Friday, June 29, 2007

Richard Greene, Q.C, MHA: 1923-2007

On June 18, 2007, Richard (Dick) Joseph Greene, Q.C. passed away. Part of a vanishing important generation, he was a man of great influence on the political life of this province.

You can read the official obituary but that dry recitation of essential life facts and family details does little to convey the colour of the man. I knew the man slightly, and his family better, because I grew up down the street from him and his family. I went to school with his children and my father and he were acquainted.

Later on I learned much more about this neighbour of ours.

In the Confederation wars, he supported and fought for economic union with the US alongside the Crosbies and Don Jameison. For the long-term benefit and prosperity of the province, he thought it was critical that we be embedded within a larger economic framework and rejected the isolationist point of view.

After Confederation, he became a lifelong Progressive Conservative with an influence that far outstripped his titles. In the 60's he was a member of the House of Assembly and one of only three members of the opposition fighting the political hegemony of the Smallwood/Liberal political machine.

On that level he was a free-thinker and a rebel against what he saw was the stifling influence of overwhelming one-man rule.

After he left the House, he remained active as a prime mover of the PC Party policies in the election which saw the rise of Premier Frank Moores. Rumors said he was intimately involved in the backroom political machinations which finally saw the downfall of Smallwood. All through that administration, he worked the politics behind the scenes, including terms as PC Party president.

A notable moment in the limelight was his role at the 1979 PC convention where Brian Peckford was elected leader. You can see him here on the right, to the left stands Frank Moores, getting ready to announce Peckford's victory (video here). That convention saw the passing of the torch to a new generation of PC's, at least on the provincial level, and he wasn't quite so active provincially thereafter.

On the federal level he was a prominent member of the national PC Party and a critical part of their national fundraising arm, the PC Canada Fund. He had the reputation of being a political fixer and fundraiser extraordinaire.

He was a friend and confidant of the likes of Deifenbaker, Clark and especially Mulroney; they were frequent guests at his home.

As a child growing up I remember he always drove a big green Lincoln Continental land yacht.

In his private life he was legal heavyweight who generally practiced on his own rather than in a big firm. More than a few important legal case precedents from this province have his name on them.

There is no doubt that the political history of this province would have been very different without the guiding hand of Dick Greene behind the scenes. Too many stories of the problems he fixed over the years will never see the light of day. We are not very good at digging into the political history of this province and that's too bad; we miss out on knowing the best parts.

And many of the best parts of the last 50 years involved Dick.


Condolences to the family can be left here.

Thursday, June 28, 2007

BC's example for other provinces

I heard some of the local nationalists attacking this column by Barbara Yaffe, and even herself personally, so I had to find out what the fire was about. Looking through I found only the most fleeting and passing reference to this province at all.

And yet this piece still became a target. It seems like it no longer takes criticism of this province or this premier to raise ire and wrath; merely pointing out the success of another premier or province is enough.



Campbell's quiet diplomacy scores federal benefits for B.C.
Barbara Yaffe Vancouver Sun, 2007.06.22

No one is certain how it happened, or precisely when, but B.C. has become "the nice guy" of Confederation.

Since 2001, when Liberal Premier Gordon Campbell took office, B.C. has pursued what could well be called "constructive federalism." And reaped significant rewards as a result.

The modus operandi is low-key, consistent and professional. No petulant politicians travelling to Parliament Hill. No legal threats. No insults. There's also a deliberate effort to give Ottawa full credit, where due.

Action Central is a little-known intergovernmental affairs secretariat in Victoria, with 26 employees who operate as part of the premier's office.

The secretariat's website outlines the premier's mission: "To ensure a corporate perspective across ministries in all of B.C.'s relations with the other Canadian governments."

And: "To improve and strengthen B.C.'s influence on federal-provincial matters."

As it cultivates a positive rapport with the feds, B.C. this year celebrates renewed status as a "have" province.

In the past year B.C. has broken new ground in forging relationships with other provinces, and regional groups beyond Canada.

In 2006, Campbell held a "high-level dialogue" with Washington Gov. Chris Gregoire. The two jointly appealed to U.S. President George W. Bush to delay passport requirements at border crossings.

Interprovincially, B.C. and Alberta since 2003 have held a cabinet meeting together each spring. In 2006, Edmonton and Victoria penned the Alberta-B.C. Trade, Investment and Labour Mobility Agreement, forming a common jurisdiction for certain purposes for their 7.5 million residents.

It covers everything from cooperating during emergencies to enabling university students and workers to transfer school credits and job credentials between the provinces.

Without doubt, B.C.'s neighbourliness and diplomacy are yielding greatest dividends on the federal-provincial front, not only vis-a-vis the Harper crowd but with the Chretien and Martin governments before it.

Back in the late 1990s, when Glen Clark was premier, Ottawa and Victoria were hostile, dropping gloves over everything from fishery management to a federal expropriation of the Nanoose military testing range.

In an interview six years ago, just before becoming premier, Campbell predicted that under his leadership relations between the province and Ottawa would be "exceptional."

They have been. Few other provinces have enjoyed such civilized dealings. Campbell abandoned B.C.'s longstanding practice of fed-bashing to score points on Ottawa's back.

It's not that B.C. has no bones to pick with Ottawa. The province could use more cash to fight the pine beetle infestation. It would like a federal moratorium on offshore oil exploration lifted. The softwood deal Ottawa signed with the Americans certainly didn't meet with universal approval on the West Coast. B.C. remains underrepresented in the Senate. It wanted Ottawa to honour the Kelowna accord.

But Campbell prefers negotiating quietly than arguing publicly.

That's in sharp contrast to Saskatchewan Premier Lorne Calvert, who last week announced he would take Ottawa to court over equalization, or to the Nova Scotia and Newfoundland premiers deploying megaphones to bicker with Harper over the Atlantic Accord.

Harper's dealings with Quebec require him to continually do high-profile heavy lifting. And Ontario, under Dalton McGuinty, has become a provincial whiner par excellence.

Meanwhile, B.C. quietly pursues its own interests, in a respectful manner, recognizing Ottawa has its own rewards to reap.

Accordingly, the RAV line, for which Ottawa contributed $450 million, was promptly named "The Canada Line."

Ottawa, during Clark's rule, rejected a request for $170 million for a new Vancouver convention centre; more recently it handed over more than $200 million to the enterprise. Another $590 million in federal money has fuelled a Pacific Gateway Strategy aimed at making the province an internationally competitive transit hub.

Ottawa has moved the Canadian Tourism Commission to Vancouver; it has been at B.C.'s side from the start in securing and financing the 2010 Winter Olympics.

Of course, the Harperites are simply tending their own electoral backyard in the West. But Campbell deserves full credit for culling weeds and making it possible for the garden to grow.

Nationalism and oil deals

From the Economist comes this article which provides an overview of the deals struck between oil companies and nationalistic regimes around the world.

It says that "
despite all this huffing and puffing there is no consensus on what constitutes a good deal from the energy-rich state's viewpoint; and countries with the fiercest rhetoric do not always succeed in driving the hardest bargains."

This is an insightful piece worth a read.


