The following letter was sent to the Globe and Mail by Premier Danny Williams and published in yesterday’s paper.
Newfoundland won’t be held ransom by big oil companies
Newfoundland and Labrador’s economy is growing stronger every day. In the 2005-2006 fiscal year, for the first time in our province’s history, we recorded a budget surplus. Our economic turnaround is based on successfully diversifying our economy into several non-traditional industries, including advanced marine and ocean technologies, mining, agrifoods and tourism, to name just a few. And our government is committed to ensuring that we develop a broad economic base that reaps long-terms benefits, with a view to sustaining generations of Newfoundlanders and Labradorians to come.
Our oil and gas industry continues to be an important part of our economy. We currently have three producing oil fields, and the Hebron-Ben Nevis project is the next field on the horizon. Unfortunately, this week talks broke down between our government and the four partners – Exxon Mobil, Chevron, Petro-Canada and Norsk Hydro. It was most unfortunate; however, from our province’s perspective, it is not the end of our industry, nor should it be taken as a sign that our government is not investor- or business-friendly. Indeed, nothing could be further from the truth.
Our government is, however, mandated by the people to ensure that we receive improved benefits from our oil and gas resources. In fact, our election policy platform from 2003 clearly states that we will be seeking greater benefits and equity in future projects. To understand our government’s perspective, we must consider the vast sums of money that international oil and gas companies are making around the world. For example, the four partners in this potential development earned approximately $54-billion in profits in 2005 alone, with total revenues of more than $592-billion.
All our province is requesting is a small stake in our own resources. We have been in negotiations in good faith for several months now, and this issue has always been on the table. As we move the oil and gas industry forward, we feel it is important for Newfoundland and Labrador to have a stake in its own future and a fair equity stake. This is not unreasonable, and indeed, we feel that having a stake would be something the oil industry should welcome. It means that we share the risks and the rewards. These resources are finite and we, as a province, must be able to achieve greater prosperity for our people. This will help to create new opportunities, and ultimately help us to realize our goal of being self-sufficient and a net contributor to this great federation.
We are not anti-business, and we are not playing “hard ball” with big oil companies just for the sake of doing so. We are simply standing up as a people and asking for a piece of the action. And let’s be frank — the action is substantial.
Companies talk about wanting stable and predictable parameters when negotiating development agreements. I agree, that to an extent, stability is important. But times have changed since many of these fields were discovered. The Hebron field, for example, was discovered more than 25 years ago. And yet, it sits still. Undeveloped. The price of oil today — and forecasts for the future – make this an attractive and lucrative project.
The demand from companies for a half-a-billion dollars in tax incentives is something our government is simply not willing to contemplate. How can we ask our citizens to continue to bear the burden of high oil prices, and turn to companies making billions of dollars, and give them tax incentives and breaks on fuel prices? It is frankly offensive and something our government will not consider.
Newfoundland and Labrador has been a very good partner for the oil and gas industry. In turn, the oil and gas companies have, for the most part, been good corporate citizens. But as prices continue to rise, and companies continue to take home exorbitant profits, it is reasonable and fair to expect increasing returns for the province.
We want to move forward with this industry in Newfoundland and Labrador in partnership with industry. We are not, however, interested in being held ransom by companies who are unwilling to negotiate fair and reasonable terms.
I would say to those companies that are not interested, to simply move on. Go elsewhere to make your money and leave the development to those companies who are interested in actually moving the industry in our province forward.
We welcome and encourage development in Newfoundland and Labrador. But not at any cost. We may be small in numbers. But we are strong in our determination and in the conviction of our principles. We will turn down what some perceive to be a good deal, rather than do a deal that is bad for the province. The oil is not going anywhere. And neither are we.
Danny Williams is Premier of Newfoundland and Labrador.