F. The Williams administration’s rationale for change
The Williams administration is seeking changes to the Equalization offset provisions of the Accord so that the province will receive both direct and indirect revenues and the maximum possible Equalization payments. The provincial government’s position is based on three contentions.
First, reductions in any Equalization payment attributable to increased non-renewable resource revenues amounts to a “clawback” since these resources are finite. Second, as David Norris has argued for example, declines in Equalization amount to added revenue for the Government of Canada and hence violate the commitment that Newfoundland and Labrador should be the principal beneficiary. Third, the existing offset mechanism will run out before the most significant revenue benefit can be realized. Let us examine these in order.
The non-renewable “clawback”: The Equalization program has consistently operated as a form of top-up for certain province’s revenues. Any increase in a province’s own-source revenues would mean a lowering of the top-up amount. If Newfoundland and Labrador experienced a growth in revenue from information technology, it could reasonably expect to see its Equalization entitlement reduced. Newfoundland and Labrador is treated like all other provinces when it comes to the application of the Equalization program.
Clawback is a simple concept and applies in many areas of individual and business life. A clawback is defined by the Concise Oxford Dictionary as meaning to “regain gradually or laboriously, to take back (allowance by added taxation, etc.)” WordNet and Dictionary.com similarly define clawback as “finding a way to take money back from people that they were given in another way; ‘the Treasury will find some clawback for the extra benefits members received’”.
Since the Government of Canada remits in full offshore revenues to the Government of Newfoundland and Labrador, and applies no special tax or levy on those revenues, there is no clawback of these revenues as the term would be generally understood. Since the Atlantic Accord contains specific provisions to offset losses in Equalization, there is also no clawback of direct offshore revenues in that sense either.
The “clawback” argument is based on the contention that non-renewable resources hold a special status among provincial revenue sources. As the argument goes, these resources are finite and hence the period of time in which a province can derive benefit from the resources is finite. A province cannot achieve maximum benefit from non-renewable resources if it loses Equalization as revenues grow from these non-renewable resources. Hence these revenues should be exempted in some fashion from the Equalization calculation.
Two aspects of the argument on non-renewable resource “clawback” approach are worth considering in greater detail.
First, no source of revenue will exist for all time. Non-resource enterprises that generate sales tax and corporate and personal income taxes succeed and fail based on many factors. Western countries, states and provinces, that a decade ago made substantial income from the information technology sector and call centres, are now watching these revenues migrate to India and other Asian countries.
Even supposedly renewable natural resources such as fish can be destroyed by folly or a fundamental misapprehension of the circumstances affecting the health of the stocks. The reasonable lifespan of a mine or oil field may be 50 to 100 years. It took a mere 50 years for human misadventure to decimate the supposedly renewable fish stocks that had fed most of the Western world for five centuries.
Second, the “clawback” argument is one most often advanced by advocates of increased federal Equalization transfers to provinces. No one should forget that the Equalization program is funded entirely through federal general revenues. In other words, a significant portion of federal revenues derive from the very same sources for which the provincial governments claim a theoretical exemption from Equalization. Logically, what is sauce for the provincial fiscal goose should be sauce for the federal gander. The federal government holds obligations to provide services to residents of Canada just as the provinces do. Therefore, if one accepts that some revenues come from “non-renewable” sources, it would be logical for the federal government to seek the same exemption for its revenues as the one demanded by some provinces.
It is beyond the scope of this paper to calculate the level of federal funding from “non-renewable” sources. Were the amount to reach $10 billion – approximately the total outlay for Equalization – it is conceivable that the federal government would seek to eliminate the Equalization program altogether, possibly transform the system to one of low-interest loans or seek to control how province’s spend the Equalization transfer.
The 85:15 revenue split: In the overhead slide presentation, the provincial government includes several colourful charts that purport to show that the federal government receives 85 per cent of revenues from the offshore with the Government of Newfoundland and Labrador receiving only 15 per cent. A similar argument and similar slides are also found in the report of the Royal Commission on Renewing and Strengthening Our Place in Canada and in two research papers completed for that Royal Commission, one by David Norris and the other by John Crosbie.
Sadly for those wishing to assess the argument, none of these documents contains the data used to compile the charts. Neither the provincial government overhead slides nor Mr. Crosbie’s paper contain any figures. Mr. Norris does provide some evidence of his calculations. David Norris was a member of the provincial government team that negotiated the Atlantic Accord. A former provincial deputy minister of finance, Mr. Norris is currently a senior advisor to Premier Danny Williams. In 2002/2003, Mr. Norris served as senior researcher for the Royal Commission on renewing and strengthening our place in Canada. Mr. Norris is also author of one of the research papers the Royal Commission released with its final report. The fiscal position of Newfoundland and Labrador is broad overview of the provincial government’s financial status. It includes prominent sections on offshore revenues that undoubtedly form much of the basis for current government policy. In it, Mr. Norris argues, among other things that “The revenue analysis concludes that the Government of Canada is the “principal beneficiary” of future offshore oil revenues.” Given the obvious connection between Mr. Norris and current government policy and the fact that his paper is reasonably detailed, the remainder of this section will discuss the revenue split argument as he presented it.
Mr. Norris’ conclusion follows a lengthy preamble in which he sets the bases for his remarks and his assumptions on revenues and relative amounts flowing to each of the provincial and federal governments. He also quotes from section 2 (c) of the Atlantic Accord, the now famous “principal beneficiary” clause and deduces that “[a]ccordingly, revenue offset provisions were incorporated in the Accord which were intended to protect the province against sharp downturns in equalization entitlements.” He produces a chart showing the revenue sharing based on his analysis.
[Table 3-1 ]
On the face of it, his argument is persuasive. It does not stand up to closer scrutiny, however.
One of the fundamental problems with any economist’s projections is that they are based on assumption. Adjust the assumptions and the outcomes change, sometimes dramatically. Aside from the traditional economist’s folly of assumption, there are at least five reasons to doubt the validity of Norris’ contention.
First, the “principal beneficiary” provisions of the Atlantic Accord are undefined. It is erroneous to conclude that the phrase is synonymous with provincial government revenues. As a member of the negotiating team for the Atlantic Accord, Mr. Norris may be privy to information that does not exist in the public domain. Until such time as his contention is properly documented, we must remain skeptical of it. The matter of principal beneficiary is dealt with in greater detail below.
Second, as discussed above, the Atlantic Accord is based in part on the premise that the Equalization program would continue to apply. Knowing the premises on which the Accord was based, it is ludicrous for Mr. Norris and others to argue now the opposite of what was said 20 years ago. That single point is sufficient to cause Mr. Norris to remove the Equalization adjustment from his revenue chart above. Eliminate that single contention and the revenue sharing split moves from being a 76:24 split favouring the federal government to a 62:38 split favouring the province.
Third, the Accord’s Equalization offset provisions were never included in any public statement as being part of the revenue sharing arrangement between the Government of Canada and the Government of Newfoundland and Labrador. Mr. Mulroney’s original proposal is absolutely clear on revenue sharing: “Newfoundland will be entitled to establish and collect resources revenues as if these resources were on land.” As such, it is ludicrous to now suggest that the Government of Canada and the Government of Newfoundland and Labrador intended Equalization to be used in the calculation of relative incomes. In fact, the Atlantic Accord makes no mention of how much revenue or what proportions of revenue are to flow to each order of government. The intention of the two parties, as evident from the signed agreement, is merely that the province may have the opportunity to raise such revenues as it can.
Fourth, and flowing in the same vein, the Accord Equalization offset provisions are not structured to ensure that the flow of maximum financial benefits to the province, i.e. revenues plus offsets, are timed to coincide with the maximum level of revenues based on actual development of the offshore fields. Simply put, the offset provisions begin when oil reaches a defined level - irrespective of value. They decline until an arbitrary period has expired, in this case 12 years. As it turned out, and indeed as anyone may have reasonably expected in 1985, production from one discovery was sufficient to trigger the offset provisions. It would be ludicrous to suggest that anyone believed all four commercially-viable discoveries that existed in 1985 could have been fully developed and in production within four years. Hence it is virtually impossible for the existing offset provisions to have coincided with a period of maximum revenue for the province using both the provincial government’s revenues plus Equalization offsets.
Fifth, even if one allows that his contentions about revenue sharing are correct, Mr. Norris presents only a portion of the revenues flowing to the province. As noted in Section D of this paper, the province is entitled to collect revenues of no fewer than six general types. In addition, the provincial government receives indirect revenues from such sources as personal income tax, new business start-ups and revenues that come from the construction and development phase of each project.
In his chart, Mr. Norris includes only royalties, which the federal government does not claim and corporate taxes, which are in fact collected by both the federal and provincial governments. The total economic impact of offshore oil development is not considered in his argument. If these wider sources of revenue are included in the province’s claim or the paper by John Crosbie, sadly, we cannot tell since they have not made this information public.
The offset runs out too soon: Under the existing Atlantic Accord Equalization offset formula, the period of maximum potential benefit expired last year. The maximum offset existed only for the first four years after the oil production trigger was reached. Within that time, the provincial government received the largest type of Equalization offset. After four years, the level of offset declines, such that while provincial direct revenues may well grow as White Rose and later, Hebron/Ben Nevis, come on stream, the level of additional money received from the Equalization offset will diminish by 10% per year. On this point, proponents of an amendment to the Atlantic Accord are correct. That is what the Accord provides.
In assessing this argument, it is important to compare the intentions of the Trudeau and Mulroney governments on the revenue issue. The intention of the Mulroney government is clear: the Government of Newfoundland and Labrador would receive the right to set its own direct revenues for offshore resources, as if the resources were on land. Additionally, for a period of 12 years, the province would receive additional money in the form of an Equalization offset. The province would also receive local job and industrial spin-off benefits. That is what the Atlantic Accord provides; that is what has occurred.
The Trudeau government approach was different in one key respect. “The province will receive all provincial-type taxes and the largest remaining federal tax, the Petroleum and Gas Revenue Tax, the PGRT. No one can question the generosity of this proposal. When would the provincial government be expected to share some of these revenues with other Canadians? Not until the Newfoundland Government’s fiscal capacity reached 110 per cent of the national average, with an adjustment for regional unemployment that would now raise this to about 125%.”
More significantly, the Trudeau revenue sharing arrangements reflect the strategic policy commitment the Government of Canada was prepared to make prior to 1984. The federal proposal, made in September 1982, ‘ “recognizes the Government of Newfoundland and Labrador’s fundamental goal of attaining economic development and self-sufficiency by creating a strong and diversified provincial economy able to contribute fully to prosperity throughout Canada.” This goal is shared, the document states, by the Government of Canada.’
Therein lays the major flaw in the Atlantic Accord as it was originally proposed and signed: the duration of the province’s maximum potential revenues (direct revenues plus Equalization offsets) is determined by oil production levels, irrespective of the actual market value of the oil or the impact of oil development on overall fiscal capacity. Under the Trudeau proposal, it would have been linked to overall economic development.
Given the nature of industrial megaprojects of the type offshore Newfoundland and Labrador, it is not at all surprising that each project takes a considerable period of time to bring on stream. The Hibernia development agreement was signed in September 1990; first oil was achieved fully seven years later. It was fully two years after that date that Hibernia reached a sufficient level of production to trigger the Accord’s Equalization offset provisions.
Admittedly, the provincial government did not have the benefit of experience in making its calculations about the Atlantic Accord’s various benefits. However, as the overhead slide presentation indicates, the provincial government apparently anticipated rapid development of the existing fields, continued offshore discoveries at the pace experienced between 1979 and 1984/85, higher royalty regimes and oil prices remaining at then-prevalent levels.
It is beyond the scope of this paper to assess the validity of these assumptions in detail. Such an effort has not been undertaken to date and, in fact, much of the information required would be exempt from public disclosure since they were contained in documents submitted to cabinet. On the face of it, however, it would appear that the provincial government used optimistic projections when assessing the Mulroney offer. Any downward revision of their assumptions – for example, lower per barrel prices for oil – and the revenue impacts alter significantly.
Interestingly, according to slide 7, the provincial government expected that “have status” for Newfoundland and Labrador, i.e. that the province would no longer receive Equalization was “a foregone conclusion”. The one data table from 1985 that has been released (overhead slide 9) does not appear to support that contention, at least in so far as the chart might represent an anticipated worst case scenario. “Revenue and Equalization – 1985 Expectation” examines only royalties, instead of all revenue sources, and only from the Hibernia project. The graph clearly shows that royalties alone from Hibernia would not be sufficient to replace Equalization. In fact, anticipating the Accord offset provisions would begin in 1991, the graph shows the province expected Equalization transfer to climb beginning in 2004/05 and exceed pre-Hibernia levels by 2013.
