When Regimes Fall - NL Style

The last few months have born witness to the death throws of the PC govenment of Newfoundland and Labrador. In local terms: " the bottom's out of her b'ys." It began with the sudden, and unexplained departure of one Daniel E. Williams - as he likes to be referred to in legal wranglings. That was followed by the unprecedented fixing of the subsequent leadership non-race. Then there was one sorry blunder after another. The polling numbers steadily fell. The blunders continued. And so on.

The last few months however have signalled a whole new phase, and a steady decline into the absurd. A place so low, so dark, so desperate that it reminds me of other places and other actors. Different circumstances, and different geographies, but bare with me.

When a regime begins to fall, anywhere in the world, what is the first sign of panic? The first sign of desperate people clinging desperately hard to power? They turn inwards. They refuse to acknowledge the opposition around them. They become insular and isolated. They ignore the art of compromise and embrace their tools of power. Power has become their only reason and purpose. They crack down firstly on those that forment the desent. They try to isolate them, marginalize them, demonize them, and when all this fails, as it inevitably does to those that attempt to halt just progress, they turn inward. It could be Syria, Egypt, Yugoslavia, South Africa, East Germany - you get the idea.

It doesn't normally happen in democracies - although it has. Take the civil rights movement in the US as an example - although they eventually accepted the just change. Another, closer to home example, could be Quebec's "Silent Revolution". The point is, most democracies are governed by constitutions that restrain their governments from acting against the just democraltic rights their countries are founded upon. So what happens when a government, in the developed, democratic world does just that? We have such a case now in Newfoundland and Labrador.

Our Public Utilities Board was castigated, marginalized, and demonized by the government (and its supporters) when it refused to endorse the Muskrat Falls option. It was sent to the dog house with the Premier actually commenting publicly that she had lost confidence in it. An act so contemptous, so arbitrary, so cowardly that those of influence and common citizens alike, in any other province would have revolted. Yet, hardly a word is muttered about the outrageous treatment given the Board. It did result in a small compromise by the government though - an agreement to hold a special debate on Muskrat Falls and a study of natural gas alternatives. However, the government is guaranteed to win a debate where they hold the vast majority of the seats, and they chose a company to do the natural gas study that was already on the record as saying it was not feasible. So a compromise, but in name only. A compromise that was so obviously designed to appease rather than to address that it lost its relevance almost immediately.


Then came the moment. The all encompassing moment. Bill 29. An Act to ammend the Access to Information Act. In an almost suicidal move the government decided to be exceptionally democratic about an exceptionally undemocratic move. It held a four day filibuster in the House of Assembly to pass a law that essentially turned access of information into a ministerial perogative. The new law gave individual ministers the right to veto what ever they chose to from their ministry. The public revolted. Not in the streets, although some did, but rather in their hearts and minds. It was as if for once they saw the government as it actually was and not how the government had been portraying itself for some time. The opinion polling numbers for the government began to plummet almost immediately.

The government's response? A new policy that bans individual MHAs from advocating for their constituents directly to the government departments concerned. The new policy mandates that all MHAs must put their inquiries to a Minister's Executive Assistant, and that no other channel may be used. Essentially, they rendered every MHA obsolete - especially politically. In effect, complete power and control of a constitutional responsibility was taken away, and a fundamental pillar of democracy, the citizen's vote to elect their own representative in the House of Assembly, was severely weakened.

The end result of Bill 29, and the new policy on MHAs power to represent, is to transfer absolute power to the individual ministers in Cabinet. A now complete inward turn. A desperate, undemocratic, and flagrant move by men and women to deprive their own citizens of the rights they should have become acustomed to by now. A move reminiscent of the Senatorial days of the decaying Roman Empire. A move gently similar to the now deceased, or in the process of becoming so, Arab dictatorships and their secret and self-rewarding deals. Over the top comparisons you say? Dramatic and off topic? Reflect on the times, reflect on the signs, and see the truth that the government of Newfoundland and Labrador has become.

Are We Being Used Here?

It is fairly obvious to the dedicated observer of Newfoundland and Labrador politics that all is not well behind the scenes with the Muskrat Falls project.

Since it's inception, the Muskrat Falls project has been an enigma. Born to bypass the "Quebec stranglehold" on this province's export of power, yet only able to transmit a measly 500 MW of power on the Maritime Link. Heralded for being a green power revolution in the province, yet causing the amount of thermal energy in the province to actually increase. Meant to supply the ever increasing consumption of electricity to the Island, but the demand has actually decreased to 1992 levels - and the population is aging faster than any other on the continent. Promised to provide cheap, stable rates for the next 100 years, but easily the most expensive power to be produced in North America.

My questions about Muskrat Falls began with the capacity of the sub sea cable to Nova Scotia - 500 MW. It became immediately obvious that such a small cable was not capable of exporting any serious power into other markets, particularly given that Emera was given about 170 MW of that capacity for no charge as partial compensation for financing the link. I am not alone on this thinking. The CEO of Emera, in conversation with the US Consulate, had this to say:

In a section subtitled, "Are we being used here?", the author wrote that Emera was worried about being manipulated by Williams.
"The unknown factor, as Spurr explained, is N-L Premier Danny Williams. Spurr explained that N-L had been the victim of bad resource deals in the past which have left Williams very cautious if not suspicious in his business negotiations," the cable says.
"Given that legacy, Spurr remarked that he and his senior colleagues are equally cautious in dealing with the premier, with knowledge it makes more financial sense for N-L to do a deal with Quebec than with them," the author wrote.
"In fact, Spurr indicated he wouldn't be surprised if William ended up doing just that, and leaving Spurr and colleagues to speculate that Williams might be using them to exert more pressure on Quebec to offer a better deal for N-L."

So here we are, nine months after the original dead line for the Emera/Nalcor term sheet to be signed, and no deal. The question is: why not? There is also no formal loan guarantee in place despite federal commitments to do so. There are no completed environmental assessments for either the Maritime Link or the Island link between Newfoundland and Labrador. There is no word what so ever on the status of the $375 million requested from the 3P Canada Fund to subsidize the cost of the Maritime Link. Nothing.

What we do have is shuttle meetings every now and then between the premiers of Nova Scotia and this province. We get assurances that everything is fine, not to panic, and the hope that the Emera/Nalcor deal with be inked by November, 2012 - "hopefully" in Dunderdale's words. So what is going on?

Well, going back to that conversation between the Emera CEO and the US Consulate - "Are we being used here?" Good question. In my opinion, the answer to that question is yes, but not for the reason the CEO believed. The key requirement for Muskrat Falls to proceed is a federal loan guarantee. Without it there is no Muskrat Falls dam. Former Premier Williams had pursued such a guarantee from Prime Minister Harper since 2006. Finally, during the last federal election, Harper agreed to it - conditionally. The primary, central piece to the guarantee is a deal between Emera and Nalcor. Unfortunately, that agreement makes no business sense, and can not possibly earn the provincial government anything but massive losses.

Danny Williams was and remains a businessman. It is hard to believe he would enter into an agreement to export power at such massive losses. He was also a tactician, and often belligerent opponent of the federal government. What ever it took to get his way - including taking down the Canadian flags on all provincial buildings. Given his business sense, and his mercurial relationship with the federal government, and given a loan guarantee is necessary to do the Muskrat Falls project, I am left with the belief that Mr Williams' strategy was to use the Maritime Link to get the loan guarantee and then kill the deal, but still retain the guarantee.

