Tuesday, June 19, 2007

Premier Williams' speech to NOIA

Fresh from the NOIA website is this transcript of the message delivered by Premier Danny Williams to the annual conference of the Newfoundland Ocean Industry Association (NOIA).

It was received without no interruptions, with polite applause at the end and
without the standing ovation which has become de rigeur at his speeches. Response afterwards was cautious and guarded; they have heard this before.

Many participants, while encouraged, felt that the Premier had merely pointed out the birds in the bushes without coming close to putting one in the hand. Notably, the operator representatives downplayed the significance of the discussions. But compared to previous times when the Premier claimed that talks were happening, this time the operators didn't flatly deny the existence of discussions. That's progress of a kind.

With an election 4 months away and only a few potholes in his political landscape (Hebron, relations with NOIA, Stephenville, health care scandals, House of Assembly scandals) this speech was a good effort in pouring gravel.

You've read the news coverage
here, here and here and even heard fragments here, now read the speech for yourself.

And to see what Williams is responding to, see Lunn's proposed speech here.


Thank you, Roy, and good morning to our local residents and companies and a heartfelt welcome to our visitors and friends and our business partners from outside the province. Welcome to the place where the sun rises first in North America - but notice I said rises, not necessarily shines - where the continent starts its day, to this great land of opportunity with a variety of the greatest natural resource assets in the entire country.

Even Hugo Chavez can't match that.

I want to thank NOIA for inviting me to share our government's approach to the development of our energy resources. The last time I actually spoke here, that speech was instrumental in us actually getting the Atlantic Accord because it was shortly after the address I gave that Paul Martin then made his promise a couple of days later in Newfoundland and Labrador, and then subsequently delivered on that promise the following year.

I know there are some people in this room who have not been overly enthusiastic with some of our government's policies towards the oil and gas industry in Newfoundland and Labrador. I can say that, while I do appreciate your perspectives and I do acknowledge your concerns, I fully stand behind our policies towards natural resource development in our province.

As you all know, leadership requires some tough decision-making at times and oftentimes those tough decisions may create short-term challenges. But I firmly believe that long-term vision and strategic planning will be the driving force behind the ultimate success of our province.

Our government has accomplished a great deal in our almost four years in office and while I won't bore you and go through that list this morning, I would encourage you to reflect upon some of our successes.

One of our foremost achievements is the fiscal turn-around that we have achieved through fiscal discipline, financial restraint in the early days of our government and tough negotiations with the federal government. We were determined, and we succeeded, in persuading the federal government, under then Prime Minister Paul Martin that it should live up to its commitments under the Atlantic Accord.

The result of that success is, quite frankly, astounding and has made a world of difference for our province. The 2005 Atlantic Accord agreement was a significant turning point in our history.

Unfortunately for the people of Newfoundland and Labrador, this is now under threat from Stephen Harper, but believe me I'm still working on that front.

I certainly hope that no one in this room is fooled by our federal MPs insisting that no promise was broken; those same MPs who insist that we are actually better off under the new budget. It's so preposterous that it is actually insulting and the inconsistent messages from them are actually embarrassing to themselves. But we will succeed without them.

The only thing probably more insulting is that in a province where 80% of eastern Canada's discovered oil and gas resources are located, and where we produce almost 50% of Canada's conventional light crude oil, there is absolutely zero Natural Resource Canada employment presence in this province.

In fact, the Canada Hibernia Holding Company is located in Alberta, a slap in the face to a province that contributes over one billion dollars a year to federal coffers in oil revenue.

But I digress.

I firmly believe that all Newfoundlanders and Labradorians hold one very fundamental value in common and that is that we all want what's best for this province that we love so dearly. We all want to see Newfoundland and Labrador prosper and we all want to have a bright future for ourselves, and more importantly for our children and our grandchildren.

And quite frankly this fundamental value was the driving force behind my decision to enter into public life.

I have said before that I was absolutely fed up with the record of giveaways and bad deals that has been our province's history. From the Upper Churchill to the decimation of our fishery, among others, this province so truly rich in natural resources was not achieving the self-sufficiency and prosperity that we deserved.

