Is it really another giveaway?

Peter
Peter Jackson
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Why are we always giving stuff away? I mean, that’s what we’re doing, right? Giving it away?

Every few days, the clarion call goes out, in the words of our pride-restoring former premier: “No. More. Giveaways!”

But does it stop? Hardly. We may be proud, strong and determined, but we are clearly generous to a fault.

Liking that offshore oil, Exxon Mobil? Go ahead, help yourself. Take as much as you want. Just plug it up again before you leave.

Got a hankering for that nickel, Vale? Go for it. Cart that rock right on out of there. We’ve got no use for it.

And what do we get in return? Nothing.

Well, nothing, that is, except for taxes and royalties and super royalties and equity stakes, and more jobs than we have workers to fill.

Fact is, anyone who still rails about us giving stuff away needs to take a long, deep breath. When you give something away, you don’t usually get cash for it.

Last week, Premier Kathy Dunderdale and Natural Resources Minister Jerome Kennedy announced they had accepted a financial penalty of $150 million in lieu of Exxon constructing a third topsides module in this province. The Hebron project will still see the main gravity base structure and two other modules constructed here.

Dunderdale has been playing

the no-more-giveaways card for months, ever since the company announced it wanted to move the work elsewhere. Whether or not she knew or wanted to admit it, the contract was likely as good as gone right from the beginning.

 

Legitimate labour shortage

The 2008 Hebron deal stipulated that all three modules would be built in the province as long as there was sufficient labour to do so.

Needless to say, there isn’t.

Industry experts have been sounding the alarm for years, but little was done. The original Hebron deal saw a mere $1 million earmarked for training at MUN and the College of the North Atlantic. The Hebron benefits agreement calls for $120 million in research, development, education and training over the life of the project. But with the local labour pool drained, and a need for foreign workers that’s already evident in other areas, the third module was probably toast long ago.

The opposition parties foresaw this dilemma back in 2008. While they can certainly claim bragging rights now, any expression of shock or dismay at the current news rings a little hollow.

 

A decent payoff

And while some question whether $150 million is adequate compensation, it’s no less than the estimated value of the contract itself. It’s too early to calculate whether the economic value of projects the province plans with that money will make up for the lost work. Odds are there won’t be a significant difference.

This is not even the first time Exxon has agreed to make up for lost work. In 2010, the company announced a $20-million barge construction project to replace lost work from a decision to cancel pre-drilling operations at the Hebron site.

Temporary work booms do little for the long-term health of the local economy. Jobs may be top of mind when big projects come to town, but the real action comes from royalties and taxes. Long after the platforms are built, oil revenues continue to pour into provincial coffers.

Newfoundland has proven it has the workforce and infrastructure to accommodate offshore oil construction. The remaining work planned for Hebron — and the expected windfall — far exceeds that created by the Hibernia project.

Losing one module — with a cash consolation prize — is hardly a giveaway.

 

Peter Jackson is The Telegram’s commentary editor. He can be contacted at pjackson@thetelegram.com.

Organizations: College of the North Atlantic, Exxon Mobil, Hibernia

Geographic location: Hebron, Newfoundland

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Recent comments

  • yip, it's a duck
    October 18, 2012 - 11:43

    there are not enough workers in Alberta to run the oil sands. what do the oil companies do? they go find the workers and pay what is needed to get the workers to travel to Alberta and work in the oil sands. if the oil sands were located in Newfoundland the Newfoundland government would look for a way to move it out of the province so as to allow the oil companies to do the job using cheaper labour.

  • William Daniels
    October 17, 2012 - 18:21

    If it walks like a duck. Pure givaway.

    • Willie Dan
      October 18, 2012 - 08:21

      Even if was the goose that laid golden eggs, some people will still claim it's a 'pure givaway'.

  • Old Salt
    October 17, 2012 - 12:26

    The module, promised by signed agreement, is now gone. We get $150 million in lieu. For me, the comedy in that is- a) how quickly the premier had priorized projects and allocated that money for expenditure and. b) the vast number of projects it will cover off. The other chuckle I got from that announcement was watching both Dunderdale and Jerome Kennedy justify the trade-off. Jerome has that special little mannerism of looking back at the premier (in this case) as if to ask..."Am I doing OK"? In actual fact, I think the announcement of the wonderful things they would do with the $150M was to redirect attention AWAY from having accepted the trade-off in the first place. If, in fact, the premier can do all the projects that she promised with that $150M, then I suggest that she let all provincial revenues pass through that Oil Company's books so that it receive the miraculous blessing for ultimate acheivement. We would get sooo much more value for every dollar.

  • hawthorne
    October 17, 2012 - 08:49

    Bravo Peter. Common sense overview of the facts. Actually, if the module was built here, with demonstrable schedule delays, the reality is the module would have cost three times as much as the $150M and we'd be out millions in Roylties. Building it elsewhere, within budget and on schedule is in the best interest of all concerned. Sometimes some of us are greedy and grandstand for the sake of politics.

    • a business man
      October 17, 2012 - 09:07

      Exactly. The best interests of the majority of taxpayers is served by avoiding local workers. The company's interest too, and that is why they agreed to PAY $150 MILLION to avoid newfoundland's workers. Frankly, I do not blame them.

  • Frank M
    October 17, 2012 - 08:47

    You ommitted OCI exporting 75% of its quota at Fortune for some jobs. We have always been that way. Glib PR by former or current Premiers will not change that fact. We lack the sophistication to play in the big leagues. By example, since a settlement has been reached with Exxon to build the Hebron module elsewhere, why must the Province wait nearly 5 years for the cheque? The deed is done, the settlement agreed to and Exxon has the deep pockets to pay it today without even noticing. It is because the contract states any settlement would not be awarded until the module would have been near completion. Outfoxed by big corportae lawyers. We are a Have province, we have a settlement cheque for $150 million but do not lose sight of the fact we have the highest unemployment rate in Canada.

    • Christopher Chafe
      October 17, 2012 - 12:53

      Frank M, while I do agree with you in principle with what you are saying I have to disagree with what you are implying in the last sentence of your post. The "givewaways" are not the main reason why we have such a high unemployment rate. Our attitude is the main reason why we have so many people not working.