No Rock is an Island

Sometimes one could be forgiven for feeling that Newfoundland and Labrador is an isolated economic miracle that defies the normal economic rules of gravity. To listen to Ms Dunderdale or Mr Marshall is to be swept up in a feel-good-fest that only the crankiest of naysayers would dare challenge. An island economic boom that need not be burdened by its own structural weaknesses or outside turbulence.

A simple gaze to the East should shatter these flights of fantasy. The European Union is at a tipping point. A real tipping point that has the potential to dramatically shift the proverbial financial axis of the world in one big bang. Not unlike the Canadian federation, the European community is grappling with not so much a financial crisis as an attitude problem. Sure there is a financial crisis, but the bigger problem for the Unions future is the attitudes that created the crisis. Germany holds steadfast in its position that the spend thrift states must release their sovereign right to budget. It maintains that only a supra-national mechanism of control, which can veto any nation in the Unions overspending, can maintain the credibility of the Euro.

Germany argues that simply turning to the European Central Bank for bail out after bail out just forestalls an inevitable collapse. That the real demon is over spending by states that quite frankly can not back up their relatively lavish lifestyles anymore. The insinuation, on a grand scale, is that economically prudent and disciplined states would be left to give their hard earned returns to those countries that would not sacrifice - even for their own economic survival. No doubt Germany is 100 % correct.

And so we have the Canadian federation. Burdened as is Europe with those members who show financial prudence and discipline and those that do not. On the one end of the spectrum you have Quebec, and to many degrees Atlantic Canada. In Quebec's case the provincial government deliberately suppresses the value of its hydro sales to show a loss. It expends on social programs, such as its $7 a day child care program as if it were a constitutional right. It has the highest per capita debt levels in the country. It has a rapidly aging population that can never pay back the debt it has now, let alone any further accumulated debt. It plays the game of spend so as to remain a "have not province". In other words, Quebec deliberately spends far more than it ever makes so that it not only does not contribute in a net sense to the federation, but in fact is a constant financial recipient of "bail out funds".

Where do those bail out funds come from? They come from the equalization formula that aims to ensure services across the country are relatively equal. The problem is the provinces paying into the fund, and receiving nothing back, are the well disciplined ones. Alberta and Saskatchewan are tackling their own balance sheets in a fiscally prudent way. They are both either debt free or on their way to being so. They have made choices, sometimes tough ones, to ensure their province is on the right track. They do not have massively reduced electrical rates for their citizens, or fanciful daycare programs. They are in fact subsidizing the irresponsible provinces unsustainable lifestyles in many cases.

Unlike Germany, they have not been able to put the brakes on and demand financial sense from their fellow confederates. Well, maybe they will in 2014. The equalization program comes up for review in 2014. Already we have heard rumblings from Ontario that they want more. The positioning is, and has been, going on for some time. The big question is will the financially responsible members in Canada, say like Germany in Europe, be able to alter this devastatingly unfair program? Will they be able to insist that member provinces pass legislation banning deficits - like Germany is trying to do in Europe? Will the federal government, with a distinctly western outlook, take on the role of requiring fiscal responsibility of the provinces?

Seems to me the time is right. We should not wait until the federation gets torn apart by selfish and foolish spending. We should be looking at Europe and seeing the inequality and lack of justice that an undisciplined financial arrangement can create. Currently in Newfoundland we are a have province. Our government fought tooth and nail to be exempted from paying its share in the equalization scheme. That exemption runs out in 2011. Next year there are no offset payments to compensate for oil revenues going to the equalization fund. Next year we really become a have province. The joy of funding Quebec's $7 a day daycare becomes ours. Will we now be joining Alberta and Saskatchewan in demanding the other provinces become fiscally responsible?  Or will we try and take Quebec's tact and spend to the point we revert to have not status so we don't have to pay? History suggests we will spend.

It's at moments like these in history that we should be looking at others and seeing ourselves in them. Rather than increasing our civil service by 25% in four years we should be seeking massive efficiencies. Rather than trying to drive our economy by state driven mega projects like Muskrat Falls we should be directing all available dollars to the debt. If we just looked around the world today -  whether it be the US, Europe, or even the rest of Canada - the answer is so clear. Fiscal discipline. Fiscal discipline. We may be the Rock, but in the financial world there are no Islands.

Newfoundland and Labrador's Three Solitudes

It was the best of times. It was the worst of times. Newfoundland and Labrador's financial windfall from oil since 2004 filled the coffers with over 7 billion dollars. Corporate and personal income tax takes over the same period swelled the treasury. Hyperinflation in the housing market, centered exclusively in urban areas, drove massive new home construction. A belief that Newfoundland and Labrador, as Danny Williams coined it, was Canada's "newest and coolest province". An almost nationalistic pride swelled the chest, and a belief that this province could well do without the encumbrances of Confederation filled the lines of its many radio talk shows.

Yet, as all these good times unfolded, the worst of times were also hammering away at the province. Rural Newfoundland continued its slide as out-migration drove people to urban centres, leaving behind as it did abandoned homes and separated families. The population continued to gray as the massive hole in the province's demographic charts, left by the out-migration of young people to the West in the 1980's and 1990's, came home to roost - as such occurrences always do. The nearly 200,000 souls that left chose the West as their new home. It's where they chose to have and raise families. It's where their children refer to as home. They are not here to support the retirement of their parents or grand parents.

Those left behind in rural Newfoundland are a mix of the very elderly, and the remnants of a once proud fishing industry. The fishery people subsist on a tiny income from the very short fishing season, a ridiculously low quota of fish, and most importantly the now permanent unemployment benefits they receive for the remainder of the year. The elderly subsist on the bare CPP pensions they receive. The lucky are the elderly that worked for mainland companies and have a bit better pension. The economic activity, such as it is, is primarily fueled by housing in the "hub" communities. The housing is fed not by any real economic growth, but rather a need for the aging population to be closer to medical facilities and doctors - and provincial spending on "hub" recreation and health facilities. So ridiculous, and unsustainable, has this "boom" become that housing in a small hub like Clarenville is now on the same cost footing as Calgary.

Any person who has lived off the Island knows the end result of this type of "economic boom". Eventual market saturation. Subsequent halts in construction. Immediate declines in property values. Major unemployment and personal financial chaos. The always too familiar out-migration to the West.

Rural Newfoundland is the saddest of the three solitudes. Its fate sealed in demographic numbers that impact its ability to reproduce and consume. Its roads left to fall to pieces - almost exaggerating the point the government believes further investment is futile. Its fishery soon to be dealt the cold, ruthless hand not seen since the days of resettlement. Rural Newfoundland is the tragic solitude.

Labrador is the alienated solitude. For generations it has given its wealth to other parts of the world - in many cases literally given it. Its mines and dams have fueled whatever real economic activity has happened in the province. The decisions that have affected her have almost always been dictated by St. John's and its boys club. A palpable resentment has resulted and been in evidence for many years now. Separatist movements have come and gone. Politicians dedicated to redressing these wrongs have come and gone. Yet still she sits with unpaved highways, and unfinished hospitals.

The government is now putting some money into Labrador as it realizes the provinces future economic wealth lays in Labrador's lands. The question is: Is it too little too late? Will Labradorians be emboldened by their new economic successes? Will they tire of St.John's old refrain that we are one province, yet the benefits of their toil seem to go in one direction? Will they grow closer to Quebec, and its new "Plan for the North"? Will they want to go it alone and be masters of their own house? Hard to say, but one thing is certain - Labrador as the second solitude will be wanting its resources to enrich Labradorians. That is a future certainty. Labrador is the alienated solitude.

Of course that leaves St. John's - the last solitude. The great bastion of power, wealth and influence in the province. The cultural centre. The economic centre. The political capital. It has been in the past, and continues to be, all of these things. The decisions of its backrooms, and prominent families have always directly affected the other two solitudes. It encompasses the classical Newfoundland relationship of "merchants and fishers". It takes and it gives as it sees fit. It directs the exploitation of the province's resources and it directs the many cycles of resettlement - past and current.

Its concern is for power. It often makes critical decisions with short-term gain at the expense of long-term gain. Whether it be the premature exportation of salt fish to the Americas, which destroyed Newfoundland's reputation as a quality fish exporter. Whether it be the Upper Churchill deal rushed into so Brinco could avoid bankruptcy. Whether it be the current Muskrat Falls agreement that despite all common sense is being rushed through the corridors of power. Whether it be the frittering of one time oil revenues at a time of massive debt. No heritage fund. No major debt retirement or even a plan to eliminate it. The only significant debt elimination that has occurred in the province was the $2 billion Danny Williams received from the federal government in offset payments. The kicker here is that the government had to apply the $2 billion to debt as part of the agreement, so they put it toward unfunded pension liabilities.

Yet despite its current oil wealth, St. John's continues to pry every cent out of the federal government that it can. Perhaps old habits die hard. Perhaps the precedent was set when Ottawa paid out Newfoundland's debt as part of the agreement to join Confederation. Whatever the reason, St. John's has historically attempted to spend at will and have others cover its expenses. St. John's has always taken care of itself before it looked at the needs of the other two solitudes. That trend continues to this day. Look past the rhetoric of "all for one and one for all". Look where the dollars are spent. Look where the government facilities are. The health facilities. The legal facilities.

