REFLECTIONS ON A DEBATABLE YEAR

It did not come as any great shock that Muskrat Falls had not ranked, either first or fifth, among the top news stories of 2012, according to CBC’s unscientific on-line poll; though I worried that the Tory caucus had influenced that outcome, too.  A Telegram front page story, on December 29^th , made public the news that the Premier’s communications people directed Caucus Members and their staff, to influence poll questions posed by the media, online; though I am unsure who is surprised.

Rightfully, the Burton Winters story received top billing; everyone felt the sadness and loss shared over one so young.  It was understandable how a grieving family, and the larger NL community, felt embittered that, despite all our technology and resources, a rescue effort could be so badly botched. 

The Premier treated the matter politically, first agreeing to meet the deceased youth’s parents, then refusing to do so, for fear of being challenged on the role the Province played in the failed search effort.   A more confident leader would have pushed aside such considerations and conveyed, to the family, the sense of shared sadness felt by the whole Province.  In addition, she ought to have asked the Chief Justice of the Supreme Court to appoint a Judge to look into the tragedy, expeditiously, if possible, and to make public the findings.

ADVICE THE PREMIER DIDN'T TAKE

On February 16, 2012, The Telegram printed an article I had submitted entitled, MUSKRAT FALLS: SOME ADVICE TO THE PREMIER.  Though I had been away from the political scene for many years, I had never lost my interest in politics or public policy.  It was with a great deal of dismay I watched the Premier and he Minister of Natural Resources offer only rebuke to the early critics of the Muskrat Falls Project, making it clear they did not appreciate being questioned and that no voluntary information would be forth coming to assuage their worst fears.  I had spent eleven years on the staff of Frank Moores and Brian Peckford, 1979-85.  I had invested a geat deal of personal effort to help oust Smallwood and then to play a role in two Tory Administrations. 

A LITTLE NAUGHTY. A LITTLE NICE.

I was still snoring it off, this morning, when a loud bang on the front door, demanded immediate response. What would anyone want at five am, I wondered, as I ran over the stairs in housecoat and slippers? Though the aggressive knocking offered a hint that, just perhaps, my old friend had gotten confused as to what day it was, he being a ‘fixture’ at our house on Christmas Day, I was soon to discover that the confusion was all mine.

“Tarnation”, Uncle Gnarley exclaimed, as I ushered him inside, the chill air swirling, as it sought to freeze my underparts.   “Nav, why aren’t you dressed and ready”, demanded Uncle Gnarley?  “You were the one who proposed to hike Cape Spear, this morning.  You know how I hate it when you are not on time!” Suddenly, the light bulb went on. I had indeed challenged the old man to hike the trail from the most easterly point in North America to Petty Harbour, for the umpteenth time.  I had forgotten to alarm my clock. No, not forgotten.  I suddenly remembered I had drifted off to sleep watching the ‘filibuster’, on my laptop, as it played itself out in the House of Assembly.

Quietly, not wanting to awaken sleeping beauty, I explained to Gnarley what had given rise to my indiscretion.  A smirk appeared, suggesting, perhaps forgiveness, as he muttered that I was doing “god’s work” keeping an eye on “that lot”,  referring to the Government, adding, "we shall catch up on the goings on in the House of Assembly".  

I nodded and proposed that, while I was completing my ablutions, he might cook a breakfast suited to two inveterate outdoorsmen.  A couple of eggs and a slice of homemade bread should put some spring in our step, I allowed. Then, with a grin that underlined its significance, I offered, as the French would say, the pièce de résistance, “the blood pudding is on the lower shelf of the refrigerator”. 

A look of greater satisfaction could not have been seen on a six year old on Christmas morning. 

FILIBUSTER NOT NEW OR EFFECTIVE, BUT NECESSARY

Filibuster is a parliamentary procedure which permits a minority to obstruct the passage of a Bill in the parliament, using bluster, to delay a vote.  This is the action in which the Liberals and the New Democratic Parties are now engaged in the House of Assembly.  The procedure is permitted in most parliaments, though limitations on this “obstructionist” process, widely varies across parliaments. 

Wikipedia informs us that the term "filibuster" is “derive(d) from the Spanish filibustero, itself derive(d) originally from the Dutch vrijbuiter, "privateer, pirate, robber" (also the root of English "freebooter". The term in its legislative sense was first used by Democratic congressman Albert G. Brown of Mississippi in 1853, referring to Abraham Watkins Venable's speech against "filibustering" intervention in Cuba”.

DUNDERDALE'S BIG SANCTION CHARADE

Given all the pomp and ceremony yesterday evening, you might have been left with the impression that Muskrat Falls was sanctioned. I have bad news.  Premier Dunderdale has less of a “sanction” agreement with Emera than she has a “Loan Guarantee” with the Federal Government.  In truth, she has neither!

What should have been a paragraph of unqualified consent, Emera’s Sanction Agreement runs 29 pages plus a Schedule.   

What did we get last evening? Essentially, a statement that Emera would play along with the NL Government if it wanted sanction now but only if NL was prepared to pay a big price AND only if they could still be permitted to walk away.  The sanction ceremony was a big charade.

A Cautionary Note to EMERA On Muskrat Falls

If Emera sanctions the Muskrat Falls (MF) Project, its ‘sweet heart’ $600 million deal on the Labrador Island Link (LIL) will not just be plain sailing from here.  Yes, Bruce Huskilson, Emera’s President and CEO, is likely mesmerized with phone calls from NL’s Minister of Natural Resources Minister, Jerome Kennedy, demanding an immediate decision.  That is what politicians do.  Projects, like MF, are but ‘playthings’ for governments. 