And it is not just prosperity that we deserved; it is prosperity that should have naturally flowed from the development and exploitation of our natural resource based economy. It never ceases to amaze me that a province like ours has struggled for so long.

The Upper Churchill is one of the great wonders of the world. If you add on the Lower Churchill we have probably the most significant hydro-electric resource in North America. We have also recently discovered that our wind resource in Labrador is, in fact, the best in North America. Our fishery was the envy of the international fishing community attracting vessels from all over the world.

At Voiseys Bay in Labrador we have one of the largest nickel deposits in the world. Our iron ore in Labrador is a world-class deposit, and of course, our oil and gas, while not on the same scale as Alberta, is very lucrative.

And who knows what yet is to be discovered.

So let's recap: hydro-electricity, world class; fishery, it was world class; nickel and iron ore, world class; wind potential, world class; oil and gas, world class; and most importantly, our people, world class. And yet we remain a province with the highest per capita debt in the country, and though the pace has mercifully declined from the levels of the 1990s we continue to see outmigration and watch some of our people leave home for bigger pay cheques and job security elsewhere.

What probably irritates me most of all is that we continue to listen to central Canadian editorialists and armchair critics decry the nerve and audacity of the welfare recipients in Newfoundland and Labrador looking for more than our fair share.

Just last week I listened in awe and exasperation to a popular CTV personality with a national current affairs program twice refer to the welfare that Newfoundlanders and Labradorians receive. This was in direct reference to the current debate about equalization and the Atlantic Accord. What he and countless others failed to mention are the facts.

First of all I would point out that every single province and territory in this country depends upon federal government dollars to some extent. Maybe not all in the form of equalization payments but let's not buy into the myth that Federal Government dollars only flow to have-not provinces.

From transfer payments, to industry subsidies, to other general federal government programs and employment, I can assure you that Ontario and other provinces benefit from federal monies and rightfully so. After all, we contribute to those massive federal surpluses.

What I point out to those central Canadian columnists is that Newfoundland and Labrador has made substantial and meaningful contributions to this great country, financial and otherwise.

The money flowing from our oil and gas, from our nickel deposits and from the Upper Churchill most certainly represent a meaningful and substantial contribution to this federation.

I have said before when I talk to mainland audiences that our oil and gas industry is about much more than barrels and dollars and cents.

This industry, your industry, has transformed the economy of Newfoundland and Labrador and it has contributed to a renewed energy and confidence. Though the more tangible benefits are seen on the Avalon Peninsula, the reality is that oil and gas wealth has helped the entire province. Our Government's goal is to ensure that as we move forward, even more of the wealth generated in this very lucrative industry is put to work to develop a more broad-based economic revolution in the province.

The oil and gas industry has stimulated the growth of multifaceted service, industrial fabrication, and engineering sectors with the Northeast Avalon now established as the primary service and supply area for the offshore. Major industrial fabrication facilities are also located at Bull Arm and Marystown and elsewhere. We also have a very successful downstream petroleum operation in our province.

North Atlantic Refining has been modernized and is now producing some of the cleanest, low sulphur fuels in the world. It exports in the order of $2 billion worth of refined products annually and employs around 700 people in secure, well-paying jobs in rural Newfoundland. A second refinery, an LNG facility may be just around the corner.

All of this would not be possible if not for the skilled and dedicated workforce in the local oil and gas industry, a workforce that is internationally recognized for its expertise and its commitment. The modules for White Rose, for example, were completed right here, on time and on budget; a testament to the men and women of this province who laboured on this project.

We certainly have a strong foundation on which to continue building this industry and coupled with the enormous potential of Orphan and Laurentian and the coast of Labrador.

As we move forward together the provincial government also has an obligation, and a responsibility to the people of the province, as stewards of those resources. We must put in place a set of oil and gas policies and programs and a regulatory framework that will ensure that our valuable resources are developed in the best long-term interests of all the citizens of Newfoundland and Labrador.

Our approach to oil and gas development is within the context of a larger energy policy and ensuring that there are no more giveaways. The long-term consequences of making a deal for the sake of a deal are too great and we know that from our history.

We want to increase the share of R&D that is done in this province. We want more corporate decision making to take place right here in Newfoundland and Labrador. We want to increase the share of petroleum related business activity for local firms. We want to have processing done here and we have already taken some important steps in that direction.

