The Future Prospects of Canada's Newest Province

MR.MACNAUGHTON:

Ladies and gentlemen of The Empire Club of Canada: In 1958 Farley Mowat, in his book The Grey Seas Under, quoted a Newfoundland skipper. With apologies to our guest of honour, and the other Newfoundlanders in the room for not having the proper musical accent, the quotation was as follows: "Ah, me son, we don't be takin' nothing from the sea. We has to sneak up on what we wants, and wiggle it away."

Presumably, when the skipper spoke those words, he was commenting on the difficulties of fishing. However, for the oil men working on, exploration rigs off the coasts of Newfoundland and Labrador today, the challenge of extracting the resource they are seeking from the sea is at least as difficult as that of the fishermen. But the individual who surely has the most frustrating and longstanding problem in sneaking up on what he wants and wiggling it away is Newfoundland's Premier who must try to convince the federal government that the cod in his continental waters and the resources below them belong to the people of Newfoundland. Given his record in previous negotiations it is likely that the Honourable Brian Peckford will succeed on both scores.

Mr. Peckford became Premier of his province at an exciting time in its history. With the discoveries of new sources of oil being announced regularly, the fisheries industry enjoying a revival and massive new hydro-electric projects being planned, it appears that Newfoundland and Labrador are on the threshold of an era of unprecedented economic growth. That Brian Peckford is in the Premier's office while this is taking place is no accident because he is the man who has made much of it happen.

Mr. Peckford was Minister of Mines and Energy during the period when the ground rules for energy development were established. With regard to offshore exploration his ministry's directives were unequivocal--preference for Newfoundland labour, goods and services in the drilling program and provincial control of the development rate. When the oil industry thought that he was bluffing and that by boycotting Newfoundland they could weaken his resolve, Brian Peckford refused to budge. Said Stephen Kimber in an article on our guest of honour in the Financial Post Magazine of February 9, 1980:

(Peckford) realized something that Newfoundland politicians, hungry for some tangible sign of development at any cost, had inconveniently ignored for generations--that the province is a veritable warehouse of natural resources the world needs, and that the world would ultimately be willing to pay Newfoundland's price to get them.

When the oil companies returned to Newfoundland on his terms, Brian Peckford had an immense personal victory but, more importantly, he had a victory for the people of his province who gained both economic opportunities and a new sense of pride and confidence in their prospects.

Partisans and citizens of Newfoundland alike were quick to acknowledge Mr. Peckford's foresight and determination on their behalf. Last year he was chosen by Progressive Conservatives to be leader of their party and in a general election his government was elected with a strong majority. The Honourable Brian Peckford was sworn in as Premier on March 26, 1979; today begins the second full year of his responsibilities in that office.

Ladies and gentlemen, it is a great honour to have the Premier of our country's newest province with us this afternoon and I welcome him to the Empire Club with the words of the final verse of a song by Newfoundland's unofficial poet laureate, A. R. Scamell:

Our time spent together will ebb like the tide,
Distance may part us but never divide;
We want you to know we are proud that you came -
Some things have changed but the folks are the same.

The sentiments expressed in that song reflect very clearly our feelings today as we host the leader of one of our sister provinces.

It is my pleasure now, ladies and gentlemen, to ask you to warmly welcome the Honourable A. Brian Peckford, Premier of Newfoundland and Labrador, who will address us on the topic "The Future Prospects of Canada's Newest Province."

PREMIER PECKFORD:

Mr. Chairman, members of The Empire Club of Canada: The timing of your invitation could not be more auspicious since I have been planning for some months now to undertake a speaking tour of eastern North America. Recent events in my province, especially offshore oil and gas discoveries, have created much discussion about Newfoundland's future not only at home but throughout Canada and abroad. These events demonstrate our enormous economic potential. There are many who believe Newfoundland has the potential to become one of this country's important centres of commerce. They may well be right. I would be less than honest, however, if I did not state that my principal and immediate concern is the realization of a major readjustment in the economic and social disparities which Newfoundland experiences relative to the rest of Canada.

This great objective will not be easy to achieve even given the wealth from oil and gas deposits. It is for this reason that today I want to address the future prospects of my province, especially in the context of the major challenges we have to face in order to create a greater level of economic and social prosperity for our people.

Since its entry into Confederation in 1949, Newfoundland has been an economic underdog. Every statistical indicator used to demonstrate levels of economic wealth and prosperity has applied to our province in the most negative way. Now, with progress in our fisheries, large hydro potential and very promising discoveries of oil and gas off our shores, Newfoundland is on the threshold of significant development. For perhaps the first time in our long and difficult history, our people have the opportunity to achieve a standard of living similar to that which Canadians elsewhere have enjoyed for many years. We seek to achieve economic parity, to do ourselves what thirty years of federal handouts have not achieved.

