Monday, 23 January 2017

IS NALCOR RIFE WITH CONFLICTS OF INTEREST?

The public is constantly bombarded with political "spin" as governments, institutions, politicians, and those who profit in one way or another by supporting those views, attempt to win the hearts and minds of the ill-informed.

But enormous sums are being wasted at Nalcor, and "spin" can't mask a project that has doubled in cost. That has been confirmed by a multitude of engineers.

The bevy of emails that arrive in my Inbox — from professional engineers — describe the problems in detail.

For me, having followed years of blather from the likes of Ed Martin, Gil Bennett, and politicians too, those engineers counter their "BS" in its many forms.

Mismanagement rankles the best engineers; they don't want an unsuccessful project appearing on their resumes. Besides, they resent being a part of something that is causing the province financial ruin when they know that bad politics, misinformation and contrived assumptions were merely precursors to a mismanaged project.

And while poorly-written contracts, ill-chosen managers, incompetence, and inexperience all take their toll, no problem is as offensive as conflicts of interest. Many professional engineers believe the crown corporation is rife with them.

Concerned Newfoundlander and Professional Engineer (who published on this Blog on January 12, 2016) referred to “conflicts of interest” in his "Open Letter" to Bernard Coffey, Clerk of the Executive Council.

Another engineer, in an email, drew attention to the problem of “nepotism and cronyism” in Nalcor's recruitment practices.

It deserves attention now, because the issue has been raised in emails and other communications with a frequency that I find disturbing.

The problems arise from two sources.


First, Nalcor permits many of its senior project managers to be employed via their private holding companies. The holding companies provide cover for huge compensation packages awarded by the project management team. The amounts and their recipients are shielded from public view under ATIPPA rules even though some suggest the compensation packages would make CEO Stan Marshall seem substantially underpaid.

A second area where large sums of money are involved relates to the employment of recruitment agencies. Nalcor has a preferred list of companies who supply Muskrat with professional hires. A recent release of documentation by Nalcor, in response to a third party request under ATIPPA, suggests others in addition to those who have contacted me share those concerns.

States Nalcor: 




In other words, Nalcor claims it has no relationship with those hires except that of paymaster. Of course, the relationship is far stronger in reality, and especially if a conflict influenced the hire or the choice of recruiting agency.


That is a big concern for some. How would we know of the conflict anyway, unless some hires report the problem? And, anyway, under ATIPPA the recipient and the level of remuneration are hidden from public scrutiny. Nalcor confirms, in its ATIPPA reply:


A recent phone call from a Professional Engineer informed me that some personnel are "directed" by Nalcor to recruitment agencies. That struck me as odd. After all, recruitment agencies are paid to recruit — not to be the easy beneficiaries of big fees.

Finder’s fees for recruiting and screening for a specific skill-set are the raison d'etre of the recruitment business. The companies also claim a “cut” of the salary of each hire — for each day of their employ. A megaproject is a magnet of revenue opportunity.  


Appendix E (below), copied from Nalcor's reply to the ATIPPA request mentioned earlier, contains the number of hires via recruitment agencies 2011 to 2015.  


When one considers that the "Day Rate" (see Exhibit below) is as high as $1,938 and that rates in excess of $1,000 per day are common, it is obvious that recruitment services on the Muskrat Falls project involves fees totalling millions of dollars suggests that the activity deserves diligent monitoring for potential conflicts.

One Muskrat engineer recently suggested that the recruitment agency's compensation is in the range of 15-25% of the amount of total compensation paid to each hire. Another claimed that his recruiter actually got 25-30% — noting that not all recruitment firms are compensated equally, as personal relationships between Nalcor and the recruiter can result in a higher cut for the latter.

This Blogger cannot verify the veracity of those claims. But when, in yet another email, a Professional Engineer contends that, within Nalcor, “nepotism is rampant” — including with respect to recruitment agencies — the allegation cannot be ignored.

Nalcor has dealt with those allegations before. 