Barking louder, biting less
Mar 8th 2007, From The Economist print edition

NEO-COLONIALISM, crude exploitation, plunder, blood-money: no term is too inflammatory, it seems, for critics of Iraq's proposed oil law. If passed in its current form, it will allow Iraq's weak, American-backed government to flog the national patrimony on the cheap, by signing unduly generous contracts with foreign oil firms. At least so the argument goes, especially among radical types who are inclined to write off America's whole strategy in the region as one of mercantilism backed by bombs.

In a similar spirit of stridency, Venezuela is now insisting on renegotiating the few remaining contracts with Western oil firms that it has not already overhauled. In Russia, meanwhile, an increasingly abrasive President Vladimir Putin is making it clear that in future foreign oilmen will not receive as warm a welcome as they did in the 1990s. All around the world, from Algeria to China, governments are changing the terms of investment in oil and gas, on the ground that they are not receiving their fair share of the profits. For critics of capitalism, last year's surge in oil and gas prices seemed to present a long-awaited chance to shift the global balance of power away from corporate behemoths and the governments that are closest to them.

But despite all this huffing and puffing there is no consensus on what constitutes a good deal from the energy-rich state's viewpoint; and countries with the fiercest rhetoric do not always succeed in driving the hardest bargains. The proportion of oil revenue that goes to governments can vary from as much as 90% to as little as 10%, according to Saad Rahim of PFC Energy, a consultancy. And there are many reasons—quite apart from differing levels of nationalist self-assertion—why the picture should be so mixed. Some countries have small or relatively inaccessible reserves, or no known reserves at all, and so have to offer favourable terms to entice foreigners' interest. Other states might seem like risky places to do business of any kind (thanks in some instances to past nationalisations of the oil industry) and must therefore offer preferential terms to woo investors. Others agree to sacrifice some of their take for the sake of creating extra jobs or diversifying the economy.

Governments (including those of rich countries, even the United States) often end up with a reduced share of oil revenue for less edifying reasons, such as sheer incompetence. By their own admission, American civil servants accidentally left a critical clause out of contracts signed in 1998 and 1999 with oil firms drilling in federal waters, doing taxpayers out of as much as $14 billion. The same officials are now warning Congress that its efforts to recoup the money might cost the government even more, in the form of expensive lawsuits and delays to future payments. Poor countries, with underfunded and corrupt bureaucracies, often have an even harder time keeping oil firms in line.

A common mistake made by energy-rich states is entering short-sighted contracts that take no account of possible changes in the oil price. Venezuela signed the deals it now wants to repudiate in the 1990s, when oil fetched as little as $10 a barrel. At that price, the arduous process of extracting something useful from the country's plentiful deposits of tar-like “heavy oil” was barely profitable. So the government offered to lower the income-tax rate for such projects and levy royalties of just 1%. As the oil price soared over the past few years, those enticements began to seem impossibly munificent.

Russia is another place where circumstances have changed. It was broke and desperate to attract investment in 1994, when it signed a contract with a consortium led by Royal Dutch Shell to develop oil and gas reserves off its Pacific coast. To persuade the investors to take on such a tricky job in a country with such parlous politics, the government agreed to forgo its share of the revenues until they had recouped their costs. But it did not foresee the long delays and near-doubling of projected costs that have afflicted the scheme and pushed back its payday.

Most oil-rich countries are trying to move away from such rigid regimes. But there is little consensus about what should replace them. Many governments are signing contracts with variable terms, so that as the oil price rises, either tax rates rise with it, as happens in Malaysia, or the state-owned oil company's share of production increases, as in Azerbaijan.

Some countries, including Angola, have gone as far as specifying a fixed rate of return on investments, beyond which almost all profits go to the government. But such deals lead inevitably to rows about what counts as a legitimate expense on which a profit should be earned. Angola's contracts for offshore production are structured in such a way that firms actually make more money if projects exceed their budgets—a set-up that can lead to gold-plated cutlery in the staff canteen, according to Graham Kellas of Wood Mackenzie, a research firm. Iran, in contrast, forces foreign contractors to bear almost all the expense of cost overruns—a massive risk for oil firms given the current run-up in the price of both materials and labour throughout the industry.

Nationalist rhetoric often clouds the substance of the issue. After all, Qatar, which has welcomed big Western oil firms with open arms, has managed to secure a greater share of the revenue from its oil and gas than any country in South America, despite all the tub-thumping talk of ending foreign exploitation. Even after Ecuador introduced a windfall profit tax on oil firms last year, it still offers investors bigger profits on each barrel they pump than Alaska, America's biggest oil province, according to Wood Mackenzie's calculations. Recent tax changes in Britain cost oil firms more money than similar measures in Venezuela. In terms of the percentage of future profits gobbled up, Britain's taxmen have been even greedier than Russia's (see chart).

Self-proclaimed “resource nationalists” do not even agree on what the phrase means. Iraqi firebrands insist that any arrangement that gives foreign oil firms a formal claim on any of their country's oil or gas is an unpardonable affront to national sovereignty. Meanwhile Venezuela's President Hugo Chávez is forcing foreign oil firms to migrate to contracts that do just that. The issue is not as arcane as it sounds: foreign oil firms are often willing to pay handsomely not just for the right to pump oil, but also for notional ownership of it, which makes a big difference to their accounts, in America in particular.

Nationalists also tend to encourage state-owned firms to take an ever-larger role in the oil industry, both as a matter of national pride and to build local expertise. But setting up a state-owned oil firm is a big expense in itself. They are rarely as efficient or capable as their private partners, and often run expropriated assets into the ground. After Rosneft, a Russian state-owned oil giant, took over some oilfields from Yukos, a private rival, their output actually fell, although it is now rising again. The Russian state may have reasserted its control over the oil industry, but production, and government revenues, are almost certainly lower than they would have been with greater private investment.

Raising taxes, which Russia has also done, is a simpler and often more effective method of maximising the government's take. Norway, for example, levies a swingeing 78% tax on oil firms' profits. By contrast, its state-owned oil firm, Statoil, manages to recoup only a further 6-7% of the industry's profits by actively investing in wells and rigs.

Perhaps the most elegant option for governments is to ask investors what share of the revenue from any given field they would be willing to surrender, and award production rights to the one that makes the highest offer. In 2005 Libya held such an auction, in which foreign investors agreed to hand over more than 90% of any oil they found in ten of the 23 areas up for grabs.

As those figures suggest, even oil firms themselves are coming round to the idea that the most profitable contracts are not always the best, since revanchist governments are likely to renege on any deal that seems too onerous in hindsight. Many big projects have prospective lifetimes of 20 years or more, and financing arrangements built around such expectations. In such cases, a stingy but predictable regime might be preferable to a lucrative one that suffers from frequent or dramatic revisions. By that measure, the worst place to produce oil is not Russia or Venezuela, according to Mr Rahim, but Britain, which is constantly tinkering with its tax rates.

NL in the news

There's a few interesting pieces in the Globe and Mail today which are about, or will impact, this province.

First there are some interesting energy stories having to do with that clean energy, nuclear. I've written before about the nuclear future of the region and these articles take it a step further.

First, there is a story on the explosion in uranium exploration in Labrador (Labrador goes radioactive: A run-up in uranium prices has many people glowing about Labrador's potential). It says, in part:

"What we've done is identified a whole new uranium district in Canada. We're in the process of creating a real, viable alternative to the Athabasca Basin," Mark O'Dea, Aurora's president and chief executive officer said in an interview.