Huskilson should be unavailable, for the next year or so, at least, until the NS UARB has rendered a decision on the Maritime Link (ML).  Why? Emera’s sanction of the LIL does not guarantee sanction of the ML.  The advantages which Emera’s skilful negotiators won, against Nalcor’s bureaucrats, could be all for naught.

Finance Minister Does Not Understand Risk

The Budget Update, delivered yesterday, December 13, 2012, by the Finance Minister, acknowledges the mulitude of risks attacking the declining health of the Province's Teasury; otherwise, it ignores them.  He gives no advice to the Government either, as it trundles towards sanctioning an outsized and risky megaproject.  The Minister is not a decision maker.  He should go.

Many great projects get passed over because the risk/reward ratio is simply unattractive.  In business, it is a fact of everyday life.  On paper, an idea may first appear sound; the assumptions are reasonable, cash flow analysis is excellent, pro forma rate of return, on both equity and investment, are within an acceptable range, financing is available on reasonable terms.  Then a decision is made to scrap the idea! Why? What went wrong? The answer is sometimes even good investment ideas get placed on the backburner.  Regardless of how inherently sound they may be, they carry risk, sometimes too much risk. 

The Harper Paradox

It was not abnormal for my old friend Uncle Gnarley to pay a visit.  But it was certainly abnormal for him to call in advance.   It was at sunrise, this morning, when the phone rang, the old gruff voice was more effective than any alarm clock in getting my blood moving, “Have you read it Nav….?”

“Read what”?

“The Loan Guarantee!  Have you read it”?

But, before I could answer, he continued with his usual charm, “I am coming over this evening, I want to discuss some if it’s finer points.  Be sure that you drop by the Controller’s today”.  With that the phone went dead. 

I was’t sure if I should read the Term Sheet, but I knew I had better pick up a bottle of Oban.  Gnarley may be forgiving with the former, but I would certainly feel his wrath, if I had forgotten the latter. 

Still Time to Play the Muskrat 'Hedge'

We all like to avoid risk.  Whether purchasing insurance, making an investment or constructing an RRSP, we employ strategies to reduce risk.  What we have engaged in, is called a ‘hedge’.

The word hedge is from Old English, hecg, originally any fence, living or artificial. The use of the word in the sense of "dodge, evade" is first recorded in the 1590s;[1] so, the idea is not new.

Like insurance against fire, a hedge can be a simple concept; your portfolio manager may employ more complicated schemes from using derivatives, swaps, options or futures.  Depending on the level of protection sought, a multitude of hedge strategies are available to help everyone sleep at night.     

Can a hedge strategy be employed to protect us from the risks of the Muskrat Falls Project?

LOAN GUARANTEE SELLS US DOWN THE RIVER

The only thing you can do with a Project as nonsensical as Muskrat Falls: follow the money.  Bankers understand that.  The public should, too. The “Federal Loan Guarantee” is really all about the money trail, especially the Fed's money. I have no problem with that issue.  I only wish Nalcor had been held to account, from day one, as it will under the FLG. But other problems abound under this Agreement.

The MF Project, given its financial structure, rationale and risk to the Province, is now at a point where you have to begin to question the rationality of the political leadership and ask why it is determined to jeopardize the Treasury of the Province to get this deal done.

The “Term Sheet”, for all its legalese, could not fail to hide the weak underpinnings of what Nalcor and the Province have proposed.

Not only is the Government of Canada not going to let a small cabal of engineers, at Nalcor, place billions of Federal dollars at risk, it has, compliments of Federal Minister Peter McKay, made sure that, on the front end for sanction and in the middle, as Muskrat comes off the rails, Nova Scotia and EMERA will always be in the driver’s seat. 

And when EMERA does not need to get involved, the Federal Government is there with an Overseer called the “Independent Engineer” (IE).  The IE is a “CZAR” for the Government of Canada, mandated to take control of the Muskrat Falls Project….but only when the “Guarantee kicks in”.

Cabot Martin: A ‘FRACKING’ Mess

Cabot Martin, the former policy advisor to three Premiers, Moores, Peckford and Wells, recently released a Report entitled, "An Analysis of a Study Entitled Natural Gas as an Island Power Generation Option".  Martin was reviewing a study by Ziff Energy commissioned by the Provincial Government; its purpose was to counter the view, held by many, that natural gas is a viable alternative to Muskrat Falls.

Earlier, this year, the Government ignored the views of Dr. Stephen Bruneau, a highly respected academic at Memorial University, who in a public Presentation, gave great merit to the concept.

The Ziff Study dismisses natural gas as a viable option.  It suggests that the capital cost of developing the infrastructure for such a small customer (Newfoundland) is too high, and that the oil companies are not interested in a venture which does not offer a sufficient return on their investment.  Husky Energy quickly confirmed Ziff’s conclusion. Cabot Martin dismissed the Ziff Study.  Ziff are economists, he stated; they do not possess the engineering expertise to assess the gas option.

This article is not about the merits of natural gas.   You can judge the validity of Martin’s comments yourself.

However, Cabot inspires two critical questions which individuals, interested in NL public policy, should ponder.

The PM to Dunderdale: Take It or Leave It

Just as I was beginning to think that, during my 27 year absence from politics, the Feds had become tabby cats, lovingly lavishing a $6 billion guarantee upon a Newfoundland and Labrador sponsored project, I was jolted back into reality.  Absolutely nothing about Ottawa has changed!

