Sunday, May 30, 2010

Canada's MPs, Our Money and the Waiting Game

In the past couple of days, there have been developments on the proposed audit of Canada's Parliamentary budget of $583 million (fiscal 2010) including MPs expenses, and the ensuing storm that occurred when the Auditor-General was refused access by the all-party Board of Internal Economy. News reports from last week suggest that the deadlock will be broken this week and Ms. Fraser will be invited to discuss the issue with the Board.

On Friday evening, the Globe and Mail posted this item in their Ottawa Notebook about Liberal MP Michelle Simson. I’ve written about Ms. Simson, MP for Scarborough Southwest previously; she is one of three MPs (the others being Rob Oliphant and Marlene Jennings) who, in the interest of full disclosure, have posted their MP expenses on their websites. These voluntary disclosures ensure their constituents that they are spending taxpayers money responsibly. Good on all three of them!

According to the Globe article, Ms. Simson is not popular with many of her fellow Liberal caucus members. Some of her fellow caucus members, including Mr. Ignatieff, believe that she is making them look bad because of the proactive nature of her actions. Here's what the Globe had to say about Mr. Ignatieff's reaction to Ms. Simson's actions:

"Rather than praising her and encouraging other MPs to follow her lead, however, Liberal Leader Michael Ignatieff told members not to do what she did. He told his caucus to stick together and not to be mavericks on this issue. He is concerned that different MPs could post difference expenses, creating the perception of inequities"

Here's a solution Mr. Ignatieff. Have one of the Liberal Party accountants prepare all of your MP's expense statements so they are all reporting expenses in the same fashion to make it easy for Canadians to understand, then post them online. See, Mr. Ignatieff, that wasn't so bad was it? Give Canadians more credit; most of us are capable of deciding what is fair and what is wrong.

I’d like to ask Mr. Ignatieff whether Ms. Simson represents the constituents who elected her, the Liberal Party or her fellow caucus members when she sits in the House. It is only her constituents that elected her, not the Liberal Party (or its Leader) and certainly not the Liberal caucus: it is her constituents that she is responsible to first and foremost.

The issue of representation seems to be lost on today’s politicians. The impending third reading of Bill C-391 is a prime example. This Private Member’s Bill that would see the abolition of the gun registry is currently in Committee and will be brought back to Parliament for, what Mr. Ignatieff has told his caucus, will be a “whipped” vote. All Liberals will be expected to vote along Liberal Party lines (against the Bill) regardless of the wishes of their constituents. While you may agree with the Liberals on this particular issue, it is the principle of whipped votes that I disagree with and it is an issue that the former Reform Party attempted to tackle back in their early days before they sold out to "business as usual" on Parliament Hill.

Back to Ms. Simson. During the 2008 election, she promised her constituents that she would be accountable to them and that they would see where she spent their money. She is now doing exactly what she promised her constituents she would do if elected, a highly unexpected turn of events on Parliament Hill and something that deserves respect.

Last week, another Liberal MP, Rob Oliphant, also made the right decision and posted his MP expenses online. It certainly looks like Mr. Ignatieff is experiencing yet another "palace revolt"; now three of his MPs have gone against the party line and have done what they feel is in the best interest of their constituents, the same thing that happened on the second reading of Bill C-391.

On Sunday, Craig Oliver of CTV's Question Period had the privilege of interviewing Canada's Auditor-General Sheila Fraser, a person that most Canadians both respect and trust. In the interview, Ms. Fraser told Mr. Oliver that she is waiting for a formal invitation from the Board of Internal Economy as the next step toward auditing the expenses of both the House and the Senate. Once the invitation is extended, she will meet with the Clerk of the House of Commons (and Secretary to the Board) Audrey O'Brien to discuss the scope of the audit and exactly what aspects of expenditures she will be allowed to access. She hopes to audit MP expenses as part of the examination of financial issues but will also examine broader management, security and information technology issues.

