Time to close Devco

Time to close Devco
by Fred McMahon

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11/19/98
National Post

The nationalized Cape Breton coal mines, a Trudeau-era relic, seem more and more like a Russian relic from the Soviet era. They are dirty, big, out-moded and there’s not enough money left in the till to make next month’s payroll, despite billions in subsidies.

The Cape Breton mines have been shut for repair since mid-summer. They lose millions, operating or not. Now, the union has a solution. Dig deeply into federal pockets to dig another money pit. Federal natural resources minister Ralph Goodale promised to think about it.

I have another plan. Give each miner a cheque for a quarter-million dollars and fill in the ugly holes around Sydney. That would save taxpayers hundreds of millions of dollars, probably billions.

The wounded Cape Breton environment could start to heal, and thousands of new jobs would spring up throughout Nova Scotia. Closure would liberate Nova Scotia Power from a punitive commitment to buy dirty Cape Breton coal at outrageous prices. As a result, Nova Scotia has the highest electricity costs in Canada. That damages businesses through the province, just when we desperately need to be competitive on world markets.

Most Nova Scotians believe Ottawa stanched the bleeding at the federally-run Cape Breton Development Corporation (Devco). This is, afterall, the cutback decade. Old style subsidies clearly failed. We can’t be as stupid as we were.

We are.

Already this decade, Devco has lost over $800 million. That’s nearly half a million dollars for each of Devco’s less than 2,000 employees. By decade’s end, Devco will have lost more than $1 billion, roughly $55,000 per person year.

These numbers don’t count the massive subsidy provided by average Nova Scotians when they pay their power bill. Devco so overcharges for its coal “the president of the Nova Scotia Power Corporation and the president of Devco would not even talk to each other,” according to testimony before the Senate committee studying Devco in 1996.

Devco sold its dirtiest coal to NSP. It exported its best at a lower price, and a loss. In one recent year, Devco export sales were $45 million. The company lost $20 million on these sales. Had Devco been able to sell this good coal at the same price it was charging NSP for bad coal, the corporation would have made $3 million.

Subsidized coal mining is now older in Nova Scotia than the Soviet Union was at its death. Subsidies began in 1924 so Cape Breton could compete with cleaner, cheaper U.S. coal. They were boosted in 1963 because of competition from oil. By the mid-1960s, they reached $3,000 yearly for each of the mines’ 6,500 workers. In current dollars, that’s $15,000 per worker.

Back then, even the miners’ union opposed nationalization and accepted inevitable mine closure. But a heroic federal government–with our money to burn–stepped in and created Devco. The big money started pouring in, about $3.5 billion since in current dollars. For that, we trapped another generation underground in dangerous, unhealthy, unproductive jobs.

The mines became an international embarrassment earlier this year when Nova Scotia refused to sign an environmental treaty between the Atlantic Provinces and New England. Cape Breton coal is so dirty, the agreement threatened Devco’s future.

Nova Scotia Premier Russell MacLellan explains: “Much of our problem in Atlantic Canada comes from mercury emissions in the United States. We can devastate the coal mining industry and still have these emissions from the United States. So how much further ahead would we be?”

Canada’s environmental lobby must be thrilled. We spent years telling the United States not to dump on us. Now MacLellan says it doesn’t matter where we dump. The important thing is to protect our polluting, money-losing coal industry.

Sydney is awash in pollution from the mines and the equally horrid subsidized steel mills. The environment is soiled by a tailings pile, leachates, coking emissions, and P. A. H. residues, from the family of chemicals that includes PCBs and dioxins. Residents live relatively short lives and suffer from unusually high levels of any number of health problems partly because of this. A clean-up effort cost millions and accomplished little. It collapsed in puddle of patronage and work schedules designed to maximize employment insurance payments.

Closing Devco won’t be cheap. Since 1992, losses are mainly due to past obligations, such as pension payments. Yet, we continue to pile up future obligations and costly, dangerous garbage.

Ottawa planned to halt subsidies in 1995. Devco would live off past contributions until it became profitable. But, profitability is nowhere in sight and Devco’s nest-egg is gone. Federal taxpayers have anted-up about another $100 million since 1995 to cover unbudgeted losses in Devco’s five-year-plan–a phrase you might have thought disappeared with the Soviet Union.

Devco’s board is revising the five-year plan because of, you guessed it, more unexpected losses. A 1996 federal study nixes the idea of another mine. “There is little likelihood (the mine) could be developed as an operating colliery under any commercial standards at (due to high costs), suspect reserve data, inferior coal quality, etc.,” the report, prepared by the John T. Boyd Company, says.

The billions we’ve spent on the mines have produced only negatives. It would be better literally to throw the money down a pit. Instead, Nova Scotia subsidizes federal subsidies with unreasonably high electricity costs, job loss, and pollution which will require clean-up subsidies. All this to save dirty, unhealthy jobs which shorten life spans.

The best five year plan is a write-off.