Sunday, July 27, 2014

Socialized losses, privatized gains

Every megaproject conceived and executed by BC Liberals in recent years has ended with massive cost overruns, despite the predictable "on-time and on-budget" claims. Most involved contractors with foreign domiciles. Check out the Port Mann bridge project, South Fraser Perimeter Road, BC Place renovation, Vancouver Convention Centre, Sea to Sky Highway, Northwest Transmission Line, etc.

Remember claims reported by Canadian Press in February 2013,
"Premier Christy Clark's Liberal government says the development of liquefied natural gas in northern British Columbia represents a generational opportunity that has the potential to wipe out the provincial debt and eliminate the need to pay sales taxes.

"The government's throne speech delivered Tuesday -- less than three months before the start of an election campaign -- said LNG export possibilities represent a possible $1 trillion boost to B.C.'s gross domestic product over the next 30 years.

"Clark announced in the throne speech a new B.C. Prosperity Fund that could accumulate between $100 billion and $260 billion in revenues from LNG royalties and business taxes, enough to wipe out the province's current debt of $56 billion by 2028..."
Since the government's Budget and Fiscal Plan 2014/15 - 2016/17 predicts natural gas royalties about equivalent to unrecorded liabilities now owed producers, Premier Photo Op's promise of wiping out provincial debt by 2028 depends on net royalties earned in fiscal years after 2017. Since Government projects provincial debt will grow to $69 billion by 2017, that will require a contribution of $6.3 billion a year from net natural gas royalties, which is about $6.2 billion more than BC has been averaging recently.

To accumulate revenues between $100 billion and $260 billion by 2043, the last half of Clark's 30 year vision will have to produce between $3B and $17B annually. Anyone out there believe Clark's government is serious about their numbers? Were they serious when they spoke of those dreams? Of course not.

However, what they are serious about is moving into private hands billions of dollars worth of public assets, with portions drifting into the hands of friendly insiders. That means, at least,
  • larger subsidies of gas exploration and production costs,
  • further royalty reductions and waivers,
  • payment by the public for transmission and transportation infrastructure,
  • below-cost energy for LNG liquefaction facilities,
  • relief from environmental regulations involving hazardous wastes and fossil fuel production, and
  • alteration of income tax rules for accelerated write-offs and other benefits.
Multinational LNG operators want BC taxpayers to subsidize and assume commercial risks. It is a profitable strategy and one well practiced. Joseph Stiglitz, American Nobel Laureate, former chief economist for the World Bank and current Columbia economics professor says economic policies of governments are designed to transfer wealth from taxpayers to financial oligarchs. He said,
“There’s a system where we socialize losses and privatize gains. That’s not capitalism, that’s not a market economy, that’s a distorted economy and if we continue with that we won’t succeed in growing, and we won’t succeed in creating a just society.”
Without taxpayers taking on financial and environmental risks, BC's LNG industry will be nothing more than a modest demonstration project created to further BC Liberal election prospects in 2017. The world's business press reports:
International Business Times: "Russia plans to build a gas pipeline and accompanying railroad from its offshore Sakhalin Island fields, north of Japan, through North Korea to South Korea." Korea, India And Japan, Not Just China, Are Looking To Russia For Energy

Washington Post: "Russia now aims to pipe 38 billion cubic meters worth of gas to China annually. 'This is the biggest contract in the history of the gas sector of the former USSR,' trumpeted Russian President Vladimir Putin, who was on a visit to China this week." What the epic China-Russia natural gas deal looks like

Wall Street Daily: [Sinopec] "is putting its first commercial shale gas field into production much sooner than expected... That should mean China will hit its target of 6.5 bcm of shale gas production by 2015. This is a target that western energy analysts had said was unrealistic, but now it’s within sight...", China’s Long March to Shale Gas Development

Financial Times: "Chinese oil company Sinopec will put its first shale gasfield into commercial operation sooner than expected, aiming for annual production of 10bn cubic meters by 2017 as the country seeks to reduce its reliance on imported oil and gas...." Sinopec speeds up shale gas development

Reuters: "China may boast the world's largest potential reserves of shale gas but is likely to lose to Australia in the race to be second behind the United States in bringing significant production on line..." Australia, not China, the next great shale gas hope


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Friday, July 25, 2014

Where the vision and the visionaries?

Thirty-five years ago, the U.S. government's EPA Journal stated,
"Quite simply, Love Canal is one of the most appalling environmental tragedies in American history.

"But that's not the most disturbing fact.