Ms. Fraser noted that it is unusual to have an audit with any restrictions (imagine if a publicly traded company told an auditor that they couldn't have access to all of their financial transactions); she stated that she was concerned that if any access restrictions were in place, that the audit would not be credible. She noted that she would not be judging "value for money", rather, she would be looking at "performance"; whether a program is achieving economy, efficiency and effectiveness (i.e. whether it meets certain goals). She will not be telling the House (and by extension, Canadians) whether the program or expenditure has merit; that will be up to the public to decide. She anticipates that the audit will take 12 to 18 months to complete.

Let's hope that our elected officials bend to the will of those that elect them, do the right thing and release all of the information necessary to complete a credible audit. If they don't, Canadians' trust in our political system will sink even further. It's about time Canada's MPs realize that most Canadians simply don't trust them. They need to take a step away from the palace on Parliament Hill and show some respect for those who send their tax dollars to Ottawa every April 30th. We need to tell our MPs (and Senators) that they are not entitled to spend our money without letting us know whether they are spending it wisely or not and that we need proof of their prudence.

As an aside, in the Question Period interview, Ms. Fraser also announced that she will be auditing the anticipated billion dollar expenditure on security for the G8/G20 Summits later in June. On the same show, Public Safely Minister Vic Toews stated that he would be pleased to have the expenditure audited (unfortunately, after the fact), but only time will tell if the Conservative government is co-operative or if they cook up some reason to keep the financial details secret.

Friday, May 28, 2010

A Hard Pill to Swallow for Ontario's Seniors - Present and Future

You'll see how weak the pun in the title of this posting is once you get into the article. I could also have titled it "Tough Medicine to swallow....".

In yesterday's news, there was an item that was not heavily covered by the mainstream media (at least not outside Ontario) that could ultimately affect all Canadians. I always find it interesting how governments seem to float these trial balloons just to see how we take the bad news before they hit us with the real thing. This story is nothing that will grab your attention like an oil spill in the Gulf or another Helena Guergis revelation, in fact, it won't impact you until you find yourself in the senior demographic bracket and in need of prescription medication. And for now, living in Ontario. I think we all know the day of reckoning for drug coverage is coming and it appears to be closer than I thought.

It seems that Ontario Health Minister Deb Matthews approached TD Bank to get ideas on how to curb rapidly rising health care costs. In Ontario, health care costs are rising at an annual rate of 6.5% meaning that health budgets double every 11 years. With the impending demographic shift toward an older population looming as the baby boomers reach the magic age of 65, costs will rise even more rapidly. As well, Ontario does not predict a return to a balanced budget until fiscal 2017- 2018; by that time, the province's net debt is expected to have reached $319 billion. Over the next 7 years, Ontario expects to accumulate deficits totalling $82.5 billion; that's if there are no recessions and revenues continue to grow at an average of 5% annually each and every year which is highly unlikely. From these numbers, it is apparent that Ontario's politicians are desperate to cut costs and they think that the easiest way to cut costs is on backs of their electorate. After all, the most of the electorate are not provincial employees that could threaten action if their wages are rolled back or jobs are cut. As well, hell would most likely have frozen over if Ontario's politicians had a fleeting thought of actually cutting their own expenses so we know that isn't going to happen.

In this posting, I'm going to focus on the changes that the TD Economics report recommends for drug coverage. To set the stage for those of us that don't live in Ontario, here's how the current system works. The Ontario Drug Benefit Plan (ODB) now pays for prescriptions for seniors aged 65 years and older. As the current system works, senior couples with combined net incomes over $24,175 pay a $100 deductible per person per year in prescription charges before they are eligible for ODB coverage. After the $100 deductible is accumulated, they pay a fee of $6.11 per prescription toward the dispensing fee. If the couple's income is less than the threshold, they may be asked to pay up to $2 per prescription. In addition, the ODB automatically pays for prescription drugs that are not listed on the Provincial Formulary through the Ministry of Health "Exceptional Access Program".

A few asides.

1.) Those outside Ontario should note that the Liberal government of Ontario introduced an Ontario Health Premium of between $60 and $900 annually (dependant on taxable income level) which raised approximately $2.6 billion in the 2006 - 2007 fiscal year.