With Emera out of the equation, the Newfoundland and Labrador government would be able to cancel both the Maritime link and the Island Link (which Emera is also slated to be partner in). That would leave a Muskrat Falls dam to provide power solely in Labrador - where all those mines are being developed. Unfortunately, for the PC government, it appears that strategy is back firing.

The federal government is now insisting it will not give the guarantee without the project being officially sanctioned. In order for the project to be officially sanctioned the Emera/Nalcor deal must be signed. Either Dunderdale, or Nova Scotia Premier Dexter appears to be having cold feet. On the one hand Dexter, whose popularity right now at home is about 27%, must provide the cheapest alternative power to his province. Despite the fact Nova Scotia Power is a private company (Emera subsidiary) its rate increases have caused calls for it to be nationalized by many quarters in that province. He has to deliver the cheapest possible deal or face political oblivion and unrest. To underscore the point, it has been reported by Jim Morgan on the radio show, VOCM Backtalk, that Emera has been in negotiations with Hydro Quebec for the last three weeks. I had that report confirmed by an independent media source as well.

The fact is Hydro Quebec can dump all Nova Scotia's power needs for decades in one nice, cheap, multi decade contract - and it looks as though it's in the works. It may be that a political deal is no longer needed by Nova Scotia for power. That might suggest Nova Scotia's political minister Peter MacKay may no longer care to support the Muskrat Falls project. Without his support the Prime Minister may no longer have to supply a loan guarantee. After all, the loan guarantee was to Nalcor and Emera - not the respective provincial governments. That is an important difference. Suddenly, it looks as though Dunderdale is left in mid stream without a deal, and unable to use that deal to secure that necessary loan guarantee. What was her quote a month or so ago - "For me, at the moment, it’s a Minister MacKay problem.” That was on the face of it a rant against search and rescue, etc. However, attacking possibly the second most powerful person in the federal government seems to indicate the fracture is much deeper, and serious.

What we are left with is a game of chicken between the federal government and the province. On the one hand the feds are happy to sit back and watch Emera negotiate with Hydro Quebec. On the other hand Newfoundland and Labrador can't get a federal signature on that guarantee until Emera signs on with Nalcor. And somewhere in between, shuttling between the two provinces, Premier Dexter tries to avoid a political damned if you do, damned if you don't. Surely there are a few people right now asking themselves:

"Are we being used here?"

Backroom Ballet

So the numbers are out and the panic is in. Environics polling numbers place the NDP in first with 38% - the first time ever in Newfoundland and Labrador. The ruling PCs, who have enjoyed polls of 50-60-even 70% - are now behind the NDP at 35%. The Liberals, who were in free fall before the last election, and then stabilized in the high teens as the Official Opposition, are now registering a respectable 26%. Essentially, these are transitional times.

Yes, it can be argued that really the PCs have been in a constant decline since the leadership debacle that followed Danny Williams retirement. Issue after issue that has surfaced since that time has caused the government to trip over its own feet. You can go all the way back to the "near appointment" of Williams confidant, Elizabeth Mathews, and the government getting caught out in a lie. You can look at the endless, obvious propaganda put out regarding Muskrat Falls. There is of course the very public, absolutely suicidal Bill 29 filibuster. The one constant during this time, and remains to this day, is the sheer arrogance in how these issues have been handled. An arrogance born not of confidence, but of mission.

You could look at things in this way, and say it's just the natural result of an old government going into decline - that's the spin Dean MacDonald has put on it. That's how it is viewed by the public. Or, you could look at it as an ordered, backroom transition of power. To do so, of course, is to invite yourself to be called a "conspiracy theorist" by those that would prefer such things remain out of the lime light.

The basic thought in Newfoundland and Labrador politics is that governments are run by a "strong man". That all those MHAs that are elected with him/her are simply there to do as they are told. Of course that isn't true. It's a simplistic way to sell politics to the electorate - pure and simple. Never-the-less, that's how things have been sold. The trend of late has seen Liberal strong man Brian Tobin leave the Premier's chair. He was replaced by Roger Grimes - who was betrayed by Dean MacDonald. Grimes was then quickly replaced by businessman, turned sudden/reluctant politician Danny Williams. Williams left, and hand picked Dunderdale (his Grimes). Now, under Dunderdale's watch the Party is in a full death spiral. Coincidentally, sudden/reluctant Dean MacDonald has surfaced to take over the Liberal party in November of 2013 - slightly less than a year before the next election in October, 2014.

Where was Dean MacDonald during the last election? Why did he not run as a candidate, or step up for the leadership when the Party was left leaderless with the sudden resignation of Yvonne Jones? As a multi-millionaire, where have his fund raising capabilities been as the Party languished in $800,000 of debt? Quite frankly, he has been sitting it out. Waiting for Williams to finish so he can have his turn. In order for that to happen the once mightily strong PC party had to be brought down in popularity - a lot. This is exactly what has transpired.

The swing from PC support to Liberal support is clearly evident in the last poll. The NDP are doing well, but the Liberals are gaining more PC supporters than the NDP. While, at the moment that does not place the Liberals in even second place, a further decline in PC support will likely bolster the Liberals significantly.

The big question is how did Dunderdale manage to accommodate Danny and the boys? Was she a dupe/patsy that was used for her ego to be the fall guy for the Party? Likely yes. Has she been getting really "bad advice" to help the destruction of the Party along? Without question. Do the caucus members of the PCs have loyalty to her? Very Doubtful. Ms. Dunderdale has truly taken the poison chalice. She is getting bad advice, and being held in check by a Cabinet that is on board with putting the ship into the rocks. Their one and only primary mission, other than bringing the Party down, is to ram Muskrat Falls through at any price. It won't matter how badly they are viewed in public, or how severely the media brutalize them. The price won't matter. The terms won't matter. The plan is all that matters - right Danny?

Masters in Our own House

2012 marks uncharted territory for the province of Newfoundland and Labrador. Unlike years before, the province is facing the crushing realities of the world market place on its best laid plans for economic expansion. It is about to experience the boom/bust cycle that is all too familiar to oil driven economies - like Alberta. The 2007 Energy Plan, the "Masters in our own House" manifesto, was meant to usher in a new era of strategic development. Then Lt Governor Ed Roberts read the Speech from the Throne, as crafted by the Danny Williams government:

"Our people are proud nationalists who believe it is only by affirming our identity as Newfoundlanders and Labradorians that we will realize our goal of economic equality within the federation...Our people are ready to take charge of our future and, under [Premier Danny Williams's] leadership, our province will achieve self-reliance by becoming masters of our own house."
"We as Newfoundlanders and Labradorians aspire, not to perpetual subservience, but to self-sufficiency."
"Our people are not content to tolerate a future of relying on others economically. However, our people have now also learned that we will achieve self-reliance economically only by taking charge of our future as a people."

"Our province will achieve self-reliance". Therein lies the fatal flaw. Just as there is no such thing as a "self-made man" the idea that a people, any people, can be "self-reliant" is a concept hundreds of years outdated. In the age of globalization there are no "islands" protected from the deflationary waves. The western world finds its economies being rationalized to those in Asia, and not the other way around - as was originally envisioned.

