The problem with Danny Williams is that he just doesn't act like a Have-Not. Not when he's having an argument, not when he's playing hockey, not when he's disagreeing with one of his fellow Canadian politicians. Williams, ninth premier of Newfoundland and Labrador, was even publicly and calculatingly rude to the Prime Minister, dismissing Stephen Harper as a small man who preys on the weak.
And Williams certainly does not go cap in hand to the oil companies that will decide whether his province's future is prosperity or poverty. No, he talks sarcastically about Big Oil--a leftist label, not a Conservative one--and he singles out ExxonMobil, the biggest of the Big Oil fraternity, for the roughest body checks. He told them that if they did not want to play by Danny Williams's rules, they could take a hike.
As things turned out, ExxonMobil and the rest of Big Oil swallowed hard and agreed with most of Williams's terms. And the people of Newfoundland love him for it.
In the almost 60 years that Newfoundland has been part of Canada, a goodly proportion of the province's premiers have brought the province onto the national stage: Joey Smallwood, Brian Peckford, Clyde Wells, Brian Tobin. But none has been quite as combative as Williams, who got so mad at Ottawa several years ago that he ordered the Canadian flag removed from all provincial buildings.
His critics will tell you that Williams, now into his third career, has always been a loose cannon. His admirers will counter that Williams represents nothing less than the new Newfoundland--the confident society that you see emerging in St. John's and environs. Cheek by jowl with the brightly painted clapboard houses of the old town is the evidence of a boom the likes of which nobody has ever seen. A businessman shook his head as he tried to explain to a visitor what had happened to his city. Do you realize, he said, that there are homes here that sell for more than a million dollars?
But St. John's is not Newfoundland, only part. Beyond the footprint of the capital and a few other centres, the old image of Newfoundland endures. Outports are empty or emptying, their inhabitants fleeing westward toward the jobs of Alberta and Ontario. Those who remain are waiting for the cod to come back or for the offshore oil boom to reach their doorstep. In some communities, 30% or 40% of the people have left, and among those who remain, the unemployment rate is 50%. These places recall the harsh judgment of Globe and Mail columnist Margaret Wente that rural Newfoundland "is probably the most vast and scenic welfare ghetto in the world."
For more than 40 years, the people of Newfoundland have conjured a dream of oil beneath the ocean floor that would make them rich. It was in 1966 that drilling began off the east coast of the island, but only in 1979 was oil discovered in the offshore basin, 315 kilometres out in the North Atlantic, at a spot that was dubbed Hibernia.
But, for a time, Hibernia seemed an uncertain bet. There were dizzying cost overruns and construction delays, and in 1992 Gulf Canada Resources abruptly withdrew from the consortium developing the site. If the federal government had not acquired an 8.5% ownership stake in 1993, Hibernia might have been dead.
Oil finally began to flow in 1997, but even then there were skeptics who believed the gigantic steel and concrete island in the ocean might prove to be a white elephant. Salvation lay in the arrival of higher oil prices. Oil at $70 or $80 or more a barrel makes possible what could not have been dreamed when oil was $20 or $30.
Hibernia's total net revenues to the end of 2006 were $14.8 billion. Of that, the oil companies claimed $8.8 billion, the government of Newfoundland $1.2 billion, and the government of Canada $4.8 billion. Counting production from the smaller fields at White Rose and Terra Nova, the total figure is $18 billion, and the respective shares of the companies, the feds and the province, $10 billion, $6 billion and $2 billion.
The success of the bet on offshore oil is clear enough, but for more than 20 years, Ottawa and St. John's have been at odds over how the revenue should be divided and taxed. Above all, how does oil fit in to the calculation of equalization--the federal program to ensure that all provinces can provide more or less the same level of public services?
The debate actually had fallen into a lull until Williams got himself elected premier in 2003 and pushed for a better share. Then, in a gamble for support in Newfoundland, then-prime minister Paul Martin promised in the middle of the 2004 election campaign that Williams could have his way. The agreement was that Newfoundland could keep its revenue from offshore oil without losing its full equalization payment from Ottawa. But in the months afterward, Martin did his best to bury his promise, ignoring Williams's request to have it in writing.
