Lower Churchill, Nova Scotia and NB Power: “The sheer economics of it…”

And it is not like people haven’t said this before:

Premier Darrell Dexter said he’s not surprised Newfoundland and Labrador is looking for a cheaper option than an underwater cable connection to Nova Scotia for moving energy from Lower Churchill to market.

"The sheer economics of it are undeniable in terms of a transportation corridor for that energy," the premier said after a cabinet meeting Thursday.

Read down a wee bit further in the Chronicle-herald story and you get this:

An SNC-Lavalin transmission system study for the Nova Scotia government estimates the cost of connecting Newfoundland and Nova Scotia at $800 million to $1.2 billion. The estimate of connecting Nova Scotia to New England is $2 billion to $3 billion.

Yes, stringing underwater power cables from some point in Newfoundland and Labrador to Nova Scotia would cost at least $1.2 billion.  Initial cost estimates are always low on megaprojects like this. 

But to get to that bit, you’d have to string the long from Gull Island, down to the coast of Labrador, across to the island of Newfoundland down to some point on the southwest coast of the island to get to the bit that costs at least $1.2 billion.

The cost of that plus the line out to Soldier’s Pond near St. John’s would be $2.0 billion or more.

You can tell the Nova Scotia option was never being seriously considered.  There isn’t any plan to do it currently under environmental review.

Now all this too has to make you wonder why Darrell joined in attacking Shawn Graham in New Brunswick. His whole position on this just didn’t make any sense before. And it really doesn’t make any sense now that he admits he knows the whole power line to Nova Scotia is just so much crap.

In fact, Dexter acknowledges the whole thing is crap because he adamantly insists that there’s no way Nova Scotia taxpayers would be on the hook to help build it.

“We’re not going to build it,” he said.

 

Not surprisingly, NALCOR Energy boss Ed Martin is talking about the cost of land transmission through Quebec. Hearings into NALCOR’s application/objections on that front are due to start this week. Land transmission is pretty much the only economically viable way of getting Labrador power out to any market.

The current estimate for building a new set of power lines across Quebec is $3.0 billion.  That’s not bad considering the estimates for the line Soldier’s Pond for a mere 800 megawatts.

You can tell the crowd at NALCOR understand the whole game currently being played.  Look at the way it wound up in the Telegram over the weekend:

Regardless of what happens, officials say the regulator's decisions will provide certainty for Newfoundland and Labrador's energy corporation as it tries to get the Lower Churchill hydro project off the ground.

"We've collected all the information we need," Nalcor Energy president Ed Martin said in an interview.

"This is one of the key pieces left. I'm going to have enough information (after) this to be able to complete my discussions with potential customers."

When people start talking about certainty, then you know they’ve comes to terms with reality.  “At least we’ll know for sure…” should be one of the stages of grief.

For the record and just for all those people who are still over the shock that the line through Gros Morne was a political racket for nothing, let’s get this straight as well.  The provincial government isn’t concerned that Hydro-Quebec is blocking the precious Legacy Project.

At least one person in the government is pissed off that the whole thing just can’t get off the ground for one simple thing:

the sheer economics of it.

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The Recession in pictures

Via John Gushue who got it from Business Insider who got it from Calculated Risk, a chart comparing job loss as a share of peak employment in every American recession since the end of the Second World War.

Yes Virginia, this is still the worst recession bar none. And as John Gushue points out in different words, those in the province who deal with the United States marketplace have got to be hurting.

There is more detail at Calculated Risk on this chart which is derived from the most recent employment numbers coming from the US federal government.

When you are finished digesting that bit of information take a look at this related chart which shows the percentage of American workers who have been out of a job for 27 weeks or more.  More people are out of work and they’ve been out of work longer than  in any previous recession.

Again you’ll find more on this at CR.

Three things to take away from all this:

1.  Two days left: If you haven’t voted for John Gushue over at the NL Blogroll yet, go do it now.  No fooling around.  You can come back in a minute when you’ve finished voting AND leaving a comment.  That gets him three votes in total.  Oh yes and tell your friends. And make sure you vote tomorrow too for John – you can do that under the rules of this contest. You already click out to John more than any other link at SRBP so the least you can do is vote for him.

2. The American recession is having an effect on this province and will continue to do so.  Anyone who tells you otherwise deserves a sharp jab to the throat to get them to stop fibbing.

3.  Stand by for some additional work along these lines on the local economy.  What’s actually been going on is more than a little at odds with what you’ve been told elsewhere.