That said, there can be no doubt that the Atlantic Accord Equalization offsets are working as intended by the Government of Canada and the Government of Newfoundland and Labrador. The provincial government expectations provided in the overhead slide presentation are not reflected in any aspect of the Atlantic Accord or the subsequent implementation legislation.
Given several years of experience and based on the intention of the federal government prior to 1984, it is possible to make a case for amending the Accord’s Equalization offsets. This will be addressed below.
Continued in Part 4
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Showing posts sorted by relevance for query clawback. Sort by date Show all posts
01 April 2007
Which is to be Master? Part 1
Originally written in mid 2004, Which is to be master? was an attempt to dissect the Williams' administration's efforts to change the Atlantic Accord (1985).
The issue of offshore revenues and Equalization hasn't disappeared in the past three years. Since this paper contains some useful background information, Bond Papers offers it in sections.
A. Introduction
It is now commonplace for people to believe that neither Newfoundland and Labrador nor Nova Scotia is being treated fairly by the federal government with respect to revenues from offshore oil and gas resources. As the story goes, the federal government claws back upwards of 85% of revenues to the two east coast provinces under the Equalization program, contrary to the two Accords that govern development of the oil and gas fields. Both Premier Danny Williams of Newfoundland and Labrador and Premier John Hamm of Nova Scotia contend that this clawback hampers their provinces from developing fully and from realizing the full benefits of the oil and gas resources off their coastlines.
This paper examines the Williams administration’s proposal to amend the Atlantic Accord. The findings are based on publicly available documents including the Atlantic Accord, the implementation legislation, the Williams government’s overhead slide presentation released to news media as well as papers and public comments offered by supporters of the provincial government’s approach.
B. The Williams Administration and the offshore
There is no single, concise, public statement of the Williams government’s proposal to amend the Atlantic Accord. To date the provincial government has released only a copy of an overhead slide presentation, apparently made to federal officials on 04 March 2004. In addition, the Premier has made public statements and issued at least three news releases on the subject. No other correspondence between the Government of Canada and the Government of Newfoundland and Labrador is in the public domain.
The Blue Print, the Progressive Conservative election platform, contains several references to resources and revenues from the offshore. Since they are the party’s platform they must be taken as statements of policy for the new government, or at least a statement of intentions to guide the government’s overall policy. This assessment is based on these documents, statements by senior officials of the Williams administration published before October 2003 as well as comments by John Crosbie.
The Blue Print commits the Williams government to “seek jurisdictional control and ownership over petroleum and other economic resources in the offshore as a means to achieve greater prosperity for our Province and more opportunity for our people.”
With respect to oil and gas revenues and revenue sharing, the Blue Print commits the Progressive Conservative party to “press the federal government to remove all non-renewable resource revenues from the calculation of equalization payments. In exchange, we will commit, in a formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize economic infrastructure in the Province and to bring down the provincial debt, so that future generations of Canadians living in this Province will continue to benefit long after the resources are used up.”
The only specific reference to the Atlantic Accord is a commitment to use its industrial offset provisions to the fullest extent possible. The Blue print also commits the provincial government to seeking transfer to the provincial government of the 8.5% share of the Hibernia project held by the Government of Canada.
In early 2004, Premier Danny Williams began discussions with the province’s federal cabinet representative John Efford to ensure that the province received what Premier Williams described prior to a February meeting between the two as “100% of our offshore revenues.” According to Williams, Ottawa gave a bad deal to Newfoundland and Labrador in the Atlantic Accord. The proposal would change the Equalization offset provisions of the Atlantic Accord to “provide a payment equal to 100% of the net direct provincial offshore revenue”. Net direct revenue is defined as “Royalties and Corporate Income Tax which is generated in the NL offshore area, less the equalization clawback (currently at 70%)”.
The objective was described in similar terms by a March news release: “Premier Williams has been actively pursuing the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.” A similar statement was made in April: “Premier Danny Williams today reiterated his government’s position on the Atlantic Accord and reaffirmed the province will continue to aggressively pursue the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.”
Changes to the offset formula would end what both the Blue Print and Premier Williams have repeatedly described as a “clawback” of resource revenues by the federal government through reductions in the province’s Equalization entitlement. The notion of an Equalization clawback is clearly described in the Blue Print:
Similar arguments have been advanced by John Crosbie, who served as co-chair of the federal Conservative Party’s 2004 election campaign in Newfoundland and Labrador.
Continued in Part 2
The issue of offshore revenues and Equalization hasn't disappeared in the past three years. Since this paper contains some useful background information, Bond Papers offers it in sections.
__________________________________
Which is to be master?
An assessment of the Williams administration proposal to amend the Atlantic Accord
"When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means just what I choose it to mean - neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master - that's all."- Charles Ludwig Dodgson, (Lewis Carrol), Through the Looking Glass
A. Introduction
It is now commonplace for people to believe that neither Newfoundland and Labrador nor Nova Scotia is being treated fairly by the federal government with respect to revenues from offshore oil and gas resources. As the story goes, the federal government claws back upwards of 85% of revenues to the two east coast provinces under the Equalization program, contrary to the two Accords that govern development of the oil and gas fields. Both Premier Danny Williams of Newfoundland and Labrador and Premier John Hamm of Nova Scotia contend that this clawback hampers their provinces from developing fully and from realizing the full benefits of the oil and gas resources off their coastlines.
This paper examines the Williams administration’s proposal to amend the Atlantic Accord. The findings are based on publicly available documents including the Atlantic Accord, the implementation legislation, the Williams government’s overhead slide presentation released to news media as well as papers and public comments offered by supporters of the provincial government’s approach.
B. The Williams Administration and the offshore
There is no single, concise, public statement of the Williams government’s proposal to amend the Atlantic Accord. To date the provincial government has released only a copy of an overhead slide presentation, apparently made to federal officials on 04 March 2004. In addition, the Premier has made public statements and issued at least three news releases on the subject. No other correspondence between the Government of Canada and the Government of Newfoundland and Labrador is in the public domain.
The Blue Print, the Progressive Conservative election platform, contains several references to resources and revenues from the offshore. Since they are the party’s platform they must be taken as statements of policy for the new government, or at least a statement of intentions to guide the government’s overall policy. This assessment is based on these documents, statements by senior officials of the Williams administration published before October 2003 as well as comments by John Crosbie.
The Blue Print commits the Williams government to “seek jurisdictional control and ownership over petroleum and other economic resources in the offshore as a means to achieve greater prosperity for our Province and more opportunity for our people.”
With respect to oil and gas revenues and revenue sharing, the Blue Print commits the Progressive Conservative party to “press the federal government to remove all non-renewable resource revenues from the calculation of equalization payments. In exchange, we will commit, in a formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize economic infrastructure in the Province and to bring down the provincial debt, so that future generations of Canadians living in this Province will continue to benefit long after the resources are used up.”
The only specific reference to the Atlantic Accord is a commitment to use its industrial offset provisions to the fullest extent possible. The Blue print also commits the provincial government to seeking transfer to the provincial government of the 8.5% share of the Hibernia project held by the Government of Canada.
In early 2004, Premier Danny Williams began discussions with the province’s federal cabinet representative John Efford to ensure that the province received what Premier Williams described prior to a February meeting between the two as “100% of our offshore revenues.” According to Williams, Ottawa gave a bad deal to Newfoundland and Labrador in the Atlantic Accord. The proposal would change the Equalization offset provisions of the Atlantic Accord to “provide a payment equal to 100% of the net direct provincial offshore revenue”. Net direct revenue is defined as “Royalties and Corporate Income Tax which is generated in the NL offshore area, less the equalization clawback (currently at 70%)”.
The objective was described in similar terms by a March news release: “Premier Williams has been actively pursuing the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.” A similar statement was made in April: “Premier Danny Williams today reiterated his government’s position on the Atlantic Accord and reaffirmed the province will continue to aggressively pursue the federal government to allow Newfoundland and Labrador to receive 100 per cent of the provincial revenues from offshore oil and gas.”
Changes to the offset formula would end what both the Blue Print and Premier Williams have repeatedly described as a “clawback” of resource revenues by the federal government through reductions in the province’s Equalization entitlement. The notion of an Equalization clawback is clearly described in the Blue Print:
A Better Deal on Oil and Gas RevenuesOf particular interest, both Premier Williams and other Conservative party commentators have linked provincial government offshore revenues with the concept of the province being the principal beneficiary of offshore development under the Atlantic Accord. In his news release of 12 March 2004, Premier Williams said:
The Government of Newfoundland and Labrador will collect billions of dollars in revenues over the next 20 to 30 years from oil, natural gas, and other minerals. Less than a quarter of the revenues will stay in the Province. Ottawa will simply deduct most of the increased revenues from equalization payments. This deduction is known as "the equalization clawback".
The clawback denies us the opportunity to build a better future for our children and grandchildren. We should not have to consume our non-renewable resources for current expenses and leave none of the inheritance for our children and grandchildren.
"Essentially, we are asking the federal government to live up to the spirit and intent of the "principal beneficiary" component of the Atlantic Accord. Currently, the federal government receives 86 per cent of the revenues of our offshore petroleum resources, while the province receives a meager 14 per cent," added the Premier. "This revenue sharing is completely contrary to the spirit and intent of the accord and must be addressed now before these non-renewable resources are gone forever. Our province is facing a very serious fiscal situation which must be addressed. We are making tough choices to manage our expenditures and to grow our revenues at the provincial level. We, as a province, are putting into place a long-term plan to grow our economy; however, Ottawa must also be a part of the solution."The overhead slide presentation describes the Atlantic Accord as being a ‘“Memorandum of Agreement between the Government of Canada and the Government of Newfoundland and Labrador on offshore oil and gas resource management and revenue sharing.”’ The paper includes several slides purporting to confirm that “[a]nalysis shows that Newfoundland and Labrador will not be the principal beneficiary of the revenues generated from oil and gas developments.”
Similar arguments have been advanced by John Crosbie, who served as co-chair of the federal Conservative Party’s 2004 election campaign in Newfoundland and Labrador.
9. Mr. Martin’s commitment is worth nothing unless he puts in writing that “principal beneficiary” means that Newfoundland and Labrador is to receive 100 per cent of all offshore revenues, including royalties, provincial corporation income taxes, all fees and bonuses etc. on a net basis with no clawback effect and to be received until we become a “have” province with agreed benchmarks as to when “have” status is achieved. [Run-on sentence in the original. ]Flowing from these statements of the provincial government position, four issues must be addressed. These are ownership of offshore resources, the origins of the Atlantic Accord and federal government intentions, the existence of a “clawback” in the Equalization program, and definition of the term “principal beneficiary”.
Continued in Part 2
-30-
07 February 2005
Second, we assume a can...
Now that I have had some time to go through Wade Locke's slides on the Atlantic Accord, I have a better idea of what he said last week in the"independent" assessment of the Accord deal. The slides and some other documents can be found at the Harris Centre website, along with a bunch of other interesting reading. This follows on my other post on this, First we assume a can-opener.
I've also checked a couple of details on my earlier postings. Apparently, Locke he does include higher revenues for Terra Nova in his projections, but it still seems he does not include Hebron or other revenue sources in his projections of whether or not the province will qualify for Equalization at any point under the January agreement. I am curious about the Terra Nova thing, though, since Locke's version of the revenue chart actually is more extreme than the provincial government one. It has an oddity, too. As revenues get higher and, in one Locke slide, as oil prices get higher, provincial oil revenues drop. There must be something I am missing.
If you check the Terra Nova site, for example you will see there is a plan to plateau production for a period. Logically one would accept that this should be a fairly steady revenue stream, assuming, as Locke does, that oil stays at constant price. Why the big peak, then?
Why the big peak, too, if we are actually bringing on fields in sequencerather than simultaneously?
Admittedly, I am working without the benefit of his actual comments on the night so I may misunderstand some of his points. That said, with his slides and with the media reports, I think I can offer some further observations on his presentation.
Generally, his comments are accurate but that is so solely within the information, context and assumptions that he uses. Shift any of those and his comments are anything from less accurate to completely off base.