The hoopla, over the PM's visit to Goose Bay, won't last until Monday's Question Period.

I waited until the wheels of the PM’s plane had left the tarmac and Tweeted a few words over Muskrat, to an old Tory and skilful Ottawa man, Tim Powers; then, I settled in to examine the entrails of what Harper had dropped on Dunderdale.  Soon, I started to laugh; I laughed some more, then I felt sad!  I was sad for Dunderdale, for getting herself into such a fix, but sad, mostly for this Province.

The Deal was exactly what I was warned to expect.

Media types, CBC’s Cochrane and NTV’s Mike Connors had been Tweeting all over themselves, Thursday night, trying to confirm the rumour.  Was the Press Conference going ahead or not? Dunderdale didn’t know, her staff didn’t know; but, strangely, Ottawa knew. 

Muskrat Falls and Voodoo Economics

The method that Nalcor is using to price the electricity from Muskrat Falls should be a major concern to the residents of the province. The cost to the ratepayer, in the first instance, will be kept artificially low to obscure the true cost of the project. Here are the reasons why you need to be concerned:

Nalcor (the unregulated owner) will sell Muskrat Falls power to Newfoundland and Labrador Hydro (a regulated subsidiary of Nalcor) under what is known as a Power Purchase Agreement (PPA). Under this agreement, electricity will be priced in constant dollars and will escalate annually by a figure adjusted for the rate of inflation. This is also known as “escalating supply pricing”. The project, then, would be paid for over a period of 57 years. In other words, the returns on the project are back-end loaded, the depreciation in particular, is calculated by using what is referred to as a sinking fund – the depreciation is written off much later, a procedure that is used by only a few provincially owned utilities in Canada.   The simple fact is that the provincial government, through Nalcor, is ‘kicking the can down the road’ and making it a problem for the next generation. Only government would engage in this practise. Private enterprise, especially those with public shareholders, like Fortis, would not.

More Bafflegab on the Upper Churchill

In another recent ‘information dump’ the Minister of Natural Resources released a Paper entitled: “Upper Churchill: Can we wait until 2041?”   

Many critics of the Muskrat Falls development have advanced the view that the Government should not expose the small population of NL to high cost power and to the financial risk associated with the mega project; the idea is that our incremental power needs can be met from a variety of smaller, less risky sources, until the Upper Churchill Contract expires.

For at least a year, the Provincial Government has been attempting to dispel the idea that developing a portfolio small projects, under the “isolated island” option was a viable.  Your Uncle Gnarley scribe wrote an article on the subject entitled: Upper Churchill Contract: Inherent Uncertainty or Bafflegab.  When the Minister released the new documents, The Telegram on November 10, 2012, quoted him paraphrasing an opinion contained in the Paper.  Said the Minister:

“I know at one point I laboured under the illusion that as we waited for 2041 we would get free power, we would have unlimited power, but when you look at the corporate structure of CFLco it’s not that simple.

“It’s not going to be Hydro-Quebec simply agreeing that all power will be given to Newfoundland and Labrador.  Churchill Falls (Labrador) Corp. will still exist – its ownership split between Newfoundland Hydro (with 66 per cent stake) and Hydro Quebec (34 percent).  Whatever happens with Churchill Falls, the interest of Hydro Quebec simply can’t be ignored.

“There is no doubt that Newfoundland and Labrador will benefit in 2041 power, but it’s very difficult to envision what exactly will take place”.

It is difficult to contemplate that these are the comments of the Minister of Natural Resources, a lawyer and former a Minister of Justice.   

YVONNE JONES WAS PLAIN WRONG!

Yvonne Jones was wrong, this week, to imply that she would vote in favour of the Muskrat Falls project if she could get some benefits for her district and for Labrador.

It is true, as a VOCM Reporter noted, “(t)hat the Liberal MHA for Cartwright-L'Anse au Clair has long been a loud opponent of the project, citing amongst other things, concerns of the lack of power allotted for mining developments in Labrador.  VOCM added: “Jones says it comes down to what's in the best interest of her district….in order to change her vote she'd have to see a benefits agreement for Labrador…says she's been fighting for the people of her district for 20 years and she's not going to stop now…”.

 Admittedly, the job of an Opposition Member is difficult at the best of times.    

But, Muskrat Falls is not one of those issues on which to lever district improvements, regardless of how bad they are needed.

In portraying her vote as a negotiable item, Jones does her district and the whole Province a disservice.  The MF issue is simply is too important and contains too many risks to be used as a bargaining tool. And, that is not the half of it.

The Pursuit of Apathy

I was lying in my comfy chair listening to evening news.   The forecaster called it the ‘weather bomb’.  This was a term that my old friend Uncle Gnarley had initially despised, considering it yet another example of the vulgarization of the King’s English.  But one could not deny the effect it had in describing the events which he knew was going to unfold in the next 24 hours.  The Avalon Peninsula was going to be somewhat spared.  The low pressure system was moving in from Cape Breton, over the straight and was due to hit the long range mountains by noon tomorrow.    It had come up very quickly, and it was going to be the first winter storm of the season. 

The wind beating off the side of the house was hypnotic and I quickly started to dot off.  My slumber was quickly interrupted by a knock at the door.  Who the hell would be out in this type of weather, at this time at night?  As I opened the door it was there was the cantankerous old economist Uncle Gnarley himself.  Slapped over his shoulder was an old canvas kit bag.  I motioned for my friend to come in.