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Text “HAITI” to 45678

From the Salvation Army:

Toronto, ON January 14, 2010 – The Salvation Army has activated its Text to Donate program in support of the Haiti Earthquake Disaster Relief Fund. Canadians can make a $5.00 donation to The Salvation Army’s efforts in Haiti by texting the word HAITI to 45678 from any Rogers Wireless or Bell Mobility phone. Donors will then receive a message asking them to confirm their donation with a YES reply. The proceeds of each text donation will support the ongoing efforts to serve the victims of the recent horrific earthquake that has left thousands dead and many more without adequate food, clean water or shelter.

“Our immediate focus is the safety and welfare of those affected by this terrible tragedy,” said Graham Moore, Territorial Secretary for Public Relations and Development for The Salvation Army in Canada. “The mobile giving program is another way to raise funds in support of this vital relief effort.”

In addition to the text message donation program, Canadians can support The Salvation Army’s relief effort in Haiti by calling 1-800-SAL-ARMY (725-2769), by visiting our website, www.SalvationArmy.ca, by mailing donations to The Salvation Army Territorial Headquarters, Canada and Bermuda, 2 Overlea Blvd., Toronto, Ontario M4H 1P4, or dropping off financial donations at the closest Salvation Army unit in your area. Donors should specify their gift to the Haiti Earthquake Disaster Relief Fund. The call centre (1-800-SAL-ARMY) and SalvationArmy.ca are accepting donations

According to Moore, when texting HAITI to 45678 via a mobile phone, a micro-donation of $5 will be made to aid the millions of people affected by this tragedy. One-hundred percent of each donation will go to The Salvation Army to serve this vital need. The donation will appear as a charge on a donor’s carrier bill, and standard rates may apply. Service is available on most carriers. Donors can unsubscribe at any time by replying to the message or texting the word ‘STOP’ to 45678.

Mobile technology company Zipstripe partnered with The Salvation Army to provide this service. The Mobile Giving Foundation (MGF), a non-profit organization dedicated to helping other non-profits raise funds through mobile, enabled the transactions between donors and their carriers.

About The Salvation Army:

The Salvation Army is an international Christian organization that began its work in Canada in 1882 and has grown to become the largest non-governmental direct provider of social services in the country. The Salvation Army gives hope and support to vulnerable people today and everyday in 400 communities across Canada and 119 countries around the world. The Salvation Army offers practical assistance for children and families, often tending to the basic necessities of life, providing shelter for homeless people and rehabilitation for people who have lost control of their lives to an addiction.

When you give to The Salvation Army, you are investing in the future of marginalized and overlooked people in your community.

About The Mobile Giving Foundation:

The Mobile Giving Foundation (MGF) was founded in 2007 to create a “mobile giving channel” that empowers non-profit organizations and donors. Working with North America’s top mobile carriers, the MGF enables the mobile channel for charitable giving by providing the organizational layer, operational guidelines and technical infrastructure for non‑profit organizations and donors to use the incredible power and convenience of mobile technology. The “Mobile Giving Channel” gives wireless users a simple and immediate way to receive and respond to appeals from worthy causes with the donation charged back to the carrier bill and 100% of the donation going to the designated charity. For further information, please refer to the MGF Web site at www.mobilegiving.org.

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Pat and Rush in perspective

Nothing more need be said than Keith Olbermann’s 1:48 summary of Pat Robertson and Rush Limbaugh on Haiti.

Even this is more attention than they deserve:

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Op Hestia: Canadian Forces Combat Camera

An unidentified member of 2 Air Movements Squadron (8 Wing, Trenton, Ontario) helps load a pallet of medical supplies onboard a Canadian Forces C-177 Globemaster bound for Haiti as part of Operation Hestia.

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Twitter feeds on Haiti

On the right, at the top.

1. Joanna Smith (smithjoanna) from Toronto Star.  Thanks to John Gushue for blogging her stuff over at his  as-usual superlative dot dot dot.

2.  Dr. Sanjay Gupta (sanjayguptaCNN) from CNN’s crew in Haiti.

More added as they turn up.

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The A-Team

Any movie with the line “Sucks to be you” in it can’t be all bad.

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Of Cukes and Unis

Truly, things are very strange when the guy who backed a second university for the province  - despite evidence at the time of declining enrolment – laces into critics who don’t like the much less ambitious version of “Grenfell autonomy” announced by the provincial government before Christmas.

For Former Williams administration employee Alex Marland, Premier Danny Williams attack on people inside the province must come as a complete shock. Anger isn’t always for reform, Alex. 

But the most bizarre part of the Premier’s speech in Corner Brook on Thursday was the comparison between Grenfell College and the Sprung greenhouse fiasco over two decades ago.

“With the situation of declining enrolment, we want to make sure we don’t launch this initiative and it fails and Grenfell becomes the Sprung (Greenhouse) of the west coast,” said Williams.