St. John's has always been the centre of power - unapologetically so. It sees itself as the centre of Newfoundland and Labrador's universe. It has ensured, by fiscal policy, that as the population retreats in the rest of the province that it will be the centre of the population remaining. It has thereby ensured that the majority of political seats in the House of Assembly will be in its geographical area. Just as it builds hockey rinks in its new suburbs while 258 boil water orders become permanent in nature in the rest of the province, it takes care of its own first. The old "overpass" slogan arises. Before there was an overpass it was "Townie vs Bayman". Another is "Merchant vs Fisher". For all these reasons, historical and current, St. John's is the selfish solitude.

There you have it: the tragic solitude; the alienated solitude; and the selfish solitude. This is Newfoundland and Labrador today, and yesterday. This is not Canada's "Newest and Coolest" province. This is the latest chapter in a story that remains the same.

Reading the tea leaves in Newfoundland and Labrador

It's the kind of morning where you don't know whether to laugh or cry. On the one hand, this province essentially rejected the Harper government and Ms Dunderdale's exercise of "influence". On the other hand, we have a majority federal government that was rejected by 60% of the electorate and essentially is without representation from the two most nationalistic provinces in the country. I am pleased at the election of Judy Foote, our local Liberal MP, but concerned that the federal Liberal Party lies on the rocks.

The biggest political story from our province had to be the failure of the Dunderdale PCs to influence the vote. In fact, going over the numbers from 2008 and today's, the federal Liberal vote was essentially untouched. The Conservatives did increase their vote, but not at a significant cost to the Liberals. Case in point, the Random-Burin-St. Georges riding. The Liberal vote remained virtually the same - in fact it increased by 400. The Conservative vote almost doubled, but not at the expense of any other Party. The NDP vote essentially remained the same. So the bottom line is a vote representing 18% of the overall vote came out to vote, whereas in 2008 it stayed home. Essentially, that analysis happened throughout most of the Province. St. John's Mount Pearl saw 20% of the Liberal vote bleed to the NDP candidate Ryan Cleary - an exception to the overall trend. In Labrador, the Liberal candidate lost 26% of his vote, but the Conservative candidate benifitted from 2100 votes that did not show up to vote in 2008.

Looking toward the future I see conflict. The Harper Conservatives are, after all, a marriage of the western Reform movement and the Harris Conservatives of Ontario. The Progressive element of the old Party is either gone or marginalized. We now have a dangerous combination of an idealog in the drivers seat, and an extremely polarized electorate. Then add to that the two most nationalistic provinces in Canada rejected that government. Then focus on the silent iceberg laying in wait - the renegotiation of our equalization formulas in 2012-2013. Despite all the talk of gun registries, etc., the real fights happen over dollars and cents. Quebec will be angling for taking more, the west will be angling for giving less, and so it goes. Again, the danger is the two most nationalistic provinces are essentially not in the government federally, so their provincial governments will come more to the fore. In our case that is the Dunderdale government. The thought "lambs to the slaughter" comes to mind. In Quebec's case it will mean the Parti Quebecois - a separatist Party that is more or less guaranteed to win the next provincial election there. It should have been a major point of anxiety for everyone to envision a right wing Harper majority negotiating with a left wing, separatist Party in Quebec. Apparently, that thought did not factor into the Ontario thinking process.

It's odd that Ontario did not play it's traditional role as a bridge for Quebec to the rest of the country. Instead it threw it's lot in with the old Reform Party crowd. Is that an act of self-preservation on their part? Is that Ontario's way of choosing sides so it won't rattle the goose that laid the golden egg - Fort MacMurray? With massive provincial debt crippling Quebec and Ontario, and costs going through the roof, did Ontario decide their collective interest lay with the boys from the West? Sounds like it to me. Again, a dangerous shift for the unity of the country. Don't get me wrong. The folks out West are Canadians like the rest of us. The problem is when the historical, internal, political culture and national rhythms fracture so goes the ties that bind. This is the real danger of last night's vote. I see us sleep walking toward that conflict - eyes wide shut.

One last thought. If an NDPer had to win last night, Ryan Cleary is a man who will stand and fight for Newfoundland and Labrador. I wonder though, speaking of the two most nationalistic provinces, how a man so passionate and sincere about this Province will fare in a caucus dominated by soft nationalistic MPs from Quebec? It may well be a litmus test to my theory of this oncoming national divide.

The Obvious Result of Harper's Gamble

CBC story today outlining how Ontario now demands equal treatment for it's hydro projects. I am projecting a further and much larger demand from Quebec. They will likely seek financing guarantees, or cash in lieu for the Romaine dams times four, and all the other projects they have on the go. Knowing Quebec, they may even try for retroactive compensation for projects they've built in the past. This is what happens when a Prime Minister acts irresponsibly for the sake of seats. He, above any other person in government, must not be irresponsible with power. Check out my previous post, How to Lose a National Election 101.



McGuinty demands 'equal treatment' from Ottawa


CBC News Posted: Apr 4, 2011 1:13 PM

Ontario Premier Dalton McGuinty has waded into the federal election campaign after demanding that Ottawa subsidize the province's massive electricity infrastructure upgrade
McGuinty's comments come after the Conservatives promised last week to guarantee a $4.2-billion dollar loan for the massive Lower Churchill hydroelectric project in Labrador.
McGuinty said the federal parties need to treat Ontario fairly because he says 40 per cent of federal tax dollars come from Ontario.

"So when Prime Minister Harper pledges specific aid to another part of Canada for a specific multi-billion project, 40 per cent of that money is coming from Ontarians," McGuinty told reporters Monday. "When it comes to support from the federal government for energy projects, Ontario is looking for equal treatment."
McGuinty's comments come three days after Quebec Premier Jean Charest slammed the Conservatives for the pledge, which he considers electioneering.

Ontario is implementing a 20-year $87-billion to upgrade its energy infrastructure. That includes $33 billion in investments by government and the private sector to build two new nuclear reactors at Darlington and to refurbish 10 older units.McGuinty didn't put a dollar figure on what he wants from Ottawa, but says he'll be putting the issue to all the federal leaders.He said Ottawa has been pretty good at supporting the oil and gas sector in western Canada too, so he wants to see Ontario get its fair share.

How to Lose a National Election 101

There are often many opinions on how to win an election, but very few on how to lose one. One hour ago I watched Steven Harper stand in Newfoundland and Labrador and state that his government would give the province a loan guarantee, or financial equivalent thereof, for the Lower Churchill project. Assuming it met three criteria: environmentally sound; economically viable; and in the national interest. He sort of insinuated it met all three criteria, but he never came out and stated it did.

What troubled me even further were his comments some four hours earlier in Halifax:  "The details still have to be worked out," said Harper, speaking in Halifax Thursday morning. "There is a lot of discussion still to come, but it is obviously an important project." In other words, there is no deal. There is a political interest in making a deal, but there is no deal. There is not even a written agreement. There is not even an agreement that it would be a loan guarantee or equivalent financial assistance. Consider for a moment that a loan guarantee does not physically cost the federal government a cent. Why then would he give equivalent financial assistance that presumably would cost real dollars? What is the definition of equivalent financial assistance?

This announcement of course was closely orchestrated for the purposes of gaining seats in this province. The ultimate goal being to secure a majority government. Here's the kicker. In doing so he set Quebec on fire. He gave the Bloc the best present they could ever wish for. A direct assault on their nationalistic hydro empire. The words had hardly left his lips and Charest and Duceppe were in the public screaming betrayal. Same goes for the hockey arena - except this is much worse. Most Quebecers didn't need a reason to hate Harper, and now they have a big one: aiding the mortal hydro enemy Newfoundland and Labrador. Conservative spinners came out immediately and spun the benefits of the Old Harry deal for Quebec. Problem is oil is not near and dear to Quebecer's hearts. They like the idea of dollars, but it goes against their "eco core values".

So now Quebec is on fire. Ontario next door gets concerned that Quebec is becoming unstable, and starts to take a long look at Steven Harper's ability to keep the country in relative harmony. They already have very difficult financial circumstances, and a large immigrant population all too familiar with instability. Ontario is traditionally the bridge between Quebec and the rest of the country. They look at Harper as unable to keep the balance in confederation. The West doesn't mind Quebec being on fire, and so it likely firms that base up - except British Columbia, BC already in play, splinters. That takes us back to Newfoundland and Labrador.

Home of the ABC campaign, and mostly proud of it. Many people here think Danny Williams did not create the ABC feeling. On the contrary, many believe he was a smart politician that got in front of the parade. The real ABC in this province is within the people. There are many historical grievances Newfoundland and Labrador has with the federal government, and the government of Quebec. The feelings run deep. When Steven Harper went back on his written commitment to exclude non-renewable resources from equalization the province was enraged. The betrayal went deep. Now the same prime minister is here again. Waving another big promise. This time the provincial Tory party is on his side. Unfortunately for the PM, the new premier is unable to deliver the people. They still aren't over the last, big broken promise. A recent VOCM poll showed almost 60% of the 14,000 who voted said it was a mistake for Ms Dunderdale to have warmer relations with the PM. Earlier in the day it was 79% out of 4,500 votes.

