The little things

In reading the Auditor General's latest report on inappropriate spending by members of the provincial legislature, there are some little things that pop up at you:

1. The $1,000 then-finance minister Loyola Sullivan paid to Mile One Stadium in 2005. What was that for?

2. The partisan expenditures. Since these things are obviously verboten - no ethical relative defense applies to that one, there Premier - how come the Auditor General didn't expose every single instance of this corrupt practice? It doesn't matter that the amount was only around $11,000.

That might just be the bit that was so obvious the auditors - who buggered up sections of other reports on the legislature - couldn't miss it. Perhaps there is more of the misdirected funding buried in some of the other accounts.

Partisan expenditures relate to supporting a Member's political party and would be considered an inappropriate constituency allowance expenditure. I note that the Green Commission Report indicated that expenses related to politically partisan activities should not be a reimbursable constituency allowance expense.

During the review, we identified only $11,093 during the period 1989-90 through to 2005-06 in claims that could be considered partisan in nature. However, there was no Member who had significant claims relating to partisan expenditures. Some of the items we did identify as partisan included:

• advertisement to thank voters;
  
• refreshments and facility rental for party meeting;
  
• flowers to other Member for election congratulations;
  
• dinner tickets for various party associations;
  
• expense claim to attend party convention;
• players fees for political golf tournament (this same fee was denied on another Member's claim form); and
  
• Federal party fundraising events.

3. The AG's sudden lip-lock. For a man who was prepared to male wild accusations before without a shred of credible evidence to present, John Noseworthy's silence on Friday was interesting. Chief Justice Green didn't suggest the AG couldn't say anything at all, he just strongly hinted that an auditor might want to refrain from making accusing of criminality without having the knowledge or ability to make such a claim.

Then again, if I had to explain why only two people were named in the double-billing scandal but the problem was more widespread, I might be barring the doors and windows too.

4. The $2800 bucks. The current repayment issue for that money is listed in the Auditor General's report as if it was more than just a policy some members adopted. Did the Auditor General include the $2800 on the account as an overpayment made to members before he discovered in the course of another audit that the payments had actually be authorised?

Inquiring minds might want to stick a microphone down the newly dug rabbit hole the AG lives in and see if he actually made at least one inappropriate accusation against a member who received the money, legitimately, since it was approved by the legislature's management committee. Let's not even think about whether it was the right thing for the committee to approve the money in secret. Heck, even the Premier and Beth Marshall weren't prepared to try and stop the hand-out. Let's just see if Noseworthy actually made the accusation before he knew the facts.

5. How can the Auditor General tell us that Kathy Goudie received money for expenses after she resigned when she resigned well after the period covered by this audit?

6. If he can tell us that, why didn't he tell us about the $5,000 of public money Tom Rideout "gifted" in 2007 back-dated to 2006? Not only would that amount change Rideout's "gifting" total, it would also likely attract Noseworthy's attention for the backdating.

7. And while we are looking at "gifting" why did the AG bury the bit on inadequate documentation of "gifts" in the back? (Figure 35, page 64)

Turns out that of the $1.5 million or thereabouts in "gifts", 21% had inadequate documentation. The peak periods?

	2001	2002	2003	2004	2005
	$36,875	$50,253	$87,966	$23,991	$41,276

And was there any pattern to the inadequate documentation and who was submitting it? pattern that is beyond the fact that while the total "gifts" went up after the 2003 election, the instances of poor documentation went down.

It's the little things that sometimes really do catch your eye.

-srbp-

A genuine defence of democracy

From the eloquent pen of Mark Watton comes a letter in the Friday Western Star criticising the special ballot provisions of the Elections Act, introduced just this past spring in time for the election.

For those who may not be aware, balloting actually began on August 20 even though the election proclamation will not be issued until September 17.

Interestingly enough, Elections NL is running radio spots on VOCM trumpeting the ease of voting by special ballot, presumably as opposed to the usual trip to the polling station. These are not awareness spots; these radio ads aim to increase the use of special ballots by all voters even though special ballots were intended only for those who are unable to attend at a polling station on polling day.

The province appears to be moving closer to a mail-in balloting system without the idea being proposed and properly discussed by voters. That alone should be a cause of public concern as the formal election begins since mail-in ballots favour incumbents to an extent that the very idea of elections is undermined.

Watton makes a compelling argument in defence of some of our fundamental rights as citizens in a democracy.

The Western Star (Corner Brook)
Opinion, Friday, September 14, 2007, p. 6

Changes to Election Act are ill-conceived

Mark Watton

Dear Editor: On Oct. 9 and 10, voters in Newfoundland & Labrador and Ontario will cast ballots under new "fixed election date" regimes. For the first time, the date of each election has been known well in advance, set by legislated changes to each province's elections act.

While campaigning is officially underway in Ontario, the writ has yet to be issued in Newfoundland and Labrador. With the shortest required writ period in Canada at 21 days, candidates will have to wait until next week to officially hit the hustings. After all, the election, despite its predetermined date, has not officially begun. Surprisingly, however, voting already has.

That's right. In an election which is not yet official, in which candidates can not yet legally be nominated, it is not only possible to obtain a ballot already, it's legal to cast it. Valid votes in an election not yet called have been cast since Aug. 20. In all other jurisdictions where mail-in ballots are allowed, such ballots are requested only after the writ has been issued. Manitoba is one exception, where voters may request such ballots before the writ, but as elsewhere will only receive them afterwards. Some provinces are subsequently required to provide these voters with a list of registered candidates when nominations are filed.

There is no reason why similar provisions could not have been incorporated in our Elections Act. No reason, except for a succession of partisan Chief Electoral Officers, and the unabashed self-interest of the current Members of the House of Assembly.

The rationale behind fixed election dates was to curb the advantage of incumbent governments using hastily called elections to pre-empt their opponents. In recent memory, Ontarians punished Premier David Peterson for attempting such a stunt in 1990, while in Newfoundland and Labrador, electors went to the polls in three times (1993, 1996, and 1999) in a span of less than six years.

In Newfoundland and Labrador, the current Elections Act has replaced this perceived advantage for a governing party with a profound advantage for incumbent members of all party stripes. No wonder it was passed with little debate and virtually no opposition.

Similar to their quiet deal to continue the flow of maligned members' allowances through to the election, MHAs did not flinch when presented with an opportunity to use their name recognition and stuff the ballot boxes before any opponents could even register as candidates.

Ten years ago, in Libman v. Quebec, a unanimous Supreme Court of Canada stated: "Elections are fair and equitable only if all citizens are reasonably informed of all the possible choices and if parties and candidates are given a reasonable opportunity to present their positions..." More recently, in Figueroa v. Canada, they ruled that provisions of Canada's Elections Act which effectively ensured "that voters are better informed of the political platform of some candidates than they are of others" violated s.3 of the Charter and struck them down.