"What is worse is that it cannot be regarded as an isolated event. It could happen again--anywhere in this country--unless we move expeditiously to prevent it..."
Around the turn of the 20th century, developer William Love started building a canal between New York's upper and lower Niagara Rivers. He ran out of money after excavating a 50'-100' wide ditch that extended 3,000 feet. "Love Canal" instead became a municipal dump site and in the early 1940s, Hooker Chemical began using it. The company dumped millions of pounds of dangerous waste products and covered all with clay, dirt and vegetation. According to the State Health Department,
"about 80% of the total chemicals dumped were hexachlorocyclohexanes (e.g. lindane); be nzylchlorides; organic sulfur compounds (e.g., lauryl mercaptans); chlorobenzenes; sodium sulfide/sulfhydrates; various chlorinated waxes, oils, naphthalenes and anilines; benzoyl chlorides; benzotrichlorides; liquid disulfides; or chlorotoluenes..."
Within a decade, the contaminated lands were sold and schools and residences constructed. Some years later, residents were suffering unusual and serious health defects. Ultimately, people were evacuated from areas surrounding the old canal. A State health official said Love Canal was a,
"national symbol of a failure to exercise a sense of concern for future generations."
In the controversy surrounding Love Canal, governments and industry groups spent years trying to minimize the seriousness of any problems. One quasi-science group funded by petroleum, chemical and pharmaceutical industries claimed that people were falling ill, not from exposure to chemicals, but from anxiety caused by media reporting on poisons beneath their community.

Love Canal came to mind while I was reading papers related to fracking. Environmental scientists have been warning about potential dangers of fossil fuel production techniques that depend on hydraulic fracturing. However, as Propublica notes,
"a long-term systematic study of the adverse effects of gas drilling on communities has yet to be undertaken. Researchers have pointed to the scarcity of funding available for large-scale studies as a major obstacle in tackling the issue."
Premier Clark claims that natural gas is cleaner than coal and implies that British Columbia taxpayers would be doing the world a favour by subsidizing and facilitating exports of LNG. Yet, no independent science supports the Clark government's position. This week, a BC energy expert told me,
"The methane leakage problem appears significant. I believe it's one reason why non-conventional gas is not nearly as greenhouse gas friendly as conventional natural gas. Some gas emissions from non-conventional resources have a much greater impact on warming compared to say CO2. That's a big issue so it is not honest to state all natural gas is better than coal."
America's Environmental Protection Agency states,
"Methane (CH4) is more efficient at trapping radiation than CO2. Pound for pound, the comparative impact of CH4 on climate change is over 20 times greater than CO2 over a 100-year period."
The IPCC recently updated that estimate, claiming methane is 34 times stronger a heat-trapping gas than CO2 over a 100-year time scale. One person suggested that, regardless of the science, the BC LNG fantasy does not pass unscientific tests applied by common sense. He asked,
"Why are we giving low cost hydro powered electricity to liquify our low cost natural gas so Asians can transport it 8,000 kilometres and convert it back to gas and use that gas to produce electricity?"
Many years ago, BC Premier W.A.C. Bennett saw low cost power as the way to attract manufacturing industries to British Columbia. He saw it as the way to create jobs and support communities for decades to come. Today, Christy Clark and Rich Coleman also see low cost energy as the way to create jobs and support communities. The difference is that those communities are in Asia.

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Tuesday, July 22, 2014

Norm with Ian Jessop CFAX1070, July 22/14






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In the land of Not-Net-Zero

Actuaries advised teachers about a year ago that their pension contributions were rising (again) because the plan had an unfunded liability of $855 million, up from $289 million two years before. One of the reasons was underperformance of the investment portfolio. Other pension contributors in public service — excepting senior executives and politicians — also faced higher contributions for the same reasons.

However, underperformance of investments was not much on the minds of the people feeding at the trough of the BC Investment Management Corporation. The lack of restraint speaks for itself. (Note: Executive compensation reports provide information for only five individuals. A blank means the income was unreported for that year.)

bcIMC's Five Highest Paid Execs



ADDENDUM
Last September, CBC reported Wealthiest 1% earn 10 times more than average Canadian. Based on Statistics Canada reports, the article says the median individual income in Canada was $27,600. Our nation's very rich — the top 1% — earned $191,100 and more.

In fiscal year 2014, five bcIMC executives averaged 42 times the median income and six times the amount that puts them in the top 1%. The lack of restraint at the top spreads throughout the organization too. bcIMC has a staff of about 175 people and almost 2/3 earn more than $100,000 a year.