However, Labrador won't be contesting Cameco's home base in Saskatchewan for the title of Canada's uranium capital any time soon. There are massive hurdles facing the development, not the least of which, is the fact that a uranium mine has never operated in the province.

Just for a bit of background, in the last 3 years, the US spot price for uranium concentrate has climbed from $7/lb in to a high of $135/lb.

This is an industry with a great future in the province.

And on the heels of uranium extraction is a ready market within the region in potential new reactors in New Brunswick. They already have the only Canadian reactor east of Ontario and, according this this Globe story (New Brunswick eyes new nuclear reactor) they are ready to build more to serve the US electricity market. The story notes that:
In an interview from Saint John, provincial Energy Minister Jack Keir said New Brunswick is about to launch a feasibility study for a second reactor and the additional transmission capacity that would be required

He said he met with New England energy officials during the PEI session and found them eager for New Brunswick to expand its nuclear capability and ship the power south.

Many U.S. utilities are considering building new reactors themselves. But in New England in particular, they encounter considerable local resistance to new energy projects and would expect battles over new nuclear plants.
Finally, in the world of LNG, Quebec has okayed the Gros-Cacouna LNG terminal, the province's first liquefied natural gas terminal on the south shore of the Saint Lawrence River in Gros-Cacouna, about 250 kilometres east of Quebec City. Their next step is seeking regulatory approval to build a pipeline that will link the LNG terminal's production to the Eastern Canadian distribution network.

Their main LNG competition will include:
  • Rabaska project in Lévis, across the Saint Lawrence River from Quebec City (awaiting approval by a joint federal-provincial environmental panel later next month);
  • New Brunswick's Irving Oil Ltd. announced LNG plant to be built as part of its energy complex in Saint John;
  • Maine's proposed $500-million (U.S.) LNG project on Passamaquoddy Bay which has filed for U.S. regulatory approval, but faces staunch opposition from Canada, through whose waters tankers would pass;
  • Nova Scotia's Keltic Petrochemicals Inc. of Halifax which has received environmental approval from the provincial government in March to build a petrochemical complex, complete with a liquefied natural gas receiving terminal in Goldboro, N.S.
How will this affect the hopes of Newfoundland LNG and their plans to build North America's first LNG storage and transshipment facility at Grassy Point on Placentia Bay in southeastern Newfoundland?

Who knows? But this is for sure: they better get a wriggle on if they don't want to be left behind.

Shawn Graham of New Brunswick - 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, Shawn Graham of New Brunswick.


The premier of New Brunswick has demographics on his mind. For the first time since the Great Depression, New Brunswick is experiencing a prolonged population decline. He’s concerned about the economy, since fewer people mean fewer options for employers seeking skilled workers for the jobs they create, challenges for attracting new industries and smaller revenues to his treasury. But most of all, Shawn Graham is worried about the impact this has on the very way of life New Brunswickers treasure.

So he has established a Population Growth Secretariat.

That’s the kind of person Shawn Graham is: he’s not afraid to strike at the root of a problem, to be both innovative and aggressive. He’s also building a coalition of government, business, labour, education and community-based organizations to help.

Graham’s creds for the job are unique. A teacher by profession, he served as the Executive Assistant to his father Alan Graham, Frank McKenna’s Natural Resources and Energy Minister, before succeeding him as MLA for Kent in 1998. He won the leadership of the New Brunswick Liberal Party in 2002 and led it to electoral victory in 2006. Perhaps that had something to do with his bold vision of making New Brunswick a “have” province by 2025.

He is sure of where his province’s strength lies – paradoxically, right where its current weakness is, in its people. He says New Brunswickers have a long history of resourcefulness and ingenuity, and he’s creating a climate that supports them in exercising those qualities to build momentum for population growth. A lynchpin of his strategy is finding ways to help relieve some of the pressure in Alberta’s maxed-out economy: “Rather than exporting our people,” he says, “we want to export our products.”

Graham has his eye on foreign markets as well: he is keen to leverage New Brunswick’s strategic location for export (especially of Atlantic Canada’s abundant energy products) to the United States. An advocate of regional cooperation, he works hard to build on his province’s “long and important relationship” relationship with New England.

He’s working with fellow Atlantic premiers, too, on economies of scale for infrastructure development, especially critical transportation corridors. Nonetheless, Graham emphasizes his province’s unique status as the only bilingual Atlantic province, acknowledging its need for “made-in-New-Brunswick solutions” in areas like education or health care delivery.

In the end, however, he is a strong believer in cooperation: “I’ve always believed you can’t shake hands with a clenched fist…. I will always vigorously defend the interests of New Brunswick but my approach, with the federal government and with others, is to find the common ground, the common goal to work towards.”

Graham also wants to draw on the common strength of New Brunswickers to revitalize public discourse. While committed to electoral reform through fixed election dates, he says there is a bigger issue at play: his government is currently looking at how to engage the people of the province “in an ongoing fashion, not just every four years.” This should be possible, since Graham says his province’s politics are personal and immediate. “I think people feel connected to their elected officials,” he muses. “There’s an accessibility here that I don’t think you necessarily get in larger centres.”

Born in 1968, this young premier still hears the ticking of the clock on what he wants to accomplish as premier: “For me the most surprising thing has been how quickly time passes by which is why I want to make the most of every opportunity and ensure that our government has done everything we could to put our province in the road to self-sufficiency.”

Wednesday, June 27, 2007

Rodney MacDonald of Nova Scotia - 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 and posted here.

Today, Rodney MacDonald of Nova Scotia.


If being Premier is a difficult job at the best of times, then being Premier of a minority government has to be the most precarious of times. It’s a position that leaves little room for mistakes, requiring the balance of a tightrope walker along with a keen ear for political discord.

In other words, the skills of an athlete combined with the talent of a musician.

So it’s fortunate that Nova Scotia Premier Rodney Joseph MacDonald was both before he entered politics. A former teacher of physical education, on the hustings MacDonald is just as likely to pull out a fiddle as deliver a speech. With two albums and two East Coast Music Award nominations to his credit, he’s got game.

Just 34, MacDonald was first elected as MHA for Inverness in 1999. He was the surprise choice as Progressive Conservative leader in February 2006, inheriting the Premier’s office and a minority government. In June he won his own mandate, also with a minority.

Still, he has an ambitious plan: facing the pan-Atlantic need to develop the economy and retain his province’s educated youth, MacDonald looks across the sea to Ireland for inspiration. Rather than focus on the region’s traditional industries and resource extraction, his goal is to attract information technology and financial services. With an extensive network of nationally ranked university and community colleges, he touts Nova Scotia’s workforce as highly skilled and ready to deliver.

“Over the next five years we’ll see roughly 4000 to 5000 jobs in information technology here in our province,” says MacDonald. “That means opportunity for people to come home, that means career choices for people coming out of school, and that means good paying jobs.”

In the last year, his government announced the expansion to Nova Scotia of Research in Motion (RIM) with a new 1200-person technical support operations centre. Shortly thereafter, Citco Fund Services, the world's leading hedge fund administrator, officially opened the doors of its new Halifax operation, bringing the province up to 350 new jobs.

On the regional level, his vision goes far beyond the Atlantica concept. MacDonald plans to leverage Nova Scotia's port, airport, road and rail links, and its strategic location for access to Asia and India through the Suez Canal, to make his province the Atlantic Gateway to the globe.