It is hard to imagine a greater democratic injustice than rules which permit incumbent candidates to campaign (and do so free from electoral spending scrutiny) and collect votes while their potential opponents cannot even register.

This ill-conceived and poorly-drafted legislation raises many issues of contradiction and disparity. It allows some individuals to receive votes under a party name while others can only receive votes under the name of a candidate, an impossibility given that individuals are not considered candidates until they meet the criteria - several weeks later.

In Haig v. Canada, the Supreme Court ruled that the Charter requires electoral laws to "grant every citizen of this country the right to play a meaningful role in the selection of elected representatives", an impossibility in a province without any means of preventing a determinative number of ballots being cast in a district before candidates are even nominated.

In 2000, the world was stunned as the fate of its only superpower was decided by hanging chads, inoperable voting machines, and a myriad of electoral inconsistencies. A handful of Florida counties reminded the outside world just how fragile democracy could be. The sad truth is we only cared about the flawed process because the result was close. Had either candidate won by a large margin, the inadequacies of America's electoral system would have been swept under the rug for another four years.

The "fixed" election results of 2007 in Newfoundland and Labrador likely won't be as close as those we witnessed in Florida in 2000, nor as consequential. But there's no reason to be any less concerned.

Mark Watton is a Newfoundlander studying law at Dalhousie University. He is a former political staffer residing in Halifax.

-srbp-

The lure of soft money redux

Initial news coverage and most public reaction to the latest report on the House of Assembly scandal will focus on the easy and the obvious.

Wine, artwork, pens, jewelry, cigarettes, travel, and hockey tickets.

On the eve of a provincial general election, Premier Danny Williams is encouraging people to look beyond the scandal now that reforms are supposedly in place:

But at the end of the day, do not lose faith in the political system in this province because our democracy is too important for the electorate to lose faith.

Our democracy is too important for people to lose faith in it and in the people elected to lead. However, we should not be rushed past this latest report with the admonishment of the New York cop to gawkers at a skyscraper suicide: "Move along, there Johnny, nothing to see here. " Nor should we be distracted by the baubles and trinkets that too many focused on already.

Rather, we should focus on the core damage done to our democracy by a decade in which politicians of all shades, new and old, handed out public money as gifts to constituents based solely on their own discretion and almost entirely hidden from wide public view, let alone scrutiny.

Bond Papers has hit this point before - the lure of soft money - and earned the Premier's ire for it. The Auditor General's report on Friday brings home the point once more. Of the $2.2 million in questionable spending John Noseworthy identified, $1,471,108 (63%) went to what have been incorrectly called donations.

No one should miss the point that the highest years of total inappropriate spending identified by Noseworthy were the most recent:

2001-02	2002-03	2003-04	2004-05	2005-06
$217,200	$272,729	$388,948	$284,725	$299,261

As a matter of simple observation one can see that after a peak in the last election year, inappropriate spending did not decline; it increased. For all the assurances of change, even as the scandal broke, clearly something continued to be amiss. Even after the public received the Green report - and its scathing condemnation of the gifting practice - members of the legislature still opted to keep the rules in place that allowed gifting, at least until after the election.

For those who may not be sure of what we are driving at here, let us simply quote Chief Justice Derek Green on the point:

First and foremost, the practice of making financial contributions and spending in this way supports the unacceptable notion that the politician’s success is tied to buying support with favours. Such things, especially the buying of drinks, tickets and other items at events, has overtones of the old practice of treating - providing food, drink or entertainment for the purpose of influencing a decision to vote or not to vote. As I wrote in Chapter 9, it demeans the role of the elected representative and reinforces the view that the standards of the politician are not grounded in principle. In fact, I would go further. The old practice of treating was usually undertaken using the politician’s own funds or his or her campaign funds. To the extent that the current practice involves the use of public funds, it is doubly objectionable.

Related to the notion of using public funds to ingratiate oneself with voters is the
unfair advantage that the ability to do that gives to the incumbent politician over other contenders in the next election.

To put it simply, gifting erodes our democracy in a far more insidious way than does anything else the Auditor General has described. Nothing revealed in his report is acceptable, but it is the widespread nature of gifting that should make it more odious than some of our politicians appear to appreciate.

Beyond that, gifting, as practiced over the past decade calls into serious question the judgements of legislators. The money was given for things that either used to be or were covered by government programs that were as fairly, equitably and impartially distributed as might be possible. These include eyeglasses and medical devices, funding for volunteer fire departments, accommodations and transportation.

Some of money given as gifts actually replaced programs such as medical assistance transportation eliminated from a budget voted by the same legislators. In no small irony, it would seem that just this past election summer, the members on the government side had found a way to continue making gifts of public money, this time through line departments. The lure of soft money has not dissipated; the siren merely sings its tune from another cliff.

Gifting knows no party boundaries.

Look at the top 10 gifters in the study period, by dollar volume. All, coincidentally, are or were cabinet ministers; some served as members of the Internal Economy Commission while on the opposition benches, while in government, or both:

Rank	Name	Party	Amount
1.	Wally Anderson	Liberal	$88,954
2.	Judy Foote	Liberal	$69,131
3.	Ed Byrne	PC	$63,284
4.	Loyola Sullivan	PC	$44,848
5.	Tom Osborne	PC	$44,770
6.	Anna Thistle	Liberal	$43,445
7.	Percy Barrett	Liberal	$43,444
8.	Sandra Kelly	Liberal	$42,398
9.	Paul Shelley	PC	$37,331
10.	John Ottenheimer	PC	$36,868

But to make sure the picture is clear , let us also consider the top 10 gifters by percentage of allowance given as gifts. What will become apparent is that gifting is not merely a hold-over from the days before 2003. They all represent constituencies on the northeast Avalon, arguably the most prosperous portion of the province.

They are almost all some of the newest members of the legislature (other than those elected in recent by-elections) and all embraced the gifting system with an enthusiasm that outshines the ardor of longer-serving members of any political party.

Rank	Name	Party	Percentage
1.	Diane Whelan	PC	49.05
2.	Shawn Skinner	PC	46.96
3.	Kathy Dunderdale	PC	46.90
4.	Bob Ridgley	PC	38.21
5.	Elizabeth Marshall	PC	34.23
6.	Tom Osborne	PC	30.16
7.	Hubert Kitchen	Liberal	30.10
8.	Sheila Osborne	PC	26.30
9.	David Denine	PC	25.96
10.	John Ottenheimer	PC	25.49

The formal election campaign begins on Monday. Many have talked of an election about sweeps by the majority party, unprecedented popularity, the poor performance of the opposition parties and resource deals worth billions. As a result of the Auditor General's latest report, the focus of the campaign for many voters may wind up being questions of ethics, judgment and propriety.

If this report and the practice of gifting it reveals is an indication, those are exactly what we should think about before casting our votes.