Williams got so steamed that he stormed out of a federal-provincial meeting. That was when he ordered the Canadian flag removed from provincial buildings. Most mainland Canadians thought the stunt was outrageous, but it was two weeks before Williams relented and let the Maple Leaf fly again. He remains unrepentant: "It was not a decision that was taken lightly and it wasn't intended to desecrate a flag. It was intended to be a show and a sign from this province that we felt we weren't being treated fairly by Canada."
Yet the flag flap was nothing compared with the treatment Williams has doled out to a fellow Conservative, Stephen Harper. His complaint against the new Prime Minister was essentially the same as his complaint against the old one, but with Harper it was more intense and personal. (Williams is always careful to point out that Harper is a Conservative while he is a Progressive Conservative.)
Williams publicly mocked Harper as a man who breaks his promise, a petty man who cannot be trusted, a buddy of the oil companies, a man who "just keeps on changing his colours in order to suit whatever the political need is at the time." Perhaps worst of all, Williams sneeringly referred to Harper as Steve. This is not, first of all, a familarity that Harper encourages. More important, Steve was the name that the maladroit U.S. President George W. Bush once used when the two leaders met in Washington. For Williams, that was a perfect set-up.
"Steve? His buddy George Bush calls him Steve, so I can call him Steve," Williams explained. "I'm not a buddy of his, but by the same token, I have to. . .treat him with the same disdain that he's treating Newfoundlanders and Labradorians."
In other circumstances, such language might seem politically imprudent, but Williams knows that he has a comfortable cushion of public support. In last October's election, his government was returned in a landslide: 44 of 48 seats and 70% of the popular vote.
In whatever he does, Williams plays for keeps. His tough-guy reputation goes back to when he was a sharp-elbowed kid playing hockey in St. John's. But the kid was sharp, too. On the strength of his performance at Memorial University, he won a Rhodes scholarship to Oxford, where he captained the hockey team. At 58, he still plays every week with a group of old friends, with no quarter given.
In 1972, after graduating from law school at Dalhousie University, Williams borrowed $2,500 and put together a group that successfully applied to run the first cable service in Newfoundland. The company expanded into telephone service, and Williams's own activities expanded to include an oil and gas service company and three golf courses.
Ultimately, Williams was 93% owner of Cable Atlantic. In 2000, Ontario cable mogul Ted Rogers offered him $90 million for the cable side of the company. It took months of negotiation, but Rogers finally agreed to pay $251.5 million. (The telecom operations went to GT Group Telecom for $57 million.)
"Danny Millions" was suddenly one of the richest people in the province. As evidence of his wealth, he gave $1 million of the sale proceeds to his employees. (Today he gives his salaries as Premier and member of the House of Assembly to charity.)
As for his legal career, corporate law would have been a natural specialization for Williams, but he's remembered as the lawyer who pioneered the battered wife syndrome as a defence for murder, and for representing 39 victims of sexual abuse at the notorious Mount Cashel orphanage, negotiating an $11.5-million settlement.
Politics came late. Williams did not grow up dreaming of a life on the hustings. His parents had always been active Conservatives, so young Danny, his two brothers and his sister did the backroom chores, from stuffing envelopes to acting as poll captains. But that was as far as it went until Williams had spent almost 30 years as a lawyer and a businessman.
Inevitably, when he did decide to go into politics, Williams went in with his elbows up. He had grown up and always lived in St. John's, except for post-graduate studies. But after he became Conservative leader, he decided to contest a by-election in the distant Corner Brook riding of Humber West. His explanation is that he wanted to confront "the overpass syndrome"--Newfoundland shorthand for the presumption that the province begins and ends in St. John's. Humber West had been Liberal for four elections in a row, but Williams took it with 72% of the vote. In the provincial election two years later, the Williams Conservatives took 34 of the 48 seats.
With that record of getting his way, Newfoundlanders can hardly have been surprised with the strong actions Williams took once he was in office. The new Premier promptly ordered a sweeping range of spending reductions and job cuts that inspired 20,000 public service workers to walk out in the largest strike in Newfoundland's history. Williams let them stay out four weeks and then tabled legislation forcing them to return to work or be fired.
Yet the Premier would not fit easily into a right-wing mould. As has become clear to the oil industry, he sees government as an active instrument in the economy. And, as his childhood friend, the former New Democrat leader Jack Harris, says, Williams has committed himself to poverty reduction in a way no other Conservative government has done: "On the social side, he's a very progressive guy."