Now figure in Old Harry - the disputed oil field. While the feds siding with Quebec on boundaries made very little impact in Quebec (as they never doubted their entitlement), it did have a large and growing negative impact in this province. It is becoming common to hear people refer to a new betrayal - Quebec got our oil, and all we got was a loan guarantee on a project that will lose us money. No doubt the debate will heat up here over the next few weeks, but Newfoundland and Labrador is no where near a given for the Conservatives.

The really humorous part of today's announcement was listening to Mr Harper expound on the evils of the tax and spend Liberals (or Coaltion). I'm not sure if he did not realize that during his speech he promised to support similar mega projects throughout the country? The Lower Churchill project reflects a minimum of a 50% increase in our debt. Can Quebec, Ontario, and all the other provinces now build monolithic "green" projects with our federal government backing all of them? How is that being fiscally prudent when reducing debt and eliminating the deficit are the stated goals of the government? Quebec alone would be entitled to about $100 billion in guarantees. Could they use this for their Romaine dam projects? Slippery slope, and extremely dangerous precedent.

Tonight the Prime Minister lit a fire. Not in the hearts of Newfoundlanders and Labradorians - they don't believe him. No he lit a fire in Quebec. He doused his own flame in Ontario. He placed himself in the position of a politician who will say anything to keep power. Of course, that is apparently the reason used to fire his government for contempt of parliament.

The Quebec Off Shore Accord - A Study in Betrayal

Mark the 24th day of March, 2011 on your calender as a day of betrayal. A day where political expediency trumped a people's aspirations. Many will say this is not something new, but this particular betrayal goes beyond even the Upper Churchill. Officially known as the Accord between the Government of Canada
and the Government of Quebec for the shared management of petroleum resources in the Gulf of St.Lawrence, this political document subordinates the rights of Newfoundland and Labrador to those of Quebec. You can find the complete document at http://www.cnlopb.nl.ca/pdfs/guidelines/aa_mou.pdf
To begin with it is a political document. It does not contain a fraction of the detail of the Atlantic Accord signed by the governments of Canada and Newfoundland and Labrador. The only areas that it does give substantial details of are those pertaining to the description of what area constitutes Quebec's offshore area, and issues dealing with Quebec's constitutional issues. It completely ignores the previous Atlantic Accord guarding this Province's offshore rights. A clause in the Atlantic Accord describes our protection and rights:

Precedence over other Acts of Parliament


4. In case of any inconsistency or conflict between
(a) this Act or any regulations made thereunder, and
(b) any other Act of Parliament that applies to the offshore area or any regulations made under that Act, except the Labrador Inuit Land Claims Agreement Act,
this Act and the regulations made thereunder take precedence.

The key words being: "this Act shall take precedence". Consider then that the description of Quebec's offshore area is identical to that of the 1964 Stanfield Line. A line that Quebec refuses to let go of, and a line that both the federal government and the government of this province have refused to recognize. A line that the Arbitration Board concerning Nova Scotia and Newfoundland and Labrador, 2001 completely refuted:

7. The Tribunal’s Conclusions
7.1 In the Tribunal’s view, the documentary record looked at as a whole does not disclose
the existence of an agreement resolving the offshore boundaries of Newfoundland and
Labrador and Nova Scotia, within the meaning of the Terms of Reference. This is true
whether the criterion be taken to be the international law of agreements or Canadian
public law. In particular, the Tribunal concludes that the Parties at no stage reached
a definitive agreement resolving their offshore boundary, in the sense explained in
paragraph 3.30 above.

You can find the entire decision at http://www.nr.gov.nl.ca/mines&en/publications/offshore/dispute/decision.pdf

It's decision to refute those supposed boundaries resulted in the establishment of the current maritime borders between this Province and Nova Scotia. A legal finding, by an independent arbitration board, that has been recognized by the federal government. Except apparently when it comes to Quebec.

The federal government and Quebec try to be cute by not referring to the boundaries as the 1964 Stanfield line in the Accord - although they are identical. Yet the Premier of Quebec and Ms Normandeau refer publicly to the fact that it represents Quebec's long standing demand that the 1964 border be recognized.

The problem for the federal government is that Newfoundland and Labrador's offshore jurisdiction had already been decided:

"68. The area covered by this Accord is that area below the low water mark lying off the coast of

Newfoundland and Labrador out to the outer edge of the continental margin, coming within
Canada's jurisdiction being north and east and south of the appropriate lines of demarcation
between Newfoundland, the adjacent provinces, and the Northwest Territories."

In other words, our maritime border with Quebec was not defined. It was left undefined presumably due to our border dispute with Quebec, which on the face of it makes sense. However, this Quebec Accord fully details Quebec's maritime border with us. So the federal government, the so-called neutral party, has agreed to Quebec's offshore definition of it's boundaries, but refused to do the same with this province. The federal government has sided with Quebec against the interests of the people of Newfoundland and Labrador - betrayal. Keeping in mind that no Act shall contravene our Accord, how is it that the federal government can agree to infringe on this Province's offshore jurisdiction?

How is it that Quebec's Accord allows it to be the equal of the federal government on it's Offshore Petroleum Board, with equal seats, but ours is not so? Why is it that several sections of the Quebec Accord refer to protecting Quebec's constitutional position despite any findings of the arbitration board. In other words, even if an arbitration board were to find a different maritime border that went against Quebec's view of things, Quebec would not be forced to recognize them past petroleum exploration. Why is the federal government agreeing to this despite the possible future repercussions on this Province and the country?

Then there is the title of the agreement: Accord between the Government of Canada

and the Government of Quebec for the shared management of petroleum resources in the Gulf of St.Lawrence. The key words being "for the shared management of petroleum resources in the Gulf of St. Lawrence". Our own agreement makes no mention of a particular geographical area. It refers only to the "offshore". Why is it that the Quebec Accord refers to the entire Gulf of St. Lawrence? The obvious inference is that the federal government recognizes Quebec's claim to the Gulf of St. Lawrence.

As mentioned earlier, this Quebec Accord is a political document. Crafted to meet Quebec's constitutional and jurisdictional demands. Written to ignore the long standing position of Newfoundland and Labrador. Allowing a discussion, mediation, arbitration process that can be dragged out for years if not decades. That wouldn't be bad necessarily except the federal government already established Quebec's preferred boundaries for them. It is possible that Quebec can drill and extract oil/gas from the Gulf for decades, receive all those revenues, and then be found not to have those boundaries by arbitration, but by then it will be too late and will have cost this province billions. This is a document designed for Quebec - not Newfoundland and Labrador.

Despite all these obvious problems our provincial government is almost completely silent. Ms Dunderdale says she is happy there will be an arbitration process, but not a word on how long this can be dragged out before we go to arbitration. Not a word on the fact that the arbitration processes are different in the two documents, and not a word on how our accord takes precedence according to the Atlantic Accord. She is too quiet. Is our own provincial government involved with this treachery? Their silence and lack of fight seems to suggest yes. Unfortunately, it may take a long time to expose this, and by that time we may have lost a great deal of wealth. Is this why Danny William's is so upset? We may not know how deep it goes at this moment, but we can rest assured that our own federal government has betrayed us in a way that is historically unprecedented.

Thank-you Mr Prime Minister

Reacting after the fact has been our political history in this Province, until Danny Williams that is. We often approached national and provincial issues in a defensive way, and assumed good will amongst our fellow man. However, this is not the Law of the Jungle, as it were, in the political realm. In this realm you must fully focus on your objective, believe in your cause, and be prepared to fight it until the end.

Recently I wrote a blog questioning why our federal MP's were NOT standing up for Newfoundland and Labrador's interest in the Gulf of St Lawrence, and in particularily the Old Harry sub-sea oil /gas field. It is with regret that I inform you that not a single MP, all Newfoundlanders and Labradorians, has spoken publicly on the issue or even bothered to return my email to them.

Give credit where credit is due. Prime Minister Harper's office answered the call. I would expect Minister Paradis would now follow through and ensure the border dispute is settled prior to granting Quebec an offshore petroleum agreement of any sort. If this occurs, it is a signal to the people of Newfoundland and Labrador that the right decision will be made, despite political cost, and that their interests are being defended - rightly in this case. It is that kind of governance that could result in the transformation of a minority government to a majority.

The following is a copy of my Email and the PMO's response:

December 15, 2010 8pm EST

Dear Mr Harper,


I am writing to you today in regard to the Province of Quebec`s ambition to
attain an offshore petroleum board agreement with the federal government. It
is of great concern to me, as I know it will be to my fellow Newfoundlanders
and Labradorians, that the Province of Quebec is seeking to attain such an
agreement without first successfully negotiating administration lines with
our province for the demarcation of exploration rights in the Gulf of St
Lawrence.

