Monday, 12 March 2018


Unless an issue impacts on a personal level, the public is generally sparse with its time on matters of public policy. There are good reasons for that, even if people would profit from debate and a scepticism untainted by partisanship. Ultimately, people live their lives giving priority to the needs of family and employment, even as they lament the threat to their living standards and peace of mind posed by a decade of miserable political leadership.

Yes, people want to know why Muskrat — a project glorified by all strata of society — could have been so poorly conceived and executed. They want to know if malfeasance was involved. But, in the end, they will leave the issue of responsibility and recrimination to the institutions charged with the maintenance of civil society.

Most know that what is hanging over them will be devastating if no action is taken to alter the outcome. By and large, people now want to hear solutions. They want “fixes” that constitute something more than empty promises by politicians whose focus is the next election.

The financial analysis conducted by PlanetNL, in a February 26th post entitled “Can Muskrat Float After a Bailout?”, is both important and timely. The piece provides the basis for why it is foolish to await a “miracle” when a better bet is to start facing facts now.

Unlike Nalcor, PlanetNL does not deny simple economic concepts like demand elasticity (influence of price on demand for a commodity). He calculates a 30% reduction in power demand — from 7000 GWh to 5000 GWh — acknowledging consumer behaviour in a 17 cent/kWh environment. He uses Nalcor’s numbers for debt servicing and operations, post-commissioning. If none of the debt is written-off, he calculates, the revenue shortfall for Muskrat will be $500 million annually, an amount that will rise almost exponentially (see exhibit below).
Source: PlanetNL
PlanetNL also addressed the issue of a “bail-out” of the project. Successive exhibits in the piece show that even if the entire debt of $12.7B — including $7.9B of bond funding borrowed under the Federal Loan Guarantee, $800 million from Emera for the Labrador-Island Link AND the $4B equity contribution from the provincial government — is entirely “written-off”, the project may break-even for a few years before it will, again, require additional subsidy due to increased costs to operate the Muskrat asset.

As much as the idea of write-offs seems fanciful, it is not. Write-offs are inevitable. They are inescapable. They should be on the minds of the public now, except that the Premier and the Finance Minister continue to obscure the issue with promises of “rate mitigation”, giving false hope to the public and opportunity for the Feds to wait until the eleventh hour when the Bond market dries up and we are on our knees.

If this discussion were in reference to the debt of a private company, it would end quickly. The company would be bankrupt and civil law would be employed to clear away the detritus.
In the case of Muskrat, Emera is involved, but it is insulated by a multiplicity of legal agreements.

Nova Scotia was never on the hook for cost overruns. Then, too, the UARB saw an opportunity to skin Nalcor alive when the latter — having already spent several hundred million dollars and wanting a deal at any cost — allowed themselves to be backed into a corner.

Emera’s investment in the Maritime Link and legal commitments for the supply of power to Nova Scotia could be turned upside down if the province defaulted. But for legal reasons and for political ones, too, Emera is likely to be kept whole, and likely by the Federal Government.

At bottom, governments are the ones on the hook for the debt and, of them, only the Federal Government is financially competent.

As PlanetNL suggests, the Feds will be forced even to look at the approximately $3.7B of NL’s $4B equity contribution to the project.  

Right now, it shows up in the Government’s books as part of the “Total Debt”, allowing the fa├žade of solvency to treat it as an active asset. Written off, it would be included in the Province’s “Net Debt”.

Of course, the issue is academic. The Province is not in a fiscal position to service an additional $3.7B, especially while it continues to rack up deficits well over $1B to fund annual current and capital account needs. (Don’t be put off by the terms “debt” and “equity”. It’s really smoke and mirrors — it’s all “debt”.)

The Government continues to talk about “rate mitigation” as if taxpayers were capable of servicing the entire $12.7B capital cost but, as already noted, this is fiction. For that reason, the public needs to go to war first with the Ball Administration, then with the Feds. We have a Government deliberately obscuring our dreadful financial condition when it should be girding the public for both a tough fight and challenging times.

Far too many members of the public, as well, are cavalier about the impact of 17 cents/kWh power on those with low and fixed incomes. Perhaps they forget that even middle class purchasing power will take a hit when reality catches up.

The Premier is both weak and very partisan; he will not challenge the Prime Minister on this — or any other issue — before the federal writ is dropped early next fall, or in advance of the provincial general election next October.

But before people get engaged, they need to be informed. They need to understand the truth about promises of rate mitigation; even more, they need to know why the Feds are culpable and how they enabled the sanction of an ill-conceived Muskrat Falls project.

Let’s be clear: in the same way that there is no magic in the words “rate mitigation”, there is nothing original or innovative in the idea of Federal Government “write-off”. What is important is only that it is necessary and that the alternative is unthinkable.

Unless the public prefers to believe in magic or is willing to accept the pain of penury, they have to get ready to test the goodwill and the patience of the whole of Canadian society.

But, first, they should try and understand why the Federal Government must let “write-off” enter its lexicon.

They might also want to not only goose the Ball Administration, but also awaken the seven Federal MPs from their slumber.

An examination of Federal “complicity” in the Muskrat Falls debacle is coming soon.


  1. Trying to blame this on the federal government is a load of Bullcrap. Blame it on Danny Williams and his high spending free wheeling dealing PCparty who couldn't build a lemonade business little own a hydro dam. It was a disaster of our own making. We elected NL's version of the populist Donald Trump and we are now paying a very hefty price for it. Please stop looking for your imaginary scapegoats. He resides in Galway-and not the Galway in Ireland.

    1. Typical response, how about we start looking at solutions as outlined in the article! Everyone is well aware of the problems and need to start thinking about tomorrow not yesterday!

    2. Sure here's a solution. Stop chasing Mega projects that have either got us in over our head in debt or have forced up to give up royalties by the bucketful to pay for them in return for short term, vote getting construction jobs. That is the first step and until we take THAT first step all other solutions are meaningless.

    3. "The Premier is both weak and very partisan; he will not challenge the Prime Minister on this — or any other issue "

      We all know where this got us when Danny Williams challenged Harper-another failed Mega Project.