Let's just take some key issues:
1. A logical comparison would be between what was sought and what was obtained. Wade Locke deliberately avoided this comparison and the reason is by no means obvious. There is no logical or legitimate reason to do so. He can easily model what was sought. It was a simple proposition: double revenues for the life of oil production. Poof! Instant slide. Then compare that to the January deal. Poof! Instant set of lines on instant chart. Compare both. Measure gaps, if any. Make observations. Make it more complex. Compare the pre-June 5 proposition: double oil revenues for eight years. Poof! Another instant line for comparison. Repeat measurement and observation steps above.
Locke didn't do that, though. Nope. Instead, he looked at each of the federal propositions. This presents some difficulties. The biggest one is that Locke isn't actually making a solid judgment on the apparent success or failure of the Premier's campaign. It would seem like both the most logical comparison and the most productive one for people looking for an independent assessment on which to base their personal judgment. It is curious that he wound up with a presentation that joins the chorus of cheers, hence my suggestion in an earlier post that Locke situated the estimate.
The next biggest difficulty is that Locke is working without the benefit of all the deals, details and counter details. One can only make the kind of observations Locke did make - like that each proposal was better than the one before - if he actually had details of every single nuance and detail in the discussion. For example, we know the Premier had some kind of long-term deal in June which he repudiated by his letter of January 10. Locke doesn't discuss this idea at all, preferring to completely ignore this deal. Locke also ignores the changing provincial position too. These considerations all call his final assessment into serious doubt.
What we wind up with is a case where our economist not only assumes a can-opener, he also assumes a can of beans. He then proceeds to open then figuratively and reveal their magical contents. No matter how you look at, Wade Locke's entire approach doesn't add up to a genuinely thorough assessment of the provincial position. We still have imaginary beans and a can opener
2. Locke concludes (if I gather correctly) that each federal offer from October to January got better, to the point where the province accepted the last one.
Well, as the post from Thursday shows, on paper there is actually very little difference between December and January. There was noticeable improvement from October to December after much negotiation, but the variations between December and January are anything but big. I'll highlight some specifics.
- In the core issue, the federal position remains the same: collect revenue plus offsets until past the Equalization threshold. After that, the existing Accord provisions apply. This is emphatically not what the provincial government sought in any of its three proposals and this is a point Locke apparently does not make at all. This leaves a huge gap in Locke's presentation.
- The lump sum payment concept is simply an adaptation of an October concept to the new deal. It doesn't materially enhance the January offer since, as I have argued elsewhere, the October deal could have netted out the same cash - if they tried for it. December was an improvement on October, but there was very little of substance changed between the December offer and January. The second-phase could be seen as unattainable, depending on your assumptions about economic performance that far out (2010-2012). Therefore, October might not have been that bad after all.
- The cash value of the deal in the short-term and long-term fluctuates with the price of oil. Therefore many of the deal's benefits are simply theoretical. It all depends on which scenario plays out; it's based on which can-opener you assume.
Of course, Locke has conveniently ignored the most obvious point: Danny Williams said yes to less despite his claim that he woudn't.
3. In order for this deal to pay off as Locke projects, oil prices have to remain at or below $32 a barrel for the life of the agreement, especially in the years when oil revenue supposedly peaks (06-08 depending on pricing). Locke's assumption appears to be based on an average price per barrel of oil. fair enough; most projections work this way. However, over the span of eight years, the average price could be US$32, with a low period at the beginning and peaks in between such that it averages out at $32. Unfortunately, if those peaks also push the province beyond the Equalization threshold, this deal won't pay off in the way Locke suggests. Assume a different can opener and you might not be able to open the can of magic beans.
4. Locke appears to assume no other economic activity exists. It is obvious from the slides that Locke assumes no Hebron/Be Nevis development and it would appear he also assumes no other projects such as Voisey's Bay will impact on provincial own-source revenues. As such, other economic activity could make this a really short-term deal as I have said elsewhere. In that case, Locke's praise of this deal would be...Well...Premature.
5. Clawbacks, clawbacks, clawbacks. Locke persists in the clawback mythology which only serves to confuse the issue and mask what actually occurs. For example, in slide labeled "What was the January Offer Worth?", Locke's presentation makes it appear that the maximum revenue is the red line, the oil revenue line. In the scenario being described, though, the revenue is actually cumulative and would be considerably higher than the $1.1 billion shown at peak. The oddest part of Locke's presentation is his claim that even though the supposed "clawback" climbs steadily from 14% currently toward 100%, at some magical point, when the province no longer qualifies for Equalization, the "clawback" magically disappears. What should be a 100% clawback, as Danny Williams logically used to argue, Locke says the clawback disappears. What a crock!
6. Problems/Uncertainties magically disappear. There is precious little difference between the December and January offers. Yet, Locke makes different conclusions on each. For example, in the slide "Issues with Respect to the December Agreement in principle", Locke lists as his first point that the province might not qualify for Equalization after 2006 depending on oil prices and "other things going on in the province". While this acknowledges one of the major shortcomings of Locke's assessment the same could be said of January as well. Where did you concern go, Wade? It's not like this is a minor issue.
7. Funky Math and Funkadelic Logic. In the slide on what was achieved in the January deal, there is some funky math. The "upfront payment" does not have a value of up to $400 million per year as Locke suggests. It is only $250 million for sure; any other value, such as interest, will vary widely depending on how the money is used. That looks like funky math to me.
As for funkadelic logic, Locke praises the change in the criteria for qualifying for the second eight-year phase of the offset deal. He apparently didn't notice that an "either/or" provision - meaning the province met one of two criteria, suddenly became an "and" criteria - meaning the province will have to meet two criteria simultaneously. Add in a more realistic assessment of the economy over thee next eight years and you can start to see some difficulties with hitting both criteria that we wouldn't have had with hitting one.
As for his comment about a clause for Phase 2 preventing the province from "falling off a cliff", Locke knows that the existing Equalization program has sufficient insurance against this ever occurring. It was a cute phrase Danny liked to used - maybe he got it from Wade - but it is a dubious concept at best. Of course, it won't be a benefit at all if, as Locke noted in his critique of the December deal, the province doesn't qualify for Equalization anyway.
Nasty things, those funkadelic assumptions.
I wish I'd ame the session at Memorial last week, if for no other reason than I could have heard the comments from political scientists Steve Tomblin and Chris Dunn. As it is, from Wade Locke's slides and his media interviews, I'd say his "independent" assessment fell as far short of the requirement as that offered by most news media in the province.
Too bad, really. It is difficult to have a participatory democracy when people are fed assumptions in place of analysis.
09 February 2007
For the record: Danny Williams' 2001 speech to Nova Scotia Tories
Shortly after taking power in 2003, the provincial Progressive Conservatives stripped their party website of any documents from their time in opposition.
The reasons are inexplicable.
The site could have been re-arranged but older, important document still retrieved via google. Could have been, that is, if the Tory webmaster hadn't also blocked access to the old stuff.
Never fear, gentle reader. Some of us saved files for just such an eventuality.
In light of recent events, it is useful to go back and look at what Danny Williams said to a bunch of Nova Scotia Tories in 2001. Williams had just recently been elected leader. Some of his recollections of what had happened just prior to that might not be entirely in accordance with the historical fact, but in the six years that Danny Williams has been in elected politics, some of us have come to understand the Premier's penchant formaking things up as he goes along inaccuracy.
A few things to note:
1. The then-newbie politician apparently spent 25% of his working day listening to radio call-in shows. The practice continues but now draws in public servants.
2. The obviously visceral hatred evident for the federal government, which Williams equates with "Liberals".
3. In light of the campaign to increase federal transfer payments through Equalization and offshore revenue side-deals, the oddity of this statement: "We don't want handouts. We want our pride back. We want to be independent and self-sufficient."
4. The numerous historical fallacies - a polite word for falsehood - like the bit about the federal "manipulation" on the Upper Churchill deal or pre-Confederation Newfoundland "owning" adjacent ocean resources.
Thank you very much for the invitation to speak to your annual fundraiser this evening. Unfortunately, my wife, Maureen, could not join me as she is attending a graduation party for the son of a close family friend.
I want you to know that I feel very much at home here tonight. Both Maureen and I remember fondly the day 30 years ago as newlyweds when we jumped into our beaten-up '61 Valiant Station Wagon and headed for Dal where I obtained my Canadian Law Degree. Our memories of student poverty are treasured. In particular, I vividly remember one lunchtime in Dartmouth when we were trying to scrape together the price of two snack packs of Kentucky Fried Chicken by hauling out the seats of the car to get some loose change to make up the shortfall. The Colonel hasn't tasted as good since.
But my fondness for this province is not just personal. It is also cultural. We have a history and values that go back centuries before Confederation. The bonds that unite us are far stronger than the few differences that could divide us. We have common goals, common interests, common challenges, common vulnerabilities, common opportunities and of course a common boundary. But we have been more than just neighbours sharing adjoining properties. We have been partners sharing enterprises, resources and people. We hold kinship in thousands of families throughout both our provinces. Many Newfoundlanders and Labradorians like myself have received quality education in your province and are alumni of Nova Scotia Universities and Colleges. So when I say that I feel at home, I mean it. Our Atlantic Canadian family is a strong bond that unites us all.
So you may ask yourself why am I here tonight. By way of quick background, just a year ago I was a very happy man. I had a good law practice, a successful business, some free time for my family and a chance to play the odd game of golf. But then the Leader of the P.C. Party in Newfoundland and Labrador, Ed Byrne, resigned and, in the absence of a strong successor, I decided that the province needed a change in leadership and direction - and I threw my hat into the ring. As a result, I sold my business to avoid conflict of interest. My practice is drying up because people think I'm too busy, and I now spend at least 25 per cent of my time listening to our open line shows and less time with family. In the last seven months, I have campaigned in the fall federal election - and also in two winter by-elections on the Great Northern Peninsula, both of which we won. I have had a leadership convention in April, and I now find myself running in a by-election in Corner Brook to obtain a seat in the legislature. I didn't realize how good I had it! Premier, no one will ever convince me that the role of a politician or a party leader is an easy one. As CEO of a private company, you are top dog - but in politics some days you are the dog and some days you are the hydrant.
But it does have its light moments. One supporter told me at the convention that the Liberals in Newfoundland should erect a sign in Port aux Basques that the light at the end of the tunnel has been turned off indefinitely.
And another voter who wanted change in the Northern Peninsula told me that politicians and diapers have something in common: they both have to be changed regularly, for the same reason.
But all jokes aside, I am truly enjoying the experience and challenge of political life. Like Premier Hamm, I did not seek the position for something to do to fill the leisure hours. I have sought this position because I love my province, because I see some things that are desperately wrong that need fixing, because I think I bring a background to the table that can make a difference and because I cannot rest until I have tried.
The more that I see, the more nauseous and angry that I get. The way that our people and our region have been treated by one arrogant federal Liberal government after another is disgusting. The legacy that the late Prime Minister Trudeau and Jean Chrétien will leave in Atlantic Canada is one of dependence on Mother Ottawa, which has been orchestrated for political motives for the sole purpose of maintaining power. No wonder the West is alienated and Québec has threatened separation. Canadians - and Atlantic Canadians, in particular - realize the importance of dignity and self-respect while Ottawa prefers that we negotiate from a position of weakness on our hands and knees. We must heed the words of J.F.K. who said, "Let us never negotiate out of fear, but let us never fear to negotiate."
Our fellow Canadians must wonder why Newfoundlanders and Labradorians are always angry, always complaining about the inequity of the Upper Churchill, when we receive unemployment and TAGS benefits from Ottawa together with generous transfer payments.
We don't want handouts. We want our pride back. We want to be independent and self-sufficient. We have already lost 30 years of profits from the Upper Churchill representing tens of billions of dollars. If we had just ten years of profit from the remainder of that contract at today's prices, our province would be debt-free. Instead, Ottawa saves that money by paying less to Québec.
Last year, over $2 billion worth of oil left our shores - and, after the federal clawback, we netted $12 million. Our mining industry last year produced over $1 billion, and we netted $4 million after federal clawback.
If Voisey's Bay is developed, we will net approximately $6 million after clawback on over a billion dollars worth of nickel production.
So on those three items alone with $4.5 billion dollars of annual production we would net $22 million dollars on royalties after federal clawback of 70% and 80%.
Not to mention the gross mismanagement of our cod fishery by the federal government, resulting in its destruction; the bartering of our fishery rights for favoured access to international markets; and federal manipulation in favour of Québec on our hydroelectric power.