Among the items of information sought in the ATIPPA request is this one:


Nalcor provided this response:


:Nalcor's Internal Audit Department was evidently dealing with an anonymous complaint made in 2014 claiming "unethical and/or fraudulent hiring practices" though the writer was "not personally aware of the legality of these claims...".

Nalcor's summary of the facts includes this assertion


To clarify, this complaint did not apply to a traditional “head hunter” but to one of those opaque and private corporations alleged to have been acting as a recruiter. Nalcor's Internal Audit, which wound up on 18 February 2016, evidently dismissed the claim as unsupported. The Internal Auditor concluded: "LCP Human Resources, which manages the recruiting function, is operating with [I assume the word should have been "within"] a sound control environment".

The information obtained under ATIPPA also confirmed that Nalcor investigated a second case in 2014 — involving a recruiting firm. In Nalcor's summary of the facts of the case, after an internal investigation had been conducted, the auditor confirmed "there was some merit to the complaint and steps were immediately taken to rectify the situation".

Nalcor is clearly aware of potential conflicts, having investigated at least two. But the issue has not gone away. Several engineers believe that conflicts still exist - that some agencies are favoured. They assert that the only reason the issue has not become public is that complainants risk losing their jobs.  

Perhaps this is an introductory field for the new Nalcor Board of Directors as they try to find their feet amidst a plethora of problems that have become Muskrat's insignia. Certainly, they must know that conflicts of interest are among the most corrosive - because they undermine morale in any office or on any work site.

Had the government established an “oversight committee” — one that is independent and that had earned the public trust — the engineers writing to the Uncle Gnarley Blog might have been willing to share their experiences and concerns with the Oversight Committee first. No worker who reports such concerns, whether professional engineer or from some other profession, wants to be considered an outlier or a malcontent.

Besides, the low-morale environment under which Nalcor has long suffered might have been far different — possibly one in which workers believed they could share confidences with senior management and make important personal contributions beyond their professional skills. Now, there is only secrecy and reminders of the consequences of talking.


And my Inbox proves how well that regime is working.

38 comments:

  1. I know an engineer who was hired through a recruitment agency. With too hot an environment with various megaprojects, 5 or 6 years ago there was a shortage of engineers, and companies poped up that would recruit for the oil industry, Nalcor etc. One such local recruit owner switched from being a consulting firm, for designing parts of commercial and regular buildings to this recruitment business. Engineers salaries were as expected bid up such that many doubled or more their salaries. Some are top engineers and worth the money, others maybe not, but they go where the money is.
    The agency holds a Xmas party each year. In the past the companies, like Nalcor were there with their slick advertisement of the great Muskrat project. This year no one wanted to talk about Nalcor. Engineers that were part of Nalcor did not want to even discuss the project..... apparently they are being critized by family members even, who hear all the talk of double the rates of electricity and on-going problems with the project. This engineer told me.....well, what could Nalcor say about Muskrat now at such a function.......show some photos of a leaking coffer dam, or the collapsed concrete form!
    As to cost overruns, I heard the figure that Hebron was about 15 percent more that estimated. Muskrat about double.
    The arse is out of her......as they say. She`s gone b`y, she` gone.
    Boondoggle hardly fully describes it.

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    1. Hebron was estimated to cost approximately 6.5 billion and is now at 14.5 billion approximately and |I make that about 2.25 times the original estimate at sanction.
      NL is now in for approximately 5% or 700 million approximately and then we get to forgo royalties until the platform is paid for.
      Someone please correct this info if it is not accurate?

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    2. Had MF been staggered to start after Hebron the labor market would not be as heated. How much has been added in labor costs by rushing to sanction and construction so Danny had something to go out on?
      Hebron isn't 100% funded by NLrs and has a commodity with worldwide demand unlike MF. PCs instance on a equity stake and this delayed Hebron construction for years, another symptom of the fiscal mismanagement of the previous gov.
      Not that any reporter dares to point out to DL you can't compare private and public megaprojects, or the original Churchill Falls finished ahead of time and under budget.

