EVER WONDER ABOUT THE VALUE OF GULL ISLAND AND CHURCHILL FALLS?

Guest Post by PlanetNL

PlanetNL37: Market Valuations for Gull Island and Churchill Falls

Plus The Atlantic Loop and A Curious Re-Analysis of Muskrat Falls

PlanetNL36 provided an analysis of the fair market value of Muskrat Falls based on prevailing wholesale electricity rates.  The analysis concluded that the project would be completely incapable of generating any net earnings to put toward return on debt or equity. Worse again, like a true boondoggle it could continue losing money after it is put into operations.  The Muskrat project should never have made it beyond round one of screening alternatives, let alone been sanctioned and built.  That Nalcor and Government sanctioned a project that forced ratepayers to pay ten times greater than market price, and with cost overruns more than twenty times market price, is an obscenity.

The same methodology for economic worthiness is used to consider the market value of the potential Gull Island project and the Atlantic Loop.   In addition, it will be used to put an estimate on the 2041 market value of Churchill Falls.  Plus, one final look at Muskrat will consider whether the project in a lesser form might have been more viable.

To better understand the methodology, be sure to read PlanetNL36 first.

RCMP and PUBLIC PROSECUTOR FINAL STEP IN LONG MUSKRAT JOURNEY

Guest Post by the "Anonymous Engineer"

EDITOR'S NOTE: The author of today's article is the whistleblower, dubbed the "Anonymous Engineer", who first disclosed falsification of the estimates for the Muskrat Falls project in January, 2017. 
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The Muskrat Falls Inquiry had a very interesting beginning, which may have been forgotten by now. When the costs of the project started going off the rails, the public outcry for an inquiry began to get louder and louder.  The timing was about mid 2017. The demand for an inquiry was strongly resisted by the leadership at the time, Premier Ball, Minister Coady, and Stan Marshall the CEO (Chief Executive Officer) of Nalcor. The public pressure for that response was too strong to resist. The leadership capitulated and initiated an Inquiry. Time line about mid 2018.

TOWNIES vs BAYMEN – WILL TEMPERS FLARE?

Guest Post by PlanetNL
PlanetNL24: Time to Rezone the Island Grid


The matter of backup power needs on the Avalon, as analysed in PlanetNL23, brings into focus a bigger issue about fairness to the many off-Avalon ratepayers.  Nalcor’s Reliability and Resource Adequacy Study confirmed that Muskrat energy is to be delivered specifically to the Avalon end of Island grid to meet Avalon power needs.  The future addition of new Combustion Turbines (CTs) is also a response to  an Avalon-specific risk issue. The issue is not a new one – just an ignored one.  

The high cost Holyrood Thermal Generating Station existed principally to satisfy Avalon winter power needs while the off-Avalon portion of the Island Interconnected System (IIS) was essentially self-sufficient on low cost hydro-power.  Despite this inequality of need and inequality of cost of power, all IIS ratepayers pay an equal rate.  With Muskrat rate increases just around the corner, it’s time to put this issue under the spotlight and propose a fairer allocation of costs.

CHES CROSBIE SENDING WRONG MESSAGES

I am not quite sure who the new Leader of the PC Party, Ches Crosbie, is trying to impress with some of the positions taken in recent weeks.

While he shares the well-known Crosbie name, he is coming up short in proving that he is his father's son. Regardless of the side of the partisan divide upon which one sits, John Crosbie, Ches' father, could be counted on to be forthright and to say publicly — in the Halls of Parliament and in the provincial and federal Cabinets — exactly what was on his mind.

One example is often repeated in a CBC clip in which he is surrounded by a throng of frustrated fishers following the declaration of the Cod Moratorium. Crosbie the elder forthrightly answers one indignant protester: “I didn't take the goddamn fish out of the goddam ocean!”

ANDREW NIKIFORUK A SOULMATE FOR DAVID VARDY

David Vardy, a frequent contributor on this Blog, can often be found discussing how the failure of the Muskrat Falls project is symptomatic of a broken democracy. He met up recently with Andrew Nikiforuk, an award winning journalist who has written for twenty years about the energy industry.

