Monday, 10 January 2022


The Furey Administration’s decision to cut $20 million from funding for offshore seismic surveying, a program ostensibly intended to enhance bidding for explorations rights in the offshore oil sector, is the right one. Unfortunately, the decision is a pause rather than a cancellation.

The distinction is self-evident, but at issue is that the Government of Newfoundland and Labrador really hasn’t spent five minutes on the broader public policy questions of how best to pare the expenses of the Government in pursuit of the balanced budget objective described in the PERT Report.

Cancellation, rather than pause, should have been an easy decision in this case, because more objective industry players, which do not include either OILco or NOIA, will remind that majors and supermajors - Suncor, Equinor, ExxonMobil, Chevron and others - are cash rich again, and more than capable of performing their own seismic programs. Global oil prices are replenishing their coffers, enabling them to pay down debt, buy back shares, and in some cases, double the dividends to their shareholders.

This issue should be viewed in conjunction with Government’s recent referral to the banking firm of Rothschild of an unconfirmed number of assets for valuation. Together, the decisions confirm that provincial public policy remains a haphazard, ill-defined, even kneejerk process.

Wednesday, 5 January 2022


 Guest Post by Ron Penney


Like those of you who are of a certain age, I was very much looking forward to getting my booster shot, particularly with the advent of the omicron variant, which has proven to be much more contagious, although so far a much more benign variant. 

The evidence is that the two doses does not provide much protection from getting  the variant but does protect against hospitalization and fatal outcomes for those who are fully vaccinated. The booster shot gives much more protection from infection and lessens the severity of symptoms even more. 

The objective has to be to not overwhelm our hospitals, as they also experience the loss of health care workers who have to self isolate because of possible exposure. So far our hospitalizations are very low, but the experience of other jurisdictions demonstrates that this is unlikely to last. 

Monday, 3 January 2022


Premier Furey’s year-end declaration that the “deficit must be tamed with broad action, not big bombshells” might sound encouraging if only we could point to any plan, even a “broad” one. But Furey has no such intention. He and his little band of insiders, Cabinet passively looking on, are focused on the sale of NL’s most valuable strategic assets. At any cost he isn’t prepared to impose on the Government — and the public — spending practices that reflect the more responsible behaviours employed in other provinces.

Following release of the PERT Report of Moya Greene and her advisory committee in May 2021, Furey commented that “this is the pivotal moment in our collective history… the problem is clearly laid out before us. We are not on a sustainable path.”

The statement reflected a fiscal circumstance which Greene defined as total provincial debt obligations of $46.3 billion, an abominable figure in a place occupied by only a half million people. Otherwise, the Government’s response was silence. Moya returned to London to be heard from no more.

Sunday, 26 December 2021


The annual ritual of presenting the “Top Ten” posts of the year, based on Google’s counter, is repeated below.

I owe a great deal of gratitude to several writers, especially to Ron Penney and PlanetNL who, especially in the second half of the year, kept the Blog going as I was otherwise engaged. Their ideas and analysis are widely acknowledged. This year David Vardy was busy offering his vast skillset to Moya Greene and to the Premier’ Economic Recovery Commission. The job done he continues to write; his latest contribution is entitled “Muskrat Falls An Unmitigated Disaster”.

We welcomed a post from one new contributor, Catherine Penney. We also mourned the loss of the Bard of Pynn’s Brook, John Tuach; we will miss his poetry and the enormous insights that he inscribed in each turn of phrase.  

Monday, 20 December 2021

MUSKRAT FALLS: The Millstone Reaches A Major Milestone

Guest Post by PlanetNL

PlanetNL41: The Millstone Reaches A Major Milestone

PPA Payments Commenced; Capital Cost Understated; 2022 May Get Rough

letter sent to the Public Utilities Board from NL Hydro on November 25, 2021 contains sobering news about an important milestone. 

It reported that all four turbines at the Muskrat Falls (MF) hydro generation have passed their initial run-in tests resulting in the plant being considered fully commissioned and in-service.  Ditto for the Labrador Transmission Asset (LTA), the new HVAC line that connects Muskrat to Churchill Falls. With completion of the construction phase for these two major assets, payment is now due for their operation. 

Is this happy news or grim news?  If you’re a ratepayer expected to pay off this unneeded megaproject, likely forced to spend way more on your electricity costs, maybe mad as hell is a more apt feeling. 