Still, the nationalistic governments in Newfoundland and Labrador peddle the idea that somehow the power over the future lies in their hands. That the province is an entity unto itself, and the only thing holding it back is the negative attitudes that disagree. So it boldly, with blinders firmly attached, moves forward. It scored some victories with the oil companies for equity shares in offshore projects when oil was at an all time high. It scored a victory for $2 billion in offset payments from the feds when Martin had a minority government and was facing an election. However, when all things were equal it lost. It lost the Abitibi expropriation battle. It lost the recent NAFTA battle with the oil companies over research and development subsidies. It lost countless battles with Hydro Quebec. On and on it goes.

The problem is that despite all these lessons it does not appear to learn. Fast forward to today. The government is trying to force ExxonMobile to build all three $100 million modules in the province, or pay a large fine for not doing so. Exxon has stated the province can not build the third module on time, due to a lack of resources, and it must therefore build it outside the province or face costly delays in first oil. The Premier has threatened them with fines and "troubled waters" if they proceed. The Mayor of St. John's even boycotted a meeting with a top Exxon official in protest. Its the typical us vs them mentality that takes over when the government of Newfoundland and Labrador doesn't get its way. When it can't "take charge". Because controlling economic forces is not something any country can "take charge" of, let alone a province, in a global economy. It is not an achievable goal.

The province can spend its oil royalties as it sees fit. It can build the Muskrat Falls dam as long as it has enough money saved to leverage the rest in financing. It can do all that. But, it can't make iron ore mines any more attractive on the stock markets in a time of obvious, long term, international declines in consumption. It can't force private investors to invest and buy the mines shares on the stock market. It can not keep its young people from voting with their feet and leaving - a record 4000 or so did in the first quarter of 2012. It can not control the price of oil. It can not even accurately project its income each year from oil revenues. As of today, Brent crude futures are trading at $90 a barrel - 30% below budgeted revenues. The trend is downward as the world market place gets hammered by sovereign debt, consumer debt, and the resulting decline in demand. It will be a long term problem-decades long.

It begs the question: How is the provincial government reacting to the change? The answer is the same as usual. Fighting others to perpetuate the myth that we are "masters in our own house". No updated financial document to amend the budget to reflect the obvious massive deficit coming for this year. No plans to halt the Muskrat Falls development despite the mining companies in Labrador being frozen by the chill of world wide deflation. No plans other than the original - hell or high water - blinders firmly on. As we used to say in the army: No plan survives first contact with the enemy. To put the icing on the cake, the PC government passed Bill 29, which essentially guts access to information in the province, so that it can hide all those pesky little bits of reality that might make it known its not masters of its own House.

The New Official Secrets Act - Bill 29

The House of Assembly just wrapped up a historic filibuster on Bill 29, AN ACT TO AMEND THE ACCESS TO INFORMATION AND PROTECTION OF PRIVACY ACT http://tinyurl.com/75xa3sp . The four day, marathon session was covered nationally by every major press outlet, and of course locally in both the news and editorial pages province wide. The Centre for Law and Democracy, an internationally recognized organization on access to information, had this to say when asked for comment by the CBC:

"The new cabinet exception is, well, breathtaking in its scope... I think it’s one of the widest exceptions of that sort I’ve seen anywhere... The Newfoundland one, or the proposed cabinet exception, really takes it to another level... I don’t think I’ve ever seen one as broad as that. It really throws in the kitchen sink... What we see in other countries, and in Canada as well, is that governments often abuse those exceptions,and the way the thing is worded now, it’s really wide open to that kind of abuse.”

Very damning wording for any government to receive from an independent body, let alone on the issue of access to information - a basic right in a democratic society. Well, at least most of us view it that way, except, apparently, Justice Minister Collins who disagreed:

"Mr. Speaker, the right to information is an important one, one that we have to protect and guard," Justice Minister Felix Collins said during question period Tuesday. "But it is not absolute."

He then goes on to essentially tell it as it is with the changes to Section 18 of the new Act:

“The auditor general will have access only to those records that the clerk says he can have...
by expanding the list of cabinet records, it expands the list to which he does not have access.”

Worrisome as those words are, and they should concern any and every free thinking person, the really severe, and potentially dangerous words are found further down in the Act.

Section 24:

     24. (1) The head of a public body may refuse to disclose to an applicant information which could reasonably be expected to disclose

(a) trade secrets of a public body or the government of the province;

(b) financial, commercial, scientific or technical information that belongs to a public body or to the government of the province and that has, or is reasonably likely to have, monetary value;

(c) plans that relate to the management of personnel of or the administration of a public body and that have not yet been implemented or made public;

(d) information, the disclosure of which could reasonably be expected to result in the premature disclosure of a proposal or project or in significant loss or gain to a third party;

(e) scientific or technical information obtained through research by an employee of a public body, the disclosure of which could reasonably be expected to deprive the employee of priority of publication;

(f) positions, plans, procedures, criteria or instructions developed for the purpose of contractual or other negotiations by or on behalf of the government of the province or a public body, or considerations which relate to those negotiations;

(g) information, the disclosure of which could reasonably be expected to prejudice the financial or economic interest of the government of the province or a public body; or

(h) information, the disclosure of which could reasonably be expected to be injurious to the ability of the government of the province to manage the economy of the province.

Essentially, this section gives the "head of the public body" complete authority to refuse any information that could relate to any economic, scientific, or techincal information. That would include any information on Muskrat Falls, mining, etc.

Section 27:

   27. (1) The head of a public body shall refuse to disclose to an applicant information that would reveal

(a) trade secrets of a third party;

(b) commercial, financial, labour relations, scientific or technical information of a third party, that is supplied, implicitly or explicitly, in confidence and is treated consistently as confidential information by the third party; or

(c) commercial, financial, labour relations, scientific or technical information the disclosure of which could reasonably be expected to

(i) harm the competitive position of a third party or interfere with the negotiating position of the third party,

(ii) result in similar information no longer being supplied to the public body when it is in the public interest that similar information continue to be supplied,

(iii) result in significant financial loss or gain to any person or organization, or

(iv) reveal information supplied to, or the report of, an arbitrator, mediator, labour relations officer or other person or body appointed to resolve or inquire into a labour relations dispute.

(2) The head of a public body shall refuse to disclose to an applicant information that was obtained on a tax return, gathered for the purpose of determining tax liability or collecting a tax, or royalty information submitted on royalty returns, except where that information is non-identifying aggregate royalty information.

(3) Subsections (1) and (2) do not apply where

 

(a) the third party consents to the disclosure; or

 

(b) the information is in a record that is in the custody or control of the Provincial Archives of Newfoundland and Labrador or the archives of a public body and that has been in existence for 50 years or more.

This section backs up Section 24, and specifically uses the wording: "shall not disclose". There is no maybe, no 'it's up to the discretion of the head of the public body'. It very interestingly refers directly to the issues of royalties. This is interesting in that royalties collected from offshore oil are already well documented publicly. They are not a secret. Does it refer to mining royalties? Does it refer to a potential Royalty Trust Agreement for the financing of Muskrat Falls? This section would cover those. So it would appear the government's intentions are to keep these agreements secret - otherwise why single them out specifically in the Act, and leave no room for a head of a public body to do otherwise? The timing of this legislation, prior to the DG3 numbers on Muskrat Falls and its financing, contracts is suspect at best and does nothing to quell the very real suspicions of ordinary, thinking people. Most would consider common sense.

