Sunday, July 29, 2007

Two MUNs or not two MUNS?

This is the 15 (!!) page press release from John Crosbie on the issue of the government's goal of Grenfell autonomy. It is very much worth the read.

In the meantime, here is some other coverage from the Muse (student paper) and the Telegram. VOCM has this piece in which the Principal of Grenfell, John Ashton, has no shame in baldly calling Mr. Crosbie misleading and hysterical.

Here's the Crosbie release. Far from hysterical, it reads excruciatingly clear and logical to me.

That must be why it stings.


Press Release dated the 27th day of July, 2007 of the Honourable John C. Crosbie, P.C., O.C., Q.C, Chancellor of the Memorial University of Newfoundland concerning the threat to the future of Memorial University and its autonomy caused by politically motivated interference with the future governance of Memorial by steps initiated to cause the formation of a second University in Newfoundland and Labrador located at the Grenfell Campus threatening the future of Memorial University.

I was appointed Chancellor of MUN by then Premier Clyde Wells in June, 1994 and since have been the Chancellor and an ex-officio member for the Board of Regents for 13 years. I have served as Chancellor during the administrations of Premiers Brian Tobin and Roger Grimes and since November 6, 2003 under Premier Danny Williams’ administration.

The Memorial University Act of the House of Assembly provides for the University to be governed by a 30 member Board of Regents including six elected by the MUN Alumni Association with four students and 17 others appointed by the Lieutenant Governor In Council and with three ex-officio members. The Act provides that the Board is to govern the affairs of the University providing in section 35 that “the management, administration and control of the property, revenue, business and affairs of the University are vested in the Board.”

It should be noted that in June, 2005 the Williams administration accepted and confirmed the White Paper dealing with post-secondary education which the Government had had prepared by Mr. Wayne Ludlow and that in that White Paper the Williams administration confirmed that it envisioned a post-secondary education system that comprised one University and one College.

That paper pointed out that the single University system made MUN more competitive with Universities in Atlantic Canada and elsewhere with respect to marketing and the recruitment and retention of faculty, staff and students. It stated that such a system had ensured the most effective use of resources and great benefits to the citizens, government, community groups, industry, faculty, staff, and, most importantly, benefits for our students leaving MUN to grow, to acquire an excellent national reputation and to attract increasing international recognition.

That policy paper which confirmed the policy implemented by all governments since Newfoundland entered confederation in 1949 also pointed out that accountability is a key tenet of University governments and that the ultimate authority for ensuring such accountability rests with the Board of Regents.

Despite this White Paper and confirmation of this policy by the Williams administration in June, 2005 just a few months later before the end of 2005 the government ignored its own White Paper and announced they were appointing Professor Kelly of Ireland and Professor Davies of the United Kingdom to consider a number of options for the future governance of Sir Wilfred Grenfell College at Corner Brook (Grenfell) and to do a feasibility study with respect to the governance of Grenfell.

Why this had to be done in view of the approval of the public policy adopted for 58 years by various governments of Newfoundland that the province should have only one University certainly appears strange. Strange also is consultant Kelly advising President Meisen in a letter of March 21, 2006 that “I emphasize that our function is to submit the range of options for Grenfell College and not to make a recommendation” while this is exactly what they did.”

They suggested the concept that both Universities should share a common governing Board of Regents, making the two institutions part of a proposed new Memorial University “system”. Then without any consultation whatsoever with the Regents or MUN administration or any of the stakeholders of MUN the Williams administration on April 27th issued a Press Release indicating that it “supports a preferred option that will give the College increased University status, within the single Memorial University system.”

Such a single Memorial University system is nothing but a disguise for the fact that Grenfell under that scenario would be an independent University with its own President and with one Board of Regents under constant political pressure to carry out the government’s will with respect to where assets and support go throughout the system putting the Board of Regents under political pressure at every meeting to do whatever the Government wishes to be done within the so called single Memorial University system.

Despite the fact that the Regents and the University administration had requested copies of the Kelly/Davies report be given to them before it was publicly released by the Williams Administration that Administration held the report for eight months neither giving copies to the Regents nor consulting with the Regents as to the report or any of its recommendations.

The copies of that report involving in such an important manner the future of Memorial University and post-secondary education in the province was not shared with the Regents nor the University administration nor any discussion held with them on the report before it was made public and the government’s decision announced and released on budget day when the government announced through Minister of Finance, Marshall, the MHA for the District of Humber East, the government’s decision on the report stating that “this new governance model is an important step in allowing Sir Wilfred Grenfell to lead economic and social development on the West Coast. It is yet another example of the rejuvenation the Corner Brook region is witnessing under the Williams government.”

This statement by the Minister clearly revealed the political motivation that was behind the appointment of those consultants to do what government called “a feasibility study on the future role of Grenfell” with the campus of Grenfell located within Humber West, represented by the Premier and near the District of Humber East represented by Minister Marshall.

On April 27th when the Williams Administration released the report and issued a Press Release it supported the “preferred option that will give the College increased University status, within a single Memorial University system.”

The political motivation that lies behind these actions of the government and the statements of Minister Marshall is confirmed again when earlier on October 21st 2005, public statements were made by Premier Williams in an interview with the Telegram Editorial Board, reported in the Telegram, where he stated he wanted Grenfell “to stand on its own as the Province’s second University.” He said as well “I don’t want Grenfell to just be a subsidiary or affiliate of Memorial, which is run by (MUN President) Axel Meisen and his team and all the St. John’s crowd.”

He wanted to see a competitive University situation in our province citing with approval Nova Scotia, which has eleven Universities, which most educators regard as a distinct disadvantage for Nova Scotia. The Premier in this extraordinary interview went on to state with respect to Grenfell that “right now Axel wants to have it under the thumb and I don’t agree with him under any circumstances on that one. Axel and I don’t see eye to eye.” He further said he had asked the Education Minister to have his Department move forward with a feasibility study on this issue. The results of the feasibility study were certainly predictable.

On September 1st the Premier and Minister Marshall were also reported in the Western Star as saying that Grenfell must control its own destiny. On September 9th the Premier suggested “that Memorial was inhibiting the growth of the College and in turn the City.” He suggested that the small management of Grenfell “is completely and totally preoccupied with providing reports to Axel Meisen and his group that impedes other things that they could be doing as well.”

These public statements and the record make clear that at least since the fall of 2005 the Grenfell group, led by Principal Ashton, has clearly met and worked with the Premier and Minister Marshall to accomplish their objective of having Grenfell become the second University in the Province.

These public statements certainly show why the consultants were appointed and their recommendations made and explain the Government’s actions since as they failed to consult properly or at all with the President, the Regents, the administration of Memorial and the stakeholders of Memorial and failed to make the so called feasibility study even available to those associated with and responsible for the governance of MUN. This whole pattern of behaviour by the Government, the Premier and his Ministers have demonstrated both publicly and privately their lack of respect for the Board of Regents, the Chancellor, the President and all those associated with the management and governance of MUN.

I support completely what has clearly and publicly and firmly been adopted as public policy in post-secondary education in NL since Memorial was created as a University in 1949. That principle was that NL should have one University, Memorial University, now an institution widely recognized and accepted across Canada and internationally as a very fine University institution. In my view the stakeholders in this University including the faculty, the students, the 60,000 alumni, 71% of whom live in this Province and the Senate of the University and the people of the Province should be given an opportunity to indicate what their views are on this fundamental public educational policy relating to MUN.

For the 58 years since 1949, all Premiers of Newfoundland, until the Williams’ administration took office, all chairs of the Board of Regents of Memorial and members of the Board of Regents and all Presidents of Memorial have accepted and acted on this firm and fundamental principle.

The standard to which Memorial University aspires was set by the first Premier, Joseph R. Smallwood, who declared that Memorial should be the most distinguished institution for its size in the world. To accomplish that, it was decided that there should be one university only in this Province so that there would be the greatest possibility of Memorial becoming such a distinguished institution. That policy has been continued by the 7 Premiers who followed J.R. Smallwood and their administrations and fully supported by them until the present and from the time of Dr. Raymond Gushue as President, by all Presidents including the late Moses O. Morgan, Dr. Leslie Harris, Dr. Arthur May and our present President, Dr. Axel Meisen.