“What brings you up from the shore”

“Well Nav.. I have sensed that you are getting soft in your old age, and I brought you some provisions in the event that this storm matches the high expectations of Toni-Marie”.   He looked at me, the devious smile was clearly meant as a double entendre. 

He reached into the bag, and hauled out a bottle of Laphroaig  “the peat will keep us warm tonight Nav”.

DOING THE MATH ON A MINING SUBSIDY

An article in the Kamloops Daily News, written by Columnist, Jim Wentworth, in June 2012, notes that an electrical subsidy to a proposed mine called Ajax, would alone cost B.C. taxpayers $16.5 million.

The Kamloops article suggests British Columbians already believe that they pay too much for electrical power. Wentworth adds that, “the negative revenue impact of these various resource projects may increase (B.C.’s power costs) even further. So the impact on residential ratepayers will be very substantial if the current rate structure for mining projects, such as Ajax, is not amended”. 


The issue is important to NL not just because our power rates are going up substantially too, but because of the parallels with the B. C. issue for power subsidies to Alderon and to other  mines in Labrador. 

I thought it time to put some numbers to the issue of electrical subsidy; we should decide if the cost should concern us in NL as it concerns some residents of B.C. 

Alderon is the most advanced of the mine proposals; it can help us define some of the parameters for our calculation.

The Power is in Whose Hands?

By now you have received your Muskrat Falls Brochure.  It was aptly titled “the power is in our hands”.  I have to assume that the “our” referred to, is Nalcor.

The Brochure deals less with the justification for the Muskrat Falls Project than with making sure Nalcor is credited with the Project, that Nalcor has the professionalism, Nalcor has the experience, Nalcor has the strategic vision to carry out a $7.4 billion megaproject. 

The public has been told that the marketing campaign to ‘sell’ the Project, of which the glossy Brochure is but one piece, will provide transparency and factual information to the people of the province.

It does not achieve that purpose.   

The Brochure barely notes the role of the Government. Even Muskrat Falls is secondary here. Nalcor is on display.  The Brochure boasts:  “MHI has found Nalcor’s work to be skilled, well-founded, and in accordance with industry practices…..”.  “MHI supports Nalcor’s finding….”.  “In MHI’s opinion, Nalcor has undertaken a diligent and appropriate approach…”.  Like the child that is the perennial underperformer, whose need for reassurance cannot be sated,  Nalcor needs to be the center of attention. 

WHAT HAPPENED ON THE WAY TO FORT McMURRAY?

Small island economies are naturally vulnerable.   Natural barriers, including remoteness and marine geography, implicitly, exacerbate the challenge of easy access. 

Dependence on resources like fishing, trees and tourism, historically have a seasonal character, which together with fluctuating markets and other factors, keep disposable incomes low. 

The attraction of stable, high paying jobs whether in Fort McMurray or elsewhere is impossible to ignore.

Rural communities are not just in decline, they are being gutted.  Rural NL is under threat, less now from unemployment than from labour mobility and competition for skills, from elsewhere.

Mega projects have an irresistible allure, the modest janitor can now lay claim to a six figure income out West. Fishing boats, at home, can’t attract share men.  Two paper mills have shuttered, a third hangs on, barely. 

Fish processing, the almost singular source of employment for graying fisher people, too old to do the bi-weekly flight to Fort McMurray, find China a worthy if unequal competitor. If these fisher people feel forgotten, who could blame them?  

WHO PAYS THE COST OF MINING SUBSIDIES? YOU DO.

This piece contains many questions.  I suggest members of the public should start asking some of them. 

Let’s start here: should this Province give away its minerals essentially for the few jobs mining companies offer?  Should we insist on a royalty regime for oil and gas but give back to mining companies royalties we collect by subsidizing their power costs? 

These are critical public policy questions.   

NL has a history of very high unemployment rates reaching as high as 32.7% on a seasonally unadjusted basis in 1960.  That the Provincial Government would engage in subsidy programs to lessen this burden was understandable, notwithstanding the fact that some attempts to attract industry (the ERCO plant in Long Harbour being a case in point) went beyond all reason because the number and types of subsidies awarded made a mockery of any economic rationale. 

Yet, subsidies continue today even though the jobless rate in the Province is down to 12% (and the true rate is skewed by the seasonality of under employed fisher persons and plant workers).  In Labrador West, where the mines are proposed, the jobless rate is practically zero. 

PECKFORD'S BOOK TOUR SPEAKS VOLUMES

Former Premier Brian Peckford, my boss for six years, (1979-1985) was on my mind this week.  I had read that he was spending several days conducting a Book tour in central and western Newfoundland in connection with his recent publication: Some Day The Sun Will Shine And Have Not Will Be No More.  The Globe and Mail reported recently that his Book had placed second on the Canadian Bestseller List for non-fiction.  His publisher also indicated that Peckford’s tome was already into second printing.  

I thought it appropriate that I should congratulate him on his Book’s success and enquire about his tour.

Of course, I was not without an ulterior motive. I also wanted to quiz him about the Muskrat Falls project, in particular whether the subject had emerged in his conversations with the people attending the Book Signings and what they were reporting.  I thought those two reasons were sufficient to ring him up.

I know no one else in the Province who possesses Peckford’s ability to gauge public opinion.  His instincts are uncanny and virtually incontestable. I can attest to that fact as one who directed and analyzed dozens of public opinion polls during my eleven years in the Premier’s office, working on the staff of both Peckford and Frank Moores. 