Section 43.1:

43.1 (1) The head of a public body may disregard one or more requests under subsection 8(1) or 35(1) where

(a) because of their repetitive or systematic nature, the requests would unreasonably interfere with the operations of the public body or amount to the abuse of the right to make those requests;

(b) one or more of the requests is frivolous or vexatious; or

(c) one or more of the requests is made in bad faith or is trivial.

This section is arguably the most dangerous to the basic democratic rights we all enjoy - or thought we did. Essentially, it gives the head of any public body the right to deny any request they feel like. It reminds me of the "Conduct unbecoming a member of the Canadian Armed Forces" provision in Canadian military law. It's a catch-all charge. One that if no other charge sticks this will. That is Section 43.1 - a catch-all clause. It gives a Minister the right to dismiss media requests for any information. Same goes for the Official Opposition. Same for the ordinary citizen. It is as undemocratic as you can possibly be without saying you are dictatorial - in words anyway. 

The Canadian Charter of Rights and Freedoms guarntees us:

Fundamental Freedoms

 

Fundamental freedoms

2. Everyone has the following fundamental freedoms:

(a) freedom of conscience and religion;

(b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication;

(c) freedom of peaceful assembly; and

(d) freedom of association.

The question begs answering: How can one have the freedom of belief and opinion without the knowledge to form it? How can the media be free, and communicate truthfully when it is denied the information to form that truth? How can citizens form the beliefs and opinions that allow them to reason and judge the performance of their government without open and honest access to information that is neither censored nor filtered? This is not a case of martial law. This is not a case of internal insurrection. This is not a case of state secrets at a time of war. No, this is a case of the government of Newfoundland and Labrador being at war with its own citizens. A secret war. A war that requires an "Official Secrets Act" - Bill 29. 

The Alderon/Williams Lawsuit Letter

As some of you may know, I was served with a letter from Alderon Iron Ore Corp two weeks ago today. The story begins with a phone call received on my business phone on May 9, 2012. It was a 416 number, and a woman asked: "What area of town is your business in?" I responded: "the east side." She then asked: " what is your address?" I asked: "Why do you want to know my business address?" She said: " I want to see your work." I said: "You can see our work on our business website." and hung up.

For curiousity, and because I knew a person from Toronto wouldn't be stopping by to see my work, I phoned the 416 number back. Low and behold if it wasn't the number of Cassels Brock law firm in Toronto. Several attempts to contact them for clarification for the need of my address failed to receive a response. The matter has now been sent to the Law Society of Upper Canada in the form of a compaint. You see, it's not legal for a law firm to misrepresent itself to gain information. But I digress. It just so happens that the senior partner of Cassels Brock was named to Alderon's board of directors, along with Danny Williams, on March 28, 2012. Danny Williams was granted 1,125,000 share options on the date he joined the board ( he has since acquired an additional 100,000 shares under 10981 Newfoundland). That compares to John Vettese/director (Cassels Brock) 300,000 share options; John Baker (Altius) 400,000 share options; Todd Burlingame 250,000 share options; Brian Dalton (Altius) 400,000 share options; Gary Norris 250,000 share options; and on it goes. Suffice it to say that of all the directors of Alderon, Danny Williams got the biggest number of share options of any director or officer in the company. Why that is the case? I do not know.

But there is a little background for you. Here is the document served on me by Alderon, although it appears to be almost completely about Danny Williams. Just a quick pointer: You will note that almost all comments on it that Alderon says are defamatory are quotes from the radio host, and not me. You will likely also notice the many references to discussing the Muskrat Falls project, which considering Alderon came out this week publicly campaigning for the project, seems a little rich. More on that later, but for now here is the letter (click on each letter to view):

Muskrat Falls Deducted

It's important to remember that in the beginning the Muskrat Falls project was billed as Newfoundland and Labrador's green alternative to replacing the Holyrood thermal plant, and bypassing Quebec to be a major exporter of electrical power to the US via Nova Scotia. If there was any surplus power it would: "be recalled as needed for industrial development in Labrador". The word "mines" was not mentioned once in the government's press release  http://tinyurl.com/6vz2unw . Despite the fact that the government was fully aware of the many mining developments that were at various levels of development, and despite the fact that the government was assisting in those developments, and despite the fact that the government knew full well the mining developments would require massive power that was not currently available, it did not use the word "mining" even once in its press release announcing the Muskrat Falls project. So it flew under the radar.

That was 2010. Fast forward to today. Today there is no agreement between Nalcor and Emera to transmit power to Nova Scotia - the original term sheet expiry date is now some 7 months old. There is no federal subsidy, or even a mention of it, for the Maritime Link that would have seen Emera receive over $300 million to assist with the undersea cable. There in fact is no formal agreement signed between Nalcor and Emera to construct the Island Link from Labrador to Newfoundland. There is no written loan guarantee from the federal government. None of these previously crucial aspects of the original Muskrat Falls agreement are in place. That could mean several things. It could mean everything is just moving incredibly slow - slower than it takes for say many international treaties to be formed and signed. It could also mean that they were never intended in the first place.

Take the private conversation between Emera's CEO and the US consulate:

“Given that legacy, Spurr (Emera) remarked that he and his senior colleagues are equally cautious in dealing with the premier (Williams), with knowledge it makes more financial sense for N-L to do a deal with Quebec than with them.
“In fact, Spurr indicated he wouldn't be surprised if Williams ended up doing just that, and leaving Spurr and colleagues to speculate that Williams might be using them to exert more pressure on Quebec to offer a better deal for N-L.”

Of course Mr Spurr may have only been correct in his suspicion, but not in his conclusion. It could also be the case, knowing Williams' penchant for trying to play the federal government for funds, that the real goal was to have the federal government grant the provincial government a loan guarantee based on an "Atlantic Gateway" concept. Once the loan guarantee was granted Newfoundland and Labrador could back out of the Emera deal, and use a portion of that loan guarantee for a dam only project at Muskrat Falls. In other words, it could be that Williams' plan was not to build a link between Newfoundland and Labrador, and the same goes for the Newfoundland and Labrador/Nova Scotia Maritime Link. Knowing how Williams' tends to use the nationalist card in his dealings with the feds, it is entirely likely a threat of nationalist backlash might be used against the federal government if it did not provide a loan guarantee, at least proportionately, for a dam only project -as is happening right now.

We don't know for sure. All we can do is deduce from the evidence. Here's one bit from Williams on April 3, 2012:

" we have a federal loan guarantee worth up to a billion dollars"
Now a loan guarantee of up to a billion dollars would be insignificant on a $6-8 billion dollar project, but a dam only project could cost as little as $3 billion. A billion dollar loan guarantee in that context would make more sense, and at least have an overall impact on the financing costs. That's if you believe a dam only project could work in Labrador.

