Thursday, 9 February 2017

JUDICIAL INQUIRY BEST DISINFECTANT FOR MUSKRAT FALLS SAYS VARDY

 Guest Post Written by David Vardy

PUBLIC INQUIRY NEEDED URGENTLY
The evidence is mounting that the Muskrat Falls project was ill-conceived and badly executed. Sadly there is also a growing body of evidence that the mismanagement of the project has been compounded by practices that are ethically questionable. They cry out for nothing less than a judicial inquiry into these practices and into the myths that were proclaimed as facts.

The Case for Muskrat Falls
The Muskrat Falls project lies at the heart of the financial dilemma facing the province. What was proclaimed as a “strategic investment” has become a financial and environmental disaster as well as an existential threat to our sovereignty. Why have we allowed this to happen, plunging the province into an abyss of debt, and into spiraling population decline?

There were three arguments for this project. Each has been debunked as urban myth.

Rising Demand for Electricity: The First Myth
The first myth was the rising demand for electricity.  Minister Jerome Kennedy said we needed the power, and Muskrat Falls was the least cost option – based on a forecast of $150 oil. The June 24, 2016 project update by CEO Stan Marshall presented a revised load forecast dramatically lower than the one on which sanction was based in December 2012. The load that was forecast for 2020 will not now be reached until 2036. The new Nalcor forecast recognizes for the first time the effect of consumer behaviour in substituting other energy sources when electricity prices rise significantly as a result of this project. Apart from the demand from the Vale smelter, loads have been virtually level over the past 15 years, and the declining population projected by the Department of Finance provides no basis to expect any increase.

Replacement of Holyrood thermal plant: The Second Myth
The second myth was the replacement of the Holyrood thermal plant. The PUB investigation into supply issues and power outages confirms the necessity for a large block of emergency power to be located on the Avalon Peninsula after interconnection. The Avalon is where most of the load is concentrated, and it can be easily isolated by extreme weather conditions from the lines from Muskrat Falls and from Bay D’Espoir, as well as from any emergency power from Nova Scotia. Even after interconnection there will still be a need to upgrade or replace the Holyrood plant. Muskrat Falls was never an alternative to Holyrood, which will continue to be needed.

By-passing Hydro-Quebec: The Third Myth
The third myth is that Muskrat Falls gives us an alternative path for power from Gull Island or Churchill Falls, thereby strengthening our position with Quebec. This myth has been propagated by political luminaries but has no foundation in fact. The reality is that the transmission lines are sized to carry only Muskrat Falls power, with a capacity of just 900 MW. The Maritime Link has a capacity of 500 MW. If we are to gain access to the full capacity of the Upper Churchill (5,428 MW) we will need new transmission lines and new submarine cables across both Straits in order to bypass Quebec. There will be no savings! Furthermore, by building Muskrat Falls we will have satisfied future demand for power on the Island, making it impossible for consumers to benefit from low cost Churchill Falls power when it is available.

Warning from the Joint Federal Provincial Environmental Panel
Both the federal and provincial governments ignored the warning from the joint environmental panel who told us in August of 2011 that “The Panel concludes that Nalcor’s analysis that showed Muskrat Falls to be the best and least cost way to meet domestic demand requirements is inadequate and an independent analysis of economic, energy and broad-based environmental considerations of alternatives is required.” (Joint Panel report page 34).

Warning from the Public Utilities Board
Instead of a robust inquiry by the PUB, in pursuit of its statutory mandate to ensure that new supplies are “lowest possible cost consistent with reliable service”, the Board was presented with an impossibly short timeframe and could not review a full range of alternative sources of power. Instead it was told to pick between two options only.

The provincial government ignored the advice from the PUB which concluded that “The Board concludes that the information provided by Nalcor in the review is not detailed, complete or current enough to determine whether the Interconnected Option represents the least-cost option for the supply of power to Island Interconnected customers over the period of 2011-67, as compared to the Isolated Island Option.”

By exempting the project from the Board’s jurisdiction the PUB was prevented from discharging its statutory duty.