    4. NLers are obviously incapable of competently governing themselves... they just like a bunch of naive little children in need of adult supervision... their own worst enemies.

      Why not hire on a board of retired Norwegian civil servants skilled in petroleum and fisheries management to look after your affairs? Instead of those partisan fools and dimwitted hicks who've brought the province to the brink of bankruptcy?

    5. Anyone in NL looking to blame someone for Muskrat Fails, need look no further than Danny Williams, Ed Martin, and the useless half-wit flunkies they surrounded themselves with.

      It is NO coincidence that all of the half-way experienced and competent MHAs and cabinet ministers that Danny entered office with in 2003, were gone by 2007, 2008 at the latest.

      If you are looking to blame anyone beyond Danny and Ed, or if you can't bring yourself to tarnish St. Asshole's halo, then look in the mirror. If you gullibly accepted their decade worth of propaganda, boosterism, egomania, groupthink, and bullshit, then you are part of the problem. Take your share of the blame; you deserve it.

      I'm sorry but I have ZERO sympathy for anyone who was sucked in by these snake-oil salesmen. None. ZERO.

  2. Why is it only UG and friends that are touting our dire approaching situation? Are they the only ones that are looking beyond their nose, or are they with those that like to cry wolf. Where are our business leaders, bankers, civil institutions like MUN and health boards, will they not be effected, are they safe and immune to our future fincincial situation. Where is the Bot, employers council, and union leaders, not to mention our political leaders, current and wanta bees, and not to forget our 7 federal mps. As for those mainly responsible, not much point mentioning these, except I hear they have destroyed all mirrors in their houses, including side view and rear view mirrors in their vehicles. Are we all whistling past the grave yard. Is there a day of fincincial reckoning or will it all Petter out, or as we say, it will all work out in the wash. The average Joe is asking, or are we too busy going about our lives to ask or understand, as UG suggest. Yes, a lot of questions, and I won't ask if the sky is falling in we have dealt with that silly comment before. I am just talking reality. Ah! What the hell, it won't affect me, but maybe some poor buggers. Hear ball got money from govt. for rental apartments, let's get on that one. Bigger than muskrat!!!! The brave fearless media thinks it.

    1. 400k for Ball......consider this:
      In Cathy Bennetts levy budget, I believe the figure was 50,000 dollars allocated for ALL of Labrador to support food subsidy, this then divided between 3 or 4 groups, so almost nothing.
      Coastal Labrador has most communities 60-80 percent with food shortage concerns. Ball is Minister for aboriginal affairs for Labrador.....yet he, just one man, can get 400k to help pay for his apartments in Deer Lake! Something out of whack?

    2. Yes, guess everything is relative. And I am no ball protector or supporter, but I like to see the forest from the trees or visa versa. My understanding is the 400k goes directly to the renters, so most likely low income renters or seniors get their rent 3 or 400$ cheaper than the going rate rather than being given to food banks. So in one case you may want it for food banks in the other case for renters, and as I said usually low income renters, who may also be more likely the users of food banks. So no the 400k does not go to food banks, but to the lo renters. Anyone builder I guess can apply for this money when building apt. Buildings, but guess the cost to do that is in the several millions. So the builder has to pay for the building, and the govts. Money goes to the renters. Just trying to see forest from trees... And muskrat 12$ billion that we all have to pay, compared to the govt. money going to low rental incomes. Guess in the future govt. will be paying for a lot of low income earners to pay their heat bill, unless they are going to freeze in the dark. So guess there will be a govt. Program for that too, down the road, compliments of muskrat.

    3. If the money was going to the renters, why not direct to them for that purpose. Instead it goes to the owner, who keeps rent low for 10 years, then up goes the rent to whatever the market can stand. Why only 10 years?
      10 units typical cost is about 1.25 million total, including contractor profits. I know contractor who built 10 units for a cost of 1 million, cost of labor and material , no markup or profit. Assuming Ball pays 1.25 million, he gets 400k of that back, not bad for a guy driving an Audi.

    4. I am not into the building business, so guess you know better than I do of cost. But when you include cost of serviced land, lot etc. I know a lot of people building a single dwelling for a million plus. But if you can build me 10 apts for a million, plus if the govt. will give me 400k, I will gladly take it. But know in the govt. money, it will make sure that I give my low income renters reduced rent, below the going rate, of 3 or 400$ each month. If not the govt. that came up with this scheme, think it was Davis govt., should be shot, of course not with a gun. And if you can keep this 400k, no strings attached, why are you not in the business. Guess the 10 years limit, by then the builder has paid out to the low renters, or in lieu of the going rate, grand total of 400k. But as I said I am not in the business, but I like to call a spade a spade, and recognize one when I see it. I recognized muskrat as a dud when it was announced. If I am missing something on the apt. Rental, tell me, otherwise, I may take you up on the offer, 10 new apt. For a million and 400k from the govt. that means I get 10 new apts for 600k. Or I will go partners with you. But I will still critize the govt. that gave me the 400k, if there were no strings attached. As for giving the money directly to the individual, to put into his account, well if he needs cheaper rent, he may not keep it all to subsidize his rent for a 10 year period.....

    5. You seem to have arrived at the classical state of "Trickle Down". Plain and simple; Toryism.

    6. Lol, you are too funny Robert......same as when I drink my beer....

    7. I do not think that Ball is a contractor, so likely costing him 1.25 million, less his 400k grant.
      Non profits who got grants seem to have got 100 percent from govn, which is ok I guess, and grant of 1.25 million for 10 units.
      Contractors can built cheapest if they are also the owners.....wonder how many applied and were rejected?
      Most contractors avoid the govn grant thing, and have control over who they rent to and get about 800 a month for the same space, for those getting higher income and can afford that.
      Low income tenants usually means more higher cost units going to + 50 age group, who make no fuss.
      Maybe all such with grants should be with non profit groups, many are churches etc, otherwise private units owners may turn into slum landlords, maybe, get their grant up front, and let properities decline in quality......depends on the ethics of the owner I guess. Ball gets 400k, and DW got land, some as cheap as 300.00 per acre, was it not?
      So many are not self serving?