Here is where more evidence comes. The greatest source of clues lately has actually been in the House of Assembly itself. Minister of Natural Resources Jerome Kennedy has laid it out there in plain language. From Hansard:

Hansard 29 March, 2012

MR. KENNEDY: "Thank you, Mr. Speaker...
We have a very small market here and the oil companies are telling us that we are not going to build an infrastructure to bring a very small amount of natural gas to power Holyrood when, Mr. Speaker, there is no market. I say to the member for - the Opposition House Leader, even if we refurbished Holyrood, what does that do for Labrador mining projects? "


Hansard 30 May, 2012

MR. KENNEDY: "Yes, Mr. Speaker
What we are doing and what we have indicated is that there will be power available with Muskrat Falls, Mr. Speaker, if it is sanctioned and developed. Mr. Speaker, there are no firm contracts signed. I have met with all these companies. There is only one company that said we are willing to buy power. We are in discussions, Mr. Speaker, with these companies and if they want to sign firm contracts, then we will guarantee the power if Muskrat Falls is sanctioned, Mr. Speaker."


MR. KENNEDY: "Thank you, Mr. Speaker.
On March 27, the Member for Cartwright - L'Anse au Clair asked the Minister of Natural Resources to table in the House any correspondence, analysis or reports that government has in relation to the current and projected demand for electricity in Labrador and how such demand can be met.

Newfoundland and Labrador Hydro, Mr. Speaker, is a Crown corporation owned by the people of Newfoundland and Labrador. Its focus is on delivering safe, reliable, least-cost power to residents, businesses, and industrial customers in Newfoundland and Labrador.

Newfoundland and Labrador Hydro, Mr. Speaker, is also mandated to ensure that adequate planning occurs for the future generation, transmission, and distribution of power in the Province. There is currently 525 megawatts of available electricity from the Churchill Falls Generating Station to meet demand in Labrador. This includes the 225 Twin Falls or TwinCo block and the 300 megawatt recall block.

Labrador industrial customers, Mr. Speaker, currently use the full 225 megawatt Twin Falls block and an additional sixty-two megawatts of firm power from the recall block. After Hydro's rural customers and industrial contracts are supplied, there is between eighty and 280 megawatts of recall power available, depending on the time of year. At peak during the winter, Mr. Speaker, in Labrador, 220 megawatts of power is required, thereby leaving eighty megawatts for other use in Labrador or for other export purposes.

Strong commodity prices, Mr. Speaker, have resulted in record levels of mineral exploration in Western Labrador resulting in the announcement of a number of new mining projects. If all projects go ahead, Mr. Speaker, there will be an estimated $10 billion to $15 billion in capital investment for mining developments in Labrador in the next ten years. These new developments will require an adequate supply of electrical power at competitive rates to proceed. So much depends, however, on the need for iron ore in China. The demand for iron ore is affected directly by the Chinese economy.

If Muskrat Falls does not proceed, Mr. Speaker, there will not be sufficient power available for all of the mining projects to proceed. Over the last number of months the minister and departmental officials have held numerous meetings with mining companies, including: the Iron Ore Company of Canada, Cliff's Natural Resources in Wabush, Alderon Iron Ore Corporation, New Millennium Iron Corporation, Tata Steel, Labrador Iron Mines, Vale, and Grand River Ironsands. These meetings have covered numerous topics, Mr. Speaker, and have included discussions regarding power requirements and transmission infrastructure.

As stated earlier, these projects are at various stages, Mr. Speaker, ranging from early stage, pre-feasibility studies, environmental assessment studies, and those that have commenced construction. The normal process, Mr. Speaker, for a new industrial or large commercial customer will be to approach Newfoundland and Labrador Hydro to identify their projects' needs and make a formal request for power.

The following companies, Mr. Speaker, have identified a need for power: IOC, Alderon, Tata/New Millennium, Vale, Labrador Iron Mines, and Grand River Ironsands. Once received, Nalcor then undertakes initial engineering studies that are required to provide the customer with a preliminary estimate of cost and timelines. There is a chart prepared by Nalcor, Mr. Speaker, which summarizes their assessment of potential new demand in Labrador. The chart is based on an aggregate of electricity demand from these projected projects. Some of the companies the department has spoken with have indicated other possible power requirements, such as multiple expansions, but formal requests for service have not yet been made. Projects currently under construction include Tata Steel, Canada's DSO project, and Phase 2 of the Iron Ore Company of Canada's Concentrate Expansion Program. Labrador Iron Mines is already in production and is exploring the potential to transition from electricity supplied by diesel units to hydropower supplied by the isolated Menihek substation.

Projects undergoing feasibility study included Alderon's Kami Project, Grand River Ironsands Churchill River Project, IOC's CEP stage three Project, IOC's Long-term Expansion Program, Tata's LabMag Project, and Vale's underground mine at Voisey's Bay.

Longer term developments included a second phase for the Kami project, the Julienne Lake Project, a second phase for Grand River Ironsands, further expansion associated with IOC, and the Paladin Aurora Michelin Uranium Project near Makkovik."

To satisfy these future mining developments in Labrador, there clearly needs to be a new source of power supplied. While our government would like to develop Gull Island, Mr. Speaker, it is not an option at present. Gull Island can only proceed if our Province can arrive at a favourable arrangement with Quebec on transmission. Gull Island, if developed, can supply an additional 2,250 megawatts of power for Labrador industrial use or export.

Muskrat Falls is an ideal source for new electricity. At 824 megawatts, Mr. Speaker, this project will meet the growing needs of the Island population, and enable us to close the expensive and environmentally unfriendly Holyrood Thermal Generating Station. It will also enable us, Mr. Speaker, to meet the growing needs of the mining industry. Approximately 40 per cent of the output from Muskrat Falls will be available to meet this energy demand. Until such time as the power is required, the excess power will be sold on the spot markets in the Maritimes and Northeastern United States.

The development of Muskrat Falls, Mr. Speaker, will also support significant regional economic development in Labrador. Power will be available for industrial expansion and development in the region at competitive rates, encouraging development, which brings further business opportunities."

The nuts and bolts of Kennedy's comments are utterly at odds. On the one hand he says power to the mines will be provided once Holyrood is replaced. On the the other hand he lists off nine plus mining projects that will require all and more of the 824 MW that Muskrat Falls could produce. Of course, that does not factor in the 20% or 165MW that have been promised to Emera in return for their investment in the Island and Martime Links. There is clearly something not right with the Minister's math. Especially considering his analysis that during the winter months, with full recall of the 300 MW from the Upper Churchill, that there was only 80 MW left for use.

Then, on the evening of May 29, 2012 Premier Dunderdale stands in the House of Assembly and does an hour or so rant of which the following is a partial transcript http://tinyurl.com/7k7z82g

"Mr Speaker we have to pay for generation of power. So if we, unless there is a huge population explosion in Labrador, Mr Speaker, something absolutely unbelievable happens in Labrador, along with the great mining developments that are going on up there now Mr Speaker, Muskrat Falls would never be developed because people would never be able to afford the electricity and the mining companies would never be able to afford the electricity. And we had a mining, the Minister of Natural Resources and I met with a mining company in my boardroom on Friday, Mr Speaker, and they are very interested in whats happening in Labrador, because they are ready to move on their project...
They need Muskrat Falls to be developed Mr Speaker...Mr Speaker, they understand that if Muskrat Falls does not go ahead what happens in Labrador from that point on lies squarely in the hands of Hydro Quebec and the province of Quebec Mr Speaker...We enable development in Labrador Mr Speaker, because we absorb so much of the costs. We are able to sell electricity power to atleast six mining developments we hope in Labrador Mr Speaker...Mr Speaker, does anyone have confidence that when mines go to Hydro Quebec looking for energy for developments in Labrador that they are going to get the best industrial rates in Atlantic Canada? Not likely Mr Speaker...All those benefits are on the horizon Mr Speaker, but they need power."

