The Stunned and the Gutless: Ms Dunderdale and Parson's Pond

Brace yourself. This is a true story - it just seems that nothing this stunned could be true. With minimal fanfare, and a short press release, Nalcor announced the purchase of a 67% working interest in the Parson's Pond oil and gas play from Leprechaun Resources Ltd. Leprechaun is a small resource company with it's head office in Calgary, and is controlled by John Maher - a native of Newfoundland. The deal called for a compensation of Leprechaun's equity in the project totalling $559,000.00. The provincial government further committed to reimburse Nalcor a total of $580,000.00 on completion of drilling. Curious that the government would be reimbursing it's own Crown corporation for a cost of business? Perhaps someone in the Crown corp wasn't happy about those funds coming from it's bank - the principle was added to for the purpose of payback.

That was the 7th of August, 2009. Kathy Dunderdale was Minister of Natural Resources. Ross Wiseman was Minister of Business. Charlene Johnson was Minister of the Environment. Our illustrious provincial government agreed to construct a 10.4 km access road to the site - presumably covering the cost. It had four partners in the play: Vulcan Minerals; Deer lake Oil & Gas; Leprechuan Resources Ltd., and Investcan Energy. Investcan Energy is an interesting partner considering they are owned by SCDM Energie,which in turn controlls 18.6% of the massive Bouygues Group - a controlling interest. The Bouygues Group built the James Bay hydro project, and Investcan controlls a great deal of the new natural gas industry in Quebec.

Despite the failure of a previous firm in 2004 to explore the property successfully, Nalcor and partners picked up the torch and on the 16th of February, 2010 the first well was spudded. By the week of the 26th of May, 2010 it had reached final depth of 3160 meters. Nalcor's press release of that week stated in part:

"The extent of flow characteristics and overall volumes of gas in place have yet to be
determined. The well will be suspended to allow for further analysis of the data and to
prepare testing plans. Next steps are the coordination and mobilization of necessary
testing equipment. Testing will be conducted during the summer months and further
information will be released following completion and analysis of the results.

Nalcor’s main operational objective was to gain information from this well which will
allow further insight and assessment of the petroleum potential of this area. “The
information obtained to date has already advanced our understanding of this basin,”
said Keating. “The geological and geophysical prognosis of formation depths and
stratigraphy anticipated from our pre-well analysis proved to be accurate.”

Essentially, Nalcor hit some gas, but a study of the economics of further development was required and a study of the results necessary. Nalcor goes on to state:

"Nalcor Energy – Oil and Gas is now preparing for the drilling of the second well of the

planned three well program. It is anticipated that the drilling of Nalcor et al Finnegan
will commence this summer."

In other words, we aren't waiting to see if this is a good place to drill. No, we are moving onto the next spot and drilling.
In September of 2010 Nalcor spudded it's second well at the site. Funny enough they got the same initial result - some natural gas and no oil to speak of. Their press statement in part stated:

"As with our first well in the area we encountered natural gas during drilling,” said Jim

Keating, Vice President Nalcor Energy Oil and Gas. “The well is currently suspended as
we review the data and determine next steps including a potential test plan.”
Nalcor is also about to commence testing on its first well, Seamus, which has been
suspended after reaching total drilling depth in May 2010. A test rig is on site and
testing will determine the extent of flow characteristics and overall volumes of natural
gas in place.

Nalcor’s main operational objective of this drilling program was to gain information
from this well which will allow further insight and assessment of the petroleum
potential of this area. Nalcor Energy is now preparing to drill the third well of the
planned three well program. It is anticipated that the drilling of Nalcor et al Darcy will
commence early in 2011."

Bottom line - did not take the proper amount of time to assess the first well before starting the second. Also, they were preparing to drill the third well without completing assessment of the second well. Something that doesn't happen when private sector money is deeply involved - as a rule. The result of all this interest purchasing, road building, environmental assessing, and public investment in drilling was a huge bust.