I am aware that throughout our nation some have not seen our objectives entirely in that light. Some have misconstrued our motives as being selfish and greedy, often, I am certain, without a full grasp of Newfoundland's social and economic realities. In order to appreciate the wisdom of the resource policies of my government, one must understand the past tribulations of the people of my province, their present situation and their hopes for the future.

Any serious attempt to understand what my province is all about will immediately recognize the historical facts that have led to a very real disparity in the level of public services and the standard of living in our province, as opposed to the rest of Canada.

Indeed, during the negotiations for Confederation in 1947 and 1948, we (as did all provinces entering the Canadian Confederation) tried to ensure that our transitional grants would be adequate to bring the province's economic situation up to the national standard. We were fortunate enough to have a fairly healthy surplus going into Confederation and we hoped that the terms of union, specifically Term 29, would give us the ability to catch up. However, in spite of Term 29 and major federal investments since 1949, it has been necessary for the province itself to borrow heavily against the future in an attempt to bring public services up to something close to mainland standards. This has resulted in a very heavy debt burden and that burden is a central feature of the dilemma which Newfoundland now faces. Our province's debt, and our lack of access to very large additional amounts of money, constrains our ability to move forward in the near future, even to bring up our public services to the level of the next poorest of the provinces, let alone up to the national average.

In addition, one of the problems with the large resource developments which we now face (particularly for offshore oil and gas and hydro) is a need to make large public investments prior to the province's realizing any increase in public revenues from the resource development itself. So even though our medium- and long-term financial prospects are favourable, the province has a short-term cash flow problem. The future hopes of the people of my province are best characterized by our very strong desire to become a self-supporting member within Confederation. This means having access to, and control over, our own natural resources so that by wisely developing and managing those resources, we can create employment and business opportunities within the province. The resulting large direct revenues will end our dependency on equalization and other transfer payments. Thus, we will not only become paying members of Confederation, but also help to repay the benefits previously received as a have-not province.

Newfoundland's major resource areas--offshore oil, the fisheries and Labrador hydro -are in great demand throughout the world today. However, experience has taught us that resource development itself will not ensure Newfoundland's economic progress. It is how we manage and control their development that will determine the extent to which Newfoundland will benefit. The history of my province has recorded too many instances where mere development rather than the wise management of our resources has been the major preoccupation. I have only to refer to the grossly inequitable Churchill Falls contract which permits the sale, for a mere pittance, of nearly 5,000 megawatts of power to the Province of Quebec to illustrate my point. Newfoundland stands to lose nearly half a billion dollars annually in revenues from this contract--an agreement which does not end, I might add, until the year 2034. It is not my intention today to cast blame on the perpetrators of this deal, but the lesson to be learned is clear. Careful resource management and development must be seen as the only route to economic and social progress. This can only be done, of course, if we own our resources. Thus, we as a province, place a tremendous importance on the,

ownership principle. This principle must apply to every resource sector, not just to oil and gas, but to our hydro resources, to our fisheries, and so on. To do it any other way simply means that we will not be in a position to control our own destiny.

This is why, in the fall of last year, my government took a firm stand with our Tory brethren in Ottawa over the issue of the fish stocks on the northeast coast of Newfoundland and Labrador, commonly referred to as the "northern cod stock." Federal policy permits the licensing of mainland Canadian freezer trawlers to fish our traditional cod stocks--fish which we badly need ourselves. Our cod stocks are only now starting to recover from the overfishing by foreigners during the 1950s and 1960s and we have a long way to go before an acceptable level of recovery is reached. The stark reality is that on that coast, our fish- processing plants continue to operate only at about sixty per cent capacity and for several months each year some communities experience levels of winter unemployment as high as ninety per cent.

The aim of my government is to pursue a fisheries management policy that will allow for the operation of our fish plants beyond the normal four, five, or six month period. It is out of the sheer economic need to protect the inshore fishery of our province and the hundreds of rural communities which depend upon it that we seek to retain our traditional access to northern cod for Newfoundlanders and Labradorians.

Certainly, this contention is not based on any selfish motive. Newfoundlanders have fished the northern cod stock exclusively for hundreds of years and thus we base our case on the principle of traditional historic rights. We do not believe, however, that this principle of traditional historic rights should apply only to Newfoundland and Labrador. If justice is to be done, we feel this principle should apply to the extraction of resources through all of Canada and should therefore be the same for Nova Scotians, New Brunswickers, Prince Edward Islanders and people throughout the nation who can make such claims. Indeed, each of these provinces have very lucrative, traditional fisheries and we make no claim to them.

