John Steeves Reports

Hew Repsol! Welcome to New New Brunswick

2006-03-13T16:15:00.000-04:00

The corporate world of Atlantic Canada is getting a new family member.

The Repsol group is coming to New Brunswick… equal partners with the Irving group in the construction and operation of a giant LNG (Liquified Natural Gas) terminal at Canaport, on the eastern boundaries of Saint John.

Since this is the Maritimes and we’re friendly folk, let’s be upfront. You Repsol guys sure are welcome!

In case you’re too shy to tell us about yourself, I thought I’d play the Welcome Wagon role and say a little bit about you. (You don’t have to send money… a simple ‘Thank you’ will be enough).

Repsol-YPF, a Spanish company, is one of the world’s Big 10 of privately-owned energy companies, with holdings in 25 countries, especially in Latin America. The company also has holdings in countries such as Iran, Libya and Russia.

Well, we Maritimers think that’s just wonderful. It will be good to finally get a big-time player on stage with the local players we’ve grown so fond of. Just like havin’ Todd Bertuzzi join the old-timers’ league down at the rink.

Now folks, Repsol may be a bit embarrassed about this, but this company has had a few tough times lately. Especially in Bolivia, the poorest nation in South America.

Repsol has put in a lot of money into Bolivia during the last 10 to 15 years. That’s because Bolivia has major deposits of natural gas (mostly) and oil. So Repsol has invested heavily in the development of those deposits in order to sell them at a profit to countries like the United States, nations that can afford to pay.

Unfortunately for our new corporate family member, the Bolivians elected a new government in December. The new Prime Minister claims there’s something wrong for Bolivians to have so many energy deposits and still be unable to afford natural gas themselves. Actually, the scene has been getting nasty. In February, the Bolivian customs service issued an arrest warrant charging the head Repsol executive with smuggling gas and oil out of the country.

Of course, our new corporate friend has denied the charge. The Spanish government has stepped in, asking for cooler heads to prevail. And even though Bolivian police raided the Repsol offices with arrest warrants for two company executives last Thursday (March 9), the executives weren’t there. So nobody has actually gone to jail. By Tuesday (March 14), reports from Bolivia said the executive had been questioned and were being 'detained' (probably not in jail but under house arrest of some sort).

So it’s been tough times. A couple of weeks ago, Repsol ran into more trouble when a major international credit rating company threatened to lower its credit rating.

But don’t be too concerned for our new friend. Everyone knows that doing business in Latin America is a bit tricky, especially since democratically elected governments have replaced the military regimes once so common in the region.

Still, it hasn’t been all bed and roses even in places such as the U.S., where Repsol trades on the New York Stock Exchange. Just last month, Repsol was charged in the United States District Court for the Southern District of New York with “false and misleading statements to the market artificially inflating the Company’s stock”.

Even so, complaints like that are a dime a dozen… not much different than being charged with speeding. So we Maritimers have no reason to believe our new neighbour will be hurt.

Besides, in the last month or so, Repsol has been striking deals for exploration and development in Libya, Iran and western Siberia. As a matter of fact, they will be bringing that Siberian gas to the LNG plant outside Saint John en route to the U.S.

Obviously, these are good-hearted corporate citizens. Ones we will soon be proud to call friends.

Certainly, the City of Saint John and the Government of New Brunswick recognized Repsol’s potential. They even rolled out a wonderful red carpet of welcome, a sweetheart 25-year deal guaranteeing that the LNG partners will pay a flat $500,000 annually in property taxes rather than the normal $5,000,000 (plus inflation).

Repsol, we… whether in New Brunswick or anywhere in Atlantic Canada… welcome you. We are confident that, with your history, you will find your stay in our area very pleasant.

Not to mention lucrative!

Poor Premier MacDonald

2006-03-07T10:02:00.000-04:00

If there’s such a thing as ‘premier envy’, Nova Scotia’s new leader, Rodney MacDonald, is probably suffering from it.

Why wouldn’t he? After taking a look at what other provinces pay their premiers.