That is why we are angry, we just want a fair share. Comments like "fish have no home" from Trudeau, the philosopher king, might make good soundbites, but they portray arrogance and contempt for a hard-working people who have been deprived of their heritage.
In Atlantic Canada, we are resource-rich but economically poor. We do not benefit as we should from our resource bounty, and part of the reason is that we gave up ownership and control of some of our most important resources when we joined Confederation. Prior to that, we were a sovereign country and we owned the sea's resources. We brought with us the fish in the ocean and the oil and gas in the adjacent ocean shelf, and God knows what else might be discovered in years to come with new technology.
By contrast, the provinces of Alberta and Saskatchewan were carved out of federal lands in 1905. The federal government of that day gave those new provinces ownership and control of the oil and gas in those former federal lands. They could own them and manage them as they saw fit. Alberta, in particular, has turned those resources into colossal wealth for the people of that province. There is no Alberta Accord to allow Albertans a limited share of the benefits from their natural resources. As a result, they hope to pay down $5 billion this year on their debt.
What is the difference between the wealth beneath Alberta's soil and the wealth beneath the sea adjacent to our coasts? Why have we been treated differently merely because our resources are located underwater rather than underground?
I believe that this distinction cannot be justified. I believe it is fundamentally wrong. I believe the situation is discriminatory and goes a long way to keeping our Atlantic provinces in positions of fiscal and economic subservience.
Our offshore resources belong to Canada simply because we are provinces of Canada. They are there because we are there. They go where we go. If we left Canada, the economic zone would go with us. There is no dispute about that. Why then should there be any dispute about the claim to the right of ownership of those economic resources within Canada? Joe Clark's government acknowledged our ownership and control over oil and gas resources offshore in 1979, but Trudeau rejected it in 1980. It was the Mulroney government in 1985 that gave us the Atlantic Accord.
Ours is a strong case of basic fairness and fundamental justice. Jean Chrétien knows this because he was Trudeau's Minister of Energy and intricately involved in the original negotiations. He should be ashamed of himself for the way that he has treated our provinces. Unfortunately, because of relatively low population numbers and the consequent low number of seats in the House of Commons, the Senate and the federal Cabinet, our voice is not heard loudly enough in Ottawa when we try to state our case. All too often, a muted voice is mistaken for a whining voice, if it is heard at all. Atlantic Canadians should never give up the fight to have clear ownership of resources in our economic zone restored to us. Don't ever forget that we collectively constitute four provinces of this country despite our population.
I am proud to say that one Premier in particular in this region has been fighting back and setting the example - and that Premier is John Hamm. Thank Heavens for Premier Hamm! Our province, with its string of silent compliant Liberal Premiers, owes John Hamm a debt of gratitude for fighting on their behalf. But it's time we joined forces and fought together. It's time to form a united power block in this region. With Ontario controlling the Commons, with Québec frequently setting the national agenda and with the West now uniting to ensure their particular perspective is heard, we cannot afford not to act in concert. Circumstances necessitate it. If we want to get our fair share of benefits and to influence public policy in this country, we must band together.
Provincial Liberal Governments in Atlantic Canada have put party ahead of province at the expense of the people they were elected to govern. By contrast, the Progressive Conservative approach is based on the premise that sacrificing the concerns of part of the country for the good of the whole of the country only leaves the country weaker, not stronger.
A blue tide is sweeping the Atlantic region. It has swept over the Maritimes and it is rolling in Newfoundland and Labrador, because our people are tired of poor representation. After a general election, all four Atlantic provinces will be Tory blue - and we must work together to get action.
His fellow Premier Ralph Klein has come out in favour of Premier Hamm's Campaign for Fairness. He feels that a better deal with Ottawa over the lucrative and ever-expanding royalties from vast reserves in the North Atlantic would benefit all Canadians and help the Atlantic provinces get back on their feet. Just this week, Jeffrey Simpson's column in The Globe and Mail drew attention to Premier Hamm’s campaign and the unfairness of clawback. And the Commentary in The National Post on Thursday past was entitled "The Cruel Hand of Equalization". The author agreed with Premier Klein that all Canadians would benefit by removing the shackles from Atlantic Canada and shifting from dependence on Ottawa to greater self-reliance. The perverse incentives of equalization only prevent sound, long-term development.
With developments in the U.S. energy plan and high energy prices, the time is right for the Atlantic provinces to revisit these issues and demand fairness.
Mr. Roland Martin, a former deputy Minister of Finance in Newfoundland and Labrador who now lives in Nova Scotia, recently published the first significant analysis of federal equalization payments since the program was introduced over 40 years ago. He says Ottawa should do three things to help the economies of the Atlantic provinces and reduce their dependence over the long term.
First, he says, Ottawa should take oil and gas out of the equalization formula so there will be no clawback of revenues from offshore royalties and taxes. Second, Ottawa should return to a ten-province standard for calculating entitlement to equalization instead of the current five-province standard. A ten-province standard would treat provinces equally in terms of their capacity to raise revenues, and would provide more equalization revenues to the Atlantic provinces.
Thirdly, Mr. Martin calls for a needs component in the equalization formula that will compensate, to some degree, for the higher costs of such public services as transportation, health and education in our province.
There is now a huge disconnect between the wealth generated by our resources and the net value we derive from them as provinces of Canada.
Ottawa, not Newfoundland and Labrador, is the big beneficiary.
This inability to gain any significant advantage from our resource wealth goes a long way to explaining the stark contrast between reported GDP growth and the actual economic and revenue benefits that accrue to Newfoundlanders and Labradorians.
Newfoundland and Labrador leads the nation in GDP growth and has been at or near the top for several years.
For every one of those years, Newfoundland and Labrador has also led the nation in unemployment and outmigration and trailed every other province in the nation in its ability to raise revenues to pay for essential public services, despite having some of the highest taxes in the nation.
Our dilemma is compounded by Ottawa's retreat from the federal principles of comparable public services for comparable fiscal effort. Those principles distinguished Canada among the nations of the world for much of the post-war period. But we are much less a sharing, caring nation today.
Mr. Martin, in his own paper on equalization, described the widening gap in taxation levels among provinces as "a rapidly evolving threat to the nation's political, social, and economic survival".
All of us in Atlantic Canada are suffering as a result of Ottawa's greater tolerance for inequalities in Canada.
We can no longer count on transfers from Ottawa to help pay for essential public services up to national standards.
From now on, this region will be more reliant on it own resources than at any time in the last half-century.
It is urgent that we find ways together to adjust to these new realities.
And it is urgent that we work together to impress upon Ottawa the need to give us the time to make those adjustments - to end our dependence on Ottawa in a planned way, without creating an even-wider gap between this region and the rest of the country.
I believe that we need our own Atlantic Accord and we can achieve greater self-sufficiency by working together as a region. Ontario looks after Ontario. Québec has its own agenda. The western provinces are a force in their own right and have succeeded in capturing national attention to their issues.
So far, Atlantic Canada has been irrelevant in the debate about the values of our nation and its future. Thanks to Premier Hamm, people are standing up and taking notice.
There is much work to be done.
There is a fight to be won.
Capitulation is not an option.
We owe it to our children and their children to preserve and find new creative ways to build a stronger, prosperous and self-reliant society.
The fight is well underway in Nova Scotia.
It has begun with the Conservatives in Newfoundland and Labrador.
We will fight as a united team, and I firmly believe that we will win.
The reasons are inexplicable.
The site could have been re-arranged but older, important document still retrieved via google. Could have been, that is, if the Tory webmaster hadn't also blocked access to the old stuff.
Never fear, gentle reader. Some of us saved files for just such an eventuality.
In light of recent events, it is useful to go back and look at what Danny Williams said to a bunch of Nova Scotia Tories in 2001. Williams had just recently been elected leader. Some of his recollections of what had happened just prior to that might not be entirely in accordance with the historical fact, but in the six years that Danny Williams has been in elected politics, some of us have come to understand the Premier's penchant for
A few things to note:
1. The then-newbie politician apparently spent 25% of his working day listening to radio call-in shows. The practice continues but now draws in public servants.
2. The obviously visceral hatred evident for the federal government, which Williams equates with "Liberals".
3. In light of the campaign to increase federal transfer payments through Equalization and offshore revenue side-deals, the oddity of this statement: "We don't want handouts. We want our pride back. We want to be independent and self-sufficient."
4. The numerous historical fallacies - a polite word for falsehood - like the bit about the federal "manipulation" on the Upper Churchill deal or pre-Confederation Newfoundland "owning" adjacent ocean resources.
Williams sees cooperation
among Atlantic provinces as
the key to battling Ottawa
among Atlantic provinces as
the key to battling Ottawa
Notes for a Speech by Danny Williams,
Newfoundland and Labrador PC Party Leader,
at the Nova Scotia Annual Premier's Dinner
Halifax, NS, Saturday, June 2, 2001
Newfoundland and Labrador PC Party Leader,
at the Nova Scotia Annual Premier's Dinner
Halifax, NS, Saturday, June 2, 2001
This text may vary from the delivered version
Thank you very much for the invitation to speak to your annual fundraiser this evening. Unfortunately, my wife, Maureen, could not join me as she is attending a graduation party for the son of a close family friend.
I want you to know that I feel very much at home here tonight. Both Maureen and I remember fondly the day 30 years ago as newlyweds when we jumped into our beaten-up '61 Valiant Station Wagon and headed for Dal where I obtained my Canadian Law Degree. Our memories of student poverty are treasured. In particular, I vividly remember one lunchtime in Dartmouth when we were trying to scrape together the price of two snack packs of Kentucky Fried Chicken by hauling out the seats of the car to get some loose change to make up the shortfall. The Colonel hasn't tasted as good since.
But my fondness for this province is not just personal. It is also cultural. We have a history and values that go back centuries before Confederation. The bonds that unite us are far stronger than the few differences that could divide us. We have common goals, common interests, common challenges, common vulnerabilities, common opportunities and of course a common boundary. But we have been more than just neighbours sharing adjoining properties. We have been partners sharing enterprises, resources and people. We hold kinship in thousands of families throughout both our provinces. Many Newfoundlanders and Labradorians like myself have received quality education in your province and are alumni of Nova Scotia Universities and Colleges. So when I say that I feel at home, I mean it. Our Atlantic Canadian family is a strong bond that unites us all.
So you may ask yourself why am I here tonight. By way of quick background, just a year ago I was a very happy man. I had a good law practice, a successful business, some free time for my family and a chance to play the odd game of golf. But then the Leader of the P.C. Party in Newfoundland and Labrador, Ed Byrne, resigned and, in the absence of a strong successor, I decided that the province needed a change in leadership and direction - and I threw my hat into the ring. As a result, I sold my business to avoid conflict of interest. My practice is drying up because people think I'm too busy, and I now spend at least 25 per cent of my time listening to our open line shows and less time with family. In the last seven months, I have campaigned in the fall federal election - and also in two winter by-elections on the Great Northern Peninsula, both of which we won. I have had a leadership convention in April, and I now find myself running in a by-election in Corner Brook to obtain a seat in the legislature. I didn't realize how good I had it! Premier, no one will ever convince me that the role of a politician or a party leader is an easy one. As CEO of a private company, you are top dog - but in politics some days you are the dog and some days you are the hydrant.
But it does have its light moments. One supporter told me at the convention that the Liberals in Newfoundland should erect a sign in Port aux Basques that the light at the end of the tunnel has been turned off indefinitely.
And another voter who wanted change in the Northern Peninsula told me that politicians and diapers have something in common: they both have to be changed regularly, for the same reason.
But all jokes aside, I am truly enjoying the experience and challenge of political life. Like Premier Hamm, I did not seek the position for something to do to fill the leisure hours. I have sought this position because I love my province, because I see some things that are desperately wrong that need fixing, because I think I bring a background to the table that can make a difference and because I cannot rest until I have tried.
The more that I see, the more nauseous and angry that I get. The way that our people and our region have been treated by one arrogant federal Liberal government after another is disgusting. The legacy that the late Prime Minister Trudeau and Jean Chrétien will leave in Atlantic Canada is one of dependence on Mother Ottawa, which has been orchestrated for political motives for the sole purpose of maintaining power. No wonder the West is alienated and Québec has threatened separation. Canadians - and Atlantic Canadians, in particular - realize the importance of dignity and self-respect while Ottawa prefers that we negotiate from a position of weakness on our hands and knees. We must heed the words of J.F.K. who said, "Let us never negotiate out of fear, but let us never fear to negotiate."