No Business Case for Project
Having failed to “capture” the joint panel and the PUB the proponents contrived a business case by bold-faced manipulation. Government commissioned a number of consulting studies to buttress their business case but none of these were tested by cross-examination by experts in a public hearing. Instead these studies were a desperate flurry of activity to validate the project, which was built on a foundation of sand, with questionable assumptions including future escalation of oil prices beyond US $150 a barrel. At the time there were many warnings of the impact of the “shale gas revolution” but these were ignored by our “world class experts” in the euphoria of building our “Energy Warehouse.”

Royal Commission Needed
The Muskrat Falls project has escalated from $6.2 billion in 2010 to $11.7 billion today, based on Nalcor estimates. The project will double the public debt, and place a burden of $22,000 on each man, woman and child. My expectation is that it will escalate to $15 billion; the cost per person will then be $28,000 and in excess of $100,000 for a family of four.

We must have a Royal Commission of Inquiry into why this project was sanctioned and why Nalcor was given extraordinary powers, to circumvent the Public Tendering Act, to restrict access by the Auditor General and to limit public access to information. Deliberate policy decisions were taken to shield the project from proper oversight.

A great American jurist, Justice Louis Brandeis, once said that Sunlight is said to be the best of disinfectants; electric light the most efficient policeman. As has been documented by the undersigned previously on this blog, there has been little sunlight or oversight to instill confidence in the management of this megaproject. Without oversight the darkness has deepened.

The Royal Commission must have full powers to subpoena witnesses and evidence. The inquiry must explain why the Astaldi contract rose from $1.1 billion to $1.83 billion and who is bearing the cost of the aborted canopy over the project, reported to cost $120 million. It must determine who is bearing the cost of the transmission lines which had to be taken down and replaced because of a defective strand. And it must determine the truth concerning the allegations that the initial cosr estimates were falsified.

Conclusion
Such an inquiry will be commissioned only if the people of the province speak out and demand it. Citizens will make such a demand when they learn that the case for building Muskrat Falls was a fabrication from the beginning and that the cost estimates were manipulated to ensure an early decision to sanction.

The question the Royal Commission must answer is: Why did Nalcor and the government deceive us at the time of sanction and then mislead us for the following four years? This question must be answered before ratepayers receive their first bill for Muskrat Falls power. The government is playing with fire if they think people will endure power rates exceeding 21.4 cents without vehement public protest.  


David Vardy

41 comments:

  1. Great post David.
    Of the entirety of your post, this line really does sum it up "The government is playing with fire if they think people will endure power rates exceeding 21.4 cents without vehement public protest."

    In order for this to happen the people must be educated on the facts (not to be confused with spinning facts). The person(s) doing the educating must be trustworthy and not tied to Government or Nalcor.
    One would conclude that the media would be prime candidates for this purpose but sadly not the case in NL. They are complicit in their silence.

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    1. Your support of Mr. Vardy's initiative is acknowledged and appreciated. It would be of greater impact if you would kindly identify yourself, as most of the others do on this important Blog. Would you seriously consider signing a petition to support the call for a public inquiry?

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    2. In a province such as this one, and in our current dire economic situation, it is not always possible for people who disagree with Government on the topic of Muskat Falls, or indeed on any government initiative, to identify themselves. They could be placing their employment and consequently their families' well-being in jeopardy. The impact, in other words, could be negative — and significantly so. It's essential to allow those in this vulnerable position to maintain their anonymity if we are to hear their unguarded input.

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  2. Load Growth?

    Even with Vale's nickel processing plant, at no time over the 15 year period (from 2001-2015) did our total island energy use exceed our all time high (which occurred in 2004). And by 2015 (even with Vale's nickel processing plant) we were still about 1% below our peak and 7% below our 15 year average. See http://www.vision2041.com/demand.html

    Holyrood

    We need Holyrood for VERY short term, peak demand time periods (Holyrood is needed to operate at capacity for less than 1 week per year --- 1.6% of the time); and we need Holyrood for the Avalon's high demand and emergency backup time periods (over the last 10 years Holyrood needed to provide on average only about 13% of the island's energy needs, and since 2012 the cost of Holyrood-generated power has gone down about 42% per kWh(see
    http://www.vision2041.com/demand.html

    WE HAVE BEEN CONNED. AND EVERY NL HOUSEHOLD --- you, your children, youR grandchildren, and great grandchildren will be paying for this fiasco for 50+ years.