My government is also of the firm belief that the future of the Newfoundland fishery and the development of conservation and management regulations should not remain the sole prerogative of the federal government. If we as a province are to ensure beyond any doubt that rural Newfoundland will not only continue to survive, but will grow and prosper, then some type of shared jurisdiction must apply. This is a matter which my government will be pursuing with the new federal government in the months ahead through the ongoing constitutional processes.

Let me state clearly that the fishery is the backbone of our economy and it will be the foundation on which the economic and social life of Newfoundland will depend for generations to come. Long after the oil is gone, an effectively managed fishery will be there to ensure the future well-being of our people. That is our long-term objective. In the short and medium term, the fishery will not provide the people of Newfoundland with the standard of living, the level of income and the employment which we seek.

Without some massive short-term infusion of capital, Newfoundland and Labrador will lag well behind the rest of Canada forever. Remember, we need some $350 million a year just to replace federal equalization payments. Only after this sum has been found, can we even start to improve on our position. This is why the utilization of our offshore oil and gas resources is so important. With that resource lies one of two short-term prospects of Newfoundland's becoming a have province.

In recent months, tests conducted at the Hibernia and Ben Nevis locations indicate the strong probability of a commercial oil and gas discovery. Any investor looking at my province knows what these developments mean both in terms of direct investment generally and in terms of the future economic growth and expansion. Indeed one does not have to be an economist to understand that this will mean a somewhat radical shift in the focus of economic activity in Canada. My province is determined to control that shift of economic development and to make sure that it fits in environmentally, socially and economically with the existing Newfoundland society and its priorities, both as they are and as they evolve over time.

We will not be mere bystanders in the march of events which have the potential to devastate the cultural, social and economic essence of our society which has, not without much sacrifice and hardship, withstood the impact of a sometimes unfortunate history.

We are willing, and admit our duty, to develop these, our energy resources, for the good of all Canada but the rest of Canada for its part must not ask us to commit cultural genocide in the process. Thus, the dominant feature of our policy is the control of the rate and nature of offshore development.

As the troubled history of our western provinces shows, it is only through resource ownership that a province can be assured that its objectives and concerns govern. Consequently, my province is vigorously pursuing its rights of ownership which it brought into Confederation in 1949 and which, I might add, it never relinquished by the terms of union, contrary to the view of the federal government.

The success of any federation requires not only that each component unit be reasonable in its demands but that each component also respect the reasonable demands of their fellows. Are then Newfoundland's demands in respect to offshore oil reasonable?

What, you may ask, is the matter with Ottawa's offer of a political settlement? In essence, it falls far short of being acceptable on two counts. First, under all proposals made to date, Ottawa would retain all real effective control of the host of resource management decisions which will not only shape offshore development but will, as I have said, shape and perhaps destroy our society. This is totally and irrevocably unacceptable.

We certainly have never claimed the right to all offshore revenues, any more than Alberta has claimed one hundred per cent of the revenues derived from its oil and gas resources. However, if the Maritime Provinces' offshore mineral agreement is any indication, the gap between our two positions is very great indeed. Under that agreement, a revenue-sharing formula would give Ottawa half of the revenues from any given field, the companies thirty-six per cent and the adjacent province fourteen per cent--hardly an appropriate return to the owners of the resource.

On the other hand, under Newfoundland's oil and gas regulations, the province really has a chance to go somewhere over the next few decades. Our regulations would see forty-five per cent of the revenues accruing to the province, the companies receiving thirty-four per cent and the federal government a very favourable twenty-one per cent. Hardly a bad deal from a province that has been labelled as greedy and unwilling to share its resources particularly, in light of its chronic and deep-seated economic problems.

It is no secret that there is no more money to be taken out of the Newfoundland and Labrador taxpayer through additional taxation. Revenue generation through traditional methods cannot be increased. Our forestry, mining and fishery resources are unable in the short run to provide us with the revenue we require. Therefore, as I stated a moment ago, without a substantial influx of new dollars, Newfoundland, under the present fiscal and structural arrangements that we have in Canada, can go nowhere financially. We are at a point in our economic history when, if we raise taxes, we are under the law of diminishing returns. To add to this, Newfoundland has the highest income tax in Canada. We have the highest sales tax. We have one of the highest corporation taxes. We have the highest per capita debt. We have the highest unemployment rate, and we have the lowest credit rating.