Like any good politician, Williams will talk--unprompted--about roads and hospitals and schools and treatment centres and courthouses. After all, that's how voters take your measure. However, what excites Williams is not the infrastructure of Newfoundland but the idea of Newfoundland. He describes himself simply as a Newfoundland patriot, a nationalist. He regards Newfoundland as a distinct society the way Quebec is a distinct society, a nation within a nation. But he won't push the parallel. "It's not separation we crave, but respect."
Like every Newfoundland leader before him, he is caught up in the need for development, the endless struggle to become a have-province rather than a have-not province. But he also wants a transformation of attitudes. "The biggest thing that we had to change when we came into government was the psyche of Newfoundlanders and Labradorians. We wanted to make sure that they felt very positive about themselves and had self-confidence, that we're as good as the rest of Canadians. Because I think there was a little bit of a negative attitude toward Newfoundland and Labrador. Not that people degraded us, but we always felt that we were somewhat treated as second-class citizens. It's about earning respect and I think we're getting that."
Williams hadn't been born when Newfoundland joined Canada in 1949. But during an interview in his office overlooking St. John's, the Premier announces out of the blue that he would not have been a Confederate if he had been old enough to vote in the 1948 referendums. His ballot would have been for an independent Newfoundland, a country not tied to a government in distant Ottawa.
So his identification of Newfoundland with Quebec is not frivolous. Quebec is another country tied to Ottawa, sometimes grudgingly, and if Quebec seems to be set in a constant struggle to keep its distance, it's also the nature of the game in a federal state: "I've watched Quebec at the table and they use their distinct society and their uniqueness to get their way. More power to them. But don't begrudge it to other sectors of this nation."
Williams even borrows the famous Quiet Revolution slogan of "Masters in our own house," although there's an unhappy resonance here. Hydroelectric power was the current of Quebec nationalism, but a lot of that power would come at Newfoundland's expense. For Newfoundland, an already poor province, the cost has been billions of dollars.
It all goes back to the construction of the mammoth Churchill Falls hydroelectric project in Labrador during the 1960s. Newfoundland wanted permission to "wheel" power through Quebec to markets in the northern United States and Ontario. Instead, Quebec insisted on buying the power outright. The federal government could have stepped in and legislated transmission of power through Quebec, but it was afraid of stirring up nationalist unrest. So in the end, as Williams explains it, Newfoundlanders took it on the chin for Canada.
What really steams Williams is that this bad situation was compounded when Newfoundland's first Premier, the sainted Joey Smallwood, signed the lopsided Churchill deal, which fixed the sale of the electricity at 1969 prices, prices that in 2008 are ridiculously low. Hydro-Québec has made a killing reselling the power into the U.S. market.
When Prime Minister Harper was in St. John's last November, Williams presented him with a handful of brightly coloured pie charts. Perhaps most dramatic was the chart showing the net revenue from the Churchill Falls project. Newfoundland's project it may have been, but Newfoundland's revenue was the tiny blue slice representing $1 billion; Quebec, which just let the electricity flow through its transmission lines, has almost the whole pie, a large red hunk representing $19 billion. (And for the next 34 years of the contract, the Newfoundland calculation is that Quebec will get close to another $50 billion.)
The province had no better luck in its other efforts at economic diversification. The disastrous oil refinery at Come By Chance cost the province $500 million before it was given away; the linerboard mill at Stephenville ate up $300 million before it was closed; the Sprung greenhouse was supposed to provide Newfoundland with fresh vegetables, but after a government investment of $22 million, it was calculated that the cost of producing a single cucumber was about $27.50.
All this explains why, in Williams's first provincial campaign, in 2003, one promise stood out: "No more giveaways." That slogan has continued as the Williams government's guiding star; the Premier has said that the pain of the "giveaways" has motivated him in politics more than anything else.
So, in the quest for economic salvation, there would be no repetition of Churchill Falls or Come By Chance or Stephenville or any of the others. Newfoundland would hang tough even if it meant facing down the world's biggest oil companies. And hang tough it did.