    And perhaps the biggest insult and injury of all is that the benefit that we have long awaited for with the arrival of 2041, will be stifled because Muskrat Falls locks NL ratepayers into PAYING FOR ALL OF THE approx. 55-cent per kWh Muskrat Falls power --- ALL OF IT, while most will be shipped to Nova Scotia for 4-5 cents per kWh.

    David Vardy is right ---- WE NEED A JUDICIAL INQUIRY.

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    1. We have been conned since 1949 why is it any different now that we have to spend millions again to sort out another robbery of the good people of newfoundland.....Now that the project has sucked up billions of dollars in construction do we now throw a giant tarp over the site and loose those billions....Or do we continue construction and pay money for electricity that we know we cant afford???? What a sad state of affairs.....Spend millions I guess and find the crooks and this time for the love of god put them away from any project in newfoundland so my great grand children don't have to suffer....

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  3. "If we are to gain access to the full capacity of the Upper Churchill (5,428 MW) we will need new transmission lines and new submarine cables across both Straits in order to bypass Quebec."


    What would be the point? There are already transmission lines from CF to the HQ grid, fully amortized and not going anywhere. Quebec cash is as green as anyone else's.

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  4. Indeed, a Royal Commission is needed to get to the bottom of this and expose the fraud against the citizens. It seems there was deliberate intend to deceive and this suggests more than just ethical behavior.
    Some Myths that were presented as facts are noted by Mr Vardy, there are others, likely many more. It is the job of the media not to accept statements by government without analysis whether it is factual. The media, to a large extend has been a cheerleader for this project because of no investigative journalism and willing to accept the myths as facts. Facts are subborn things, and can come back to haunt the myth makers.
    The government can avoid the worst of the fire by keeping power rates at about 15 cents instead of 22, but this only means downloading the costs on fewer dollars for health, roads etc, and increasing taxes and levies. Even 15 cent power will not prevent an abandonment of electric heat for more efficient sources.....its happening with power at 10 cents.
    As uncle gnarley suggested, Muskrat needs to be put on ice ........while the Royal Commission exposes whether there is corruption here. The commission may save the waste of another 7 or 8 billion, for a project with little if any market for the relative small power it can supply.
    Or we may be headed for a situation like Greece, where citizens are now into 6 years of austerity that is only getting worse, with debts that cannot be repaid, and their economy continues going downhill, with protests in the streets.
    WA

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  5. I continue to support David Vardy's analysis, and call for a Public Inquiry into the Muskrat Falls project.

    Robert G Holmes, (PEng. retired)
    Living in Fernie, BC

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  6. A couple of things David.

    Why are you not calling primarily for a halt to MF now? You well know the sunk costs are irrelevant. With no need for any power before 2041 why not demand the madness stop pending rational analysis?

    Second your questions about why MF are rhetorical and bitterly comical. We all know the why and wherefore for the MF tragedy. Does a demagogic strongman not explain it all? Dancing around the truth serves little purpose.

    The time a Royal Commission takes will lead nicely into another Commission of Government in a decade. Too little too late.

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    1. You make some very good points Bruno, and I do believe that such a halt needs to take place now, and I think that David Vardy has asked for that on several occasions.

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  7. I wonder if a stop is not being considered or just a little more prudent (less wasteful) in spending.........Pennecon at MF has laid off some 200 , at first for a few days, but now half longer term. And before Xmas a neighbour got a job as Soldiers Pond, was to be for 2 years, but work stopped after 3 weeks, and he is gone to Toronto. And are the line crew for the faulty overhead lines, are they not still off after 6 months, and the concrete that set up after the form failed......was that ever removed.........
    Sure its winter and maybe makes sense...........or waiting some miracle for export sales, or watching peak demand, or if our standby power is adequate for years to come, given declining power sales..........or assessing the impact of customers moving away from electric heat, and further declines. Or really worried about the safety of the North Spur that offers no cheap fix........
    Not full speed ahead..... maybe pondering the budget and more dollars for Nalcor.......and the fall out of the reliability investigation by the PUB, with Liberty and others in the fight. Stan Marshall may be scratching his head as to the inevitable ........the boondoggle cannot be fixed.
    WA

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  8. i dont know why they just did not build a dome over the dam to allow construction in the winter.