So again we can see the pattern. There are numerous mines in Labrador putting pressure on the provincial government to move forward with Muskrat Falls quickly as their developments are ready to go - or close to it. The twist in Dunderdale's comments:
 "...are going to get the best industrial rates in Atlantic Canada?"
Kennedy's comments to the Telegram were close as well:
“I have met with IOC, Tata Steel, Alderon Resources, Labrador Iron Sands, Labrador Iron Mines, and Vale Inco; they all need power. They are saying to us: where can we get the power? They want the power at industrial rates because industrial rates in Quebec and in Manitoba, you have to be competitive. So, we are still in the process of determining what those rates will be.”

To listen to, and believe the government, you would think there were mines begging for power, at competetive rates, and that at this time no decisions had been made. That any number of senior mining executives would be chewing their nails in nervous fashion over the apparent state of flux the project is in. Certainly, there is a hint of that in Alderon's annual return filed with the US Securities Commission:

"Alderon needs to enter into contract with external service and utility providers

Mining, processing, development and exploration activities depend, to one degree or another, on adequate

infrastructure. In order to develop a mine at the Kami Property, Alderon will need to negotiate and
conclude various agreements with external service and utility providers for rail transportation, power and
port access and these are important determinants which affect capital and operating costs.
The Company’s future operations will require rail transportation from the Kami Property to a sea port
(expected to be the Port of Sept-Îles) and ship berthing, storage and loading facilities at such port. The
Company has not yet concluded agreements with the relevant rail companies or port operators
necessary for the transportation and handling of the Company’s planned production of iron ore and
there can be no assurance that agreements on acceptable terms will be concluded. The inability to
conclude any such agreements could have a material adverse effect on the Company’s results of
operations and financial condition and render the development of a mine on the Kami Property unviable...

Although low cost power from a major hydroelectric development at Churchill Falls to the east is
currently transmitted into the Wabush region for the existing mine operations, the current availability of
additional electric power on the existing infrastructure in the region is limited. The solution to the current
power capacity situation is the construction of a third 230 kV line from Churchill Falls; however, no
agreements have been reached for such construction and there is no certainty it will occur. If the current
power capacity issues in the Wabush region are not resolved in time for the Kami Property’s
development, Alderon will have to investigate other sources of power. There is no certainty that the
Company will be able to access sources of power on economically feasible terms and this could have a
material adverse effect on the Company’s results of operations and financial condition and render the
development of a mine on the Kami Property unviable."

However, and in a seeming direct contradiction to that statement, Alderon's Chief Executive Officer Tayfun Eldem, states in a corporate promotional video on the Kami project http://tinyurl.com/83sghms :
"We have very cheap power available to us at competitive rates that we believe will be a great advantage to Alderon."
That comment does not seem to square up with the comments made by the government. That comment does seem to square up with the comments of  Alderon's Executive Chairman Mark Morabito when, in the same promotional video, he states:
"There is no other iron ore project in North America, and very few in the world, get to production faster than we can and particularity at our low cost. In order to create an iron ore mine what you need is access to infrastructure, because you are required to move tons and tons of material. And so you need rail, you need power, you need ports. There are alot of iron ore deposits in the world that have been identified that have none of these things and if you want to put those things in it requires billions of dollars in capital and years of time to build that infrastructure. Here we are, we've found a deposit inside an existing iron ore mining camp with rail, with power, and with port."

So, to summarize by way of deduction, we have a government desperately trying to push a hydro electric development through to supply mines with power in Labrador. That government is being dishonest with its citizens as to the intent of the development, and its reasoning does not hold up to the least amount of scrutiny. For example, somebody should ask the Premier how much power (how many MW) would Alderon's Kami project require? Or any number of the rest of them that they've admitted to being in talks with. A simple question. Then the Muskrat Math will become quite evident. Cap Ex, by way of consumption example , apparently needs around 250 MW for it's mining project in Quebec. With only about 659 MW available after Emera gets their supposed share, does it defy common sense to believe that mining operations in Labrador could be satisfied? Not even close. Does it mean that that Maritime and Island Links are likely not on the table and never were? Yes. Does it mean the vast majority of KWHs being produced by a Muskrat Falls project will be sold at 3-4 cents per KWH to mining operations? Yes.

Does that mean the taxpayers/ratepayers of Newfoundland and Labrador will be massively subsidizing mining operations in Labrador for generations? Yes it absolutely does. 

It's just a matter of simple deduction.

The Freedom to Speak

Supreme Court of Canada, 2009:

The Supreme Court has named the new defence "public interest responsible communication" to reflect that the defence is available not just to the press, but "to anyone who publishes material of public interest in any medium."

The Supreme Court agreed with the submissions made by Blakes on behalf of the Toronto Star that "the current law with respect to statements that are reliable and important to public debate does not give adequate weight to the constitutional value of free expression." The court agreed that the traditional law of defamation too greatly favoured protection of reputation, stating that "defamation lawsuits, real or threatened, should not be a weapon by which the wealthy and privileged stifle the information and debate essential to a free society."

The Feds outplay NL PCs again

Chess on the federal level is not a game that our PC provincial government is effective at - to put it gently. Rather than realizing it's playing against an opponent, the Newfoundland and Labrador government acts as if the game only flows one way.

Take the request Ms. Dunderdale finally made to have a meeting with the Prime Minister. The Premier made accusations the federal government had failed its "humanitarian duty" to send a helicopter to participate in the Winters rescue mission in Labrador. There is an assertion by the provincial government that there was a two hour window that a federal chopper could have made a difference. Of course that assertion ignores the time for a chopper to travel from say Gander to Labrador and back. Forget the complete lack of common sense of that assertion for a moment.

Instead, think of the intelligence of singling out Peter MacKay for her wrath. Not only is he a primary factor in the dolling out of all that federal cash she is constantly on about, he is also one of two "founding fathers" of the new Conservative Party of Canada. The ruling party. The majority party. Does she not understand that it was Leader Peter MacKay of the Progressive Conservative Party of Canada that struck the deal with the Alliance's Harper to form the Conservatives? Does she understand the terms of that deal? Does she wonder why he has escaped so many bad hits on him as a Minister? For Harper to fire Peter MacKay would be like Harper setting fire to his own house, and unlike Ms Dunderdale, he's not likely to do that. So why attack him to get your issues on the table? In the first year of a federal majority government?

Then, as if to compound the injury, Dunderdale says:

"I have no authority to institute an inquiry into the federal government's activities to have access to the kind of information that we would need," Dunderdale told the house of assembly in March. "I can call on the federal government for such an inquiry [and] that may very well happen."