When Williams became Premier in 2003, the terms were already set for the giant companies that were pumping oil from the floor of the North Atlantic. Except for the 8.5% share of Hibernia owned by Ottawa, the vast richness of the three fields was controlled by giant oil companies: ExxonMobil, Chevron, Norsk Hydro, Petro-Canada, Murphy, Husky and Mosbacher. Newfoundland was not in the game.
Newfoundland's $2-billion take from the three oil fields over the past decade was not chicken feed. But measured against Alberta's haul, it did not seem like much. So Williams decided that it was time for Newfoundland to get a larger share of the game. He would begin with the new Hebron field; negotiations were just starting on terms and conditions for the exploitation of the 700 million barrels of Hebron's heavy oil--after Hibernia, the largest of Newfoundland's fields.
To ensure that Williams understood the game, the province hired several oil company executives to explain how the cards were played. It was useful coaching. When the companies assured Williams they were not making any money from Newfoundland's oil--well, he says, at that point he knew they weren't being fair.
Williams's conditions were clear enough. He wanted an equity share, he wanted more local employment through secondary processing, and he wanted a greater piece of the action if oil prices continued to rise. As Williams explains it, the oil companies, led by Chevron, quickly said there could be no secondary processing because heavy oil provides poor returns. Williams said fine, but he would insist on the other two conditions.
That was in the spring of 2006, when both sides dug in, but Williams at least figured he knew the other side's game better than they knew his: "For me it was about fairness. I knew what they were making; I knew what they were taking. And I knew what the feds were getting and the industry was getting and what Newfoundland and Labrador was getting. And this was our resource. So, you know, we had to negotiate tough."
To hear the industry tell it or to read the industry-sympathetic newspapers, negotiating tough was almost the destruction of capitalism as we know it. There were dark hints of all the companies packing up and leaving Newfoundland because Williams's demands were clearly impossible to meet.
Williams replied by rattling the industry's cage. If the oil companies did not begin developing the Hebron field, he said, he might revoke their leases. When there were cries about expropriation, the Premier replied that it was no such thing. It was use it or lose it, he said. For newspapers, the favourite jibe was to describe Williams as Danny Chavez, a reference to Hugo Chavez, the revolutionary president of Venezuela. One distressed Globe and Mail columnist complained of Newfoundland's expropriation, extortion and "extreme confrontation."
In the end, the crisis was hardly a crisis. It looked more like a bluff that was called. The oil companies protested they could not accept Williams's demand for a 10% equity because 5% or more would give Newfoundland a veto. (This doesn't seem to have been an issue with the feds' 8.5% stake in Hibernia, but Williams just smiles when that is mentioned. He has already embarked on a campaign for Ottawa to give that share of Hibernia to Newfoundland.)
Williams insists he was interested in an equity stake only because he wants an insider view of the industry, not because he wanted a veto. So he agreed to 4.9% equity, for which Newfoundland would pay $110 million. Nobody seemed particularly worried any longer about the idea of government equity that had been such a terrible precedent just weeks before.
The consortium dropped its demand for $500 million in tax breaks, and Williams accepted a slight reduction in the "super royalty" for Hebron. (The super royalty is an extra 6.5% of net revenues that kicks in when oil prices exceed $50 [U.S.]a barrel.) A further reward for Newfoundland is that a new oil rig will be built in the province.
At the August press conference announcing the settlement, Williams predicted that the Hebron project, whose initial cost will be $6 billion, would contribute $16 billion to Newfoundland's coffers over its 25-year life. The federal government, meanwhile, would get $7 billion. Three weeks later, Williams released a new provincial energy plan that calls for a 10% ownership stake in future offshore oil fields, yet, for the moment at least, there has been no more talk of Danny Chavez.
Concerning the Hebron agreement and the retreat of the oil companies and their cheerleaders, the usually stern Williams permits himself a smile. It was, he says, "a sweet moment."
Not all oil companies joined the united front against government equity. One significant exception is Husky Energy and its president, John Lau. While the rest of the industry was growling defiance at Williams last spring, Lau was telling the Husky annual meeting that Williams had been very helpful and that Husky was eager to work with Newfoundland. Lau went so far as to say that the relationship with the province was so transparent that it had resulted in a level of trust that is unusual between a corporation and the government. Husky understands the government and the government understands Husky, he said, and there is no hidden agenda.