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  9. Additional MYTHS:
    1. When forecasting power needs the formula uses a variety of inputs. One of these is technological change. This allows for improvements going forward for building upgrades and more efficient heating, hot water and appliances, and lights. For this they stated that this factor was approaching saturation level, that little more could be achieved. This is totally false. Heatpumps alone reduce heating by 50 to 60 percent for space heating and 50 percent for water heating.
    2. Another Myth: that the DC line would not be subject to salt contamination as to reliability issues for causing flashovers and outages. Not only false, but more at risk than AC lines. And a special risk when considering the terrain of the Great Northern Penisular.
    These are technical issues that are not, in my opinion, lack of due diligence, but seems deliberate deception to help create the MYTH of Muskrat being a 2 billion lower cost option.
    Another Myth.....that Nflders are not interested in energy conservation. Nfld power surveys show that consumers are very interested in conservation if it saves them on their energy bill. This puts the onus on the power company to do end-use research to prove which measures save significant energy. Manitoba Hydro cites our power companies in its failure to do this, although it is a best practice carried out by progressive power companies. Here they still refuse to do this. So they do very little that is meaningful to reduce peak demand, and try to maintain or increase peak demand, and so justify Muskrat as necessary. No Energy Efficiency Corporation here, because Nflders don't believe in conservation! Right!
    Winston Adams

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  10. It is possible that the present government will finish out its term in 2019 or so. They have shown so far every intention to complete the Muskrat project and the present schedule is to complete in 2019, if that is indeed possible. The present government will therefore not call a public inquiry. If not finished by 2019 it will surely be beyond the point where it makes any sense to stop.
    If we elect the present opposition party or the present government, there will be no inquiry.
    Therefore you may be whistling in the wind and we will all pay dearly either through rates or taxes and the guilty will go unpunished and pay no more than their share of the cost.

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    1. Fair assessment. Now we should target the Federal level; Auditor General, MPs, to investigate what the Ottawa Liberals are up to in using the Canadian taxpayers to continue to heavily subsidize this Muskrat venture, for what gain. Where are the NL MPs, all Liberals no less? Why aren't the Que Liberal MPs so silent? Bernard?

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  11. The genius, Wade Locke, says we have lost 10,000 jobs in Nfld in the last few years, and expects to lose another 20,000 in the next 3 years.....his report to the Board of Trade cited in the Telegram. He says we all must share in a solution! The gall of this guy who promoted Muskrat as a great project. He says our unemployment is headed for a 20 percent rate! Yet he is still employed by MUN! Pray tell, why! And does he get a fee for this speech to the Board of Trade.
    We can only hope he is as wrong as he was on Muskrat.
    I am still waiting for him to reply to my email sent him in 2012, a suggestion for part of a solution to an alternate to Muskrat.........10 pages......he said he never had time to read it! Now he says we all should contribute to a solution to our economic situation. Suggestion for you Wade.....resign, turn over any pension benefit to the government, hide away like Dunderdale, Kennedy and others. You shame the profession you are part of. And go on diet.......you are headed for a burden on our health care system, and they have enough problems.
    Winston Adams

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    1. Glad to see the fire in your belly Winston.

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    2. Wade Lock is a terrible example of incompetence in a teaching role. Heaven help the yet to be trained at the university level here in NL!!

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  12. You are correct that the Muskrat transmission lines and underwater would not be sized to take more than the approximate 2/3 of the available power and energy from Muskrat only to Nova Scotia. It can be however an alternate route for CF power and energy post 2041, if a market can be found in the USA for such a large block of hydropower at that time. There is no present route for this power and energy through Quebec and we could once again be held to ransom at the Quebec border as we were in 1969.