For those who don’t know, Sprung was the disastrous decision that spelled the end of Brian Peckford’s third administration.

Now Sprung didn’t fail because its proponents failed to support the government decision and prove the idea could work.

Sprung failed because it was doomed from the start.  Senior provincial government officials warned against the magnificent claims of the proponents, claims like growing more cucumbers in a hydroponic greenhouse in Newfoundland than could be grown with the near perpetual sunlight of a city near the Equator.

Unfortunately for the provincial treasury, that is for taxpayers, the politicians involved ignored the sound advice they got from people who warned of problems with the whole scheme and instead poured cash into the project.

In the Grenfell case, there is no sign any government officials voiced objections.  Others, like your humble e-scribbler and a bunch of people at Memorial University did point out that – among other things – the whole scheme the provincial government endorsed (the Premier included) was built on a model that needed Grenfell enrolment to double in 10 years.

One of those people – one Eddie Campbell – paid a price for speaking his mind.  That mess over finding a new president for the university led to a second major crisis for the university on top of the Grenfell one, both of which were driven entirely by politicians around the cabinet table.

And as for enrolment at Grenfell, it hasn’t been working its way to double in a decade.  Far from it.  Enrolment has been sliding steadily downward but not from lack of effort by the good people at Grenfell.  Rather, there just aren’t the students or prospective students to fill the seats.

They also endorsed the whole idea based on little more, apparently, than a rather lightweight assessment of the whole idea of Uni Two concept. That study was bought and paid for by the politicians, not by the proponents of the project.  And the study would also have figured out the enrolment problem since the signs were there at the time. 

The consultants would have figured that out if they had actually bothered to look at the issue.  Odd that they didn’t give it a thought, given that enrolment – students – is one of the big things that would drive a university’s success in the first place. 

All in all, it seems to have been a very odd first speech in the New Year for the Premier in his district.  It’s not odd that he chose the occasion to pick a fight with people or react negatively to anything less than an outpouring of unending support and devotion.  What’s odd is that the Premier linked his own decision with one of the singularly worst decisions taken by any administration in recent times, bar none.

This speech and all its implications might wind up having some not so pleasant consequences.

Meanwhile, for those who are interested in the Sprung fiasco, just scan down the right side and check out the series of posts linked there on Great Gambols with Public Money.  If that doesn’t work, just type that phrase into the search box up there on the top right.

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Kremlinology 14: Dead Caterpillars

Brian Tobin did it.

Roger Grimes did it.

Well, yes both served their political party as leader and served the province as Premier.

But before they became premier, they took the rather obvious step of shaving off a moustache they’d sported for years before.

There’s no coincidence.  As the groomers and other hangers-on start to gather around prospective political leaders, one of the first things they suggest is that the ‘stache has to go.

And go it does if the pol has leadership aspirations.  In countries following the British parliamentary tradition, facial hair on politicians generally – but especially on first ministers – has been out of fashion for a century.

After the fashion changed, along came the rationalisation that people don’t trust their first ministers to have beards or moustaches. There’s probably no empirical evidence to support that but it is there all the same.

And you can be guaranteed the advice will come to a politician who wants to lead anywhere:  shave it off.

It doesn’t matter if the thing works aesthetically.  Take a Gander at Jerome!’s official mug shot. The moustache is neat and well trimmed.  It’s also a natural colour, something St. John’s municipal politicians could notice. The ‘stache also gives him the appearance of having a mouth sized in proportion to his face.

He looks pretty good.

So the only reason he would dump the dead caterpillar – short of some sudden, previously undiagnosed skin condition – is political.

Here’s the new Jerome!, incidentally, in a screen cap from a recent CBC television interview.

The difference is quite striking.

Striking yes, but in some respects a difference brought on by the same limited, unimaginative thinking that wanted to take Trevor Taylor and put him through an Eliza Doolittle kind of sanitizer merely to get rid of his accent.

In Trevor’s case, his accent was not impenetrable and his tendency to use colourful language reinforced his core strength:  he spoke sincerely, honestly and straightforwardly.

In Jerome!’s case, the moustache didn’t really serve as a distraction. What had been working against him was his tendency to speak rapidly and  - when he got excited - to have his voice head for a pitch heard only by dogs. 

Jerome! has evidently been working on speaking more calmly and speaking in the lower part of his range.  All that has helped him immensely and his recent performance in the new portfolio has been extremely good.

But getting rid of the moustache?  That’s probably the least of his worries.

The only thing Jerome and his handlers have done is sent an unmistakeable signal that he wants to be Premier.

Oh yes.

Mustn’t forget.

And that he might get a chance at the job sooner than people think.

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As myths go…

This one was strong.