The Regents after a great deal of research and discussion, sent to the Williams’ administration a statement of principles on the governance of Grenfell College outlining the firm opinion of the Regents that this Province is best served by a system that (1) has one university, Memorial University of Newfoundland; (2) is governed by one Board of Regents since accountability is the key requirement of University governance and the ultimate authority for ensuring accountability rests with the Board of Regents, (3) is presided over by one President as Chief Executive Officer who must have responsibility for the entire University, if the responsibility for the day-to-day operations of the University, designated by the Board to the President together with the development of a strategic plan of the institution is to be achieved and carried out with MUN consisting of three principal entities, with clearly defined mandates and working collaboratively, the St. John’s campus, the Grenfell campus and the Marine Institute; with academic matters governed by a single senate with significant authorities conferred by the Regents and the Senate to the academic council of Grenfell; with the administrative responsibilities for Grenfell Campus entrusted to a Vice-President of Grenfell with a broadened academic mandate; that the Vice-President of Grenfell should report to the President of the University on broad issues of policy and become a member of the senior executive committee, working collaboratively with the other Vice-Presidents of MUN; should receive one comprehensive budget allocation from the Government of NL through the Department of Education with the Regents authorizing annual budget allocations to the St. John’s campus, the Grenfell Campus and the Marine Institute, but remaining accountable for the expenditures of all university funds which enables the Board of Regents to fulfill its responsibilities under the University Act and the Transparency and Accountability Acts while maintaining the University as an autonomous institution.

It is only with a comprehensive budget allocation consistent with the mandate approved for each entity that makes it possible for the Board of Regents to pursue and meet the stated goals of an integrated strategic plan.

This considered position of the Board of Regents the Government never bothered to discuss with the Regents during the months from receipt of the Report by the Government until it made its press release despite the best efforts of the Regents at dialogue.

Any significant change from this Statement of Principles of the Regents in my view will lead to grave difficulties since what is suggested as acceptable to the Government would provide a system where the Board of Regents will have to be arbitrating differences between a University at Grenfell and the University at St. John’s radically changing the role of the Board requiring significant extensive and expensive support mechanisms to be created causing most important decisions to become the subjects of political pressure from and contention with the Government, fatally destroying the autonomy of Memorial from political interference.

In this Statement, the Board proposed significant changes to give Grenfell increased academic flexibility over its courses and programs while insuring the maintenance of University-wide common standards for admission, programs, graduation and transferability of courses resting the administrative responsibilities for Grenfell in the position of Vice-President (Grenfell) with a broadened academic mandate rather than just the present position as Principal of Grenfell. This statement of the Board was completely ignored by the Government which failed to give the Board a chance to discuss these issues with the Premier or Members of the Government.

The current conclusion of the Government with respect to the feasibility study of its consultants that the Government might support an option that will grant Grenfell University status and a separate executive, senate and budget within a single Memorial University system with a common Board of Regents is a decision that, if made, in my view, should not be accepted as such an arrangement would make it impossible to manage and administer the affairs of the University without constant political interference from the Government of NL with constant and continuing battles as to how the resources of MUN are to be divided in the system between Grenfell and the rest of the principal entities of MUN.

Any suggestion that Grenfell should have increased autonomy with its own President, executive, academic structure and senate, while reporting to one Board is not acceptable since it will make impossible any rational administration of the MUN system that could operate in future free of political pressure and interference by the Government. Memorial would no longer have the autonomy that is necessary for universities to have in relation to the governments that support them. Any common system will be an invitation for continuous political interference with the Board by the Government of NL and is not supportable.

Any implementation of this recommendation of the Kelly/Davies study would give Grenfell full university status under the façade of continuing in an abomination called “The Memorial System”.

It is clear from public statements made by the Premier and Minister Marshall that recent events in connection with the governance of Grenfell have been initiated by them as the MHAs for the Districts of Humber East and West and so motivated by political self-interest. Their motivation was confirmed by the statement by Minister Marshall in his April 27th press release that the decision is “yet another example of the rejuvenation that the Corner Brook region is witnessing under the Williams’ government”.

In the 58 years since Memorial was established as a University, so far as I know, and I have known and dealt with all Presidents of the University, all Chairs of the Board of Regents and all Premiers, this is the only instance I know of where there has been such political interference in the management of Memorial which is the University created in the memory of those who served the Province and the British Empire so nobly in World War I and in world conflicts since then. All governments of NL since 1949 led by premier Smallwood, Moores, Peckford, Rideout, Wells, Tobin and Grimes have supported the public policy imperative that our Province should support one University only, the Memorial University.

The announcement made by the Williams’ administration at the time of the budget of April 27th has already damaged MUN in serious ways. Since the term of the present President Axel Meisen expires in 2008, the University has had to appoint a committee to conduct a search to find a new President to replace him.

With public evidence of conflict and differences of opinion existing between the present Williams’ administration and the present administration of MUN and with the prospect of likely future political interference by the present Government with MUN as the Board of Regents has to make decisions involving spending in this proposed new university system it will obviously be impossible to attract an excellent candidate to become President of Memorial. Excellent candidates are not likely to apply when they observe that the academic freedom and independence or autonomy of the University is threatened by an overbearing and autocratic government acting with obviously politically partisan motivations not appearing to care how much its actions and statements may weaken the University.

In addition to the detrimental effects the Government’s announcement of April 27th will have on the effort to find a replacement for President Meisen, widely recognized at having done an excellent job for the University, the Government’s public announcement, without any consultation with the Board responsible for the governance of the University under the Memorial Act will be disastrous in its effects on the new public campaign planned by the University to go to the public across Canada for funding for university purposes planned to go forward at the present time in the expectations of raising from the corporate sector and private individuals many millions of dollars needed to improve the funding of scholarships and fellowships, to improve the facilities of the University needed for teaching and for research.

Certainly potential donors are highly unlikely to be encouraged or motivated to make generous donations to a second major fundraiser campaign at this time by the University. As Chairman of the first general campaign across Canada to raise funds for the University, known as the Opportunity Fund Campaign initiated in 1995, which carried on until 2001, I know it resulted in MUN raising $29,620,000.00. That Campaign was undertaken during the period when there was no public evidence of any fundamental disagreement or differences between the Government of NL and the University while the Campaign was much assisted by the Tobin administration agreeing to match, dollar for dollar, every contribution made to the Opportunity Fund.

The Williams administration has not agreed to such an arrangement this time. The Government of NL has matched the opportunity fund with to date $26,400,000.00 on a dollar for dollar basis which together with interest earned on the money has caused $58,078,799.00 to be raised for the purposes of the University.

The experience of that Campaign persuades me that one of the major reasons for its success was the fact that we could point out that Memorial was the sole university in Newfoundland so that all funds gained would be spent without dispute or argument on the University, its students, facilities and programs without conflict or competition among a number of universities in the Province which would need funds raised for their purposes. It is difficult to see how a second major fundraising campaign at this time can be undertaken if there are major differences in contention between the Government of NL and MUN as to its future, as to how it operates and with the obvious threat that recent events show exists to the autonomy and independence of the University.

If a University is created at Grenfell, to attempt to have a common governing Board of Regents for the university at Grenfell and the university at St. John’s, would create more problems, tensions and disruption than even having Grenfell as a separate university.

If Grenfell is to become an independent university, which is most unwise, then it must be independent, completely separate and apart from Memorial, since the single system suggested cannot succeed and will result in the complete politicization of the decisions that any Board of Regents of Memorial must make.

The work done by the University in analyzing the consultant’s report reveals significant errors and failure to deal with such issues as the absence of a strategic development plan for Grenfell. The Report fails to deal with the need for an independent identity and autonomy of Memorial and certainly about who is to speak authoritatively for MUN when its voice becomes divided between two Presidents, with its Board of Regents becoming, in effect, a Board of arbitrators to decide conflicts between the two independent universities in the system. Complete separation is clearly to be preferred if the Government wishes to force its will upon Memorial University no matter how undesirable this is or how it weakens Memorial. The Report also fails to advance any proper or accurate analysis of the financial costs of the proposals made in the Report.