-srbp-

But will Hydro charge itself a handling fee?

Remember the bit of Dunderdale confunderdaling everyone on Hydro purchasing power from itself on the Lower Churchill?

Turns out natural resources minister Kathy Dunderdale said exactly what is planned:

Once the transmission link is constructed, Hydro will enter into a Power Purchase Agreement with the Lower Churchill Project for the purchase of power to offset thermal generation at the Holyrood Generating Station, which will assist in financing the project.

Hydro - which should be the owner (if we really are going it alone) or controlling partner in the Lower Churchill development company - will actually purchase power from itself in order to replace the Holyrood generating plant.

This raises some interesting questions about the organization and structure of whatever company will develop the Lower Churchill on a go-it-alone basis. It also raises questions about the financing arrangements, since one impact of this approach would be to have the people of the province shoulder the financial burden of developing almost 20% of this project instead of using export power - and other people's money - to cover the construction cost and still deliver a real profit.

-srbp-

The ghost in the turbines

The Telegram makes an interesting observation in its Thursday editorial on the energy plan:

How refreshing it is to hear a government making plans that consider a time that they might not be in office, as well as the time that they are;

to have a government looking at the long-term needs of the province, as well as addressing the sort of short-term needs that get governments re-elected.

How refreshing indeed, although it's doubtful Telly publisher Miller Ayre would acknowledge the most significant approach of the type. That would be Challenge and change, the province's strategic economic plan issued in 1992. It laid the groundwork for much of the economic success of recent times.

Challenge and change marked the first time in the province's history any administration had adopted a comprehensive plan to guide development well after the administration that implemented it had left office. The 1992 SEP was so successful that it has survived through every subsequent administration. The Progressive Conservative's 2003 Blue Book even contains a precis of the SEP as one of its chapters.

The Telegram editorial also endorses the energy plan's assumption for continuing high oil prices, saying "[a]ll in all, any forward-looking plan has to operate with some inherent assumptions, and a continuing high price of oil is probably a better bet than anything else."

A better bet than anything else? There's a highly debatable point and an odd conclusion given that the editorial also notes that the infamous Churchill Falls contract contained a low price assumption that proved wrong.

In the case of Churchill Falls, the assumption was that electricity supply would keep power prices low. A huge and unexpected upsurge in demand, when increased oil prices suddenly meant home-heating with electricity was more economical than fuel oil, blew those assumptions right out of the water.

The old Telegram editorialist four decades ago took a decidedly more cautious view of that agreement. Here's a sample of thinking at the time, in the form of a scan of one editorial. Click on it to enlarge the picture. You should be able to pick out the last two paragraphs.

Great promises of revenues to the provincial treasury all without a shred of paper or any detail to demonstrate how it would work. A call for the legislature to be opened to debate the deal and see what the deal between BRINCO and Hydro Quebec looked like.

Interesting that 40 odd years later, another editorial team was willing to take an administration's word for the riches to come, but with the knowledge of the earlier circumstance.

As much as we've decried the use of Churchill Falls as justification for just about anything in this province, it's a bit hard to avoid it in this case: the Telegram invoked the spectres in the turbines and then ignored the rattle of their chains.

-srbp-

The power of confusion

In an interview with CBC Radio On the Go, natural resources minister Kathy Dunderdale tried to explain why the province's energy plan doesn't include extending Labrador hydro power to small communities in Labrador.

The argument Dunderdale was advancing seemed to puzzle host Ted Blades, since Dunderdale argued that running lines all the way to the island to replace the Holyrood generating station would entail no increased cost to rate payers, even though the project would be significantly more costly than hooking up some of the communities in Labrador currently served by diesel generators.

Here's a taste of the exchange:

Blades: I’ll get back to that subsidy in a minute, but let me just pursue the cost of the line a little bit further, you said roughly a hundred million dollars to put a spur out to the south coast when the line comes across to the island, what would it cost to go out to the northeast coast above Groswater Bay?

Dunderdale: Well, I would have to get those numbers for you Ted, I don’t have
them right in front of me, but it would cost in the hundreds of millions of dollars, would drive rates up significantly for ratepayers in Labrador and on the island.

Blades: Alright, well given that it’s going to cost billions of dollars to
run the line down to the island, so does that mean that our rates are
going to go up here on the island to pay for that?

That's where things got rather odd. Dunderdale explained that the Holyrood replacement would be financed through a guaranteed power purchase agreement with Newfoundland and Labrador Hydro.

She said it twice, which is a bit odd.

Newfoundland and Labrador Hydro is the entity that would be building the Lower Churchill and the transmission line, either directly or through its Lower Churchill Development Corporation subsidiary.

Now in the context, Dunderdale might have misspoken, saying Hydro when she meant Newfoundland Power. The former is the electricity producer; the latter is the private sector electricity retailer.

Still, it was an odd comment:

Dunderdale: No, what it means is that’s part of the overall project, we’ll need to get financing for the project, we will have to leverage the money that we earn out of our non-renewable projects to help fund the $6- to $9-billion that are going to be required to build the Lower Churchill. What happens with the transmission link is we are able to sell power from the Lower Churchill to Newfoundland and Labrador Hydro to replace Holyrood, so the transmission link, right in the first instance, gives us the first opportunity to have a power purchase agreement with Newfoundland and Labrador Hydro for around 500 MW of power, which will be part of the financing deal, will allow us to leverage financing to develop that project.

Then again, maybe she didn't misspeak. Maybe LCDC will sell the power to its parent, which will in turn sell to Power. Then Hydro - rather bizarrely one might think - would provide the purchase agreement for 500 megawatts of power and somehow give NLDC another bit of leverage to raise the capital to build the project. The Holyrood replacement power represents 18% of the estimated 2800 megawatts that would come from the Gull Island and Muskrat Falls generators.

That's a fair chunk.

Maybe Dunderdale has given another question to ask about Lower Churchill financing. After all, it wouldn't be the first time over the past few weeks when seemingly bizarre comments about energy and royalty regimes led ultimately to more information emerging.

-srbp-

Other people's money

From the Toronto Star editorial on the Hebron memorandum of understanding:

It's such a good deal, Williams said, that if he were outside government and had the chance to make such an investment, he would do so "in a heartbeat."

But Williams is not outside government and the comfort zone for a private investor is not a useful guide for the deployment of public funds.

Newfoundlanders might want to consider what happened when another Conservative premier used his provincial treasury to acquire a stake in the oil business.

In 1981 in Ontario, Bill Davis committed about $800 million to buy shares in Suncor. After falling in value for more than a decade, they were dumped in the early 1990s for a net loss of about $400 million.

Still, if Williams is right and the money starts rolling in, he will have earned his local-hero status.

If not, Williams will have provided another example of why politicians should stick to governing and leave investing to people who are only gambling their own money.