2.) Don Drummond was a big proponent of Ontario's new HST. He feels that without the HST, Ontario will not be able to balance its budget. He states that the existing 8% retail sales tax makes Ontario less competitive on its export pricing.

3.) Per capita health care spending in Ontario was the lowest of all provinces (see chart at the end of this posting). As well, the average percent of GDP that was spent on health care was right in the middle of the provincial pack as was its average annual percentage change.

4.) In 2006, 13% of the total population of Canada was 65 years of age and older. By 2020, that will rise to 18%. As well, in 2006, 51% of the Canadian population were working; this will drop to only 49% by 2020 and even lower by 2030 (a date used in the report) if employment rates remain stable. There will be fewer people contributing tax revenue to more seniors who will be relying on the government for more assistance of all types but most specifically health care.

Back to the TD Bank "Charting a Path to Sustainable Health Care in Ontario" report. Don Drummond, TD Bank's economic guru, came out with his report yesterday; you can access the pdf file of the report here. It is well worth a read and is very well written if not more than slightly scary.

In the report, Mr. Drummond notes that Ontario's health care budget currently consumes 46% of its total program spending and that this is projected to rise to 80% by 2030 just as the last of the baby boomers reach 70 years of age if health care spending continues to grow at a 6.5% annual rate. He notes that there is limited scope to further increases in taxes (thankfully) since Ontario is already highly taxed. He suggest that there need to be changes to the effectiveness of health care delivery without affecting its quality.

In specific, Mr. Drummond suggests major changes to the Ontario Drug Benefit program as described above. Mr. Drummond suggests that Ontario needs to scale back drug coverage for "higher income seniors" so that only those in need have their drugs subsidized. In his report, he states that "51% of drug spending is earmarked to higher income seniors, versus only 15% on lower income seniors." He recommends that rebalancing could be done in one of two ways; first by increasing the co-payment (deductible) for higher income seniors on a sliding scale and second by forcing private insurance companies to pay first then topping up with ODB instead of the reverse as is the situation now. I'd have to imagine the insurance companies will love this one; they'll be forced to raise premiums to cover increased payouts. It would also be interesting to know what he thinks the threshold income should be for coverage; that could be a real political football if Mr. Drummond's plan is adopted.

By changing the ODB, I agree, it will save money if all else remains equal. Unfortunately, the demographic shift that will take place may make these changes moot. Basically, what this plan will do is penalize those seniors who spent their younger years living through the Great Depression and decided early on in their lives that they would make certain sacrifices so that they could save for their futures. Most governing parties live in fear of seniors as they vote in large numbers and are a very powerful lobby group. I'd love to hear Premier McGuinty explain this one to his senior electorate! As well, in the future, it is really going to nail the baby boomers that have also tried to save for their retirements once they reach 65.

Mr. Drummond's report makes other recommendations that I will comment on in upcoming posts. One of these that is particularly interesting is changes that he recommends to doctors' compensation.

Governments, both provincial and federal should have been aware of the growing pressures on their program spending resulting from future demographic changes for the past two decades. They have no one to blame but themselves if they were unaware; just because they were, and still are, playing foolishly with our futures is no fault of ours, unfortunately, we will pay the price.

Lest those of us living in other provinces wipe our brows thinking that we're immune because we aren't living in Ontario, guess again. Here's a chart from the TD Economics report to prove it; you can see for yourself that Ontario sits right in the middle of the provincial pack as far as health expenditures go by pretty much any reasonable measure.

And here I thought it was better to get old with money in the bank. Apparently, that may not be the case. Maybe it will just be easier to rely on the Nanny State while living hand to mouth, eating cat food and rocking away in the dark.


Thursday, May 27, 2010

G8, G What?

According to news reports on May 26th, the security price tag for the G8 and G20 joint summits to be held in Toronto and Huntsville Ontario from June 25th to 27th is now estimated to be close to $930 million, up from the original estimate of $179 million set aside in the March 2010 budget. Ms. Christine Csversko, a spokeswoman for Public Safety Minister Vi Toews acknowledged that the costs were based on a "medium security threat" and did caution Canadians that the final tally for the security costs will not be known until after the completion of the dual summits. She also claims that the unprecidented combination of having the two summits at the same time is adding to the security cost.