On the domestic front, he shows a thoughtfulness and political realism that belie his years. On the reputation of politicians, he admits, “Unfortunately, it’s not where I’d like to see it. We need to continue to work with the public on ensuring that, not only that we fully appreciate what their issues are but they fully appreciate the job we have to do and, at times, the decisions we have to make.”

“I think in year’s past there was greater respect for our elected representatives.”

As Premier, he is sobered by the dignity of his office. His biggest surprise since taking office has been “How strongly people feel about the position, not necessarily about the person in the position; and the level of respect they give the position of Premier….There’s a real strong connection between the position of premier and the people of the province.”

NorskHydro - Very funny!

Why would you ever associate the Norwegian energy/industrial giant with funny? Here's why: a series of ads encouraging kids to become engineers.

Enough said.

High resolution download here

High resolution download here

The end tag: "There are many young engineers out there. We can’t wait to see them grow up."

See the story of the campaign here.

Tuesday, June 26, 2007

Actually, no

Today, NL News of Note shatters their self-imposed boycott of Globe and Mail links to thoroughly mischaracterize one of their stories. This story, previously noted here, is an interview with Graham Kellas of Wood Mackenzie. At the end of the story, it notes:
Lampooned as "Danny Chavez" after Venezuela's socialist president Hugo Chavez, Mr. Williams has been fiercely criticized in the oil industry and among business commentators for his insistence the province receive greater royalties and an ownership stake in all future developments.

But Mr. Kellas said Mr. Williams is merely reflecting a global trend -- though one absent in the U.S. and Britain -- to demand state equity in oil and gas projects.

His approach is similar to that of North Sea producers like Norway. "The introduction of government equity in Newfoundland and Labrador may be new for the region, but is standard practice elsewhere," he said in the study.
It's too bad NLNN didn't hear the presentation in it's entirety to put the remarks in context. In it, Mr. Kellas notes that the demand for state equity is standard practice is some places but only for emerging nations like Angola, Venezuela and Papua New Guinea.

The practice is "rare" (his word) in the other regions he referred to: North America, Europe and the rest of the industrialized world. The notable exception is Norway where they have been gradually divesting for years.

While some might want the province to pursue in a headlong fashion the policies of 3rd world and emerging nations, perhaps it might be more prudent to look at the best practices of more industrialised nations.

Isn't that where we would rather be?

Nativism, isolationism and autarky

In our household a radio is always on and yesterday afternoon was no exception. Different shows are on a different times (we follow shows and hosts, not stations) and the late afternoon is time for CBC's On the Go with Ted Blades.

A regular part of the show is audience response callbacks. Yesterday there were two which reinforced each other and both were in response to this interview with Jeffrey Simpson on Wednesday, June 20th. One caller was Sue Kelland Dyer and the other was a lady whose name I missed.

In different ways, both callers disagreed with Simpson's comments taking Ted Blades and CBC to task for having him on the air offering a diagnoses to problems facing this province and prescribing solutions when there are so many true-blue, saltwater-blooded NLer's available to do that instead.

In effect they were asking What is CBC doing giving a platform to that mainlander?

Rather than giving this point of view the short shrift it deserved, Ted's response was almost apologetic. I thought that was odd. labradore seemed to think so too.

Over the last few years I have found it alarming the extent to which isolationism has taken hold in this province. Our public rhetoric is permeated with quasi-separatist nonsense like moral autonomy, going it alone and telling everyone else in the country to mind their own business.

And this comes from the very top.

The refrain gets transferred from the rhetorical to the economic and morphs into a bizarre economic autarky where the goal becomes economic detachment and self-sufficiency for political purposes. Not one spoonful of nickel can leave the province unless and until it is turned into washing machines and automotive body panels, for example. The low point of this silliness is the insistence that all electricity generated in Labrador must be kept away from Ontario (who will only pay us money for it and who wants that) in favour of keeping it all here.

The hope is that we will become an industrial power without the economic or human infrastructure available to make that happen. The assumption is that cheap energy is all it takes to make that transformation.

When was the last time you bought a manufactured good from Saudi Arabia or the UAE?

I look forward to the argument that not one spoonful of uranium can leave the province unless and until it's value-added processed into warheads.

Migrating from the economic to the social sphere, the next morph is a peculiar nativist stance where the only people fit to comment on the state of the province are the true-blue, native-born, MUN-educated, saltwater-blooded NLer's. It's bad enough when newspapers like The Independent pass off low-rent ideological leanings as news and sites like NL News of Note (AKA News We Like and Agree With) pretend to present information about the province while choosing to avoid information which disturb it's strongly-held prejudices*.

CBC should never fall into that trap nor should they ever even faintly apologise for presenting the widest possible perspectives on this province from the widest possible set of sources; mind-closing currents should be resisted.

It's ironic that just when geographic isolation has largely become a bad memory due to improved transportation, communications and population movements, some among us choose to narrow our world view to the comfortable choosing to attack anything or anyone who might disturb it rather than embracing a diversity of views.

This province was settled by people who were not afraid of the new and different. Traditionally, we have been a seafaring people to Europe, the Caribbean and the "Boston States." Our ports were the crossroads of the world where a myriad of languages could be heard. Global trade defined our economy and our policy was to expand that to have more trade, not less. Our early political leaders came from all over the British Empire and our self-image was as part of that larger whole.

We should never turn our back on those traditions. We should never choose to limit ourselves to tolerating only the smallest possible set of views. And no-one should apologise for offering a platform to broaden the scope of public debate.


*NL News of Note no longer links to Globe and Mail stories because it is just too upsetting for their audience. I'm going to assume my audience is more robust than theirs and won't object if I continue to offer those links.

NL in national news

Three pieces in the Globe and Mail today highlight different aspects of local events as long as the only local events which interest you are the oil industry and the Premier's snit of the day. It seems that if it were not for the NOIA annual conference, there would be little news at all because it has been generating a flood of news stories with national circulation, even days after the close.

Shawn McCarthy has two pieces. The first, When a boom goes quiet, re-covers the old ground of the local adjustments made made by local business in the wake of having no further oil developments in the works. It's become such a common theme that even the Premier felt obliged to address the issue in his opening NOIA address.

The Globe article opens with:
Greg Gulliver is one of Newfoundland's fortunate sons - making good wages as a project supervisor at the Orphan Industries Ltd. fabrication mill just a few kilometres from his St. John's home.

More often than not, though, the marine launch and recovery systems he works on are being fashioned for overseas markets - the Gulf of Mexico or offshore Angola - rather than for the oil and gas fields located a few hundred kilometres off the Newfoundland coast.

Mr. Gulliver, 40, joined Orphan's parent company, D.F. Barnes Ltd. six years ago, and has prospered along with the St. John's success story. From a 10-person operation just four years ago, D.F. Barnes has grown to 320 people today. Revenue has climbed to $1-million a week from $1-million a year.

But with the recent slowdown in offshore oil activity, the company has followed a well-trod path that so many take in this province - finding work in booming oil fields around the globe, including in Alberta, where a third of D.F. Barnes' work force is located.

The concept of local companies shifting to fabrication for clients out-of-province was also covered in a piece, Jobs out east, that I wrote some months ago for Atlantic Business Magazine.