-srbp-

How convenient for Len and Danny

Any bets Len Simms will get his patronage job back right after the election?

-srbp-

Energy Plan

[Update: 1400 hrs local. More on the energy plan later on Tuesday and on Wednesday.]

When is a plan not a plan?

When it is a political statement.

Around Bond, we branded the energy plan - released today at 11:30 AM - as a political document months ago.

Some details may change, but the substance of that view remains.

The Hebron deal was a sign of how details may change, for example. That's the deal in which we now have Premier Danny Williams heading into his first election as Premier endorsing the royalty approach he condemned as leader of the opposition only four short years ago when he was looking for the job he's got now.

The big fight with Big Oil might not be such a big fight after all. In June, no one would have predicted a Hebron settlement. But the political nature of the document will remain.

It will still be the story of our future, as in the future is ours. it will still be about "fair share" and reasonable."

But as in the Hebron deal, there will be a lot more accommodation and concession that anyone in government is prepared to acknowledge.

The gas royalty regime - which was supposed to be released with the plan - might not make an appearance today if some versions hold true. It might appear but in a very vague form. The operators, you see, have already made it plain that they really don't want to see costs driven up. Equity still causes a problem, apparently, and one of those problems is cost, especially if the provincial government wants to farm in, by law, from the outset and in future projects will get a right of management control.

Let's see how that one plays out.

There might also be a new oil royalty regime, modelled on Hebron, but that will have to be vague. After all, the Hebron memorandum of understanding is secret so far, hidden from the resource owners because the co-venturers - including the provincial government - agreed among themselves to keep it secret.

Overall, though, we'd expect there to be a rehash of the past, lots of election-type rhetoric. And when it comes to an actual plan with action items and timelines? Those things an administration can be held accountable for?

Don't hold breath today waiting for those.

And as sometimes occurs here at Bond, this is one of those occasions when it would be so nice to be proven completely, utterly and totally wrong.

-srbp-

Danny Williams: I am my own electoral grandpa

In the land of completely useless news releases, one on Monday from the Premier's Office would surely be crowned king.

That is, it would be useless if it didn't reveal a far more serious problem with the current Elections Act than the trivial bit of business it purports to discuss.

Let's see if we can map out the problem.

The release headline purports to explain that a by-election is being called for Baie Verte district, yet at no point does the release indicate that the by-election has actually been called.

The reason for that schlamozzle is a series of changes to the Elections Act introduced by the Williams administration.

Under those changes, a by-election must be called within 60 days of a seat being declared vacant. The district of Baie Verte has been without a member in the House since former cabinet minister Paul Shelley resigned on July 12, 2007.

Hence, a by-election needs to be called very soon. The deadline is Wednesday.

However, the Elections Act also sets a fixed date for the general election. The writ for that can drop no later than Monday, September 17 so that voting day can be set for October 9. Once the House of Assembly is dissolved and a general election called, the by-election would simply be eliminated.

Unglaze those eyes.

It gets better.

Paul Shelley did his old boss a fine favour when he left, knowing full well the dates for the general election and when the writ for that would be dropped.

And that is really one aspect of what the "news" release is about. Someone shagged up royally in the rush to deliver on this particular promise from the last election, never considering the possibility of this sort of scenario. The Williams amendments from a few years ago cover the resignation of first ministers but they ignore the ordinary sods of the provincial legislature, like say cabinet ministers. They were clearly poorly thought through.

The release includes a wordy comment from the Premier which, like the rest of the release, is long on self-adulation but short on substance.

Like when exactly is the by-election the release mentions?

Turns out that in the midst of all the self-pleasuring comments, no date is given. This would lead one to conclude - logically - that no date exists for the by-election, since the Premier did not visit His Honour, the Lieutenant Governor and seek the necessary document authorizing the by-election as required by the law the release takes great pains to point out was brought into existence by the very fellow who couldn't find the time to take a short car ride to Government House at any point since July 12.

58 days ago.

And thereby give effect to his own law.

Plenty of time to have a by-election within the time limits prescribed by legislation which - we are told - was amended in order to reduce "the timelines required to call a by-election."

Now under ordinary circumstances, one might forgive the Premier for filling out the paperwork and calling a by-election, announcing it and then getting the big writ dropped a few days later.

or...

He could just take a cab down to Government House and drop the big writ on Wednesday. That way, he'd have killed two birds with one easy stone. He'd also have avoided the huge waste of time involved in issuing this news release that does nothing except praise himself to the hilt.

But we promised this tale gets better and indeed it does.

Under changes to the Elections Act introduced just this past spring, sped through the House of Assembly and gazetted before Paul Shelley packed it in, people have been able to vote by special ballot in the by-election that hasn't been called yet.

That's right.

The only problem is that the section of the Act, cooked up by former cabinet minister Chuck Furey while he was chief electoral officer, stipulates that a person may apply for a special ballot no more than four weeks before a writ of election is issued.

It doesn't specify general election or by-election. It just says "writ of election."

Since everyone knew the date of the general election - it being spelled out in black ink - figuring out the date for special balloting was pretty simple.

But what about a by-election, in which the Premier has the discretion of waiting up to 60 days to make the call? One would need to be Kreskin to figure out when the four weeks begins.

Maybe not, though.

To determine eligibility to apply for a special ballot, would one count from the end of the 60 days or the beginning of the period? One can make a logical argument both ways.

However, since the intent of the reforms introduced by the current administration [*see note below] was to reduce delays in holding by-elections, one might reasonably conclude that the clock started ticking on the day the resignation became effective.

Now, bear in mind as well that Paul Shelley didn't just walk into the Premier's Office on July 12 and throw his teddy in the corner, effective immediately.

Not by a long shot.

In January - nine freakin' months ago - Shelley announced he was leaving politics and would resign once the House finished its spring session. He fixed the date towards the end of that session, in other words, at such a time that he and his colleagues could have figured out the problems that would ensue from the amendments to the Elections Act they were pushing through.

Because here's the thing: under the Elections Act, a voter in Baie Verte district would be reasonably entitled to have applied for a special ballot at any time after June 14 (when the amendments received Royal Assent) since that is less than four weeks before the earliest date on which the by-election for Baie Verte could have been called.

Let's see if we can put it together in just one - very long - sentence that, as much as anything else, embodies the sheer inanity of the current elections law in this province.

Take a breath:

The news release announcing a by-election that never contained the information on the by-election supposedly being called, but which actually discussed why changes to the Elections Act introduced by the current administration needed to be followed - even though they created a nonsense of calling a by-election and then calling a general election days afterward, actually pointed out yet another problem with the special ballot provisions of the Elections Act, namely that someone could have actually, legally applied for a ballot to vote in a by-election that had not been called, almost a month before Paul Shelley actually resigned.

I am my own electoral grandpa, indeed.

