Some possible solutions
Posted on November 20, 2020 | Atlantic Business Magazine | 0 Comments
In my last piece I identified the very serious extent of Newfoundland and Labrador’s fiscal situation. I also promised to offer up some possible solutions in this edition. In no order of priority, let’s dive in…
First, I recommend a comprehensive overhaul of the CNLOPB, the federal/provincial agency responsible for regulating the province’s offshore oil industry. Regulatory oversight and its associated processes have made the province the most expensive jurisdiction in the world for oil companies to explore and extract oil. The harsh and remote nature of the offshore environment obviously contributes a great deal to those costs. There is much we can learn from the more mature and prolific North Sea basins, administered by the United Kingdom and Norway. We should immediately harmonize all our regulations with theirs, including those of Transport Canada. No more ripping out central vacuum systems in the accommodation areas of drilling rigs to install ones compliant with Canadian regs. (While that’s a silly, albeit true, example, it does point to the scope of the problem.) Those jurisdictions have learned how to adjust taxes and introduce incentives to help the industry through the sorts of cycles in which we now find ourselves. Moreover, we need to be much more responsive to industry applications. Time is a critical component of costs. The best way, in my opinion, to achieve this is to change the mandate of the CNLOPB. Its objective should be to maximize revenue for the community and the government both directly and indirectly — and under an over-arching priority of safety and environmental best practices. Every decision should be weighed in that context.
We need to extract all the oil we can while it still has economic value, understanding that in so doing we are simply replacing a similar quantity of oil from another jurisdiction without adding a single ounce to global greenhouse emissions.
Second, we need to embrace and promote immigration. Although Atlantic Canadians, and Newfoundlanders in particular, are a very hospitable people, we are not good at opening our communities to people from ‘away’. We often consider them threats, here to steal ‘our’ jobs or to take advantage of our generous social support systems. There is a huge difference between a good immigration policy and a poor one. We should throw open our borders to anyone with a university degree or a technical skill. We want people who want to come here to work and contribute. We don’t want people with criminal records or no obvious ability to self-employ or be employed. (I should add there is now and always should be a humanitarian component to our immigration policies under which we welcome refugees.) It is virtually impossible to grow an economy absent population growth and the hard data tells us we are failing in this area. Immigration in the numbers we need will only happen if we promote our community to the rest of the world as a great and welcoming place to work and live—and we have to prove it.
Third, we need to get on with supporting the economy of tomorrow. That economy is resident in a vibrant startup, small business ecosystem. We are seeing signs of this now—incubators are full across the region. Entrepreneurial juices are flowing and the interest in starting one’s own business has never been so high. But we need to feed this eco-system. We have to be more tolerant of failures, do a better job of embracing the role of small businesses in supply chains. Governments and larger businesses need to better understand how to engage with emerging companies. We must communicate and celebrate the innovation and creative ideas resident in many of the dreams of young entrepreneurs and provide mentorship through their infancy and growing pains. This emerging sector of our economy is what will replace the jobs and tax revenues now resident in the sunset industries of hydro-carbon production and attract real talent to our region.
Fourth, we need a transition fund—a source of capital which will finance the next five or six years of deficits as our political leadership right-sizes the provision of services and government staffing levels to the capacity of the economy to support such a cost. That capital could be linked to the revenues the province will be entitled to when the current Churchill Falls contract with Quebec expires. Yes, that is over 20 years away but it is a secure source of new revenue. While the parameters of a new deal with Quebec are uncertain, we do know the province will be able to secure a much greater share of the revenues being produced by this incredibly valuable asset. And we also know for certain the price or value of electricity will be higher in 2043 than it is now.
I have more ideas, but I’ll save those for next month. In the interim it is vital we all understand this is not a problem from which any of us are immune. This is not a problem for which any current government or political leader is to blame. This is a problem for which we all bear responsibility and we must all understand the role we can play in transitioning to a more sustainable and exciting (and there is no reason it can’t be) period of growth for our region. The problems and the solutions are in our hands. Remember that. •
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