Our fellow Canadians must wonder why Newfoundlanders and Labradorians are always angry, always complaining about the inequity of the Upper Churchill, when we receive unemployment and TAGS benefits from Ottawa together with generous transfer payments.
We don't want handouts. We want our pride back. We want to be independent and self-sufficient. We have already lost 30 years of profits from the Upper Churchill representing tens of billions of dollars. If we had just ten years of profit from the remainder of that contract at today's prices, our province would be debt-free. Instead, Ottawa saves that money by paying less to Québec.
Last year, over $2 billion worth of oil left our shores - and, after the federal clawback, we netted $12 million. Our mining industry last year produced over $1 billion, and we netted $4 million after federal clawback.
If Voisey's Bay is developed, we will net approximately $6 million after clawback on over a billion dollars worth of nickel production.
So on those three items alone with $4.5 billion dollars of annual production we would net $22 million dollars on royalties after federal clawback of 70% and 80%.
Not to mention the gross mismanagement of our cod fishery by the federal government, resulting in its destruction; the bartering of our fishery rights for favoured access to international markets; and federal manipulation in favour of Québec on our hydroelectric power.
That is why we are angry, we just want a fair share. Comments like "fish have no home" from Trudeau, the philosopher king, might make good soundbites, but they portray arrogance and contempt for a hard-working people who have been deprived of their heritage.
In Atlantic Canada, we are resource-rich but economically poor. We do not benefit as we should from our resource bounty, and part of the reason is that we gave up ownership and control of some of our most important resources when we joined Confederation. Prior to that, we were a sovereign country and we owned the sea's resources. We brought with us the fish in the ocean and the oil and gas in the adjacent ocean shelf, and God knows what else might be discovered in years to come with new technology.
By contrast, the provinces of Alberta and Saskatchewan were carved out of federal lands in 1905. The federal government of that day gave those new provinces ownership and control of the oil and gas in those former federal lands. They could own them and manage them as they saw fit. Alberta, in particular, has turned those resources into colossal wealth for the people of that province. There is no Alberta Accord to allow Albertans a limited share of the benefits from their natural resources. As a result, they hope to pay down $5 billion this year on their debt.
What is the difference between the wealth beneath Alberta's soil and the wealth beneath the sea adjacent to our coasts? Why have we been treated differently merely because our resources are located underwater rather than underground?
I believe that this distinction cannot be justified. I believe it is fundamentally wrong. I believe the situation is discriminatory and goes a long way to keeping our Atlantic provinces in positions of fiscal and economic subservience.
Our offshore resources belong to Canada simply because we are provinces of Canada. They are there because we are there. They go where we go. If we left Canada, the economic zone would go with us. There is no dispute about that. Why then should there be any dispute about the claim to the right of ownership of those economic resources within Canada? Joe Clark's government acknowledged our ownership and control over oil and gas resources offshore in 1979, but Trudeau rejected it in 1980. It was the Mulroney government in 1985 that gave us the Atlantic Accord.
Ours is a strong case of basic fairness and fundamental justice. Jean Chrétien knows this because he was Trudeau's Minister of Energy and intricately involved in the original negotiations. He should be ashamed of himself for the way that he has treated our provinces. Unfortunately, because of relatively low population numbers and the consequent low number of seats in the House of Commons, the Senate and the federal Cabinet, our voice is not heard loudly enough in Ottawa when we try to state our case. All too often, a muted voice is mistaken for a whining voice, if it is heard at all. Atlantic Canadians should never give up the fight to have clear ownership of resources in our economic zone restored to us. Don't ever forget that we collectively constitute four provinces of this country despite our population.
I am proud to say that one Premier in particular in this region has been fighting back and setting the example - and that Premier is John Hamm. Thank Heavens for Premier Hamm! Our province, with its string of silent compliant Liberal Premiers, owes John Hamm a debt of gratitude for fighting on their behalf. But it's time we joined forces and fought together. It's time to form a united power block in this region. With Ontario controlling the Commons, with Québec frequently setting the national agenda and with the West now uniting to ensure their particular perspective is heard, we cannot afford not to act in concert. Circumstances necessitate it. If we want to get our fair share of benefits and to influence public policy in this country, we must band together.
Provincial Liberal Governments in Atlantic Canada have put party ahead of province at the expense of the people they were elected to govern. By contrast, the Progressive Conservative approach is based on the premise that sacrificing the concerns of part of the country for the good of the whole of the country only leaves the country weaker, not stronger.
A blue tide is sweeping the Atlantic region. It has swept over the Maritimes and it is rolling in Newfoundland and Labrador, because our people are tired of poor representation. After a general election, all four Atlantic provinces will be Tory blue - and we must work together to get action.
His fellow Premier Ralph Klein has come out in favour of Premier Hamm's Campaign for Fairness. He feels that a better deal with Ottawa over the lucrative and ever-expanding royalties from vast reserves in the North Atlantic would benefit all Canadians and help the Atlantic provinces get back on their feet. Just this week, Jeffrey Simpson's column in The Globe and Mail drew attention to Premier Hamm’s campaign and the unfairness of clawback. And the Commentary in The National Post on Thursday past was entitled "The Cruel Hand of Equalization". The author agreed with Premier Klein that all Canadians would benefit by removing the shackles from Atlantic Canada and shifting from dependence on Ottawa to greater self-reliance. The perverse incentives of equalization only prevent sound, long-term development.
With developments in the U.S. energy plan and high energy prices, the time is right for the Atlantic provinces to revisit these issues and demand fairness.
Mr. Roland Martin, a former deputy Minister of Finance in Newfoundland and Labrador who now lives in Nova Scotia, recently published the first significant analysis of federal equalization payments since the program was introduced over 40 years ago. He says Ottawa should do three things to help the economies of the Atlantic provinces and reduce their dependence over the long term.
First, he says, Ottawa should take oil and gas out of the equalization formula so there will be no clawback of revenues from offshore royalties and taxes. Second, Ottawa should return to a ten-province standard for calculating entitlement to equalization instead of the current five-province standard. A ten-province standard would treat provinces equally in terms of their capacity to raise revenues, and would provide more equalization revenues to the Atlantic provinces.
Thirdly, Mr. Martin calls for a needs component in the equalization formula that will compensate, to some degree, for the higher costs of such public services as transportation, health and education in our province.
There is now a huge disconnect between the wealth generated by our resources and the net value we derive from them as provinces of Canada.
Ottawa, not Newfoundland and Labrador, is the big beneficiary.
This inability to gain any significant advantage from our resource wealth goes a long way to explaining the stark contrast between reported GDP growth and the actual economic and revenue benefits that accrue to Newfoundlanders and Labradorians.
Newfoundland and Labrador leads the nation in GDP growth and has been at or near the top for several years.
For every one of those years, Newfoundland and Labrador has also led the nation in unemployment and outmigration and trailed every other province in the nation in its ability to raise revenues to pay for essential public services, despite having some of the highest taxes in the nation.
Our dilemma is compounded by Ottawa's retreat from the federal principles of comparable public services for comparable fiscal effort. Those principles distinguished Canada among the nations of the world for much of the post-war period. But we are much less a sharing, caring nation today.
Mr. Martin, in his own paper on equalization, described the widening gap in taxation levels among provinces as "a rapidly evolving threat to the nation's political, social, and economic survival".
All of us in Atlantic Canada are suffering as a result of Ottawa's greater tolerance for inequalities in Canada.
We can no longer count on transfers from Ottawa to help pay for essential public services up to national standards.
From now on, this region will be more reliant on it own resources than at any time in the last half-century.
It is urgent that we find ways together to adjust to these new realities.
And it is urgent that we work together to impress upon Ottawa the need to give us the time to make those adjustments - to end our dependence on Ottawa in a planned way, without creating an even-wider gap between this region and the rest of the country.
I believe that we need our own Atlantic Accord and we can achieve greater self-sufficiency by working together as a region. Ontario looks after Ontario. Québec has its own agenda. The western provinces are a force in their own right and have succeeded in capturing national attention to their issues.
So far, Atlantic Canada has been irrelevant in the debate about the values of our nation and its future. Thanks to Premier Hamm, people are standing up and taking notice.
There is much work to be done.
There is a fight to be won.
Capitulation is not an option.
We owe it to our children and their children to preserve and find new creative ways to build a stronger, prosperous and self-reliant society.
The fight is well underway in Nova Scotia.
It has begun with the Conservatives in Newfoundland and Labrador.
We will fight as a united team, and I firmly believe that we will win.
31 March 2006
Danny's Deal not delivering as promised
Today's new agreement is a giant leap forward on the path of progress. It gives our province 100 percent of our provincial share of offshore revenues, free from equalization [sic] clawback while we are an equalization-receiving province. [Emphasis added]
Premier Danny Williams
Atlantic Accord 2005 signing ceremony
February 14, 2005
Atlantic Accord 2005 signing ceremony
February 14, 2005
The January 2005 offshore revenue deal with the Government of Canada will deliver only half the revenue protection promised by Premier Danny Williams in 2005, according to an assessment of figures released by the Government of Newfoundland and Labrador on Thursday in Budget 2006.
Provincial government figures show that while total oil and gas revenues will be some $927 million in Fiscal Year (FY) 2006, the provincial government will receive offsets of only $329 million.
That's just half the $648.9 million the province should be receiving.1
Coupled with the Equalization offsets contained in the Atlantic Accord 1985, Danny Williams' 2005 agreement with former prime minister Paul Martin was supposed to create a new federal transfer payment that would equal 70% of the province's total offshore revenues. This is the amount supposedly clawed back through reductions in Equalization caused by growing oil and gas revenues. The remaining 30% was supposedly shielded from Equalization calculations already.
In the budget speech, provincial finance minister Loyola Sullivan said:
In 2006-07, the province is expecting to generate royalties from oil production of $703 million2 and corporate income tax from companies operating in the offshore area of $224 million. This represents direct revenue from offshore oil of $927 million in this year alone. This forecast assumes the average price per barrel of oil will be $US57. Added to this is the benefit accruing to the people of the province from the Atlantic Accord arrangements which will contribute an additional $329 million in 2006-07.While Danny Williams originally sought a deal that would deliver to the provincial government a federal transfer equal to total provincial oil and gas revenues, the agreement signed in January 2005 contained an important redefinition of the word "revenue" that to date has never been discussed publicly.
The January 2005 agreement defines revenues as being the money collected under the Canada-Newfoundland Atlantic Accord Implementation Act (1987)3. That federal law refers only to royalties collected on behalf of the province.
Even using the more restrictive definition - which has never been publicly acknowledged by the provincial government - the forecast offsets for 2006 are below what they ought to be. Provincial royalties estimated at $663.4 million would give an offset amount of $464.38 million.
That's a difference of $135.38 million more than the budget forecast.
Using Sullivan's royalty figure of $703 million, the offset should be $492.1 million, or $163 million more than Budget 2006 projects.
-------------
Notes
1 Based on the original Williams proposal to offset total provincial oil and gas revenues. The figure is 70% of the total oil and gas revenues and assumes that the remaining 30% of total revenues is already protected from supposed Equalization clawbacks. Some sources have estimated the clawback to be much higher, amounting to as much as 85%. The 70% clawback is used since it is the one referred to most often by Premier Williams in 2004.
2 The Estimates gives this figure as $663.4 million. See for example, Statement IV, p. vii.
3 "2. ...The Government of Canada intends to provide additional offset payments to the province in respect of offshore-related Equalization reductions, effectively allowing it to retain the benefit of 100 per cent of its offshore resource revenues...[Note 1 in original] Defined as revenue received from the Government of Canada under the Canada-Newfoundland Atlantic Accord Implementation Act and Hibernia contractual royalties."
Under the Canada-Newfoundland Atlantic Accord Implementation Act, 1987, the Government of Canada collects royalties from the Newfoundland Offshore Area, which are transferred to the Government of Newfoundland and Labrador under the terms of a memorandum of understanding between the two governments.
The Atlantic Accord (1985) defined the province's revenues much more broadly:
On the basis of the foregoing, Newfoundland shall receive the proceeds of the following revenues from petroleum related activity in the offshore area:
(a) royalties;
(b) a corporate income tax which is the same as the generally prevailing provincial corporate income tax in the province;
(c) a sales tax that is the same as the generally prevailing provincial sales tax in the
province;
(d) any bonus payments;
(e) rentals and licence fees; and
(f) other forms of resource revenue and provincial taxes of general application, consistent with the spirit of this Accord, as may be established from time to time.