McCarthy's second, Oil rises, Canada's take doesn't is an interview with Graham Kellas, Wood Mackenzie's vice-president for petroleum economics. I saw Kellas' presentation at the NOIA conference and it was pure gold. If I could have one petro-economic mind on my desk in a jar with a speaker attached for communicating, it would be his. He was complete and throughly informative.

After his presentation, I asked him why developing countries were able to charge such high royalties and why corporations were willing to pay the price. The answer was partially about those nations' utter dependency upon that resource for revenue and their inability to collect more generalised spin-off revenues.

In short, the situation was more complex than this provincial government's tendency to hold these nation's actions up as examples for us to follow would lead you to believe.

But this article focused on only one small part of the presentation, Canada's reduction in our take of oil revenues due to reduces corporate taxes. McCarthy writes:

In the past five years, Canada is the only significant oil and gas producing country to actually reduce its share of oil revenues, the British consulting firm Wood Mackenzie says in a new study.

Many other oil-rich jurisdictions, including Britain and Alaska, have significantly increased their share of the revenue pie generated by rapidly rising global crude prices. But as a result of cuts to federal corporate tax rates introduced by the former Liberal government, oil companies have seen their tax bite reduced, relative to their overall revenues.

“What you've seen in a number of countries is that they have introduced additional taxes for oil companies, to get more of a share of the recent price upside,” Graham Kellas, Wood Mackenzie's vice-president for petroleum economics, said in an interview Monday.

“But what's happened in Canada is that . . . the tax rates that the companies face today and into the future are lower than they were when prices started to rise.”

There was actually a whole lot of other things in that presentation and many of them were much more interesting and relevant to what is happening here. I'll see if I can post more on that.

Finally, at the usually sociable gathering of Eastern Canadian premiers and New England governors, things are not so pleasant. Shame.

Saturday, June 23, 2007

Simpson on Dannyism

There's no doubt that the a huge proportion of the province seek solace in blind political trust. After all, look how well we did under that psychological regime the last time.

When it comes to minding business, the future of the province is the business of every person who has something to contribute.

In this column published today in the Globe and Mail, Simpson demonstrates to his employer the value of putting him on the road.


Newfoundland goes for the 'trust me' approach
JEFFREY SIMPSON, June 23, 2007

ST. JOHN'S -- 'Trust my judgment," said Newfoundland Premier Danny Williams this week. Apparently, an overwhelming majority of Newfoundlanders do.

With an election this October - fixed dates are now the law - Mr. Williams' party might capture close to every seat in the 48-member House of Assembly.

Not since the heyday of premier Joey Smallwood, who won six crushing victories after Newfoundland joined Confederation in 1949, has any political figure so dominated the province's politics.

Just as in Mr. Smallwood's day, when the premier demanded and received absolute loyalty, no one dares cross Mr. Williams publicly. In a small province with big ears, even private criticism gets back to the Premier. Since the government is involved in just about everything in Newfoundland, fear of Mr. Williams's legendary capacity for retribution has a lot of people careful of what they say.

Mr. Williams's modus operandi is simple: You're with me or you're not. Black or white; friend or foe. Adversaries abound, and they must be brought to heel or, as he said this week, "told to mind their own business."

The mentality both reflects and accentuates part of Newfoundland's political culture, in which the province is seen to have been held down by outside forces that prevented it from achieving its full potential.

The list of outside forces is long: fish merchants in Britain and St. John's, the perfidious British government that manipulated Newfoundland into Canada, Quebec (for the iniquitous Upper Churchill Falls hydro development), Central Canada, foreign fishing fleets, business interests (especially oil companies) and always, always the federal government.

A standard in Mr. Williams's many public utterances explains best his popularity, "We are fed up with giveaways and bad deals." To Newfoundlanders, their history has been potted with "giveaways and bad deals" in which other interests always did them in. How else to explain the gap between Newfoundland's relatively poor economic position and what its citizens have always believed should have been a brighter future?

There is plenty of myth and romanticism in this interpretation, but there is truth, too.

The Upper Churchill Falls project turned out disastrously for Newfoundland. True, Quebec took a risk at a time when energy prices were low, but when prices jumped, Quebec grabbed all the additional money in a 65-year deal and refused to reconsider.

Every drop of water that spins the turbines in Labrador reminds Newfoundlanders of their loss. They remember, too, that Ottawa refused to pressure Quebec to allow Newfoundland's hydro to pass through the province.

That one deal gone horribly wrong still colours public policy in Newfoundland. The memory and the reality of that deal make it harder for the province to do any deal, since the fear of a repeat remains so prevalent. That's why Mr. Williams's assurance, as a successful businessman, that he will never allow a "giveaway or a bad deal" allows Newfoundlanders to "trust" him almost to the point of messianic fervour.

There was also the collapse of the cod fishery, which is blamed exclusively on foreign overfishing and federal mismanagement.

Whatever the tangled interpretation of the cod fishery's collapse, and the history is tangled, it has come down today in the minds of most Newfoundlanders, and in Mr. Williams's litany, as Ottawa's fault, pure and simple.

When Mr. Williams steamrollered former prime minister Paul Martin to secure a new equalization deal, Newfoundlanders cheered him on. Today, opinion is as close to being unanimous as you will find in a democracy that Prime Minister Stephen Harper "screwed" (that is the frequently used word) Newfoundland, and that his Conservative MPs "betrayed" the province by putting a cap on equalization payments and reneging on a commitment not to include non-renewable resources in the equalization formula.

The oil companies, too, figured in Mr. Williams's pantheon of forces keeping Newfoundland from its potential. He thinks they got too sweet a deal in the first three projects, and he wants a much better one for the province in any future development.

That's why he made new demands on the consortium that was ready to proceed with the next project, Hebron - demands the consortium refused. He wants Newfoundland to have an equity stake in new projects as a window for the province on the industry and as a potentially lucrative investment. It's a bold, defensible approach used extensively around the world (Norway, for example), although not elsewhere in North America, Britain or Australia.

Thus far, Mr. Williams has little concrete to show for his approach. The province still lacks a natural gas regime, and a long-promised energy policy paper remains unpublished (although promised before the election). Drilling activity remains feeble.

Relations with Ottawa are in a deep freeze. Even civil servants aren't talking. Other provincial governments, too, have been put off by his style and conduct. The Lower Churchill hydro project remains a dream, although a lot of work is going into studying options, including ones that would completely cut out transmitting power through Quebec, a sort of psychological payback for that "giveaway" of the Upper Churchill.

The "trust me" approach hasn't produced much yet, except a knockout against Mr. Martin. But it has produced a profound political response in Newfoundland, of a kind not seen since Joey ruled the province.

Friday, June 22, 2007

Royalties are only part of the equation

This was published as a forum peice in the Telegram today.


I have to respond to a recent Telegram column by Brian Jones called “Oil rich but dirt poor — what’s wrong with this picture?” (June 15). He argues that provincial governments from 1989 to 2003 were exclusively fixated on natural resource jobs to the detriment of natural resource royalties, and that royalties are the only way to accumulate wealth for the province.

I don’t have to trawl through every ministerial speech and statement or Hansard record for the time period he offers to show his statement is ridiculous. It should suffice to point to the latest provincial budget, which forecasted total direct revenues from offshore projects of over $1.25 billion this fiscal year, including over $1 billion in royalties alone.