    8. Maybe the man is his own contractor. Not the first time the Owner decides it can keep the books closed, if he contracts to himself. Isn't that what the convoluted EPC arrangement NALCOR has on Muskrat?

    9. Full details of the deal were publically announced in 2015:

      $40k/units seems to be the going rate and average of those announced....

      I have no knowledge of the program and cant comment on its value of efficiency---but optically all seems OK with this one, sour grapes on Davis for complaining after the fact when his government approved the grant.


  3. The impact of 17 cent/kwh power!
    So, what will be the impact, and who is expressing concern?
    And is serious impact, why was it not evaluated before MF sanction?
    If food of gas was to rise by 70 percent would there not be a riot?

  4. If comments on this post are any indication, illiteracy still runs rampant in Newfieland. Creating readable syntax - in other words, stringing words and sentences together in a manner reasonably decipherable - seems, for many commentators here, to be a task more difficult than plugging the septic drain that this excuse for a province is rapidly circling.

    1. Omg...same guy again that haulted UG about, "beg your pardon" or similar comment. I am not a university grammar professor, but doubt your hyping syntax arrangement would garner an A plus. And maybe we should question the reading ability of some as well as the writing ability, says the average Joe.

    2. On the contrary, anon 17:27 makes a quite valid point... those who use poor grammar/spelling/syntax when making their point risk diverting their audience's attention from WHAT their point is... to HOW they're making it... and consequently failing miserably to make their point due to the impaired prose with which it was made.

      The net result of such impaired prose is posts such as anon 17:27's. And rest assured that for every anon 17:27 who bothered to post a critique, there's at least a dozen more who are thinking the same thing but didn't bother to post.

    3. Malaprop reader13 March 2018 at 23:32

      Sometimes the posts here are unintentionally funny such as the malapropism in the first reply to this article where the author wrote "little own" but meant "let alone".

  5. "Unless the public prefers to believe in magic or is willing to accept the pain of penury, they have to get ready to test the goodwill and the patience of the whole of Canadian society. "

    You didn't mention the third option Uncle... Guysborough County is absolutely beautiful... and the summers come early, and linger late.

    1. "Cut and run" is not in Uncle Gnarley's lexicon. Better to elect better leaders and make better public policy choices.

    2. No doubt, however... unfortunately the colossal apathy of the average Newfoundlander may make such a noble endeavour exceedingly difficult to accomplish.

    3. Lol, to say the least anon 22:17, you are being rather presumptuous!

    4. As UG says---NL need better governance and true leaders, not vote pandering and people trying to win a popularity contest posing as leaders as we have now. I stand by previous comments that it is not the system that needs fixing, rather the attitude of the populace need awaking---I also then listed who I felt were the best-worse premiers in order, I see no real reason to change that yet.

      Considering that the only MF number that means anything is $500---that is what ever man, women and child will owe annually for 57yrs to cover just the capital costs of MF. MF has 2 possible revenue streams---internal (ie from Nler's) and external. Internal revenue will come in the form of rate mitigation, provincial sales of power etc, while external revenue would come IF we can find a buyer---irregardless $500 annually (in addition to what you pay now) is what YOU will owe for capital costs.


    5. UG....You must have more money than I do...Cut and run is the only option that I can come up with....I retired 10 yrs ago after 32 years working in the Mining industry...Had an heart attack and retired on a Full Company pension...Got a Medical Canada Pension ...In two yrs time I turn 65 yrs old...I lose a portion of my Canada Pension and there will be a full claw back on my company pension..With a non indexed pension and increased price and taxes on everything , my income is starting to get stressed even at this point...MF is a bill that I cannot pay....I read all your articles and you can see, by the responses, that Newfoundlanders will never come together on this issue or anything else for that matter...We had everything that we wanted but the Rich people in Government had their own agenda and it wasn't for the betterment of the working class ....Cut and Run...Thats the "Best Choice Option for Me"

    6. To "cut and run" may not be an apt description of the pending wave of Muskrat refugees that will leave NL so as to seek greener economic pastures elsewhere.

      Perhaps their decision to emigrate may better be described as "voting with their feet".

  6. This comment has been removed by the author.

    1. Just a reminder here, the CF assets alone are worth a few $Bs. 

      Whether the Feds take it as collateral, or we sell it to the highest bidder, we get to shed a few $Bs off MF dept.

      Or we take those additional revenues post 2041 against MF interest payments (or some of it).

      We're definitely not bankrupt yet - but for sure we wasted a bundle...

      (Please don't kill me for my syntax, being from Qc...)

    2. Not to worry, as long as you have your sanity, syntax won't matter.

    3. I decided to post this comment to stir the pot. UG is supposed to be provocative right? However, I do feel that points raised below represent the perspective that some people outside of NL when considering a federal loan write-down. Please don’t shoot the messenger. If you feel my comments can be safely ignored then that is fine with me. I have no skin in this game.

      I am sympathetic to the idea that the Federal government is responsible for the fiasco at Muskrat Falls. The project never would have seen the light of day without the Federal loan guarantee (FLG), full stop. At the time, we were assured that the FLG would reduce borrowing costs but would not cost the feds a cent. Of course that is not how a loan guarantee works. If the project fails, the guarantor should normally assume part, if not all, of the debt if the borrower is deemed to be insolvent.

      That being said, UG states that NL “ is not in a fiscal position to service an additional $3.7B, especially while it continues to rack up deficits well over $1B to fund annual current and capital account needs”. Some commentators may expect that before asking for a federal bailout, something should be done to reduce the annual deficit. NL remains the Province with by far the highest Provincial spending per capita (, about 50% higher than in Quebec, Ontario and BC. Moreover, public sector employment and public sector compensation are among the highest in the country ('s%20Public%20Sector%20Study%20(Final)(1).pdf)

      Finally, I would suggest that some people outside of NL may find it hard to conclude that the Province is insolvent while completely ignoring the Upper Churchill. Some people may question how it is that PlanetNL can conclude that Nalcor is in dire financial straits while generating cash-flows from Muskrat Falls for the next century while completely ignoring flows from the Upper Churchill as of 2041. If you are convinced that the current value of the Upper Churchill asset to NL is insignificant and can safely be ignored, I suggest you contact HQ or Emera, I am confident that they might have a different opinion on the value of that asset. It is clear that NL has a cash-flow problem between now and 2041. However, In order to convince the feds that NL is insolvent you may have to evaluate the fact that as of 2041, NL will assume 66% ownership of one of the largest hydro electric assets in the world. Then again, what do I know?

