Deal sops up red ink from N.L. treasury

Rob Antle
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Projected deficit plunges even more

The final deal on the Hibernia South extension announced Tuesday will erase $158 million from this year's provincial deficit.

That's because it resolved a 13-year-old dispute over how oil companies deduct transportation costs for the purposes of calculating royalty payments.

The final deal on the Hibernia South extension announced Tuesday will erase $158 million from this year's provincial deficit.

That's because it resolved a 13-year-old dispute over how oil companies deduct transportation costs for the purposes of calculating royalty payments.

The agreement triggered payout earlier on the Hibernia project.

Payout is the point at which the oilfield recovers all of its development costs. When that happens, the province's royalty rate jumps to 30 per cent from five per cent.

The final deal - and quicker payout - means an extra $158 million will pour into the treasury this fiscal year.

And even though the province announced a tentative deal on Hibernia South last year, it did not take that additional cash into account when making its financial projections.

The extra $158 million "all goes right to the bottom line," Finance Minister Tom Marshall told The Telegram Tuesday.

Last spring, the government predicted a $750-million deficit.

In December, officials revised that total down to $443 million, citing stronger-than-expected oil prices.

The extra cash from the Hibernia South deal would effectively reduce that figure to roughly $285 million.

And that does not take into account continued strong oil prices, and a recovery in the province's pension plans.

Increased pension costs comprised hundreds of millions of that original $750-million deficit estimate.

At a public forum commemorating the 25th anniversary of the Atlantic Accord last week, Memorial University economist Wade Locke suggested the 2009-10 deficit would be much lower than expected, and possibly headed towards zero.

But Marshall would not be drawn into a conversation about whether the red ink could be entirely wiped away this year.

"I have never been told anything that will indicate to me that we will not have a deficit this year," Marshall said.

"Now this $158 (million) is obviously going to help, but there's still a ways to go. You do the math."

The fiscal picture should become clearer when the provincial budget is tabled. That is expected to happen next month.

rantle@thetelegram.com

Organizations: Hibernia

Geographic location: Hibernia South

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Recent comments

  • shem
    July 02, 2010 - 13:33

    Money from oil and gas should be reinvested into other sectors of the economy as well as a diverse portfolio of investments outside of our province. Oil and gas revenue is a one time cash influx, we are liquidating assets here, not generating sustainable income for provincial coffers. Paying off debt is just going to leave us broke and borrowing again once the oil money is gone. There needs to be a resource fund, simular to Alasks's permanent fund within our province that wil generate revenue from its savings (through interest and sound, diverse investments)...then use that money to pay off debt while never depreciating the principle, otherwise were just running in a circle. oil and gas will eventually run out and what will we have left for ourselves, and our childern....good job danny this, good job danny that....people need to wake up and question where and what oil revenues are being spent on, this is the only shot we have as a province to work towards lasting prosperiety. Just because danny's there and fighting for us, doesnt mean we can sit back and not fight for ourselves..BE AWARE, TAKE ACTION, GET INVOLVED AND CONSTANTLY QUESTION BOTH GOVERNMENT AND INDUSTRY.

  • Bert
    July 02, 2010 - 13:31

    Good news story after good news story!!! The Danny bashers are running out of ammunition to throw at the supporters. Their ammunition was wet anyhow. Calling supporters names was all they could find wrong with Danny. I wonder will this cause Russell or Pam to write an editiorial complimenting the Williams govt.

  • Pam
    July 02, 2010 - 13:14

    Bert, don't change that dial.

  • Saucy Face
    July 02, 2010 - 13:11

    Well that Danny Williams is one dirty so and so! Imagine, going against all those previous government's long standing policies of living with deficits and driving up our debt. The nerve of him for looking after our money in such a responsible fashion!

  • shem
    July 01, 2010 - 20:22

    Money from oil and gas should be reinvested into other sectors of the economy as well as a diverse portfolio of investments outside of our province. Oil and gas revenue is a one time cash influx, we are liquidating assets here, not generating sustainable income for provincial coffers. Paying off debt is just going to leave us broke and borrowing again once the oil money is gone. There needs to be a resource fund, simular to Alasks's permanent fund within our province that wil generate revenue from its savings (through interest and sound, diverse investments)...then use that money to pay off debt while never depreciating the principle, otherwise were just running in a circle. oil and gas will eventually run out and what will we have left for ourselves, and our childern....good job danny this, good job danny that....people need to wake up and question where and what oil revenues are being spent on, this is the only shot we have as a province to work towards lasting prosperiety. Just because danny's there and fighting for us, doesnt mean we can sit back and not fight for ourselves..BE AWARE, TAKE ACTION, GET INVOLVED AND CONSTANTLY QUESTION BOTH GOVERNMENT AND INDUSTRY.

  • Bert
    July 01, 2010 - 20:20

    Good news story after good news story!!! The Danny bashers are running out of ammunition to throw at the supporters. Their ammunition was wet anyhow. Calling supporters names was all they could find wrong with Danny. I wonder will this cause Russell or Pam to write an editiorial complimenting the Williams govt.

  • Pam
    July 01, 2010 - 19:52

    Bert, don't change that dial.

  • Saucy Face
    July 01, 2010 - 19:48

    Well that Danny Williams is one dirty so and so! Imagine, going against all those previous government's long standing policies of living with deficits and driving up our debt. The nerve of him for looking after our money in such a responsible fashion!