In his new job, Premier MacDonald is, beyond doubt, the poor cousin of Canada’s First Ministers. With a paltry salary of just a bit more than $105,000, the Nova Scotia premier might well be forgiven if he looks enviously at his counterparts’ wallets as he joins them for negotiations.

Premier MacDonald probably can understand why he is getting less money than the leaders of those ‘big’ provinces such as Quebec, Ontario, British Columbia and Alberta. After all, no manager of a small ‘mom and pop’ convenience store expects the same salary as the guy who runs the Wal-Mart down the street. (An assertion that might merit more investigation).

But Premier MacDonald must wonder about New Brunswick’s Bernard Lord, Canada’s highest paid provincial premier. With a whopping salary of $191,458. Almost twice Rodney’s pay.

Of course, Premier Lord’s money doesn’t all come from New Brunswick’s treasury. $75,862 comes from the provincial Progressive Conservative Party. That’s Mr. Lord’s salary as party leader, money that comes from donors who receive tax-deductible receipts for the money they pay directly to the party. As far as the provincial treasury is concerned, it’s not public money.

Mr. MacDonald might be able to justify the disparity by remembering that he is the leader of a minority government in a very small province. Except that Mr. Lord also leads a minority in an equally small (less in population) province.

“Well, Nova Scotians are poor,” Mr. MacDonald might rationalize. “They can’t afford to pay much.” New Brunswick is statistically a bit more impoverished.

“It must be Bernard’s image,” the soul searching Mr. MacDonald might continue. “After all, he’s been a politician, a lawyer, and a used-car salesman, three of the professions Canadians most love to hate. What have I done, except be a musician before running for office?”

Premier MacDonald, it’s obviously time to stop fiddling around! Get yourself a better-paying job!

Salaries of Canada's Provincial Premiers - Source: CBC News

Bernard Lord, New Brunswick $191,458
Jean Charest, Quebec $175,361
Danny Williams, Newfoundland and Labrador $163,252
Dalton McGuinty, Ontario $152,835
Gordon Campbell, British Columbia $146,000
Ralph Klein, Alberta $135,420
Lorne Calvert, Saskatchewan $135,420
Gary Doer, Manitoba $113,500
Pat Binns, Prince Edward Island $107,237
Rodney MacDonald, Nova Scotia $105,621

The Energy Dummies seem to be at NB Power

2006-02-28T14:34:00.000-04:00

Sometimes, a news story is so compelling that it hardly deserves comment. Although the same story may well raise questions.

Consider today's

story on CBC Radio. The one about the provincial Public Utilities Board's frustration at not being able to find out the details of a secret contract between NB Power and the Irvings to buy Irving-produced electricity. Apparently whether NB Power needs the power... wants it... or could produce it cheaper themselves.

It's easy to understand the Irving's wish to keep their corporate affairs quiet. But the story raises a few questions about NB Power:

1. Why would a publicly-owned corporation think it had the right to sign secret deals?

2. How dare NB Power officials try to hide behind the confidentiality clauses of this deal to refuse to explain their actions to a watchdog such as the Public Utilities Board?

3. Why hasn't government fired someone? Especially in light of NB Power's inability to sign a contract with Venezuela for the supply of orimulsion to the Coleson Cove generating plant.

The word 'boondoggle' is sometimes used to explain NB Power. It must be the wrong word. It doesn't seem angry enough.

But, this story has left me without the adequate words to describe it.

A Dummy's Guide to Energy in New Brunswick

2006-02-28T08:16:00.000-04:00

"If you're the Irvings, you make your profit at home in New Brunswick and spend it somewhere else! Why spend it at home? It's not as if New Brunswickers need jobs". John Steeves Reports from Sussex, New Brunswick.

The following article first published in the Halifax Herald newspaper in February 2006, by freelance writer John Steeves has been picked up by a number of media outlets as it reports on the interests of the commercial Irving family energy industry holdings, always a subject of fascination in eastern Canada.

In the field of New Brunswick energy policy, it's more and more difficult to separate the good guys (if there are any) from the villains.

Take the case of the snafu involving the giant Coleson Cove electrical generating plant, just west of Saint John.