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    3. On Hebron Danny adjusted the standard royalty regime which payed small but increasing royalty prior to payout, for a super royalty. However with the super royalty only 1% royalty was levied prior to payout. With the increase in cost, and reduced oil price, payout is pushed well into the future. We will not be seeing any significant royalty from Hebron for a very long time.

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    4. I beg to differ but even though only approximately 5% of the cost of Hebron, consistent with our equity stake, is funded by NL taxpayers; we will pay dearly in delayed royalties because of the massive cost overruns on that project.

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  2. Nepotism and a mechanism to shield Nalcor from having to disclose salaries....hmmmm, who would have guessed it!

    Nepotism and corruption flourish in the shadows. Nalcor has from the outset been protected from oversight or any transparency in any realm. Neither the finances of this project hemorrhaging money or the engineering are open to public scrutiny.

    Will this ever end or will NL go broke before some oversight and an airing of the Nalcor's bumbling incompetence (or worse) takes place?

    Keep up the good work Uncle Gnarley.

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  3. Follow the money. Always follow the money, the hiring, and the personal relationships.

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  4. I know about nepotism for sure.No one absolutely no one gets a job in NL with having a relative or at least a friend on the job.A refinery comes to mind.I know,I worked there.Oh,one can probably find a job at minimum,but hey,what else is new.Nl runs on minimum wage anyway.

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    1. No doubt about that lol..The skullduggery that goes on in newfoundland knows no end....I haven't worked in the province much but enough to know theres a cult that controls all the jobs on the rock...In the trades I know for sure that the same crowd wears the same hat on every project..It would be easier to sneak Dracula into the blood bank then a common man getting a job in this system...Gotta love the rock mentality lol

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  5. A trademan informed me of the coming and goings of tradesmen and the job site, to suit thier other occupations as fisherman etc, unbelievable happenings on a large job like this, as this source had worked on many large jobs before. This guy was open to talking to a Telegram journalists on this, but no Tely journalists was interested. Maybe they share Williams attitude that this is negative news, wheter than if it was appropriate and showed incompetance.

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    1. When it comes to Muskrat, the Telegram has never had a journalist on that beat, only compliant stenographers.

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    2. We always called them "Cahillboys" (cowboys). Always the same bunch of brown nosers. LOL. I could tell you stories after stories...one guy in particular was NEVER out of work lol. Always bounced from project to project...must be nice.

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  6. Stan Marshall said that many false assumptions led to this boondoggle. It is well known that politicians put a spin on facts often to mislead.It is one thing to spin, another to lie. The new way to lie, as now used by the Trump outfit is to lie and call it alternative facts. This is in respect of how many turned out for Trump day or Obamas first day, or the womens march on Washington.
    When does something that is false become a lie. And when is telling lies to the public become a fraud on the public instead of just an assumption of false assumptions, to assume false just means they were errors. Is the Muskrat boondoggle just a result of errors of false assumptions, or a fraud on the public. One example : that Muskrat was the lowest cost alternative! When only 2 alternatives are evaluated does this means one of them is the lowest cost, given many other alternatives were not considered or not properly evaluated. Was this an error and false assumption or a fraud. There are many such examples of appears to be false or what may be fraudulent action that allowed Muskrat to proceed. And where was the main media to examine these false assumptions!

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    1. It was fraud. I was there.

      Welcome to the post truth world or should I say Nalcor used "alternate facts"?

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  7. Watching Spicer (Trumps press guy), pull in his horns, being questioned on whether he will be truthful or prepared to lie to the press. He says he will be truthful , but that whether it be he, or the press, sometimes they get it wrong, but that when the correct information comes to them , they can and do make corrections. The press there intends to hold them accountable.
    When were the false information here with Nalcor have corrections made! They passed legislation to exclude the PUB from discovering the false information, and then the secrecy Act! So the false information was effectively covered up. It was not mere errors.

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  8. And as to the PUB investigating the risks associated with a potential breach of the North Spur, here is the key part of the recent PUB Order -----------IT IS THEREFORE ORDERED THAT:
    1. Hydro’s motion to strike the two Bernander reports dated November 26, 2015 and October 13,2016, and the Raphals report dated October 17, 2016, is granted.