The people - Liberal, Progressive Conservative and new Democrat - who brought you this farce will soon be knocking on your door, asking for your vote so they can run the province for another four years.

Take your time before deciding.

Frankly, it's doubtful any of them are even qualified to be your latex salesman.

-srbp-

[*Incidentally, it is not the Williams government with or without a capital "g". It is Her Majesty's Government. The first minister presides over an administration which will - like its predecessors - come to an end. The government is the enduring entity.]

Welcome to Energyville!

Energyville is an online game that illustrates the challenges and complexities of meeting energy needs in a modern society. The game was developed by The Economist Group and hosted at willyoujoinus.com, a site run by Chevron.

UK-based communications consultant Neville Hobson describes the game this way:

The game makes you think about the issues surrounding energy usage, society’s needs, security, effects on the environment… indeed, all the hot issues surrounding the changes happening in our world and the impacts we have on our environment.

Energyville is cleverly conceived and implemented. It has credibility, both in the breadth and depth of content and the fact that The Economist is behind its development.

Where it really scores is in how it wraps all of this up and presents it in a highly entertaining way.

What would be great is if this online game were to be developed as a standalone, downloadable version and made available for a nominal cost if not for free. Then I think there would be real opportunities for enormous awareness-raising.

Anyway, have a go yourself and see if it impacts your thinking about our environment

willyoujoinus.com is a Chevron initiative designed to foster an online discussion about energy and environmental issues. The website is essentially conventional in many respects, although it apes the interactivity and language of Web 2.0 with terms like "post".

As Neville Hobson has pointed out in another post, a blog approach would have provided Chevron with a site that offers personality and authenticity. those are key factors in establishing credibility and credibility is one area where a website on energy and the environment may suffer when run by a major oil company.

As it is, the site includes e-cards, but the bulk of the site - aside from Energyville and the discussion forum are Chevron's standard advertising content supporting the initiative. lovely stuff, that it is, these traditional approaches won't succeed where a more up-to-date approach would likely have succeeded. In an online world where "go big or go home" is more likely get positive results, Chevron stuck with the same-old, same-old.

Still, willyoujoinus.com is a step in the right direction. Energyville in particular has bags of content that will be highly provocative. Having the game designed by The Economist helps significantly with its credibility. Just imagine the impact this site might have had if Chevron employees were able to speak directly about major issues they deal with each day.

-srbp-

Mulroney skips Atlantic

Brian Mulroney is skipping Atlantic Canada in the tour to flog his new memoirs.

Burlington, Ontario, known to some locals as Borington, will get to see the former prime minister in the flesh, as will Canadians living in Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal.

Burlington.

But not a single stop in Atlantic Canada.

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To comment or not to comment

From the Australian public relations blog, Better communications results, comes a timely post on the subject of comments on blogs.

Not surprisingly, opinions vary.

Equally unsurprising is the indication of a trend to be found on some local blogs for comments to turn into pointless, sometimes personally hostile comments by anonymous people.

There have been some examples of that at Bond Papers, especially in the posts by an essentially anonymous commenter on the post "The revenge of the newfies?" containing Benoit Aubin's recent L'actualite piece on the province.

If you want to see the sort of pseudo-flame war that can erupt, there's a good example locally from a blog run by a pseudonym who - himself - also keeps his profile closed and makes it pretty well impossible for most people to find out either his identity or an e-mail address where you could reach him to take up an issue privately. The big spurt of personal vitriol erupted in the late winter and early spring; he commented on the "Revenge" posting, incidentally, following the same tactic of launching a form of personal attack rather than deal with the post itself.

As a last point, let's take a clip from Dave Winer's view on the subject of comments:

..."The cool thing about blogs is that while they may be quiet, and it may be hard to find what you’re looking for, at least you can say what you think without being shouted down. This makes it possible for unpopular ideas to be expressed. And if you know history, the most important ideas often are the unpopular ones…. That’s what’s important about blogs, not that people can comment on your ideas. As long as they can start their own blog, there will be no shortage of places to comment.”

Comments are an issue, and how to handle them takes some consideration. Moderation is, to my mind, a form of peculiar censorship. In practice, it seems to turn that unpopular comments - i.e. ones that don't fawn over the blogger or essentially confirm their line of argument - never see the light of day.

At Bond Papers and Persuasion Business, the practice has been to require a blogger.com ID and an e-mail address as a way of forcing people to take responsibility for their own words. People who don't want to do that can go elsewhere and their comments - usually the pseudonymous, blocked profile types - will usually find their words deleted. This is especially the case when the comments turn out to be ad hominem nonsense. They remain in the e-mail in-basket, though, for future reference.

Comments can add significantly to a thread, such as Craig Welsh's questioning of the recent poll goosing post, or the opinion offered by another commenter - with a name but closed profile - on a thread about Hebron royalties.

In a post on Grenfell, strong opinion was voiced from what appeared to be an anonymous commenter. When challenged on that point, an e-mail appeared which identified the person as someone who has offered - as in the comments - thoughtful, strong opinions. The person took responsibility for his words and hence they remain available for all to see. He added significantly to the discussion.

At Bond Papers, there have always been comments even if the ability to comment on each post has been disabled. That's while the profile is open and an e-mail address is prominently displayed. Some of the most valuable, informed and sometimes highly critical comments have come from there. Productive discussions ensued and in one case, a scathing comment intended for publication with the thread came through e-mail; it went on the thread as the commenter intended originally intended and with the commenter's permission. Strong words and critical comment are not enough to get someone's words in the bin.

Comments on blogs are likely to be a hot topic in the upcoming election for two reasons:

1. Blogs have become a source of critical or alternative comment, something the Premier has made plain he doesn't like.

2. One tactic to counteract that would be deploying sock puppets - the anonymous ad hominem attackers - to disrupt the information flow. They are the modern version of the thugs sent to a rival meeting to start a fight.

Let's see what happens as the story unfolds.

-srbp-

[Cross posted to Persuasion Business]

Brave talk, but still meaningless blather

Natural resources minister Kathy Dunderdale signed off on another extension to the White Rose oil field on Friday. Husky energy, the main partner in the project can now develop 24 million barrels of recoverable oil at a cost of $595 million.

Good news, considering there was much speculation that the provincial government would try and squeeze cash out of the lucrative development. White Rose's light, sweet crude is easier and cheaper to develop than Hebron.

Turns out the province is just going to settle on talking about possibly, theoretically maybe getting some extra cash or local benefits.

Don't bet on it.

If the financial discussions are not a specific condition of the development application amendment approval, there's pretty much Sweet Fanny Adams that Dunderdale can do. She says some brave bluster words, but consider Dunderdale to be full of so much hot air.

As Dunderdale told the Telegram:

"The proponents have chosen to proceed with this development, even though the fiscal and other terms haven’t been finalized.

