Premier behind 1985 Atlantic Accord slams new deal for length of fixed term
Brian Peckford lends his voice to cavalcade of mixed opinions on $2.5B deal
Thoughts of Joey Smallwood and Hydro-Québec popped in Brian Peckford's head as he read the details on the renewed Atlantic Accord on Tuesday morning.
"A fixed deal for 37 years? The first thing rings in your mind is the Upper Churchill contract where we lost out badly because we had a fixed number," he said. "What are we doing negotiating a fixed deal for 37 years?"
Peckford — the premier who signed the original Atlantic Accord in 1985 — wonders if this deal could become lopsided at some point in the future, since the contract states payments are "fixed and shall not change over time."
This is an accounting sleight of hand.- Brian Peckford
The deal was announced Monday at the Sheraton Hotel, as Premier Dwight Ball and member of Parliament Seamus O'Regan stood side by side.
While the payments will be made until 2059, Ball said the money will count towards our net debt immediately.
Peckford, the Tory premier of Newfoundland and Labrador from 1979 to 1989, isn't impressed by the promise to pay down the debt today.
"This is an accounting sleight of hand, where you take monies that you are going to get over time and bring it back and say you are going to reduce your debt now. It's an accounting procedure more than anything meaningful on the ground to Newfoundland."
Ball told CBC Radio's On The Go that Peckford's concerns about a fixed term are invalid, because the bulk of the money will be paid early in the contract.
The first 11 years are front-end loaded, with about $2 billion being transferred to the province by 2030.
"We don't have to sell this deal," he said. "It stands on its own."
What's the motive?
Economist Wade Locke is speculating on why the federal government would fork over $2.5 billion to the province for any other reason than politics.
"It could be purely political, in terms of hoping to provide some resources to the provincial government so that people would feel good about the current [federal] government, which happens to be Liberal," he said.
Or it could be the federal government is trying to safeguard the province to show bond ratings agencies that Canadian provinces are solid, he said.
There is nothing in Canadian law that states the feds must save a province from bankruptcy, but it's always been an implied safety net, Locke said. Provinces can continue to borrow money at lower interest rates if the agencies know Ottawa will back the provinces when necessary.
"It's the only thing that makes any sense, if you think about it for a second," Locke said.
"We have the highest per-capita revenue in the country, bar none. So you're taking money from other provinces through the federal government and transferring it to this province.… It's hard to understand why you would do that, other than the fact that you're exposing the rest of the provinces to a risk, if we were to go and get into financial trouble."
It's good for the province.- Wade Locke
Just as Ball stated it would, Locke said the province can count the money as new revenue now and factor it into its budgeting.
While politicians are staying within party lines while debating the merit of the deal, Locke said it's positive from an economic standpoint.
"It's good for the province. It generates additional revenue they otherwise wouldn't have, and it'll make it a little easier to deal with the fiscal situation they got."
NDP raising questions about rate mitigation
In the deal with Ottawa, there is going to be federal involvement in rate mitigation of Muskrat Falls, steady revenue from oil royalties and no restrictions on the use of the money.
But NDP Leader Alison Coffin said the deal has left her "with a lot of questions," in particular about the agreement with oil revenues, which will see a consistent amount of money coming in even when the price of oil is low — as well as when it's high.
I think perhaps had we done this a little bit earlier we would have less outmigration .- Alison Coffin
Coffin said that will mean when the market is good, the province won't have more royalties coming in; she also doubts if oil drops severely low that money will continue to come in from Ottawa.
The timing of the deal, as well, is something Coffin questions.
"It's very convenient, for sure," she said.
Like Peckford, Coffin said the amount of money is a pittance when considered it will be given over three decades.
"There's often justifications of, we're a smaller province, we have a lower population, we have a smaller GDP, but we also have a fairly substantial need," she told CBC's St. John's Morning Show.
"I think there needs to be a reconsideration of how those federal government transfers are moved to the province, especially when the federal government were the people who signed the loan guarantee for us in the first place."
'We need to work with what we have'
Meanwhile, Labrador MP Yvonne Jones said this is not the kind of deal reached overnight, and it may seem like it took a long time, but the federal government had a lot of work to do to ensure a fair deal was reached.
"We needed to continue to give back what rightfully belongs to the people of Newfoundland and Labrador," she said.
"Projects like Muskrat Falls, that component is in this agreement because that is a new energy development project, it is a new resource sector. It is where the government of Canada would like to see our country going today, to move us off fossil fuels."
Muskrat Falls is a step in the direction of a "refined climate agenda," Jones said, adding the province "stepped up in a big way" when it sanctioned the project.
"Whether that project was financially secure or necessary or unnecessary, it is there today. It is there. We can't change that," she told CBC's Labrador Morning.
"We need to work with what we have. And one of the pieces to that project is ensuring the financial stability of Muskrat Falls and ensuring that there's a rate-structuring plan within Newfoundland and Labrador that taxpayers can afford."
With files from Labrador Morning and The St. John's Morning Show