MUSKRAT FALLS: THE ‘SKINNY’ ON COST OVERRUNS

My Blog Posts and letters to The Telegram have mostly dealt with the arbitrary approach of the Dunderdale Administration and the consequences of the ill-conceived Muskrat Falls project both for the public treasury and for democratic government. 

I am a fortunate person; having served two Premiers for a total of eleven years, I left the service of government to become engaged a business career, now spanning nearly three decades, that included construction and development.  While I am not an engineer, I have learned much from some very good engineers and other construction professionals including some of the things contained in this article.

Experience is often the ingredient that offsets construction risk.  Right?  Well, not always.  Ask yourself this question: If experience alone were sufficient, why do oil sands projects continue to experience huge cost overruns despite the fact that large conventional projects can almost be now characterized as cookie cutter? Even SAGD and similar technologies are far more technically simplistic.

COST OVERRUNS: IS MUSKRAT FALLS IMMUNE?

The Economist, February 18, 2012 edition, contained an article referring to America’s “…30 year itch” with nuclear energy, manifested by its inability to move beyond the 1979 accident at Three Mile Island. The item held my interest, not for any reason related to nuclear energy, though the lengthy period required to pay for the Muskrat Falls scheme had me thinking of the “half-life” terminology of that industry.

The article contained two references with a local context; one where a nuclear plant under construction in Georgia, by a company called Votgle, experienced a spike from its original estimate of $660 million to a “cool $8.7 billion with electricity costs spiking as a result”.  (Thinking the Economist to be an error, the final cost was confirmed by a secondary source).

Fortunately for the Georgia, it has a population of just under ten million people; twenty times the population of NL.  Although, that State’s population will pay for the Votgle’s project cost overruns through their electrical bills, it is a private company, so the tax payer is shielded from bankruptsy.  Nalcor, on the other hand, is playing with our dime.

THE ELUSIVE LOAN GUARANTEE

Prime Minister Stephen Harper pledged a federal loan guarantee, for the Muskrat Falls project or equivalent, during a 2011 campaign stop in St. John’s.

The guarantee still eludes.

The Premier is on tender hooks.  She can’t schedule the debate in the House of Assembly and MHI can’t complete its final report unless the guarantee arrives. Is this why the Premier was recently heard in the media voicing the possibility that the debate could take place without the guarantee?

To those who say that the Feds made a commitment, I’d say what about the “conditions” attached to the offer.

On Sept. 12, 2012 the CBC recorded federal Finance Minister, following a speech in St. John's, saying:  “We have a commitment…to provide the loan guarantee, and we have to work on the details, of course…we will honour the commitment”.

Two weeks later, on September 27, 2012, concerned that the guarantee (and hence, the project) was falling off the rails, Dunderdale raced off to Ottawa to meet with PM Harper but came up empty handed.

Now the end of October is upon us. Still, there is no loan guarantee, notwithstanding the new impetus ostensibly given federal bureaucrats by the Prime Minister.  

The Premier’s Speech: From Triumphalism to Despair

James McLeod, Telegram Reporter, diligently recorded and transcribed the Premier’s Remarks to the delegates at the P.C. Convention in Gander on the morning of October 13, 2012.  It was an important speech, dealing with, among other issues, the fiscal situation of the Province.    

The Premier was obviously troubled by the Province’s diminished financial position, a realization brought on by oil prices that are more inclined to the $100 mark than to the $124.12 per barrel ‘Budget plug’ her Finance Minister’s used last March.  With one third of Provincial revenues dependent on the higher number, the Minister’s forecast deficit, this year, of $258.4 million is likely to grow, by the Premier’s own reckoning, to $600-700 million and $1 billion next year.

Maintenance, interrupting production on the Terra Nova and White Rose platforms, was known at the time the Budget was delivered. The date for the end of offset payments under the Atlantic Accord, a reduction in annual revenue of $536.1 million in 2012-13 and beyond, has been known since the deal was struck in the 1980s. 

What did the Premier say in her Speech?  This is one excerpt:

“Let me tell you, we’re spending too much money…. We are. And we’ve got to get a handle on it. …Do you know that in Newfoundland and Labrador, we spend almost $5,000 per person more than any other province in Canada in providing services to the people of Newfoundland and Labrador.  Four thousand seven hundred dollars more”.    

James McLeod, Telegram Reporter commented on the Premier’s next volley.  Remarked, McLeod: “She also said that oil revenue has led to citizens being cavalier about government spending, because the funding isn’t coming out of their own pockets”.  Said the Premier:

DON’T CONFUSE ‘PRINCIPLE’ with ‘PROJECT’

I was surprised that delegates to the P.C. Convention, this past weekend, were asked to vote on a resolution in support of the Muskrat Falls project.   

Why be surprised?

Muskrat Falls is the largest construction project ever undertaken by a provincial government; it is the legacy project of Danny Williams and Kathy Dunderdale.  Surely, party members should be asked to weigh in and give it two thumbs up? Well, actually, no.

At the very least, the Premier ought to have given Party Members the courtesy of the DG-3 numbers, the latest cost estimates generated by SNC Lavalin; she should have informed them of the cost of Muskrat power on a KWh basis and how many billions of dollars will be added to the public debt to pay for the project.


Cartoon Credit: John Meaney, Rand and Roar

In a gesture of transparency, the Premier might have insisted that Party Members be informed of the net cost to the consumer given that NL needs only 40% of Muskrat power.  The Premier’s number, per KWh, would have factored in the 20% of the 824 MWs to Emera, at no charge, and the balance to mining interests at the price of less than 4 cents per KWh.  Such a gesture would have constituted respect for the people who make the 'Party' function.  Then, perhaps, armed with that information, Tory delegates would be ready to vote?  Alas, that is not the case.