It is astounding that the Government of NL would take decisions of such importance to the future of post-secondary education in Newfoundland, changing a fundamental public policy of 58 years, without a public debate or full consultation with the University, all its stakeholders and the public, on matters that will cause conflict, strife and grave damage to Memorial.

The recommendations of the Kelly-Davis Report and the Government’s response totally ignore the fact of the decline of the population of NL in recent years. The University has had to struggle to achieve an enrolment of 17,800 students by campaigning vigorously within the Province, on the mainland and internationally to attract students to the University.

The Report completely ignores the demographics that are so important to the present economic situation of NL. In 1999 there were 3733 high school graduates eligible to become students at MUN. By 2005 the number of eligible high school graduates had declined to 2,493.

This problem is even more serious for the Corner Brook area where the number of eligible high school graduates in 1999 was 182 while in 2005 there were 122. At Stephenville the number of eligible high school graduates were 259 in 1999 but by 2005 had declined to 119.

The Kelly-Davies Report does not deal at all with demographic challenges to University enrolments in this Province. The fact that enrolments at Grenfell now stand at around 1150 (1350 as a total with the inclusion of the Western School of Nursing) is not even discussed seriously in the feasibility report!

Memorial University of Newfoundland is one of the Province’s important institutions, a source of pride for our people. Its defining ethos is deeply inscribed in traditions larger than quarrels between the cities of St. John’s and Corner Brook. The University’s role has been as a living memorial and with deep meaning throughout the Province. A distinguished University has been established and created in our 58 years of Confederation. Who is to speak for Memorial University if its voice becomes ambiguous because divided between two Presidents?

The consultants and those who advocate academic and administrative autonomy for Grenfell apparently don’t hesitate to endanger or diminish the autonomy of Memorial vis a vis the provincial Government. The very commissioning of this Report by Government and the way it has being handled by the Government indicates there are serious threats to the autonomy of Memorial University that need to be resolved if it is to continue to produce effective, high quality educational programs, maintain academic freedom, continue research in public issues, in an environment that is safe and protected from external sanctions.

Wednesday, July 25, 2007

Tory Bad Ideas For Ontario

Thoughts From the Western Edge excoriates John Tory's pandering to minority voters. Fair enough. There is no doubt John Tory is vigorously pandering as fast as he can.

However, the question that needs to be asked is is there a way around provinces who jealously guard their monopoly over a mediocre education system to provide assistance to those parents who would like to have an alternative?

A common premise to the argument that the public educational systems is important to society is the assumption that public education is always good education. I don't think that is always the case.

The problem is this - how can you provide publicly funded alternatives to the current system of monolithic school board run education without compromising academic standards or, worse yet, funding radical Muslim schools ("madrassas"), for example, more concerned with teaching the practical skills of bomb making than the more abstract subjects like physics.

So if we refuse to fund religious schools, then is the public and government run system the only choice available for families who can't afford the $8-20,000 a year per child it takes to get out?

Fort McMurray - Exporting social problems

From arguably the most important magazine out there, The Economist has a piece on the social effect of the oil sands boom in Fort McMurray.

It points out that, like any other western frontier boomtown in history, two commodities highly sought-after by young single men with lots of money in their pockets are women and altered state inducing aids (alcohol and drugs).

It's fine for a 21 year old to be taking home $5000 a month, and some are. The tragedy is when those same 21 year olds are saving precisely none of it due to housing, truck payments, women and booze/drugs. It's not all that hard to go through $5000 a month out there - you don't really even have to put your mind to it.

We are already aware of some of the local effects of the Northern Alberta boom: young people heading out for work, provincial shortage of skilled trades, communities left behind surviving on remittances, etc.

Another so far lesser known effect is the impact of those young men when they come back home from their rotation (2-on-2-off or 6-on-2-off or whatever). Not only do they come home with cash in their pockets, they arrive with drug cravings in their system and/or drugs for personal consumption or sale in the community.

If you thought that crystal meth, crack or cocaine were unknown on the Great Northern or Port au Port peninsulas, you would be dead wrong. Just talk to the local constables in the area and they will set you straight on that.

It's easy to think about those kind of boomtown social problems happening far away. And before the age of regular flights from Fort Mac to west coast NL, they were far away.

But now they are in our backyard and we are woefully ill-equipped to deal with them.


Boomtown on a bender
Jun 28th 2007 | FORT MCMURRAY
From The Economist print edition
The downside of explosive growth in northern Alberta

WITH C$36 billion ($25 billion) invested so far in its oil sands and another C$45 billion expected over the next decade, the Canadian province of Alberta is booming. Workers have flocked in, lured by wages of up to C$120,000 a year. The once sleepy town of Fort McMurray, at the centre of the bonanza, boasts a crowded casino and a busy airport. But big money has brought big problems, including overstretched infrastructure and soaring drug use.

The town's population has grown by 9% a year for the past six years, says Sheldon Germain, the deputy mayor. In all directions, swampy forests are giving way to sprawling rows of clapboard houses that cost more than they would in the suburbs of Toronto.

The local authorities are struggling to cope. They cannot approve any more buildings in the town centre, Mr Germain says, because the sewerage system is overflowing. Doctors at the hospital complain of being overwhelmed; housing costs deter new recruits. The sole road connecting Fort McMurray with the rest of the province is crowded and deadly. The only way for the town to raise revenue to tackle these problems is to increase property taxes. But locals complain that they already suffer from exorbitant local prices, and want the oil companies to foot the bill.

Crime is another problem. Many of the thousands of workers who live in barrack-like accommodation at nearby mines and construction sites come to town at weekends, to drink a beer or ten, brawl, and buy sex and drugs. “This town is awash in cocaine,” says one long-time resident. Marijuana, crack and crystal meth are also widely used. Drug abuse in the northern oil patch is more than four times the provincial average.

According to Harold Hoffman, a specialist in occupational medicine in Edmonton, about 40% of the workers test positive for cocaine or marijuana in job screening or post-accident tests. Companies worry about lower productivity (due to absenteeism or sloppy work) caused by drug abuse, and the safety risk. On drilling rigs and in oil-sands mines a small mistake can easily result in injury or death. Some experts believe Alberta's rising job-site accident rate (up 17% in two years to 180,000 cases in 2006) is partly due to drug abuse.

Most of the biggest companies conduct drug tests before hiring, as well as after any accident. But many workers have learned to get around these with synthetic-urine kits from drug-paraphernalia shops. Many smaller contractors prefer to turn a blind eye for fear of losing workers in such a tight labour market. Lawrence Derry, an addiction expert at the University of Alberta, says that one contractor told him that “if I brought in drug testing, I'd lose half my crew—they'd go right over to my competitor.”

Monday, July 23, 2007

Best premier ever

CalgaryGrit blogger has come up with an interesting summer project - a set of 10 polls to select the best premiers ever and then a second round to select the best premier in the country.

The NL premier poll to select our national entry can be found at Wild Rose Grit.

Vote early, vote often!

And to answer the question that must be popping up in your mind - yep, there *are* Alberta Liberals

North Sea Oil - Keeping it going

North Sea oil was discovered in the early 1960s with the first well coming on line in 1971. Still, it wasn't until prices went high enough and the technology was sufficiently developed that the fields were intensively exploited.

And now the fields governed by both Great Britain and Norway are falling into decline.

Dr. Roger D. Blanchard of the Department of Chemistry at Northern Kentucky University has recently published a paper showing the path of decline. These charts show the the Norwegian decline (table 1) and the UK decline (table 2).

These are both pretty classic shapes and are really not all that different than the charts showing decline for the NL offshore sector.

The difference between the local sector and the North Sea is that the North Sea is fairly well-exploited and they are heading into a phase of metaphorically scraping the bottom of the barrel. There are no real big fields left in that region and it's already been very well explored.

Over here the chart merely shows the fields already developed. In fact, there is much to be explored and developed off our coasts.

Naturally The Economist (one of the finest news analytical magazines in the English language) has a story on how the North Sea is working to maximise it's barrel scraping efficiencies.


Every last drop
Jul 12th 2007
From The Economist print edition
How to prolong the North Sea's life

THERE is no shortage of oil and gas beneath the North Sea. Total production so far has been around 34 billion barrels, and roughly 20 billion are thought to remain. Indeed, production is forecast to rise slightly this year, to 3.1m barrels a day from 2.9m in 2006, thanks largely to the discovery of the Buzzard field, which came on stream in January.