Nalcor's (read the taxpayers) initial share of the costs was $14 million dollars for 3 wells drilled. By the time Nalcor announced a premature end to drilling after the first two wells our responsibility is about $23 million. Almost double the original cost for all three wells. The reason: wells that were supposed to take only 50-55 days to drill instead took 100 days. Translation: it took twice as long as we thought to drill the wells.
A mind blowing loss to the taxpayers of at least $23 million. About three times the cost of moving the air ambulance service from St. Anthony's. About half the cost of the brand new hospital in Lab West - before it doubled to at least $90 million.

The government's response - a late Thursday press release from Nalcor stating an end to operations at Parson's Pond. A late enough release to try and kill the story over the weekend. Not one press release from the government or the Minister of Natural Resources Shawn Skinner. Minister Skinner was interviewed by NTV on Friday. His response: "Well we got unlucky on these two. It may take four, five, six attempts, but we'll get there. We thought it best to stop for now and have a look at things. Look how smart we are at administering your money. Aren't we on top of things. We are on your side." This is my summary of what he said, but you can check it out for yourself on NTV.

Ms Dunderdale, now Premier, then Minister of Natural Resources, had this to say: nothing... In any province in this country, or any state in the world this would be a scandal that would at a minimum bring down a minister. Here we get 'don't worry be happy'. Rural Newfoundland and Labrador continues to suffer from the inflation of the off shore boom, but receives none of the benefit. We lose proper access to health care, services for family and children, and so on. Yet, amongst the still evident wreckage of hurricane Igor we live while our provincial government throws the dice at $23-25 million at a time on wreckless less oil and gas plays. While the fishing industry, and all those families that depend on it, lies in suspended animation awaiting the illusive MOU, our PC government fritters away the bountiful inheritance on stunned resource gambles. Mr. Harper, if you are listening, see this example as a stark warning of the inability of this provincial government to make the right decisions for it's people, and do not grant any financial assistance for the Lower Churchill development. It simply is not fair to the people here.

Democracy, Censorship, and Spin

The one thing that can be said of the provincial PC Party in Newfoundland and Labrador is they love their spin. They are incredibly bad at it, but when it's the only game you have you go with it. In this Province it is the only game they have. The truth be damned should it in any way interfere with the game. Certainly these words must be hanging on a Confederation Building wall next to the "To hell with the rest of the country" sign. A really inspiring set of motto's to run a provincial government by.

We just finished up a darling of a by-election in Humber West. A west coast seat vacated by former Premier Danny Williams. The PC candidate won the seat with a healthy 63% of the popular vote (39% overall turn out). Low turnout always favours the incumbent government, and this was no different. There were some interesting facts that surfaced though. Most interesting I suppose was the no show by Ms Dunderdale on the night before polls closed. Every other party leader was out there -  not her. In her place was one retired Danny Williams. While you can't blame the PC's for trotting out the ex premier, and using him for his popularity, it does beg the question: Is Ms Dunderdale that big of a liability? It sort of fits with the use of her decade old picture on all governmental and party advertising. A Premier who is so illegitimate that her presence seems to emphasize the fact on it's own.

Another interesting result of the by-election was the drop in the PC Party's popular vote by almost 25%. Interesting in that it reflects a drift away from the PC's in a seat that is essentially safe for the governing party. If Danny William's old seat, tried and true, could lose 25% support what about the rest? Could it be the PCs have lost 25-30% support across the Province? Would that put them at say between 40-45% or less provincially? While Ms Dunderdale is harking on about their perfect plan to win Humber West is she really casting a weary eye to the Province as a whole? How much lower can it go? How large is the undecided?

Then we have the case of the Roger's family, and their tragic loss of their children. Despite massive media coverage of the issue the provincial government continues to deny these people access to their children. Bad enough to be sure. Now, believe it or not, the PC government is going to Court Thursday to have a media ban placed on the whole issue. In case you don't know, this issue has been in the media for at least 6 weeks, and now they want a ban. Of course the usual talk of protecting the children has been thrown out there, but this has been in the media for over a month. Can you say spin? What good could a media ban do now? There is only one possible answer to that - shut the media down. The government, in another blatant abuse of power, is trying to shut down our freedom of expression in the Courts. The reasoning is for the purely political death of this issue. Censorship of the media and the issues they discuss - pure and simple. Another line crossed - not many left.