As if this were insufficient cause to make Newfoundland's case for ownership of its offshore resources irrefutable, I thought it might be useful to do some comparison of the relative position of the wealthier provinces to Newfoundland in the context of earned income. Indeed, it is earned income which is the real basis of wealth. Consider these facts. The average earned income in Newfoundland is only fifty-three per cent of the Canadian average. Therefore, just to reach the national average, Newfoundlanders would have to almost double their earned incomes. Moreover our average income is less than fifty per cent of that of Ontario, British Columbia and Alberta. To catch these provinces we would have to more than double our average earned income.

Of course, the prospect of catching up is even more remote because the other provinces are growing at the same time. For example, if Ontario, Alberta, and British Columbia were to grow at three per cent per year in real terms over the next twenty years (as I sincerely hope they will), then Newfoundland would have to grow at a real rate of six and six tenths per cent per year to catch them by the year 2000. This would require almost a four-fold increase in real earned incomes in twenty years.

Canada has survived a situation where provinces such as Ontario have been more than twice as wealthy as Newfoundland. Yet the very concept of Newfoundland's even aspiring to the national average appears to some people to be a frightening prospect which will put great strains on the national fabric. This is nonsense, for surely the vast majority of our fellow Canadians appreciate and welcome a situation wherein Newfoundland is in a position to work towards the national average (or even exceed it) twenty or thirty years from now.

To achieve this goal all we are asking is that Newfoundland have the same degree of control over its resources as the other provinces already have over theirs; nothing more. We are not asking for anything special, but only to be on an equal footing with the other provinces in Canada. If Newfoundland, in the years ahead, achieves this objective, who can argue that Newfoundland, and as a consequence, all of Canada, will not both be stronger.

Finally, I want to speak briefly about Newfoundland's second prospect for greater short- to mediumterm economic prosperity--our hydro resources. I am sure many of you are well aware of the vast undeveloped hydro potential of Labrador. Today, I would like to talk about the developed hydro-electric power at the Upper Churchill Falls and assure you that the province of Newfoundland and Labrador has not given up its attempt to regain control over those resources.

As a result of events in the 60s (when the government of my province was unfortunately not nearly as exertive of its rights as it should have been), Newfoundland and Labrador was denied the right of transit across Quebec in defiance of the spirit and letter of the Canadian Constitution. Indeed a land-locked state would have more right-of-transit over an adjoining foreign country than the Province of Newfoundland turned out to have across Quebec. This cynical disregard of the Constitution put Quebec in a monopolistic buyer's position vis-a-vis Churchill Falls. The result is that Quebec has exclusive access to vast amounts of hydropower at the energy equivalent of $1.80 per barrel for the first forty years and $1.50 per barrel for the next twenty-five years. It is obvious that in today's overall energy environment, this is an absolutely and incredibly one-sided agreement with unconscionable inequities against the Province of Newfoundland and fabulous profits for the Province of Quebec. My government is pledged to rectify this matter.

While we are anxious to develop our remaining hydro potential in Labrador, we are certainly not so anxious as to want to engage in any kind of deal which even closely resembles the Churchill Falls contract. There is no doubt that the island part of my province and eastern Canada in general, as well as the eastern United States, has a tremendous need for the huge hydro-electric potential that is now flowing into the sea. But of what benefit are these resources to our people, if most of the revenue accruing from them must go elsewhere? My government cannot tolerate a situation whereby its sister province, Quebec, is consciously and unfairly determined to exploit its geographic position visa-vis Labrador.

As I have already stated to Premier Levesque, we are willing and happy to provide Quebec, and indeed any of our sister eastern provinces, with hydro power but only if it is truly surplus to our own people's needs and then at fair (but less than world) prices. Is that being unreasonable?

I have tried to demonstrate to you that Newfoundland cannot afford to have the benefits of its natural resources go elsewhere. Indeed, our people would never tolerate it and my own conscience would never permit it.

I stated earlier that there are some who see Newfoundland's endeavours to gain control of its resources and to seek the maximum benefits therefrom as being a selfish and greedy strategy, indeed an un-Canadian position. To this I reply, nonsense! I would ask, is it greedy to want to help Canada by helping ourselves? Is it wrong to provide more jobs for Canadians who live in Newfoundland? Is it wrong to want to depend less on equalization and more on our own economy? Is it wrong to want to retain our uniqueness to enrich the Canadian experience?

I submit that the basic principles underlying the spirit of Confederation support our positions in these matters. My concept of Canada has always been of a country in which the people of each province have a right and an opportunity to realize their own destiny.

This is the concept of Confederation towards which, as Premier of the Province of Newfoundland and Labrador, I want to strive. I sincerely believe that it is the only concept under which Canada, as a nation, can achieve the social and economic greatness of which it is capable. Indeed, it is the only concept which, frankly, can keep us all together.

The thanks of the club were expressed to Premier Peckford by John W. Griffin, a Past President of The Empire Club of Canada.