Except, and here we go again, the feds know how to play chess. So, the one MP that Dunderdale could have criticized fairly safely, Peter Penashue, comes out today and says no problem. Specifically, he stated:


"We would not be in a position not to co-operate...This is a legally initiated process and everyone would have to co-operate...Everyone knows that if you call an inquiry, everyone has a legal responsibility to participate."

In other words, checkmate. The feds are more than willing to participate in the inquiry. They recognize the province's right to hold such an inquiry, and they've placed the ball right back in Dunderdale's court while she waits for a call back from the PMO on her requested appointment. Bottom line is the feds know that land search and rescue is a sole provincial jurisdiction, and that if they were to dispatch the air assets to participate then they would be unable to fulfill their sole jurisdiction - sea search and rescue - should a call come in during the same time. They know that no inquiry will be able to find any differently, and that the province will be found in its usual position: trying to cheap out on spending on its core functions and blaming Ottawa for the shortfall.

To compound the troubles, MHA Paul Lane spilled the beans prematurely that the Premier had requested an appointment. Now the humiliation watch is on. How long will it take for the PMO to get back to her with an appointment time and day? How long will the appointment be? Now she is at the complete mercy of the PM, which is not the way it should ever be.

It reminds me a lot of the Old Harry issue. The day before the federal election the feds grant Quebec an offshore accord that directly attacks Newfoundland and Labrador's oil and gas interests in the Gulf. Does the provincial government make it an issue in the federal election? No. Does the Premier, or even better the House of Assembly as a whole, file a formal protest to Ottawa? No. The response was:
“We haven’t seen a lot of the details that might be included today, but we’re told that that dispute resolution process is included.”

So the first rule of federal combat is you give no ground until you see all the details. The details of this deal essentially placed the Old Harry basin into a kind of suspended animation. A no-man's land. Why does that matter? Well first of all, it took 18 years to come to a resolution with Nova Scotia, who we get along with, on the dispute between the two provinces on the maritime boundary between them. Secondly, it essentially killed all exploration in the area. Corridor Resources, which had been actively seeking financial partners so it could explore its licence on the Newfoundland side of the line, had to essentially give up in 2012. Corridor never stated it publicly that I'm aware of, but it's hard to get serious investors to inject cash where there is instability in jurisdiction. That instability did not exist as much as when the feds gave Quebec exactly what it wanted. So now Quebec has all the time it needs to set up its offshore oil and gas industry while Newfoundland and Labrador loses revenues for up to twenty years - potentially.

It is mistakes of maneuver, of exercising power properly within Confederation that constantly plague the provincial governments here. It's not that Confederation does not work for Newfoundland and Labrador, it's the inability of the provincial government to play properly within Confederation that's the problem. Danny Williams made the same mistakes. The only reason he won a short term reprieve on off shore oil revenue was the minority position the federal government was in at the time. Other than that he would have been just another casualty of poor play. Disagree? Look no further than his botched attempt to covertly install his communication director on the CNLOPB as Vice-Chair. You could even examine that poor preparation before Igor, and the subsequent hat-in-hand aftermath for military assistance and funding - again after the fact.

Kathy Dunderdale is not capable of playing with the big boys in the federal government - let alone getting a result that favours the province's people. It's not just her though. It was the man in the chair before her as well, and so on. The finger also points to the senior "advisers" that normally surround a Minister/Premier. It would appear that Newfoundland and Labrador politicians are concerned about one thing and one thing only - hold onto power for as long as possible, to dish the cash to as many friends as possible, and if it happens to benefit the common man... well... we can spin that as well. The focus is purely on the hold of power and not on the greater good. It's not unique to the current crowd for sure. The difference being we should know better by now. Newfoundland may be an island in the physical sense, but the vision needs to look past that. The over the top corruption and self interest that blinds the provincial government in Newfoundland and Labrador belongs in the past, and a focus on playing the game in Confederation, for the benefit of all its citizens, needs to become the focus of the future.

Dunderdale's Dithering

“The amount of influence we have is certainly now on the table for examination. There is no question about it.” Kathy Dunderdale, 17 May, 2012.

Those bewildering remarks came from Premier Dunderdale in response to the federal government's decision not to expand the role of the Goose Bay military installation that had been promised. She indignantly screeched at the cameras her utter dismay, her complete confusion, and her total contempt for the Minister of Defence Peter MacKay. She even put in a not so subtle threat to the Prime Minister:
"For me, at the moment, it’s a Minister MacKay problem.”

Dunderdale proclaimed, in an indignant rampage, that Newfoundland and Labrador had been let down once again by the dastardly federal government. She questioned what it would take to get the federal government to do her will:
"What is it that we have to do down here to get your attention?" she said. "We try to cooperate, it doesn't work. We vote for you, it doesn't work. We don't vote for you, it doesn't work. What is it?"

And in those remarks lies the mentality for all to see. The simple, fatal flaw that has befuddled Newfoundland and Labrador politicians since 1949. The truth of the matter is that the corrupt, disloyal, divisive feudal politics used by Newfoundland and Labrador's politicians doesn't wash in the greater Canadian political culture. Not because it is unique or cultural, but because it is the type of politics that most people in Canada want to see banished to the annals of history.

The Premier's attempt to manipulate a campaign promise some 6 years old to play the victim card illustrates the point well. Feeling political pressure on the Island she abandons her own, very public, alliance with the Prime Minister and in the process fans republican/separatist feelings in the province with the tried and true strategy of: "they screwed us again". Not over some life or death issue like say the Marine Search and Rescue Centre (I was at the protest in St. John's, but didn't see her..). That happened too close to her deal with Harper, and she didn't want to jeopardise the Muskrat Falls loan guarantee. Not over the feds agreement with Quebec which recognized their jurisdiction over Old Harry - one day before the last federal election. No, she picks a six year old campaign promise, and attacks Peter MacKay instead of the man who made the promise - Mr. Harper.

Instead of taking responsibility for a political arrangement that she freely entered into, Dunderdale blamed the federal government for failing on their end of the deal. In that way Dunderdale managed to live up to the most ancient political trend in politics - lack of accountability. She then fired a verbal assault on Peter MacKay that didn't even make the national news - and when has it happened that a premier attacking a federal minister hasn't made the headlines? And what does she have to leverage over the federal government's head if they don't listen? Absolutely nothing. She has no cards to throw on the table. She doesn't even know how to create cards to throw on the table. Her whole strategy is: "I'll huff, and I'll puff, and I'll blow your house down."

Course the feds are likely sitting back and having a good laugh. After all, a Premier with no cards that sets her own house on fire is hardly a going concern for the federal government. The feds are cutting across the board. They are applying their own brand and view of fiscal federalism - which they are entitled to do as a majority government (not an endorsement by the way). They are going to get grief from every provincial government. The key difference is most provincial governments aren't going to try and manipulate that in order to excite the provincial separatism that may exist in their jurisdiction. They aren't going to try and alienate their own people from their country. They aren't going to equate loyalty and citizenship to the dollar. They aren't going to commit the disloyal, some would say treasonous, act of taking flags down from government buildings.

They realize that they are stronger as one, despite the ideological differences. They understand budgetary decisions as they make them as well. To commit the despicable act of lowering flags, and alienating people from their own country only serves to isolate the province. It does not create allies in the rest of the country - unless you count Quebec separatists. It makes you look small, petulant, and childish. It makes you look untrustworthy. Without trust you can count on repeating this little diddy over and over again:
“The amount of influence we have is certainly now on the table for examination."