George W Bush probably said it best: " Don't piss on my boots and tell me it's raining." The PC government in this Province has insulted the intelligence of all with it's ridiculous spins. Whether it is peekaboo Premiers, phantom principles, democracy of convenience, you name it they have done it. It's as if they think the people here live under rocks and are blind and stunned. It's as if they believe our collective backbone is measured in government payoffs and not in principle. I believe they are wrong. I believe in this place and it's people. I believe in our future together - spin that.

Absolute Power Corrupts Absolutely

“The provincial government has retained the services of local law firm Roebothan McKay Marshall …”
The last line of Tuesday's press release regarding our province's lawsuit against "Big Tobacco". Not a shock in itself. This firm after all is purportedly Newfoundland and Labrador's preeminent personal injury law firm. I suppose you could consider tobacco use as a personal injury. All in the name of redress against the great sins of the producers of the evil weed. Not those that sanction it's sale of course - that would be our government. Try to look past that one for now. Let's look at the pure and unadulterated greed behind it.

For those not in the know Roebothan McKay Marshall used to have another name in front of it - Williams. Yes, that's right, Williams as in former Premier Danny Williams. The same Williams that just left Office in this province leaving behind a leaderless and unprincipled crowd to rule. A crowd that owed their existence to him. A crowd that treats rules and regulations like steeples rather than road blocks. Certainly the recent Auditor General's Report is a classic example of this. Then there is my own experience with the shameless disregard by the Party of the Party's own constitution during the recent leadership non-race - I digress. The point is, as stated in my letter of resignation, this Party and Government has lost it's moral compass. It has abused power and, by the rules of the jungle, it must now lose power.

The conflict of interest in choosing this law firm is obvious. Danny Williams, with several other lawyers, founded this firm. He may or may not still have an interest in this firm - that is an unknown. What is incredibly obvious is that the government is in a gross violation of every common sense rule that applies to politics. Here's one: Justice must not just be done - it must be seen to be done (my version). The arrogance of this decision is apparent just on these grounds. However, it doesn't end there.

Further investigation by Russell Wangersky finds that it was not tendered. A lawsuit that has garnered hundreds of millions of dollars, if not billions, in other jurisdictions is not tendered. We could measure the possible value of such a contract if we new the fee, or more likely percentage, of this contract to William's old firm, except the government won't disclose it. Will not disclose it. It is not unheard of law firms taking on cases for 25 to 30 percent of awards - especially if they know it's a guaranteed win. If that were to be the case here we could lose hundreds of millions to this one law firm. Theoretical of course as the terms aren't being made public.

I often wondered about previous decisions by this government to make futile legal challenges on issues such as the Upper Churchill agreement. It seemed that the only possible winners could be the law firms that did the work. I suppose that is another issue - or is it?

Just to summarize, and wrap my mind around this scandal, a law firm founded by the former premier is awarded a contract of massive proportions less than two months after the former premier departs. The contract is awarded without tender. The government refuses to disclose how much the firm will benefit. All  because they are the best personal injury law firm in the Province...except for one thing: 
"They will be working closely with foreign legal consultants Humphrey, Farrington and McClain of Missouri who have expertise in dealing with tobacco companies.”Okay. So the American law firm are the experts in dealing with Tobacco companies, but we must still have "the best personal injury" firm in the Province involved. Apparently, this US firm was previously contracted for a 30 percent share in any suit against the tobacco companies by the previous Grimes administration. So what's changed? It sounds a lot like Mr Williams old practise of getting a cut on energy deals before allowing them to proceed with their business. Is it the case here that somebody wants a percentage of any deal - other than the American firm of course? Will the St. John's firm get a cut of the American's pie, or is that a further cut of what the people in the Province will receive? Right now we don't know for certain, because the boys and girls in Confederation Building feel we are not worthy of information about our own government.

Another first class reason to have an open and essentially unrestricted access to information law. Our press folks have been calling this government out on it, and it's easy to see why. After all, they are the ones who educate us - thank God somebody is. Frankly, the stench of dictatorship gone bad is wafting throughout the Province, and the antics would be laughable if it were not so painful.

Note to the provincial PC Party: I apologize.You never "lost your moral compass" - you destroyed it.