Two words - holy crap! Five more words - that's a lot of pepper spray!

For those of you poor at math, the new estimate works out to $12.9 million per hour of the 72 hour combined summit, $116.3 million for each of the G8 leaders and $46.5 million for each of the G20 leaders if divided evenly. What exactly are we protecting these so-called VIPs from? Generally, protests at these summits are fairly tame events with a less than a few thousand young anti-globalization, pro-human rights demonstrators hurling epithets and rocks followed by a wrestling match with police after they take a face-full of RCMP Staff Sgt. Hugh Stewart's famous 1997 vintage spicy pepper mix. Sure, bad things can happen at any time but we can't cover all bases. For instance, earthquakes do happen in Southern Ontario from time to time as do tornados but we certainly can't protect G8 leaders and their entourages from either nor should we be expected to.

What Canada should have done was to have set the G20 meeting in a location other than downtown Toronto where there are hundreds of high rise office towers and condominiums with hundreds of thousands of windows that require securing. It would most likely have been cheaper to hold the G20 meeting in another part of the country where security would have been a simpler matter and then moved the cast of characters involved in the G8 meeting to Huntsville.

Looking through the population statistics for the G8 (Italy, Germany, U.K., Russia, Japan, Canada, United States and France), Canada has, by a wide margin, the smallest population. This means that on a per capita basis, individual Canadians are footing a very large bill. Sure, when you break it down it's only $27 and change donated to this very worthy cause for each of us and that doesn't seem so bad. It's when you look at the size of the number for security alone and that fact that this is still an early estimate that the magnitude of this expenditure becomes alarming. Our government is running a deficit in the $40 to $50 billion range this year; I'd much rather have seen the billion dollars spent on something that will benefit real Canadians, not elected so-called VIPs. As well, there are other costs to hosting this event; food, accommodation, transportation, upgrades to local facilities that were estimated to be at least $50 million for the 3000 to 5000 attendees. While there are short term economic benefits to the hosting communities, long term economic benefits are unquantifiable despite glowing estimates made by the Canadian government (the same Canadian government that "misunderestimated" the cost of the G8 security!). As an aside, should you wish to check in the future the expenditures of our elected officials at this or any other summit, here's the website where you can get all of the details.

Generally, G8 summits accomplish very little of lasting value. Since leaders of all G8 countries change from time to time as their respective voters show them the door, the agenda of each country changes. I can't imagine that the U.K.'s new Prime Minister David Cameron has the same agenda as Gordon Brown; in the year since the G8 last held a summit in July 2009, all bets on what the U.K. wanted to accomplish within the G8 are off.

If the G8 and G20 leaders are really sincere about helping out the world, why don't they skip the staged, self-serving photo ops and meet by video conference like the rest of the world and let Canada spend the billion dollars where it will actually benefit Canadians not just a few of the world's elite. But, I guess this just shows us that our government finds it easy to spend money they haven't earned.

Wednesday, May 26, 2010

Not Negotiating with Sheila Fraser

The story of Auditor-General Sheila Fraser's requested audit of MPs expenses has morphed slowly over this past weekend. Back in early May, the all-party Board of Internal Economy of the House of Commons rejected Ms. Fraser's request to audit the House of Commons, most specifically MP expenses which total over $500 million annually. The last time the expenses of the House of Commons and Senate were audited by the Auditor-General (Denis Desautels) was in 1991.

The NDP have decided (finally, after everyone else joined the party) that they will not stand in the way of further negotiations with Auditor-General Sheila Fraser regarding her request to audit MP expenses, following in the footsteps of the flip-flopping being done by both the Conservatives and Liberals. Earlier, the NDP had claimed that since Ms. Fraser was an officer of Parliament, an audit performed by her would be like "auditing her own bosses". Hardly. Like most Canadians, I don't believe that Ms. Fraser would be biased in performing an audit of Parliament since she appears to be quite independent of both the government and MPs. Most Canadians seem to trust Ms. Fraser's impartiality and integrity and, sadly, far more than we trust those we are forced to elect to public office election after election. In fact, I suspect she would hands-down win an electoral race should she chose to participate.

