Sue's Blog

Wednesday, October 11, 2017


Yesterday Sue's Blog focused on the journalistic style of James McLeod in his story headlined "Nalcor audit won’t be done before retirement: AG".

Today let's look at some of the other information we can take from this interview.

The AG Terry Paddon is retiring at months end. He leaves behind an unfinished audit of specific operations of Nalcor.

The story does not tell us some important things.

How far along is the audit?
When did Paddon expect to finish it when it began?
Did he run into unforeseen difficulties in attaining the information he needed?
Was it Paddon's intent to finish the audit before he retired?
What does Paddon think the cost will be to finish it?
Is it more costly under a new Auditor General than if he completed it before he retired?
Did he find anything worth noting now?

Terry Paddon is one of those nice people. Not much - I've ever seen in his personality that would put people off. He is a professional by designation and as best I could tell - took his role seriously.

Paddon - however - missed a couple of key areas in his tenure with the Department of Finance and as Auditor General. He missed some real activity regarding the Federal - Provincial Fiscal Arrangements Act (Equalization) - despite being alerted to it.

Equalization - as the program is normally referred to - primarily has been to the benefit of Quebec. The program which Stephen Harper promised he would change but then did not - I assume was kept whole for Quebec.

Harper's promise to remove royalties from non-renewable resources from the formula - would have meant that our oil revenues could have served to improve the lives of future generations so much more. That was a digression. (still angry at CPC for deliberately conning Newfoundland and Labrador and "Seantor" Manning's standing at Harper's side as he did it)


Many people may not have noticed - but Hydro-Quebec does a significant amount of public program spending. They have been doing that for decades.  Why is the question....


Back in 2000 Stephane Dion then President of the Queen's Privy Council and Minister of Intergovernmental Affairs appeared on Bill Rowe's Open-Line. I asked questions the Minister could not answer on line - so he did as he promised - wrote me the answers to my questions.

Below is the response: 

"On the question of the treatment of Churchill Falls under the Equalization program, it should be noted that an adjustment has been made in the calculation of Equalization payments since 1982 which takes into account how Churchill Falls hydro is priced. Equalization payments are based on the relative ability of each province to raise taxes; and the Churchill Falls adjustment shifts some capacity to tax hydro sites from Newfoundland to Quebec. The net effect is to reduce Quebec's annual Equalization payments while raising Newfoundland's. Furthermore, to the extent that profits from Churchill Falls translate into profits to Hydro Quebec that are remitted to the Quebec government, these too have the effect of lowering Quebec's Equalization."

Right from the get-go we were being further penalized on the Upper Churchill - while Quebec reaped even more benefits. Then the formula was changed to reflect the real contract (albeit not enough in my opinion).

Were we ever compensated for the past - NO.

The real kicker though was found accidentally in the last sentence of Dion's response.  "Furthermore, to the extent that profits from Churchill Falls translate into profits to Hydro Quebec that are remitted to the Quebec government, these too have the effect of lowering Quebec's Equalization."

That little remark was an eye opener for anybody watching Hydro-Quebec - as I certainly was.

The hundreds of News Releases coming out of Hydro-Quebec in those years were phenomenal. Now it made sense. Before profit - expenses come out. If Hydro-Quebec delivered or helped to deliver public programming on behalf of the Government of Quebec - they lowered their profits - while the province of Quebec saved equalization money - which gave the province even more to spend on public programs.

In short - Hydro-Quebec making billions off our resource - reduced their profits - lowered remitances to the government - in some years almost to zero - to avoid the loss of equalization. This in turn exponentially increased the value from Labrador resources for Quebec.

At the time Newfoundland and Labrador Hydro was making money and was remitting profits to Newfoundland and Labrador. At the time we could have taken advantage of the same. Today Nalcor is not "profitable" - only by force of the PUB, our laws, and oil activity. Nalcor never did do the investment and development that Hydro-Quebec has successfully. 

Terry Paddon was aware of this and we did nothing. We sat on our hands and did nothing.

The political and media spin in Newfoundland and Labrador became we MUST become a "have" province. The romantic - naive - irrelevant title of "have". The "have being based on a formula that could see a financially destitute province be "have" while a thriving growing super power province be "have not".

Let me be more clear: Quebec has an unemployment rate of 6% Newfoundland and Labrador is at almost 15%. The population in NL was 530,854 in 1971 and 528,817 in 2017 meanwhile the population in Quebec was 6,137,305  in 1971 and 8,394,034 in 2017.  Provincial debt NL is $23,052 per person while in Quebec it is $22,104. This does not include the albatross of 13 Billion for Muskrat Falls. Then we take into account that Nalcor is not financing all it's own obligations - we put in a fair chunk and it is only barely profitable because of oil operations. When compared to Hydro-Quebec which has hundreds of millions in profits - without oil revenues.

Paddon failed by not describing what equalization truly is and how the system works. It's not all his fault - but political masters should not have had that much say.

The media - should really get its collective act together and do some real reporting. It should make itself knowledgeable about important issues and policies before it puts out fluff - this denying the people of balanced information on which they can make a decision.

It is no longer acceptable to have zero leadership in politics and zero accountability of the news media.

We are broke. We continue to repeat mistakes. We continue to dream without doing anything that remotely will help us achieve our dream of prosperous future. 

By the way - are there any MHA's willing to wade in to this discussion or members of our "press corps"?


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