17 August 2015
The 2004 war with Ottawa revisited #nlpoli
The 2004 “war” with Ottawa over a version of federal Equalization payments to Newfoundland and Labrador is an early episode in the provincial Conservative administration.
The confrontation helped propel Premier Danny Williams to unprecedented heights of popularity. This, in turn, affected the rest of his tenure as Premier. It was a critical element in his quest for political hegemony in the province during his first term.
In SRBP’s review of Ray Blake’s new book on federal provincial relations, there are some comments about Blake’s chapter on Danny Williams and the war with Ottawa in 2004. The review wasn’t the place to get into that. The subject is too big.
This post will explain the problems with Blake’s accounts and with other accounts of the period.
The confrontation helped propel Premier Danny Williams to unprecedented heights of popularity. This, in turn, affected the rest of his tenure as Premier. It was a critical element in his quest for political hegemony in the province during his first term.
In SRBP’s review of Ray Blake’s new book on federal provincial relations, there are some comments about Blake’s chapter on Danny Williams and the war with Ottawa in 2004. The review wasn’t the place to get into that. The subject is too big.
This post will explain the problems with Blake’s accounts and with other accounts of the period.
01 April 2007
The need for public discussion
Following is an opinion piece originally published in The Telegram during the offshore discussions in 2004. It is based on the longer piece of the same name, posted below in four parts.
The Government of Newfoundland and Labrador currently receives 100 per cent of provincial revenues. Under the 1985 Atlantic Accord, the provincial government gained the right to set its own revenue regime for offshore oil and gas developments and it has done so through legislation and development agreements with the companies that have brought Hibernia, Terra Nova and White Rose on stream. It collects every penny of the revenues defined in the Atlantic Accord, and set out in those development agreements. In addition, it collects revenues, mostly taxes, from the business that have grown up around oil production.
The Williams administration, like the Grimes administration before it, claims money is lost through an Equalization “clawback”. There is no clawback in the way that word would normally be used. Ordinarily, Equalization is a glorified top-up scheme. Any provincial government making less than a national standard from its own-source revenues gets a cheque from Ottawa to make up the difference. Make more money; get less of a top-up. If there was a sudden growth in high technology manufacturing – if the province became a Celtic Lynx – Equalization would be reduced accordingly.
The Atlantic Accord contains a provision than offsets any losses in Equalization transfers resulting from growing provincial government revenues, for a period of 12 years. The calculation is made on a 10 province standard, so it is no surprise that last year the province collected $123.8 million in oil royalties and received $178 million in offsets. The major problem with the offsets – if there is a problem - results from the fact the offset provisions are triggered by quantity of oil produced, not on their economic impact as such. Once triggered, they decline over time irrespective of how many oil fields have been developed or what their economic benefit has been to the province. Danny Williams’ current proposal is apparently aimed at changing the offset provisions of the Accord.
There are at least two major problems with the proposal from the Williams administration that would, as Danny Williams recently put it, “renegotiate the Atlantic Accord”. The most significant problem is that there is no plain English description of the problem or of the government’s proposed solution: it isn’t in writing. How can anyone judge the success or failure of upcoming negotiations between the federal and provincial governments if we do not know what the Williams administration is seeking?
The second problem is in the way the argument has been framed. The Williams administration claims that by changing the offsets, the provincial government can become the “principal beneficiary” of the offshore, as the Accord intended. Unfortunately, the Atlantic Accord does not say the provincial government will be the principal beneficiary nor is “principal beneficiary” defined as meaning provincial government revenues. The Atlantic Accord delivers significant benefits to the province as a whole. The provincial government gets the right to co-manage the offshore with Ottawa. The provincial government sets its own revenues, as if the resource was on land. The province as a whole gets industrial benefits, something Brian Mulroney considered to be a major aspect of the Accord. Those industrial benefits go against the spirit if not the letter of inter-provincial free trade agreements and the North American Free Trade Agreement, Right now, the Accord is exempt from NAFTA.
“Principal beneficiary” is central to the Accord; redefining it changes the Accord fundamentally. Change the Accord’s underlying principals and it may well become a new deal, one that would be subject to NAFTA. Of all the Accord provisions, the one that would clearly not fit NAFTA is the industrial benefits provision. We can’t be certain, in largest part because the Williams administration proposal has not be clearly stated and thoroughly examined. There is enough information, though, to encourage the provincial government to be cautious.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. There is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned. More important than mere contrariness though, the absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them. Getting more cash from Ottawa is one thing. If that comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. If nothing else, the people of the province have a right to know what is being talked about. They will either reap the reward of the proposed changes or bear the burden.
_______________________
Which is to be master?
Public discussion, more information needed on Atlantic Accord changes
Public discussion, more information needed on Atlantic Accord changes
“The absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them.”
The Government of Newfoundland and Labrador currently receives 100 per cent of provincial revenues. Under the 1985 Atlantic Accord, the provincial government gained the right to set its own revenue regime for offshore oil and gas developments and it has done so through legislation and development agreements with the companies that have brought Hibernia, Terra Nova and White Rose on stream. It collects every penny of the revenues defined in the Atlantic Accord, and set out in those development agreements. In addition, it collects revenues, mostly taxes, from the business that have grown up around oil production.
The Williams administration, like the Grimes administration before it, claims money is lost through an Equalization “clawback”. There is no clawback in the way that word would normally be used. Ordinarily, Equalization is a glorified top-up scheme. Any provincial government making less than a national standard from its own-source revenues gets a cheque from Ottawa to make up the difference. Make more money; get less of a top-up. If there was a sudden growth in high technology manufacturing – if the province became a Celtic Lynx – Equalization would be reduced accordingly.
The Atlantic Accord contains a provision than offsets any losses in Equalization transfers resulting from growing provincial government revenues, for a period of 12 years. The calculation is made on a 10 province standard, so it is no surprise that last year the province collected $123.8 million in oil royalties and received $178 million in offsets. The major problem with the offsets – if there is a problem - results from the fact the offset provisions are triggered by quantity of oil produced, not on their economic impact as such. Once triggered, they decline over time irrespective of how many oil fields have been developed or what their economic benefit has been to the province. Danny Williams’ current proposal is apparently aimed at changing the offset provisions of the Accord.
There are at least two major problems with the proposal from the Williams administration that would, as Danny Williams recently put it, “renegotiate the Atlantic Accord”. The most significant problem is that there is no plain English description of the problem or of the government’s proposed solution: it isn’t in writing. How can anyone judge the success or failure of upcoming negotiations between the federal and provincial governments if we do not know what the Williams administration is seeking?
The second problem is in the way the argument has been framed. The Williams administration claims that by changing the offsets, the provincial government can become the “principal beneficiary” of the offshore, as the Accord intended. Unfortunately, the Atlantic Accord does not say the provincial government will be the principal beneficiary nor is “principal beneficiary” defined as meaning provincial government revenues. The Atlantic Accord delivers significant benefits to the province as a whole. The provincial government gets the right to co-manage the offshore with Ottawa. The provincial government sets its own revenues, as if the resource was on land. The province as a whole gets industrial benefits, something Brian Mulroney considered to be a major aspect of the Accord. Those industrial benefits go against the spirit if not the letter of inter-provincial free trade agreements and the North American Free Trade Agreement, Right now, the Accord is exempt from NAFTA.
“Principal beneficiary” is central to the Accord; redefining it changes the Accord fundamentally. Change the Accord’s underlying principals and it may well become a new deal, one that would be subject to NAFTA. Of all the Accord provisions, the one that would clearly not fit NAFTA is the industrial benefits provision. We can’t be certain, in largest part because the Williams administration proposal has not be clearly stated and thoroughly examined. There is enough information, though, to encourage the provincial government to be cautious.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. There is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned. More important than mere contrariness though, the absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them. Getting more cash from Ottawa is one thing. If that comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. If nothing else, the people of the province have a right to know what is being talked about. They will either reap the reward of the proposed changes or bear the burden.
-30-
11 February 2010
Government smears landmark agreement with false statements
The provincial government has tarnished the 25th anniversary of the Atlantic Accord by issuing a news release which contains false information:
In 2005, the Williams Government improved upon the benefits in the original Atlantic Accord by negotiating a new deal that retained a greater share of offshore revenues for the province. The new revenue-sharing arrangement reached between Premier Danny Williams and then Prime Minister Paul Martin resulted in Newfoundland and Labrador receiving 100 per cent of its offshore revenues for the first time, free from any clawbacks while an equalization-receiving province. he 2005 Accord enabled Newfoundland and Labrador to truly be the “principal beneficiary” of the petroleum resources off its shores. …[Emphasis added]
“The original Atlantic Accord has greatly assisted in the pursuit of long-term economic prosperity and self-reliance for Newfoundland and Labrador, and these benefits were secured and improved in 2005 when Premier Williams succeeded in convincing the Federal Government of the inequity Newfoundland and Labrador had endured for years in not receiving the full benefit of the exploitation of its offshore resources,” said Acting Premier Dunderdale.
All of that is completely false.
Provincial government officials should know it is utterly untrue false because they link to the text of the 2005 deal in the news release. Here’s what the 2005 agreement says in plain English:
2. This document reflects an understanding between the Government of Canada and the Government of Newfoundland and Labrador that:
- Newfoundland and Labrador already receives and will continue to receive 100 per cent of offshore resource revenues as if these resources were on land; [Emphasis added]
There were no changes to revenue-sharing spelled out in the 1985 Accord. Under the 1985 agreement the provincial government alone sets and receives all offshore oil government royalties. The federal government collects only what it would from any other industry in the way of business and personal taxes.
Despite ludicrous claims at the time it was signed, the 2005 agreement delivered nothing more than a single $2.0 billion payment to the provincial government.
That’s it.
The Equalization formula continued to work as it is supposed to work. As forecast in 2005, the provincial stopped qualifying for Equalization payments in 2009.
When that happened, the “clawback” described in today’s news release didn’t hit zero. Rather it became a full - 100% - clawback of all offshore revenues.
The 2005 made no changes to any of the provisions of the 1985 agreement.
The 1985 Accord alone forms the basis for the current offshore oil industry and for current provincial prosperity.
Here’s the way your humble e-scribbler laid it out in 2004/2005:
First, [under what became the 1985 Accord] the provincial government would gain the right to manage the offshore jointly with the federal government, particularly with respect to setting the mode of production. This had significant implications for local benefits, as evident from construction of the gravity-based system (GBS) for Hibernia.
Second, the provincial government gained the right to collect revenues from the resources as if they were on land. This established that the provincial government would determine its own revenues to be collected from offshore oil and gas development and production just as a province like Alberta is able to do. These revenues would, de facto, be treated as “own source” revenues like income tax, sales tax and other similar levies.
Third, the province as a whole would benefit from the development of local jobs. Mulroney committed that oil-related infrastructure would be sited in the province, where possible. This was no small matter. Mulroney’s letter [Brian Mulroney to Brian Peckford, 1984] contains strong language and conveys a deliberate intent on the part of the future Prime Minister to provide this province with significant job and business benefits. “Local job creation and labour development would be of paramount concern.”
Fourth, the province would benefit since the provincial government would not see a dollar-for-dollar loss of Equalization payments that would naturally result from growth in the government’s own-source revenues. The Government of Newfoundland and Labrador would receive all of its own-source revenue, potentially a portion of any federal shares in the offshore, and as well, additional payments to offset any losses from Equalization.
The same general approach was taken by the Liberal administrations which preceded Mr. Mulroney. For example, the comprehensive proposal made by the Government of Canada in 1982 stated that “it is recognized that Newfoundland should enjoy the major share of the revenue that offshore resources are expected to generate…” and that “the people of the province would realize the greatest and the most direct benefits from the development of offshore oil and gas resources in terms of growth and income, jobs, opportunities for new businesses, and significant new provincial government revenues.”
The federal Liberal proposal on revenue sharing was linked inextricably to the overall performance of the provincial economy and hence may be taken as further evidence of the extent to which the federal government before 1984 viewed the benefits from the offshore to this province to be greater than just the sums flowing to the provincial government’s treasury.
While local job benefits merited two short paragraphs in the original Mulroney letter, both the Accord itself and the enabling legislation provide an elaborate structure aimed at managing local benefits. No one can underestimate the value of local industrial benefits to the province; nor can anyone easily dismiss the contention that the architects of the Atlantic Accord saw local industrial development as a significant factor in establishing this province as the principal beneficiary of offshore oil and gas development. [Paragraphing altered to improve readability]
-srbp-
17 May 2005
John Crosbie - some background
As I headed off to work this morning, I caught the former imperial Tory governor of Newfoundland - one John Crosbie - defending the Connie cause by attacking Liberals.
