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Thursday 11 October 2012

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. 

 “Well you see Nav, it was not too long ago that a former premier had a rallying call of ‘not one spoonful’ of ore to leave this province.  Now these were buoyant days when we insisted that a large mine would be accompanied with a billion dollar smelter, local benefits and royalties.  There was never talk about subsidies to mining back in them days.  Any Premier who would suggest such a thing would be driven out of town in the back of a Mac truck. 

Now Nav, after hearing the Premiers speech to the Board of Trade, I am fearful that the mining industry has fallen onto hard times.  She has said that Muskrat Falls has to go ahead, because it is the only way that the mining industries in Labrador will get access to competitive industrial electrical rates.  The mining companies must be so strapped for cash, and the ore prices so low, that subsidized electricity must be a pre-requisite for the export of iron ore to China and India.  And Nav… the in-situ storage cost of all that iron in Labrador is putting a real drain on the provincial treasury”?
Although I was getting accustomed to the old economist method of prose there were times that he still confused me.  Sensing that he had one again had thrown an intellectual juggernaut he continued.

 “Nav… the Premier has changed her message yet again.  We now have to develop Muskrat Falls to ensure that Labrador Mining will get access to subsidized power.  The reason we need to develop Muskrat is that we could never depend on Hydro Quebec to deliver cheap power for industrial expansion in Labrador.  As Hydro Quebec are mandated by the United States Federal Energy Regulatory Commission to deliver power at market rates does this mean that the Premier now wants to deliver power at rates even less than market value? 

"Have we gone from a government who said that the people of the province are the primary beneficiary of our resources, to where you and I must help pay for the electricity to power the mines.   That is some New Energy now Nav isn’t it, eh?”

With this I pulled the SUV into the parking lot.  To my surprise there was JM.  I thought that this meeting was a little too coincidental.  I looked over to Uncle Gnarley, who had a large smile on his face.   
“Well, Nav, I thought that JM may have something to say about the Premier's speech, and I thought: what  better venue to discuss subsidies to Labrador mining that this great conference”.

After the normal salutations the three of us proceeded to the nearby coffee kiosk to discuss the most recent news.  It was clear that this meeting of the two had nothing to do with mining, but everything to do with Muskrat Falls.    

JM was the first off the slip “Well Uncle Gnarley, the Premier gave a very passionate speech that was sure to enflame the nationalistic fires in the province.   She gave many compelling arguments for the development of Muskrat Falls.  I believe that we may need to reconsider your modest proposal?”  It was now JM who lobbed the loaded question. 
To that Uncle Gnarley reached into his jacket pocket, and pulled out a silver flask.  He poured a small amount of tonic into his coffee, “More for flavoring Nav than anything else”.  He then looked at JM, who respectfully declined the offer.  Uncle Gnarley then drew a deep breath. 

“The Premier's speech was indeed well attended, and it fair to say one of the most important in her political career.  But it was a speech that was long on rhetoric, but very short on fact.  We should not be seduced by the former, but we should wisely wait to be convinced by the latter.  For it is fact, and not emotion, which will steer us to the right decision.  
I requested this meeting with you, JM, to get your somewhat educated perspective on the matter”.

After a short sip of the Jamaica Blue, JM replied.
“In this speech the Premier has put the focus on Quebec. For Premiers, who need to shore up popular support, there is no better form of ‘Argumentum ad antiquitatem’.   So alas, the preverbal line has been drawn in the sand.  We need to bypass Quebec to ensure that we reach the best possible benefits for the people of the province. 

"Now Gnarley this is a noble cause, but as I have previously written this may not actually be the case.  Newfoundland can buy all the power we could possibly use from Hydro Quebec, and it would represent a lower cost alternative to the rate payer (Upper Churchill: The Unexplored Alternative).  We could also build Muskrat Falls and then export the small surplus amounts through the existing wheeling agreement with Hydro Quebec rather than the more expensive Emera option (Labrador Mining - A Reason to Rethink?).  This would also ensure that we actually do have power to enable growth in Labrador, without having to go through this entire process again in 2-3 years. But in both instances the Government has potentially made the more expensive decision”.

As I have observed in our earlier meeting, Uncle Gnarley provided JM the respect of letting him finish his sentence.  A social grace never afforded to myself.  The old economist then retorted.    
“The Premier drew the line in the sand, but it will be no more effective than the Treaty of Paris in keeping the Frenchman out of Labrador.  In an effort to screw Quebec, we are screwing ourselves”.

This colorful language was a sure sign that Uncle Gnarley was frustrated.  My look of displeasure at the use of such excessive language was not lost on the old man.  It was JM who was the next to speak.
“Gnarley that is a very rousing thought.  Can you explain further”

“Well you are a businessman.  You know that Quebec companies are free to participate in the mining industries no different than Newfoundland based companies.  They are, in fact, well entrenched in the iron trough.  The development of mining in Western Labrador is no less a vehicle of industrial development in Sept Isle than it is in St. Anthony.  Probably more so.  With the building of rail lines, and ports, mining developments in Labrador also fuel industry and jobs in Quebec.  It is in Hydro Quebec’s interest to sell electricity to Labrador mines at competitive rates, as the province of Quebec will certainly benefit from it no different from Newfoundland. The geographical embrace that we share, circumnavigates the great political divide”.
JM nodded in agreement with these words, and realized that this old wet economist although retired was still at the top of his game.  He countered with an observation of equally piercing effectiveness.    
“Gnarley this seems to explain with why no Government of Quebec has really given more than a token challenge to the loan guarantee provided by the Federal Government.  If Newfoundland provides subsided power to mining companies, then Quebec are also getting the benefit of great industrial development, but with none of the risk!  They also get to keep the Upper Churchill power for export besides.  A very good position for Quebec.  Some would even call it a double windfall”.

My very own premonition of two weeks prior was unfolding in front of my eyes.  The two great minds were fully in tune, each trying to outdo the other.  Gnarley, in a great showman form, had to play the trump card against his intellectual understudy:
“Instead we are proceeding down the road of releasing the stranglehold of Quebec, to be replaced by nothing other than a great stranglehold of debt.  Any power directed to Labrador mining at industrial rates, will be subsidized by the people of the province and may lead to higher rates to ourselves.   The province of Quebec will certainly benefit tremendously from the development in Western Labrador, which will be fuelled by the great hydro dam that our tax dollars will pay for.  Sure Nav, we see it now with the scores of Quebec engineers, and tradespeople who are currently working on the projects because of the skilled labour shortage in the province. 
But it can not be forgotten that this project will be paid for by you and I.  It as if the taxpayers of Newfoundland and Labrador will be paying for a make work project on the North Shore”. 

To which JM mumbled under his breath “It is as if the Premier is robbing Gnarley to pay for Jacques”
Gnarley reached again into his blazer pocket “In an odd and indirect way, this is sadly true”.

(Editor's Note:  This Post was written by "JM" for Uncle Gnarley Blog. JM is the anonymous person who presented a 175 page Submission to the PUB on Muskrat Falls and recently released the Research Papers noted in this Post.  He also wrote "The Balvenie Affair, Parts I and II, both found on this Blog).