We have appointed some Newfoundlanders and Labradorians who are very knowledgeable and experienced in the international petroleum industry to senior executive positions at Newfoundland and Labrador Hydro. We have strengthened our Department of Natural Resources.

And earlier this month we passed legislation to allow for the creation of a new provincial energy corporation. This will separate regulated activities of Hydro from the unregulated activities associated with the energy corporation.

My ultimate goal is that the equity assets of this new corporation from onshore and offshore oil and gas, wind, hydro, and other energy assets will ultimately have a value in excess of the debt of our province so that eventually we will be debt-free. I don't think there's any of the entrepreneurs in this room that could object to that goal.

In anticipation of the release of the energy plan we have committed $12 million in the fiscal year to begin implementation of energy-related activities. This is money that we will invest in developing our energy industry in the province with particular emphasis on the west coast and Labrador.

For example, $5 million of this will go toHydro for the Petroleum Exploration Enhancement Program that Minister Dunderdale announced at the International Symposium on Oil and Gas Resources in Western Newfoundland just two weeks ago.

Through this program Hydro will have the flexibility to commission seismic work independently and/or partner with private companies to obtain crucial geo-scientific information by investing in their seismic activities in exchange for an equity position. The steps we have taken, and others to follow, will contribute to the common goal we share of building a strong energy industry.

And I want to say with all sincerity that I am very, very, very optimistic about the future of our province's oil and gas industry and I do appreciate the contributions of the companies who make the industry tick. And though there have been issues of concerns on both sides, there are ways to work through them and I believe that we are all sincerely committed to do just that.

I am especially pleased to report that after a brief but necessary hiatus of just over a year, we are progressing with formal discussions with the Hebron proponents to explore a way forward. These are not negotiations but, in fact, meetings to clarify our outstanding issues and are a true cause for optimism.

The companies are sharing concerns over costs which are increasing around the world. They are also updating us on possible scheduling opportunities and threats. At the same time we are continuing to share our thoughts on such issues as equity and royalties. The proponents fully understand that these are entrenched principles for our government and that these principles will be reinforced in our energy plan. They are clearly a condition precedent for moving forward.

But I also think that despite some negativity, around the concept of equity in particular, what our government is asking for is not extraordinary and Norway is the single best example of putting resources to work for people.

One of the lessons learned is that to become knowledgeable, to have access to the information you need to make wise decisions, you have to be at the table with industry. The most effective way to do that is through participation.

Governments in oil producing regions typically set up agencies owned by governments that actively participate in the development of their oil and gas resources by taking an equity stake in projects. The percentage can be very high, often far in excess of 50% for some of the bigger oil producers.

We already have an example of a very successful and well-respected state-owned company involved in our offshore. Norsk Hydro owns a 5% stake in Hibernia and a 15% stake in Terra Nova. Indeed the Government of Norway's fiscal take from it's oil and gas industry is more than 70%.

The idea of participation of the producing jurisdictions having some degree of ownership in its own oil fields is not a radical idea. Rather, it is normal state of affairs within the industry worldwide. We have an example right here in our own backyard with the Government of Canada's 8.5% equity interest in Hibernia. This percentage in no way impedes the private operating partner's ability to reap large profits from this project.

To date Hibernia alone has produced approximately $15 billion with over $1.2 billion to Newfoundland and Labrador, over $4.8 billion for Canada,and approximately $8.8 billion for industry.

In fact, the Government of Canada has recouped its investment three-fold to date; a good time, I think, for Ottawa to give its equity interest and MPI benefit to the province.

Given that success, it should be little surprise that the Government of Newfoundland and Labrador has determined that we want to have an equity participation in our own fields as we go forward.

And let me clear up another misconception. We are not insisting on a free ride for our equity. We are prepared to be a contributing partner and some choose to ignore this fact or simply use the ignorance of the fact as a propaganda tool against us. But the companies, the consortium who are dealing with us in good faith, know what our position is as do our people, and that's all that really matters.