Here are a couple of observations, since Mr. Crosbie found it necessary to blame the Liberals for the whole offshore mess.
1. John Crosbie negotiated and signed the original offshore deal in 1985 complete with the clawback - by one assessment - of 97% of offshore revenues through the Equalization program. [I am merely presenting the situation as Crosbie himself would have to admit it, given that he now believes in clawbacks.]
As provincial cabinet ministers, Loyola Hearn and Norm Doyle supported 97% clawbacks, too incidentally.
2. In 1990, Crosbie savagely opposed any changes to the clawback, arguing the provincial government was biting the hand that fed it.
3. In 1993/94, then-finance minister Paul Martin improved the Newfoundland and Labrador offshore revenues by changes to the Equalization protection offered.
4. In January 2004, Prime Minister Paul Martin accepted the provincial government's proposal for changes to the offshore Accord as the basis for discussions.
5. In January 2005, Prime Minister Martin reached an agreement on behalf of the Government of Canada with Premier Danny Williams on offshore revenues.
John Crosbie might want to look at the record objectively before he starts spouting off.
He has a lot to answer for in the dock of historical judgment.
Here are a couple of observations, since Mr. Crosbie found it necessary to blame the Liberals for the whole offshore mess.
1. John Crosbie negotiated and signed the original offshore deal in 1985 complete with the clawback - by one assessment - of 97% of offshore revenues through the Equalization program. [I am merely presenting the situation as Crosbie himself would have to admit it, given that he now believes in clawbacks.]
As provincial cabinet ministers, Loyola Hearn and Norm Doyle supported 97% clawbacks, too incidentally.
2. In 1990, Crosbie savagely opposed any changes to the clawback, arguing the provincial government was biting the hand that fed it.
3. In 1993/94, then-finance minister Paul Martin improved the Newfoundland and Labrador offshore revenues by changes to the Equalization protection offered.
4. In January 2004, Prime Minister Paul Martin accepted the provincial government's proposal for changes to the offshore Accord as the basis for discussions.
5. In January 2005, Prime Minister Martin reached an agreement on behalf of the Government of Canada with Premier Danny Williams on offshore revenues.
John Crosbie might want to look at the record objectively before he starts spouting off.
He has a lot to answer for in the dock of historical judgment.
04 January 2005
Which is to be Master?
In July, I released a discussion paper on the Williams administration proposed changes to the Atlantic Accord.
The title comes from Alice through the looking glass, by Lewis Carroll. The theme running through the paper is that so much of Danny Williams' claims are based on changing the meaning of words. For example, although the provincial government already receives its entire provincial government offshore revenue, he claims that 100% was merely 14%.
Or, in the Atlantic Accord, the province gains more than just provincial government revenues from offshore oil development. "Principal Beneficiary", under the Accord includes the right to set revenues (not the amount of money involved), the right to manage the resource with the federal government, and local preference for jobs and spin-offs work.
Well, to get the full paper in PDF format, just send me an e-mail (ed_hollett@hotmail.com) and I'll forward it to you. If I can figure out how to upload the file to the blog, I'll post it. The paper is also available online through Greg Locke's blog (www.greglocke.com) in a posting he made in July. Greg and I may not see things exactly the same way, but he did manage to give this paper some exposure and give a decent summary.
In the meantime, here's an article based on the paper that was carried in the Telegram at the time.
Which is to be master?
The title comes from Alice through the looking glass, by Lewis Carroll. The theme running through the paper is that so much of Danny Williams' claims are based on changing the meaning of words. For example, although the provincial government already receives its entire provincial government offshore revenue, he claims that 100% was merely 14%.
Or, in the Atlantic Accord, the province gains more than just provincial government revenues from offshore oil development. "Principal Beneficiary", under the Accord includes the right to set revenues (not the amount of money involved), the right to manage the resource with the federal government, and local preference for jobs and spin-offs work.
Well, to get the full paper in PDF format, just send me an e-mail (ed_hollett@hotmail.com) and I'll forward it to you. If I can figure out how to upload the file to the blog, I'll post it. The paper is also available online through Greg Locke's blog (www.greglocke.com) in a posting he made in July. Greg and I may not see things exactly the same way, but he did manage to give this paper some exposure and give a decent summary.
In the meantime, here's an article based on the paper that was carried in the Telegram at the time.
Which is to be master?
Public discussion, more information needed on Atlantic Accord changes
The Government of Newfoundland and Labrador currently receives 100 per cent of provincial revenues. Under the 1985 Atlantic Accord, the provincial government gained the right to set its own revenue regime for offshore oil and gas developments and it has done so through legislation and development agreements with the companies that have brought Hibernia, Terra Nova and White Rose on stream. It collects every penny of the revenues defined in the Atlantic Accord, and set out in those development agreements. In addition, it collects revenues, mostly taxes, from the business that have grown up around oil production.
The Williams administration, like the Grimes administration before it, claims money is lost through an Equalization "clawback". There is no clawback in the way that word would normally be used. Ordinarily, Equalization is a glorified top-up scheme. Any provincial government making less than a national standard from its own-source revenues gets a cheque from Ottawa to make up the difference. Make more money; get less of a top-up. If there was a sudden growth in high technology manufacturing - if the province became a Celtic Lynx - Equalization would be reduced accordingly.
The Atlantic Accord contains a provision than offsets any losses in Equalization transfers resulting from growing provincial government revenues, for a period of 12 years. The calculation is made on a 10 province standard, so it is no surprise that last year the province collected $123.8 million in oil royalties and received $178 million in offsets. The major problem with the offsets - if there is a problem - results from the fact the offset provisions are triggered by quantity of oil produced, not on their economic impact as such. Once triggered, they decline over time irrespective of how many oil fields have been developed or what their economic benefit has been to the province. Danny Williams' current proposal is apparently aimed at changing the offset provisions of the Accord.
There are at least two major problems with the proposal from the Williams administration that would, as Danny Williams recently put it, "renegotiate the Atlantic Accord". The most significant problem is that there is no plain English description of the problem or of the government's proposed solution: it isn't in writing. How can anyone judge the success or failure of upcoming negotiations between the federal and provincial governments if we do not know what the Williams administration is seeking?
The second problem is in the way the argument has been framed. The Williams administration claims that by changing the offsets, the provincial government can become the "principal beneficiary" of the offshore, as the Accord intended. Unfortunately, the Atlantic Accord does not say the provincial government will be the principal beneficiary nor is "principal beneficiary" defined as meaning provincial government revenues. The Atlantic Accord delivers significant benefits to the province as a whole. The provincial government gets the right to co-manage the offshore with Ottawa. The provincial government sets its own revenues, as if the resource was on land. The province as a whole gets industrial benefits, something Brian Mulroney considered to be a major aspect of the Accord. Those industrial benefits go against the spirit if not the letter of inter-provincial free trade agreements and the North American Free Trade Agreement, Right now, the Accord is exempt from NAFTA.
"Principal beneficiary" is central to the Accord; redefining it changes the Accord fundamentally. Change the Accord's underlying principals and it may well become a new deal, one that would be subject to NAFTA. Of all the Accord provisions, the one that would clearly not fit NAFTA is the industrial benefits provision. We can't be certain, in largest part because the Williams administration proposal has not be clearly stated and thoroughly examined. There is enough information, though, to encourage the provincial government to be cautious.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. There is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned.
More important than mere contrariness though, the absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them. Getting more cash from Ottawa is one thing. If that comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. If nothing else, the people of the province have a right to know what is being talked about. They will either reap the reward of the proposed changes or bear the burden.
-30-
The Government of Newfoundland and Labrador currently receives 100 per cent of provincial revenues. Under the 1985 Atlantic Accord, the provincial government gained the right to set its own revenue regime for offshore oil and gas developments and it has done so through legislation and development agreements with the companies that have brought Hibernia, Terra Nova and White Rose on stream. It collects every penny of the revenues defined in the Atlantic Accord, and set out in those development agreements. In addition, it collects revenues, mostly taxes, from the business that have grown up around oil production.
The Williams administration, like the Grimes administration before it, claims money is lost through an Equalization "clawback". There is no clawback in the way that word would normally be used. Ordinarily, Equalization is a glorified top-up scheme. Any provincial government making less than a national standard from its own-source revenues gets a cheque from Ottawa to make up the difference. Make more money; get less of a top-up. If there was a sudden growth in high technology manufacturing - if the province became a Celtic Lynx - Equalization would be reduced accordingly.
The Atlantic Accord contains a provision than offsets any losses in Equalization transfers resulting from growing provincial government revenues, for a period of 12 years. The calculation is made on a 10 province standard, so it is no surprise that last year the province collected $123.8 million in oil royalties and received $178 million in offsets. The major problem with the offsets - if there is a problem - results from the fact the offset provisions are triggered by quantity of oil produced, not on their economic impact as such. Once triggered, they decline over time irrespective of how many oil fields have been developed or what their economic benefit has been to the province. Danny Williams' current proposal is apparently aimed at changing the offset provisions of the Accord.
There are at least two major problems with the proposal from the Williams administration that would, as Danny Williams recently put it, "renegotiate the Atlantic Accord". The most significant problem is that there is no plain English description of the problem or of the government's proposed solution: it isn't in writing. How can anyone judge the success or failure of upcoming negotiations between the federal and provincial governments if we do not know what the Williams administration is seeking?
The second problem is in the way the argument has been framed. The Williams administration claims that by changing the offsets, the provincial government can become the "principal beneficiary" of the offshore, as the Accord intended. Unfortunately, the Atlantic Accord does not say the provincial government will be the principal beneficiary nor is "principal beneficiary" defined as meaning provincial government revenues. The Atlantic Accord delivers significant benefits to the province as a whole. The provincial government gets the right to co-manage the offshore with Ottawa. The provincial government sets its own revenues, as if the resource was on land. The province as a whole gets industrial benefits, something Brian Mulroney considered to be a major aspect of the Accord. Those industrial benefits go against the spirit if not the letter of inter-provincial free trade agreements and the North American Free Trade Agreement, Right now, the Accord is exempt from NAFTA.
"Principal beneficiary" is central to the Accord; redefining it changes the Accord fundamentally. Change the Accord's underlying principals and it may well become a new deal, one that would be subject to NAFTA. Of all the Accord provisions, the one that would clearly not fit NAFTA is the industrial benefits provision. We can't be certain, in largest part because the Williams administration proposal has not be clearly stated and thoroughly examined. There is enough information, though, to encourage the provincial government to be cautious.
It should not escape notice that in making its proposal, the Williams administration is merely picking up where the Grimes government left off. There is precious little difference among the three political parties in the province on this issue. In itself, that should be cause for concern, as Mark Twain warned.
More important than mere contrariness though, the absence of public debate prevents a thorough discussion of options, a chance to see dangers and avoid them. Getting more cash from Ottawa is one thing. If that comes at a larger cost, namely bringing the Accord under NAFTA, then the Premier will need wider public support to continue on his path. If nothing else, the people of the province have a right to know what is being talked about. They will either reap the reward of the proposed changes or bear the burden.
-30-
What Danny wants.....
For every person in Newfoundland and Labrador who claims to stand solidly behind Danny Williams in his efforts to change the Atlantic Accord, there is a different version of what the premier wants. For some it is to get "our" share of the offshore, as if the Atlantic Accord doesn't exist. For others it is fixing a problem with the Accord. For still others it is to get "our" revenues plus a bit more besides to help out.
For Loyola Sullivan, it now seems to mean reparations for every possible slight the province has received or every bad deal we negotiated. Compared to the Upper Churchill deal, the Versailles diktat was a minor annoyance.
Odd then that the Premier told the House of Assembly last fall that there was no need to debate the Accord in the House because "we know what we asked for...".
That's an odd comment, because, as you will see below, there are actually three different versions of what the Premier asked for. Just so that his supporters don't suddenly turn blue with rage, rest assured that the three versions are accurate and based on official documents.
The following information comes from four sources:
- the Progressive Conservative policy manual, the so-called Blue print;
- correspondence with the Government of Canada, released by the provincial government through Freedom of Information requests and news releases;
- media interviews by Premier Williams and others; and,
- provincial government news releases
At the outset, it is important to recall two aspects of the Atlantic Accord in particular.