"What we will have to ensure, as we continue our discussions around these satellite field developments, is that the province receives a fair return."

Right off the bat, "fair return" is the sort of meaningless phrase that Danny Williams and his minister's like to throw around. They never say what it means, which means that it can be anything they want it to.

Dunderdale and her boss add nary a nickle to the existing development over and above the lucrative generic royalty regime established in 1996? That's a "fair return".

The company agrees to do "whatever work is possible" here in the province, but with no obligation to do any fixed percentage or amount?

That's a "fair return" as well.

Vague words.

No possible way of defining it and measuring it.

Therefore, success or failure are impossible to determine.

It's the opposite of accountable.

In fact vague language like "fair return" is deliberately designed to promote unaccountability.

Second of all, no oil company in its right mind would develop a field - even an extension of one in development - unless it knew the costs of development were settled or could be predicted reasonably well. The idea Husky is going to figure out later what to pay the provincial government is simply ludicrous.

But it's an election season so the provincial government has to give it's goosed version of the facts. To reinforce what will quickly become the Hebron myth, Dunderdale is obliged to say the province is looking for all the things it won at Hebron.

Only difference is, at Hebron they held up approval to negotiate first.

On White Rose, Dunderdale and her boss don't have quite the same leverage.

They signed it away, up front.

-srbp-

"Hebron means money, research for Memorial"

From The Muse, student newspaper at Memorial University:

“The Faculty of Engineering has a particularly strong link with the oil and gas industry, so there are direct benefits that I expect would follow from the Hebron project. These include increased opportunities within our province for our co-op students, graduates, and alumni of the Faculty of Engineering,” said Dean of Engineering Ray Gosine.

According to Memorial’s Oil And Gas Development Partnership (OGDP), these job opportunities will trickle down to other facets of the community.

The initial phase of construction is less likely to employ MUN students, however there are many opportunities down the road, says Randolf Cooper, executive director of OGDP.

“It’s quite encouraging to look at the bigger picture and the long term. That’s where you start to break down a lot of stereotypes. … I think there may be just as many jobs for people with business degrees, as opposed to degrees from earth sciences or engineering,” he said.

“Some of it takes on aspects of the trickle down economy, by the time the money gets into circulation, there are certainly a lot of people in the hospitality business that are going to benefit.”

Director of OGDP Research, Ian Atkinson, agrees.

“Even though first oil is in 2015, there is an immediate economic boost when they commit to the project. They bring people in, and right away there’s a need for more housing and people are spending money,” he said.

It will also mean major research opportunities in the future, in all sorts of scientific disciplines.

“It remains very much a laboratory for Memorial,” said Cooper. “It certainly looks like oil is headed more and more towards arctic and harsh weather environment exploration.”

-srbp-

"Insert a simple clause"

Will there be such a simple clause in the Hebron agreement?

The Telegram
Friday, May 17, 2002, p. A4

Williams on Voisey's warpath

Deborah Thomas
The Telegram

Danny Williams is making it his personal mission to make sure the people of Newfoundland and Labrador don't get a raw Voisey's Bay deal.

The Opposition leader is calling on the Grimes government to include a clause in any Voisey's Bay deal to state the agreement must be ratified by the House of Assembly first.

No such clause exists now, and Williams fears Inco will take legal action if, after a debate in the House of Assembly, the government has to make changes to it.

"Our responsibility here, as members of the legislature, is to make sure the people of Newfoundland and Labrador are protected, and the only way to do that is to see that deal," he said. "Such a simple clause will eliminate all legal risk."

Williams said the clause needs to be tight, fool-proof and clear, but also simply state that the House of Assembly must debate and approve it first. He's afraid a lawsuit could bankrupt the province.

"The premier does have a majority in this legislature. Why is he afraid of an open and a frank debate? Is he afraid there is going to be loopholes or flaws or problems with that deal?" he said.

-srbp-

Called at last. Called at last.

The provincial Progressive Conservatives were short candidates in two seats when voting started on August 20.

It wasn't from lack of trying. No one apparently has shown any interest in running in the Grit stronghold of Torngat Mountains.

Meanwhile, the presence of four good candidates in full campaign mode didn't seem to impress the party leader enough to call the nomination in the safe Tory seat of St. John's East, being vacated by the superlative gentleman, John Ottenheimer.

There's been speculation about some secret strategy but that is a smoke screen.

According to local political scuttlebutt, Dan was desperately trying to get his old buddy Dean to take the spot. Dean said no.

Then there was casting about for a Number 2.

Apparently, Valerie took a pass as well.

So now it's down to Ed Buckingham, Dave Crosbie and a couple of others to battle it out in the race that starts officially on September 17. The nomination opened officially at 5:00 PM on Friday and ends - surprisingly - on Sunday.

In the meantime, let's all ponder this one: someone votes early and writes Dean MacDonald on the ballot in St. John's East.

Since Deano was never a candidate for any party, how would that vote be counted?

-srbp-

Porn Talk

On Friday afternoon's show, Crap Talk host Bill Rowe asked political candidate Elvis Loveless if he was any relation to singer Linda Lovelace.

Singer, Bill?

Umm.

Not exactly a singer Bill but... oh never mind.

Linda Lovelace was just the star of one of the most well-known porno movies in history and probably the most profitable one in all cinema history.

The title of the movie, and Linda's particular skill, was the inspiration for the name given to the secret source Bob Woodward and Carl Bernstein used to break the Watergate scandal.

After a break, Bill sheepishly explained that he'd actually meant singer Patty Loveless.

Pesky things those homonyms.

Ahhh. That explains it.

Quick save, there Mr. Producer

After all, if Bill had really been thinking quickly, he'd have tossed in the fact that singer Loveless has a song titled "I try to think about Elvis" whereas the actress Lovelace might have had some other connection to Elvis.

And then the eye-rolling would have started again across the network named for the Volvo Owners Club of Malaysia.

-srbp-

Pull the other one

vocm.com is carrying a story featuring comments from Corporate Research Associates president Don Mills on his company's latest poll results in Newfoundland and Labrador.

It includes this statement:

Mills says the timing of the Hebron announcement was 'impeccable' for the premier given the election is just weeks away.

Well, the timing was impeccable but it had little to do with the election, which, as pretty well everyone knows, has been underway since at least last June.

Nope.

Check the timing on when CRA was in the field.

August 9 to August 31.

The Hebron announcement came, quite suddenly, and quite inexplicably given that there was no final deal, on August 22.

Right smack in the middle of Mills' data collection.

Not like the first time this administration - or its predecessor for that matter - timed major government announcements to coincide with Mills' quarterly data collection.


Take a look at the graph at left. The blue line is the weekly number of news releases from the provincial government. The green spaces are the times CRA was in the field.

The provincial government knows when CRA is collecting data since the provincial government is a CRA client for the quarterly survey.