Monday, 6 December 2021


Guest Post by PlanetNL

PlanetNL40: Nalcor Gone in Name Only

Misrepresentation of Fact Still A Problem

After the Commission of Inquiry into the Muskrat Falls Project, ratepayers and the public at large might have reasonably hoped and expected that the Utility would change its stripes and try straightforward honest truth for a change.  Apparently, it is a tough ask. 

The recent changes to restructure the Executive ranks and the elimination of the Nalcor side of the business brought a glimmer of hope for real change.  The signals are already there, however, that not much will change in how the utility interacts with the public regarding Muskrat Falls and anything connected to it.  Which just happens to be almost everything they do. 

Monday, 8 November 2021


Guest Post by David Vardy

Recent news reports have disclosed that the November 26, 2021 completion date for Muskrat Falls will not be achieved. No target completion date has been set. Yet the project continues to accumulate costs. A recent Tweet put the daily cost of the delay at $1 million a day. This is an understatement. What is the daily cost, both in total and on a per capita basis?

In this post we set out the bare facts of the unmitigated and misguided Muskrat Falls project, its costs, without rate mitigation, and how they compare with the cost of Holyrood-generated energy, for which Muskrat Falls was intended to offer a less costly solution. We will also look at how unit energy costs for power sold to Emera compare with the costs imposed by the power purchase agreement on local ratepayers. We will show how the project was a misguided, mistaken choice, and how, through the power purchase agreement, it places an unsustainable burden on ratepayers.

Monday, 11 October 2021


If you visited the pumps lately, you likely came face to face with oil prices north of $1.60/L. The pricing pressure begins downstream; Brent crude/barrel hit US$85.00 last week. 

Some analysts suggest that if the resurgence in airline travel and underinvestment in exploration activity is combined with other events, such as a colder-than-usual winter, the result could be $100/barrel oil! 

That’s great, isn’t it! Well, not really; when unexpected developments occur, there are always winners and losers, too. 

In this case the general public will likely see themselves the losers; the provincial government may be the temporary winner. But don’t jump to conclusions before I have a chance to burst that little bubble. 

In this province, oil revenues represent the glue of solvency, even if it isn’t actually true. That is the job of “faith”, mostly of the bondholders, which is derived from the perceived goodwill of the Government of Canada. 

"Faith" having been invoked, we’ll come to those possessing “hope” shortly. 

This year’s provincial Budget was based on a price projection of $US64.00 per barrel. Provided that the $C/$US exchange rate averages 79.6 cents, each additional $US/barrel represents an additional $19.0 million to the provincial coffers. So far in 2021, the average exchange rate favours this budgetary assumption but because average oil prices also stayed close to GNL’s forecast, any uptick in revenue may only be modest. 

Next year might bring better news, if high oil prices persist and don’t cause a tailwind of inflation and interest rate hikes. 

To the point, however, even if oil returns additional royalties of a couple hundred million dollars or so, will it really matter? 

The last time oil prices spiked the move made our politicians crazy. Government became so inebriated on spending and deficit financing that spiking oil prices may never go high enough again to meaningfully resolve our fiscal predicament. 

It is worth remembering that NL has a structural deficit of around $2 billion. Borrowing for capital account – infrastructure – adds roughly another billion onto the deficit. The requirement to borrow $3 billion each year – not including the shortfall required by Muskrat Falls “rate mitigation” – remains a sobering state of affairs. GNL uses accounting trickery to distort this truth but the perception won’t endure. 

Against those numbers, even an additional two hundred million dollars from royalties is not curative; in the hands of spenders it might even serve as fuel for more spending. 

This brings me to the nub of the issue: though the Furey Administration was returned to Office in March, not a word has been heard on a plan to curtail program costs. Such a plan is the only real solution to our deficit woes and even this effort must be combined with a lot of luck (i.e. high oil prices, low inflation, and continued low interest rates). 

I took out my copy of the PERT Report recently. That’s the one which Premier Furey put Moya Greene and a Committee of capable people to work on our fiscal mess. The Report was not perfect, but it contained important elements of a plan for fiscal repair. Perhaps you will remember one particular revelation. The Report noted: 

Adding in estimated borrowings to cover the 2020-21 shortfall of approximately $2.8 billion, brings the total public sector debt obligation to $47.3 billion - the equivalent of $182,000 for every worker or $215,000 for every household in the province.