But big finds are the exception and the rise in output will be only a small blip in a downward trend. Buzzard, which contains 500m barrels, was the largest discovery for ten years. Much of the remaining oil and gas in the North Sea is stored in small or geologically tricky deposits that are expensive and difficult to develop profitably.

Technology is one way to keep the hydrocarbons flowing. BP's Rhum field, for example—with temperatures of 150°C and pressures up to 12,700 pounds per square inch—has been known about for years, but drilling technology has only recently advanced to the point where production is practical. Improved seismic surveys can give a better idea of what is present below the seabed. High-tech imaging persuaded Total, a French firm, to develop the Jura field (another large find of 170m barrels), which is due to start production in 2008.

Another option is to bring in specialist firms. Big oil companies are often uninterested in small fields, preferring to pursue larger and more profitable developments elsewhere. In 2003 the government created new, cheaper licences to try to attract firms that specialise in wringing as much as possible from small or partially depleted fields. Half of the 150 licences granted last year fell into this category.

The industry is also eyeing the few unexplored frontiers in the North Sea. The seas west of the Shetland Islands are thought to hold billions of barrels of hydrocarbons, mostly natural gas. But the lack of infrastructure in such a remote area would make it difficult to bring production to shore. And although oil prices are high, gas prices have slumped following the opening earlier in the year of a big import pipeline from Norway.

Despite these difficulties the government wants Britain still to be pumping 3m barrels of oil and gas a day by 2010. But its actions belie its words. As chancellor of the exchequer, Gordon Brown raised taxes on the industry in recent years. Oil firms now pay a 50% corporation tax on new developments, compared with the 30% rate charged on other companies. The tax squeeze on the North Sea oil industry may end up accelerating its decline.

North Sea oil - Aberdeen looks outward

Here is an interesting piece on the North Sea oil industry from The Economist (one of the finest news analytical magazines in the English language).

It describes how Aberdeen is the center of the offshore sector for the North Sea. Much of the technology developed for the offshore wells in the area, the first serious offshore basin in the world to be developed, was invented and deployed by smaller Scottish companies. Big oil uses these companies as subcontractors.

But with the oil running out, the local support industry is shifting focus to developing techniques in extracting oil from more marginal and difficult reservoirs. And with a quarter of their business exported (to here, among other places) they want and need even more exports to keep their knives sharp.



When the wells dry up
Jul 12th 2007 | ABERDEEN From The Economist print edition
Offshore production has spawned a high-tech cluster of British businesses with global ambitions

“EVERYONE else in Britain hangs on what the Bank of England does with interest rates,” says one proud Aberdonian. “Up here, we don't care about that. We're much more interested in what OPEC does to the oil price.” An exaggeration maybe, but Aberdeen is the Houston of an offshore industry that has long made Britain a big oil and gas producer.

The petropounds coursing through the “Granite City” on the north-east coast of Scotland have turned Aberdeen into one of the most prosperous cities in Britain. The typical worker makes £481 ($971) a week, compared with median earnings of £447 across Britain. The city's unemployment rate is well under the national average. The oil industry employs 33,000 people directly in Aberdeen and is estimated to provide work for 400,000 in Britain.

Aberdeen is booming now thanks to high oil prices, but the future looks less rosy. Offshore output peaked eight years ago, when Britain was the world's sixth-biggest producer of oil and gas; by 2006 it had become the 12th-biggest. The International Energy Agency said on July 10th that the drop in production had been steeper than expected. “There'll be nothing here in 15 years' time,” says one former offshore worker. “Oil's been good to me, but I wouldn't want my son going into the business.” The recent decision by Royal Dutch Shell to sell off several of its North Sea fields and to abandon the construction of a £25m headquarters in the city has added to local worries.

Yet even though oil and gas output is declining, the local businesses that have sprung up to support it have bright prospects. The North Sea was one of the earliest offshore oil basins to be developed. Many of the technologies needed to produce oil from underwater wells—especially in the difficult, gale-prone waters off the British coast—were developed in Scotland. Around 90% of oil-industry workers are employed not by the big international companies such as BP or Total that operate the fields but by local businesses.

For example, Wood Group is a big oil-services firm that specialises in, among other things, enhanced-recovery technology and offshore pipelines. Sub-Atlantic is a small outfit that makes remotely operated submarines. Altogether such businesses—covering everything from catering and construction to geology and engineering—have a turnover of around £11.7 billion a year. The hope is that they will be able to sell the expertise they have acquired in the North Sea to an industry searching for oil and seeking to maximise production in ever more testing submarine conditions around the world.

One area of particular British expertise is in subsea technology, a catch-all term for things such as automated wellheads and long pipeline networks on the seabed. These allow oil companies to use cheap ships instead of expensive fixed platforms and enable them to operate several wells from one platform many miles away. Remotely operated vehicles are used to install and maintain equipment where water is too deep for divers.

In 2005 Britain's subsea industry's output was worth around £3.4 billion, half of which was exported, a 20% rise on the year before. There are big opportunities to keep growing fast. British firms account for half of global sales, and the industry is expanding rapidly. The world market for subsea services could be worth $40 billion by 2011, according to Scottish Enterprise, a development agency. David Pridden, the boss of Subsea UK, a trade agency, thinks exports from the British industry could reach $15 billion by 2020.

Local businesses also have experience in squeezing more output out of existing fields, or cheaply developing smaller ones—something that should extend the life of Britain's North Sea industry (see article). As big finds become rarer, producers are focusing on how to extract oil from smaller reservoirs that can be geologically or technically tricky to operate. “As other oilfields around the world begin to mature, there'll be a centre of expertise here that can tell them how to get the most out of their remaining reserves,” says Geoff Runcie, the boss of the Aberdeen and Grampian Chamber of Commerce.

The city's cluster of high-tech businesses may have sprung up to support the North Sea oil industry but there are also opportunities beyond it. Many local firms have branched off into other areas, such as defence. Technologies developed to pull oil and gas from the ocean floor can find other uses, too. When a Russian mini-submarine became caught on the Pacific seabed in 2005, it was cut free by a British remotely operated submarine based on technology developed for the North Sea.

Aberdeen also has ambitions to exploit its oil-support know-how in green energy. The hope is that local businesses with expertise in offshore construction and engineering can provide services to firms building offshore wind turbines or, in future, tidal and wave-powered generators. And even exhausted oil and gas fields may come in handy. One idea is that they can be used to store carbon emissions from fossil-fuel power plants.

The city is not short of ambition, but cooler-headed businessmen point out that it is easier to recognise opportunities than to grasp them. Exports still account for only about a quarter of the oil-support industry's output. Last year they grew by just 2%, compared with 16% in 2005, despite efforts by Scottish Enterprise to encourage firms to expand overseas. Oilmen make similar complaints to their counterparts in the rest of Britain's engineering sector: that the country lacks skilled workers; the standard of technical education is inadequate; and the government is ineffective in tackling these problems.

Yet such complaints have been made ever since the first North Sea well started pumping in 1967. The cluster of businesses in Aberdeen has achieved a critical mass thanks to the North Sea. It now stands a good chance of thriving in more distant offshore markets as the demand for energy continues to boom.

Federal-Provincial law

A well-worn Canadian joke is that whatever the pressing issue under discussion, in the final analysis it always comes down to whether the matter falls under provincial or federal jurisdiction.

We've seen more than a few local legal cases predicted on the idea that NL has jurisdiction, always had jurisdiction, should have jurisdiction or never gave up jurisdiction over this or that.

Some have argued about the jurisdiction of fly-over rights (a complete non-starter) while others have made a fine career over making these jurisdictional arguments in fisheries cases.

As with issues of these kinds, the reality is complex, subtle and evolving. For a taste of that, check out a brief overview of the issue at Thoughts from the Western Edge which concludes:
All to often in recent years we have heard assertions of territorial absolutism coming from various provincial governments that oppose ideas of national health care standards, national environmental laws and national securities laws (for example).

This government sees a small federal government that has to be held in close check if the the autonomous provinces are not to be allowed to fulfill their destinies.