    So the PUB has prevented the risks as outlined in the above-noted reports from being entered into evidence.

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  9. Replies
    1. Missed it. Who was on?

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    2. Ian Lee,

      http://newsroom.carleton.ca/experts/lee-ian/

      North American Grid comes first, Muskrat a Boondoggle. Stan or Dan not the issue now.

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  10. Re CBC Cross Talk, guess Ian Lee( who views Muskrat as a very bad move for Nfld Needs) from Carlton University:Re Williams vs Stan Marshall, and viewpoints and commentators.
    My view:

    Caller from Corner Brook, Dave Eliot, thinks Muskrat is necessary despite the high cost, but Lee says that in Ontario people are switching from electricity even at 12 cent cost, many to natural gas. Eliot says people never conserve energy unless the price of power goes up. Lee agrees with him. On that Elliot and Lee are wrong, though it is the most often reason.
    Gerry Skinner says prior to Muskrat that he almost had a deal to supply windpower to replace Holyrood. 600MW of wind from a site at Trepassey, going 57 miles to Holyrood. That the winter efficiency was 78.4 %, and yearly average was 71 %, and that wind there never drops below 37Km (based on satelite data) That the cost was 4.5 cents per kwh to Nfld Hydro , and no risk and no liability yo Nfld Hydro.
    This claim is questionable. Current wind power of 54 MW has an average capacity of 43 percent. If Skinner is saying his 600MW could produce 470 Mw in winter, this does equal Holyrood thermal plant output but is remarkable that it can produce 78.4 % capacity on average. Nfld average wind is about 20 MPH so the average of 37km stated seems about average, not minimum wind speed,as Skinner claims. Nevertheless even if only 43 percent average, 600MW could deliver 258MW of wind power.
    The problem with wind, besides not always available, is that you can only use wind to a proportion of the grid load. If winter load is 1700 Mw, 5 percent wind max would be only 85 MW max. Manitoba Hydro said it could go to 10 or possible 15 percent, so 170 or 255 max. Given we have 54 MW now this could allow to to 201 MW max additional (on our island stand alone system).If 43 %capacity this would give an extra 86 MW in winter . If 78.4 % capacity, then an extra 157 Mw capacity. Lee was impressed with Skinners micro knowledge of the wind issue. It suggest Skinner and Lee does not understand the constraints on wind, which seems to limit it to one a fraction of what Skinner says. Nevertheless wind could add another 85 MW of more in winter, a significant contribution to cut fuel burning at Holyrood. Skinner invited Lee to his VOCM Energy Show, and Lee accepted. Skinners show is a infomercial on solar and wind, which offers little economics except for remote cabins.
    Winston Adams, Logy Bay

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    1. Skinner is aware that there is some 80 Mw of additional island hydro undeveloped that is economic. He also says that when replacement of existng hydro generators came due, they could have higher capacity....he dos not give new MW from this. What has been ignored has been the combination of new island hydro, plus more wind within limits permitted, and Demand Management from efficiency. The last item has the most potential and the most cost effective of all three sources, but all 3 should be used. Seems Lee and Skinner has limited knowledge on this combination of energy sources. Pity.........as they get a lot of air time.
      Winston

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    2. Sorry Winston but your analysis is rubbish. The grid can be strengthened to take much more renewable energy.

      Secondly you ignore the fact that utility scale storage (battery) is now viable and available as a service. It means that intermittentcy is no longer an issue. The cost would come in at 1/5 the cost of Muskrat.

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    3. Bruno, what is your expectation regarding grid "can be strengthened.."? Was feasibility, including $ estimates, etc. ever done? What is status on the great infrastructure program reconstruction with Fed support in NL?

      Thanks for your insights.