    4. Bernard,you are right in saying that the UC will (or as of now anyways) will become 66% under our control but that is 23 years from now. At our current rate of borrowing (just to pay the bills now and not even considering how much more we will have to borrow when MF comes on stream) we will be $19 billion more in debt. With our current population of 500K we will become basket cases--the spin doctors can polish it up any way they can but essentially we are (or will soon be) insolvent. I am convinced that we will be forced to relinquish our 2041 rights if we are to remain solvent. If this happens and we have the same mentality of leadership, we will be right back in the same boat only this time without a paddle. A comment by Anon 13 March @ 11:25 "look in the mirror if you gullibly accepted their decade worth of---" is unfair in that it puts the blame on the shoulders of the populace. We were fed a crock of
      Bullshit by DW, his business plants and his political successors which ensured our demise. We were fed half truths and outright lies which we accepted. Short from rioting in the streets, what choice did we have? It is only now that the truth is coming out thru this blog which UG and those in the know, tried to inform us before. DW and KD must take responsibility for the demise we are in--not ourselves. DW ensured the lights were turned on in Galway by manipulating his successor and calling the shots with Nalcor (Ed Martin et al). Unless significant punishment is handed out we will continue to be screwed (if there is anyone left to screw)

    5. Bernard, as a Canadian, now living outside NL, I take your point. Personally, I have raised this point with my peers, this Blog, NL MPs, David Vardy, etc. and attempted to get discussion in Parliament, but, curiously no concerns being exercised. I suspect a back room deal is already in the works, like Atomic Energy deal with SNC Lavalin. My bet; Hydro Quebec/NALCOR/AMERA deal, with possibly Fortis. The taxpayer is on the hook.

    6. Wayne, you raise good points and I certainly understand your frustration - NLers deserved better - however, I am simply trying to explain as honestly as I can, some of the tough questions that I would ask if I were involved in discussions with NL over debt forgiveness. Thankfully, nobody will ask me my opinion.

      My point is that there is a difference between a cash flow problem and a net asset problem. If you lose your job and can’t make payments on a million dollar home, the bank may erase your debt but will take your house. I am only saying that is the way these things usually work. Future cash flows nevertheless have a value today. I have no idea what the Upper Churchill is worth today but commentators in NL seem to assume that value is zero. PlanetNL seems to assume that Upper Churchill flows are zero. According to Wikipedia, the Upper Churchill produces 35 million MW of electricity annually. The average price of wholesale energy in New England last year was about $33 a MWh. At that rate, the Upper Churchill would produce annual cash-flow of over $1B ... not quite chump change. Also, in most cases (say Greece or Ireland) debt forgiveness also tends to go hand in hand with forced austerity. It may be hard for the feds to justify assuming MF debt while NL continues to register per capita program spending which is the highest in the country.

      Robert, I have no idea if there are back room discussions on these issues. I have a hard time seeing NL and Quebec agreeing on anything. Moreover, the biggest problem is that there is surplus capacity across the Northeast. Even Ontario produces a surplus of electricity. I am afraid you are giving our leaders a bit too much credit but who knows?

    7. Oh and by the way, the price of $33 per MWh I mentioned above is in US dollars so around $1.3B Canadian per year

    8. your first point, re: the loan will be taken over by the Feds, when the borrower becomes insolvent. Let's assume we are not insolvent, but just a matter of a cash flow for the present time, until as you suggest 2041. My question is, does the borrower have to become insolvent , before the Feds take over the loan, and for good measure take muskrat too. Then between the Feds and Nova Scotia, they decide what they want to do with muskrat, until 2041, and let's see where we are then. In a meantime, NS needs power, so let them get what they can, along with the Feds, and we will just charge them for a power corridor through our territory. Now, what do you say to that. Nope, not asking for my cake and eat it too. And, yes, I do believe the breacurates in Ottawa have come up with a solution for us, they just need to sell it to their political masters, and I think it revolves around the Atlantic accord and off shore oil.

    9. Anon 16:48 - there are any number of solutions that one could imagine. I suppose UG’s argument is that the feds are partly responsible for MF and should therefore assume some fraction of the debt while the MF asset would still belong to NL. I am sympathetic to that argument on some level. However, that is not the way these things usually work.

    10. From Bernard: "At the time, we were assured that the FLG would reduce borrowing costs but would not cost the feds a cent" That is my recollection as well.
      Personally, I was not really impressed with the Feds -providing this MF financial back up. From the start,MF was just barely profitable (based on false premises we later learned) and it would just further depressed US export markets, hurting other hydro exporters in the process.

      But that just me, as a Quebecer; we're evil, aren't we?

      Anyways, normally before discussing dept forgiveness, assets sale normally occurs. As Bernard says, CF is worth a lot of $, even at current depreciated electricity prices.

      Spending cuts (if exceeding certain parameters - like those mentionned by Bernard) are also expected to occur.

      The above should be sufficient to avoid the requirement of a dept forgiveness.

      Can you imagine Canadian's reaction if the Feds just forgive the dept, w/o due diligence?

      Right now, we must pressurize our NL leaders for better fiscal management. And better management at the MF construction site. We also need to prepare for the future. Like ensuring we don't sell our assets at fire sale prices.

      Don't kill me here, I'm just exposing one external point of view. (We must thank Bernard for his remarkable/knowledgeable financial exposee on this board. I just find him too accommodating thought. NL has to be a responsable, and face the music. It still has all the means for it)

    11. Always interesting to here your opinion ex-Military engr. I am sympathetic to UGs demands for debt forgiveness for one reason and one reason only. The federal government was totally irresponsible in this case. The feds short-circuited their own evaluation process and stood aside as NL did the same. Moreover, the viability of this project is one thing. The most unforgivable sin of the feds is that surely they knew or should have known that this project was too big to fail for a Province the size of NL. This is especially true given NLs heavy reliance on energy prices - if they were wrong on their prediction for 100$ oil until the end of time, the viability of MF disappears just as NLs fiscal capacity declines.