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  13. It must be hard for many to condone the false assumptions and reasoning put forward for proceeding with this project even at the original estimated cost. Now that it has become clear that the present government has no intention of halting the project, we should not forget that there is potential for some revenue to be available to help reduce the rate for our electricity. The sale of power and energy surplus to that promised to Nova Scotia for building the cables for access should all be used to lower rates in NL. In addition to that revenue it should be possible and probably planned to maximize the sale through Quebec of the full 300MW recall from the upper CF contract by supplying power for use in Lab West and Goose Bay over existing lines and the new line from Muskrat. Any and all such revenue should go first to the project costs to help reduce rates in NL.
    The present government has committed in its election platform to use these revenues to reduce rates and they should be held to this and this commitment should be sought from all parties during the next election campaign.

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    1. A shell game for political purposes. Any reduction in rates by using sales revenue only means increased taxes, levies etc.

      The real purpose is to placate voters,i.e for the benefit of the political part in power.

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    2. I get the feeling that this person thinks that the revenue available for excess power export is meaningful number relative to say the 21.4 cents per KWh with which we are 'threatened'. I wonder by how many cents he/she thinks those costs will be reduced.

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    3. Not sure how meaningful the rate for export power sales from Muskrat will be but I am suggesting that any and all revenue from such export sales should be put towards the massive cost of the project to help reduce the rates in NL as the present government promised to do in their election platform. Since we don't need the power here in NL it should be substantially available for sale through NS via the Maritime link and the 300MW capacity already available over the HQ system into NS.

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  14. In was appropriate of me to make the comment about Locke to "go on diet", though no one complained of this.
    But to his comment to the Board of Trade that we all need to help with the solution of our economic situation, my suggestion:
    A couple of years ago New Brunswick brought in a Energy Conservation policy, as recommended by consultants. It was modest to help reduce energy use and reduce peak demand on the system. It would also create about 750 jobs and stimulate the economy, as government expenditure in this causes residents to also spend for upgrades, which triples the expenditures and also generates sale tax revenue. We should have such an initiative (long overdue), and about 3 times that of NB, and so create 2000 jobs scattered all over the island.
    There is another reason to do this: peak demand forecast have gone from increases of + 1.5 percent , to o.4 percent by the spring of 2016 forecast, to now going flat or negative in the latest Nov forecast.
    Liberty says our peak load is vulnerable to our our capacity, and may require additional gas turbine capacity over the next 3 years. Upgrades and good maintenance on our system this past year may allow our system to be adequate. But shaving our peak load with efficiency and conservation measures can assist our reliability and further reduce peak load. We should strike on this while the iron is hot (already flat and declining loads). The problem with this is that it goes counter to the promoters of Muskrat, and supports the reasons to put Muskrat on ice. Perhaps Wade Locke could update his view on load growth, efficiency and conservation? I ask our finance Minister Bennett to consider this proposal in her budget considerations.
    Winston Adams

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    1. Your continuing support for Energy Conservation activity must rankle economic advisers, who espouse fossil-based, energy wasting systems of pre 1970. That NL ministers chose not to follow the National Energy Program; displacing BOE, (barrel of oil equivalents), etc. speaks of anti-conservation bias. Of course Tories moved hard, under Mulroney/Crosby to tear down Red Square in the 80's and destroy NEB.
      Keep it going Winston.

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    2. Robert, I am surprised and amazed to find that MUN Engineering Dept also seems biased against conservation.
      I have been investigating actual field performance for Nfld (the St John's region) for heatpump energy savings and peak demand reduction, as to the residential applications. The results are rather impressive, which should not be surprising, as HPs are being used extensively for commercial and institutional buildings, and seeing a big uptake in residential.
      So I contacted MUN looking for their opinion and interest in assessment of my work and findings.
      I was surprised and amazed that a MUN engineering professor advises he is very confident that heatpump performance as promoted is "MOSTLY A MYTH".
      And so too, the world is flat, and the earth does not go around the sun, and Chinese invented the Climate Change scam. And our many good engineers here locally specifying heatpumps for their designs for the last 3 decades must be ripping off their clients with "alternative facts" about the benefits of this technology
      Winston


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  15. "...could once again be held to ransom at the Quebec border..."