First, the provincial government gained the right under the Accord to set its own revenues from offshore production as if the resources were on land, that is as if they were "own-source" revenues. This includes royalties. The provincial government receives 100% of the revenues it has set without any reduction; in Fiscal Year 2004, the provincial government will receive at least $300 million in direct revenues from offshore oil production [Williams to Martin, May 26, 2004 attachment "Offshore revenue, existing offsets and proposed offset"; mid-year financial statement by Hon. Loyola Sullivan]
2. Direct revenues are defined more accurately.
3. The commitment to direct the added revenues to specific purposes has been removed.
4. The duration of the offset is clearly stated as being for the life of production.
For Loyola Sullivan, it now seems to mean reparations for every possible slight the province has received or every bad deal we negotiated. Compared to the Upper Churchill deal, the Versailles diktat was a minor annoyance.
Odd then that the Premier told the House of Assembly last fall that there was no need to debate the Accord in the House because "we know what we asked for...".
That's an odd comment, because, as you will see below, there are actually three different versions of what the Premier asked for. Just so that his supporters don't suddenly turn blue with rage, rest assured that the three versions are accurate and based on official documents.
The following information comes from four sources:
- the Progressive Conservative policy manual, the so-called Blue print;
- correspondence with the Government of Canada, released by the provincial government through Freedom of Information requests and news releases;
- media interviews by Premier Williams and others; and,
- provincial government news releases
At the outset, it is important to recall two aspects of the Atlantic Accord in particular.
First, the provincial government gained the right under the Accord to set its own revenues from offshore production as if the resources were on land, that is as if they were "own-source" revenues. This includes royalties. The provincial government receives 100% of the revenues it has set without any reduction; in Fiscal Year 2004, the provincial government will receive at least $300 million in direct revenues from offshore oil production [Williams to Martin, May 26, 2004 attachment "Offshore revenue, existing offsets and proposed offset"; mid-year financial statement by Hon. Loyola Sullivan]
Second, the Atlantic Accord provides that Equalization will apply to these revenues. As such, as provincial own-source revenues grow, the amount of Equalization top-up declines. The Accord does provide an Equalization offset that effectively shielded some revenues from the Equalization calculations. It is clear from the Accord itself that this was intended to be a temporary, declining offset. ["The Atlantic Accord: memorandum of understanding between the Government of Canada and the Government of Newfoundland and Labrador on offshore oil and gas management and revenue sharing", 11 February 1985. www.cnopb.nfnet.com/publicat/reg/aa_mou.pdf.]
This interpretation is confirmed by comments made by John Crosbie in a 1990 interview with the Sunday Express. Commenting on the claim that the Accord reduced the province's Equalization entitlement due to growing provincial government revenues, Mr. Crosbie said:
"That's the whole point to the [Equalization] formula... This is nothing to complain about; this is something to be joyous about. So why would they try to pretend that Newfoundland gains nothing from the royalties? I mean this is absolutely bloody nonsense..." [Philip Lee, "Newfoundland, Ottawa clash over Atlantic Accord royalty provisions", The Sunday Express (St. John's), 23 September 2004,]
With that background, let us now turn attention to Premier Williams' proposals.
Danny Williams: Premier in Waiting, October 2003
The Blue Book (www.pcparty.nf.net) contains no reference to changes to the Atlantic Accord.
Rather, it commits a Conservative government to seek changes to the entire Equalization formula so that revenues from non-renewable natural resources are removed from the calculations.
The Blue Print also states that:
"[i]n exchange, we will commit, in a formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize economic infrastructure in the Province and to bring down the provincial debt, so that future generations of Canadians living in this Province will continue to benefit long after the resources are used up." [Emphasis added]
Danny Williams: January - June 5, 2004
Premier Williams met with Prime Minister Martin in Ottawa on December 18, 2003 and again by telephone on January 6, 2004. The Premier follows up with a letter to the Prime Minister on the same day. He described the province's fiscal position and the government's plans to address the problems. Included in that letter is the following statement:
"Simply put, the ability to invest 100% of our Atlantic Accord oil revenues in economic infrastructure and in paying down our debt would go a long way to helping Newfoundland and Labrador stand on its feet in the long term." [Williams to Martin, Jan 6, 2004]
The Prime Minister replied on January 27, 2004:
"With regard to the Atlantic Accord, as I stated on January 6, 2004, the Government of Canada is open to discussing the issues related to offshore resources. However, it is imperative that these discussions be based on the principle of fair treatment across the country." [Martin to Williams, Jan 27, 2004]
Some details of the provincial position were contained in a slide presentation made to John Efford on February 27, 2004 and titled "Proposal for new Atlantic Accord offset mechanism". This appears to be the only written version of the proposal, except for a similar slide presentation made available to news media and tabled later in the House of Assembly.
The presentation focuses on changes to the Equalization offset provisions contained in the original Atlantic Accord. These were intended as temporary, transitional grants to the provincial government designed to offset losses in Equalization as provincial own-source revenues grew from oil production. The original offset nominally shielded a declining amount of provincial revenue from Equalization calculations.
An assessment of the original offset prepared by Wade Locke in 1991 concluded that the original offset provisions actually shielded only 3% of revenues from Equalization including the offset payments. [Wade Locke, An examination of the equalization protection provided under the Atlantic and Nova Scotia Accords, (St. John’s: Memorial University Institute for Social and Economic Research, 1991) ]
Slide 9 from the February 27 presentation contains the following points:
- Replace the existing offset provisions [Editor's note: due to expire in 2011/2012]
- New offset mechanism
- Provide a payment equal to 100% of the net direct provincial offshore revenue
- Net Direct Revenue
- Royalties and Corporate Income Tax which is generated in the NL offshore area, less the equalization clawback (currently at 70%)
There is no specific reference to a time period for the new offset, although a bullet point on Slide 10 states that the new mechanism would provide "benefits over a longer period". The original Accord offset mechanism shielded 100% of revenues but only for the first four years. As noted above, the original Accord offset provisions expire in 2011/2012 and shielded less revenue from Equalization than indicated in the slides.
The Chretien administration provided a new Equalization offset option to the provincial government in 1993, one that shielded more revenue than the original Accord and did so for the duration of oil production. This is the so-called generic option which shields 30% of oil revenue from Equalization calculations; in other words if oil revenue is $100 million, then only $70 million is used to determine the provincial government's per capita fiscal capacity.
The Premier's commitment on using revenues for debt reduction and infrastructure is repeated in a letter to the Prime Minister on May 21, 2004. Another letter on May 26, 2004 to the Prime Minister contains Slide 9 of the deck presented on February 27, 2004.
The provincial government's position can be summarized as follows:
1. A new offset mechanism that provides the provincial government an amount equal to 100% of direct revenues in addition to direct revenues.
2. Direct revenues are defined as royalties and corporate income tax. [Note that under the Atlantic Accord, provincial government direct revenues comprise six separate types, including royalties and corporate income tax. There is no explanation for this apparent mistake on the part of the provincial government.]
3. The money would be used for debt reduction and infrastructure development.
4. The time frame is unclear. It can be read as meaning seven years (replacing the existing offset) since the time frames match and the doubling up of revenues replaces the Accord's original offset with a concept that "benefits over a longer period" (12 years total versus four years).
Danny Williams: June 10, 2004 to current
The Premier and Prime Minister spoke by telephone in a now infamous conversation on Saturday June 5, 2004. Fully five days later, the Premier wrote to the Prime Minister ostensibly to confirm the agreement. His letter contains the following statement of the provincial proposal:
"The proposal my government made to you and your Minister of Natural Resources provides for 100% of direct provincial revenues generated by petroleum resources in Newfoundland and Labrador Offshore Area [sic], to accrue to the government of Newfoundland and Labrador and be sheltered from the clawback provisions of the Equalization formula, (currently at 70%). Direct provincial revenues include royalties, provincial corporate income tax, and fees forfeitures and bonuses. Our proposal is for the current time limited and declining offset provisions in the Atlantic Accord to be replaced by a new offset provision continuing over the life of the offshore petroleum production which would provide a payment equal to 100% of the amount of the annual direct provincial revenues which are clawed back by the equalization program."
This may be summarized as follows, with the changes being obvious:
1. The offset is in addition to provincial direct revenues, as previously proposed.2. Direct revenues are defined more accurately.
3. The commitment to direct the added revenues to specific purposes has been removed.
4. The duration of the offset is clearly stated as being for the life of production.
Several points are worthy of note beyond the obvious changes.
First, no provincial government currently enjoys or has ever received this type of transfer from the Government of Canada.
Second, this proposed "offset" would continue irrespective of whether or not the provincial government qualified for Equalization transfers. In other words, under the revised Williams' proposal the provincial government would receive an amount equal to 200% of its direct revenues (direct revenues + new transfer) even after the provincial government's fiscal capacity met or exceeded the national standard used for judging Equalization entitlement.
Newfoundland and Labrador is forecast to be off Equalization, that is to become a "have" province within the next three to five years, based on economic growth, oil prices and development of Voisey's Bay and Hebron. Under the Williams revised proposal, Newfoundland and Labrador would receive federal transfer payments to which no other province is entitled, unless Nova Scotia attains the same "have" status.
The Premier has implicitly acknowledged this interpretation in several media interviews. He no longer refers to an Equalization offset but to a new type of offset designed to "keep us whole". Premier Williams explained it to Carole MacNeil of CBC Sunday in this way during an interview in October 2003:
Williams:...What the issue is, once we get to equalization, the equalization border - the five province standard - once we get equalized, we are not asking for equalization. That's where the misunderstanding is: we are saying that once our revenues get to a point where we no longer need equalization, we don't want it. We'll be the same as every other province that gets equalization - New Brunswick, Prince Edward Island, Nova Scotia. What we want, though, is the right, after we equalize, to keep 100% of our revenues, our provincial royalty revenues. The cap prevents us from doing that. (...)
MACNEIL: Until you're equalized.
WILLIAMS: No, no and beyond, because why should we get less than 100% of our revenues after we're equalized? [The full transcript of this interview may be found at www.cbc.ca/sunday/williams.html]
It must be noted that the Premier's reference to the cap, the use of the Ontario fiscal capacity from the October 2004 federal offer, is completely erroneous.
Under the Atlantic Accord, the provincial government continues to receive its own revenues, including royalties, in their entirety until oil and gas production ceases. There is no mechanism by which those revenues are reduced, nor has one ever been proposed. All that would occur once the provincial government is "equalized" is that the Equalization transfers would cease. Provincial government own-source revenues, including oil and gas revenues, continue unaffected. The cap was merely a mechanism by which the federal government proposed to calculate the added transfers in addition to Equalization and direct revenues and determine a cut-off point for what was originally an offset to Equalization losses. The Premier's convoluted language in the MacNeil interview appears to represent, among other things, an attempt to reconcile his pre- June 5 position with his current one.
Third, the provincial government proposal on June 10 eliminated its own condition on how the added transfer would be spent.Conclusion
The provincial government proposal on Atlantic Accord changes have gone through at least three substantive alterations. The provincial government's contention that its position has been consistent flies in the face of direct evidence.
The changes are not inconsequential. The Government of Canada must always be mindful of the impact of special arrangements with individual provinces on its relations with the others. It must also be mindful of the financial implications of such arrangements. Quebec, for example has been seeking special treatment of the parental leave program within Quebec all at federal expense. The federal government under Jean Chretien rejected the concept out of hand.
The revenues being transferred, especially under the revised proposal, are not provincial revenues. They are federal revenues collected within Newfoundland and Labrador to sustain federal government programs and services. Historically, in this province, the federal government has provided almost half of the money the provincial government uses to provide services that are exclusively within the provincial government's constitutional jurisdiction. In the current fiscal year, for example, the provincial government will receive an estimated 75% of all provincial and federal tax-type revenues in the province through its own sources plus Equalization and other transfers. The Williams' revised proposal (post-June 10) would see that situation continue, contrary to the basic principles of the Equalization program to which John Crosbie referred.
Irrespective of the position one takes on proposed changes to the Accord, it is clear that the Williams administration has changed its position at least three times. Perhaps most strikingly, in light of continued references to the province's supposedly unprecedented financial situation, the government's own commitment on how the money would be spent has been dismissed
The crux of the current impasse may well be that the federal government is working to meet the original Williams proposal, something that is attainable in the context of the Constitution and historical federal-provincial fiscal relations. In the meantime, the Premier has committed that he "will not say yes to less" than his revised proposition.
An irresistible force may well have met an immovable object.
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