These cases are a ringing rejection of that idea. Instead we see a Canada where the two levels of government co-exist and can be allowed to work together in a wide range of areas to develop both local and national objectives as a nation and not merely as a loose collection of principalities looking to the federal government as a bandit charged with the dirty work of robbing from one set of provinces to give to another set.

The Independent and hypocrisy - Take two

Apparently, I'm not the only one to have the same response the Independent's lead "story" this week - Geoff Meeker looks at it as a media insider.

What are the odds of staff resignations? Not too likely - everybody needs a job.

How about an editorial retraction, correction or clarification? Even less likely.

Most likely response will be a Ryan Cleary patented sweeping defence of the indefensible coupled with a thundering condemnation of those scurrilous critics.

Wait for it.

Sunday, July 22, 2007

Independent? Not so much

It's now widely accepted amongst sensible people that The Independent is the local promoter of pseudo-nationalist, politically paranoid elaborate grievance-based conspiracies about this province.

So it's easy to forget that the publication is not a stand-alone publication but part of a larger corporate family comprised of a web of formal and informal connections. And they are not shy about exploiting those connections for maximum synergies.

For example, pick up this week's copy and start scanning the text and pictures which passes for news on the front page. It turns out that Managing Editor Ryan Cleary has been doing some travelling on an airline called Astraeus.

You know them - they are the heirs to the NL-London route which Air Canada dropped amidst great controversy.

Courtesy of two free airline tickets, he's been able to write a very fine travel story. The text and photos (by the talented photo-journalist Paul Daly) cover the top half of the front page and then goes on to fill both pages of the centerspread.

Cleary, the hard news writer and polemicist extraordinaire, outlines the joys of travelling in Great Britain and breathlessly informs us that London is not just a destination that's cheaper than you might think, it's a gateway to other destinations too.

And if you're lucky, you just might be able to catch a glimpse of Justin Timberlake! Or Fergie!!

The only shadow in the story is the fear of not generating enough traffic to keep the flights going so the story drops in a gentle hit about supporting this worthy venture. And just so you don't miss that subtle sales message, the whole article is headlined Use it or Lose it.

And by the way, don't forget the fact that they:
... also operate charter flights between Gatwick and Deer Lake, the nearest airport to the high-end Humber Valley Resort ...
It's an unbiased, clear-eyed and fair promotional piece about this quality airline, their flight schedule and their future plans. All in all, it's just another bland and happy puff story about about a great company providing a great service to great places and incidentally supporting our historical right to have an airline flight to London.

Actually, it's a good deal more than that.

Astraeus Airlines has a fair history in this province already. Back in Nov 2006, Minister of Transportation John Hickey was falling all over himself praising Astraeus for their twice weekly flights to Deer Lake and St. John's.

What an odd flight, when you think about it - Gatwick to Deer Lake through St. John's twice a week. What would generate that kind of traffic? Well, the "high-end Humber Valley Resort" as referenced above has a very significant European clientele and they need to be able to get back and forth.

In that press release, Hickey was thrilled to note that:
The partnership with Astreaus Airlines was brokered by Brian Dobbin, chief executive officer of Newfound NV, to service Newfound’s Humber Valley Resort.
And why wouldn't wouldn't Mr. Dobbin broker such a deal? It's only right and proper and it serves his interests to do that.

Mr. Dobbin, a local businessman of some repute, has quite a few businesses in his stable. While mainly in the area of real estate, he also dabbles in other sectors as well.

One of them is as Publisher and majority owner of the Independent.

Don't bother looking on the website for that information because it's not there except as a passing reference in one online story. He does, however, appear on the masthead of the print publication. Other than that he's usually simply referred in the paper as a businessman with wide interests.

Oddly, he's never mentioned as the chief executive officer of "high-end Humber Valley Resort" which advertises heavily in the paper.

And so we come full circle: Mr. Dobbin brings the airline to NL to service his resort and then ruthlessly promotes the flights of the airline in his paper as well as the resort it services.

And he has every reason to ensure those flights continue and continue profitably: if Astreaus pulls out of the province, that strands the "high-end Humber Valley Resort" high and dry.

So you thought the Independent took the time and trouble to tell the airline's story out of a sense of NL pride in maintaining historical NL-London air links? Think of it more as a feature piece in a corporate newsletter.

Of interest is the other recent change in the paper where we now see an impressive and generous selection of advertising from the provincial government and government owned agencies.

Who knew one would need a full broadsheet page ad just to advertise 3 jobs and a tender? I'm sure government could have seen better value for it's advertising dollar it it wasn't for all that gratuitous white space and the huge triffid in the corner.

It wasn't all that long ago that Independent was on the outs with our premier and nary a government ad could be found between its covers. Now the cup of government and government related advertising overflows.

As for editorial policy, it's clear: Our Man In Ottawa, Loyola Hearn, is evil.

Oddly, that's exactly what out Premier thinks too. And lets not forget the casual smears made about the reputation of private citizens who criticise our premier.

Will coincidences ever end?

In addition to being the ringing voice of local patriotism, the defender of the Pink-White-Green and supporter the "Fighting Newfoundland", you really have to wonder what and who's corporate and political interests the Independent and Managing Editor Ryan Cleary really speaks for.

Independent? Not so much.

Thursday, July 19, 2007

Hillier staying put

While there's been persistent rumours, in the province and in Ottawa, that General Hillier might be returning to NL to take up a political career, that turns out be nothing but hot air. In a story from the published in the last few days states:
Gen. Rick Hillier wants to make one thing clear – he has no plan to enter politics.

Hillier quips he's in a dead-end job – once his tenure as Canada's highest-ranking officer is done, it's almost certain he's out of uniform. But the outspoken career officer is adamant he has no plans to put his popularity and profile to the test and try a run at political life.

In fact, Hillier actually seems insulted by the suggestion he would even consider becoming a politician, a rumour that made its way around Ottawa this spring. "Political ambition? None ... I never, ever have aspired to a political career."
So much for that.

It's fascinating is how these rumours developed around a man who never ever gave any remote indication that this kind of career change was in the cards. Just as fascinating is how some were ready to slag him on the merest whisper.

Saviors: we worship them, we eat them alive.

Military as patronage, tainted by upalong

An extension of the misplaced attitude that military spending should be used as economic development money is the witless idea that senior military appointments are patronage posts.

Canada (and NL is part of that) has an international reputation as well-trained and professional. And that includes the military contingent from this province which is way disproportionately high compared to our population (5-10 times higher depending on the source).

The military environment, compared to almost any other type of organizational environment, is a hard-core meritocracy. General's stars are not handed out like candy based on political popularity.

So to baldy state that positions like Chief of the Defence Staff turns the individual into a puppet of any kind is based on fundamental ignorance of fact and knowledge. It reveals the final triumph of chauvinistic fanaticism over common sense.

There's an old "joke' about NLer's who leave the province and do well:

When they stay away they betray us by not giving the province of their birth the benefit of their skills, abilities and position. If they return home, then they really weren't successful anyway otherwise why would they have left to come back home?

Add a new one: NLer's successful away should stay away because they've been somehow tainted by their time away.

It must be the water upalong, I guess.

Wednesday, July 18, 2007

The sentimental Ireland economic drive

NL has economic and social challenges which need to be addressed. On that most everyone would agree. The disputes arise out of which is the solution we should adopt.

A major obstacle we have to developing policy responses to the issues which confront us is the eternal quest for the Easy Answer.

You can always tell the Easy Answer when it comes up. When you hear somebody say, "If only we _____ or if only we were more like _____", whatever is in that blank is the Easy Answer.

They are answers that are incomplete, simplistic, ineffectual, misunderstood or just plain irrelevant.

So what Easy Answers do we hear?

When somebody argues that if only we could rebuilt the fish stocks, get back the Upper Churchill, develop the Lower Churchill, get aluminium smelters, get an oil project equity state, end the giveaways, went out on our own, stop outmigration, offer free tuition or revitalise the rural areas then all our problems would be solved, then you are hearing the Easy Answers.

When somebody argues that if only we could more closely emulate Iceland, Quebec or Ireland, then you are hearing Easy Answers.

The problem is that governing is not about looking for the Easy Answer; governing is hard. More on that later.