Those funds, 21 per cent of total government revenues, come from projects for which negotiations concluded in the period 1989-2003. So, clearly somebody in those governments talked about royalties at some point.

Oddly, while this government has gone to war over an equity stake it doesn’t need — holding up a project we do need — it has been largely silent on the issue of economic development benefits and the associated employment opportunities.

As for his bald statement that “jobs are fine but real wealth comes from royalties, as any redneck can tell you,” Mr. Jones is dead wrong.

Royalties alone do not create provincial wealth; royalties increase government cashflow and provide cash for government spending and government jobs. But all that stops as soon as the royalties dry up.

Real wealth comes from building capital: human, physical and economic.

Human capital develops when local businesses and workers gain experience on one project and then apply that experience to other projects. Those workers at Bull Arm bought houses, cars, raised their children and fed their families on exceptional wages while gaining invaluable expertise and experience they can use anywhere. They accumulated wealth and the potential to earn more of it in the future.

We build physical capital when we construct infrastructure that can be used for other projects, here and around the world. The Bull Arm fabrication facility is an excellent example.

It would be nice to see a local equivalent of the Alberta multibillion-dollar Heritage Fund, and I strongly support that. We need to accumulate lasting economic wealth from this non-renewable resource. Right now, it all goes into general revenues with nothing put aside for the future.

When Mr. Jones and others argue for an equity stake by saying that our contribution to future projects is the simple ownership of the oil resource, they are partly right. In the same way you own a building and somebody wants to put in a store, you want to be compensated for that. But the benefit you extract from the ownership of the building is not an automatic equity stake in your tenant; it is rent. In the case of the oil resource, rent is called royalties.

We should note that the Alberta Heritage Fund was created with royalties and not from provincial equity stakes. Alberta does not own an oil company (they divested decades ago), nor does it hold equity stakes in local projects.

That government has to be front and centre and directly involved as an equity partner in industrial activity is a quaint point of view that has been thoroughly discredited in most parts of the industrialized world.

And that includes Norway, this government’s stated model for involvement in the oil industry. Over the last five years, the Norwegian government has been gradually divesting itself of its stakes in Statoil and NorskHydro.

Experience shows that the government has a poor track record in managing private-sector activities. Just look at the very long list of Smallwood/Peckford industrial schemes ranging from chocolate to boots to cucumbers to orange juice.

And I don’t mean to pick on the Newfoundland and Labrador governments in particular. Look across Canada and see the expensive skeletons of failed provincial government industrial projects of all kinds, from the Bricklin factory in New Brunswick to the fast ferries of B.C.

This province needs royalties for the government to function and to benefit the population as a whole. The people of this province need the business activity, jobs, skills, expertise and other opportunities the resource provides to be competitive in the wider world and to take advantage of local projects in the future.

We need them both — royalties and jobs. That’s how we accumulate wealth.

Simpson on oil

Jeffrey Simpson, a mainland Globe and Mail columnist some local nationalists love to hate, has been in the province this week. Not only did he speak to the NOIA conference, he's been publishing columns centered on NL provincial issues.

This is one from today.

(Graphics from Wade Locke's presentation to the Harris Institute.)


The Rock's very own cliffhanger: offshore oil
JEFFREY SIMPSON, June 22, 2007

ST. JOHN'S -- Down the road, past the rhetorical fog that envelops relations between Newfoundland and the federal government, lies the cliff.

The cliff is known to those who follow public issues closely. It scares them, because the fall-off is sharp, and the landing will be hard. The cliff ought to be the consuming public policy issue in Newfoundland. It is not, alas.

Right now, three offshore oil projects (Hibernia, White Rose and Terra Nova) are operating, pouring money into government coffers. Offshore royalties jumped more than $600-million to almost $1-billion for Newfoundland this year. (Ottawa is doing splendidly, too.)

Production and revenues from these three will continue at high levels for another three to five years. Then comes the cliff: a sharp decline in both production and revenues.

Hibernia South might extend production near Hibernia, but it's only perhaps a third the size of Hibernia. White Rose, smallest of the three, will tease out some additional oil. But that's it for the existing three.

There is a fourth project, Hebron, smaller than Hibernia, larger than the other two, located in deep water, with high costs. Hebron was set to move along until, in April last year, the consortium walked away following fruitless negotiations with Premier Danny Williams's government over new demands for equity and royalties. Mr. Williams said this week "discussions" have resumed that he hoped would lead to negotiations.

Most of the Hebron team packed up. Even if a new deal were negotiated, it would take at least a year to reassemble a team. Seven to 10 years later, maybe, oil might flow.

In the meantime, Newfoundland would have arrived at the cliff, the years when production and offshore revenues plunged. A fast restart for Hebron would push back that day of reckoning, but only for five to seven years, because nothing else is in the offshore pipeline.

No commercially recoverable oil has been discovered off Newfoundland for two decades. What's being pumped now was found from 1979 to 1984. A big and very expensive ($225-million or so) drilling project came up empty earlier this year in the Orphan Basin, 325 kilometres offshore. Expensive misses like that one do not encourage fast repeats.

When the going was better, and oil was being discovered in the late 1970s and early 80s, six to 17 drilling projects occurred each year. Since 1988, the it's fallen to zero to three. The competition for drilling rigs worldwide is ferocious. The cost per day has skyrocketed.

Newfoundland's provable offshore deposits are hugely important to the province, but small in the global scheme of things. The world uses about 85 million barrels of oil per day. Newfoundland's total reserves, as known today, would satisfy 20 to 25 days supply; Hebron only perhaps seven days.

The cost of offshore discovery and extraction in Newfoundland is high, which might explain why nothing is in the pipeline after Hebron, discovered in 1980. Natural gas might help, but the province still doesn't have a generic regime for gas. As for the "energy plan" that was promised about three years ago, Newfoundlanders are still waiting.

The cliff is ominous, whether the province confronts it in four, seven or 10 years, because offshore oil is the province's best hope for fiscal stability. With a declining population, personal income tax and sales tax revenues will not grow.

Even if Newfoundland gets its way with Ottawa over equalization and the Atlantic Accord - a highly unlikely possibility given the friction between the two governments - the additional money would be smaller than oil royalties.

Newfoundland's budget last year was $5.3-billion. Royalties and taxes from the offshore brought in about $1-billion. That money allowed the provincial government to cut personal income taxes, raise spending and pay down debt.

It was a wonderful budget in an election year. There could be more like it. But not as many as Newfoundland needs, because the offshore is the only major source of new revenue on the horizon, and it's going to start falling.

Mining is doing well, and the province will get money from those projects. As for developing the Lower Churchill Falls hydro potential, that's at least a decade away. In the meantime, there's the cliff.

Branding, northern style

In a recent interview I did with Mr. Edward Martin, President and CEO of NL Hydro and the new and unnamed provincial energy corporation, he noted that this new entity would get a name after a branding exercise.

Some variation on the triffids, perhaps?

Branding, as noted before, is a useful process but much more complicated than it first appears; brands are not logos/wordmarks although a logo/wordmark might represent a brand.

In poking around on this issue, I came across this history of branding website which shows dozens of brands and where they came from.

All this is a segue to some of the most interesting brands and logos I've seen in my recent travels. These are photos I took of signs on buildings in Iqaluit, Nunavut. They all use common and recognizable northern symbols as their basic image and then give them a slight twist, in some cases, to project the function of the organization they represent.

