This is the third of a six-part auto-biographical series about the Cape Breton Development Corporation (DEVCO) by Gerald Wright, who was from 1989 to 1992 a senior policy advisor to the federal minister responsible for DEVCO.
Though DEVCO was a crown corporation wholly owned by the federal government, the company was tightly bound to the Nova Scotia government. DEVCO mined coal which was owned by the province and paid the province a royalty for so doing. Another circumstance colouring the relationship was that the company’s main customer was the provincially owned Nova Scotia Power Commission (NSPC), which generated 65% of its power in coal-fired plants. The NSPC held most of the cards. In particular, it possessed the flexibility to become more reliant on oil, depending on the price. At the same time, it was under pressure to bring down industrial power rates in the province. Renegotiation of its contract in 1989 had reduced DEVCO’s revenue by $20 million but that did not stop critics from contending that unjustifiably high rates, accountable to the NSPC’s support of Cape Breton’s coal industry, hampered the competitiveness of the manufacturing sector.[1]
For reasons that transcended, and certainly conflicted with, our strategy, the high command in Ottawa deferred to Premier Buchanan. The Cape Breton Development Corporation Act, for example, stipulated that two of the company’s seven directors be provincially appointed and that the province be consulted on the appointment of the chairman and president. In practice, the Mulroney government cleared even its own nominations with the Premier. He vetoed a federal government nomination at least once.
Moreover, Nova Scotia governments used DEVCO as a means of systematically milking the federal government. Leave aside the constitutional division of responsibilities and tortuously developed fiscal arrangements. My experience uncovered subterranean rivulets of federal subsidy never publicly acknowledged. One was a hospital tax that could be raised at the will of the province. Another was a decree of the Nova Scotia legislature that any loss of lung function by a long-working miner, regardless of how that might have been caused (for example, by heavy smoking), was DEVCO’s problem, requiring it to pay out substantial sums in workers’ compensation benefits. In the end, the federal government footed the bill.
John Buchanan himself supplied the first stumbling block we encountered. A Cape Breton native with a capacity to charm, he was highly sensitive to voter sentiment in the region and bent on rescuing his, at that time stuttering, career. Buchanan did not demonstrate the slightest understanding of what we were trying to do. In fact, when the miners went on an illegal strike in the summer of 1990, he publicly endorsed their action!
Dealings with the premier were seldom by the book. His views were normally conveyed to us not through official channels but by Michael Cochrane, a Toronto businessman, DEVCO director and later chairman of the DEVCO board. With the approach of a crucial provincial by-election in Cape Breton Centre, a riding populated by Lingan miners and their families, we began to see and hear more of Buchanan himself. Tom Hockin and I met with him in a Montreal airport hotel room. A consummate constituency politician, he took us up and down the streets of Cape Breton Centre, recounting how each householder had voted at the previous election, not forgetting the name of one resident who had been unable to cast her ballot because she was visiting a friend in Boston. We were being softened up.
Buchanan had already publicly committed to the survival of Lingan. What he wanted now was to be able to issue a statement that would substitute a more empathetic approach, dangling the possibility of Lingan’s continuance, for the tough line the minister was taking. That would have undercut our strategy, which was to keep the threat of closure alive to spur greater cooperation from the workers. As the by-election grew closer, I had to field as many as a dozen personal calls a day from the premier, pressing for such a statement. I tried to rebuff his request as tactfully as possible, but in vain. Stanley Hartt, the prime minister’s chief of staff, reversed my position. I found it telling, as well as confusing, that he also said that I had done the right thing.[2]
The premier chipped away at the Hockin strategy but it was more seriously endangered by bringing onstream another coal mine, in Pictou County on mainland Nova Scotia. Leading the charge on behalf of this project were a federal minister, Elmer Mackay and a provincial minister, Donald Cameron who, after February 1991, was Premier. They represented the new Westray Mine in their respective legislatures. Federal and provincial governments joined in giving the project financial backing, the former providing tax credits and a loan guarantee, the latter a low-interest loan as well as a contract with the NSPC that was initially shrouded in secrecy but ensured the purchase of 700,000 tonnes of coal annually. To this was added a take-or-pay provision whereby Curragh Resources (Westray’s owner) would have been paid for an additional 275,000 tonnes, regardless of whether it was mined or not. No such deal was available to DEVCO.
Was it a rational move to develop another coal mine when DEVCO was on the ropes, the environmental case against coal was building and international prices were low? Proponents tied themselves in knots, arguing that the new mine would not damage DEVCO because the business it lost to Westray, essentially coal deliveries to the Trenton Power Station, would be replaced by deliveries to the yet-to-be-built Point Aconi Station with its circulating fluidized combustion technology to deal with the coal’s high sulphur problem. Donald Cameron piled on derogatory comments about DEVCO and its workers.[3] Whatever the merits of the arguments, Westray rendered the prognosis for DEVCO less favourable.
On the home front, other federal government departments could get in the way of what we were trying to do. Such was the case when finance minister Don Mazankowski brought down his 1992 budget, which gave notice that DEVCO’s privatization was under consideration.[4] Privatization was where our strategy was leading but the sudden prospect of a private company acting without regard to the special needs of the region reverberated in a community easily alarmed by any mention of private ownership. It was taken as yet another sign that the powers-that-be had lost interest, that, though rubbed raw by adversity, Cape Breton enjoyed no special status.
Whether or not that was true, DEVCO was shown little mercy. The corporation was under pressure from customers to agree to lower coal prices, making it hard to break even, while, at the same time, it was subjected to the charge that its government subsidy was enabling it to undercut market prices. The minister of energy, mines and resources, prompted by the Coal Association of Canada, alerted the industry minister that DEVCO’s pricing practices were causing problems with the International Energy Association and potentially with the GATT.[5] The corporation’s defence was that lower prices compensated for the coal’s sulphur content.
In sum, disparate regional interests and conflicting ministerial mandates posed a challenge when it came to implementing our strategy. Getting DEVCO to stand on its own feet should have been, but was not, a “whole-of-government” objective. Still less was it a goal shared with the Nova Scotia government. The best we could hope for was that the strategy would not be dealt a mortal blow by the schemes, well intended or otherwise, of fellow Conservatives.
Retired after a career in government, universities and a private foundation, Gerald Wright is Senior Fellow of the Norman Paterson School of International Affairs of Carleton University. From 1989 to 1992 he was senior policy advisor to the federal minister responsible for the Cape Breton Development Corporation (DEVCO).
Notes:
[1] Michelin Tires (Canada) Ltd., which employed 5,000 people in three mainland plants, led in criticizing the NSPC’s support of Cape Breton’s coal industry, claiming that Nova Scotia’s power rates were the highest in the country. “Pressure on rates,” Cape Breton Post, January 28, 1991.
[2] Nevertheless, the result in the Cape Breton Centre by-election went against the Progressive Conservatives and shortly after Premier Buchanan resigned.
[3] Typical of Donald Cameron’s comments was one made in the Nova Scotia Legislature. “A year ago, when the Stanley Cup playoffs were on, they could hardly keep one mine operating because there were so many people who got sick.” “Don Cameron stung by correspondent’s questions,” Cape Breton Post, February 16, 1991.
[4] “Tom Hockin had earlier dismissed privatization as “a classical red herring”. “Devco minister sees ‘real signs of progress’”, Cape Breton Post, October 27, 1990.
[5] General Agreement on Tariffs and Trade. Letter from the Honourable Jake Epp, Minister of Energy, Mines and Resources to the Honourable Michael Wilson, Minister of Industry, Science and Technology and Minister for International Trade, August 15, 1991. Thomas A. Hockin Papers, York University.
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