      Delete
  11. Maybe the MUN economic guru, (Locke?), and Lee should be put on air, to publicly debate the economics of Muskrat, Dave Vardy to facilitate. Then have the Engineering Leadership have a go. The Public have charter rights to know. Finally, Let Danny, Ken and Stan take questions in a Trudeau-like Town Hall.

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  12. Wonderful idea Robert. I would pay to attend to see that. Instead there may be an inquiry some years down the road, like after the Sprung greenhouse inquiry and conclude that not enough research and analysis was used prior to sanction, and no one held accountable. Came across a reference to that in Bill Rowes latest book, at Costco, saying Peckford had a fund raiser held for him after his retirement, and raised 100,000.00, despite pension income.
    Winston

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    1. Over to you, CBC, VOCM, Telegram, MUN, APEN, Carleton, Board of Trade, HQ, Nalcor, etc.

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    2. Your mention of our former premier resonates in BC. as a strong Tory supporter of the Site C Dam, based on BC Hydro's trumped up demand forecast, not unlike Nalcor's "proof" that Muskrat was justified.

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    3. Robert if only you had a functioning democracy the media would act like the Fourth Estate and a rationale debate on Muskrat would occur. Have you been in a coma for the last six years?

      All the pillars of your democracy have been short circuited, one after another to facilitate the MF boondoggle. It continues to this day with the PUB striking crucial evidence to the public interest by Raphals and Bernander from the record.

      While the PUB exposes itself as corrupt to the core you daydream. Wake up and ACT!

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    4. Robert , you in a coma,........ I with a stroke......Bruno is really colorful.
      Meanwhile the PUB seems to be consistent, in that it allowed issues as to transmission reliability, but not on the North Spur safety. Life downstream is not big under their mandate. And I suppose, if they allowed it, it would require a 2 year PUB hearings on all the technical issues surrounding quick clay etc, with opposing views, and maybe beyond Liberty expertise, certainly beyond Andy Wells to sort out, without considerable time and expense of many consultants, and legal questions by the power companies to derail it. Such issues should have been settled before sanction. As it is, transmission reliability will be looked at 5 years after sanction! Not exactly a D Day operation. What chance do we have for democracy if the USA has lost it's, with "alternative facts" meaning lies and deception, the norm. We have but Russell at the Telly and Pete Sucey, and one Germain at the CBC, while they have CNN and a hundred other journalists trying to keep truth at the forefront. Heading up truth here is Uncle Gnarley,....... Des, as best he can.
      Winston

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    5. Wrong again Winston. Raphals evidence is all about reliability using historic data that shows the capacity well below the claims under the current flow regime of the river.

      The PUB wants no evidence contrary to the Nalcor "alternate facts".

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    6. Peckford will forever be remembered for the zeal with which he embraced a cucumber.

      Williams will forever be remembered for the zeal with which he embraced a muskrat.

      Only Newfies have the quirkiness necessary to accomplish such remarkably bizarre feats of self-immolation. You just can't make this stuff up.



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    7. Well, I have not read recent arguments to the PUB by the power companies on how it fitted into reliability.
      Raphal's data is mostly about the water flows and the average and worse case figures, which reflects negatively for Muskrat. I used them to illustrate that to have a capacity of 18 kw of electric heat to a St. John's house from Muskrat power, is equivalent to 990,000 dollars for supply to that one house.
      But the transportation of power for reliability to me is for the most part is different. If is whether power can be "reliably' delivered subject to all the adverse climate (salt, high wind, ice loading, tower strength etc). On these I have long expressed concern for reliability, and Liberty has likewise says reliability will be less than Nalcor stated, such that backup such as Holyrood likely will be needed.And I believe Raphal touched on that as well (you can correct me if not).
      You have your interpretation and I have mine. I guess Liberty got it all wrong also.
      I mean the North Spur could fail, and power could still flow from the Upper Churchill to Nfld if the line is reliable, they can argue. I agree that the wider consideration of the Dam failing and a loss of a 8 billion power house and dam asset should be the wider focus of reliability, but that wider focus was denied last year as far as I remember.
      Winston is Wrong so Bruno can be Bruno..........yes sir.. it was all about water flow. Job to keep track of it all you know.
      Winston

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    8. Your descent into technobabble might please you but it is largely irrelevant.

