Confederation Chic

Every history, so they say, is a history of the present. The past is brutally unchanging, but what flares up through its wreckage to the observer hinges on the moment they turn to look back. (“The way to see,” according to one French mystic, “is to not always be looking.”) This is especially true in the case of historical ruptures that never quite get stitched up, or those regularly reopened under political strain. Newfoundland and Labrador’s Confederation with Canada in 1949 certainly fits this bill.

Confederation was legendary in its own time, thanks to both the propagandist in the Premier’s chair and the romantic reaction he generated. As it recedes from living memory its mythic stature will only grow. You need only see Joe Smallwood, ‘Last Father of Confederation’, decked out in a Newfie Republican tricolour bowtie to realize we regard our past through a thickening stained-glass windowpane.

It’s been a great many years since our cozy relationship with Uncle Ottawa has featured so strongly in the anniversary celebrations. Confederation 50 in ’99 was a simmering unease about ‘Our Place in Canada’ after the cod moratorium—and first oil from Hibernia—upended everything in the province. Confederation 60 was a coke- and petro-fueled bender in the brief sunshine of ‘Have’ status and goofy money. The atmosphere around Confederation 70 feels like the grinding hangover, all dull throbbing headaches and paralyzing anxiety and trying to piece together how many times we flashed the Mastercard while out on a drunken rampage.

There was a powerful energy of hyperbolic optimism in the Liberals’ Atlantic Accord announcement. Confederation Chic, let’s call it. Lots of great fanfare about the triumph of Canadian Union and how the Fathers of Confederation themselves would surely be gazing up at us with pride for our sophisticated accounting skills. Premier Dwight Ball even conjured up a reasonably good Smallwood impersonation in his enthusiasm for the new Accord deal. It was almost like the old man himself was there, propped up against a lectern like the corpse in Weekend at Bernie’s.

The ‘Atlantic Accord’ itself did not figure prominently in the party. The original 1985 document was negotiated between the federal government and the province under Brian Peckford to ensure that NL’s offshore oil resources (which are subject to federal jurisdiction under the Constitution Act, 1867) would be jointly managed by both governments and taxed by the province as if they were on land. The Accord was revisited in 2005 by the Danny Williams administration, which managed to collect back payments mistakenly accruing to the feds for their Hibernia stake to the tune of some $2 billion, as well as exempting the province’s offshore royalties from counting against us in calculating Equalization payments. The 2005 agreement included a clause stipulating that it be reviewed no later than 31 March 2019, which brings us down to date.

The $2.5 billion touted by the Premier is part of a new arrangement, the Hibernia Dividend Backed Annuity Agreement. The federal government has agreed to pay the province $3.3 billion (the expected revenue from Ottawa’s 8.5% equity stake in the Hibernia project over its remaining lifetime) over a period of 37 years (2019-2056), minus $800 million in service fees we pay back to Ottawa starting in the 2040s. We assume no actual ownership of the Hibernia stake, and therefore none of the risk or decommissioning costs.

The annuity is front-loaded, meaning the first $1.9 billion will be delivered to the province by 2030. This works out to 11 unconditional annual grants of about $173 million apiece until the end of the coming decade, and then a further 26 unconditional annual grants of $50 million through to 2056 (save 8 annual payments of $100 million between 2045-2053).

Despite 37 years of unconditional grants, the Hibernia revenue arrangement counts as an asset against the province’s net debt for accounting purposes. This—let’s be charitable—will presumably give the state breathing room with creditors and allow the government to slowly (and humanely) ratchet back on spending instead of plunging us into an austerity bloodbath. Premier Ball also proudly insists that the incremental nature of the money ‘guarantees the province will not commit to unsustainable spending,’ which a cynic might interpret as meaning that nobody trusts us not to immediately do something stupid if given a large lump sum of money.

All told, the annuity itself is fine. $173 million blank cheques every year for a decade isn’t a silver bullet but neither is it an insignificant chunk of change. But it is odd that we came away without ownership of Canada’s 8.5% Hibernia stake in favour of the fixed revenue, because Crown equity stakes in offshore developments are the guiding principle of all provincial oil development. Equity stakes in Bay du Nord are supposed to be funding the province’s looming Nalcor 2: Oil & Gas Edition. The two approaches seem fundamentally at odds. It’s all well and good for the Premier to inform us that we’re avoiding the risk that would come with the Hibernia stake, but then why are we taking the opposite line with all our other projects? Our official positions on owning equity seem to be mutually exclusive.

