Debt, Hydro Power, and fighting for the Crumbs

The game of Hydro Power domination, currently unfolding in Maritime Canada, will be fueled by old faithful - debt. Or perhaps more accurately: debt capacity. Afterall, most businesses close their doors when their debts hopelessly outnumber their assets, and all the players involved in the Power War are in this diminshed position. Like the Emporer without clothes they strut, and yet their citizens dare say nothing, as to do so would force them to recognize their own naked place. And so we stumble on until the great international financiers force a mirror on us in the form of credit downgrades, credit freezes, devestating interest rates and terminal deflation.

When the government of Quebec proclaimed it's intention to buy New Brunswick Power, partner on the Lower Churchill, or any such project, it was really like the dog frantically chasing it's tail. Contemplate the following financial facts on the province: Quebec's gross debt today is 49.9% of it's GDP; it's gross debt is projected to be 53.4% of GDP by 2014; and it's current total debt is 94% of GDP. Those numbers place Quebec in the not so auspicious position of just behind Greece as one of the world's most indebted economies. Essentially bankrupt. If you combine that staggering debt with the lowest birthrate in North America Quebec's medium to long term prospects are dim - to say the least. It is estimated that should Quebec ever seperate it's debt would be aproximately 300 billion. To put that into context, Quebec would have to slash programs, and raise taxes 53% just to instantly become a member of the Third World.

It helps to put things into context. Here is another shocker. Hydro Quebec, the great propeller of  Quebec's Manifest Destiny, is in serious debt too. As of 2010, Hydro Quebec's debt is 36 billion dollars  with planned investments of 18 billion more by 2013. That's 54 billion. In that context it probably is not surprising that Quebec tries to thwart Newfoundland's entry into the market, or allow it to free the chains of the Power Contract, 1969. Essentially, through an extremely exagerated sense of self- importance, and a spending spree to match, Quebec has reached the limit. If it can not expand it's primary natural resource, hydro, then it will start to shrink and decline. In strictly financial terms it has already peaked and declined. Now they are trying to swim upstream just ahead of a massive water fall. The recent letter by Quebec's Premier to Mr. Harper, complaining that any funds given to Newfoundland and Nova Scotia would constitute an unfair subsidy to their hydro ambitions, rings hollow when you consider Quebec recieved at least 8.5 billion in equalization payments last year - including compansation for subsidized electrical rates for Quebec residents and business. Desperate people sometimes do desperate things.

The province of Newfoundland is not exactly in great financial shape either. Trapped in low wages, high taxes, shrinking revenues, massive debt, declining birth rates, net migration and surrendered resources Newfoundland is also on life support. Bravely, along the lines of the Emperor's new clothes, Newfoundland continuously fights to stay above water. However, without recapturing the Upper Churchill revenues, and developing the Lower Churchill potential, Newfoundland's future will echo that of Quebec's.

Both provinces have spent way past their means. Both have tried to build massives infrastructures in a relatively short period of time with declining birth rates. Bucking the wind as it were. Unlike say China, India, and Brazil where their population growth is positive and their development and spending is therefore sustainable, Newfoundland and Quebec have been living life on high. And for all, there comes a time to pay the piper. Now, rather than enjoying the benefits of our ancestors prudence and discipline, the things that differentiated the New World from the Old, we find ourselves like the world of Old - fighting for the crumbs.

So I say to the government of Newfoundland and Labrador: Fight. All you have to lose are your chains. But know you are in for the fight of your lives, and, therefore, fight accordingly. Please.

And so it starts...

An eventful, and somewhat predictable week begins the not-so-unofficial hydro war between Newfoundland and Quebec. You could say NALCOR and Hydro Quebec, but the reality is the massive dollars involved are targeted primarily for public coffers.

Things started with the disclosure that Newfoundland, in partnership with Nova Scotia, had officially requested P3 funding for an underwater electrical cable linking Labrador, Newfoundland, and Nova Scotia. While we in the general public have not heard the "deal" that obviously exists between Newfoundland and Nova Scotia, you can bet there is one. The Quebec government, Premier no less, wrote an official request to the Prime Minister to disallow such funding based on the presumption that it was an unfair subsidy to Newfoundland's hydro ambitions. By doing so Quebec not only "outed" Newfoundland and Nova Scotia's appeal for public funds, but also, and likely more importantly, they set the stage for the ongoing saga lovingy known as "the betrayal of Quebec".

This theme Quebec brings to the fore every time they feel their interests are threatened. Essentially it is a warning to the federal government that if such and such were to go through, well, they couldn't be held responsible for the reaction amongst the people of Quebec. Read here: revival of the seperatist movement and Quebec's march to "rightful" independance. We have seen this movie so many times now that the Canadian people know it by heart. That does not mean however that Canadians are not concerned about Quebec actually attempting to seperate. They just are no longer prepared to sign over whatever Quebec wishes to keep it in place. Certainly attitudes in this regard changed with the defeat of the Meech Lake Accord and the subsequent Charlottown Accord, and likely peaked with Jean Chretien's bold statement to the Quebec government that if Canada is divisable then so is Quebec.

