As for major resource development - I call on Gerry Reid - Lorraine Michael - and Danny Williams - to introduce legislation that would require such MOU's to be released and debated in the House of Assembly. Otherwise you are all hypocrites.
Now that Danny won't release the MOU and Gerry has gotten into a list of questions - which I say the Premier will have a list of answers to during a televised election debate (won't be pretty) - I have some questions and answers of my own.
Why in the face of obvious public support for equity ownership (risks-benefits) accepted - do Gerry Reid and the Liberal Party continue to question the policy choice?
Here's one of Gerry's questions:
How long will it take for government to recover its up-front investment?
An estimated $600 million is a lot of money to put forward in up-front costs without any immediate return on investment. How long will it take to recover this investment before any real money flows into the province's coffers?
My answer is - yes it is a significant investment - with significant reward potential - nothing is guaranteed. At a time when oil was below $20 a barrel the feds purchased a piece of the Hibernia action and it has paid off exponentially. Now when oil sits at almost 4 times that value - we are wondering why we should take a piece of the action. Well that thinking gets us right back into the Upper Churchill. If we had taken some of the financial risk of that investment as Quebec did - we might be sitting here now with a few hundred million a year to work with. Labrador could have a highway of gold.
What is more puzzling is that the NDP and the PC's are willing to invest in equity and the Liberals are waffling on the whole idea. Get your arse pants off the picket fence and make solid policy choices.
Yes there are risks with equity - but you still buy a home right? Anything might happen.
With the size of our stake and the associated costs - one might imagine the "risk" the companies must be taking with the other 95%. We all know the oil companies do one thing better than any other industry - make profit. They too would have to speculate what the market would deliver - and they expect to make money from the Hebron development. We will also.
Let's look at another of Reid's questions:
How much money has been left on the table by compromising on the royalty regime and allowing a one percent payment until payout?
If the generic royalty regime with an increasing royalty rate from 1% to 7.5% until payout is applied, similar to White Rose, hundreds of millions of extra dollars will flow into the province=s coffers in the early years of production. What impact will your compromise have on the amount of money that could have flowed into provincial coffers in the first ten years of production?
Well I will address this two ways. First if we take more royalties on the back end of the deal instead of in the first ten years - we have essentially accomplished our equalization objective. Harper did not remove non-renewable resource revenues from the formula - so why scoop them all up now - only to lose equalization payments? No let's be more clever - bide our time - maybe the formula will change to reflect that policy in years to come - but if we are in the country let's max equalization as is done in Quebec.
Secondly if the profits of the equity are funneled into the new Energy Corporation and invested in much needed social and economic programs - we hide them from the equalization formula - thereby increasing our take again of the resources in our waters.
The Liberals had this advice in the past and ignored it. Too bad - they could have used the boost in public popularity and increased our benefits. Notwithstanding all of this in order to be a Norsk Hydro or a Hydro-Quebec we have to be players - and under past Liberal policy we were not. I only wish the Premier had done the same with wind - because in that you find Danny's weakness - inconsistency. That should have been further obvious when he did not release the MOU.
Over the next few days I will respond to Gerry's questions - and give you my take. Meanwhile Danny release the MOU. I have my own theory on where the oil companies made the gains and it's not with Hebron.