    12. Agree with you Bernard, the Feds mess up in the evaluation process. (Originally, the financing was legally related to the underwater power line, wasn't it? If so, legally that part worked out. Only the later financing was suspect, but it was too late then)

      Nalcor (and NL politicians) lied about the viability of MF project and provided false data. That's a big strike to me, espacely at a provincial level.

      How can we congratulate such behavior by just granting dept forgiveness?

      NL has the highest tax revenues (per capita) of the Maritimes & Quebec. When will it start to balance its budget and ajust it's spendings accordingly? Probably never if we expect dept forgiveness...

    13. In case you are interested, this is an excerpt from my post on Tom Adams Energy from last year. This is not a prescription for what should be done, it is a descrption of how these things usually play out.

      There are some similarities between the situation in NL and that of some of the more heavily-indebted European countries. Their debt is issued in a currency that they do not control. Of course, as a member of the Canadian federation, investors will no doubt anticipate, and rightly so, an implicit federal backing, especially since the amounts are manageable in the grand scheme of things. For NL, a best case scenario is that the Federal Government recognizes its responsibility for enabling this project and simply assumes the guaranteed debt as its own. However, bailouts are a difficult operation to negotiate, notably because of the moral hazard problem. Typically the proverbial feet have to be held to the fire. NL would no doubt have to endure tremendous suffering prior to any decision on federal debt relief. Moreover, as in the case of Greece, austerity imposed in the event of a bailout can involve conditions that are worse than default. The timing of a debt crisis is impossible to forecast. The thing to watch is Provincial bond spreads. NL 30 year provincial bond spreads vs Ontario have risen from about 30 basis points (100 basis points equals 1%) at the beginning of 2016 to around 60 basis points today However, this widening mostly reflects NL’s deteriorating budget situation. For the moment, few investors are focussed on the impact of the situation at Muskrat Falls. If and when investors become doubtful of NL’s capacity to repay their debt, NL interest rates will spike and the crisis will be upon us.

    14. Guys - In 2014, with the collapse of oil prices, it was very apparent that NL was spending far beyond its means with MF only being a part of the problem. The Tory government under Paul Davis had ballooned the size of the civil service during the years of high oil prices, increasing the numbers by around 40% between 2006 and 2014. Dwight Ball inherited this situation when he was elected in 2015 but has done very little to reduce the size of the civil service since becoming Premier. The primary reason for Ball's unwillingness to reduce the size of the civil service is that public sector unions along with the NL Federation of Labor maintains political control in NL due to the large number of unionized workers in this tiny province. The leader of the NL Federation of Labor Mary Shortall contends we really have no financial problems so the government should not lay off any workers. Cathy Bennett who was originally Finance Minister in the Ball government was ready to challenge public sector unions for downsizing in contract negotiations but received no support from her Liberal colleagues so she resigned. She was replaced by Tom Osborne as Finance Minister who crafted the great plan of no wage increases in exchange for no layoffs, delivering practically no cost reductions from the enormous cost of the NL civil service. Bottom line is the Labor movement controls the vote in NL. If the NL government is serious about reducing costs, they have to layoff workers, scale back labor agreements or a combination of both. The Liberals under Dwight Ball do not have the fortitude to do this because they know it will lead to a loss in the next election. So we continue to run deficits, which we likely do again this year, unless we are saved by the price of oil, which is not likely to happen. What the public sector unions don't seem to get is that by hijacking the governments ability to properly manage the finances of the province, the people who are most at risk are the public sector workers themselves, who would be badly hurt if the governments finances collapse. It is quite a gong show to watch in the NL press as people like NAPE leader Jerry Earle talks about the size and strength of his union. When the business community criticized the recent NAPE labor deal, Mr. Earle organized a public effort to discontinue patronage of NL businesses who don't openly support the NAPE labor deal. Basic message... support this outrageous labor deal or we will run you out of business. MF is only one of the problems that are contributing to our financial demise. I personally would welcome conditions from the Federal government for debt relief including a downsizing of the civil service and a privatization of many government services so the Federation of Labor no longer controls the vote. NL is doomed to irresponsible financial management as long as the government can be blackmailed by public sector unions.

    15. Hear, hear!!

    16. Hear, hear, unions there......!!

      "....downsize the civil service and privatize many of the government services...." Equals debt relief, conditions from the federal government. If the Davis government and previous PC givernments gave them their jobs, hired them, why would they turn on Davis and elect ball? I don't follow the logic here. I don't recall Davis making any promises of downsizing the civil services in the last campaign.

    17. Anon 22:00 thanks for taking the time to explain the situation - very interesting - it is always very difficult to reduce the size of the civil service in all Provinces - good luck

  7. Seems Peng2 may indeed be on this blog to sway opinion: that Ball is good , Leblanc is good, Inquiry is largely a waste of time, DW and Davis and all PCs is the root cause, don't fault the Liberals, compared Leblanc with Berger, yet he seems to side with Winston on technical issues that seem factual anyway;
    But, from the previous piece and comments, seems he did not follow up with WA for what he called a "cold eye" look to lend credability to his monitoring, nor comment on the proper way to control the flood gates, or spill gates to protect Mud Lake. He is deliberately silent on some issues it seems to this observer. Wonder why Peng2?