That was sobering, especially when the figures eluded mention of even the Office of the Auditor General. 

The PERT Report stated that if Newfoundland and Labrador’s per capita program spending was in line with that of other provinces, program expenses would have been $1.18 billion less in 2019-20. This means that at least some measure of a solution, though not the whole one, is possible if only the will could be found. 

Among other ideas, the Report proposed:

- Balanced Budget Legislation, legislation which “would encourage everyone, not only politicians, to work within a fiscal framework.”

- 50 per cent of oil and mineral royalties should be considered in expenditure planning; the rest should be paid on debt or placed in a Future Fund.

It does seem absurd to be talking “Future Fund” when you are up against an annual $3 billion deficit and a $47 billion total provincial debt. But everyone conveys the prospect of hope differently. I’m not big on hope except when it comes to weather; I prefer a realistic repair plan and sticking to it - come hell or high water. Admittedly, it is a difficult sell when partisan politics trumps common sense.

When, eventually, GNL has to admit that even $85+ per barrel is no better plan than “hope”, one can always wonder if the dust settling on the PERT Report is a consequence of Premier Furey’s big “reimagining”.  Decisions, not deydreaming, is what creates real change.

The public ought to be demanding a program of expenditure reduction, even if the likelihood of any appearing seems delusional.

They should also see an accounting for the Muskrat “rate mitigation” calculations so that they fully understand the assumptions on which revenue forecasts are based for the capital and O&M costs. Transparency demands that they be permitted to come face to face with the amounts unaccounted for by the promise of Federal generosity and the rhetoric of other sources, which an empty provincial Treasury will be expected to fill. 

This might even be accompanied by forecasts of domestic power demand for the next five years, which Nalcor always exaggerates; lower demand, in this case, puts upward pressure on rates just to even out revenues. 

The merger of Nalcor and NL Hydro has been announced. An able Premier would inform us of the efficiencies achieved to date. 

Having buried the PERT Report, he could also tell us why the healthcare “reimagining” of Dr. Pat Parfrey and Sister Elizabeth Davis will be treated any differently. Perhaps, it’s not only the bondholders who have faith. 

Otherwise, considering the ferry procurement management disaster reported on the the A-G, reminiscent of some of the goings-on that occurred during the Muskrat Falls pre and post sanction period, the Premier ought to be reporting on whether NL still has a competent senior public service. Perhaps he can tell us what has changed and why we should believe that they would not mess up any plan of fiscal reform. 

The public cannot rely on the Tories for any such discussion; those specic cases occurred on their watch.  

On the larger issue, however, high oil prices are only an aggravation at the pumps; they are not a source of hope even if the politicians say otherwise. 

But if “hope” works for you, who am I to argue.

Monday, 4 October 2021

DANNY WILLIAMS: Bottom Feeders and Naysayers

Guest Post by Ron Penney

On September 15th, Memorial hosted a conference on the “Economic snd Fiscal Trajectory of Newfoundland”. 

I took a miss once I saw the program and the list of speakers, including Mr. Williams. I suspected the day would not be very edifying. 

A program on our fiscal situation which didn’t include Dame Moya Greene, or a member of her committee, or the Auditor General, the Parliamentary Budget Officer, all of whom have extensively reported on our dire financial situation, but did include the author of much of our current problems, didn’t inspire much confidence. I thought it would be a waste of a day and it would appear I was right. 

What possessed the conference organizers to give a forum to Mr. Williams to spout, unchallenged, his usual nonsense about Muskrat Falls and to continue his diatribe against the critics of the project? At the very least they should have given us equal time! 

Monday, 30 August 2021


Guest Post by Ron Penney

I, and some of my fellow naysayers, have been trying to understand the latest scheme for rate mitigation, announced just before the calling of the federal election.

There was very little information given out when it was announced but we have gotten our hands on the technical briefing given to the press at the announcement and a senior official has kindly agreed to meet with some of us on two occasions to discuss the plan, to answer some of our questions and to take other questions under advisement. 

In addition, the agreement in principle on the financing components of the deal together with an exchange of letters on the Hibernia revenues between the Premier and the Deputy Prime Minister are on the website of Intergovernmental Affairs.