The coincidence of the peaks with the polling periods doesn't look random. In fact it's a bit hard to explain making a major announcement in August, for example, or a high volume of government releases in August when most people are on vacation.

It's harder to explain a quickie announcement of a huge oil deal before the deal is actually finalized. Election? Well, there was a whole block of time after Labour Day for that, especially the time when the election is on and people are focused on electioneering.

Impeccable timing, yes, but timed for the election?

Pull the other one, Don, it's got bells on it.

Telephone bells ringing with a pollster on the other end of the line.

-srbp-

Election Blogs

CBC's Mike Rossiter and David Cochrane will be on the campaign trail and keeping blogs.

The thought of these guys tapping out daily observations separate from their reports is not as strange as it might seem. It's a variation on what CBC did in 2003 with all its campaign reporters and Cochrane even posted a few things to his own experimental blog.

It'll make things interesting if, during the campaign, the Premier decides to take a swipe at those nefarious bloggers he seems to notice every once in a while.

Anyway, what exactly will these reporter blogs be called?

Ross-itations?

Cochrants?

Tales from the Crackberry?

Winne-blogo?

The possibilities are endless!

-srbp-

Another blog, a cut above

Writer.

Good writer.

Bright future.

Sheena Goodyear's Don't quote me on this

-srbp-

Standing by your man via Blackberry

The opposition parties want health minister Ross Wiseman to resign over problems in the province's health system.

Failing that, they'd like the Premier to end Wiseman's second career in heath care. (He used to be a human resources manager.)

Ok.

That's a pretty standard political cry.

Not surprisingly, the premier is standing behind his man Ross, as he said in a statement coming - presumably - over his comms director's Blackberry:

"He is an incredibly competent, conscientious and hard-working minister. He is dealing with a number of serious issues, many which started under the Liberal administration, and I have great faith in his abilities," Williams said.

Again, a pretty standard response.

But if the Premier really stood behind Wiseman he might have used his own voice and done it by deriding the opposition for yet another lame-assed, predictable pile of drivel.

As it stands, Wiseman got the same endorsement one imagines that Rona and Gordon got just before they were punted to new jobs.

-srbp-

Summer of Love: MHAs continue gifts of public money

Remember Tom Rideout's dance trying to explain away how he and all his colleagues in the House of Assembly misled the public on when the Green report was taking effect?

Remember his gift of $5000 of public money to a local charity just a few short weeks before Chief Justice Derek Green condemned the practice?

Remember the claim that the Progressive Conservative caucus had taken The Pledge and would not be handing out public money as gifts? It was a big part of the story on how - according to Rideout - today was today but tomorrow was October 9 and not June 15, the day after the Green bill was passed. The old rules can stay in place - even though we suggested something else to you already - because we have promised not to hand out public money as gifts to the public.

Turns out to have been a crock.

The gifts - always labelled "donations" - are just coming from a different pot than the one they used to come from.

Clayton Forsey, the Progressive Conservative MHA for Exploits, shows up in St. Alban's (not in his district) in August and is referred to in the local paper as handing out $500 "on behalf of" none other than Premier Danny Williams.

Then two weeks later, the local paper prints a correction saying that the "donation" - to a local fundraiser for a cancer centre - was actually from the provincial health department. The money came, but it was from the health department. Check the hard copy because Transcon hasn't updated thecoaster.ca for almost a month.

Delivered by Clayton Forsey, mind you and so obviously identified as a partisan. The money didn't come from the minister or even the deputy minister or even the head of the local health authority. Nope it came from visiting Tory back-bencher, like that was a secret.

Since when does any provincial line department give a "donation" to an event such as this in the first place let alone deliver a cheque by such an obviously partisan means?

Good cause, mind you but departments put up the capital to build cancer centres and staff them. They don't make "donations" to local fundraisers, especially through an MHA, Tory now or Liberals before. If the Liberals did it before, then it is no more right than Forsey and whoever of his buddies are doing it these days.

This one needs some investigation by someone. If there's one example, there's like more that never got picked up by the local weekly.

This little story is highly suspicious.

So suspicious in fact that it should get the attention of the Auditor General, not to mention members of the general public who have already been misled on this issue at least once before by members of the House of Assembly.

oh yeah and while we're at it, where did this grand come from? [By mid-day this link turned up dead for some unknown reason. google search "clayton forsey $1000" and it will re-appear. Check the "cached page" for the full story from August 20. if that doesn't work, try this link which seems to be a new page identity for this story.]

Someone should be taking official notice of these goings on. After all, it's not like this is the first time Forsey's been reported handing out public money, even before the Summer of Love officially kicked off.

-srbp-

Charest chief of staff and comms director leave

Two senior members of Jean Charest's staff have departed. Chief of staff Stephane Bertrand and communications director Michel Guitard.

Gitard's departure is effective September 14. The two are said to be passing the torch and leave the office voluntarily.

-srbp-

Deep Panuke approved

The Deep Panuke gas project offshore Nova Scotia passed another hurdle today with a decision from federal environment minister John Baird that the project "is not likely to cause any adverse environmental effects."

The project has now been referred to other regulatory authorities for further action. A project description can be found at the Nova Scotia offshore regulatory board website.

-srbp-

For Number One Daughter

who started Grade Four today, who is always full of enthusiasm and energy and who, each day, makes her family prouder (none prouder than her mother who is still a bit taller than she is).

-srbp-

For Number One Son...

who started Grade Nine today, who is in no danger of failing, and who makes his family prouder every day (none prouder than his father, who is still a bit taller than he is.)

-srbp-

Show me the oil money!

Here's another story on the Hebron deal from Embassy. The story discusses the recent Hebron announcement in the wider context of a policy debate in Alberta over royalty regimes.

There are some interesting comments in the story, coming from natural resources minister Kathy Dunderdale.

"It [the first round of talks] fell off the rails around equity, super-royalties and secondary processing," Newfoundland Natural Resources Minister Kathy Dunderdale said of the negotiations in an interview Monday. "The premier [Danny Williams] said at the time we were prepared to let some things go, but not the equity or the super-royalties.

Not exactly.

Premier Williams made two different sets of three demands. In April 2005, he said the province was looking for two of the three of:

- better royalties (undefined);

- better local benefits; and,

- local processing.

The Premier took the refinery off the list as soon as a consortium announced they were exploring a second refinery for Placentia Bay.

A year later, the Premier had three different demands:

- better local benefits;

- a super-royalty, to kick in when oil traded above a certain price per barrel; and,

- an "equity" stake.

The super-royalty was never clearly defined; indeed, not much of the list was defined in any measurable way.