I love the housing corporation one.

Thanks to Townie Bastard for reminding me I had these.

Wednesday, June 20, 2007

What a change(?)

In light of the news from the last few days, this Financial Post story from just a week ago shows either how much things have changed in 7 days or how oversold the Premier's claim of Hebron talks actually is:
"There are no negotiations taking place between the Hebron co-venturers and the Newfoundland government," he (Chevron spokesman Dave Pommer) said. "We still remain open to the possibility that the project could proceed at some future date."

And on it goes.

Gary Lunn speaks (in abstentia)

Again, fresh from the NOIA site, the speaking notes of Minister Gary Lunn for the address never given.

Premier Williams was careful to pre-refute Lunn's leaked points but, as you can see here, while critical and testing, the speech was not as adversarial as it was billed.


Thank you Caron, (Caron Hawco, NOIA Vice-Chair) for that introduction and thank you for inviting me to be here with you today.

It is always a pleasure to be in Newfoundland. I was here last March speaking to NOIA, just weeks after I was appointed as the Minister of Natural Resources.

I was impressed I was with the level of enthusiasm surrounding the oil and gas industry at that time. I remember telling you that this province was on the cusp of a bright sustained energy future, and that our Government would work with you to ensure a vibrant oil and gas industry in Newfoundland and Labrador.

We discussed the collaborative work with the provincial government and industry to build a competitive economy and sustainable communities so that Canadians right across this great country would benefit from all your hard work.

Today I do not sense that level of optimism or promise that I witnessed last year in this province.

I say that with sincerity and concern. And I am going to be blunt in my remarks today to describe the current state of Newfoundland and Labrador’s oil and gas industry, and what I think needs to be done to carry us forward.

All levels of Government and you – our industry partners – have an important task at hand. To ensure that the oil and gas industry in Newfoundland and Labrador remains strong, competitive, and above all, achieves its full potential for many, many years.

Our Prime Minister refers to Canada as an emerging “energy superpower”. The potential is real and it is on its way to being realized…along with the associated benefits…in many jurisdictions across this country.

Your industry is having a positive impact on the economy and, if managed properly, it should continue to grow.

The figures are truly staggering and I’d like to run over them briefly.

Over 28-hundred people are employed by the Hibernia, Terra Nova and White Rose projects.

Another estimate says around 14-thousand people are working in the support industries and businesses.

In total they represent 8% of all the people employed in Newfoundland and Labrador and that number can only grow. In 2005 the industry accounted for a quarter of your provincial GDP.

Let’s just focus on oil.

With 179 billion barrels…Canada’s crude oil reserves are second only to Saudi Arabia. Based on current projections, we should climb from 8th to 4th place in terms of oil production by 2015…jumping ahead of Norway, Mexico, China and Iran.

Newfoundland and Labrador is a critical part of Canada’s energy strength. Current estimates peg recoverable reserves at 2.8 billion barrels of oil, not to mention 10.2 trillion cubic of natural gas. But let’s be honest. We know we have only scratched the surface…what we need is to attract exploration to unlock and prove our true potential.

That said, to achieve this potential in Newfoundland and Labrador, we need to see new projects.

Canada’s strength does not just rest in its impressive resource base. We are more than a simple warehouse of natural resources.

Canada’s energy advantage is rooted in its people, its ideas, and its innovative capacity. I believe governments should add to that advantage by providing stable and competitive fiscal and regulatory regimes which encourage investment and innovation.

When you look across the country, you see governments…both federal and provincial…providing stable and competitive fiscal and regulatory regimes…which have led to a rush of innovation and investment on the part of industry…and jobs, revenues, and other benefits for governments and citizens.

Canada’s energy advantage is real. We live in a world of increasing demand for energy, including fossil fuels. But that world is also marked by increasing instability…particularly in key energy producing regions. While it is expensive to find and develop oil and gas in Canada, our strengths are as a significant, stable and secure supplier.

When you look around the world at the behaviour of some of our competitors, attracting investment should be a cake walk. And, it has been for some provinces.

In 1997…Hibernia’s first year…capital investment by the oil and gas sector across Canada stood at $19 billion. In 2007, that figure will come in at $45 billion. How is Newfoundland and Labrador doing? Well, in 2006, Newfoundland and Labrador only attracted about $700 million, about 1.5% of the Canadian total.

What is most concerning is that while other oil and gas provinces…such as Alberta, Saskatchewan and BC…have seen investment and activity surge, Newfoundland and Labrador have seen it drop dramatically.

The boom across Western Canada has created opportunities for Newfoundlanders and Labradorians…but most have been forced to leave their homes, families and way of life. Those opportunities should have been here for them…but they weren’t.

In a province so rich in oil and gas potential, how can it be that 50% of working age people are not working? That is 10% below the national unemployment average.

These should be the best of times…and they are in the other provinces I have mentioned. Does it feel like the best of times here? As business people, do you feel more optimistic about your future than you did four or five years ago? These are tough questions. Why are so few people asking them?

Maybe it is because you can still see and feel the decisions, discoveries and deals of the past. People are working on the existing projects and in the supply and service industries which account for about one quarter of your GDP. Provincial coffers have benefited from your industry. The province has collected over $850 million in royalties alone over the last 2 years.

But today is the product of discoveries made a quarter-century ago and three developments that collectively will soon hit their peak. We are only years away from significant declines in production and revenues.

A recent report suggested that Newfoundland and Labrador is on the cusp of becoming a have-province. I believe it. I have seen the graphs showing surging oil revenues over the next few years. But I have also seen the other side of those graphs…a cliff and plunging revenues without new developments.

Brian Peckford, in a powerful address, once dreamt aloud…”one day the sun will shine and have-not will be no more”. Newfoundland and Labrador’s time in the sun need not last for a brief moment, but that is in fact where it is headed. Again…tough stuff. But it needs to be said.

It does not have to be this way. Companies want to invest in Newfoundland and Labrador’s offshore area. But there is an atmosphere of confrontation and uncertainty that is preventing anything from moving forward.

Think back to the 1970s and early 80s when then relationship between the federal and provincial governments was marked by a divisive jurisdictional dispute, leading to two court references. Investment and development were held back by the uncertainty, to neither Canada’s or Newfoundland and Labrador’s advantage.

Two Conservative governments….that of Brian Peckford and that of Brian Mulroney…came together and negotiated the Atlantic Accord. Like any deal…the Accord required compromise and a spirit of good will. The benefits of that approach are obvious.

That spirit of good will and compromise have to be rediscovered if we are to move this industry forward. It is not too late…not by a long shot…and your federal government stands ready to pull its share of the weight.

Everyone here knows that Newfoundland and Labrador receives 100% of the offshore royalties – as they should. This year those revenues are expected to be over half a billion dollars.

There has been much talk about Equalization recently.

Newfoundland and Labrador has the option to accept the Atlantic Accord. Nothing has changed from what was signed in 2005. Nothing has been taken away from the provinces.

In Budget 2007, our Government brought in the new Equalization formula with the fiscal capacity cap. No province will be worse off because of this formula – in fact all provinces will receive more money as a result of our package.

But I want to emphasize here that the focus should not be on Equalization…it should be on increasing offshore revenues. Ensuring the economy continues to grow so that Newfoundland and Labrador will not have to rely on federal Equalization payments.