In the case of the Conservatives, Mr. Harper's spokesman Dimitri Soudas stated on Sunday that:

“The Prime Minister is keen to see discussions continue. He’s also keen to see this matter resolved with more transparency...”.

Perhaps, as usual, Mr. Harper is basing his new position on the results of the latest poll that shows that 88% of Canadians want to see an audit of MP expenses. Mr. Ignatieff also flip flopped stating that what he supported was:

"Sheila Fraser, the Auditor-General, coming to the Board of Internal Economy and talking about what she wants to do and then taking it from there..."

I find it most interesting (and more than a bit frustrating) that the NDP, Conservatives and Liberals are all forcing Ms. Fraser to "negotiate" and "discuss what she wants to do" with regard to an audit. There should be NO negotiation and NO discussion; this audit should be mandatory, non-negotiable and should be performed regularly (i.e. more frequently than every 10 to 15 years) to ensure both transparency and complete honesty.

Canada's Election Act should be changed before the next election requiring that all candidates from all Parties agree that their detailed expenses be posted on both their personal/MP websites and on the Parliamentary website. If the individual running for the office of MP is not willing to subscribe to complete transparency when it involves spending taxpayers' funds, then they should not be allowed to run. If potential MPs are not willing to tell us how they are spending our money, then they obviously have character deficiencies that make them poor candidates for political office. As I've posted previously, MP Michelle Simson (Liberal - Scarborough Southwest) posts her expenses on her website. Here is a screen cap of her disclosure (I hope she doesn't mind):

She sets a fine example to other MPs of all Parties; her expense statement is transparent, complete and detailed enough that it provides her constituents with an excellent view of the efficient manner in which she performs her duties. MP Marlene Jennings (Liberal - Notre-Dame-de-Grace-Lachine) also posts a "Proactive Disclosure" on her website. Both of these MPs set an exemplary precedent for the remainder of Canada's MPs.

In contrast, here's what we get from Board of Internal Economy through the Speaker of the House:

It is interesting to note that Finance Minister Jim Flaherty spent $18,266 on "Other" items when many of his fellow MPs had other expenses that were less than a few hundred dollars. This is where more detail is necessary.

Publicly traded Canadian corporations submit their financial statements to a full audit every year to assure shareholders that corporations are truthfully stating their financial health. While this doesn't always work (i.e. Nortel), it more or less ensures a level playing field for all Canadian corporations. In the case of Canada's Parliament, the Canadian public is the shareholder (i.e. owner) of the business and our elected officials are merely our employees. Without a regular audit, our employees can spend as they wish because they are not responsive or responsible to anyone but themselves. Under the present system, our MPs and Senators can increase spending without restriction. That has to change.

Go get 'em Ms. Fraser.


From a CBC report this evening, it now appears that the Conservative government is willing to invite Ms. Fraser to conduct a performance or "value for money" audit and will announce a series (yet another) of proposals to ensure greater transparency (one of the CPC talking points) for MP and parliamentary expenses. The proposals will be taken to the Board of Internal Economy next week.


Tuesday, May 25, 2010

Dimitri Soudas = John Baird

Today was supposed to be Dimitri Soudas' (communication director for the Prime Minister) big day testifying before the Commons ethics committee investigating government interference on Access to Information requests. Mr. Soudas was supposed to answer questions about ministerial attempts to block Access requests. Instead, he was replaced by the Conservative's pit bull Transport Minister John Baird.

The Conservative government, through Government House Leader MP Jay Hill (Conservative - Prince George-Peace River), stated that:

"Ministers are answerable to Parliament and its committees. It is Ministers who decide policy and Ministers who must defend it before the House and ultimately before the people of Canada...When they (Parliamentary staffers) accepted their jobs, they never imagined that one of the skills required was to stand up to the interrogation of a bitterly partisan parliamentary committee. They could not have expected, in our Westminster parliamentary system of responsible government, that hostile committees and tyrannical chairmen would deny them the protection of the rules and their minister."