When the talks fell apart, there were essentially two issues:

1. The companies could not agree among themselves on the equity request, reduced apparently from 10% to 4.9% to avoid involving any management decision-making powers; and,

2. A request by the companies for tax concessions which the province was not willing to consider.

In the memorandum of understanding, the issues were resolved such that the companies got a royalty break in lieu of the other tax concessions. The province got two other items but the details of how those work are still secret.

That's what makes discussion of the equity stake in the context of the Embassy story a little odd. There are some references - including here at Bond - to operating a state-owned oil company as in other countries. In truth, the thing may turn out to be nothing more than shares handled by an operating company as with the Canada Hibernia Holding Company.

How the shares are handled and what the energy company turns out to be will affect the net value of the thing to the province as a whole. Notice that the minister refers to the vague concept of having a window on the industry from the standpoint of developers. It certainly isn't clear what that means and how it may benefit the province in any way at all.

-srbp-

Start Your Own Political Party

If there's one of these, then why do we need one of these?

The New Democratic Party is supposed to be the party of labour but now someone starting a labour party.

Hmmm.

Next thing you know someone will re-start the Newfoundland and Labrador Party, which is not to be confused with the Newfoundland and Labrador First Party.

Has anyone seen the Popular People's Front for the Liberation of Judea (Officials)?

-srbp-

The Zen of Blogs

Wise One: What, grasshopper, is the sound made by one head repeatedly hitting the computer desk?

Grasshopper: Shagged if I know, Boss. But the head might be banging after finding a serious story about a shortage of urologists in the province linked by Dave Barry's blog in the US, with the suggestion that "Canadian Urologist Shortage" would be a good name for a band?

This one comes with a gigantic doff of the bowler to the cbc.ca webninjas who tied their sites to Technorati.

To update that story, the official position of the regional health authority is that they won't be speaking publicly about concerns raised recently by a local urologist. His concerns led to the CBC story that led ultimately to Dave's World.

Lessons?

Well, Lesson One: just about anyone will find anything funny.

Lesson Two: if you just got the living daylights hauled out of you on a health issue when your media strategy was entirely reactive and didn't say a heckuva lot, then maybe it might time to think of a new concept in public relations besides "no comment".

That second lesson isn't for the comms people invovled - it's for the management types who think silence is an effective way to disseminate information.

-srbp-

The impact of new media

Update: link to fleetstreetpr.com fixed.

New media can be used for niceness or evil, to paraphrase Maxwell Smart.

How you interpret this example from Ontario's election campaign on a "Goodness" scale depends on which partisan side you take.

The one thing everyone will agree on is that new media had an impact - an apology was issued - even if it is a transient one.

From the other side, there are examples like this one poking at John Tory's Liberal counterpart Dalton McGuinty.

-srbp-

Deconfusing the royalty confusion

In Friday's National Post, Premier Danny Williams said:

With regards to criticism of modifications to the basic royalty, it is important to note that the change is the difference between 2.5% and 1% -- not between 7.5% and 1% as reported by Mr. Coyne -- in addition, we still maintain the 5%, and in some cases 7.5%, level of royalty once costs are recovered.

For those familiar with the provincial generic royalty regime, this would create some confusion since the situation described by the Premier is not how the existing generic royalty regime works.

The generic royalty regime provides for a basic royalty that increases from 1%, through 2.5%, 5% to a maximum of 7.5% depending on when the project achieves simple payout. Under provincial petroleum regulations, simple payout occurs when cumulative gross revenue and incidental revenue exceeds the sum of allowable pre-development costs, capital expenditures, operating expenditures and basic royalty paid.

After simple payout is achieved, the royalty paid is the greater of the basic royalty rate (assessed on gross revenue) or the net royalty rates of 20% and 10% after an allowed rate of return.

In order for the adjustment to basic royalty in the pre-payout phase to be the difference between "2.5% and 1%" - as the Premier states - the Hebron project would have to recover its eligible costs within the first two to three years of production or less. His comment assumes an extremely optimistic scenario.

The Premier referred to total costs of between $7 and $11 billion in the 22 August announcement. Taking that as the amount to be recovered (pre-development plus development plus operating expenses and royalties fixed at 1% annually), and given the scenarios contained in two previous Bond Papers preliminary assessments, cumulative gross revenue would exceed $7.0 billion after about three to four years.

At that point, the basic royalty under the generic regime would likely about 5.0%. Thus the difference between Williams' Hebron and the generic regime would be the difference between 1% (Williams) and 5% 9generic). If costs are higher and the time to simple payout is longer, then the generic regime would likely reach 7.5%.

At the same time the Premier said that : "in addition, we still maintain the 5%, and in some cases 7.5%, level of royalty once costs are recovered". This is correct, however, under the existing petroleum regulations, those rates would apply - and the province would collect that revenue - only in a situation where the basic royalty produced more revenue than the Tier 1 and Tier 2 net royalties. Presumably under the Williams regime, this would also include the Tier 3 royalty.

In other words, in a scenario where the basic royalty was paid at 5% or 7.5% after simple payout, none of the much higher rates on net royalty - including the Premier's new Tier 3 - would be paid. This point is explained by provincial government documents.

The royalty regime appears to have been adjusted for Hebron as indicated in the 22 Aug news to a flat 1% royalty due at the commencement of production. This replaces the generic regime that started at 1% and would likely have increased to 5% or more by the time of simple payout. At the same time, the regime under the proposed Williams' Hebron regime is, to paraphrase natural resources minister Kathy Dunderdale, a decision to forego revenues (royalties) in the initial years of production for possible royalties in the later stages.

This is an understandable compromise given the cost issues in the project, but it does reduce the initial royalty accruing to the province likely by between 4% and 6.5%. Any revenue foregone in the initial phase of the project may be recovered subsequently but only as long as prices for oil stay above $50 per barrel for WTI (Tier 3 royalties apply). Again, depending on how the Tier 3 royalty works this may be an understandable compromise. Unfortunately there is insufficient information in the public domain to assess the potential performance of the Tier 3 royalty.

The revenue accruing to the energy company does not offset this royalty concession. in the initial stages of production, the provincial energy company will be recovering its own share of the development costs. it is also liable for operating expenses, provincial taxes, federal taxes and other costs.[Note: see below] Thus any revenue, it collects must be assessed on a net basis.
Royalties are received by the provincial government acting as the resource owner (100%), without any liabilities; the net and the gross are identical figures. The provincial government collects and retains 100% of royalties with no revenue from royalties accruing to the federal government.

-srbp-

Note: Under s. 41 of the 1985 Atlantic Accord, Crown corporations receive no exemptions or special treatment with respect to taxes and other payments to the federal and provincial Crowns.:

Crown corporations and agencies involved in oil and gas resource activities in the offshore area shall be subject to all taxes, royalties and levies.

As a result of the Hebron memorandum of understanding, the Government of Canada will collect revenues from the provincial government's share of overall revenues which it ordinarily would not collect. These come in the form of federal corporate taxes, for example.