Mega Bust

It was with great fanfare, and a lot of provincial pride, that most people in this Province welcomed the Lower Churchill Development Agreement with Emera, and Nova Scotia. The largest "green" mega project in North America. A "nation building" exercise akin to the great national railway. An end run around the monopolistic clutches of Hydro Quebec. A rousing appeal on many levels. I was initially agreeable on all fronts.

However, the details started to come out. The first detail to really get my attention was the capacity of the sub-sea lines and stations. The Labrador-Island Transmission Link will cross the Strait of Belle Isle and have a capacity of 900 megawatts. The Maritime Link will run from Bottom Brook, near Stephenville and connect at Lingan, Nova Scotia. The sub-sea link will be approximately 180 kilometres long and will have a capacity of 500 megawatts. 900 MW to Newfoundland and 500 MW to Nova Scotia? Excuse me.

The sub-sea links from Labrador to Nova Scotia are completely inadequate to ever transmit the power from the Upper Churchill project to the Maritimes. The excavation and installation of such a massive sub sea link, and of course the cost, would logically require a much higher capacity line to qualify as an end run around Hydro Quebec. What would be the point of having your primary asset isolated by functionality from your main market if you intended to be a major player in the hydro electric business south of the border? Makes absolutely no sense from a corporate point of view. In a private corporation such vision would likely result in termination and laughter - not sure which would come first. There would certainly be a share holder revolt.

The "green" aspect is also questionable. There is a big debate going on in the US right now as to whether or not large hydro electric power projects qualify as new green power. Of course Hydro Quebec is fully invested in the propagation of this idea in Vermont and other key US states. The key reasoning is a large, matching US federal government grant to promote new green energy initiatives. In other words, the Mother of all Double-Dipping. Get paid for the power and get a nice bonus on top of that. Big money and big business. The real environmental impacts, especially in Labrador, are highly questionable. Including, but not limited to 41.5 km2 of flooded land. Some would say this is a much smaller flood impact than the Upper Churchill. However, I like the argument: We used to live in caves, but we don't do that either anymore.

The big clincher for me was the economic impact. I am not speaking of the positive benefits, because any expenditure of billions is going to create spin offs - long term and short term. No, I am speaking of debt. The killer of dreams and aspirations, the chains that bind us to futility, and the proven fatal curse of all civilizations. Newfoundland and Labrador's current debt hovers in the $11 billion mark - a massive amount for 500,000 souls. The interest payments on that debt alone take a sizable bite from the Province's annual budget as it is. Now imagine adding another 6 to 10 billion on top of that. Even with federal loan guarantees the interest paid on that debt over it's lifetime will double the cost to at least $20 billion. That would be almost suicidal enough if it were making money, but with massive surpluses already existing in the hydro market it becomes genocidal.

The bottom line is every dollar we ever hoped to get from oil would be paid in interest to foreign bond holders for a massive concrete block on the lower Churchill River. In 2016 we are going to lose another 20% of our revenue from the Upper Churchill in accordance with the automatic renewal clause of the 1969 Power Contract. Factor in an aging population. The end result is a financial quagmire of biblical proportions. The only way any financial group would even glance at this project is if the federal government would guarantee the loans, but should they?

The federal government needs to take a step back, shake it's collective head, and wake up. It should not even consider supporting this "project". If the provincial government is in collective lemming mode someone has to show reason. Corporately it makes no sense. Financially it makes no sense. Environmentally it makes limited sense. Perhaps we need to call a spade a spade. This whole project is simply a negotiating ace - and not a good one. The Provincial government holds out the Lower Churchill as a stick against Hydro Quebec. That may be warranted, but the stick has to be taken seriously. As the saying goes: "This dog don't hunt."
The federal government needs to come clean with the people of Newfoundland and Labrador and explain to them the ramifications of this project.

Personally, I was at first a big fan of the idea. If you love the Province, you have to pull for it on something this big. However, when the real details started coming out, if you love the Province you have to say no to this project. To do otherwise is to sentence the Province, and her people, to a destitution not yet seen in these lands.

Update: Chick Cholock strikes again II

Anonymous has left a new comment on your post "A SIGN OF THE TIMES":


Brad...do you even know where Humber West is??

I see you are fitting in with the Liberals by using these tactics. Just to let you know a majority of the people in the province do not like these tactics...hense the popularity of the Liberals.

