, but other than that there was no joking about the prestige attached to flying it into action.

Dave took a kit of the Convair, added the multi-bladed engines and did the paint job and markings himself to create The Moose.

It might be called silly week but there’s nothing silly about the talent involved.

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Imagine if they were senate vacancies…

Seems that something is holding up the announcement of four appointments to the provincial court.  The clerks’ room at Number 3 Iniquity court was abuzz before Christmas with anticipation of an announcement ‘round about the first anniversary of l’affair Singleton.

Don Singleton’s appointment was announced on December 23, you may recall, and withdrawn in a storm of controversy on January 12.

Since then, there has been no sign of new appointments and the number of vacancies is four times larger.

Four empty seats on the provincial court doesn’t look very good, especially when a couple of them have been vacant for a year or more and after things got rather squirrely out in Gander in the middle of 2009.

So unless there is something akin the shenanigans last time that is causing some sort of massive last minute re-think of the whole announcement, maybe it is time for justice minister Felix Collins to take the list that showed up in the department some time ago,  tick off four names and get the release out there. 

After all, it’s already been checked over to see who’s been naughty and who’s been nice and the only ones left have passed the sooper dooper clearance checks supposedly imposed by Collin’s predecessor after said predecessor got caught out in the whole Singleton business.

After all, at some point, even the conventional media might notice that the provincial court is short a few judges and that the vacancies are getting older and older with each passing day.

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Why I write

“In any thriving democracy, sound public policy can only come through informed debate and discussion.”

The reason for writing The Sir Robert Bond Papers remains today as it was five years ago when the first post appeared:  to support informed discussion of issues that are important in Newfoundland and Labrador.

The reason remains because the need remains. 

In the wake of political scandals and in an atmosphere of sometimes intense political thuggery, too many people of conscience have abandoned public life in our province. They have turned their backs on politics.

What’s worse, thoughtful people have turned away from talking seriously in their day-to-day lives about our province and its people and their future.

“Sound public policy” comes across as a really high-brow pile of words.  Simple put, it is about choices.  Politics is really about picking between different views, different goals, different ways and different ideas. 

In order to make choices people need to know what choices there are. So Bond Papers provides a point of view that you just don’t find in many other places, if at all. Offering another point of view has become, of necessity, the second reason for writing.

So much of what does get talked about these days in Newfoundland and Labrador is based on false information. No one can make a sensible choice based on myth and fantasy.   And that has become, again of necessity, the third reason for writing:  Bond Papers is a source of accurate information.  

All those links are there for a reason.  They take you back to where the information came from in the first place. They also take you back to the heart of what democracy is really all about.

In a democracy, everyone gets to make the choices. So when you read something here, you don’t have to just accept that it is correct because someone in authority – real or supposed – tells you so. You can go and think about it, find the original information and make up your own mind. You have a right to information, accurate information, complete information.

And in the end, you have the right to make a choice for something other than what those in authority decide is best if that’s what you think is best. You and every other individual in this province have that right. You have the right to expect your politicians to listen when you say something.  They ought to listen every day, not just when there is a by-election on. 

Anything else is not healthy.

Bond Papers continues five years after it started, five years and some four and a half thousand posts later, because the need for it remains.

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