    1. UH? It seems to me that we all have a finger in the pie for this mess we are in. First of all the dream of "living" of our resources isn't feasible. We are not Norway and we do not have the large proven oil reserves that they have so we should learn to live within the total 2.8 Billion "proven" fields that we do have. That being said, the development mode chosen by our former governing parties was a mistake since we gave up far to much in royalties in return for short term mega project construction jobs. Muskrat Falls was just and extension of this mentality as well as the huge increase in the civil service in recent budgets. A large part of the rationale for developing the hydro dam was the high priced construction jobs most of which flowed back to the political base on the NE Avalon through camp jobs and engineering contracts. A far better option would be to look at privatizing all electrical generation in this province with a consumer Coop for distribution. This will ensure that a project becomes feasible based on economics rather than the number of jobs it produces. Second, allow the more isolated parts of the province to generate their own electricity. Maintaining the interprovincial grid is one of the most expensive costs added to system and their is a huge potential for savings. there. Third bring in a two tier pricing system with an annual household base kilowatt consumption priced at a lower rate and any consumption above priced higher. This will ensure a conservation based approach to electricity consumption and bring us away from the demand side economics of it. These are a few starting points but I am sure there are more. Space limits the number of ideas in a single rant.

    2. Anony @ 1:08:

      I only try to present some facts that seem to have gotten lost, along with my thoughts on a subject. To that end, I would ask you:
      1) Why should we expect less than Berger (do you have some reasoning?)---I have previously provided my reasoning why the Inquiry should produce similar deliverables. I my analysis of MF and MGP, there is a community of interest in issues at both locales---I present Berger as an example of what could be presented as so people have a concept of just how much work is potentially infront of LeBlanc if we hold him to a high standard.
      2) I have never passed any opinion on LeBlanc 1 way or the other---and I am not about to pass judgement on a jurist. I did however give Ball a B- for his handling of MF to date and the way the MF inquiry was generally heading---any opinion I pass is simply based on media reports and giving a fair assessment unless I say I have additional info at hand.
      3) I haven't forgotten about WA, it was about 3wks ago when we settled on that. I have been following WA's install for quite a while and have no doubts in what he presents---I knowing of his career, I have 100% faith(almost always) in what he says. And I haven't forgotten about Maurice, I owe him a subsea slope analysis that is proving difficult as there is almost no geo/sounding info to use.
      4) As I have previously presented (7 reasons posted months ago) the Liberals had no choice but to complete MF, that was guaranteed in 2006 when work on MF was publically announced. The previous Liberal administration had a GI deal worked out that DW et all scrapped in favor of Anglo-Saxon and MF---so yes, I will lay blame where it belongs.

      Not sure why people cant/wont typically respond when I have presented factual info in point form---most recently when the AE posted about the Audit, or in the past when I explained when MF couldn't be stopped etc. Not sure whey it seems as if I am silent ontimes---I will only post if I have something to add in a dissenting opinion, otherwise I either have no opinion of agree.


    3. Peng2...And how would you propose to reduce the chance of flooding at Mud Lake this spring, 2 months from now, any lessons learned from Nalcor's misadventure last year? Is there a Nalcor flood control expert, internal or external, assigned to this issue? With Marshall's assurance to the residents, this must be a critical issue at this time frame?

    4. So peng2, as you have stated and given previously 7 reasons in your opinion why muskrat could not be stopped. So an effect you are saying that once any mega project is started, it can never be stopped. As God knows, if ever there were enough reasons to stop a maga project, muskrat has them, and will never be viaiable as many have given all the reasons. Or if you don't think a maga project can ever be stopped, can it ever be paused, throughly evaluated, then a decision made to proceed or mothball. Like when they built the dome, and then discarded it, it proved that there wasn't much work going on during the winter months. So pause, say in November, evaluate and then decision made in April. So a six month pause. Think it's a mental adjustment as well as a physical adjustment to the possibility of scraping it. Sure it causes a lot of inconvenience, maybe hard ship to some, but completing it causes hardship to all, including those unborn. So it's short term gain for long term pain. I know it's all water under the bridge now, but in hindsight. So Ball and Marshall had an opportune time to pause, but blew it, it appears. Or better still from a political standpoint, should Ball not have had as his campaign slogan. Pause and evaluate. That would have prepared people for a possible mothball two years ago.

    5. Very curious, PEng2, that you have a fixation on"Berger". Different time, totally different project characteristics. Could this be an effort to divert attention away from the important lessons learned from Muskrat, and Nl's intransigence with respect to developing an appropriate Energy Policy?

    6. Anony @ 10:14:
      I said before in response to WA that I am so sure I would live downstream of any hydro development(fortunately for existing insular developments when spills do occur the most affected areas are remote enough that there is little impact), nor would I live on the bank of most rivers, especially in areas where runoff is abrupt and sudden. I am not so sure some hydro modeling methods used in more southern areas where spring comes in gradually are the best tool in more northern areas.

      Anony @ 10:45:
      You are stretching my words in saying that any project can’t be stopped-in the case of MF, I would suggest the die was cast for MF in the way contracting/prelim prep was completed and it was beyond stopping in 2006. As you say during lulls in execution there also needs to be as assessment of status-was this assessment done effectively, I think most would say no.

      I disagree that Berger was a different time-discussions on Churchill Development has been ongoing since the original MGP talks. I would also offer that both are characteristically similar in that 1st Nations issues, environmental concerns, remote development and debate over if each are actually necessary make LeBlanc todays Berger. Add to that both are projects that have been primarily governed by policy and not sound engineering and I would argue that my comparison is valid.
      Energy policy I would argue is a separate issue, absolutely necessary for sure-but it was not the cause for MF; a lack of sound policy was used as a scape goat yes, but not the cause.


    7. PENG2, I take your point regarding 1st nations, environmental, social issues. There is no need to have this as part of the Muskrat Inquiry. In fact this will just get lost in the search for criminality about the project process. Rather, the Government of the day, with overwhelming public support, needs to be encouraged, (pushed), to have this debate in the House, and take appropriate action, as is happening across the country. Reconciliation, MMW, et al.

