A great man once said, "Politics is inherently stupid." That great man was me.

Tuesday, October 24, 2006

Fallow Field Legislation

Last week, Newfoundland Danny Premier Williams made the national news when he very publicly chewed out the Prime Minister over Harper's opposition to "fallow field legislation." It's grated on me ever since. On the one hand is my belief in Canadian conservatism, and on the other is my love of my province. The trouble is, I can't support one without contributing to the detriment of the other.

For those of you who've been busy with other things, let me briefly explain to you what the situation is: in case you haven't noticed, Newfoundland and Labrador isn't the wealthiest province in Canada. This is despite overwhelming oil and gas resources in an energy based world economy (and a fishery that, until 1992, was the richest and most productive in the world). The province has so much potential to be wealthy, and yet remains economically stagnant. A contributing factor to this problem is constraints put upon the province by the federal government.

In an effort to end this economic stagnation, the province is actively pursuing oil and gas production. But there are several obstacles in our way: first, the federal government currently claws back through equalization almost all natural resource revenues the province generates. Equalization was not meant to be a zero-sum game; the aim is for provinces to pull themselves out of stagnation and get moving again. The current system makes this impossible for a resource-based economy like that of Newfoundland and Labrador. The second is the fact that by federal law, Newfoundland and Labrador is not allowed to build a refinery to process its own oil. I'm not making this up.

That's why the Atlantic Accord was so important to us, and that's why most Newfoundlanders and Labradorians stood by the regrettable (but unfortunately necessary) decision to pull down Canadian flags over the issue. The fact of the matter is that Martin left the province with no other choice. Oil is a non-renewable resource - Newfoundland cannot afford to have it sold for the benefit of the federal government while it stuggles along trying to provide basic services for its citizens.

Enter the current conflict over fallow field legislation. For those of you who aren't aware of the concept, it means that if oil companies purchase the rights to drill for oil in an area, they must essentially use it or lose it. As it stands, the development of the Hebron Oil field is indefinitely on hold. Why? Because a foreign oil company with its mind on its already fat and bloated bottom line doesn't like the idea that it should pay a fair royalty regime to the province from which it generates its oil. And so the field sits, undeveloped, while the province stagnates economically. This begs the question: why should a province with four massive known oil fields be poor?

Compounding the problem is that, despite bringing them into confederation, Newfoundland has no control or ownership of its offshore oil. Unlike Alberta, which has direct control over its oil and gas resources because they are land-based, Newfoundland and Labrador has no control over these resources because the oil reserves are based offshore - an offshore it has owned for over 500 years, and yet is now under federal jurisdiction. For this reason, the federal government has an 8.5% share in the royalties of the Hibernia offshore oil field - and yet, a simple 4.5% royalty share is too much for already rich oil companies like Chevron. The feds have already recouped their investment in Hibernia - so why not deliver the share into the hands of an economically struggling Newfoundland? The move can only benefit the nation as a whole. And still, the feds refuse.

The Prime Minister refuses to support fallow field legislation. His argument is that supporting fallow field legislation is harmful to Canada's business interests. I say the interests of Canadian citizens take priority. Should we allow already rich companies to benefit off the backs of a struggling people? Is this morally right? Harper's argument that this sets a dangerous precedent rings all the more hollow when one realizes that Alberta has similar fallow field legislation that mandates oil companies begin to develop an oil field within five years or lose the rights.

The bottom line is this: Newfoundland can't afford to wait around while Chevron refuses to develop an oil field in the hopes that oil prices will rise and that it can get an even more lopsided deal. Harper can only lose in Newfoundland by refusing to support this legislation. Why he will not is beyond me.
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