On the Hebron front, I should be clear that while an enormous amount of work still remains before we can come to an agreement, I would categorize the fact that these discussions are even occurring as very, very positive and very productive. It is my hope that full-scale negotiations can resume sooner rather later, certainly this summer, and that a negotiated agreement is not much farther down the road. The owners will then have some work to do to receive final project sanctioning but I am confident that we are on the right track.

I should also mention that a key concern for both parties involves labour supply. Our government and our industry partners have a number of large projects in the works that could potentially lock up both workers and fabrication facilities for a number of years. Marine construction, hydromet, second refinery, LNG facility, the Lower Churchill, to mention just a few, all bode very well for our future in this province.

It is critically important that we factor the Hebron work into the schedule or there may be no facility available in the near future. This potential boom in skilled trades requirement is why we launched our Skilled Trades Task Force some time ago. We want to be as ready as possible for the opportunities that are before us.

More immediate negotiations are underway with Husky on the development of the White Rose extensions. Just recently, John Lau stated in a national paper that the relationship between his company and our province is so transparent that it has resulted in a level of trust that is unusual between companies and governments.

We were very excited to hear the success that Husky has experienced in their drilling program. Their success will be our success. These resources will provide new revenues for Husky and stabilize Government's revenue stream for many, many years to come.

I am also confident that Hibernia South will happen once we receive the information we have requested from the owner companies. As stewards of the resource we have a legal and a moral obligation to ensure that we have all the information we require to properly evaluate any development in this province and we take that obligation very seriously.

I would also like to commend the Hibernia Management and Development Company for the professionalism that they have demonstrated throughout this entire process.

Of course, we are also looking beyond the oil industry and are now having discussions with some of the lead partners who are interested in pursuing the development of natural gas royalties. We have already shared with them our draft natural gas royalty regime and will soon share it publicly. We look forward to positive developments on this front in the coming months as well.

I can assure you that our government will not be sidetracked by the nay-sayers and the critics. Our time is too valuable and our goals too important. Unfortunately some of them do not see the big picture when making narrow-minded observations.

If standing on principle and fighting for fairness and equity and justice is called corrosive or confrontational by adversarial politicians then I say to those critics, it beats the alternative. They should just mind their own business and just keep their promises.

I much prefer to listen to folks like Gerry Byrne who are full of optimism and confidence and are working hard to move the industry forward and attract work for the province that ten years ago no one would have dreamed possible. I choose to listen to the construction workers, the engineers and the trades people who say they are working beyond capacity and are excited about the prospects. I respect and admire the comments and sacrifices of Newfoundlanders and Labradorians working thousands of miles away in Fort McMurray, who tell me that they are prepared to wait if it means no more giveaways and great rewards for their children. They inspire me.

I ask for your patience and your support as we work on deals which finally see our true potential achieved. I don't think they are far away.

Trust my judgement. Short-term pain will lead to long-term gain.

As Jean Jacques Rousseau said, patience is bitter but its fruits are just as sweet, and I see NOIA playing a key role in providing leadership to ensure that Newfoundland and Labrador businesses have a key role in the growth of this industry. I want to make it very clear to you all that I know and I truly appreciate the central role that NOIA has been playing and will continue to play in the amazing success story that is the Newfoundland and Labrador oil and gas industry.

We need to go forward together to build an oil and gas industry in Newfoundland and Labrador that will succeed not just in this province but internationally. The Government of Newfoundland and Labrador is just as anxious as you are for these developments to proceed. I know what it's like to run a business, including an oil and gas business, and how much it means to have these large projects go ahead. You have payrolls to meet and you have bottom lines to worry about.

There is no joy in us for making your lives more difficult.

On the contrary, the more vibrant the small business sector in this province, including those businesses involved in the service and supply sector, the better for the province. But nevertheless, it is our responsibility as government, and my responsibility as Premier, to look at the big picture and to do what we believe is in the long-term best interests of the people of this province including you, the business people.

It is time for the Prime Minister to do likewise.

We need to be united in ensuring that our oil and gas resources are developed so as to create a diversified industry that will be a major driver of our economy for many, many years to come. This is about a partnership for all involved, governments, industry, and organizations like NOIA. Successful partnerships will yield success for all, but success is a journey, not a destination.

Thank you very much.

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