Quebec Natural Resources Minister Natalie Normandeau has publicly alluded to
a ``special understanding`` between herself and your Minister of Natural
Resources, Christian Paradis, as noted in an editorial of the Montreal
Gazette today. It concerns me deeply that Ms Normandeau has been making many
public remarks on this point. It also concerns me deeply that you have
stated, and in all places Newfoundland and Labrador, that a you see no
reason why an offshore agreement with Quebec cannot be reached.

Specifically, in the case of the Old Harry site, there are legitimate
questions as to whether Quebec has any right to explore there. The Magdalen
Islands, after all, are far removed from Quebec`s natural shoreline, and as
such could rightfully be relegated to a 22.5 km territorial sea, as was the
case with the French islands off Newfoundland`s coast. In any case, without
a maritime administration line agreement how can the federal government give
any credence to Quebec`s assertion that an agreement is possible.

I believe, as our Prime Minister, that it is your duty to also represent
Newfoundland and Labrador`s interests in this dispute. At a minimum, I
believe that Mr Paradis or yourself must publicly state that an agreement
with Newfoundland and Labrador is necessary before the federal government
and Quebec can enter into an offshore petroleum agreement.

Yours sincerely, Brad Cabana.

_______________________________


January 7, 2011 9pm EST

Dear Mr. Cabana:


On behalf of the Right Honourable Stephen Harper, I would like to thank you for your e-mail, in which you raised an issue which falls within the portfolio of the Honourable Christian Paradis, Minister of Natural Resources. The Prime Minister always appreciates receiving mail on subjects of importance to Canadians.

Please be assured that the statements you made have been carefully reviewed. I have taken the liberty of forwarding your e-mail to Minister Paradis, so that he too may be made aware of your comments. I am certain that the Minister will give your views every consideration.

P. Monteith
Executive Correspondence Officer
for the Prime Minister's Office
Agent de correspondance
de la haute direction
pour le Cabinet du Premier ministre

The Labrador Shuffle

The Labrador - Quebec border dispute has been resolved for 93 years. It was sent to the British Privy Council in 1927 by the then Dominion of Canada and the Colony of Newfoundland for binding arbitration. The dispute was initiated over logging rights between the two. In 1927 the Privy Council rendered the following decision:

... a line drawn due north from the eastern boundary of the bay or harbour of the Anse au Sablon as far as the fifty-second degree of north latitude, and from thence westward ... until it reaches the Romaine River, and then northward along the left or east bank of that river and its head waters to the source and from thence due northward to the crest of the watershed or height of land there, and from thence westward and northward along the crest of the watershed of the rivers flowing into the Atlantic Ocean until it reaches Cape Chidley.


The decision was clear enough, and is even added to Quebec's official road map, albeit in dotted lines and referred to in brackets as undetermined - see map below. In keeping with Quebec's major political commandment, "everything old is new - if we want it to be", she refuses to recognize this arbitrated decision. Instead, Quebec ignores the westward line of the 52nd degree of north latitude, and places that line much further north encompassing the head waters of the Romaine River - amongst others.
 
Quebec's strategic blind eye came into focus with the proposed construction of the four dam complex on the Romaine River by Hydro Quebec in 2008. The environmental agencies of the governments of Canada and Quebec conducted mandatory assessments of the impacts of the proposed dams. Yet, despite formal submissions and complaints by the government of Newfoundland and Labrador, the dams were given the go ahead - with conditions. Unfortunately, none of those conditions included recognizing the legitimate border of Newfoundland and Labrador. The government in St. John's was not even recognized by the Canadian government's own environmental agency as having jurisdiction over the area awarded in the 1927 decision.
 
This is unforgivable considering the wording of the Terms of Confederation between the Government of Canada and Newfoundland and Labrador, by which Newfoundland and Labrador agreed to enter into Canada:
 
TERMS OF UNION


UNION
1. On, from, and after the coming into force of these Terms (hereinafter referred to as the date of Union), Newfoundland shall form part of Canada and shall be a province thereof to be called and known as the Province of Newfoundland and Labrador.

2. The Province of Newfoundland and Labrador shall comprise the same territory as at the date of Union, that is to say, the island of Newfoundland and the islands adjacent thereto, the Coast of Labrador as delimited in the report delivered by the Judicial Committee of His Majesty's Privy Council on the first day of March, 1927, and approved by His Majesty in His Privy Council on the twenty-second day of March, 1927, and the islands adjacent to the said Coast of Labrador.


Not unlike the current federal government's refusal to force Quebec to negotiate a formal maritime border with this province prior to signing an offshore petroleum agreement, the Canadian Environmental Agency simply ignored Newfoundland and Labrador's constitutional rights. The reason - Quebec economic interests. The excuse - Quebec separation. Same as Old Harry is shaping up.

The only way to defeat the sacrificing of Newfoundland and Labrador is to be more determined and more creative than the collective will of Quebec City and Ottawa. It should not be the way it is in a country such as Canada, but it would be foolish to think otherwise. It is within our province's ability to successfully manage both challenges but, that aside, the Government of Canada must be reminded it is the national government and as such has the responsibility of applying the Constitution equally amongst it's citizens. To "cherry pick" the application of law is to invite deep discontent. A further question goes out to the Liberal and NDP members of the House of Commons representing Newfoundland and Labrador federally : Why are you not standing in the Commons and demanding that the federal government recognize the Terms of Confederation and thereby our proper border in Labrador? Why are you not standing in the House and demanding the federal government not grant an offshore petroleum board agreement with Quebec until the proper maritime borders are agreed to? The only federal representation coming from our Mp's seems to be MP Todd Russell who is surveying Labradorians as to whether or not they want the Lower Churchill project built - in seeming conflict with the provincial government here.

The unholy trinity of Quebec separatists, Quebec federalists, and the Federal government must be brought to the realization that Newfoundland and Labrador will not be pushed. Our previous Premier, Danny Williams, ferociously fought for that cause. To his undying credit he refused to let one undermining action go unchallenged as he likely knew all too well that to do so was to invite more of the same - at the cost of our province and her people. Our federal government needs to rediscover the fact that it is a national government, with national responsibilities, and national obligations. The first and foremost of those responsibilities is ensuring all Canadians are treated properly in accordance with their Constitution. To do otherwise is irresponsible, and places the future of the country in peril.


Government of Quebec Official Map - note their idea of the border and
maritime boundary. Actual Labrador border is the dotted line running east
and west on the 52nd.

Separation Quebec's Best Insurance Policy?

When it comes to negotiating with Quebec on topics like the Upper Churchill, maritime boundaries, Old Harry, or even the upcoming talks on equalization payments, you need to know who and what your dealing with. The common refrain throughout Canada is that Quebec likes to have it both ways. In this article by Kevin Dougherty of the Montreal Gazette you will see that played out in their own words.

It goes back to my blog - Poker Quebec Style. The gullible will be eaten by the politicians of Quebec. There are just too many examples of that happening to ignore it. It is not being anti-Quebec. It's just reality. Newfoundland and Labrador requires the vision and courage of conviction to battle this mentality, and prevail in order to look after the welfare of our people and province. What the Quebec politicians in this story are saying is that if you don't follow our will, then we will tear down your house. They will bank on the media to turn public opinion in their favour, because to do otherwise would be to risk the country.

It is a blackmail of the lowest order. We in Newfoundland and Labrador will not sacrifice our people or province any further on the alter of pacifying Quebec. We did not enter Confederation to become the economic colony of Quebec. It's time for the Quebec government to look for a new insurance policy.

Sovereignty threat is Quebec's 'best insurance policy': Drainville


By Kevin Dougherty, Gazette Quebec Bureau October 24, 2010 •Story•Photos ( 1 )


"The reason we have bargaining power in Ottawa with questions such as Old Harry is because they know they have to respect Quebecers," says Parti Québécois MNA Bernard Drainville. “Because Quebecers are masters of their decisions and might decide one day to be sovereign.”- Bernard Drainville, the Parti Québécois MNA for the South Shore riding of Marie-Victorin, says the prospect of Quebec sovereignty is “the best insurance policy” the province has ever had.

“Even non-sovereignists should not let it go,” Drainville said during a pause in a weekend meeting of the PQ to discuss Quebec’s energy independence. Just having a sovereignist party in Quebec bolsters even the federalist cause in the province, he added, “because it is their bargaining chip.” “The day that Mr. Legault or others drop sovereignty, not only do they drop the best collective project we could have, but they drop the best insurance policy we will ever have in Quebec.”


Drainville was referring to François Legault, the former PQ minister, who is rumoured to be creating a new party that would shelve the idea of another sovereignty referendum. Drainville is also his party’s spokesman on Old Harry, a huge hydrocarbon structure in the Gulf of St. Lawrence where drilling is allowed in the Newfoundland sector, but not in Quebec’s sector, pending federal approval. “The reason we have bargaining power in Ottawa with questions such as Old Harry is because they know they have to respect Quebecers,” he said. “Because Quebecers are masters of their decisions and might decide one day to be sovereign.”