In the meantime, below is a piece originally published July 18, 2007 in Dalhousie, the Alumni magazine. The reason I include it here is that it reinforces a theme from a selection of my more recent posts in explaining why the drive by this provincial government to become an economic powerhouse by becoming more like Ireland, while fine as a cultural sentiment, is misguided economic policy.


Eye of the tiger
Michael Bradfield asks, "What happened in Ireland?"

By Marilyn Smulders

Every time a company pulls out of Atlantic Canada or employment figures take a dip, you’ll hear the refrain — Why don’t we cut corporate taxes and attract more foreign investment? After all, it worked for Ireland.

Or did it? In a paper published recently in the Canadian Journal of Regional Science, economist Michael Bradfield argues the grass isn’t greener on the Emerald Isle. And, if Atlantic Canada is to take lessons from abroad, perhaps Wales provides a better example.

“If Ireland is the model for Nova Scotia to follow, then you have to be honest and say, ‘Well, what happened in Ireland?’” says Dr. Bradfield, recently retired professor of economics at Dalhousie University.

Through much of the 1990s, Ireland’s economy – dubbed the Celtic Tiger — roared as foreign companies arrived to get access to the much larger and prosperous European Union market. The accepted logic is that the Celtic Tiger earned its stripes when Ireland slashed corporate taxes to make itself more business friendly to attract foreign direct investment (FDI).

But in the paper “Foreign Investment and Growth vs. Development — A Comparative Study of Ireland and Wales,” Dr. Bradfield takes a closer look and discovers most of Ireland’s rapid growth came only after it raised — not lowered — corporate taxes.

Massive subsidies

“For those who claim that the zero corporate tax is key, it is inconvenient that the surge in FDI occurred after corporate taxes on foreign investment were increased because of pressure from the EU,” writes Dr. Bradfield.

He continues: “Thus, it is logical to argue that the Irish experience shows that rising taxes (and the provision of government programs they finance) are crucial to attracting foreign investment!”

Dr. Bradfield maintains that Ireland benefited by massive subsidies from the European Union. These funds helped the country build up its infrastructure, provide services to businesses, wrestle down debt and most important, offer benefits to its citizens, such as free university tuition. When foreign companies came calling, Ireland could offer a well-educated populace eager to work. Moreover, ex-pats who left the country in search of work were able to return home.

But while more people are working, they aren’t taking home more money. That’s because the Irish government sweetened the pot for foreign companies by imposing a nationwide wage cap and keeping unions out.

“If Ireland is a tiger, it is a paper tiger,” contends Dr. Bradfield. Because of its reliance on foreign investment, Ireland’s rapid GDP growth looks good on paper, but it hasn’t translated into across-the-board improvements for its people.

Wales a better model?

Meanwhile, across the Celtic Sea, Wales was attracting foreign capital, but without making the same kind of concessions that Ireland did. Wales, moreover, provides a better model for Atlantic Canada because of the similarities; like Nova Scotia, and Cape Breton in particular, Wales has had to reinvent itself into a service economy after traditional industries such as coal mining and steel declined.

“Wales was effective in designing its own growth strategy. The government there decided to put the focus on developing local enterprise,” says Dr. Bradfield, a Dalhousie professor for 39 years. “They have done quite well doing that.”

The example of Wales shows that an emphasis on building the local economy may not be flashy, but it does work, he says. It’s an approach that builds on a country’s own strengths and needs without pandering to outside influences. And that’s the real lesson for Atlantic Canada.

“It amazes me how people get caught up in the next ‘big idea’ — whether that’s a casino or the Commonwealth Games… I’m sorry, there is no gold ring, but there are little things that we can do. We can build on our own resources, culture, lifestyle, and needs. If we develop these things for ourselves, others can use them too.”

Monday, July 16, 2007

30% cut to cod quota

The national government has released a report recommending a sharp reduction of 30% in the cod fishing quota. The TAC is now at the lowest level in generations. The minister is implementing the recommendations of the report but regrets the effects of his actions as remote rural communities will be harmed. Still, he defends his actions saying it will strengthen the stocks in the long run.

Harvesters protest noting that the government has been consistently wrong in their stock predictions. Fishing vessel owners demand participation in marine research and a say in decisions. Meanwhile a professor of fish science says more money should be put into research.

This is a familiar story that has been part of the public environment around the fisheries sector in the province of Newfoundland and Labrador for years.

It's just too bad, as the local wags claim here and here, we can't be more like Iceland who have been far more aggressive in exercising complete control over their fish stocks with wisdom and foresight.

The only problem is that the first couple of paragraphs of this post have nothing to do with this province. These events all come from the last 10 days of Icelandic news stories about their fishery: the Icelandic Minister of Fisheries Einar K. Gudfinnsson has just instituted a 30% cut in their cod quota.

Chances are that's only the beginning for that rocky isle.

It would be worthwhile to closely examine the cold facts why Iceland has been forced into these actions rather than simply pining with starry-eyed sentimentality to be just like them.

More to follow.

Sunday, July 15, 2007

HMCS St. John's

The HMCS St. John's, FFH 340, was in the city today. My daughter and her squad, sea cadets all, received a special tour this afternoon.

This ship, a multi role patrol frigate, was built in Saint John, NB and commissioned on June 26, 1996 in St. John’s, NL. She is the eleventh of twelve HALIFAX Class Frigates and one of the most combat capable warships in the world, so they say.

I saw this shot and took it.

Fly the flag with pride.

New blog from Robert Janes

Here's a new blog that is worth giving a read. An old school chum of mine, Robert Janes, has entered the blogosphere with Thoughts from the Western Edge. He's a NLer who lives and practices law in BC.

He's always had a very very sharp mind and he is a keen observer of the wider environment. I have no doubt that his contributions will be consistently thoughtful, insightful, well-informed and articulate. In his profile he writes:
My wanderings across the country (I have lived in Newfoundland, British Columbia and Ontario) have also led me to spend a great deal of time thinking about the glue that sticks the country together -- particularly in the modern world where the thought is, I hope, that we do things on a rational basis rather than just falling back on the old habits of tribe and kin.
Can't wait.

Friday, July 13, 2007

Conrad Black Found Guilty in Fraud Trial

According to the New York Times, Black was was found guilty today by a Chicago jury of three counts of mail fraud, one count of obstruction of justice but not of racketeering.

He could face up to 35 years in prison.

He is expected to appeal and the judge is expected to allow him to remain free on bail during that process.

In addition to his potential incarceration, Black also faces more than $1 billion in civil litigation from former shareholders of Hollinger International, the company itself and the S.E.C.

The Times goes on to note that:
Though Mr. Black’s lawyers say he will appeal, the verdict today would seem to write a career coda for a member of a dwindling species, at least in these parts: the swashbuckling newspaper mogul. They used to loom large, the Northcliffes and Pulitzers and Hearsts, the Beaverbrooks and the Robert Maxwells, but with most newspapers in the English-speaking world now in more corporate hands, the Citizen Kane types are getting ever scarcer; and the one great exception to the trend that springs fastest to mind bestrides a much broader media and entertainment empire, one where the newspapers sometimes seem to play only a supporting role.

Thursday, July 12, 2007

Aluminum smelters and opportunity cost

One of the great hoary examples of economic models totted out from time to time by the local economic nationalists is Iceland. There are a few different reasons why Iceland has become the NL economic nationalist poster child but one of them has to do with aluminum smelters and electricity.

The argument is a simple one: you need an aluminum smelter, bauxite (aluminium ore) and cheap electricity to make aluminum. Lower Churchill is all about cheap electricity. Therefore let's build smelters, import bauxite and get into the aluminum business.

There's no doubt that Iceland is in the aluminum business and that their business is going to get bigger. In January, the government of Iceland officially approved an Environmental Operating Permit (EOP) for the Alcoa Fjardaal smelter project.

Besides that, talks continue on a possible smelter on Bakki by the town of Húsavík in North Iceland, Alcoa, Nordurthing municipality and the Ministry of Industry. They have decided to continue with feasibility studies and start on the third and last phase of the MOU in co-operation with Landsvirkjun and Landsnet. If constructed, this one will be powered by renewable geothermal energy.