    8. As to flood control downstream of Muskrat:
      My view:
      There is a choke point at the discharge of the river into Lake Melville, that always makes the river rise a few feet at runoff time, and can get worse if ice jambs backing water up the river, into the town of Mud Lake.
      There is another choke point in the river further up, that chokes more than the one near Mud Lake, that other one being at Muskrat Falls itself. Without this natural choke point,the full river flow would be much worse each spring, downstream of Muskrat. This choke point naturally backs up the spring thaw flood water, upstream of Muskrat, long enough to avoid serious flooding further down. That is what nature provided. It permits the elevation to rise, upstream, say 10 or 15 ft or more long enough to protect the downstream area form excessive rise. Natural flow at Muskrat does NOT keep the water elevation fixed constant there at spring thaw, it rises.
      Now with the spill gates , Nalcor , in their wisdom, or lack thereof, decided to keep the water elevation there constant , last spring, at 21.5 meters. This was not natures way.
      With the spill gates , they could have, with gate regulation, actually modulated the water flow better than mother nature, to reduce the rise downstream.
      Just prior to the thaw, the water flow from the winter freeze up is very low. Also the water coming from the Upper Churchill is then also low.
      So, how would you modulate the gates?
      1. Jut prior to the thaw, Open the gates further to increase flow, being safe as flow is already very low. This drops the water elevation in the reservoir upstream, providing room for the melting water than you know is coming.
      2. As the melt progresses,and flow increases upstream, you would then start to close the gates some, tempering the elevation rise downstream, but increasing the elevation upstream ( similar to what mother nature used to do) .
      3.So, instead of holding the elevation at Muskrat constant, first lower, then let it rise.......this protects downstream.
      4. The degree of this modulation changes as the reservoir area increases in size. In its natural form the rise would be considerable. In the final form , when the elevation at is 39 meters, the modulation required would be little , maybe 18 inches.
      At the present elevation, the modulation might need to be say 6 or 8 ft change. ..........but to keep it fixed at 21.5 ft seems improper to me. When fixed, then water = water out, which means no tempering of the flow, and worst flooding downstream.This is what happened last year.
      If my thoughts on this is wrong, someone please comment. especially PENG2.
      Nalcor's plan of operation for the gates this spring should now be public knowledge.....improving from lessons learned last year. They may see and understand the flow control differently that I expect it would operate. But at least tell us what you have in mind: That residents and contractors again this spring should not be guessing at Nalcor mode of operation, whether they are doing right or wrong, and winging it. That is not transparency. Tell us your plan in advance, allowing that changes may be necessary in line with the speed and volume of the thaw and water flow. Ease the minds of residents that there is, in fact, a control plan, based on good engineering practises, and how this should work effectively and safely.
      I'm all ears.
      Winston Adams

  8. All this comparing Newfoundland (and Labrador) to Norway is not sensible.
    They have 10 times the population and many time more resources.
    They are a sovereign nation, we are a poor colonial cousin.

    It started in Peckfor's days and included the St. John's Aberdeen comparison as well.

    The suggestion we could bring in a Norwegian expertise to save us isn't without merit, however,as we seem incapable of solving our self-inflicted misery by ourselves.

    The Norwegian side of the North Sea and the Norwegian Sea have 10 GIANT producing oil fields; the Grand Banks has four medium (maybe even small) producers.

    And Norway is turning national investment away from oil because of lower prices and a diminishing resource.
    We are praying for oil because we couldn't do Muskrat Falls without it; an obvious BIG mistake.

    SO stop with the Norway comparisons,already as they are meaningless.

    1. Right on! We are not Norwegians, and neither are we Koreans. But maybe we could learn something from them, if at the same time we don't forget who we are, in that context, as you have pointed out.

    2. Norway also invests its windfall outside the country, which makes eminent economic sense. NL used its windfall for short-term political gain, and to line the pockets of the business elite across the province from Quidi Vidi village to Conception Bay South.

    3. And Norwegians don't have silly rituals of kissing dead fish,wearing clothes backwards,drinking bottles dry and speaking unknown gibberish. And if we question any of this nonsense we're traitors and told to chill out. Oh well.

    4. Lol, Norwegians are not purest either, from my experience, seen some bottles go dry. But get your drift, and agree with you. They work hard and play hard. But just as comparison, they were using the Norwegian jigger, and we were still using the old lead jigger for decades, as one simple example.

  9. Apparently the Speech from the Throne does not even mention Energy policy. How can those of you who support this 'do nothing government', not feel a conscience and shame? If you also voted for the Fed Liberals, who deem carbon taxes shall be charged across the country, presumably to help bail out the Muskrat, not call on your MP to debate the future of the Muskrat bail?

  10. Maybe the best use of this world class fabrication plant, would be to build prefab housing units for Eastern Canada;
    More offshore oil, Canada does not need. Come By Chance and Irving aren't interested, and "World Price" for oil, is a myth.

  11. Can you make your font smaller and the comment section font bigger Des, please?

    I already know what you are going to say for the most part, but I need my glasses to read the comments. Make your writing in a smaller font, for skimming over, and increase the size of your guest's font, in the comments.

    Thanks for listening.

    1. Of course you have to realize UG, you are not a very important contributor to your blog, just the enabler. Yup, everyone thinks differently. Lol

  12. Come on here now guys, you gotta call a spade a spade, and recognize one after you have seen it. The fed are not to blame, just one by the name of HARPER. He had no use for the people in Atlantic Canada, and called them a self defeated attitude. So he saw his oppurnity to nail two of them he was hoping to get NB to, as there were being courted on muskrat in the beginning, and of course PI would be thrown in for good measure. And of course his arch enemie was DW, and visa versa. So Harper saw is opportunity to get DW and the works of us, so he willing gave the loan guarantee, but wrote the terms that we will all be starving, and freezing in the dark before the fed help kicks in. And KD was so desperate to get the loan guarantee, she would have signed and did anything placed before. Because she was shore, along with DW and others, that muskrat was our sauvoir and W E were to big to fail, too much oil money, with no end in sight. Think they would have gone with muskrat without the Feds loan guarantee. They had OIL on the brain, and $$$$ danced in their heads. But HARPER made sure we didn't stall and pushed the fools further. The last laugh at DW. Now the second loan guarantee was ball and Justin. And neither was in their position at that time to know if muskrat was something good to eat. So what do the Feds owe us?? HARPER owes us the dam lot. He saw his chance to sock it to us, no not a favour, but a chance to sink Atlantic Canada and jumped at the chance. Now the chickens have come home to roost. And we are between a rock and a hard place with also an albrotross around our neck. Now what the f...k. If someone co signs for a car loan for me, and encourages me to buy a lemon, do you know what I am going to do. Park the dam thing in his drive way, and say you own it lock stock and barrel, and the loan guarantee is all yours. Now that is our only way out. And if the case were properly presented to the Supreme Court of Canada, hope they would see it that way too.