Drainville told about 500 delegates and observers at the weekend meeting that Ottawa is delaying an agreement with Quebec to develop its undersea resources to keep the province dependent on equalization payments. “Is the federal government afraid Quebec will be too strong, too rich, too free?” Drainville asked PQ delegates at the end of his presentation on Old Harry.


Old Harry is 460 metres below the Gulf of St. Lawrence, with possibly as much as 2 billion barrels of oil. The formation straddles the disputed undersea border between Quebec and Newfoundland. PQ finance critic Nicolas Marceau estimated Old Harry is worth $160 billion to Quebec, enough to pay the accumulated provincial debt. Newfoundland and Labrador has had an agreement with Ottawa, which according the constitution owns offshore resources, for 25 years. That agreement allows Newfoundland to collect royalties on its undersea oil and natural gas.


Drainville noted Prime Minister Stephen Harper only said this week, after the National Assembly unanimously adopted a PQ resolution on Old Harry, that he favours a similar accord with Quebec.
Equalization is money paid by Ottawa to the poorer provinces, including Quebec. Newfoundland, because of its oil wealth, no longer receives equalization.


Drainville called equalization payments “compensation for damages” Quebec receives because Ottawa favours other provinces, such as Ontario and Alberta. “If we were independent, we wouldn’t have to go to Ottawa,” Drainville said. “If we pump our own oil, we don’t have to buy from others.”

I REST MY CASE.

In Case You Missed It

The government of Quebec is hard at it - trying to stop Newfoundland and Labrador from getting too much of the oil from Old Harry. The big question is how does the federal government enter into an offshore agreement with Quebec when the border dispute is unsettled? Can we expect another betrayal at the hands of our federal government? Is our provincial government going to stand up and let it be known we claim all of Old Harry in accordance with the Convention of the Seas - which our country has signed onto? There is absolutely NO time to waste in making our position clear. Or do we trust that our federal Natural Resources Minister, Christian Paradis, a Quebec MP, will negotiate with Ms. Normandeau taking into account our provinces' interests and claims. We must be on guard for a shady, and quick, back room deal here. The following news story came out today in the Montreal Gazette, but was not reported in any of our papers...

By Kevin Dougherty Gazette Quebec Bureau, Montreal Gazette December 15, 2010 5:02 PM
Quebec will ask the federal government for 100 per cent of the resource royalties from oil and natural gas developments in the Gulf of St. Lawrence, which could bring the province as much as $8.7 billion.

Natural Resources Minister Nathalie Normandeau emerged from a regular meeting of the Charest cabinet Wednesday to announce that the cabinet has given her a mandate to negotiate a royalty agreement with the federal government.


Several potential drilling sites have been identified in Quebec’s portion of the Gulf, but Normandeau admitted Quebec has been pushed to act by plans to start drilling on the Newfoundland and Labrador side of the disputed underwater boundary between the two provinces at a place called Old Harry.

Corridor Resources Inc. of Halifax wanted to drilled on Quebec’s side of the line, but cannot without an agreement between Quebec and Ottawa.


So Corridor will drill instead on the Newfoundland side.


Geologists estimate that there are about 2 billion barrels of oil in Quebec’s portion of Old Harry. But the deposit could also be natural gas or perhaps a salt dome.


“We want 100 per cent of the royalties,” Normandeau told reporters. “Our priority in the short term is Old Harry.”


The federal government, backed by a Supreme Court of Canada ruling, claims full ownership of Canada’s offshore resources. Quebec also claims full ownership of undersea gas and oil deposits.


Normandeau said reopening the constitution to resolve the dispute is a dead-end.


So, like Newfoundland and Nova Scotia, Quebec will seek an administrative agreement with Ottawa, which will leave the ownership issue unresolved.


Under the administrative agreements reached by the two Atlantic provinces, joint federal-provincial boards manage offshore hydrocarbons.


Normandeau said Quebec wants to collect all the royalties itself, without federal participation.


She said the fact Christian Paradis, a Quebec MP, now is the federal natural resources minister represents an opportunity to resolve the dispute.


“I would be totally irresponsible not to seize this opportunity,” the minister said.

Normandeau added that Paradis is expecting Quebec to make this offer and talks will take place at the “top level” between deputy ministers, but that she plans to get actively involved in the talks as well.

Why Old Harry Belongs to Newfoundland and Labrador

The "administration line" dividing Newfoundland and Labrador's maritime economic zone and Quebec's is in dispute. At the heart of the dispute is the Old Harry sub sea oil/natural gas formation - a 29 km long aquifer of  up to 2 billion barrels of oil and/or massive quantities of natural gas. The oil there is so plentiful that satellites pick up at least 6 natural oil leaks from the sea floor. Newfoundland and Labrador are already exploring it on the eastern side, but Quebec cannot start as it does not have an agreement with the federal government to proceed. One issue Quebec has is it's demand the federal government recognize it's sole jurisdiction to these waters - which the feds won't do. The other major problem is a lack of agreement over where the "administration line" is between the two provinces.

Quebec historically clings to the argument that an unofficial agreement in general between the Atlantic provinces and itself settled the boundary issue in 1964 - the so-called Stanfield Line. Newfoundland and Labrador has always challenged that boundary stating that not only was it general in terms, but that it was not ratified by an Act of Parliament as would be required under the Constitution. In actuality, the 1964 agreement was more an effort by the provinces to secure sub sea minerals (oil and gas) for themselves. The boundary issue was loosely agreed to in connection with this strategy. In 1967 the Supreme Court of Canada, in a constitutional reference on the matter, found that the seabed belonged to the federal government.

In 2001, Newfoundland and Labrador and the Province of Nova Scotia went to arbitration in order to establish the validity, or lack thereof, of the 1964 Stanfield Line agreement. The following is the finding of that group:                                            
                                                                AWARD
             For the forgoing reasons, the Tribunal unanimously determines that the line dividing the respective
             offshore areas of the Province of Newfoundland and Labrador and the Province of Nova Scotia
             has not been resolved by this agreement.
             Hon. Gerard La Forest
             Leonard Legault
             James Richard Crawford
In other words, there is no agreement upon which any maritime boundaries could be established or recognized.

The old 1964 agreement had an administration line that essentially brought Quebec's maritime border all the way from the mouth of the St Lawrence to 80 kms east of the Magdelen Islands - a massive 350 kms or so. Without such an extension to encompass a tiny set of islands Quebec's maritime boundary would not surpass 50 km east of Anticosti Island into the Gulf. In reality, the Magdelen Islands actually lie more in Nova Scotia's waters than they do in Quebec's. There have been legal precedents set for small islands lying off the waters of another's jurisdiction, and not conforming to the natural coast line of the host jurisdiction. One in particular case, St Pierre and Miquelon Islands (France), is a very good example.

St Pierre and Miquelon Islands are the last territorial remnants of France's once great empire in North America - located just south of Newfoundland. In fact they are so close they are located within Canada's Exclusive Economic Zone (EEZ). Canada and France had been squabbling for many years over the territorial waters that such an island deserved, and the effects on Canada's EEZ. In 1992 it was finally submitted for binding arbitration with three neutral international panelists, and one each from Canada and France. In a three to two decision, the two being Canada and France, the committee decided that France kept a 22.5 km territorial sea surrounding the islands and an additional 22.5 km contiguous zone. It was only 18% of the claim that France had made. The remainder of the territory was to remain Canada's EEZ, with the exception of a small corridor to the open seas. The committee used a straight forward interpretation of the Convention on the Law of the Sea, which Canada was a signatory to.

Based on this very close example, The Magdelen Islands would only have a very small "territorial sea" surrounding them, and not essentially the entire Gulf of the St Lawrence. Quebec's "administration line" or maritime boundary would then stretch in a line following it's mainland coast, but encompassing Anticosti Island. The result of this alignment is that Old Harry is not actually situated in Quebec's maritime economic zone. Far from it. The same territorial sea argument can likely be made for Anticosti Island as well.

According to the Constitution, boundary changes between provinces themselves must be agreed upon by those provinces involved and then sent to the federal government for ratification. The federal government can arbitrate, but only if requested to do so by the affected provinces. Without a settlement of the boundary issue Quebec cannot form a joint board with the federal government to oversee and grant licences for offshore exploration and development. It is highly doubtful that Newfoundland and Labrador would subject themselves to that process. Although, if they did, precedents seem to indicate that Quebec would lose and Old Harry would belong to Newfoundland and Labrador. However, should Quebec continue to cut it's nose off to spite it's face, Newfoundland and Labrador might as well develop the east side of Old Harry and, as they say, oil has no borders.

What should be:

The 1964 Stanfield Line:

Dec 6, 2010 news story that did not make the press. Wonder why?

QUEBEC - Danny Williams threw one last curveball at Ottawa before exiting politics by asking the federal government to help finance energy transmission from Newfoundland and Labrador's Lower Churchill project despite Quebec's long-standing opposition.

