Better a Broken Promise than None at All

Mark Twain once said, “Better a broken promise than none at all.”

I wonder about his philosophy.

With a federal election again sullying the picturesque landscape of Newfoundland & Labrador those promises are flying around faster than a poorly discarded grocery bag in a force 5 hurricane.

After decades of living under the thumb of Hydro Quebec (thanks to the now infamous Upper Churchill Power contract) and after being denied access on Quebec’s grid in an effort to market Lower Churchill power, Canada’s political Czars have finally seen fit to “promise” Newfoundland & Labrador a loan guarantee for development of a portion of the Lower Churchill river in partnership with Nova Scotia.

Or have they?

Let me start by apologizing for the length of the following but as much as the various political machines would like everyone to believe this is a simple matter, it most assuredly isn’t, thus the need to use far more than the 50 words or less the leaders of the parties are so expert at casting out.

To begin, just what have Mr. Ignatieff and Mr. Harper actually promised?

After piecing together various comments from both men, their statements differ depending on where they’re campaigning and in which official language being used, here’s the result.

Michael Ignatieff likes the idea of co-operation between provinces and regions but… since he hasn’t seen all the details he’s only willing to say he stands behind the project and would likely support a loan guarantee.

This may be seen by devout Liberals as a promise but it’s a little too ambiguous to truly pass the smell test.

Speaking of undesirable odors, Mr. Ignatieff also said he would like to see the entire Lower Churchill project developed in future, not just the currently planned Muskrat Falls section. His belief is that other provinces, he specifically identified Quebec, should play a part in developing the remaining, and much more valuable, Gull Island portion of the river.

On this point I smell something very fishy indeed and not at all in Newfoundland & Labrador’s favor.

The question then becomes: After the election, should he win, do Michael Ignatieff’s words indicate that he might try to tie a possible loan guarantee to some form of agreement with Quebec on development of the Gull Island generating station?

After living with the fallout of the existing Upper Churchill contract nearly my entire life (with thirty years to go if I live well into my seventies) I have to wonder about statements like that. Remember it was Ottawa’s refusal to defend the Constitutional right of provinces to access markets that played such a big part in the existence of that one sided contract in the first place.

I shudder consider a scenario where Newfoundland and Labrador is locked into an arrangement that only permits hydro development on terms agreeable to Hydro Quebec and the Quebec government.

As for Mr. Harper, he’s said he’ll provide a loan guarantee, or equivalent funding, as long as the development meets certain criteria.

If (and only if) the project meets a test for financial feasibility, regional development value and greenhouse gas reductions will a loan guarantee be put forward.

On the surface those criterion sound perfectly reasonable but what exactly are the measurements of each and what constitutes a pass or a fail?

These non-specific criteria, though mana from Heaven to Conservative followers, are in fact an off ramp a two year old could drive an eighteen wheeler down.

Repeatedly when speaking about his “promise” Mr. Harper has also crowed about how much the project will mean for regional co-operation and for reducing Canada’s greenhouse gas emissions. He’s even spoken of the virtues of power produced in Newfoundland and Labrador serving as a replacement for dirty power generated in Nova Scotia and New Brunswick. I don’t disagree with any of this but I’m quite struck and very concerned by something he has, almost intentionally it seems, not said.

Not once has Mr. Harper made any mention of Newfoundland & Labrador’s intention to sell excess power into the lucrative U.S. market.

The ability to reach those markets is what Quebec has denied to Newfoundland and Labrador for generations and it’s exactly what every politician in Quebec is railing against ever since Mr. Harper’s “promise” hit the news wires.

Could it be that the Harper Conservatives plan to use, as part of his mysterious approval criteria, the caveat that power generated by the Lower Churchill project, with federal assistance, can only be used to benefit Canada as a whole (read: only sold and used within Canada)?

Such a move would, of course, destroy Newfoundland and Labrador’s energy and financial aspirations and would guarantee that any power not purchased in the Atlantic region would inevitably flow to the end of the line, so to speak. Not into the U.S. at all, but into Quebec.

In such a scenario, any energy not required by the region and locked out of the U.S. market would be virtually worthless to everyone, with the exception of Quebec. A move like this would allow Hydro Quebec to scoop that power up at fire sale prices and re-sell it, inside Quebec boundaries of course, thus freeing up more of Hydro Quebec’s own power for sale elsewhere at a staggering profit.

There is no doubt any conditions of this sort would mean the law of supply and demand will benefit Quebec alone, certainly not Newfoundland & Labrador.

Do such scenarios sound a bit too dastardly for Michael Ignatieff or even for Stephen Harper to consider? Perhaps, but a similar approach isn’t without precedent.