I understand Premier Williams announced to you this morning that discussions were back on with the partners for the Hebron project. This is good news – very good news. Although I have heard that discussions – not negotiations – have been on and off many times. But I do hope this is a sign of better things to come.

When many people talk about oil and gas, their minds immediately drift to the activities of the global exploration and development companies - what some call “big oil”.

But the reality is that it is your efforts to build and strengthen the local supply sector, and your capacity to compete – not just here but around the world – that are the real foundation of this industry.

In this regard, I am aware of the work that NOIA has been doing over the past few months to develop a strategic plan which will guide your future as an organization and an industry. I can assure you that our Government will be here – as we are now – to support your important efforts.

For us at least, there is nothing “annoying” about your work. You are the backbone of the oil and gas offshore industry.

Newfoundlanders and Labradorians deserve a fair share from the development of their resources. Every study I have seen suggests that they are receiving that fair share, but the provincial government has every right to mix things up… to try something new…and raise the bar.

But, at some point the provincial government has to lay out what it wants or people will start to question whether they know what they want or where they are going.

The test will be whether it attracts investment…if we see exploration increase…if developments proceed…if your businesses grow and prosper…and the people of Newfoundland and Labrador stop leaving.

At the end of the day, we have to remember that decisions…no matter how popular or appealing, have consequences.

By way of a concrete example, the nixed Hibernia expansion project would have represented a $500 million investment in platform upgrades, up to $5 billion in direct revenues to the province, and would extend the life of the field significantly.

Furthermore, the arrested development of the Hebron field would have resulted in $90 million in expanded offshore payrolls, almost $10 billion in direct revenue to the province, $32 billon in GDP, and significant spending on R&D and training.

And of course, of critical importance to you, it would have meant millions and millions of dollars in employment benefits through local fabrication, construction, procurement, and engineering activities.

Together these two projects could have delivered an additional $14 billion in revenue to the province….More than enough to wipe out the provincial debt.

The people of this province will have to live with the consequences of missing those opportunities.

It will not be felt today or tomorrow, but when oil revenues begin to decline the hard questions will come fast and furious.

All I am saying is do not wait until it is too late to ask those questions. I know the people of Newfoundland and Labrador are blunt…it is a virtue. And I believe in being blunt especially if it means being constructive.

Your federal government, which includes Fabian Manning, Norm Doyle and Loyola Hearn are ready to work with you and the provincial government to put this sector back on track.

This Conference is about identifying what needs to be done, and it is a valuable contribution. I will listen to your ideas and I will learn from them.

That’s how we’ve worked in the past and that’s how we’ve been successful.

As partners, we will find ways to address challenges and create opportunities.

I want to leave you with a message:

You have the resource potential, you have the people, you have the innovative capacity and there’s a strong partnership between our governments on science and technology and regulatory effectiveness. We need to leverage these strengths and work together to get on with growing the offshore industry to reap the benefits for the province and for Canada.

I hope you have a enjoyable and productive conference and thank you again for inviting me to speak with you today.

Thank you.

All NL all the time

An embarrassment of riches today: four pieces in the Globe and Mail this morning on NL and the issues facing it. And who says we get no attention from the national media?

One comes out of the NOIA oil industry conference and covers his speech ('No compromise on Hebron: Williams Newfoundland Premier says he won't yield to pressure and sign 'a deal for the sake of a deal'). Related to that, the national media are responding to Ottawa's release the text of NRCAN Minister Gary Lunn's broadside(?) he was supposed to unleash on Premier Williams until Lunn's plane turned back because of fog.

The third outlines Premier MacDonald's and John Crosbie's appearance in front of the Senate and their opposition to the federal budget do to its Atlantic Accord provisions.

Finally, Jefferey Simpson's column on NL outmigration. It makes for sobering reading. Simpson will be speaking at NOIA today and tomorrow. Here's the text.


Buffeted by the winds of the great migration
JEFFREY SIMPSON, June 20, 2007

ST. JOHN'S -- Could anybody in Ontario imagine their province losing 1.5-million people in the past 15 years? Could anybody in British Columbia get their mind around their province shrinking by 500,000 people since 1991?

Yet a decline of commensurate size happened in Newfoundland. Since 1991, its population fell by 12 per cent, or about 70,000 people.

The very young and the very old didn't leave. Young and middle-aged adults did - the people who work, pay taxes, raise families, support others. The decline was greatest after the cod moratorium, but it persists today. And it will continue. Today's population is about 510,000. Under the best scenario, it will fall to 495,000 by 2020; under the worst, 460,000.

More difficult still, the population is aging, quickly. The entire Canadian population's demographic profile is getting older, but Newfoundland's is getting older faster. In a generation, Newfoundland has gone from having the country's youngest population profile to its oldest. In the 1970s, Newfoundland had the country's highest birth rate. It now has the lowest, courtesy of people of child-rearing age having left.

For decades, politicians of all stripes, and at both levels of government, have pledged to revive rural Newfoundland. These promises continue. There are pockets of modest revival, sometimes because people who went to Alberta or other places "away" came back with money. These are the exceptions, in fact, if not in rhetoric.

Agencies, task forces, royal commissions, studies, programs and billions of dollars have been thrown at the problem. The political culture of the province requires the suspension of belief, a culture no political figure dares challenge.

Meanwhile, here is what is happening - because people took rational decisions in their own self-interest - and what is projected to occur.

According to provincial statistics, of the province's 20 "economic zones," only two have kept steady populations: the Avalon peninsula that encompasses St. John's, and northern Labrador with its aboriginal peoples. Every other one has lost people in the past 15 years, with the decline ranging from 12 to 30 per cent.

The reporting of the raw numbers of decline doesn't tell the whole story because it misses who is left behind.

Take the southwest corner, Stephenville and Port aux Basques. In 1986, it had 15,200 people aged 1 to 19, but only 3,100 people over 65. The ratio then was five young people to every senior. Today the ratio is 3 to 2, and by 2020 it will be about 1 to 2, or about 4,000 young people for almost 8,000 seniors.

Another example: the Burin peninsula on the south coast. In 1986, it had 11,600 people under 19 and 2,500 seniors, for a ratio of about 4.5 to 1. By 2020 it will be about 3 to 4, with 2,800 young people and 4,300 seniors.

Today's median age is 41. By 2020, it will be about 49, but much higher in the rural areas. In 2006, for the first time, Newfoundland recorded more deaths than births, the only province where that occurred. Said the province's finance department, "there appears to be no relief in the foreseeable future for demographic issues stemming from declining births and rising deaths."

The depopulation of rural Newfoundland, in the face of every policy to arrest it, leaves the province with big delivery and spending problems.

A rapidly aging population means higher health-care costs. Outports, even shrunken ones, still need roads plowed, children educated, police on call, but the economy of scale of providing those services grows worse.

Facing these facts, and they are facts, is politically very hard. It is easier to speak of hope, revival, return, and to offer another plan. It is a completely nefarious myth that Newfoundlanders do not wish to work. Newfoundlanders would not have left, and be leaving, in such great numbers if they were shifters.

The work, however, is not there in large swaths of the province. People know it. But governments cannot admit it, and so maintain policies designed to blow against, rather than with, the winds of the great migration.

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.