Enlarge Photo

Photo: JOE GIBBONS/The Telegram

Outgoing Newfoundland and Labrador Premier Danny Williams, left, speaks during a news conference announcing the $6.2-billion Lower Churchill deal. Others are Nova Scotia Premier Darrell Dexter, Chris Huskilson, chairman and CEO of Emera Inc, and Newfoundland and Labrador Natural Resources Minister Kathy Dunderdale. Photo: Joe Gibbons/Postmedia News

Whether Ottawa agrees to lend a helping hand, observers say it ought to carefully craft its response because it could trigger a fresh dispute between two old energy foes.
"If the feds buy into the Quebec argument, it will go down very badly, not just in Newfoundland but in all Atlantic Canada," said Donald Savoie, a leading economy expert at the Université de Moncton.
"This is a very divisive issue."
Quebec has opposed federal subsidies for the construction of transmission lines, including an underwater cable, for the joint $6.2-billion Newfoundland-Nova Scotia Lower Churchill hydro project, on the grounds federal help could distort the price and market for electricity.
Newfoundland and Nova Scotia have asked Ottawa for some $400 million in federal infrastructure funding to help with the cost of building the sub-sea cable from Newfoundland to Cape Breton.
Quebec Premier Jean Charest warned Ottawa any financial involvement in the construction of the transportation line would violate international trade agreements.
Meanwhile, Quebec's natural resources minister has said the province is looking at all its options to make sure Ottawa doesn't throw a penny into the project - and she didn't rule out legal avenues.
"We are putting all the necessary energy into this to tell the federal government: 'You simply won't finance the transmission line between Newfoundland and Nova Scotia.' We, too, are able to put our foot down," Nathalie Normandeau told reporters.
Jean-Thomas Bernard, a Laval University economist specializing in energy analysis, said Quebec could have grounds to sue the federal government if the financing leads Newfoundland - as laid out in the agreement with Nova Scotia - to sell power from Lower Churchill to the U.S. northeastern market.
"That would have an impact on the electricity markets," Bernard said.
Ottawa is trying to distance itself from the dispute. A spokesman for Finance Minister Jim Flaherty said the application for infrastructure money is being reviewed by PPP Canada, a Crown corporation that operates "in an objective, arm's-length manner."
The spokesman added the decision will be made on a "merit basis."
The Newfoundland government and Nalcor, its provincially owned power utility, declined to comment on the potential battle.
This is just the latest episode in a long-running energy battle between Quebec and Newfoundland. It all goes back to the controversial 1969 agreement that has allowed Quebec to reap windfalls by transmitting through its territory cheap power from the Upper Churchill hydro project, and selling it for large profits in North American markets.
Newfoundlanders still harbour a deep resentment against Quebec for this deal and the provincial government has tried for years to overturn that agreement. However the courts, including the Supreme Court, have sided with Quebec and declared the agreement between the two provinces valid.
To add to the division, both provinces also have a historic quarrel over Labrador's frontier.
When Williams, who left the premier's office last month, announced the deal with Nova Scotia with great fanfare on Nov. 18, he said this would put an end to Quebec's long dominance over the fate of Labrador power.
Like many observers, Savoie and Bernard feel the N.L.-N.S. agreement is still a long way from reality, notably because of the financial and technical challenges of building an underwater cable.
They both noted it would be in Quebec and Newfoundland's best economic interest to seek a deal to transmit power from the Lower Churchill project through Quebec's existing transmission grid to markets in Ontario and the United States.
"Quebec's best response would be to cut a deal with Newfoundland," Bernard said.
However, Savoie believes it might be too late for the two sides to reach an agreement.
"I think the relationship between both provinces is sealed," said Savoie.
He said it might be up to Ottawa to solve this long-running battle by forcing Quebec and Newfoundland to negotiate.
"I don't think Ottawa can sit idly by. I think in the interest of economic fairness, they should get involved and solve this dilemma in some way," he added.
However, ex-Parti Québécois minister and former Hydro-Québec executive Rita Dionne-Marsolais said it would be politically very difficult for both provinces to reach a deal considering how Newfoundland has used the Upper Churchill deal to attack Quebec.
"The popular pressure in Newfoundland is high and people feel they were swindled by Quebec. This prevents the two provinces from making a smart decision," she said. "I think no one is winning that

Understanding Old Harry

In 2008 Corridor Resources, an exploration company, agreed to give up it's permit to explore the "Quebec side" of Old Harry - a 29 km long undersea basin of oil and gas. In that same year it signed onto a five year exploration permit with Newfoundland and Labrador. Corridor is fully involved in the Quebec on shore oil and gas exploration, including the Anticosti Island project.

Things in the oil and gas industry have changed in Quebec in the last little while. Prior to 2003 Hydro Quebec was functioning in it's usual state sponsored role as controller of the resources - including oil and gas. The Parti Quebecois, Quebec's separatist political party, had placed the rights for drilling and exploration in Hydro Quebec's hands. The purpose was to know doubt develop Quebec's oil and gas industry in a monopolistic, and state controlled fashion - not unlike their role as purveyors of hydro power. However, with the election of the Liberals in 2003 that function was to change drastically.

Hydro Quebec's role in the oil and gas industry was rolled back. Small junior exploration companies, with a distinct Quebec accent took Hydro Quebec's place at the helm. Companies such as Gastem Inc., Junex, Petrolia Inc, and Questerre Energy Corp. Raymond Savoie, former Minister of Mines in the previous Liberal government founded Gastem. Sitting on that Board of Directors are people from the former Hydro Quebec oil and gas division to the legal representative to the Royal family of Luxembourg. Junex has the famous Andre Caille, retired head of Hydro Quebec, on it's Board. International players have also become involved as partners to these smaller entities: SCDM Energy (Bouygues Group France), Pilatus Energy(Switzerland), Sprott Asset Management(Toronto), Forest Oil(USA), and Talisman Energy(Canada). Bouygues Group is a massive international conglomerate that coincidentally built the James Bay Hydro Electric dam, among others, for Hydro Quebec.

The latest trend appears to be consolidation, and quasi-take overs of massive properties and their hidden treasures. In June, 2010, Petrolia Inc bought out the interests of Junex and Gastem in the Haldimand field, Gaspe region, Quebec. Don't feel bad for them though as Junex owns 9.4% of Petrolia. One month later Petrolia entered into an agreement to develop the property on a 50/50 basis with Investcan, a subsidiary of SCDM Energie France. SCDM Energie owns 18.6% of the massive Bouygues Group - a controlling interest. Coincidentally, Investcan also has oil and gas operations in Newfoundland and Labrador - three separate on land exploration projects - one in partnership with Newfoundland's own Nalcor.

In 2008, Petrolia bought out Hydro Quebec's interests in Anticosti Island, becoming an instant partner of Corridor Resources. And so it goes. The big one came when Gastem took over the exploration rights to Old Harry on "Quebec's side". Of course it can't do anything with it, because although the Quebec government agreed to give it the rights, it does not have the legal right to action those rights - without an offshore exploration agreement with the federal government - who owns the seabed and it's bounty.

Of course all levels of government know this as do the companies, but what it does do is position them should the time come when an agreement happens. The problem for Quebec is that before the federal government will enter into an offshore agreement Quebec must first negotiate a "maritime economic boundary" with Newfoundland and Labrador. The chances of that happening under current circumstances are worse than nil. If Quebec wants a snow balls chance in hell it must first renegotiate the Upper Churchill agreement - radically altering it's terms. The government of Quebec needs to decide whether a large financial loss to Hydro Quebec's bottom line is worth tapping into the massive Old Harry field. While it may sound akin to extortion it's just business - just as the Power Contract of 1969 was.

It may be a case of 'a bird in the hand is better than two in the bush.' However, waiting too long will likely result in Quebec being too late to join in on Old Harry's fabulous wealth. After all, Corridor Resources is already doing the exploratory work off Newfoundland. It already has an offshore agreement with the federal government. It already has most of the world's largest oil companies in play at it's other offshore sites. Quebec is at least five years behind the eight ball already. Rarely has Quebec been so caught off guard when it comes to this kind of business exploitation. Perhaps, just perhaps, Quebec better get to the negotiating table and repair the damages of the Upper Churchill contract. God guard thee Newfoundland.

Taking Back the Upper Churchill Falls Now

Hydro Quebec is our number one competitor now for hydro electric generation. They know it and so do we. With the announcement of the Lower Churchill development, and more importantly the sub-sea cable links, Newfoundland and Labrador are officially walking in Hydro Quebec's perceived turf. Hydro Quebec are the type of people who don't like to share their turf. Be that as it may, we are there. The question is: Do you allow the other crowd to survive fiscally or do you go for the jugular.

It seems that there are those in the province that are resigned to allowing the Power Contract of 1969 to expire naturally in 2041. I disagree. The economics of that issue can not be ignored for another thirty years. Some are suggesting that a large tax will be placed on the power delivered after the renewal term comes into force in 2016.  They argue the lost revenues can be made up while utilizing Hydro Quebec's transmission system. On the surface that sounds like a reasonable idea. However, it is not utilizing the economic dependancy that Hydro Quebec has developed on the Upper Churchill. In other words, it allows Hydro Quebec to continue on relatively strong until 2041 which is not in our long term interest as a competitor.

