Tuesday, 8 July 2014

"MUSKRAT MADNESS" Book Review by David A. Vardy

Muskrat Madness
by Cabot Martin
(Available at Afterwords Bookstore, 245 Duckworth Street, St. John's
and Online at:  http://www.muskratmadness.ca/)

Cabot Martin has once again rendered a major public service to the people of Newfoundland and Labrador by writing his new book Muskrat Madness. It is required reading for those interested in sound public policy.

This is the same Cabot Martin who advised Premiers Frank Moores and Brian Peckford in the early days of offshore development and who helped develop policies to ensure maximum benefits to the people of the province from oil and gas development.


Cabot has now prepared a memoir on Muskrat Falls, an invaluable document that does not claim to cover everything that happened, but which covers many of the key issues including project costs and how they fit into the energy economics of 2014. 

His memoir includes some of his letters to the Telegram. In one of these he concluded that “Muskrat is a dog-unless, of course, you are Nalcor.” In June 2012 Cabot opined that future oil prices are key to the viability of Muskrat. He said “the combination of, say, a 25% increase in cost and a fall to $100 per barrel…would result in  a similar eradication of Muskrat’s economic advantage even as constructed by Nalcor-and that’s actually where we find ourselves in the summer of 2012.” 

Muskrat Madness went to press before the recent announcement by Nalcor that costs have gone up by $800 million, raising project costs from $5 billion in 2010 to $7 billion by June 26, 2014 (not including financing costs or the Maritime Link with Nova Scotia) an increase of 40%.

The book gives prominence to the quick clay problem associated with the North Spur, which is a one-kilometre component of the natural dam to be joined to the man-made dam, allowing the impoundment of water at Muskrat Falls. 

Cabot documents his personal journey to find a world class expert, Dr. Stig Bernander, to obtain his opinion on the risk associated with the quick clay and on the need to undertake due diligence to find a solution. Cabot describes how the possibility of instant liquefaction of the quick clay not only threatens the large investment in the project but also threatens the life and safety of those living downriver. His book includes a link to the Norwegian YouTube video describing the Rissa landslide of 1978, which is a graphic display of what could happen at Muskrat Falls.


Cabot also documents his efforts to ensure that other options to Muskrat Falls are explored, particularly natural gas. 

He describes how a full public hearing by the PUB into all the options was circumvented by an order-in-council exempting the project from the Board’s jurisdiction. Such a full hearing would have allowed consideration of how the natural gas resources on the Grand Banks could have been developed as feedstock for a thermal plant at Holyrood, thereby creating a potentially lower cost option. 

He believes that government should adopt a proactive policy to encourage the development of natural gas (much of which is now reinjected for future use) not only to fuel a thermal plant but also to serve as a catalyst for a liquefaction plant to produce gas for export, creating enhanced economic benefits from our growing reserves of natural gas, complementing and enriching existing oil developments.


The correspondence with Environment Minister Joan Shea concerning an application to construct a dam, under the Water Resources Act, is quite enlightening. He asked her to respond to the points raised by the Swedish expert Dr. Stig Bernander concerning safety risks caused by quick clay on the North Spur. He asked if Nalcor had sought the necessary approvals required under the Water Resources Act, section 48.

      48.      (1) A person may apply to the minister for a permit to carry out an undertaking that under this Act or the regulations requires a permit and the minister may issue that permit in accordance with this Act.
             (2)  A person shall not, without obtaining a permit required under subsection (1), carry out an undertaking for which a permit is required under this Act or regulations.

Minister Shea did not respond. Instead she sent the letter to the Minister of Natural Resources, Derrick Dalley and to Nalcor, the proponent. 

The Minister of Environment should not be turning this letter over to the proponent for reply. This is a breach of due process and compromises the independence of the Minister of Environment from the project proponent. Cabot states that Minister Shea “was the Minister responsible here and that to involve the Dam Safety applicant, the object of her scrutiny, Nalcor, to help draft her reply was highly improper.” 

This for me is a “smoking gun”. It raises a broader question as to the integrity of the whole environmental assessment process and whether it has been compromised by inappropriate influence by the proponent.

The response itself is another “smoking gun”, where Dalley responded that all the approvals will be sought after the dam is built. He said “these documents are required prior to impoundment of the reservoir, not with the start of construction.” 

Why would they seek approval only after the project is completed? To quote Cabot: “Nalcor is going to spend $10 billion and only then see if it can be considered safe as required under the Act?” Minister Dalley did his best to downplay the credibility of Dr. Bernander and the applicability of his expertise to the issues at play. 

Cabot had done his homework well and leaves the reader with the strong apprehension that this issue is not only “Nalcor’s worse nightmare” but a concern for all of us.

This is a personal memoir by a person who began as an advocate but, upon learning more about the project, quickly became an opponent. It was the “shale revolution” which convinced him that the economics of the Muskrat Falls project were now compromised by a fundamental and adverse change. 

Cabot’s is not an academic history. It is a history by a participant in the process, one who has taken a strong stand. It concludes with a commentary on the quality of democracy in our province: “the way in which Muskrat is being rammed through has exposed deep fissures in our collective instinct to act in a democratic fashion”. 

The book is a clarion call to “Halt Muskrat Now”.

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About David Vardy: Vardy is a graduate of Memorial University and holds post graduate degrees in Economics from the University of Toronto and Princeton University. He is an economist who served for close to 30 years in a variety of senior positions, including Secretary to Cabinet (Clerk of the Executive Council), President of the Marine Institute, and Deputy Minister of Fisheries and Chair of the Public Utilities Commission.David has had a long standing interest in the development of sound public policy as a policy advisor, consultant and university researcher. He is the recipient of the nationally adjudicated Gold Medal Award from the Professional Institute of the Public Service of Canada (PIPSC), the Lieutenant Governor’s Award for excellence in public administration from the Institute of Public Administration (IPAC) of Canada, and an Honorary Doctorate from Memorial University. 




2 comments:

  1. It seems physical risks is NOT to be an issue to be reviewed by the PUB, as Nfld Hydro was applied to get questions on this to be disallowed . Now physical risk from the North Spur stability is a big concern, but is secondary, it seems, to power reliability issues for MF, which is allowed to be looked at. However, in the case of the possibility of the North Spur collapse, it gives rise to both power reliability as well as physical damage from flooding downstream. If the PUB cannot address the physical issue of flooding and possible loss of life, surely the issue of possible collapse affects power reliability.... no dam , no power. Accordingly, it seems the issue should be heard and assessed. In terms of power reliability, a dam stability issue is the same as a transmission line tower failure, but of course much more consequence. It will be interesting to see how the PUB rules on that issue. Winston Adams

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  2. Key words in your argument: Economics, economy, economic advantage, risks, costs, costs gone up!

    Your arguments lack - speak in the name of what is really being lost here, speak for goodness sake about 'real people', 'real interests'! When the voice of power speaks, it speaks from a particular perspective with a mind on values important to them and that is visible and audible through the choice of language. Opposition is using the same vocabulary, you are reinforcing the dominance of the powerful voice by sharing in their values - they only hear your fervour for their values. If you care about the Newfoundland (and more importantly for the Labrador) people then you will speak about the culture, the heritage, the traditions, the connection to something that is irreplaceable and is quickly being destroyed.

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