Shows that you were never a PC to begin with!!

CHICK CHOLOCK STRIKES AGAIN

The following little nasty gram was sent from Chick Cholock's government IP address. Note to Chick, we have trackers on our blogs...

Anonymous has left a new comment on your post "A SIGN OF THE TIMES":
Brad...we will see how Democracy plays out in October. Thats how we do things in "OUR" province.
Lets see if those 73 people vote for you as a LIberal.

A SIGN OF THE TIMES

Press Release Jan 31 2011

31 January 2011


To: Newfoundland and Labrador Press

From: Brad Cabana

Subject: Court challenge of PC Leadership Process

Members of the Press Corps,


I wish to announce this day that I will not be proceeding with a court challenge of the PC Party’s position that I am ineligible to run for the leadership of the PC Party. As an active Conservative, for some 22 years, at both the federal and provincial levels, it is with a heavy heart that I make this decision. I support Newfoundland and Labrador’s right to secure its natural resources for the benefit of her people. I believed that Danny Williams had the best interests of the Province at heart when he fought for those rights. Unfortunately, it would appear that those he left behind are more concerned with controlling power than controlling our natural resources.

I was deeply shocked at the release of the Auditor General’s Report, and the gross violations of trust contained therein. Whether it be investments awarded in violation of requirements of the Department of Innovation, Trade and Rural Development, unauthorized access to personal databases, or breaches of government policy and the Teachers Pension Act in hiring pensioned teachers, all pointed toward arrogance and abuse of power.

Unfortunately, these events parallel too closely my own experience with the Party and its leadership race. Gross violations of the letter and spirit of the Party’s Constitution including: failure to call the date and place of the convention prior to the call for nominations which is constitutionally required, and necessitates an entry on the Candidate’s Form which in this case had to be left blank; failure to follow membership rules properly; failure of the Convention Co-Chair, Minister Skinner, to remain impartial through the process and refrain from public comment even during the appeal process; failure to release a copy of the taped deposition, given under oath without option, of the Appeal Committee meeting upon request and thus far ignored; failure to serve the written decision of the Appeal Committee to myself within the 72 hour period required in the Constitution; and failure of the Party Leader and President to uphold the Constitution, and it’s requirements, as is required in the Constitution.

Furthermore, the lack of Ministerial accountability by Mr. Wiseman, on the occasion of his senior staff member’s visit to my home. It defies all logic and respectable conduct that a Minister of the Crown would condone by his inaction the intimidation of any citizen. It defies explanation how that same Minister would speak publicly to some of the same points his staffer made and find nothing wrong with the approach, or at the very least find it highly inappropriate. It concerns me the Leader of the Party would not contact my wife or I to get further evidence on this situation despite the obvious inappropriateness of the actions.

These combined set of circumstances leaves me with no other option than to consider the Party’s leadership, and the government’s by association and action, out of touch with my moral and political beliefs. I further believe that the Party has caused itself immense damage with it’s approach, especially considering a delegate selection process and convention have been initiated regardless. I therefore resign my provincial party membership effective immediately. I will remain a federal Conservative.

Having given the matter serious thought and consideration, and in keeping with my commitment to make this Province the best of all provinces, I have decided to join the Liberal Party of Newfoundland and Labrador. It was a very difficult decision based on my life long affiliation federally and provincially with the PC Party. However, the provincial PC Party here has lost it’s moral compass, and as such it’s ability to govern in the best interests of the people of this province.

I do intend to seek a nomination for MHA in the next election. I will be proud to carry the colours of the provincial Liberal Party as it seeks to replace an old and tired government with a revitalized and focused administration, should I be chosen by the District Association.
Thank you for your emphasis on the democratic process, or the lack thereof, over the last few weeks. I remain concerned that our political leadership has crossed a line that should never be crossed, and our democracy has been violated. I for one will not have any part of it.

Yours Sincerely,
Brad Cabana, B.A

Newfoundland

Newfoundland, an island the waves try to destroy, but the rock won't allow it.

Newfoundland, a place where the company has always taken, and the people have always given.

Newfoundland, a people whose present is rooted in it's past, and it's past is rooted in the present.