The proof is in the numbers. Hydro Quebec purchases power from the Upper Churchill for $0.0025425 cents per KWH until 2016. When the agreement automatically renews in 2016 the price will be $0.0020000 cents per KWH. Hard to believe, but yes, we will be receiving 20% less for the power until 2041. The cost of the profits lost by that reduction over the life of the contract, at today's rates and without inflation, will be between $71 billion and $95 billion. A staggering figure of lost revenue.

The real question is how important to Hydro Quebec is the Upper Churchill. Again it's in the numbers. You will hear many people, especially in Quebec, say Hydro Quebec has a surplus of power and is bringing on new power generation all the time. That while it's nice to have the 5428 MW of power from the Upper Churchill it's not the end of the world if they lose it. Those people base their assumptions on the quantity without looking at the profitability.

Hydro Quebec's average cost to produce power from it's many plants and dams is approximately $0.06 cents per KWH. That does not include transmisssion and distribution costs. They receive our power for $0.0025425 cents per KWH. Translation: It takes 25 James Bay Dams to equal 1 Upper Churchill Falls - profitability wise. Further translation: Hydro Quebec can not lose the Upper Churchill or all the profitability of their corporation will be lost. They will be forced to try and raise domestic Quebec rates to make up the difference, which in turn would be taxed back by the federal government in equalization transfers.

A larger problem would be debt sustainability. Most Hydro Quebec projects are built on 35 to 50 year projections of revenue and costs. All their financing, primarily through bonds, are based on those projections. The corporation's credit ratings are similarily affixed. In other words, the loss of profitability effects all the corporation's operations - nationally and internationally.

Conversely, NALCOR could strike at the heart of their chief competitor early in the game. Gain the upper hand on the long term battle, and be in position to compete on a much better fiscal footing. Strategically, it is as important to stop your competitor as it is to try and advance yourself. Hydro Quebec certainly understands this principle.

A Little History Lesson

Premier Jean Lesage, 1965:

"The primary and absolute condition is that all energy that will enter Quebec becomes property of Hydro Quebec. That condition ... has always been the same, and we will never negotiate from another basis. We will never permit, under any condition, others to build a transmission line on Quebec territory, or let others transport the energy produced at Churchill Falls whatever the destination of that energy, whether it be to the United States or the other provinces." Le Devoir, 1965.

"And they think Newfoundland and Labrador are being irrational and disruptive to the national fabric."
Brad Cabana, Rock Solid Politics, 2010.

Just a thought for today

Montreal Gazzette, 30 March, 2010 : Pauline Marois, Leader of the Opposition in Quebec: " Every time we raise hydro rates, it lowers transfer payments from Ottawa."
Montreal Gazzette, 19 November, 2010: Jean Charest, Premier of Quebec: " They (Newfoundland and Labrador) can ask for it (subsea cable subsidy), but they know Quebec is opposed to it because it would be an intervention in the market."
Montreal Gazzette, 19 November, 2010: Nathalie Normandeau, Minister of natural resources Quebec: "...has received assurance from federal minister Christian Paradis that Ottawa will not directly fund the construction of transmission lines."

coming soon - TAKING BACK THE UPPER CHURCHILL - NOW

Quebec INC vs Newfoundland and Labrador

Like their ancestors before them, the bedrock of Quebec's modern economic prowess pushes forward into the world to carve out their place. The push to overcome harsh environments, survival, linguistic challenges and a never ending need to prove themselves to the world may sound like the New France of old, but it equally reflects the corporate culture of modern Quebec. The need to master and conquer all before them. That leads us to today.
Power Corporation of Canada, Hydro Quebec, Casse de Depot et placement du Quebec, GDS Suez, Areva, Transcontinental Media, and so on. Massive corporations, operating on an international basis, and controlling more and more economies - strategically. They are also all French. They also all share members of their boards and often have a part ownership of each other with the exception of Hydro Quebec and the Casse which are controlled by the government of Quebec - although the government of Quebec is highly "influenced" in it's operation and makeup by these corporations. Total Oil of France, partially owned by Power Corp of Canada, will likely be a player in Quebec's offshore future - if it has one. It is already active in the Alberta oil sands - recently taking over a smaller Calgary competitor for a large ownership of a tar sands project. The Casse has taken over Hydro Quebec's Gas Metro, now Valener, freeing it of the costs of a gas industry in decline, and taxes. SNC Lavelin, another Quebec multi-national followed suit and sold it's shares this month to the Casse. Hydro Quebec, through it's subsidiary Hydro Quebec International, has bought controlling interest in distribution lines and power generating facilities in the US, Australia, South America, Panama, and China. Most recently, the day after Premier Danny Williams announced the Lower Churchill project, North East Utilities, the largest utility in New England (in the process of getting bigger by taking over NSTAR -Massachusetts largest utility) made formal application to build a massive transmission line from Windsor Quebec to New Hampshire. A message of sorts.
In the bigger picture, GDF Suez (France) is in the process of taking over International Power (Britain) with the assistance of an American corporation's 7% proxy vote. The new corporation will be easily the world's largest utility. Unfortunately, it will also be in a strategic partnership with Hydro Quebec - making an already monolithic Crown corporation even more monopolistic. The nimble, and seemingly well coordinated Quebec corporate class has shown itself to be world class players, and that must be recognized.
That brings us to the Lower Churchill deal. Newfoundland and Labrador, as represented by Premier Danny Williams, is bucking this trend. One could better describe it as a tidal wave. A brave stand by a brave man. A bravery that most people of the province don't fully understand, but should. Even though Danny is a wealthy man, his funds are coffee money for these other people. That is why Quebec scoffs at the government here and it's deal. However, that scoffing is superficial. A people that want to be the DeBeers of energy do not want any players in the market other than themselves. They cannot set the rate the market will pay if another is under selling them. If they cannot set the market then they cannot predict the serviceability of their debts. If their revenues decline, then their debt serviceability declines and their bonds get downgraded. If their bonds get degraded their debt servicing costs go up. Then the cycle keeps repeating itself to the point where the massive monolith collapses. Make no mistake, this is their main concern.
The problem for Newfoundland and Labrador, as illustrated by Hydro Quebec's alliances, is that it does not have a large enough strategic partner in this sector. It is not tied into the corporate circle if you will. The large oil corporations are willing to come in and develop the oil/gas resources, but have not been involved in developing the province's hydro power or it's distribution. Emera, Newfoundland and Labrador's strategic partner, is a small and publicly traded company. As such it would be an easy target for any one of Quebec's alliance to take over - hostile or otherwise. It would seem a logical move on Quebec's part to have any smaller power distributor, which agrees to do business with NALCOR, taken over by another larger friend. While Newfoundland and Labrador may have the resource, Quebec may have the friends to stop it's distribution rendering it useless. Do not be surprised to see a takeover attempt of Emera in the coming year or, even better for Quebec, after the deal is finalized. This is one of the reasons Hydro Quebec normally takes a controlling interest in it's distributors.
What Newfoundland and Labrador desperately needs is a very large friend in the jungle. An international corporation large enough to withstand the other alliance, and with access to the US market. An access that can be defended and guaranteed. Perhaps some of the oil corporations with large investments in the offshore might be a logical choice. After all, if you can learn one thing from studying Quebec's economic development, alliances are based on intertwined interests based in the province and projecting outwards.
Until then, I fear, Newfoundland and Labrador's government will be subjected to a covert, if not overt, campaign by those that wish to see Quebec's monopoly stay in place. By way of example, The Telegram has been assaulting the Premier, without balance in it's editorials. The Telegram is owned by the previously mentioned Transcontinental Media - Montreal. The Liberal Party of Newfoundland has recently signed on some major Conservative talent for it's public relations. The former Liberal premier of Newfoundland and Labrador, Roger Grimes, has suddenly come out of the woodwork to attack  Premier Williams. The aforementioned Power Corporation of Canada is publicly known to be the source of primary influence within the Liberal Party in Canada. Although, Jacques Parizeau's brother, and Bob Rae's brother have sat on it's board of directors. As does the Conservative's Don Mazinkowsky.
Then of course there is the CBC, with it's head office in Montreal, that has been at the forefront of attacks on the William's government on many fronts as of late.
In the end, Newfoundland and Labrador deserves to control and exploit it's resources without interference. The people here have suffered through the economic enslavement of the Upper Churchill contract for too long. If Quebec wants peace, and to carry on, perhaps it should recognize the imperialist approach taken toward Newfoundland and Labrador was a historical misjudgement. Perhaps they should re-open the Upper Churchill Falls contract and renegotiate the rate to at least a 50% share of the profits on that power. Such a gesture would go along way with the people here - and likely the Premier. After all, hydro is just one source of energy. This battle will rage through all parts of Newfoundland and Labrador's economy to the unnecessary detriment of many of Quebec's companies and interests. Perhaps Quebec should go to it's own perceived grievances and realize that we should "do unto others as you would have them done unto you."

