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GUEST COMMENTARY: Equalization, Muskrat Falls, we need solutions

An aerial view of the Muskrat Falls site. — File photo
An aerial view of the Muskrat Falls site. — File photo - Contributed

Yes, this province is in a difficult spot now. And yes in the case of Muskrat Falls, it is largely, but not entirely, of our own making.

Not only is the Muskrat Falls energy-cost shock coming, we have been, and are still running year-over-year provincial budget deficits. The current running rate is around $3 million every day, just to keep operating, and the end is not in sight. Everyone knows, or should know, that is just not sustainable.

That said, there is a federal equalization program designed to address regional standard of living differences. However, the rules for funds distribution have changed over the years, and exclude the current circumstance Newfoundland and Labrador finds itself in. Further changes were proposed prior to the 2019 federal election and would have seen additional funds flow to Newfoundland and Labrador. However, the government of the day decided to maintain the status quo.

All of this, and the chaos created by the COVID-19 pandemic means immediate steps are needed to right the ship. The province is blessed with natural resources needed to supply world demand. We have an abundance of minerals, oil and hydro electric potential. If managed properly, those resources can be developed to benefit the provincial economy such that residents can enjoy a standard of living at least equal to the Canadian average. We have tourism and hospitality industry growth potential that can be unlocked with better infrastructure. Government response to the pandemic to date has been exceptional, but, who’s minding the economy?

Defaulting on our provincial financial obligations would get their attention. Without a major intervention, we are headed there, The only question is how long it will take? Given our dependence on oil revenues, and the pandemic and resulting world economic chaos, it could come sooner than most people realize.

The federal government just bought an unfinished, stranded western Canada pipeline that at best is a longshot to ever make money or even operate. Our Muskrat Falls problem, is similar and no less important or urgent.

The biggest obstacle we face is getting federal attention. We only have seven of 338, or two per cent of the MPs, none of whom appear to have any particular clout with the Prime Minister’s Office (PMO). Six are with the governing Liberals. With the current administration, it appears all decisions of national importance emanate from the PMO. Whatever their strategy was with the pipeline purchase, my sense is we do not rate anywhere near that level of attention.

Defaulting on our provincial financial obligations would get their attention. Without a major intervention, we are headed there, The only question is how long it will take? Given our dependence on oil revenues, and the pandemic and resulting world economic chaos, it could come sooner than most people realize.

Let’s be blunt, for reasons far beyond Muskrat Falls, the Newfoundland and Labrador economy is in serious trouble. We need our federal government to step in: to deliver the promised solution for Muskrat Falls rate mitigation to maintain our electrical energy cost in line with neighbouring provinces (and no, shifting liability from ratepayers to taxpayers will not help); and a fix for the broken equalization program or an alternative that addresses standard of living and infrastructure disparities with the rest of Canada.

There have been calls for a task force comprised of business, community group and other community leaders to investigate solutions to our untenable debt, and to look for options for economic growth and development. Given where current and past policy planning has landed us, that needs to be done.

Ottawa has promised action. Will it happen before time runs out? It should. Newfoundland and Labrador is contributing billions to a neighbouring, provincially owned public utility, through windfall profits on the sale of energy from Newfoundland and Labrador’s Upper Churchill Falls hydro project. Their domestic per kilowatt hour (KWh) energy rate is the lowest in the country at 7.3 cents per KWh versus N.L. at 13.8 cents per KWh which, without intervention, is about to explode. The same province is already getting over half of the total equalization pie ($11.7 billion of $19 billion in 2018-19, and over 50 per cent of the program payout since inception).

So yes, we do help each other. It’s the Canadian way.

(Editor's note: This is Part 2 of a commentary. Part 1 appeared on July 4.)

Rolly Card,
St. John's

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