Had a Muskrat Plenary Session dominated the entire weekend, where seminars on Nalcor’s poor demand numbers had been discussed, the Water Management Agreement or the alternatives to Muskrat Falls received the scrutiny of a group still cloudy from the previous night’s festivities, it still would not have been appropriate to invite the delegates to commit themselves on such a project.

TOM OSBORNE: OPTIONS FOR A POLITICAL ORPHAN

When the St. John’s South MHA defected from the Tories, he stated that the people in his riding would help him decide where he will be seated on a more permanent basis.  I happen to live in Mr. Osborne’s riding; I want to take him up on his offer, now.
Mr. Osborne is a lifelong Tory; he has won five elections under the P.C. banner.  Upon defection, he said his problem did not arise from any single issue except for the Tory leadership, though some backbench MHAs and Cabinet Ministers may now be added to his list, given their visceral response to his move.  


Cartoon Credit: John Meaney, Rant and Roar

When Jim Hodder, an MHA for Stephenville and former Premier, Tom Rideout deserted the Liberal Party in the mid-1980s, they did do so, not in consequence of the then Liberal Leader, but, ostensibly at least, on account of a policy that favoured the Federal Liberals on oil and gas issues, in contrast to the NL centered position aggressively (and, in hindsight, successfully) advanced by the Peckford Tories.

In every interview, the St. John’s South MHA was consistent: the problem was Dunderdale.  This might suggest Osborne may wish to go back ‘home’.  He will have to wait until Dunderdale self-destructs; though, by then, the P.C. Party may be a poisoned chalice if Muskrat Falls is sanctioned.

For this reason, the possibility of Osborne re-joining the P.C.s, may well be a Hobson’s choice (no choice at all).  But, we’ll call it option #1.

Robbing Gnarley to Pay For Jacques

It was Uncle Gnarley who broached the idea of going to the upcoming mining conference at the old hotel.   I thought that it was a strange request from the retired economist, yet, I welcomed the healthy diversion from all the recent talk about Muskrat Falls.  Knowing that there was bound to be a story, I asked the question while en route in my new SUV: “Now Uncle Gnarley why all the recent interest in mining”?

“Well Nav, truth be told when I was much younger man I worked in some of the great mines in the province.  It included the iron mines in Labrador, the asbestos mine near Baie Verte, and most enjoyably panning for gold out west.  It is how I self-funded my education.  Even though I went to economics school, mining has remained in my blood since then.  But with all this talk about mining and Muskrat Falls I thought I should go and see what is happening.  You see Nav…  I am concerned that the mining industry is falling on hard times”

With this I knew that the air conditioning within my new vehicle would not be sufficient to keep Uncle’s Gnarley’s face from turning 50 shades of red.  He was building a great head of steam, and my interjections would certainly be ineffective in stopping his verbal tsunami. 

WHY SMALL SOCIETIES FAIL

Why would Premier Dunderdale refuse a proper debate on the Muskrat Falls project in the House of Assembly?  Why would any government, want to assume complete control over the issue and bring upon itself full and unfettered blame if the costs become more massive than already projected?  

Dunderdale, Kennedy and Marshall leave me in a state of bewilderment as to what influences  their thinking.

My own reference point is the late ’70s to mid-1980s, when Brian Peckford was Premier; it was a time of deep and often bitter federal/provincial exchanges over the Atlantic Accord, fisheries jurisdiction and repatriation of the Constitution.  The level of engagement he fostered with the public was simply huge; it still has no parallel. 

It is not an approach favoured by Dunderdale; she is not one given to citizen engagement in public policy matters; sadly, she does not claim to be one of those confident politicians who engage citizens freely and fearlessly nor one who regards the House of Assembly as a focal point of our democracy.

As Peckford’s recent book, “Some Day the Sun will Shine and Have Not Will Be No More” painstakingly describes, the achievement of the Atlantic Accord was a tortuous exercise. NL was ‘as poor as a church mouse’ and could ill afford to make enemies in Ottawa; yet, he persisted. Strikingly, neither local labour nor business groups, like the St. John’s Board of Trade or the Liberal Party or the NDP, got behind Peckford’s dogged initiative. 

THIS IS NOT DEMOCRACY

Photo Credit: NunatuKavut

Photo Credit: NunatuKavut

The Government said it will not sanction the Muskrat Falls project until after the Decision Gate-3 numbers are in, until Manitoba Hydro International has submitted its review and until after the debate on Muskrat Falls in

the House of Assembly has concluded. 


Photo Credit: NunatuKavut

Photo Credit:NunatuKavut

What do you see in these photographs?  Perspective is always shaped by bias. But, photographic evidence is compelling even to those in denial.

Perhaps you believe that Nalcor should forge ahead with Muskrat Falls regardless of what anyone believes.  Perhaps you believe that, since Government money is involved, a lower standard of scrutiny is acceptable. If you dare think that public money does not deserve to be treated as if it were your very own, you have chosen a slippery slope.

What ever your thoughts about the viability of Muskrat Falls or how you feel about millions of dollars public money being spent in this way, or whether you are upset that the Government has offended the Rule of Law by ignoring the legitimacy of the Public Utilities Board, I suggest that you not take your democracy for granted. 

This time its Muskrat Falls; next time, it may involve an issue you feel strongly about, where another Government decision impinges upon your sense of fairplay and the sanctity of your democratic institutions. 

