N.L. has been told to stop depending on oil. How is it going to do that? With oil
Moya Greene's PERT report envisions a 'green economy,' but oil is still very much on the agenda
All kinds of bonfires erupted Thursday, almost as soon as Moya Greene released a report that wrote a prescription for Newfoundland and Labrador's dismal fiscal health. Unions fear job losses, students are angry over recommended post-secondary cuts, employers loathe tax hikes in the wings … in other words, there's something there to bother everyone.
In the midst of all those recommendations are some structural changes, and a few of them have to do with a key factor that's been driving the Newfoundland and Labrador economy for a full generation: oil.
The Greene report — named The Big Reset — is also, in a way, a green report. It's far, far away from the work of environmentalists, but embedded in the recommendations of the premier's economic recovery team (PERT) is an understanding that N.L.'s economy simply has to fundamentally change.
"The province must build a greener, technologically advanced economy," the report declares. There are frequent references throughout its hundreds of pages to how and why the world is shifting. The phrase "green economy" itself occurs dozens of times over the course of 338 pages.
The PERT report envisions an economy in which Newfoundland and Labrador functions without having to depend on oil.
Just — and this is where PERT parts ways with environmentalists — not any time soon. Indeed, it expects the offshore oil industry to be in production for years and years to come.
The lubricant that the report identifies to get N.L. to a greener age is, in one word, oil.
Well, there's another word, too: mining.
Earmarking revenue
"Only 50 per cent of oil and mineral royalties should be considered in expenditure planning; the other 50 per cent must be paid on debt or placed in the Future Fund," says the report, referring to the fund it wants created to pay down N.L.'s staggering net debt (the last budget pegged this at $16.4 billion) or for special, non-operational things … like funding "the green economy transition."
That may sound easy on paper, but that's quite the tall order. Even in last year's pandemic budget, offshore royalties were expected to reach $540 million while mining revenues were set at more than $112 million.
If that sounds high, consider the headier days of, say, the 2012 budget, when those figures, respectively, were set at $2.2 billion and $269 million.
The PERT report faults prior governments for not paying down the province's debt when it had the chance. That, however, is not entirely true. During the bonanza days of sky-high oil prices, the former Tory government did plow billions against the debt. Former finance ministers Loyola Sullivan and Tom Marshall championed the strategy, and helped bring a debt that had been around $12 billion to the $8-billion level.
But — and this is a huge but — the same governments also used gushing oil revenues to pay for dramatic increases in key spending areas, in terms of both wages (you may remember the four-year deal that hiked wages across the public sector board by 19.84 per cent) and the depth and breadth of the public service itself.
For years, oil (and, yes, mineral) revenues have fluctuated widely, but each cabinet has used the money to keep the place going, as well as to fund their own projects. The report also notes that while gross domestic product has been driven by oil and mining, actual employment numbers have not. See the chart below.
The idea of putting aside a portion — let alone half — of the money collected from resource extraction is a long, long distance from the status quo.
Speaking of Loyola Sullivan, another idea from PERT echoes a call he made years ago: legislation that would make deficits illegal. Sullivan brought this idea forward in the budget of 2006, while marking the first of what would be a string of surpluses. Mandatory balanced budgets, though, died on the vine, and Sullivan and then premier Danny Williams fell out.
How green is your economic vision?
Meanwhile, as much as the PERT report celebrates a green transition, it's also easy to find evidence that its vision for the future sees oil as integral to the economy.
In fact, one of its recommendations is to "ensure competitive oil and gas regulation," which calls on government to "streamline regulatory processes" to speed up development and "adjust regulatory approaches." It says government should direct the Canada-Newfoundland and Labrador Offshore Petroleum Board so that "development of the offshore area is a priority function."
These are not the thoughts of the green activists who have been calling on Newfoundland and Labrador to decarbonize.
Still, the report is firm about not just accepting a green economy as the goal, but to embrace it.
It may help to look at the report's definition of a green economy. In a note, it says a green economy is "generally defined to include renewable (and low-carbon) energy supply, reduced demand for energy through more stringent building codes, increases in energy efficiency and conservation, energy substitution in the transportation sector, sustainable resource management, development of 'negative' greenhouse gas emissions opportunities such as improved forest carbon storage and underground carbon storage, and improved environmental management and protection."
There's quite a lot to chew on — and argue about — in this report.
I suspect the place of oil will be threaded through a lot of the debates to come.
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