These, and other projects, will create thousands of person-years (PYs) of work. Incidentally, they are also the source of much controversy among the population. Local NL boosters who blindly point to Iceland as an economic example neglect to mention that there is hard opposition to these projects from a significant part of the Icelandic population.

Be that as it may, there is still more to this industry than meets the eye. One is the number of idle smelters in the US that are no longer producing because of their increased cost of electricity. These smelters have already been built but have been mothballed because they are uneconomical to operate unless and until their energy prices go back down.

But none of this answers the question of what's wrong with this province getting in the aluminium business. After all, Iceland is and it's working out for them.

The real question that needs to be answered is not why can't we be more like Iceland. The real question is why is Iceland in the aluminum business?

And the answer to that is simple: Opportunity Cost. For Iceland, the generation and use of electricity for smelters has no opportunity cost and is the best use for it.

In economics, opportunity cost is the cost of something in terms of an opportunity forgone. If you choose to turn down a $10/hour job in favour of keeping your $8/hour job, the opportunity cost to you is $2/hour. In effect, you are giving away $80 every 40 hour week.

In the case of Iceland, they already have enough electricity for their own use. So any additional electricity they produce is surplus to their current domestic needs. And since Iceland is an island, they do not have the option of exporting anywhere; they don't consider long underwater transmissions lines to be sensible in their case.

So if they produce electricity cheaply, and they do, then smelters are a fine way to use it. What other choice do they have?

The case here in Labrador is different. To get into the aluminum smelting business, we have to build smelters, import bauxite and then, on top of that, sell the electricity cheaply enough to make the project economic for the producer.

Can we do that? Sure we can. We can easily sell off any generated electricity cheaply enough to make a project economical. But at what opportunity cost?

If you look at my previous post detailing the economic analysis of Quebec smelters, you see that the Quebec government is paying a subsidy of almost $300,000 per year per job (for 760 jobs) for 35 years. Do the math and you come up with a subsidy of $7,980,000,000 over the life of the project. The government says there are economic spinoffs and there are some. But those spinoffs will not come close to $8 billion over that time period.

That is the choice the government is making. They would prefer to sell out to the political expediency of pointing to an aluminium smelter rather than simply sell the electricity and have an additional $8 billion to invest in economic development or social programs or infrastructure. Even just road building and improvements would have a much great beneficial economic impact than these smelters.

And that's the opportunity cost. By choosing to subsidize a a smelter through low electricity prices over selling that same electricity at market prices, the opportunity cost to Quebec is $8 billion. In effect, they are giving away that money for no good reason.

In Iceland, smelters is a smart choice because they have no other options for the electricity they generate. In Quebec, which can export electricity to the US or Ontario at market costs, reserving it for domestic smelters at subsidized prices incurs a horrific opportunity cost.

In this province, enticing smelters with subsidized electricity rates is, in local parlance, a giveaway. In fact it's worse - it's paying industry to use our electrical resource for a few paltry jobs and it's an economic goof of Smallwoodian proportions.

When will we learn?

"They are out there begging for power"

The title of this post is a categorical statement made by Sue Kelland Dyer in conversation with Randy Simms on VOCM Open Line in the context of a discussion on why we couldn't sell electrical power at market rates to Ontario. Instead, she says, industries are so desperate for power that we should use power as bait for the local situating of industry.

No evidence was offered; no case studies presented; no details were provided.

In fact, she demanded evidence for the contrary position.

The only suggestion she offered was this sweeping generalised unsubstantiated assertion that because "they" are begging for power then we must rope in these unspecified "they" to finance the lower Churchill projects within some indefinite timeline on the condition that they locate their industry here.

This is preferable, she says, to moving forward financing the project through power sales.

After all, she says, Quebec has three smelters. Why not us?

To be fair she is not the only person making this argument. More than a few local economic nationalists, most notably at this snake's nest of foolish circular and ill-considered positions of all kinds, parrot this position.

In the interest of clarifying the issue, may I suggest a quick review of this information proffered by the Montreal Economic Institute. A respected economic analysis think tank, the MEI points out that subsidies for Alcan aluminum smelters recently announced by the Quebec government are a loss to Quebec society.

They go on to outline in a report authored by Gérard Bélanger and Jean-Thomas Bernard, professors of economics at Laval University, that:
... recent agreements in the aluminum sector and others under preparation fail to take account of basic economic logic and will harm Quebec’s economic development for decades to come unless the government follows a different path.
That sounds bad and sounds like something to be avoided. What are they talking about? Well, in February, two orders in council from the Quebec government gave official stature to a hefty subsidy to Alcan as part of an aluminum smelter project in the Saguenay-Lac-Saint-Jean region.

To create 740 jobs, the government is giving up $2.7 billion in revenues in exchange for a $2-billion investment by Alcan, the two researchers estimate. The total cost to the government of the subsidy to Alcan equals nearly $274,338 per job each year for 35 years.

That's worth repeating: $274,338 per job. Per year. For each of every of the next 35 years. For each of the 740 jobs "created".

So that's the answer to how and why Quebec gets all those smelters - they pay for them!

The rejoinder from the local economic nationalists will be a vague "economic spin-off" point. Let's put that one to bed right now. The report goes on to note that:
The true cost of the electricity provided under this deal can be measured by its opportunity cost to the Quebec government. Opportunity cost is a term used by economists to denote the most advantageous alternative solution. What it means in this instance is the export price that could be obtained by selling our electricity on the market to our U.S. neighbours.

The reason used most often to justify government assistance is economic spin-offs. The justifications provided in this case by ministers Raymond Bachand and Pierre Corbeil come from calculations filled with double counting and neglectful of alternatives. An analysis of other solutions that could be considered shows that the government is giving up at least $2.7 billion.

This amount could have been used, for instance, to improve Quebec’s highway network, an investment that would generate far more in direct and indirect economic spin-offs than the $2 billion pledged by Alcan.
So no more giveaways - let's pay industry to take the power away.

Finally, if you follow this debate long enough, you will hear somebody say, with all possible conviction, that exported electricity only creates jobs elsewhere but never here. This study addresses that argument too noting that:
It should be understood that all spending generates economic spinoffs, whether conducted by government (in health, education, income security or other areas) or by the private sector (assuming individuals and businesses end up with greater disposable income due to lower taxes).

It is thus false to state that “exported electricity does not create jobs in Quebec” as argued by the Aluminum Association of Canada in an advertisement that ran in several newspapers.
That pretty well covers it.

So if you don't pour the money into subsidizing jobs, how could you effectively use that money instead? Again, this report has that covered noting that, to start:
The same amount could go, for example, toward improving Quebec’s highway network, generating far more direct and indirect economic spinoffs than Alcan’s $2 billion. A similar analysis could be applied to other public or private spending.
So you have to ask: Why are we better off to hold up the development of the Lower Churchill project on the condition of attracting massive industry a la Quebec rather than simply selling the power at market rates?

Clearly it's not better.

Tuesday, July 10, 2007

Doc O'Keefe strikes again

From this CBC story today where the federal government has announced $300,000 to help market the province's ports to the cruise industry, with the Newfoundland and Labrador tourism department kicking in another $100,000:
"In the long run, this industry may be — can be, will be — more valuable than even gas or oil, because the gas and oil is valuable, yes, but the day will come when it won't be [there] any more," he said.
This quote from St. John's Deputy Mayor Dennis O'Keefe is the kind of political over-the-top statement that either:
  1. takes your breath away because of the depth and breadth of vision expressed in the comment; or
  2. makes you wonder about his ability to distinguish self-serving civic-boosting fantasy from economic reality.
I vote for #2.

Monday, July 09, 2007

MLAs under investigation in NWT

In the Northwest Territories, an MLA gets an additional annual $27,000 Yellowknife rent allowance if they swear they normally live outside the territorial capitol region. The allowance pays for their housing when they are in the territorial capital on assembly business.

It might sound like an excessive amount but it's not really all that huge considering local rent levels.

Still at least one MLA swore he did live outside Yellowknife and collected the additional $27k even though he did not live in the small community just south of Yellowknife as he claimed.

The story states in part:

Assembly speaker Paul Delorey announced the audit at the request of other MLAs, who wanted to make sure all housing claims are legitimate.

