GEOTHERMAL: WE MUST DO BETTER THAN THE BILL ALLOWS– By Carl B. Nisbett

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The responsibilities, duties and obligations of the Nevis Island Administration are to the people of Nevis. I cannot say in good conscience that the NIA has lived up to any of it with the Geothermal Bill (the “Bill”).

The financial terms of the Bill are too heavily in favor of West Indies Power and its investors. By law, more than 95 percent of the gross annual revenues will go to WIP. Just about every other aspect of the bill weighs in favor of WIP. Enacting an ordinance that puts a cap on the amount of money Nevisians through their governing body, the NIA, will receive from a resource that is owned by the people of Nevis leaves us scratching our heads.

Kerry McDonald has said, “like any good businessman, I would like to recover my money as soon as possible.” I suspect a few business persons may disagree with him in some respects there. “Good” and “recovering [his] money as soon as possible” are not necessarily of the same qualities; one can recover money in the most obnoxious of ways to the detriment of the many. That being said, it should not have been the goal of the NIA to be a guarantor that he recovers it as “soon as possible.” The goal of the NIA should have been to see to it that Nevis got the best deal. The NIA failed in that regard.

Those who start businesses do so knowing full well that there is an element of failure associated with their venture. They assumed the risks that they may never recover their money. At the same time, they also know that they may recover the money they put into the venture, even if it takes them years to recover it and to make a profit, but they do not start their businesses with a guaranty from the government.

It is not the role or function of the government to guaranty that a private business venture in Nevis succeeds. It should create an atmosphere with policies that would encourage people to start businesses and the government should not work against those businesses. It is, however, another matter to guaranty by law the success of a venture.

Yet, that is exactly what the NIA did with WIP. It guaranteed that WIP will get its money back and that it will make a nice profit if geothermal is successful. That is rather unusual.

It is a guarantee when the Bill allows WIP, before any calculation of the royalty to be paid to the NIA, to deduct “all interest and principal paid or accruing during the preceding twelve (12) month cycle by the Licensee on the debt service of all capital debts incurred by the Licensee directly related to the [geothermal] Concession.” Third Schedule 3(b).

Minister Powell has acknowledged that much when he recently said, “the second way that Nevis will be making money is that once West Indies Power Limited (WIPL) would have paid off their initial loans then the Government of Nevis will be expecting to get a share of the profits.”

Along that line, what is there to prevent WIP from claiming that the capital contributions of its investors are “loans”? They can term and structure their investments as “loans”. So, and in fact, the deducting of the “loan” principal would be nothing more than a return of capital to the investors and the “interest” would be nothing but a payment of dividend to those same investors. Those investors could receive a full a return of their capital with a dividend because it is couched as a debt and they could do so even before the NIA receives one penny from WIP over the years.

Under the current provisions of the Bill, some of those same investors could very well receive more money over the years from geothermal than the NIA would receive from a resource that is owned by the people of Nevis.

The Bill puts no condition, no prerequisite, to claiming that loan deduction. There is no provision in the Bill that calls for any certification that the “loans’ are actually loans and not investment money. There is no provision in the Bill that requires that the gross annual sales be held in an account bearing both the NIA’s and WIP’s signatures and stamp. Such a provision would give the NIA some leverage in its dealings with WIP. Every bit of the financial provisions of the Bill is in WIP’s favor. Only when the royalty is paid will the NIA hold any of the money.

Also, if and when there is money for the NIA to receive a royalty, WIP gets the remaining 95 percent or more of the gross annual sales along with the revenues from the first 10 MW, tax deductions for the royalty paid to the NIA and a host of other deductions. Taxes are currently being increased on Nevisians.

Given the extraordinary lengths the NIA has gone to defend and secure the best interests of WIP, it is only fair to ask: Did Kerry McDonald and others draft this Bill for the NIA to simply put its seal to it?  Did the Premier and his ministers read it beforehand? Did the NIA or anyone closely affiliated with the NIA receive any money from WIP? Did the NIA serve as guarantor, outside of the Bill, to any of the debt that WIP has incurred to date, the US $4 million McDonald said has been spent? Did any of the institutions in Nevis lend any part of the money to WIP and is any of it backed by the government or any private individuals in Nevis? Clear the air!

While the Bill puts no conditions or prerequisites to the loan and interest deductions, it is specific in making certain disclosures a criminal offense. Section 68, the “confidentiality” or rather secrecy section of the Bill, says, “no information, obtained under or by virtue of this Ordinance, about prospecting or production operations under a Geothermal Resources License or Concession shall be disclosed by the Government” unless the disclosure is made for certain reasons. 68 (1). It goes on to say, “the right of [WIP], their servants or agents to disclose information about prospecting or production operations under a Geothermal Resource Permit, License or Concession is subject to any restrictions or limitations [prescribed therein]”. Section 68 (3).

The Bill further states, “any person who discloses information in contravention of Sections 68 (1), (2) or (3)  . . . of this Ordinance, is guilty of an offence. In proceedings on a prosecution for such offence”, public knowledge is a defense. Section 68 (4).

A number of questions present themselves. Why the need to make unwanted disclosures a “criminal offense”? Why the need for such secrecy from a “government in the sunshine?”  What is the purpose? What or whom do they seek to protect?

Crime is on the rise in Nevis. The use of guns is on the rise. Nevisians are facing a number of other problems, including spiraling food costs, energy costs, increasing property taxes and payroll deductions and other problems. Yet the NIA has the time to make certain disclosures about geothermal a criminal offense.

And imagine this: While the NIA was creating a new criminal offense for disclosure, some members of the NIA were denying there is a problem with crime in Nevis. But they were keen to have detailed provisions in the Bill to make certain disclosures criminal.

Are these provisions that ban disclosure aimed at intimidating Nevisians and others from saying what they may know?  “No information, obtained under or by virtue of this Ordinance” can cover an array of information even if the Bill seemingly limits it to “prospecting or production operations.” One simply does not know the intent of such a ban, especially when it makes disclosure a criminal offense and especially as the Bill gives the minister the authority to “make Regulations” to, among other things, regulate “matters of confidentiality.” Section 69 (3)(q).

Another disturbing provision of the Bill is its sweeping repeal of provisions of any law that comes into conflict with any provisions of it. Section 70 (1) says, “any provisions in any law inconsistent with this Ordinance is void to the extent of the inconsistency in relation to the matters covered by this Ordinance.”

There are some humorous aspects to section 70. What if some provisions of the federal laws conflict with the Bill? Take that Mr. Prime Minister – you’ve  been “wipped” (pronounced “whipped”)!

On the other hand, if the NIA wishes to repeal any provisions of the Geothermal Bill, it must mention each provision to be repealed. Contrast section 70 (1) with section 70 (2) which states, “the terms included in this Ordinance may only be repealed or amended by a law that specifically refers to them.”

That is special and exceptional treatment under the law for WIP and each provision is drafted to make certain that nothing stands in WIP’s way.

If only the members of the NIA were as vigilant in representing the people’s interest as they were in representing WIP and its investors, whom ever they are. The Premier and his ministers have failed Nevisians with this Bill.