Mr. Hill claims that Parliamentary staffers are not elected and that they are often intimidated and humiliated when asked to appear before a Committee that often consists of a majority of Opposition members. I can't imagine that either humiliation or intimidation happened when the Conservatives/Alliance/Reform formed the Opposition members in Committees, can you? And as for his comment about "bitterly partisan parliamentary committee(s)", Mr. Hill need look no further than his own Party if he wants to see bitter partisanship.

If Ministers must defend their policies before the House and ultimately to the people of Canada why is it then, that during Question Period, Ministers obfuscate when asked a question by a member of the Opposition? They'll dance a jig, sing a song, perform a magic trick and do just about anything but actually answer a question, difficult or otherwise. If you've ever written to a Minister about an issue and they actually make the conscious decision to respond, you get a letter full of platitudes and talking points that rarely address the issue at hand.

The issue of Dimitri Soudas' non-appearance today brings to mind two questions:

1.) Why did John Baird appear for Dimitri Soudas when, quite clearly, Stephen Harper would be Dimitri's superior/Minister?

2.) If a staffer does not appear before a Committee when summoned, would he/she be in considered in contempt? If the wrong Minister appears (i.e. not the staffer's actual Minister), would the non-appearance of the Minister be considered contempt?

My suspicion is that the current government feels that those who serve the public (rather than their political masters) as their underlings are not sufficiently versed on the CPC talking points and that they may slip up and reveal something that the government regards as unfavourable under the pressure of repeated questioning. All of this seems to have cropped up after Sabastien Tognieri, the aide to then-Public Works Minister Christian Paradis, testified on May 11th that he had "...made a mistake in judgement..." more than once when asked why he had intervened in the release of a document under the Access to Information Act by cutting the release to 30 pages from more than 130. Apparently, Mr. Tognieri was mistaken twice - the first mistake he admitted to when questioned by the Committee, the second was that, by association with him, the current government had made a mistake. As Canadians, we are well aware that this government makes no mistakes; Mr. Harper will not allow it.

It appears that Canadian democracy is slipping away one bit at a time. Oh well, it was good while it lasted.

Monday, May 17, 2010

Really Big Oil, Really Small Fines

Last week, Andrew Mayeda of the National Post uncovered changes that Canada's National Energy Board (NEB) had quietly made to offshore drilling regulations. Before these changes, companies had to meet specific requirements, most notably, in the type of blowout preventer and other pressure safety equipment that had to be installed while drilling. Under the new regulations, companies only have to set goals that will protect the environment, the specific equipment they install is up to them.

In this posting, I will compare the penalties for environmental infractions in both the United States and Canada and will then discuss the size of the penalties in context of the profitability of the enterprises involved in drilling in frontier areas.

In the United States, the legislation that penalizes companies for environmental infractions, like what is presently occuring in the Gulf of Mexico, is administered by the Environmental Protection Agency (EPA). The Oil Pollution Act (or OPA) was signed into law in August 1990, largely as a result of the Exxon Valdez spill in Alaska. Its intent is to provide the resources necessary to respond to oil spills by fining those companies that are responsible for non-compliance.

Here's an excerpt:

Key Provisions of the Oil Pollution Act

§1002(a) Provides that the responsible party for a vessel or facility from which oil is discharged, or which poses a substantial threat of a discharge, is liable for: (1) certain specified damages resulting from the discharged oil; and (2) removal costs incurred in a manner consistent with the National Contingency Plan (NCP).

§1002(c) Exceptions to the Clean Water Act (CWA) liability provisions include: (1) discharges of oil authorized by a permit under Federal, State, or local law; (2) discharges of oil from a public vessel; or (3) discharges of oil from onshore facilities covered by the liability provisions of the Trans-Alaska Pipeline Authorization Act.

§1002(d) Provides that if a responsible party can establish that the removal costs and damages resulting from an incident were caused solely by an act or omission by a third party, the third party will be held liable for such costs and damages.