BCiMC Salaries Above 100K





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Gifts for our children

When Liberals formed British Columbia's government in 2001, they had a commitment to manage provincial finances responsibly. The result: program cuts, reduced capital spending and lower costs of administration. Fiscal conservatism was the BC Liberal mantra and provincial debt reflected the style. In Gordon Campbell's first term, debt rose by $577 million.


However, parsimony discourages existing friends and wins few new ones. As the end of the second Liberal term came into view, the commitment to fiscal conservatism altered. It didn't merely soften; it dissolved.


The outflow of public cash was suddenly unrestrained. In the last four years, debt increased by $19 billion, a rate 33 times higher than in the Liberals' first four years.


Amazingly, direct provincial debt is only part of the story. Liberals were tossing out contracts and commitments by the billions. The political party that arrived with a promise of fiscal conservatism had become recklessly extravagant and wasteful. A different kind of party was in progress; a party marked by greed, waste and personal enrichment.

Clearly, Christy Clark, Rich Coleman and friends think there are more fortunes to be distributed and more pals to be rewarded. Despite the financial disaster that is ongoing, they are planning to spend tens of billions on the LNG fantasy that replaced the failed dream of exporting electricity. The province is on the hook for $55 billion for private power but LNG could be worse.


The claim of fiscal conservatism is proven a fraud. Liberal politicians governing British Columbia have been as prudent and conservative as Ken Lay and Bernie Madoff were while robbing investors of more than $100 billion. However, at least the victims of those fraud artists got angry and put a few people in jail. We won't do that; we're Canadian; we're too nice.
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Saturday, July 12, 2014

BC's crony capitalism in action

This item was first published March 17 but is worth reviewing because it fits with Thursday's post, Patronage and private privilege - BC Liberal P3.

It is apparent that Christy Clark and her Minister of Graft and Corruption believe no rules constrain them. Even when a senior public official like Michael Graydon is determined to have offended standards of good conduct, his former colleagues pretend surprise, avert their eyes and walk away saying, "Nothing can be done."

What they really mean is, "Nothing will be done."

* * * * * 
Flipping channels Sunday, I paused to watch as Vancouver Whitecaps FC played an MSL game at StubHub Center in the Los Angeles suburb of Carson, CA. In a facility capable of seating 27,000, the announced crowd was 6,684. No way was that a head count. Feet, maybe. Or, toes.

Regardless, I learned that no matter how many, or how few, sports fans paid admission, California taxpayers were unaffected because StubHub Center was financed by its operator, Anschutz Entertainment Group. I looked at the financing of other sports arenas - or multi-use facilites, as the spinmeisters prefer - and learned that BC Place sets a standard than none of the others come close to meeting. The graph illustrates:


Dollars in the following detail have not been adjusted for project timing or exchange and that would change the comparisons slightly.

This would be amusing if it were not such an impactful situation. For more than a decade, BC Liberals have claimed to be skilled managers of the people's finances, saving us from economic disasters that would result if lefties were in charge. The taxpayers of BC paid almost $15,000 for each and every seat of BC Place. Yet, the Socialist squanderers in Sweden managed to open the equivalent sized Friends Arena in Stockholm for a public cost of $1,325 per seat.










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Thursday, July 10, 2014

Patronage and private privilege - BC Liberal P3

By numerous measures — lower job and GDP creation, fewer public services and rapid expansion of public debt — BC Liberals are colossal failures. Most BC residents are unaware because the major accomplishment of this government is its mastery of disinformation as political strategy.

With a breathtakingly large crew of contractors, communication managers and social media engineers, along with political officers and spinmasters throughout the public service, taxpayers pay most of the costs. But the industrial and commercial beneficiaries of Liberal policies fund other elements of the disinformation machine. These include business associations and astroturfing "citizens" groups created in PR offices. For business, there is no net cost; expenditures are investments returned through friendly policies, corporate welfare and tax breaks.

A thoroughly compromised political media barely pretends to be outside the government orbit. It does little independent reporting of note, preferring to echo talking points and press releases. Punches are pulled and rewards gathered.

We live in a province where patronage and privilege has become government's purpose. Services to citizens interest Liberals only if there are major contracts to be awarded to loyal old friends or new friends with adequate generosity. BC Hydro, a utility that was established to provide decades of low cost power to businesses and residents, was seen as an asset pool to be sucked dry.