Coleson Cove was originally designed to burn Bunker C industrial grade petroleum. The main supplier of the Bunker C was Irving Oil.

Always in the search for cheaper ways to provide electricity to New Brunswickers, the good folks at NB Power came up with a plan. They spent millions of dollars refurbishing Coleson Cove with a new fuel supply in mind. Instead of using expensive Bunker C, the redesigned Coleson Cove would use a low-grade fuel called orimulsion, a fuel available only in Venezuela.

And while it's probable the orimulsion would still be delivered to New Brunswick in Irving-owned ships, Irving Oil would no longer be the actual supplier. NB Power officials personally went to Caracas, the capital of Venezuela, to work out the details of the supply contract.

Everything seemed idyllic until the refurbishment was almost complete.

Suddenly, Venezuela balked, saying there was no contract and the South American nation had no intention of supplying orimulsion to the New Brunswick power utility.

NB Power responded with threats of a billion dollar lawsuit, saying that, even without a signature, the deal was legally valid. NB Power also argued that a favourable court decision would be enforceable in the United States because Venezuelan assets, such as those owned by CITGO Corporation, could be seized.

More recently, NB Power realized that throwing more money into legal bills makes little sense and the Crown Corporation quietly dropped the suit.

So Venezuela seems to be the villain in the piece for not honouring the verbal deal. And in the scenario so far, NB Power seems to have naïvely based its plans on an unsigned contract.
Then, earlier this month, Irving Oil came back on the scene, playing the role of the “guy in the white hat.” Irving implied that it can supply Coleson Cove with a fuel that will, in fact, be cheaper than orimulsion. No details of what this fuel would be were released.

Everything would have fallen into place… bad Venezuela, naïve power corporation and good Irvings… except for a news release issued earlier this month by Irving Oil in the United States.
The release explains that Irving Oil and Venezuela are, in fact, business partners. On February 1, Irving purchased 55 per cent of the ownership of the marine terminal at South Portland, Maine from Venezuelan interests. The other 45 per cent of the terminal is still owned by the Venezuelan-controlled CITGO group.

This deal south of the border has led to some local speculation that the mystery fuel Irving can now supply is, in fact, a mixture of orimulsion from Venezuela and waste sludge from Irving's giant refinery in Saint John. After all, even though the Venezuelans were unwilling to honour a verbal contract with NB Power, they might be willing to supply the same product to Irving, a long-time buyer of that nation's petroleum and now a partner at the terminal in Maine.

Whatever the case, it raises the question of whether the Irvings are wearing the “white hats” after all.

There's another interesting feature to the news release.

For instance, it mentions that Irving terminals “are supplied by a modern fleet of double-hulled tankers including the MT New England 2006, the MT Great Eastern 2005, the MT Acadian 2005, the MT Nor'easter 2005 and the MT Irving Canada 1981.”

The four ships constructed in 2005 and 2006 are apparently “sister ships.” Only one, the Acadian, is registered with Transport Canada at the Port of Saint John. (At it turns out, all four are owned by a Dutch company, VROON, and are under permanent lease to Irving Oil. And, while the Acadian is registered in Canada, the other three carry the flag of the Marshall Islands, in the south Pacific). All four ships were built at the Hyundai dry dock, in South Korea.
So, whether technically owned by VROON or by Irving, these are Irving ships.

But wait a minute!

The Irvings just collected $55-million from the federal government as compensation for shutting down its own shipbuilding facilities in Saint John. If the company needed ships, why didn't they build them at home? After all, it's not because the ships were too large for the Saint John facility. The same Transport Canada data indicates that the Irving Canada was built in 1981 in Saint John even though that ship is slightly larger than the newer vessels.

In response to that question, one Irving apologist told me that the answer is simple: There was no way the ships could be built in Saint John as cheaply as in Korea.

So it was good business. Make your profit at home in New Brunswick and spend it somewhere else! Why spend it at home?

It's not as if New Brunswickers need jobs. Or that the Irvings feel some sort of responsibility as good corporate citizens to buy locally.