OVER A BARREL: THE START OF A NEW RESOURCE GIVEAWAY?

Inflation exposed the Upper Churchill contract as a “sell-out”. With Newfoundland’s unemployment rate exceeding 20% in the late 1960s, the Smallwood government chose jobs rather than risk Quebec Hydro walking away from the massive project. They made not a single demand — not even a royalty from the grant of water rights.

That is one aspect of a history of resource giveaways. I will note one more — in case you think Hydro Quebec wants to be your friend.

BRINCO was the developer of the Upper Churchill. Hydro Quebec’s strategic and persistent delays in signing a power purchase agreement (PPA) with the company — during which time it spent millions in pre-construction costs — had it facing bankruptcy. The company behaved unwisely, to be sure. They listened to Hydro Quebec’s good-faith claims and ran out of cash.

With Hydro Quebec holding a gun to its head, an additional 25-year extended contract was wrung out of BRINCO at an even lower price than it had negotiated for the first 40 years. Even ancient Rome experienced inflation. But any reflection of such an economic norm was suppressed in the feeding frenzy visited upon a far too trusting business partner.

NALCOR CAN'T BE TRUSTED TO NEGOTIATE WITH HYDRO QUEBEC

The public has been in a state best described as “delusion” since Danny Williams unveiled the Muskrat Falls project. However, this condition is due less to a wilful state of denial than it is to a deliberate, preordained, and persistent institutional and politically inspired deceit.

Neither the government nor the crown agency, Nalcor, can find vested interest in keeping an ill-informed public abreast of the problems that affect them financially - both individually and as a society.

Proof is the credibility which Premier Ball still ascribes to Muskrat. It will be a good project ‘in the long run’, said Ball again recently - seemingly unmind of its problematic state and their consequences.

The deception is also found in the government’s refusal to properly describe the project’s legal status – following the Quebec Superior Court decision.

MUSKRAT FALLS: THE PUBLIC RIGHT TO DECIDE (PART II)

Guest Post by David Vardy

In Part I of Muskrat Falls: The Public Right to Decide, I described how Nalcor’s Board of Directors has been an interim board since April 22, 2016, while the PUB continues to be denied authority for regulatory oversight over the Muskrat Falls project. This Part II examines other mechanisms for regulatory oversight.

Can we find mechanisms which will enable greater public participation in decisions, as well as create enhanced transparency and accountability, or is the only rational decision the suspension of work on the generation site, while completing only the transmission line?

Loss of the Quebec court case on Hydro Quebec’s rights to power from Churchill Falls for the period from September 1, 2016 to August 31, 2041 may have large implications on cost. Similarly recent problems with the coffer dam may add to cost escalation and delay the project ever further. These events add weight to the argument for suspension.

MUSKRAT FALLS: THE PUBLIC RIGHT TO DECIDE (PART I)

Guest Post written by David Vardy

Introduction

Many people are in shock as the drama surrounding Muskrat Falls continues to escalate, along with the rising costs and increased exposure to risk. People are greatly alarmed about the impact on our power rates and on the future cost of living in the province, particularly for those on low and fixed incomes. We embarked on this project without knowing what it would cost and without exploring the alternatives. Much of what could go wrong has done so. All of the risks surrounding the project were pointed out by citizens who were ignored by the previous government.

We need to change our course to reflect the escalating risk to our ability to sustain a standard of living comparable with that of other Canadians. To make this change we need to find out where we are now. Stan Marshall said last week that there will be no report on the project cost until next June, indicating that there is great doubt about our current position. Yet we continue blindly to toss more and more money into this money pit.

THE WAY FORWARD A FISCAL DUST CATCHER

One of the most important revelations in the Ball Government’s policy document The Way Forward — and there are very few — is that it recognizes they have a spending problem. Yet it constitutes neither road map nor resolution for the province’s fiscal woes. Recognition of the problem, alone, is not enough.

Says the document:

“This fiscal problem was not caused by a drop in oil prices, but was instead exposed by the decline in oil prices. The past decade has been marked by an incredible increase in Government revenue… Even in 2016-17, Newfoundland and Labrador has the highest per capita revenue, and the highest per capita program costs among provinces. We cannot treat our current situation as only a revenue problem. Our province has a spending problem.” (p.3)

Still, it is peculiar phrasing — it seems no one discovered they were out of water until the well went dry!

WHO REALLY BENEFITS FROM MUSKRAT FALLS?

Guest Post written by Gabe Gregory

Nalcor's most recent estimate of the capital cost for the Muskrat Falls project is $11.4 billion. Emera is spending $1.6 billion for the Maritime link (ML) to NS. The total capital investment on the venture is $13.0 billion.

The table below - at Line 2 - confirms Nalcor’s estimate of total annual power production from the project at 4.642 TWh. The table also puts at 1.192 TWh Nalcor's most current estimate (June 2016) of how much electricity Newfoundlanders will use in the first year full power is produced. The amount committed power to Nova Scotia, under the Nova Scotia Block, is 1.220 TWh. The balance - 2.230 TWh - is the amount Nalcor can export - though approximately 80% of this power is also committed to Nova Scotia.

STAN MARSHALL DESERVES A GOOD TONGUE-LASHING

It is not difficult to figure out why Nalcor CEO Stan Marshall wasn’t invited by the Premier to sit in on the marathon session with aboriginal leaders. Evidently he would not have been helpful. Already he is dissing the importance of the methylmercury issue — mere days after the protesters broke off their sit-in.

At the beginning of his tenure, Marshall appeared in front of the media to confirm that the Muskrat Falls project is a “boondoggle” and to say that he is trying to mitigate the impact of 21.4 cent KWh power on ratepayers. Otherwise, he has largely been mute.

Whether it was the protesters or something else that stirred him to consciousness is uncertain.

The Nalcor CEO used his two-day media blitz last week to largely dismiss the deal the politicians had constructed. He downplayed concerns about methylmercury and suggested the science would not require clearcutting and soil removal. Marshall may be right. But how is the expression of such views supposed to advance progress in establishing a relationship between the parties?

HOW RELIABLE WILL MUSKRAT POWER BE? PHIL HELWIG DEALS WITH THE QUESTION

Guest Post Written By Phil Helwig, P.Eng. (Retired)

Phil Helwig is a retired Engineer and Hydropower Consultant with over five decades of experience -  much of it right here in Newfoundland and Labrador. He has been a frequent writer to the Telegram on the North Spur stability problem as well as on other issues including power reliability and security.

This is Helwig's first contribution to the Uncle Gnarley Blog. It is a timely one, too. In recent weeks readers have seen posts regarding the Phase I Report of the Public Utilities Board (PUB). It dealt principally with the findings of the Liberty Group's investigation into the root causes of DARKNL. In late August Liberty filed its Report on Phase II of the PUB's mandate which includes consideration of security and reliability issues in the post-commissioning of Muskrat Falls. Phil Helwig has now distilled this Report and comments on the concerns of the Liberty Group for Uncle Gnarley readers. I am pleased to welcome him to the blogosphere and say that I am very grateful to him for lending his expertise in such an important public policy area. - Des Sullivan