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?