Pillar to Post | Craig Westcott
It’s hard to see how the Dwight Ball government’s decision to hive off a piece of Nalcor to create a new Crown Corporation for the offshore oil industry makes any financial sense. Especially when the same government is scrambling to find savings at Nalcor to mitigate the looming jump in electricity rates resulting from the appallingly bad decision to proceed with Muskrat Falls.
All that Natural Resources Minister Siobhan Coady’s decision will do is pile a new cost onto the festering pile of unnecessary and exorbitant expenses created by the past PC administration, when it created Nalcor in the first place.
Like the previous government’s decision to create and staff a new Health Information agency with a regiment of handsomely paid vice presidents – a decision embraced and maintained by Ball’s PC-lite government – the new oil corporation will be overstaffed with seat warmers who will be grossly overpaid and underworked.
The Liberals’ offshore oil policy is a continuation of the previously bad PC one. Premier Danny Williams made a big deal about buying equity stakes in the offshore oil industry, with promises of riches coming in the end. His policy has cost us taxpayers over a billion dollars so far with little to show for it.
Williams’ much-vaunted equity stakes didn’t even buy us a seat at the corporate boardroom tables of the projects in which we’ve invested. But they have put us on the hook for a share of any and all cost overruns associated with the projects, and much worse, also on the hook for any environmental liabilities that might result from an oil spill or blow out. The Deepwater Horizon blowout in the Gulf of Mexico cost British Petroleum billions in cleanup costs and some $20 billion more in claims from fishermen and others impacted by the disaster. If the same thing were to happen say at Bay du Nord, where the Ball Liberals want to spend $1 billion for a 10 per cent equity stake, we would have to pay for 10 per cent of the resulting damages.
The other major flaw in the equity stake policy is that it places our government in a direct conflict of interest when it comes to regulating the oil industry. How can we expect our government to properly set the rules for developments and determine royalty and tax levels when our politicians and bureaucrats are in bed with the honchos at the oil companies?
Take the Hebron deal. Danny – and his successor Kathy Dunderdale - paid the oil companies close on a billion dollars so far for a 4.9 per cent equity stake, but gave up half a billion in sales tax on goods and services up front and hundreds of millions, likely billions, over time in a much smaller royalty scheme than the ones previous governments managed to obtain on earlier projects. To add insult to injury, there were no improvements or increases in the amount of fabrication work that Newfoundlanders got during the construction phase of the Hebron project. As usual, we were expected to be content and grateful for the “monkey work” of building relatively simple components like the flare boom.
Nice job, Danny. Your equity stake really worked out for us there.
The Bay du Nord development – in much deeper waters and much farther away than any of the fields tapped so far – heightens the environmental risk and potential cost overruns dramatically. It’s a bigger roll of the dice with much more money for us to lose if something goes wrong. It would be much safer, and wiser, for our government to do only what it is supposed to do – set the rules for safe development of the project and ensure we get a good return in royalties and taxes. But Ball and Coady, like Williams and Dunderdale, are not content with just that. They’d rather play at being Texas oilmen, only with our money at stake. We’d all be better off if we bought them a couple of Stetsons and packed them off with a pair of one-way tickets to a dude ranch.
Not that the other crowd, who invented this cockamamie oil policy, look to be any smarter. Slicker maybe, but not smarter.