"They want the public to know that what they're saying is in fact the truth," Delorey told CBC News.

"The credibility and honesty … and the integrity of the institution is at stake. So it's exactly why we're doing the audit.

Sounds familiar. The story goes on to say:
"It shows that we have some gaps in our system that need to be looked at," Sahtu MLA Norman Yakeleya said. "It shows that MLAs have to be a little more monitored or scrutinized."
They are not the only ones, it seems.

Sunday, July 08, 2007

Pat Binns of PEI - Atlantic Premier (fmr) Profiles

I wrote profiles of the four Atlantic Premiers for publication for the May issue of Atlantic Business Magazine (ABM). One has already left office (Pat Binns of Prince Edward Island) but the other three are still in power: Rodney MacDonald of Nova Scotia, Shawn Graham of New Brunswick and of course Danny Williams of Newfoundland and Labrador.

A companion piece to these profiles is an overview of all four Atlantic premiers previously published in ABM and posted here.

For the sake of completeness, I include my last profile of former premier Pat Binns of Prince Edward Island.


Pat Binns is a rarity in Canadian politics – transplanted from one province, he became premier of another.

Born Saskatchewan in 1948, he first came to Prince Edward Island in 1972 to work with its Rural Development Council. First elected in 1978, Binn has been successful in both provincial and federal politics, serving first as MLA in PEI and then a stint in Ottawa as a Parliamentary Secretary in the Mulroney government. After a federal electoral defeat in 1988, Binns spent the next eight years focused on building a successful bean farming business.

Since his return to provincial politics in 1996, his homespun, approachable style has won him large majorities as premier of this clannish agrarian province. Binns clearly believes the old adage that all politics is local. He calls PEI politicians “approachable, accessible and down to earth” and says that “being on a first name basis with the people we serve… leads to greater accountability” – not to mention a great deal of constituency work.

The people of Prince Edward Island love him, and he loves them. He calls Islanders the province’s biggest asset, whose community spirit and dedication to keeping their home a clean, safe place to live creates a positive environment for social and economic success.

That may be why he is so concerned about healthcare. Binns says escalating costs and a limited provincial budget makes it difficult to deliver on the kind of healthcare Islanders deserve, let alone other social spending priorities. But he’s rising to the challenge by leveraging the “Islander asset”, promoting healthy living initiatives and community collaboration – the kind of things that come naturally in this tiny province.

Like the other Atlantic premiers, Binns sees east coast opportunity in western Canada’s booming economy: he is working on ways to keep young people on the Island, providing goods and services for export to Alberta. He is also keen to foster an open trade environment and access the larger US and European markets, since “One potato farm could supply all of our consumers.”

He says he is intrigued by the Atlantica concept, but like his counterparts, is not in favour of political union. Regional cooperation on trade promotion is a priority, as is health and wellness.

Binns regularly participates in the Council of the Federation and the Council of Atlantic Premiers, but acknowledges that their hectic schedules limit informal communications – it’s hard, he says, to just pick up the phone and chat. Binns’ preferred political approach is cooperative, since (as he says) it tends to work – although his hoped for “better deal on equalization” remains elusive on the federal scene.

On the issue of the political moment, electoral reform, Pat Binns has taken a characteristically practical approach: in a 2005 plebiscite, he asked Islanders what they wanted. When they answered that they were satisfied with the current system, that satisfied him.

Such straightforwardness is the quintessential Binns. And when you ask straightforward questions, you tend to get straightforward answers. Perhaps that’s why he says that his biggest surprise as premier has been “that there were not more surprises.” But he did find out that “Premiers are just people like everyone else, with a little more responsibility for government.”

Canada advances to Octos

The Canadian national high school debate team is competing at the World Schools Championship in Seoul, South Korea.

So far so good. They have broken 9th of 16 and their next scheduled opponent is Slovenia.

Follow their progress at this blog.

Friday, July 06, 2007

Political personality types

There are fundamental differences between politics and business but there are similarities too. Some, but not all, of the qualities which can lead to success in one field are also required for the other and vice versa.

So this article in the Globe and Mail today (Seven Deadly Leadership Sins) which outlines elements different bad-leader archetypes applies just as easily to politicians. In politics, just like in business, there are Narcissists, Ditherers, Avoiders, Panderers, Faddists, Tunnelers and Fantasizers.

My personal favourite is:

Narcissists are those self-centered leaders who are intolerant of criticism and alienate followers - except for "toadies," who latch on to them and serve as a buffer against people who might challenge or criticize this leader. Perversely, narcissistic leaders often charm and fascinate boards, shareholders, customers and even journalists.

They may achieve great business results, and not just for the short-term, since those results may secure them considerable support over an extended period of time.

Yet, once they finish their runs, they usually leave little behind in the way of enduring leadership bench strength. They perform for the present but don't build for the future.

And, despite their brilliance, narcissistic leaders often preside over toxic or corrosive cultures that neither sustain results over the long run nor lead to the development of their successors.
Try this: think of a politician and decide which class he belongs to. Send me a list and I'll compile and publish the results if I get enough suggestions.

Thursday, July 05, 2007

Danny Williams of NL - Atlantic Premier Profiles

I wrote profiles of the four Atlantic Premiers for publication for the May issue of Atlantic Business Magazine (ABM). One has already left office (Pat Binns of Prince Edward Island) but the other three are still in power: Rodney MacDonald of Nova Scotia, Shawn Graham of New Brunswick and of course Danny Williams of Newfoundland and Labrador. Over the next couple of days I'll post all the profiles.

A companion piece to these profiles is an overview of all four Atlantic premiers previously published in ABM.

Today, Danny Williams of Newfoundland and Labrador.


Danny Williams is one of the most complex and contradictory figures in Newfoundland and Labrador’s political history.

Lawyer, Rhodes scholar and communications magnate, this highly-successful son of a prominent St John’s family consistently defines himself as an outsider, battling oppressors of every kind. Long active in the political backrooms, he did not run for office until 2001, when almost 50.

A lifelong Conservative, since becoming premier in 2003 Williams has dramatically expanded the role of government in the province’s key industries, energy and communications. Fiercely proud and protective of Newfoundland and Labrador’s culture and history, he nonetheless feels that its people have not, until his administration took office, been able to control their own destiny.

Perhaps it is this sense of historic grievance that fuels his ambitious plans for Newfoundland and Labrador. Williams is dedicated to re-engineering his province’s rural regions on a sustainable hub-and-spoke model: “The goal,” says Williams, “is that each region will have its own cluster of industries, businesses, and health, education and government services. As a result, people living in outlying communities will have access to education, training, health care and employment within reasonable commuting times.”

His stepped economic initiatives - the near-term Regional Sectoral Diversification Program, medium-term Innovation Strategy and a Skills Task Force with a longer-term focus – are intended to create jobs and slow outmigration: “We know that we have a preferred lifestyle in Newfoundland and Labrador and given the opportunity, our young people will stay at home.”

Williams wants to create that opportunity by leveraging his province’s abundant natural resources – petroleum, hydropower, wind, minerals and fish – but is in no hurry, believing “it is better to wait for a good deal, than to take short terms gains to the detriment of long term benefits”.

Patience and planning are the hallmarks of Williams’ administration. He has even tried to bring order and accountability to Newfoundland and Labrador’s unruly political system. He imposed fixed term elections and returned the legislature to the oversight of the Auditor General – and while no-one expected the spending scandals that emerged, he says he has no regrets.

Despite his reputation as a scrapper, Premier Williams believes in regional and national cooperation. While hesitant to endorse the Atlantica concept, he acknowledges the common ground among the Atlantic premiers and communicates frequently with his counterparts. He values the Council of Atlantic Premiers and the Council of the Federation as forums to address common challenges, maintains issues unique to specific provinces “require an independent approach”.

Williams’ pugnacious independence is most evident in his relationship with Ottawa: while nodding toward cooperation, he vows “as leader of Newfoundland and Labrador I will always protect the interests of the people of the province.”

Reviewing his first term as premier of Canada’s most easterly province, Williams says the thing that surprised him most was “the immense satisfaction I feel when our government implements policies and programs that positively impact everyday life in Newfoundland and Labrador.”