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Newfoundland Gets Off Canada’s Dole as Williams Takes on Exxon

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Bloomberg: Newfoundland Gets Off Canada’s Dole as Williams Takes on Exxon

By Greg Quinn

 April 17 (Bloomberg) — The poorest province in Canada is getting off the dole.

The province of Newfoundland and Labrador is being transformed by oil, and by the willingness of Premier Danny Williams to fight Exxon Mobil Corp. and Chevron Corp. for a bigger slice of the revenue. Oil is raising the standard of living for the province’s 508,000 people while bringing lower taxes, smoother roads and cheaper education.

Oil income probably created a record budget surplus for the year ended March 31, provincial documents show. The benefit has magnified since oil pushed past $100 a barrel in February. Newfoundland soon may be too flush to qualify under Canada’s equalization program, which redistributes federal money so less affluent provinces can provide comparable services.

“We have lived for 400 years with the problems of poverty, and I wouldn’t mind looking forward to a couple hundred years of prosperity,” said Jerry Byrne, 57, president of D.F. Barnes Group, an energy and industrial services firm in St. John’s, the capital.

Newfoundland will receive C$899 million ($883 million) of equalization payments this year, down 23 percent from a peak of C$1.17 billion in 2000. The oil that started flowing in 1997 from the Hibernia field, Canada’s biggest offshore deposit, helped the province recover from the collapse of its cod fishery, blamed on overfishing or habitat damage, five years earlier.

“You see the SUVs and you see the number of vehicles, the lovely homes being built, and people with everything that they seem to want,” said Alex Dawe, 58, sales manager of a Chrysler LLC dealership in Harbour Grace, 100 kilometers (60 miles) northwest of St. John’s.

Home Prices Rice

The average price of a detached home in St. John’s jumped 13 percent in the first quarter to C$164,000, according to Royal LePage Real Estate Services. That’s almost double the national price increase.

The nascent prosperity brought a career change for Wayne Bartlett, who auctions wine and art to raise funds for schools and charity groups. He recently sold a bottle of Chateau Haut- Brion wine for C$1,000.

“I’m skimming the cream off the top,” said Bartlett, 43. “I have this job that didn’t exist.”

The province’s economy has grown 50 percent since Hibernia began producing nine years ago. That’s second only to the 53 percent expansion in Alberta, whose tar sands hold the biggest oil deposits outside the Middle East.

Economic Shift

Newfoundland’s gains show how economic growth is shifting to commodity-producing regions and away from central Canada’s manufacturing-intensive provinces, Ontario and Quebec. Newfoundland’s 9 percent growth last year was three times the national average, Royal Bank of Canada estimated April 3.

Crude oil for May delivery rose $1.14, or 1 percent, to settle at a record $114.93 a barrel on the New York Mercantile Exchange yesterday. Prices are up 81 percent from a year ago. Futures touched $115.07 a barrel, the highest intraday price since trading began in 1983.

Voters credit the premier with making sure Newfoundland got its share of the oil money, re-electing him in October with a 70 percent majority. Williams, known as “Danny Millions” for parlaying a C$2,500 loan into a C$200 million cable-television fortune, demanded an ownership stake in Chevron’s proposed Hebron offshore oil project. The holding will bring the province an estimated C$16 billion of revenue over 25 years.

Negotiating Stance

Williams threatened to expropriate oil fields if energy companies that hold licenses don’t develop them. He refuses to let Exxon, the world’s biggest oil company, expand the Hibernia field until it offers more jobs and revenue. Exxon spokesman Merle MacIsaac declined to comment.

“If we as a province and a people have been wronged, then I’m going to stand up and fight to the best of my ability,” Williams said in an interview.

While wresting better terms from oil companies, Williams dissuaded the federal government in 2005 from cutting the province’s equalization subsidies immediately. Newfoundland will be phased out within two years as its oil income increases, he said.

“He stared down the giants,” said Bartlett, the auctioneer.

Oil receipts allowed the provincial government to cut personal income taxes last year by a record C$155 million. The province, with a C$6.15 billion budget, is investing C$2 billion over six years in road and school repair. It’s also building schools, freezing tuition at Memorial University, and adding and upgrading medical facilities.

“Provincial revenue, health and education, it is all closely tied to oil,” said Sam Synard, mayor of Marystown.

Highest Unemployment

Newfoundland is still wracked by the country’s highest unemployment, 13 percent, and lowest family income. Median household income rose to C$47,600 in 2005 from C$38,800 in 2000.

One in 10 people have left since the cod fishery collapsed in 1992, and construction jobs disappeared when the oil rigs were completed. In Marystown, almost a fifth of the 6,000 people commute to jobs with the expanding energy industry in Alberta, 4,400 kilometers away, said Synard, 48.

Still, the town benefits because those workers come back every month and spend at local stores. Its hospital has a new dialysis machine and CAT scan.

“Without the inflated $100-a-barrel oil, we would probably still be a have-not province,” Synard said.

To contact the reporter on this story: Greg Quinn in Ottawa at [email protected]

Last Updated: April 16, 2008 23:01 EDT and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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