§1004 The liability for tank vessels larger than 3,000 gross tons is increased to $1,200 per gross ton or $10 million, whichever is greater. Responsible parties at onshore facilities and deepwater ports are liable for up to $350 millon per spill; holders of leases or permits for offshore facilities, except deepwater ports, are liable for up to $75 million per spill, plus removal costs. The Federal government has the authority to adjust, by regulation, the $350 million liability limit established for onshore facilities.

§1016 Offshore facilities are required to maintain evidence of financial responsibility of $150 million and vessels and deepwater ports must provide evidence of financial responsibility up to the maximum applicable liability amount. Claims for removal costs and damages may be asserted directly against the guarantor providing evidence of financial responsibility.

§1018(a) The Clean Water Act does not preempt State Law. States may impose additional liability (including unlimited liability), funding mechanisms, requirements for removal actions, and fines and penalties for responsible parties.

§4301(a) and (c) The fine for failing to notify the appropriate Federal agency of a discharge is increased from a maximum of $10,000 to a maximum of $250,000 for an individual or $500,000 for an organization. The maximum prison term is also increased from one year to five years. The penalties for violations have a maximum of $250,000 and 15 years in prison.

§4301(b) Civil penalties are authorized at $25,000 for each day of violation or $1,000 per barrel of oil discharged. Failure to comply with a Federal removal order can result in civil penalties of up to $25,000 for each day of violation.

From what I understand, under the Oil Pollution Act, BP will be on the hook for a maximum penalty of $75 million (and, of course, removal and other cleanup costs) as the holder of an offshore lease or permit as outlined in section 1004. That sounds like quite a bit, especially when you add in the cleanup costs, but let’s take a look at some of the financial numbers from BP and the other 4 largest publicly traded oil companies:

Company Year Earnings (millions)

ExxonMobil 1Q 2010 $6300
2009 $19280
2008 $45220
2007 $40610

Royal Dutch Shell 1Q 2010 $5481
2009 $12581
2008 $26277
2007 $31331

Chevron 1Q 2010 $4550
2009 $10483
2008 $23931
2007 $18688

Conoco-Phillips 1Q 2010 $2100
2009 $4858
2008 ($16998)
2007 $11891

BP 1Q 2010 $6079
2009 $16578
2008 $21157
2007 $20845

Those are some pretty big numbers, ExxonMobil for example, had a net income that was nearly the same size as Canada's federal budget deficit for the past fiscal year.

If we look at the net income for all five companies from 2009 (which was a bad year because of the economic meltdown), the average is $12.756 billion. Since the maximum fine for a spill is $75 million, the fine works out to be an average of 0.588% of their annual net income. If we compare that to an average Canadian family with a median household income of $66,500 (2007) that gets a speeding ticket for $250 (and it's not hard to get one that size), the ticket works out to be 0.376% of their annual gross income. From this very rough calculation, you can see that, as it stands now, fines that currently penalize violators of the U.S. Government's Oil Pollution Act are no worse than an equivalent traffic fine to Joe Citizen. Certainly, the oil companies have to clean up the aftermath of an oil spill but insurance covers much of that cost.

In Canada, the situation is even more lopsided since the penalties for environmental damage caused by oil spills are far smaller. Remember that the same multinational oil companies are operating in Canadian waters, often through their Canadian subsidiaries. From what I can determine, under the Canada Shipping Act which came into force in July 2007, the maximum penalty for a pollution offence is $1 million. As well, the maximum penalty is $1 million under the Fisheries Act, $1 million under the Migratory Birds Convention Act and $1 million under the Canadian Environmental Protection Act. I have not been able to find any other fines that could be levied but if any reader has any additional information, please feel free to pass it along.