When Ministry of Finance experts work on the provincial budget, financial information is created that politicians treat as inconsequential beyond how it will effect their communications strategies. A good example of this assertion arises from private power policies, Here is a record of Ministry estimates of electricity values in the Pacific Northwest:


So, while the experts had a decent handle on the downward trends in electricity prices, Liberal politicians were determined to do business with private power producers, even if it meant billions in losses were to be suffered by BC Hydro customers. I reviewed average market prices along with various reports of prices paid to independent power producers. The quality of information from BC Hydro is poor and average prices paid for private power are manipulated by factors not fully disclosed. I think it is impossible for a person outside the industry to create an accurate picture of average prices but we do know the upper range of prices. These are reflected in the following graph. It is also clear that, as private power has come on stream, the overriding BC Liberal principle has been, "Buy high, sell higher."


Can anyone looking at these numbers think for a moment that honest and ethical management of public assets is intended in British Columbia? Don't assume the Legislative Press Gallery will be looking closely at this situation. They have places to go and people to see.


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Monday, July 7, 2014

Unparalleled, indeed

In 2009, the Vancouver Sun reported that BC Liberals intended to build
"an electricity export industry unparalleled in B.C.’s 30-year history of power sales to the U.S."
Gordon Campbell was telling Americans,
"We want British Columbia to become a leading North American supplier of clean, reliable, low-carbon electricity."
Immediately, the Liberal chorus began. The Business Council of British Columbia published an 80-page report — sponsored by Plutonic Power Corporation — that urged the province to build transmission infrastructure and shape policies to take advantage of "growing export opportunities to the United Sates." Black Press polemicist Tom Fletcher lauded Gordon Campbell's "long-term strategy to export hydroelectric power" and he called John Horgan the champion of doomsayers. Fletcher wrote of "evidence that current NDP energy policy is nonsense."

How fortunate that British Columbia had a government determined to spend big dollars to increase exports to American markets for electricity. Lucky too that Liberals had the full support of business leaders and a courageous corporate press willing to stand with the government and call out naysayers who thought it was a mistake to commit tens of billions more to insure private power producers against business risks.

However, some of those same timid obstructionists might now be asking how BC Liberals' "unparalleled" plans for power sales to the USA are working out. Since Tom Fletcher and his colleagues in the Legislative Press Gallery might be too busy to mention the subject, I reviewed electricity export figures collected by Statistics Canada. Here's a comparison of the last five years (2009-2013) under BC Liberals to the final five years (1996-2000) of government by those anti-business, anti-commerce New Democrats.


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Saturday, July 5, 2014

Megan Metcalfe speaks

From a Facebook post. You can read the entire item HERE.
"I sent a letter to Christie Clark's office, Peter Fassbender's office, and my MLA about two weeks ago. I got a response just today. It was addressed from the Premier's office, but it was not signed and there was no name connected to it. It was the most bland, uninformative "yes, thanks for your input, we're doing our best, yada, yada, yada" kind of letter. So I sent this back:
"Hm. I would address this to an individual, but no one signed the form letter that was sent to me. I do thank you for at least replying to me. But I find the content of your reply to be quite empty and void of real concern or discussion.

I am an open minded individual, and I like to pride myself on listening to both sides of any story, but I am angry right now, angrier than I've ever been as an adult citizen of Canada.

"You see, I feel that the provincial government's actions at this time in history are unconstitutional.

"I feel that my son's years in school have been decimated, specifically and directly as a result of decisions that have been made to support the wealthy via tax cuts at the expense of our educational system.

"Your very large, very expensive ads to denigrate the teachers' position in the negotiations included incorrectly done math!! Is it that the people you had construct these ads are incompetent, or is it that you think the people of BC are stupid enough to believe the incorrectness of the ad? Either avenue does not bode well for the perception of the liberal government.

"I have heard the analogy used, and I think it's a pretty good one, that if a family needs to "tighten its belt" financially, it doesn't go buy a Lamborghini then say it can't afford groceries. This seems to be what the choices of the Liberal government reflect. It's not that the money doesn't exist, clearly if we can spring for a roof on a stadium to the tune of 514 Million dollars, there is money available, the only question is, what will we spend it on?

"I believe, from what I have read, what has been shared with me, and from what actions I've seen the Liberals take, that there is not only a personal vendetta against teachers, but an all out war on proper education for the masses. I think you are making every effort to create a two-tiered educational system. High end for the wealthy, low end for the economically struggling. And I don't like it. And I will stand up against it..."

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