Yes, those photos confirm that the Muskrat Falls project already under way, notwithstanding the commitments Dunderdale and co. have given the public to not proceed with construction until official sanction. Perhaps, like me, you probably see more. 

Photo Credit: Clarice Blake Rudkowski
 

I see a Government that is so determined to build Muskrat Falls, that it has already started work without legislative sanction, without adhering to the commitments previously given. I see a Government that is flaunting the democratic process. I see a Government in contempt of the Legislature. As far as the Dunderdale administration is concerned: the public be damned! 

Spending by Nalcor is proceeding at the rate of $12-15 million a month. The Nalcor President says he wants project sanction by the end of the year. Who does he think he is?

Has Premier Dunderdale no shame?

Race for Best Opposition Party Starts Now!

Recently the Liberal Opposition announced a number of rules which, they believe, should govern the structure of the House of Assembly debate on Muskrat Falls.

I had some difficulty with the logic of a few of the Liberals’ Rules.  The idea of examining witnesses in the morning with debate in the afternoon is questionable (why not get all the information, then engage in debate).  The Libs also want to help construct the resolution (why would you even want to, unless you planned to support the resolution).  I have a few other issues but they are minor.  None of them diminish the fundamental importance of a ‘structured’  examination of witnesses before the debate begins.

The NDP must now put forward its own proposal.

Both Parties also have to decide how far to push the Government to accept their debate ideas or at least get them to negotiate.  And they will need to push hard.

Dunderdale has already commented that there will be no examination of witnesses; that the Vale Inco Debate is the “template” for the Muskrat Falls Debate.  Some template!

The Opposition would be silly if they let her set the rules for the Debate in the House of Assembly as she has for public consideration of the issue.

PAN the Muskrat Falls Debate...Unless

If you feel a sense of hopeful anticipation about the impending House of Assembly debate on the Muskrat Falls project, likely, you will be disappointed! 
You may well ask, why?

If I suggested that elected Members ought to be well briefed, in advance of voting, you might agree.  

You also might also think: government will soon have the so-called Decision Gate-3 numbers (the latest cost estimates) and Manitoba Hydro International’s (MHI) latest comfort letter; isn’t that all they need to get the debate underway?   

I don’t like to answer a question with a question.  But, don’t you think Members ought to intimately understand the key elements of the Project and the government’s shifting rationale, first?  Then, the DG-3 numbers would be far more relevant.   

If you thought all the issues relating to Muskrat Falls had been mastered by your MHAs, think again.

The fact is your elected Members are not ready for a debate on Muskrat Falls.

How might they have been prepared?

The Balvenie Affair – Part III

I want to acknowledge “JM” who again authored today's post.  While respecting his desire for anonymity, he is, nevertheless, owed a debt of gratitude for his contribution to the PUB’s review of the Muskrat Falls project as well as for the research and analysis he continues to perform.   -   Des Sullivan, Uncle Gnarley Blog.
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Following our eventful meet with ‘JM’, Uncle Gnarley requested a couple days ‘Close to the Ground’, as he was known to say.  I assumed that this meant he had departed for his annual moose hunting gallivant, where he would partake in a week of reflection, introspection, and self- infliction.  This would all then be followed by a great massacre on some remote barren in Central Newfoundland.

But after a number of days with no contact, I decided to take a drive down the shore and pay a visit to my cantankerous old friend.  As I neared his door I could hear what sounded like rapid fire.  A familiar sound from my youth, but one I could not readily place.  Concerned, I cautioned ahead, and peered into the window.  Well, it was like seeing a great moose in the headlights.  There before me was the old economist himself, wearing only his wistered underwear.  His old frame was whiter than the fresh snow.    

The clanking which alarmed me was coming from his old manual typewriter.  Although I have never seen it in use, I know that the great man often referred to it as his ‘arsenal of democracy’ in homage to one of his personal heros.  It was clear that Uncle Gnarley had a bee in his bonnet, and I naturally assumed that it was related to our recent encounter with ‘JM’.

To not startle the old man I knocked on the door. 

THE BALVENIE AFFAIR (Part 2)

Note: Uncle Gnarley wishes to acknowledge and thank "JM" for having written today's Post.  "JM" will also write part 3 of this Series.

JM took the bottle of Balvenie and placed it on the board room table.  He placed good catholic disbursements to each of us, as he seemed to collect the thoughts in his head. 

“Uncle Gnarley this issue is a complex one indeed.  It is difficult to argue the Premier’s position that it is prudent to invest our current oil wealth for future generations of Newfoundlanders.  It is a noble effort and I believe that the Premier is sincere when she speaks these words.  Yet, with rumor of recent cost increases, I am more troubled by this great project that they call Mush-rat Falls”.

With that JM took the first sip of the golden nectar.  Despite his preference for Rum his response confirmed that he was well accustomed to the peaty taste of the Scottish juice.  “Muskrat Falls represents one of the greatest public works projects in our province’s history, the type of project that engineers and tradespeople dream of working on.  Yet our economy is booming, labour is in short supply, and project costs are increasing due to the other resource based projects.  If you remove all the arguments about demand forecasts, and overall feasibility I just don’t know why the government is doing this project now.

“Roosevelt built the Hoover dam during the great depression.  It provided a livelihood and hope for a generation of Americans.  However, we are completing Muskrat Falls in a time which is so busy that Newfoundlanders will not be able to truly benefit from its construction, despite the fact that their tax dollars will fund it.  Why are we doing this now?”