A number of years back Ottawa pulled the same stunt when they sold the then bankrupt Come by Chance oil refinery, also situated in Newfoundland & Labrador. The people of the Province wanted the refinery back online and access to the jobs that would come with the sale. Ever the fair bunch that they are the feds agreed to a sale under the condition that beyond what oil would be produced for use in Newfoundland and Labrador, not one single solitary barrel would ever, ever, be sold inside Canada’s border. It never has and never can be.

At that time it was the Irving family screaming and being placated by Ottawa. What’s to stop Hydro Quebec from doing it this time around?

Adding to the mass confusion around these so called “promises” are statements made by characters other than the federal candidates themselves.

Bloc leader, Gilles Duceppe, has called these “promises” a slap in the face for Quebec and said Ottawa is using Quebec tax dollars to help Newfoundland and Labrador unfairly compete with Hydro Quebec.

Quebec Premier, Jean Charest, has said that it isn’t right for Ottawa to subsidize power rates in Newfoundland and Labrador since Ottawa never helped Quebec develop its power grid.

Ontario Premier, Dalton McGuinty, is screaming blue murder that Ontario tax dollars are being used to support Newfoundland and Labrador. As a result, he says, Ontario wants support from the feds for its projects, the price of which McGuinty will, “…determine later”.

As they say, never let the truth get in the way of a good lie.

Suppose for a moment that which ever party forms the next government actually keeps their promise to Newfoundland & Labrador, without locking the Province into a catastrophic agreement, what would that actually mean?

It means that regardless of what Mr. Duceppe, Charest or McGuinty say, a loan guarantee doesn’t actually require money from any federal taxpayers, no matter where they live. It's like a co-signature on a loan, nothing more.

Consider as well that while crying about subsidization more than 70% of the profits of Hydro Quebec (a provincial corporation) are a direct result of locked in 1960’s prices for energy Quebec resells at a monumental profit thanks to the afore mentioned Upper Churchill contract.

Even developed at the kind of lower interest rates a loan guarantee would bring Newfoundland and Labrador's Lower Churchill project could never come anywhere close to producing power as cheaply as Quebec is getting power from the Upper Churchill, so who is subsidizing whom?

Never mind as well that Quebec’s & Ontario’s grids are fully inside their respective Provinces while the proposed transmission system for the Lower Churchill would cross provincial boundaries and travel under the ocean, which is within federal jurisdiction. Ottawa should play a role.

Let’s also ignore the fact that with the borrowing power of both Ontario and Quebec, at least in the past, has been similar to that of the Federal government meaning loan guarantees of any kind would have had little if any benefit to either Province.


Add it all up and it’s one heck of a situation isn’t it?

So far Newfoundland and Labrador has received little more than weak election promises, no contract has been drafted and no passing or failing grades have been given to the project by Ottawa, yet look at the fuss.

If, even after all the concerns I’ve expressed so far, these promises are actually fulfilled in the end, Newfoundland and Labrador will only receive a loan guarantee which actually costs taxpayers nothing, zip, zero.

Well…

It’s here that I have to also admit to being guilty of not letting the truth get in the way of a good lie since I’m willing to wager my substantial penny collection that these “promises” will actually cost taxpayers a great deal, though they shouldn’t.

Just days after the “promises” were made, in order to placate the complainers, agreements have been made on the $2.2 billion dollars (of real taxpayer money) Quebec wants for introducing the HST decades ago.

It’s also been reported that Ottawa will help Quebec with building a new bridge. It’s not yet clear if this will be in the form of a loan guarantee or actual tax dollars but coincidentally the bridge project is valued at almost exactly the same $6 billion dollars or so the Lower Churchill project is expected to come in at.

I can’t wait to see what kind of goodies the Ontario government will milk the situation for over the coming weeks, especially after Mr. McGuinty’s statement that he’ll determine the value of what he wants later.

As I said at the start of this lengthy commentary, nothing is as simple as the political parties would have us believe.

In the end Newfoundland and Labrador may actually end up with nothing from the federal government, not even a simple signature, or perhaps worse, find itself locked into an agreement that destroys its financial future. Either way, you can hang your hat on the fact that Ontario and Quebec will surely benefit from the carrot now being dangled in front of voters in the Province.

As McGuinty, Charest and Duceppe have said in the past few days, this promise will cost a great deal of taxpayer dollars, but they failed to mention that Ontario and Quebec are the provinces that will receive those dollars, not Newfoundland and Labrador.

Based on the numbers being bandied about, by the time this election is over what should have been a free promise to provide a free loan guarantee for the Lower Churchill project will assuredly end up costing taxpayers far more than the entire Lower Churchill price tag itself, with not one penny going to the proponents of the project.

So, was Mark Twain correct when he said, “Better a broken promise than none at all.”?

I’m not convinced, but it’s pretty clear Mr. Twain didn’t spend much time in Canada.

How much does a Quebec stadium cost to build these days anway by the way? Hmmmmmm....