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    9. If you, dear Bruno think that my basic description of power reliability issues is technobabble, then we should stay away from issues such as what is 2+2, as you may short circuit.
      Now the government prevented the PUB from oversight of Muskrat. Dark Nfld power failures triggered a PUB investigation of the failures. Poor maintenance of Hydro assets was one of the problems that led to poor power "reliability". All of this had to do with the island grid. Then the Grand River keepers argued that Muskrat could contribute to island grid reliability going forward. This was effective and very important, as it opened up the door somewhat for the PUB. Indeed, Liberty supports that power reliability can be a very big issue........not due to water flow , but for transmission issues.Hence Part 2 for the PUB. If this is technobabble, then you should run and hide when addressing flashovers from salt contamination, from power instability when faults(short circuits) cannot be cleared in 1 second, etc.....or 10 inches of ice on the tower is more than expected .........and we are in the dark. Reliability is full of technobabble, so avoid the PUB part 2, I suggest. If there was more analysis of the technobabble before sanction, sanction should have never proceeded. Now we have issues of soil stability..... technobabble that you really must have trouble with. You call the North spur "the beast". That is really impressive on a technical level. The quick clay experts must really be impressive. Good engineering analysis depends on facts Bruno, not on colorful language.........like Williams reference to bringing in power from Labrador in pickup trucks. Goes over for the simple minded.anyone ever tell you that you have some of Willaim's traits....in a word .....nasty. But now I am nasty. Sorry Bruno.....it's bedtime, and i have watched too much CNN on Trumpism.
      Your anti Muskrat friend,
      Winston

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    10. If you check the record of the JRP you will find I outlined the reliability issues on the transport through mountainous terrain and Syncronous inverters that they under-designed (lack of expensive replacement parts) that can and will lead to outages measured in months.

      You spend too much time in the alternate CNN universe and are somewhat dizzy from the talking heads and the false equivalence that drives the news cycle.

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  13. Dear Bruno, A big problem with the main media is lack of technical ability to ask questions that are of technical nature that are important to exposing false assumptions.And they do not seek assistance to understand technical issues, maybe because they want to give the impression that they "know it all"
    So what is a syncronous inverter, do you mean the DC inverters or synchronous condensers, pray tell, and where could one find your valued input in the JRP ( Joint review Panel?) , can you direct me to where ....is it at the PUB.........their site is pretty messy......and the page number of your input.
    Yes , too much CNN, but they are challenging everyone move by trump......much more that they challange Nalcor here, do you agree? Our faith lies in American journalism, which has an approval rating of 16 percent , I hear. So a rough time ahead.
    Your buddy,
    Winston

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  14. I meant synchronous condensers. As you know they are composed of banks of plates that are heavy and expensive. Manitoba Hydro also warned that without a spare bank of plates that cost close to a billion if memory serves me, the failure would take months to repair.

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  15. As the so called experts that know about building, negotiating, adhering to contracts (mmmm south coast transmission line??) to this Hydro Mega project sit in their nice comfy office located on Torbay road one needs to sit back and wonder if some of these hiring agencies are directly owned or somehow associated with individuals sitting at Torbay Road. Paul Harrington has a connection, Pat Hussey and Ed Bush are all affiliated with either their own or immediate family owned agency. Is this why they are so quiet? Did anybody ever inquire about the LOA (Live out allowance) that these money hungry people are collecting, tax free! Amounts from $3000 to 6500 a month. This contributes to the overall cost of the project which is now at 11.4 BILLION dollars. Does Gilbert know any of this, and OH where is Gilbert? Has he gone in hiding again? This is an issue for tax payers of the province just like the water our tax dollars are leaking though that cofferdam. Yes they are 50% near completion and not able to stop it now, but us as Newfoundlanders and Labradorians we need to ask the questions and make Nalcor accountable. Remember our population is 500,000 are we going to be able to afford this when it is finally completed.

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