Prime Minister Harper, It's Time

Mark this day, the 18th day of November, 2010 on your calender and heart. Today our Premier, Danny Williams, announced a deal to develop the Lower Churchill. It was also signed by the Premier of Nova Scotia, NALCOR energy of Newfoundland and Labrador, Emera Energy, and the Innu people's representatives. A deal that will establish a power plant at Muskrat Falls, Labrador with power lines and sub-sea cables ending at North Sydney, Nova Scotia. A hybrid of private enterprise and Crown corporations. A partnership between two, and likely three, Atlantic provinces. In short, the people who live here for the people who live here. As it should be.

This is not the massive octopus that is Hydro Quebec, GDF Suez, and Enbridge. Put in another way: the Quebec government, the French government, and natural gas. You see Hydro Quebec is not just a little power company minding it's own business in northern Quebec. In reality Hydro Quebec is a huge multi-national corporation, with strategic partners that are foreign to this country, and are involved in: electrical power, natural gas distribution, banking, telecommunications, and even small water companies. Despite being prohibited from operating outside Quebec by their founding charter, Hydro Quebec owns several American power companies. They get around this by owning holding companies such as Noverco, Meg Holdings, and the list goes on. They own American companies such as Bucksport Energy (Maine), Green Mountain Power (Vermont), and Vermont Gas Systems (Vermont) among others. In the same week as Hydro Quebec made an offer to purchase New Brunswick's power utlity GDF Suez purchased a Montreal electrical company that will supply all of Hydro Quebec's power transformers up to 100 MVA. Not to mention the 800 million dollar liquified gas plant near Quebec city that GDF Suez is planning on building.

No our little deal is nothing like that. We do not have a foreign country involved in our strategic alliance. What we need is OUR federal government to come in and do the right thing. This is where you come in Mr Harper.

We expect, and when I say we expect - I mean we expect, the federal government to satisfy it's national obligations to the Province of Newfoundland and Labrador. Those obligations are: to provide the requested funding to subsidize the construction of the sub-sea cable links as per the joint provincial request for said subsidies; to provide loan guarantees for the construction of the project; and last, but NOT least, complete it's obligations under the New Dawn Agreement between the Province of Newfoundland and Labrador and the Innu peoples of the province. This must be done without delay.

You may ask why should the federal government become involved, and why should it offer up the loan guarantees. Simple. This Province is owed atleast that. It has been living under a draconian agreement since 1969 that has taken 22 billion dollars from the economy thus far, and will take a further 75-90 billion dollars before it expires in 2041. The federal government, despite the usual separatist politics, should have stepped in years if not generations ago to right this wrong - but chose to turn a blind eye. Now the inevitable result of that policy is here. This current deal is the best case scenario for Canada now. Should the federal government not follow through, and do the right thing, I suspect Newfoundland and Labrador could be in the balance. There is such a feeling of treachery in the province that should the federal government side with Hydro Quebec (Quebec) on this issue the end result would be catastrophic and tragic.

Mr Harper, rise above the politics, rise above your connections, and do the right thing by the people of Newfoundland and Labrador. Do it now.

Poker Quebec Style

Throughout Canadian history the politics of Quebec have been a virtual theatre for the rest of the country. We watch the never ending charades play themselves out from decade to decade and generation to generation. It is almost like being at a perpetual state of war from the Orwellian 1984. Never is it satisfied. Never has just the right peace been achieved. Many in this country consider this type of politics to be deliberately designed to "milk the system" for all it's worth. Some say it is just a symptom of the underlying inferiority complex that seems to pervade most utterances from the government of Quebec. Yet others will argue, while not excluding the previous two points, that the government of Quebec is in a sense brainwashing it's people to believe they are constantly persecuted and wronged and therefore are entitled to separate for the good of all. In the west, some folks think it's a deliberate strategy to cause such resentment that not only would we not fight to keep Quebec, but that we would in fact be happy to see her go.

Some or all of these arguements may have an element of truth, but how do they manage it? How does the government of Quebec keep coming up with claims over this or that? What is the basis for their grievances?

Purely and simply - it's poker. They are the best political poker players in the country, and they are playing against people who for the most part don't want to offend them by calling their bluff. Often, it takes a Quebecer to call the bluff of the government of Quebec. A few instances: Prime Minister Trudeau invoking the War Measures Act and putting troops on the street in Quebec; and Prime Minister Chretien stating that if Canada can be divided then so can Quebec. That one got the separatists so riled up they proclaimed that Quebec's territory was sacred. This is the line of thought I wish to follow.

Is Quebec's territory really sacred? Based on what? While prior to the Conquest of "New France" in 1760 there was no Quebec. Quebec was formed by the British in 1763. The inhabitants were granted the use of their language and civil code. Those that did not want to accept British rule were given eighteen months to leave. That was the eternal birth of the Province of Quebec. A small strip of land running from Montreal to the large opening of the St Lawrence to the Atlantic. That was the "sacred" territory. Whatever other territory that may have had a French presence in New France was given to Britain, by France, with the exception of St Pierre and Miquelon - which remains a French possession to this day. So that part of the Treaty of Paris has been respected.

The Quebec Act of 1774 further enlarged the territory. However, losses of territory during the War of Independance and the creation of an Upper and Lower Canada again split the new territory - esentially in half. Again, the sacred territory of Quebec was decided by Britain and reduced and enlarged at will.
The modern growth of the territory of Quebec really happened in 1898 with the creation of the Quebec Boundaries Act, passed into legislation by the Parliament of Canada. A second edition of this Act was passed by Parliament in 1912. Modern day Quebec's "sacred territory" was therefore permitted by an Act of the Parliament of Canada. Remembering Prime Minister Chretien's comment on Quebec's divisibility, it is easy to see that should the Parliament of Canada decide to rescind the Quebec Boundaries Act, the entire portion of territory granted in that Act would revert back to the Crown - Government of Canada. Many argue that it is completely illegal for Quebec to separate in any case, but there is no question that a national Parliament can rescind it's own legislation.

The problem with telling a lie is that bigger and bigger lies become necessary to explain the first. To give it legitimacy. To make it historical. That brings us to another more present myth. The Old Harry oil field. Located some 80 kilometers from Quebec's Iles-de-la-Madeleine this 29 kilometre long oil/gas field is becoming central to a dispute over provincial maritime borders. Only one problem. There are no provincial maritime borders. There are no provincial maritime economic zones or maritime territorial waters. None. Another bluff by the government of Quebec. Another lie told to the people of Quebec by their government, and it's separatist opposition. The government of Quebec refuses to sign an accord with the federal government, as every other province must do, should they wish to explore for offshore oil and gas. It insists the federal government must recognize Quebec's sole jurisdiction to it's territorial waters. Of all the guff!

Then there is Quebec's arrogant assertion that it does not recognize Labrador as a part of the Province of Newfoundland and Labrador. Unfortunatley, for Quebec, that issue was legally settled. The dispute over Labrador was between the then countries of Canada and Newfoundland. Unable to reach a compromise they submitted the dispute to the Privy Council of Great Britain for arbitration, and in 1927 it was reaffirmed by that body that Labrador belonged to Newfoundland. When Newfoundland and Labrador entered Confederation in 1949 the Terms of Confederation recognized that territorial fact. Yet the government of Quebec continues to place Labrador as part of Quebec on it's website.

Here's were the poker comes in. The very nature of a bluff is that you have nothing in your hand, yet you want others to believe you do. Here's what happens with a bluff. Your opponent folds blindly, or he calls your bluff and you must eat humble pie and lay down your cards. Despite any purported agreement on maritime boundaries for the provinces between the Maritime provinces, Quebec, and the then Leader of the Official Opposion Mr. Stanfield (1964), no such agreement could exist without a constitutional amendment or an Act of Parliament at the least. Therefore, to say this group defined the boundaries, as Quebec argues, is akin to saying some folks got together at Tim Horton's and came up with the deal. It has no legal, or even logical basis in fact. The oceans belong to Ottawa from the low tide mark out. The Supreme Court decided it. Hey Quebec, wake up! Your bluff has been called. Newfoundland is exploring for natural gas and oil at Old Harry with the permission of the federal government. It is not sawing off it's nose to spite it's face. There are no sea borders for provinces. Deal with it or lose out altogether.

The same goes for Labrador. It was stripped from France before there was a "Quebec" by force of arms. It was granted to Newfoundland by Britain. It has been recognized by the British Privy Council, the Parliament of Canada, and the Government of Newfoundland and Labrador. There is no debate, and your recognition of the facts is not required. I suspect that should the time ever come that Quebec hopes to separate, and I hope it never does, that the Government of Canada will call your bluff too. Afterall, should they rescind the territorial expansion act, Newfoundland and Labrador might very well inherit all of current day northern Quebec, and all it's bounty therein. Did you hear that Mr. Ducceppe? Oh sorry I forgot you are in Europe promoting and getting the world ready for Quebec's separation.