From the Globe and Mail, December 2007:

Now, instead of the predicted poverty, there's the "Danny Williams effect" as the local economy surges.

A local real estate blog picked up the line;

The Globe and Mail printed an article on December 17, describing the recent boom in the Newfoundland Real Estate market. Dubbed “The Danny Williams Effect” after the recent Hebron offshore oil project, homes in St. John’s and surrounding areas (including Mount Pearl, Paradise, CBS, and Torbay) surged 68% from October to November.

Then they repeated it in a list of reasons to invest in “Newfoundland” real estate:

3.  Danny Williams. Whether you like him or not, the “Danny Williams Effect” has certainly placed a positive spin on Newfoundland.

The phrase made it back around to the Globe, other news media and even the odd blog across the country via  - you guessed it – a real estate agent trying to explain a local housing boom in St. John’s:

On the upswing is St. John's, N.L., which is expected to see a 12-per-cent jump in house prices in 2009, which ReMax says is due to the “(Newfoundland Premier Danny) Williams effect on the overall economy.”

You’ll also find the idea  - if not the phrase - in a 2008 Policy Options article by a lobbyist for the provincial government’s oil company:

Newfoundland and Labrador premier Danny Williams has led his province from have-not to have status in the Canadian federation, thanks to offshore oil revenues.

That’s the way one photo caption put it.  Or, from another part of the article, the same idea:

One of Williams’ skills, like other successful leaders before him, has been in understanding the temperament and desires of his audiences. He has used that ability with great aplomb to build a significant political support base in Newfoundland and in other parts of
Canada. His power is proportional to the strength of the provincial economy and solidified by circumstances that allow for the cultivation of a never before-seen “have” Newfoundland.

There’s that idea between the power of the economy and the power of The One.

And the cult of personality really didn’t just limit this amazing-ness to the economy.  Memorial University political scientist Christopher Dunn even trotted out the idea of a Williams effect when it comes to politics generally. Now to be accurate, Dunn was really blowing a gigantic pile of smoke to cover over the fact he really didn’t have anything of substance to talk about. 

Dunn refers to something he calls the “Williams effect” and claims it is a model others may emulate.  But at no point does Dunn even try and describe what this “effect” might actually be.  That’s a dead giveaway for academics, by the way.  If they can’t tell you what it looks like, you know they are just making crap up.

Dunn’s not alone.  The real estate hucksters basically put a name on something to capitalise on what was supposedly popular. That’s what hucksters do.

And the Globe reporter did what Globe reporters do with Newfoundland and Labrador:  they dip into the convenient well of stereotypes or, as in the case of Canada’s Ersatz George Will or Roy MacGregor they just resort to old-fashioned safari journalism. It all comes out to the same malodorous end.  There may not be a bubble in St. John’s harbour any more but you can get the same effect by reading anything in the Globe about events east of Oshawa.

You can tell the whole notion of a “Danny Williams Effect” was just so much bullshit because you don’t hear these people talking about it any more.  Well that and the fact no one decided to call a band after him. 

Alan Parsons Project.

Danny Williams Effect.

Anyway…

The recession put paid to any idea of an economic protective shield or immunity derived from The Will of I Am. 

The recession also should make it plain that the financial boom of the last couple of years had nothing to do with projects that don’t exist – like Hebron for the house brokers – or with endless jihads against foreign infidels.

Nope.

It was all about outrageous oil prices.

And when those outrageous oil prices stopped, so too did the miracle.

There were a couple of new bits of evidence this past week that the whole economic DW effect was fiction.  That is, if Paul Oram’s confession wasn’t enough, already.

Shell found out it couldn’t offload a refinery in Quebec. No one was interested in taking a refinery and reworking it to feed the North American energy market.  Reworking is cheaper after all than building new.  Just ask the guys behind that second refinery fairy tale on a day when they aren’t trying to lure new investors.  They’ll eventually tell you what the market has really told them all along.  Hint:  it ain’t anything close to “here’s a cheque and when can you start building.”

Then there was a piece in the Globe that noted Ontario electricity prices are the lowest they’ve been in years.  Consumers aren’t getting the benefit of the low prices – three and a half cents a kilowatt hour – because the province is using the cash to subsidize a raft of expensive “green” projects like wind farms.

That should pretty much tell you why it is that there is nothing called the Danny Williams Effect that has yet to produce The Best Undeveloped Green Energy Project in North America.

Nor is there some conspiracy in Quebec acting like some sort of French Canadian kryptonite to block the Great Effect from, well, having an effect, great or otherwise.

Rather, it is simple economics.

As myths go, the Danny Williams Effect was a strong one.

But as a myth that seems to have been about the only power it really had.

All you have to do is look at the evidence.

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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.

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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.

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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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