Remember that much
ballyhooed ZIFF Report? 

Do you mean the one that
Government trotted out after Cabot Martin’s well publicized case for the “Natural
Gas Option”?  The one that got under the
skin of Kathy Dunderdale and Jerome Kennedy, bolstered by Dr. Steve Bruneau,
(the younger)? 

And, for certainty, is
that the same natural gas on which Husky Energy is now conducting a feasibility

Exactly the same. 

Is the announcement giving
Dunderdale and Kennedy gas pains.  No,
no, of course not.  You misunderstand.  Muskrat Falls has been sanctioned.  The bromides will be needed later.

So, how are Kathy and
Jerome reacting?

Well, what do you mean?  Reacting to what?

Aren’t they, at least, a
bit pissed that Mr. Li did not seek their advice?

Mr. Li is the Co-Chairman
of Husky Energy and a major Owner of the Company. 

Shouldn’t he have called
Kathy or Jerome? 

You’re asking an awful lot
of questions.  Shouldn’t you get on and
make your point?

Well, you see, I was
thinking of the UPSTREAM Oil and Gas Newspaper report that “Calgary-based Husky
Energy is in the very early stages of assessing the potential for building a
liquefied natural gas plant in eastern Canada, underpinned by gas resources off
Newfoundland & Labrador”.  Shouldn’t
that Journal have been commenting on Mr. Li’s wastefulness?  

I hadn’t thought of
that.  But, you are right; it is out of
character for Mr. Li.

And, not to his credit, I
might add.

All Mr. Li had to do was
pick up the phone to Premier Dunderdale (she would have taken Mr. Li’s call but
not Cabot Martin’s). 

He could even have called the
more lingua franca, Jerome Kennedy. 

Either could have advised
Mr. Li that he is wasting his money, that the idea had already been considered and
it makes no sense.

They would have said: save
your money, Mr. Li.  We have “ZIFFed” it
out.  Sir, our gas is different from
other people’s gas; ours is just a pain. 

The Premier would have enjoyed
advising one of China’s great entrepreneurs; she would have suffered none of
the pressure of Mr. Li’s gas wells, either. 
Having just issued Ed Martin a big cheque (public money; not that silly private
capital that Mr. Li risks) and given him orders to get on with Muskrat Falls, she
would have felt emboldened; like a real Chinese Emperor. 

After a few tut, tuts and
an admonishment to Mr. Li that he was wasting his money, she would have instructed
him on the “chatty Kathy” approach to management.  Certainly, she would have wanted to issue him
her very own autographed copy of “EXCESSIVE SPENDING BY DUMMIES” …yes, yes, the
same one she and Jerome employed managing the new Budget. 

But, no, Mr. Li did not
call Kathy or Jerome for advice.  He denied
the Premier and her favourite Minister, the opportunity to impress him.  It must have hurt. 

Then I got to thinking. 

Mr. Li would never set out
to snub the Premier.  He would understand
political sensitivity better than most.  Mr.
Li is from China for gosh sake. Of course, he did not call the Premier.  In his heart of hearts he could not.  He may not understand how to make millions by
wasting billions, like an Ed Martin, and he may not know much about this gas
stuff, but he is a very astute and sensitive fellow, the very finest Tai Chi
practitioner or so they say.

You see, Mr. Li also has
enormous experience working through China’s bureaucracy; asking the Premier to
release the real ‘shinny’ on Newfoundland’s gas would be like asking Bo Xilai
to come clean. 

Anyway, might Mr. Li have noted
that the Premier had already erected her own “Great Wall”?  Hadn’t she invoked Bill 29? Wasn’t access to
information, in Newfoundland, as complicated as an answer from a Chinese censor?

Mr. Li, like the gentleman
he is internationally reputed to be, would have concluded he could not, must
not, call Premier Kathy.  He would have to
forgo the work of the great international company called ZIFF.  Too bad, Mr. Li might say.  Such a nice sounding Chinese name! 

Of course, Mr. Li,
meticulous to a fault and always well informed, might have noted Cabot Martin’s
comments about the company of whom the Premier speaks so highly.  Didn’t this fellow Martin say that the Ziff
Report was “a railroad job” and “far too restricted and too inaccurate to
constitute a valuable addition to our Muskrat information base”?  Didn’t he also accuse the Government of “not
allowing a full and free evaluation of the natural gas option…”?

Was this Ziff, Mr. Li
might have wondered, like so many Chinese companies?  Did it also do what it was told?

A polite Mr. Li chose not
to ask.  
Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.


Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.


This is the most important set of negotiations we have engaged in since the Atlantic Accord and Hibernia. Despite being a small jurisdiction we proved to be smart and nimble enough to negotiate good deals on both. They have stood the test of time and have resulted in billions of dollars in royalties and created an industry which represents over a quarter of our economy. Will we prove to be smart and nimble enough to do the same with the Upper Churchill?


  1. Will there ever be a way to audit Exxon's financial statements regarding Hebron? If the company does not have to pay royalties until they break even, what is stopping this process from abuse?
    1. Could they throw in tons of design and engineering work that disproportionately benefits other projects? I.E. If there were three similar projects going on within Exxon, what is to stop Exxon from putting these design costs primarily on Hebrons balance sheet?
    2. Natural Disaster: If there is a major oil spill, does the cost of cleanup associated with the disaster fall into the break even point? Would the NL government be on the hook for increasing the equity stake for an issue like this? Would one disaster mean zero royalty payments on the whole project?
    3. With the recent cost overruns heading into the billions, is there an extreme financial benefit to Exxon, knowing they can recoup any cost by avoiding royalty payments indefinitely? I.E. if on paper it shows that Hebron has cost untold extra billions, does that help their tax bill, all the while they can recoup the loss because they are able to avoid all royalty payments until they break even?
    There really seems to be something fishy about this super royalty agreement, nothing that Danny has done has turned out to be what was sold at the time. To give a company like Exxon complete control over how much they pay NL, based on their lawyers interpretations of a very loose financial agreement. The super royalty may turn into a super mess.