Newfoundland and Labrador - To be or Not to be?

The capacity to borrow, or pay debt, is the number one issue driving the world financial markets. It has been for some time. What plays into that? The first is demographics. In a world economy based on consumption of goods the larger your base of consumers the better. However, the age groupings of those consumers, their family sizes, etc also come into play. Secondly, the ability of those consumers to consume is crucial. Large, older populations that have reached their ability to pay for goods they have consumed, or are consuming, renders them somewhat irrelevant to the financial markets of the world that need to expand to remain relevant.

These are the primary reasons why the previously very third world countries of Brazil, India, China, etc are now the new engines of world consumption. They have large, young populations that have relatively low debt levels and similar expectations. International corporations, financial and otherwise, understand that the future is there. The Western World, the "old frontier", has essentially reached its limit of borrowing capacity compared to that which it produces - so its on the decline. You can see it everywhere in Europe, and we saw it dramatically in the US in 2008 til present. We even see it in Canada as a kind of microcosms of the world. Alberta and Saskatchewan, fired by resources consumed in the developing world, have experienced wage inflation which has in turn created housing inflation. That inflation has led to property equity increases, on paper, that have not been earned or paid for. Meanwhile, Ontario, Quebec, and for the most part Atlantic Canada decline.

Thomas Mulcair, federal NDP leader, recently referenced the situation as the "Dutch Disease". Essentially, the rationalization of the national economy toward resource based inflation that in turn causes a massive loss in traditional industries. The "petro dollar", created by high fuel prices, leaves most of your other industries unable to export internationally. It's very political in Canada's case as it pits region against region. So while Mr. Mulcair was 100% right in his analysis, the Premiers of British Columbia and Saskatchewan attacked him for saying it.

Newfoundland and Labrador reflects both of these realities. While on the one hand it has realized offshore oil wealth that has fueled one third of all government spending in the last five years, on the other hand it has all the negatives that are affecting the rest of the western world. It has the worst demographic/age outlook of any political jurisdiction in the western world - and that's saying something. It has fifty percent of its population dispersed over its rural area. Despite its new found oil wealth the majority of its population works for between $10 to $15 dollars per hour in non-unionized sectors. Its government and resource based, unionized labour sectors, inflate the average wage levels - deceptively so. Its property values have increased in the Avalon area, and Labrador, allowing homeowners to leverage new debt on "sudden equity", while its rural areas suffer stagnation or decline in real estate values - thereby restricting the amount those people can borrow.

Then there is the case of the Newfoundland and Labrador government. It has seen its general revenues, driven by oil/mining and high taxes, swell. In 2001-2002 the government held, at the end of the fiscal year, $ 510.2 million in cash and temporary investments. These funds were invested at between 1.00% and 4.85%. Its gross debt was $10.65 billion, minus $1.73 billion in assets, for a net debt of $8.92 billion. Its unfunded pension liabilities, for public service pensions, was $3.391.6 million. Its revenues for the year were $3.9 billion and its expenses were $4.5 billion. The population for 2001 was 512,930 with an average age of 38 years of age.

Fast forward to 2011-2012, and the oil boom province. At the end of the fiscal year the government held $2.21billion in cash and temporary investments. Theses funds were invested at between .20% and 7%. Its gross debt was $13.1 billion, minus $5 billion in assets, for a net debt of $8.1 billion. Its unfunded pension liabilities, for public service pensions, was $2.67 billion. Its revenues for the year were $8.13 billion  and its expenses were $7.53 billion. The population for 2011 was 511,036.

It's easy to see that in the last decade government revenues and expenditure have risen substantially. This despite the decline in population, and the fast aging population in the western world. It is also noticeable that the cash on hand at the end of the fiscal years has dramatically increased. Its also interesting to note that despite the one time $2 billion payment given to former Premier Williams on account of the Offshore Accord, which had to be directed to debt (unfunded pension plans) by agreement of the parties, that the unfunded public pension liability has actually substantially increased since 2005 - when the payment was received. It's also shocking to note that, despite all the oil revenues, the province's gross debt has actually grown by almost 30%.

The bottom line is that the government of Newfoundland and Labrador has just been undisciplined - period. It has ignored the very real international, and even national, financial lessons provided in the last many years. It follows the financial thinking of making the books look good to the banker, while hiding the many inherent weaknesses its lack of financial discipline has had on the province's true financial picture. The Conference Board of Canada recently stated that Newfoundland and Labrador's offshore oil revenues would decline rapidly after 2020 - eight years from now. Despite this, offshore oil revenues are not being used to retire debt. In fact that debt has grown - and will continue to do so. It has taken the rather childish position of "having money in the bank" as opposed to funding its unfunded pension plans. It has tried to leverage its money to super inflate certain sectors of the economy like hydor, mining and oil, while watching the majority of the economy suffer "all of the costs of inflation but none of the benefits."

A final, but telling example. The province had, at the end of 2011, an equity investment of $1.28 billion in Nalcor - its energy crown corporation. It claimed assets worth $2.6 billion. It made, on operations, a total of $77.5 million net. Contrast that with the Newfoundland and Labrador Liquor Corporation.  The province had a total equity position of  $62.3 million. It claimed total assets of $91.6 million. It made, on operations, $132.013 million - of which it turned over $132 million to the province's general revenue fund. Nalcor did not return one cent to the fund. Given that the province intends to proceed with the Muskrat Falls Hydro development, and the estimated price tag for that is between $5 billion - $8 billion (financing costs not included), and given the rate of return on investment to the people of the province of Nalcor's operations, and given the overall financial and demographic picture of the province as laid out above, one is left questioning the credibility of the government's position. Sinking clear profit (oil) into a business that can not produce a substantial return (Nalcor) is the worst thing that could happen to the people of Newfoundland and Labrador.

After all, would it not make more sense to arrange a power purchase agreement with Hydro Quebec to supply power to mining developments in Labrador? The infrastructure would then be in place for the 2041 hand over of the Upper Churchill to the province at a much reduced cost. The mines would get their power and the province would get their royalties. Let's not forget the average life span of an iron ore mine is 25 years. In the mean time, precious oil revenues could be used to pay off the provinces debt, which includes a number of large borrowings at 10% interest carrying forward for the next thirty years. Eliminating debt would also allow the province to reduce or even eliminate provincial sales taxes and gasoline taxes. That would encourage both public and corporate participation in the economy for the long term, and not just on a mega project by mega project basis. It would also place Newfoundland and Labrador in an enviable position nationally and internationally of being one of the few places left in the western world that has the capacity to consume debt - should it choose to.

Sadly, this is a tipping point in our history. A once in a historic lifetime opportunity to fundamentally alter the province's future, and most importantly the lives of the people that live here. A moment in time when real discipline could transform the province from a state of survival to the place to be. As I see it, we are half way through that moment in time and the important (beyond window dressing) fundamentals of Newfoundland and Labrador's economic future have been badly misplayed. The incessant, childish one-up-man ship approach of the province's political characters is only upstaged by the delusional dreams of those that are duty bound not to lead their people into this kind of future. Accountability is screaming its absence - at all levels.