When Husky and Petro-Canada and Newfoundland signed an agreement in December for the extension of the White Rose field, Husky vice-president Ruud Zoon said there was no problem with government equity: "Obviously, we generally don't like to do away with equity in our fields, but this is something that we are used to. It's done by governments elsewhere in the world, and so if that is part of the government's policy then we will try to entertain that and try to work with that, and we've been able to do so."
Economist Wade Locke of Memorial University shrugs off the stories of how unhappy the oil companies were in their fight with Williams over Hebron. The companies lost out on the super royalty for Newfoundland and on the province's insistence on equity, but nobody forced them to sign the agreement, he says. They got over it because they were not really worried. Like everyone else, the oil companies expect oil prices to stay high enough for everyone to prosper. Rising oil prices will lift all boats.
Williams's accomplishment was to see past the smoke and mirrors of the industry and its sympathizers, such as the Fraser Institute. On the basis of a slight survey undertaken in the spring of 2007, the Institute judged the province to be about as appealing a place to do business as Venezuela, Russia or Iran. A view similar to the Fraser Institute's comes from Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, who believes that "Newfoundland has done significant damage to itself with international investors." Cirtwill complains that Alberta's demand last year for increased royalties for its oil fields effectively diverted attention from Williams and Newfoundland: "Now Danny doesn't look so bad."
Danny does not look so bad, either, to those parts of the oil industry that were relieved to see the arguments stop and serious planning begin for Hebron. "The producers are obviously able to work with the province to work out a deal that's satisfactory to them," says Bob Cadigan, president of the Newfoundland Ocean Industries Association. "The Premier has a view of what he wants to achieve and he has negotiated a couple of deals which I think are important in Newfoundland's future. I can't argue with that."
Husky aside, the oil industry's view of the negotiations on the Hebron project is not known. Chevron Canada, which is leading the Hebron consortium, said it would give no interviews. ExxonMobil, the largest shareholder in the consortium, said it would give no interviews if Chevron was giving no interviews.
On the Newfoundland side of the table, there was what economist Wade Locke admitted was a pretty depressed mood during the long months of deadlock. That changed last summer: "With signing of the Hebron agreement and the recent signing of the White Rose agreement, momentum is back in this industry like you wouldn't believe. And the long-term, and short-term and medium-term, prospects for Newfoundland are quite bright."
With the oil flowing from the offshore and prices high, Locke believes that Newfoundland may cease being a have-not province within the next year or two. High oil and nickel prices have already heralded a record $882-million budget surplus for the current fiscal year. The surplus means Newfoundland will have the luxury of paying down the provincial debt by about $700 million, to $10.8 billion, by the end of fiscal 2008.
But that last bit of good news is a reminder that Newfoundland's $22,000-per-capita debt is still more than double the $10,000 national average. For all his optimism, Locke warns that the flood of new wealth may bring problems for which Newfoundland is not prepared. There is already a painful shortage of specialized labour. Alberta is teeming with skilled Newfoundlanders, but they are not going to turn around and go home unless there are guaranteed jobs to be had. The result is that in St. John's and rural Newfoundland, there are waiting lists of weeks for the services of plumbers and electricians. Even the service sector, usually the refuge of unskilled labour, is short of people, and is trying to attract workers by offering free food and other benefits. Meanwhile, housing prices in urban areas are pushing upward. And there are signs that the classic problems of a booming economy--drugs, crime and social tensions--have become part of St. John's life.
The face of the capital is already changing: new buildings everywhere and evidence of a new lifestyle. At the Crow's Nest, a cozy pub off Duckworth Street, young and old gather once a month to drink beer and sing Celtic folk songs, fragments of an older Newfoundland, now fading. But what's now characteristic of the street are the new and fashionable restaurants, each with more customers than the Crow's Nest. There's sushi, South Indian--worlds away from cod tongues or seal flipper pie.
Elsewhere, the old Newfoundland is hanging on by its fingernails. Or trying to. Twenty-five kilometres to the south of St. John's is the village of Bay Bulls, where an elegant harbour has sheltered local boats for centuries. A generation ago, between the fishing and the fish plant, 600 people made their living from the sea. Then the cod disappeared, the government imposed a moratorium on cod fishing, and the fish plant burned down. These days, no more than 50 people here make their living from fishing; another 35 work at fish plants out of town. Most others survive by commuting to work in St. John's.