But maybe this is why the reference to rate mitigation appears in the Atlantic Accord announcement; maybe equity ownership was the price of having Bill Morneau commit to looking at refinancing Muskrat Falls or otherwise subsidizing electricity rates. It is difficult to see why else Labrador hydroelectricity would be lumped into discussions about offshore oil—unless it was an effort by government to weigh down both the Accord (and the stunning photo-ops afforded by Confederation 70) with as much pre-election ‘Good News’ as both Premier Ball and Seamus O’Regan could muster.

As for the actual Atlantic Accord itself, both parties have deemed it functioning as intended, pending a more substantive review of federal-provincial joint management within the next two years. The Premier assures us these negotiations include commitments on extending C-NLOPB management to new areas like worker safety and environmental regulation, although there are still scant details on what, exactly, that means in practice. So far, what we do know is that one Marine Protected Area has been opened for oil exploration (the Northeast Slope Marine Refuge) and another one closed (the proposed Laurentian Channel Marine Protected Area). Unfortunately, that’s just enough information for the local opposition to develop the literally delusional claim that this is a “fake” Accord meant to destroy the offshore oil industry. (Three cheers for the future of No-BS politics!)

Charitably, we could say that the real heart of the Accord review is the spirit of close collaboration it enshrines between both levels of government, and the tedious details of its execution are secondary. Less charitably, you might get the impression that producing a spectacle for ‘Confederation Day’ just ahead of a snap election drove the delivery of this heavily-fluffed announcement instead of the other way around.

Whatever else may be the case, however, the Premier isn’t wrong in connecting the Accord announcement to the anniversary of Confederation. The whole thing is certainly symptomatic of the Canadian Union. A 34-year-old side agreement between St. John’s and Ottawa to circumvent dissatisfaction with the country’s 37-year-old still-unfinished effort to overhaul the constitution. After two failed constitutional accords and a secession crisis in Quebec, Confederation works because all parties involved have opted not to look the gift horse too closely in the mouth.

This is the machine Smallwood built for us, fully plugged in and lit up. The system is at the height of its power. Strong Liberal governments in both Ottawa and St. John’s with a powerful local minister in the federal Cabinet to broker deals between the Prime Ministers of Canada and Newfoundland. The partisan stars have aligned and Newfoundlanders and Labradorians can get back to work Developing or Perishing.

Speaking of developing and/or perishing: the real story in the April 1 announcement was not the Accord, or the Hibernia Dividend Agreement, or even the possibility of remortgaging Muskrat Falls. It was Natural Resources Minister Siobhan Coady, hyping the crowd before her Premier took the stage.

“Our offshore sector has never been hotter,” she told an enraptured audience. “All of the operations in our offshore are located in a single basin. We have 20 known basins and 650 prospects. Imagine the potential.”

But as these local festivities were underway, a new federal government report on climate change leaked to the media, revealing that Canada is warming more rapidly than other parts of the planet. Even assuming rapid mitigation, sea levels are expected to rise across Atlantic Canada well above the global average. The provincial government is already assuming nearly seven degrees of warming in northern Labrador by 2050, according to its own climate plan.

None of this could keep the Natural Resources minister from gushing over the prospect of unchecked oil extraction. Who wants to tell our leaders that climate change is cumulative, non-negotiable, and doesn’t offer the option of a four-decade deferred payment plan?

Anyways: every history is the history of its present. Confederation 70 celebrated the province’s special relationship with Canada, both as partner in nation-building and as the benevolent financial backstop that keeps our ruinous fixation on megaprojects from obliterating the Newfoundland state again. The Hibernia Dividend Annuity Agreement was wrapped up in all kinds of properly ‘federalist’ Newfoundland-national symbolism. The 2019 Atlantic Accord is as self-conscious of its historical anniversary as it is ignorant about its broader historical moment.

None of us can predict the politics of the future. But between the federal service payments and the rising seas, it’s hard to imagine they’ll be commemorating this deal for Confederation 100.

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