It was clear that Uncle Gnarley was animated, and eager to long join a debate with someone near his own caliber.  But as I thought he was about to embark on one of his own lengthy discourses, he seemed to rethink.  Happy to hear more from JM he asked what, at first, seemed simple enough.  The question was not just loaded, it was lobbed, as if it was a test for JM:  “But don’t we need the power now?”

HOLDS A SECRET MEETING WITH THE ANONYMOUS "JM" (Part 1)

(Author's Note: After a fortuitous encounter with the anonymous, but very real "JM", the person whose 175 page Submission to the PUB on the Muskrat Falls was frequently referenced in that Agency's Final Report, the author and JM have agreed to write a three part Series dealing with certain critical issues pertaining to the Muskrat Falls project. Part 3 will disclose new issues regarding Muskrat which new research by "JM" has uncovered.  Today's Post is written by this Author; Parts 2 and 3 will be composed by "JM". Part 2 will be posted on Wednesday, September 26, 2012 and Part 3, a couple of days later .  While Uncle Gnarley is a fictional character, the issues dealt with in this Series, and in earlier Articles by the author, are real).
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“Now, Nav”, Gnarley continued, “who would have undertaken such a demanding project? Who would have made such a commitment knowing that he could neither benefit financially nor on an academic level?  After weeks of difficult research, the decision to sign off on the work, under the anonymous "JM", had to be tough.  Whoever JM is, Nav, I believe he left the signature of a real academic; a person in pursuit of the truth rather than any reward, not even self-aggrandizement”. 

That was Uncle Gnarley, in July, long after having read “JM’s” 175 page anonymous Submission to the PUB on the Muskrat Falls project.  That Agency had relied upon JM’s Brief to help it with its analysis, frequently quoting him in the Final Report. 

Now, Uncle Gnarley was sitting in my SUV, fidgeting and exhibiting his characteristic impatience as he waited to be driven to meet the same JM, the heretofore ‘anonymous’ expert on Muskrat Falls.  Impatient may not be the best word to described Uncle Gnarley’s demeanor; he wore an aspect that suggested ‘agitation’; some ‘dilemma’ was clearly causing him conflict and, on this occasion, I was not invited to assist with a resolution.  I wondered if it involved JM or if there was some other matter causing him distress.

The invitation had popped into my “Inbox”; not only had JM written a new Paper on Muskrat, entitled, Upper Churchill: The Unexplored Alternative, to which, I knew, Uncle Gnarley would want to give thoughtful consideration; it was accompanied by a request from JM to meet Uncle Gnarley face-to-face.

AMATEUR HOUR IN THE PREMIER'S OFFICE

When a Member defects, as Tom Osborne did last week, there are always repercussions for the party leader. 

When the act is by a Member on the Government side, as Osborne was, the ensuing questions and concerns are magnified.  Why?   The defection speaks less to the defector, personally, than to the message he sends regarding the condition of the ‘ship of state’.

Cartoon Credit: John Meaney, Rant and Roar

For that reason, the political fallout must first, be understood, and then, skillfully (intelligently) handled.

People are unnerved about any political upset; but, they are alarmed when the Premier’s response is perceived as one that diminishes her person and her office.

Unfortunately, most people do not engage politics except on a superficial level; they should not be judged too harshly, for life intervenes and there are mouths to feed.  But they are never completely tuned out; that is why, intuitively, people take note when they feel ill at ease by the very government they have put in charge.

Tom Osborne’s decision to quit the P.C. Caucus is a clarion call, a call to action.  Skillful leaders know that, in these circumstances, the public wants re-assurance, expressions of intelligent thought and consistency, overlain with a reasonable rationale for what has just transpired.  None of that was on offer, last week. Indeed, the sheer scale of the vituperation emanating from Government Members was truly appalling.  

Osborne, it must be remembered, is not just any MHA.  He was the longest serving member of the P.C. Caucus. Both he and his family boasted a record of Party service that outshone every other Member. He held three Cabinet posts. He enjoys respect in his constituency and has been returned to the House of Assembly a total of five times. He has not quit over any point of principle or singular issue, except for, as he clearly stated, a lack of confidence in the Premier. 

A party stalwart with that record, is not one that you should mindlessly pillory or denigrate.  He has not defected to another Party; hence, with the leadership problem fixed, he could possibly be back in his usual seat within months.  These are the facts.

Let’s look at the Government’s response.

Tom Osborne Defects: Time for a Realty Check

The announcement by the MHA for St. John’s South, Tom Osborne, that he is quitting the Dunderdale P.C.s, had me recalling my June 25^th Post, entitled, “All Eyes on the Backbench, Please”.

Since posting that warning of the political cost of Dunderdale’s declining popularity her personal Poll numbers have been in free fall.  Her comment, that ‘strong leadership’ does not govern by Poll results, was unconvincing. 

Everyone knows, Premiers can’t let a single poll result or two cause a reversal in decision making.  But a trend will.  And what Premier Dunderdale is experiencing right now, is exactly that, a trend. 

Tom Osborne’s decision begs five points of analysis:

First, when the Premier’s popularity descends into free fall, the authority of leadership is the first casuality. Most Premiers have enough personal IOUs with caucus members that they can survive periods of voter displeasure, especially when it occurs early in the mandate. This is a crucial test which Dunderdale has failed.

Second, when Osborne refused to endorse Dunderdale for the uncontested Tory leadership position, she all but shunned him.  It was one thing not to appoint him to Cabinet; that is her prerogative.  It is quite another not to make him feel welcomed inside the Tory caucus and attempt to gain his confidence.  That is an error in judgement.