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.

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. 

MUSKRAT FALLS: A MODEST PROPOSAL (Part 3)

Editor’s Note:  Part 3 of Uncle Gnarley’s review of the Muskrat Falls project became more expansive than first expected, as he explains why it is a bad idea right now, and what alternatives the Provincial Government ought to be considering.  Gnarley was not prepared to compromise completeness for brevity; hence, part 4 will be posted Monday, next).

Uncle Gnarley seated himself comfortably in his ‘own’ chair and gave me a look of expectation when his favourite ‘lubricant of the soul’ was not in evidence.  Sensitive to his most egregious habits, I proposed that we try a recent purchase, a 12 year old Balvenie, a personal favourite, aged in portwood and full bodied; the spirits boasted a taste and character that was delicious and smooth.  Producing the evidence, I received no comment on what a friend had thought was a “shrewd” purchase, though the look of surprise and satisfaction, which characterized his discerning smirk, afforded me confidence, that, this evening at least, I would not be reminded of my shortcomings on the water.

Uncle Gnarley was now ready to get on with his review of the Muskrat Falls project. 

“Indulge an old man for another few minutes, Nav, and I will head back down to the Shore, Gnarley began, simply. 

“Last time, I put paid to the Nova Scotia link.  For the reasons I explained, there is little or no power to export, so why give away 20% of the project for free. Though, the point is rather academic, he added.

“More importantly, replacing Holyrood at all, with Muskrat Falls, and at a cost that may well climb to $10 billion or more, is just such an incredibly terrible idea”.

“What about Alderon? I interjected.  The company says it needs power. “Yes, Alderon”! He scratched his head, shaking it a little: “they really should consult IOCC to see how they got their power”, replied Gnarly, dismissively.

“40% of Muskrat, 330 Megawatts (MWs), is thought necessary, by Nalcor, to replace Holyrood; the cost of the whole project will be repaid by levying the Newfoundland taxpayer a rate increase every year for 50 years. 

“That is the basis of the ‘take or pay’ contract they have designed for us, he declared, regardless of whether the power is needed, regardless of changes in technology over that period; regardless if oil prices fall; and, regardless if natural gas overtakes other forms of energy, as we are now seeing in the U.S. with shale gas. 

Muskrat Falls: NO POWER TO EXPORT (Part 1)

The distinctively loud and rapid sound of the gargoyle, which serves as a knocker on my front entrance, confirmed that a visit from Uncle Gnarley was imminent. I opened the door quickly and the grey bearded eminence himself entered in a flourish.  A day old newspaper covered his favourite ‘river warrior’, but could not hide its delicious aroma.  Uncle Gnarley had caught a salmon. 

Gnarley did have a sense of timing. He had been absent for several weeks and I had begun to miss the irascible old man.  Luckily, the day held no impediments and a dangerous shortage of our favourite elixir had just been remedied.

“Nav”, Uncle Gnarley barked, as he pushed the parcel towards me, “I thought I might invite myself to dinner.  I suggest you put a lid on this one, he was a real fighter”.

As Gnarley headed for the only chair that fit his broad frame, he allowed that we had some business to discuss and quickly held out a whiskey glass for an ample serving of 15 year old Macallan’s; a perfectly suitable reward for his victory on the Gander River.

“I have had a lot of time to think”, Gnarley bellowed, now anxious to share what was clearly bothering him. “I have never felt more unsettled”, he continued”. 

MUSKRAT FALLS: ‘POLICY OF PROGRESS REVISITED (PART 2)

(Uncle Gnarley had many views to share, regarding the Muskrat Falls Project, upon his return from the Gander River.  His comments were written as he expressed them, but the material suggests  his ideas should be shared in three Posts, beginning with part 2, to be followed later by parts 1 and 3.)

Having wolfed down the better part of his prize from the Gander River, Uncle Gnarley was ready for an evening stroll to aid digestion and to inspect all the little changes, in the neighbourhood, that were apparent to someone with his keen eye.


He loved improvements that showed pride of place.  There was much to see as we strolled down the old Newfoundland Railway bed, whose current purpose, as a T’Railway, seemed more suited to the charm of the Waterford Valley than any of the dreams of Sir William Whiteway, Newfoundland’s longest serving Prime Minister, before Confederation and the railway’s chief promoter.



“A Policy of Progress”, voiced Gnarley, in a tone that sounded almost derisive.  “That was a key Whiteway slogan and a trans-island railway was the centrepiece of his policy.  It had worked for many countries, including Canada.  But unlike central and western Canada, Newfoundland’s pattern of settlement was established around hundreds of coves and bays, built around an inshore cod fishery. 

ALDERON, DANNY AND BAD MANNERS

Small societies suffer from a distinct disadvantage: smallness. Smallness permeates our politics, our economy and all the institutions that constitute our societal underpinnings.
Smallness is not just about the absence of scale, it is about history and geography. Sometimes, it’s about diminutive politicians and business leaders, too.  The diminutive effect is compounded by a short history of democracy, compared, for example, with other small societies such as Iceland, where political maturity has overcome their small scale.

From a different perspective, smallness affords familiarity, the quaintness of distinguishing one resident from another, as tall Jim and short Jim.  It also imposes a certain discipline; to be careful about criticism and the giving of offense; perhaps, it is what prevents us from publicly telling the Chairman of Alderon Iron Ore Corp. to mind his own business.  
In small societies, a few people, often just one or two, can influence, not just the politics, but public policies, too.  Indeed, some often achieve a sway over their government that is disproportionate to their wisdom and ability.   Could one of those have been Danny Williams?