John Crosbie, The Telegram, 17 January, 2011

On the provincial front, Crosbie was surprised at the lack of interest in the top Progressive Conservative job vacated when former premier Danny Williams dramatically quit politics last month.
“ This hasn’t happened too often,” said the former Tory warrior who proudly bears the scars of both federal and provincial leadership battles.
Just one potential contender — a small business owner with thin ties to the provincial party — arose to challenge Premier Kathy Dunderdale, hand-picked for the interim job by Williams. But the party rejected the legitimacy of Brad Cabana’s support among bona fide Tory members. He has appealed the decision.
“When I ran in the federal leadership (in 1983), our polling indicated I had the support of about three per cent of the delegates,” Crosbie recalled. “I said: ‘ Shag it. I don’t care if there’s three per cent. I’ll try it anyway.’
“Nothing would stop me running if there was a leadership.”
He finished a strong third behind Mulroney and Joe Clark.

http://thetelegram.newspaperdirect.com/epaper/viewer.aspx

Appeals and Democracy

'Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.'


Sir Winston Churchill, Hansard, November 11, 1947

British politician (1874 - 1965)

Wise words from a wise man who earned his knowledge through war and peace. Many times since those words were spoken have democracies been challenged, and in just as many cases she has prevailed. It is indeed a comment on our human nature - that we are less than perfect although we persist in the search of perfection. Those of us in Newfoundland and Labrador are getting our lesson in democracy, and it's rough edges, right now.
 
On the 24th of January, 2011, my son's 14th birthday, I will be presenting my appeal to the Rules Committee in St. John's of the Credentials Committee's decision to reject my candidacy for Leader of the PC Party. While there are many grounds submitted for the appeal, I believe the most important to be the unconstitutional interpretation of membership.
 
The Purpose, Aims, Objects section of the Constitution clearly states: ' i) to provide for democratic procedures and practices to effect the purpose, aims and objectives of the Party.' Two other parts of this section state: 'e) to elect a Leader of the Party; and (f) to provide for a nominating process for the selection of candidates for election as progressive Conservative members of the House of Assembly.' In other words,
democratic processes and practices must be used to elect the Leader, and nominate the candidates seeking to be MHAs. It does not speak of a dual status of membership. In fact, all memberships, and processes to get memberships, must be done in a democratic fashion. The basis for any definition of democracy is equality of the person. That despite your wealth and influence, or a lack of it, your vote shall have the same effect and influence as all others. There is no caste system in Canadian democracy.
 
It is an established fact that the District Association nomination meetings allow any interested resident of that area to vote for the candidate of their choice - with the proviso that they support the aims and principles of the Party. It is also an established fact that their membership is instantaneous upon their declaration of support, and that no other steps for membership are required.While this process may be considered open to manipulation, it is also the best guarantee of citizen influence on our democratic process. People simply are normally not that interested in politics, unfortunately, but should they feel their input is required, a process is in place to do that. It is a check on absolute power, and a wise process for any party that wants to stay in touch with the people. It also allows the Party to evolve politically as the people do.
 
If equality of the person is the foundation that democracy was built on, and if democratic procedures and practices must be followed in accordance with our Constitution, then the membership requirement for nominating leadership candidates must be the same as those requirements in place to nominate candidates for Members of the House of Assembly. To do otherwise would be a contravention of the aims and principles of the Party - an observance of which is necessary for membership.
 
As if to almost enforce this belief, the Candidate's Entitlement section of the Constitution states that a candidate is only entitled to a list of District Association members, ex-officio delegates, Executive members and the like once they have been accredited. The logical implication of this being that the signatures of endorsement by these people must not be required for nomination. If they were required it would constitute a violation of the principles and aims of the Party in that only people with extensive knowledge of the membership would be able to participate, thus ruling out any others - undemocratic in other words. It would be akin to not giving out voters lists until after the election.
 
There are clearly many contradictions in the Constitution. However, the one requirement, reinforced over and over again, is the necessity of recognizing the principles and aims. It is clearly the most dominant portion of the Constitution which all other sections are subordinate to. It is my belief that it was written that way to safeguard the democratic rights of the people of Newfoundland and Labrador - the membership at large.
 
de·moc·ra·cy   /dɪˈmɒkrəsi/ Show Spelled[dih-mok-ruh-see] Show IPA



–noun,plural-cies.