Apparently, despite this strengthening of the collective Canadian will, some Quebec politicians believe that setting the old background up prior to the main match is still a comfortable strategy. Well, they may as well save their breath. The rules of engagement have changed, and Newfoundland is not going to back down on the Upper or Lower Churchill Falls, and nor should they.

Premier Danny Williams must reconvene the Newfoundland House of Assembly and pass the necessary legislation to ban hydro sales to any entity that does not recognize and practise English as it's primary language. Insert the notwithstanding clause to avoid any court action by the Quebec or federal government. Nalcor will have no choice but to cease selling to Hydro Quebec as to do otherwise would then break the law. The Power Contract of 1969 would still be alive, but it would be against the law to fufill it in other words. Why would the Premier wait, and in some ways dance around with Quebec and others on this issue. It is too crucial to Newfoundland's survival. He certainly has the people on his side, and a vast ocean of political capital to draw on should he need it. Quebec, and to some degree Ottawa, need to understand that Newfoundland is not begging for pennies. It is asserting it's rights over it's own resources, and no soft pedalled deal can come in between the way of that right. We can talk, but only after we have regained control over our own vital natural resource.

If you want to fight the Quebec government, then you must out do them at their own game. Do not try and be gentalmanly as they will see that as weakness. Do not compromise until you have achieved the primary goal as they will see that weakness. Do not lose sight of your reasons for fighting this injustice, as they will see that as opportunity. There is no longer any need to try and partner with Quebec. If you question that, then you should have been watching the news this week. Make no mistake, Quebec's strategic plan is to keep the 1969 contract until it's expiry date. In the mean time they will construct their own facilities so they are prepared to lose that power at that time. They do not have a long term interest in Newfoundland, and they know their time in Labrador is limited. They obviously no not care one iota how their policies have affected the people of Newfoundland - not in the least. Literally could not care less. We must meet this with our own strength, and with this knowledge in mind. As the Premier of Nova Scotia stated today: "Quebec does not have a veto." Perhaps the bigger question should have been: "Whatever gave them the idea they did?" In any case, let the games begin!

Good Old Harry

When you here the name "Old Harry" you could be forgiven for thinking it might be some old clock in England, or a funny nickname for the old guy down the street. However, Old Harry really stands for big money, big oil and a seriously annoyed Quebec. You see old Harry is the name for a 29km long oil/gas deposit off the coasts of Nova Scotia, Quebec, and Newfoundland. Technically, atleast according to Quebec, the majority, if not the entirety, of Old Harry lies within Quebec's maritime jurisdiction. We can't really call them maritime boarders as the players are all in the same country - although sometimes you might wonder.

This time around, unlike 1969, Newfoundland has got a jump on Quebec in exploiting this massive resource. You see, any province wanting to explore/drill on the offshore must have a revenue sharing agreement in place with the federal government. It must also agree on being compliant to federal legislation and establish regulatory oversight. Newfoundland has already gone through that entire process, and has had many years of experience in the field. Quebec - has not. The Quebec government has been pushing Ottawa to finalize a deal so they can begin hauling in the catch, so to speak, at Old Harry. Ottawa on the other hand has told them to negotiate with Newfoundland first to straighten out the border differences between the two.

Where does that leave Quebec? Deep in it I would say. For starters, Newfoundland has begun work on it's side of the line with an eye on beating Quebec to the field. Afterall, just because they drill on the Newfoundland side of the line doesn't mean they can't empty the Quebec side of the resource. Question that? Go back to the Saddam Hussein days and the slant drilling Kuwait and Iraq were doing to each others fields - depending on who you spoke to. Newfoundland is definately in a position to hand Quebec its first massive financial lose since it lost on the Plains of Abraham. No doubt the separatists in Quebec will say this is yet another humiliation inflicted on Quebec by the rest of Canada.

However, before they speak, they should remember the Upper Churchill. In the resource war that now consumes Atlantic Canada and Quebec, this is just another salvo - albeit painful. There will be no peace, no good will, no sharing amongst the family until the blight that the Power Contract of 1969, and the Upper Churchill enslavement, are set aside for a new agreement. This isn't just a one off. This is going to become the norm - and it is dangerous.

Those of us that love this country are very concerned that pettulant provincial battles constantly rip at her fabric, and the greatness we have as one is threatened by the greed of some. Never has any province in the history of this land been subjected to an economic enslavement such as the Upper Churchill contract by another province. Her own fellow Canadians. It has cost Newfoundland entire lost generations and monumental wealth - replaced of course with massive debt and horrific demographics. The Upper Churchill contract must be set aside voluntarily, or otherwise. If not, the eastern half of this country will come to resemble an internal economic civil war. Quebec needs to understand that greed can only take it so far, and it's dream of dominating the hydro electric market is not going to happen. There is no great separate manifest destiny for the province of Quebec, and she must immediately halt her ridiculous "nationalistic" energy practices.