The Harper government has recently recommended in its 2010 Budget that responsibility for conducting environmental assessments for energy projects drilling in frontier areas (i.e. the Beaufort Sea) be administered by the energy industry-friendly National Energy Board rather than under the auspices of Canadian Environmental Assessment Agency which is accountable to the Minister of the Environment. This should concern Canadians since the National Energy Board members appear to have marginal qualifications to assess environmental issues related to offshore drilling. Unfortunately, that is what they are being called on to do. As I stated in my posting of May 2, 2010, Imperial Oil Resources (aka ExxonMobil) has applied to drill a well in the Beaufort Sea without drilling a same season relief well (in case of a blowout) since they claim that improved blowout preventer technology should prevent an oil spill.

I would suggest otherwise. So, most likely, should BP.

Both the United States and Canadian governments need to markedly increase fines where oil companies are found guilty of oil spillage incidents. Unless fines are severe enough to cause some notable measure of financial difficulty for these multinational oil companies, they will not be in any hurry to improve their safety practices. Cost-benefit analysis could result in cost reduction at the expense of the environment since reducing costs adds to earnings over the short term (and also increases the value of executive stock options).

Even if oil companies make herculean efforts to prevent environmental damage, accidents still happen but Canadians need to know that our politicians are doing their best to protect both the environment and those who rely on the marine ecosystem for their livelihood.

Saturday, May 15, 2010

Stamps and Guns and "Other Expenses"

I thought I'd post a three catch-ups on items that I posted earlier this week.

1.) Stamps, Guns and Candice: On Wednesday, I posted a writeup about Candice Hoeppner's attempts to influence voters in Wayne Easter's Malpeque riding using her MP postage budget regarding her Private Members Bill C-391. Yesterday, in the Globe and Mail, she admitted that she had sent out between 500 and 800 letters to "people who indicated to her that they are interested in the issue" of dismantling the gun registry. She sent these letters to voters in the eight Liberal ridings whose MPs voted for her bill in second reading back in November 2009, against their Party. She's urging these people to put pressure on their MP to vote for the Bill. While I am in agreement with her Bill (although it is $2 billion too late), I am not in agreement with her tactic. Yes, according to "the letter of the law", she complied with the rules of the House and is allowed to use her postage budget in this manner. My concern is that she has now wasted roughly $450 of taxpayers' money strictly to further promote her own agenda on this one issue. That is wrong, especially in light of the recent ban on the clearly partisan "10 percenters".

2.) Go get 'em Sheila Fraser: In yesterday's posting, I discussed the MP refusal to allow Auditor-General Sheila Fraser access so that she could audit their MP expense budget. The Board of Internal Economy used the excuse that it was beyond her mandate and then took off for a one week break. Despite the media's attempts to ask both the Liberal and Conservative Government House Leaders about this issue, they were unsuccessful. As well, a recent poll indicated that 88% of Canadians thought that MPs expenses should be public but I guess that's not enough for the Board of Internal Economy, after all, 12% still think MPs shouldn't be scrutinized! Fortunately, the Globe and Mail has posted a pdf file listing all Member's expenditures for the 2008 - 2009 fiscal year. It is downloadable (after you click a few times on the Scribd website) but it makes for fascinating reading. You don't get specific expenditures (i.e. how many toilet seats were bought) but you do get an idea of how much is spent on travel, telephones, printing, office rent etcetera and you can see how much your own MP spends compared to his or her peers. One column I found particularly interesting was "Other" Some MPs like Ken Epp of Edmonton - Sherwood Park had expenses as little as zero in that column, others like Steven Fletcher of Charleswood - St. James - Assiniboia had "Other" expenses as great as $308,905. It sure would be nice to know what that was spent on but taxpayers will never know because Board of Internal Economy decisions are made behind closed doors.

I say, keep trying Ms. Fraser, Canadians deserve to know how 500 million tax dollars are being spent.

3.) Helena Guergis: On May 13th, 2010, the much persecuted Helena Guergis posted this press release on her website. I don't have much to say about it other than it does seem to contradict some of the statements she made in the CBC interview with Peter Mansbridge earlier this week. What stood out to me was the reversal of her comments on Monday regarding her husband's non-use/now use of her Parliamentary email account through her Blackberry. This story has more twists and turns than a drunk driver on a mountain highway. The press release is worth a read if only to put her spin on things after she took the time to mull over her Mansbridge interview.