At 41, Mayor Don Drew says that he's a cod fisherman and he'll always be a cod fisherman. But in last summer's limited experimental cod fishery, his quota of 2,500 pounds was worth between $1,500 and $2,000. His catch of crab was worth $50,000, which wasn't bad, certainly a lot better than three years ago when the price of crab in the U.S. was so low that he barely covered his costs. That, he admits, "was not comfortable."
After that bad year, he wondered whether he too might have to go to Alberta, like most of the other fishermen from Bay Bulls.
Small wonder that St. John's airport always seems crowded with passengers bound for Calgary or Fort McMurray. On Air Canada and WestJet, they are going for three- or four- or six-week turnarounds; some Alberta companies even arrange charter flights for their Newfoundland work teams. Some husbands and wives arrange alternating shifts so that one parent is always working and the other is at home with the kids.
In a way, Alberta is preserving at least the hope of a return of the old life, the life of fishing. Don Drew says many of those heading for Fort McMurray are going to pay off their boats or buy a fishing licence (which can set one back hundreds of thousands of dollars). For others, the shuttle to Fort McMurray means they can hold on to their home overlooking the harbour and hope for better times.
Statistics Canada figures show that in 1992, the year the cod moratorium began, there were 580,000 people living in Newfoundland. Every year since then, the number has got smaller. Even with Hibernia, there was not enough work to keep sons and daughters and grandchildren at home. The latest report from Statistics Canada registers Newfoundland's population at 507,000.
Many Newfoundland politicians have decried the trend; Danny Williams hopes to be the one who actually does something about it. His immediate dreams are pinned on the non-renewable resources of the offshore oil fields. It's all balanced out so that revenue from Hibernia, Terra Nova and White Rose will carry things through until the new Hebron field kicks in and produces for perhaps 25 years.
At the same time, the province should see development of endless and renewable hydroelectric power on the Lower Churchill River. This time it will all belong to Newfoundland, although nobody has yet figured out how to get the electric power to market economically unless it goes through Quebec. And then, in 2041, the old lease will expire and Newfoundland will get control of the Upper Churchill hydro operation, but that power will also have to find a way to market.
Those conundrums will be added to the to-do list of the energy company established by the province last summer to look at economic development in the future. On another list are the Premier's pet projects for the time when the oil runs out: an aluminum refinery, a liquid natural gas port, wind power from Labrador, and development of the estimated 60 trillion cubic feet of natural gas off Newfoundland's shores.
Maybe, maybe. When he gets wound up, the Premier is almost unstoppable: "I'm trying to keep us in the game, and once we have become a have-province, stay there or stay very close to it on a long-term basis. It's that type of security I'm trying to give young Newfoundlanders and Labradorians, young couples, so they can come home and have their families here and instead of a population decline, we'll have a population increase."
Experience has established that if you're rude to Danny Williams, he will be rude back, and then some. But for a guy with a reputation as a political brawler, he is charming and courteous. True, he has a handshake that could break walnuts, but with his rimless designer glasses, his immaculate dark blue suits and an easy smile, he does not appear to be a man who is looking for a fight.
So does he enjoy being a tough guy? The Premier of Newfoundland and Labrador looks slightly startled at the question. He shrugs.
"I'd prefer not to, but I don't mind a fight. I've always been that way. We're so busy here and we've got so many exciting things happening, I don't like to have 50% of my attention in my first four years diverted to battles that shouldn't happen. But if a battle's got to happen, then I'm game. It's as simple as that."
Is it fun? The Premier smiles ever so slightly and tries to push the question away. "Fun wouldn't be the term."
But when he called Harper "Steve"?
At that point the Premier actually laughs.
Does the "Steve" shtick not drive Harper crazy? The Premier laughs again.
"I'm sure it does. There is that fun side of it. There are strategic positions that have to be taken in any kind of a negotiation. And I do enjoy it. I become very strategic. I'm not a chess player, but I can think like a chess player and I like being three or four moves ahead all the time."
All of which suggests that on the matter of relations between Ottawa and Newfoundland, the next few months will be a lot more fun for Danny than for Steve.
photographs by steve payne