1.government by the people; a form of government in which the supreme power is vested in the people and exercised directly by them or by their elected agents under a free electoral system.


2.a state having such a form of government: The United States and Canada are democracies.


3.a state of society characterized by formal equality of rights and privileges.


4.political or social equality; democratic spirit.


5.the common people of a community as distinguished from any privileged class; the common people with respect to their political power.

Thank -you to all those people who have shown your support, whether in person or in action.
Brad Cabana

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

Leadership for Newfoundland and Labrador

Political leadership is the cornerstone of all societies. It can be used for the the good or the bad. It can take societies to the greatest heights or piles of rubble. We can view it in the warm comfort of hindsight, or see it up close in the chaotic financial meltdown of today. Either way, it surrounds us continuously. The big question is: What is political leadership and how can it work for us?

Leadership has many different components, depending on who is explaining it, but some of the main components are generally described as: Integrity; Energy; Self-belief; Vision; Decisiveness; Drive; Creativity; Communication; and Courage. I will add a modifier to vision - political foresight. Great leaders of recent history that we recognized as having these qualities include Winston Churchill, Martin Luther King, Gandhi, and so on. Great names associated with larger than life contributions. Many in this province would include our recent Premier Danny Williams as a great leader with the required qualities. It is easy to see by the small amount of names, compared to the great numbers of people, that these folks are extremely special and do not come around everyday.

Unfortunately, the problems do. In our case we have numerous historical and current problems that, as the saying goes, "keep on giving." The Upper and Lower Churchill, Old Harry oil, offshore drilling, boundary disputes, an aging population, a shrinking tax base, a large provincial debt, a destroyed fishing industry and the list could go on. A big part of leadership is knowing the past. Without knowing the past you cannot understand the future, and you are doomed to repeat the same mistakes. A good leader understands this, and uses those lessons to change the future for his people.

A good leader understands the roots of issues, and communicates those to his people. Together they take the journey, and together they finish it. A good leader understands that he is nothing without the people, and that their well-being is his mission. A good leader places himself last and the people first, at all times, and demands the same of those that work for and with him. A good leader makes sure justice is not just seen to be done, but is done.

In the Newfoundland and Labrador context it means changing historical wrongs, and setting new courses for the future. It means rewriting the Upper Churchill agreement, building the Lower Churchill, affixing maritime boundaries to exploit the Old Harry oil field, getting the best possible return for our resources, expanding our economy, building our infrastructure, increasing our population, eliminating our debt, breathing new life into our fishing industry, and fending off the wolves. Any leader of Newfoundland and Labrador can expect to be challenged from within and from without by those who seek their own self-interest, and could care less about the consequences for us. That has been a historical fact, and remains true to this day. Any leader of this province must therefore be reinforced with a powerful courage of conviction.

The next leader must be able to deal with Quebec and Ottawa, and withstand an incredible amount of pressure in order to successfully achieve this province's goals. That kind of leadership requires the ability to project yourself onto the national scene, and achieve a very divisive victory, without ripping the country apart in the process. The ability to fight in the trenches and in the end ... diplomacy. Our leadership in this respect has normally achieved one or the other of these qualities, but not normally both. It is absolutely critical to our future that this be handled properly. However, should it not be possible to do so, the leader must have the courage of conviction to look after this province's interests first. In other words, the quality of an extremely thick skin will be necessary.

Once it is all over, and the challenges have been met, the future direction of the province will take shape. Leadership will then be required to set priorities on spending in a post-debt era. What do we value the most? Is it a low tax, low debt, and minimal government society? Is it a high tax, low debt, government stimulated society? These are issues for the future, though not too distant future. They will require a leadership that is open to the cultural and societal needs of this province.

Perhaps the most elusive quality of leadership today is humbleness. We live in the "me, me, me" era. The ability to listen to people, to take your guidance from them when they wish to give it, is absolutely necessary. Many leaders fail to understand that while you can not please all the people all the time, you must at a minimum please the silent majority. Be humble, open your ears and mind and listen to them. They will not let you down - don't let them down.

**caveat: his = his/her

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