  13. So it seems like maybe HQ, Emara and maybe others are waiting for a fire sale on the UC when the bond raters, will not buy our bonds or the rate will be such that we can't afford and when we default, the vouchers will have gathered to pick our bones clean. UC, anything of any value at muskrat, offshore oil equity, roalities, and anything else we have of any value. That's what some are expecting!! How and can this be stopped from happening. Starts by asking our politicans, current and wanta bees. Ask our bankers. And a warning to ball, who is eager to open the Atlantic accord with Ottawa, be careful what you ask for, or you will be like the dog and his bone crossing the bridge and sees his shadow.

    1. Hoops!!! Knew you know I meant vulchers, but it would confuse those that have reading difficulties.

  14. I would ask Bloggers to carefully read the following 2015 article on a possible National Energy Strategy;

    In particular, Bernard Lahey, what do you suppose might be at play by Leonard Mousseau's commentary regarding "Quebec, for example, subsidizing US power costs about $1Billion a year". Aren't we all subsidizing US energy? What is the Offshore oil about, other than aiding the US to be the Dominant Energy supplier to the "Free World". Anna Marie on the Current this AM should be a podcast for NLs to hear, to see what powerful interests are behind offshore oil expansion, and yes Muskrat at all cost. The Ball, sitting tight for the rescue, complaining about "Doom and Gloom". A Plan is in the works. We have nothing to fear. Its just about Cash Flow. Maybe Quebec will again pick up the annual cost for Muskrat. Another $1B/year will nicely write off the Boondoggle, eh wot? n'est pas?

    1. Robert, your ending caught my attention;
      Eh wot: a neighbor, Melrose Lynch , of Bishop's Cove, now passed on, often used this, such that others would sometimes imitate his style, when retelling what Melrose said, ......... anyway I googled it and it means "an obselete British slang exclamation, to end a sentence, particularly a jovial remark, and meaning "you understand, right"?
      N'est pas....meaning "right"? if you are confirming the valitity of a statement.
      Shows my poor knowledge of language, English and French.
      To your point: Florida banned offshore drilling, despite Trump wanting to do so. North Carolina is looking to ban drilling also, at it is detrimental to their 3 billion a year tourist industry.
      Here, it is drill baby drill.
      Yesterday DOF reports 70 percent drop in capelin stocks, and that environmental factors is the cause...........took them over 25 years to admit that. Fisheries be dammed, oil is on the brain of Ball and many others.
      PENG2 conceded he was in error on the historical importance of four fishery.
      In 1933, when less than 250,000 population, 65,000 Nflders made their living from the fishery. Today it is less than 10,000?
      Some 500 government employees in Nfld , feds and provincial in fisheries , and much office space and other facilities. Quantity of full time capelin researchers......ONE ( capelin being the lynch-pin fish for other stocks). So what are all the others doing, counting beach rock? Difficult to warn of environmental factors when at the same time promoting oil drilling expansion.
      Winston Adams

    2. According to the federal government employment by department there are 10,230 people employed with DFO. I can't help but wonder how many true "bona fide" fish harvesters make their living from the sea in this country. I would suggest the number in NL is much lower than people realize yet for some reason their is no decline in the number of civil servants. Whose interest is being served?


  15. Perhaps PENG2 missed my comment yesterday on Nalcors plan for flood control about to come this spring.
    I look forward to his response: he previously stated the investigation gave Nalcor "plausible deniability", which I took to mean he figures Nalcor was indeed at fault. PENG2, Being a civil engineer (as you are?) , how does he , and you, see the approach of flood control?

  16. I will try and sneak in this comment on minisplits: It has been suggested by the power companies and some distributors that when these unit cycle on and off they are inefficient.
    Normal thermostats of course cycle heaters on and off all the time. Minisplits , most all of the time vary the heating output by modulating the speed of the compressor. But at real low loads they too do cycle.
    Yesterday being sunny, with temperature about +1C, my unit cycled from 1;30 pm to 8 pm.
    So the power load when cycling? At noon, before cycling the consumption was 420 watts. By 2 pm , with cycling, it was 360 watts, by 4pm it was 260 watts, then trended up 430 watts by midnight.
    My unit starts to cycle when the load is lower that 410 watts, Newer models go down to 150 watt before cycling which is better.
    So , inefficiency? A red herring.
    I encourage others not to comment, least the moderator get complaints. I just put this out as an observation from monitoring, to counter a myth.
    Winston Adams

  17. What do you think, PENG2? Doesn't look like a Berger type Inquiry now does it?

    Who gets the honour of being called to first hearing?

  18. When talking about Upper Churchill, Newfoundlanders complain about how they were NOT supported. Now about the Lower Churchill, Newfoundlanders complain about the fact that they HAVE BEEN supported. Make you mind please...
    Both projects were too big for Newfoundland. Upper Churchill ended up right because its risks were transferred to an entity capable of handling them. Lower Churchill turns in a disaster because the one baring the risk is unable to do it.
    Upper Churchill ended up as a gigantic power plant at no cost and no risk for Newfondland and still, CFLCo complains about not having it all, including the cash flow, up to Supreme Court. BTW : Judgment will be published soon about this one. For those who did not watch the audience, let says that most judges were highly unimpressed by CFLCo and when a decision is ready in 3 months instead of 6, it is because there was not much internal discussion about it...
    Lower Churchill will push Newfondland above the limits. As explained by others, selling assets and cutting expenses are required before taking any other steps. One reason is that if you don't do it, the one who got in trouble get out too easily and starts repeating his mistakes right away. For those who need a proof, just search for the link between cucumber and electricity...
    Two projects done without a market analysis for the need, improper cost estimates, undertaking a project that was declined by all the pros and more... Newfoundland should have learned the lesson but obviously, the impact was not hard enough with Peckford's Pickle Palace. Lets hope this one will hit hard enough for Newfoundland to learn it this time...