    That myth seems to be unkillable I guess.

    If such a fear keeps persisting, better start NOW negociating post 2041 with HQ. That whould give us time enought for a plan B; bulldoze that transmission line thru instead... ;-)

    But hey, that would cost us many Billions too! (It did not come cheap in the 60s either, when HQ constructed alone those 3 original 735kv lines over 1000km).

    Gosh, no free rides here.

    More seriously, I believe we should negociate that post 2041 soon. It would help us clarify the way forward in this foggy non-transparent swamp. (And remove some anxiety)

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    1. No rush to negotiate. The CF plant could use a rest until say 2045. A chance to dewater and refurbish some of the aging hydraulic structures and other parts of the plant that can't be taken out service without a total plant shutdown, while looking for the best customer and the best route to market.

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    3. Never heard of such CF shut down requirements. Would you mind letting us know where you got that?

      You do realize there is a multi-year turbines heavy maintenance (even replacement if/when needed) program in place, performed every summers, right?

      Anyways, shutting down a 5428 MW capacity generating station (four years) would be really strange from CFLCo shareholders... Curious to see that business case, hoping Nalcor or Williams did not not write it ;-)

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    4. The main point is that we should look at all the options and give ourselves the time to get the best deal possible and not rush out and get ourselves another total giveaway(or was it takeaway) without any recourse. We owe that to our children and grandchildren. Surely the Muskrat thing will be solved long before then. And then there's Gull.

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    5. Don't you think it would be safer to know at the earliest time what kind of deal we can get from HQ?

      That would gives us enought time to look/decide on alternatives if need be? (Like your old proposal to plow thru QC ;-)

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    6. Gull implies massive transmission infrastructures (underwater or whatever). And with current electricity surplusses / low prices; not going to happen for some time.

      And idling CF for four years or so, that would be an even worst boondoggle than MF. Good luck convincing CFLCo "shareholders", particularly the one holding 34.2%...

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    7. Good luck convincing NL to continue the windfall profits to Quebec post 2041 if redress is not achieved in the Supreme Court of Canada.

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    8. Not sure I understand what you mean.

      Let's assume the Supreme Court comfirms (or whatever) the 1989 contract was signed in good fate by the signataries; at what price should CFLCo sell its electricity poat 2041? To whoever wants to pay the highest price right?

      If not, CFLCo is not obtaining the best revenue potential for its asset. What am I missing here...

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  16. Here's a valid point brought earlier by our great contributor, Robert H. Holmes:

    "Why are the Quebec Liberal MPs so silent?"

    Veri good question. Why Quebec Liberals are so silent when the Feds are distorting the electricity commercial market by helping/favoring one provincial producer over the others?

    How about risking having the US to accuse us of unfair subsidies? Believe me, we don't want their attention - softwood lumber someone?

    And then, we put $8 Billion of Canadian taxpayer's money at risk.

    And worst of all, providing the "enabler" that got this whole boondoggle to go forward.

    The last time Québec complained about this, they were accused of being "un-canadian" (actually, way worst name callings - all accross Canada). The resulting Québec bashing was just not worth the trouble. And it could also help propel up the Parti-Quebecois. (I know, they deserved it anyways ;-)

    =>The only hope I see is "evil" Bloq Québécois. They've been asking very CLEVER questions in Ottawa lately.

    Anyone willing to form an anti-Muskrat group (us) and contact those "evils"?
    The BQ would perform way better "mileage" with the help of a bunch of Newfoundlanders. With all the above anomalies, we might be able to get the OAG onboard...

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  17. Yes bye but its okay for the Feds to support by bailout a poorly managed, privately owned, publicly traded company like Bombardier!!

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    1. I know, it should just be illegal for the Feds to forward any kind of money to Quebec... ;-)

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