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Oil Companies, Equity stake, tax concessions
The Hebron Solution
By Myles Higgins
Thursday, August 16, 2007
Last week, premier Danny Williams left the premier's conference in New Brunswick citing a fresh round of negotiations over the Hebron oil project as the reason. This was good news for the province, not to mention a golden opportunity for Williams to break away from the infighting and wheel spinning taking place in New Brunswick at the time.
The restarting of official negotiations for the Hebron project has come after many months of silence on both sides. Talks broke down because the oil companies expected tax concessions and showed no interest in allowing the province to hold a 4.9% equity stake in the project.
Several months ago, Premier Williams helped get negotiations back on track with his public statement that the province's new energy plan would be released sometime prior to the October 9 provincial election. He also said that after its release the "ask" by the province for all projects would exceed the 4.9% expected from the Hebron partners, but noted that if a deal was made prior to that time the province would still be willing to settle for the previously quoted amount.
Another factor that may be at play here, but one that the people of Newfoundland and Labrador will never know for sure about, is the potential for backroom federal intervention. It's possible someone on the national scene interceded on the issue and spoke with "friends" inside the oil industry, perhaps someone who hails from the oil rich west.
If this was the case it surely wasn't done for the good of the province. More likely it would have been done to improve federal revenues.
It's only speculation of course, but some people are finding it more than a little curious that when Newfoundland and Labrador was fighting to retain 100% of offshore revenues, as promised by Stephen Harper during the last election, talks fell apart and Ottawa refused to support the province.
Hey, Harper is from out West isn't he? Hmmmmmm.
Sorry, where was I? Oh yeah, now that Ottawa believes it has assured itself of gaining revenues every time a project moves forward in Newfoundland and Labrador, or more accurately they'll end up paying far less to the province in equalization, suddenly the talks are back on again. Just a coincidence I'm sure but you know how conspiracy theories get started.
Regardless of the reasoning behind the latest round of negotiations I believe the province has a golden opportunity to show Ottawa that two can play the game when it comes to financial slight of hand.
Perhaps Newfoundland and Labrador should setup a royalty and offshore revenue distribution system that shuts Ottawa out of the picture completely and denies them their pound of flesh.
It's not really that difficult. In fact it could be accomplished with a payment system that allows a portion of royalties and revenues from the Hebron project, or any other, to be paid directly to the province's creditors rather than the province itself. The Hebron partners could also direct a portion of the provincial share directly into funding programs such as schools, roads, hospitals or anything else the province decides.
Such an approach would see the provincial debt paid down in record time, freeing up even more money that would otherwise go to servicing the interest, and it would allow expensive provincial programs to be maintained or even enhanced without the provincial treasury ever actually laying its hands on a single penny from offshore.
It's something that should be considered very seriously.
When it comes to equalization, Ottawa can't claw back something the province never had.
Myles Higgins is freelance columnist, who lives with his wife and a terminally lazy Terrier named "Molson" in the beautiful town of Portugal Cove - St. Philips, His website can be found at: Web Talk - Newfoundland and Labrador. Myles can be reached at: letters@canadafreepress.com