(REAL) RATE MITIGATION REQUIRES SPARKING THE LARGEST LAWSUIT IN CANADIAN HISTORY.

If you were disturbed by the Telegram Brian Jones’ “apocalyptic” editorial last week (finally, it seems, ‘mainstream’ meets blogger) which forecasts the inevitable shutdown of Muskrat Falls because it will prove to be too expensive to operate – you will be equally frightened by the fact that the Premier’s assertions around rate mitigation are grounded in ideas that are just as fraudulent as those that brought us this project.  

Of course, JONES IS RIGHT.  But that’s another story.

The province has limited wiggle room to escape the apocalyptic; so it's time to listen up. The smart money should anyway.

As if to prove he doesn’t get it, the Premier promises rate mitigation — engaging a Committee which will include Nalcor — letting the fakers, possibly fraudsters, extend the deceit that pervades the Muskrat Falls project.

BE CAREFUL COMPARING MUSKRAT WITH TROUBLED HYDRO PROJECTS ELSEWHERE

Site C Hydro Project, B.C.

Hydro projects underway in British Columbia and Manitoba are making waves among observers, all drawing parallels with the Muskrat Falls project. While there are many similarities, the public should be careful in concluding that Muskrat is entirely their mirror image.

Each has origins inextricably tied to gung-ho engineers, compliant bureaucrats, and politicians unwilling to subject self-serving assumptions and overbearing risk to professional and objective review. This is bad enough, except Muskrat will be forever dogged by the deceit that underscored project sanction.

We’ll come back to that point, but others are also instructive.

LANDSLIDE'S AMAZING PICTURES STILL WON'T SPUR NALCOR

How did 2.2 million m³ of sand and clay that lay atop the section of the lower Churchill Valley shown in the photo below disappear? The devastated one-square-kilometre site is located across from Edward's Island — a short distance upstream from Muskrat Falls. Read on and you will find out.

Site of  landslide viewed across the Churchill River from Edward's Island

The North Spur stability problem — specifically Nalcor’s refusal to submit its "fix" for independent review — still rankles those who have followed the sad saga of the Muskrat Falls project. 

The current $11.7 billion price tag is its own testament to, among other issues, Nalcor’s incompetence. But its failure to take every precaution to ensure the dam’s integrity — having been warned of the risks, having closed the door to expert analysis — is another in its list of indictments.

The North Spur instability problem isn’t about money anymore — that ship has sailed. But four years after project sanction, an independent assessment of Nalcor’s remediation plan still eludes. 

ARE YOU READY TO PAY TO POWER NOVA SCOTIA?

A Tale of Two Regulators

Guest Post by JM

The government of Clyde Wells introduced the Electrical Power Control Act in 1994. It was implemented to define electrical power policy in the province and to provide a means for the utilities to earn a return on their investment in the generation and delivery of the power.  Under the EPCA the Public Utilities Board (PUB) has broad powers to regulate and legislative responsibility for the planning of future power supply in the Province. 

It is worth reading the Act to truly understand the breath of powers which the PUB possesses in these areas. This did not occur by accident. On the contrary, the legislation received the very deliberate focus of the premier of the day.  When he introduced the Bill in the House of Assembly, Clyde Wells stated: 

Since June 2010, when the decision was made by Nalcor to develop the Muskrat Falls Project, the PUB should have had an integral role to ensure the project met the clear “Declaration of Power Policy” as outlined within Section 3 of the Electrical Power Control Act. 

The process of review ran counter to the intent of the 1994 legislative initiative.  Muskrat Falls was conceived in secrecy, and born under both delusion and deception. 

WHEN MEDIA SILENCE HURTS EVERYONE

The act of telling a lie is nothing new. In the English language the word “mendacity” has hardly changed from its ecclesiastical Latin origin, mendacitas or 'lying'.

Individuals lie. Often they are only fibs with harmless intent, like those that preserve innocence about belief in the Easter Bunny.   

Governments lie too, sometimes with minor consequences — to escape political accountability, to bolster popularity, or to avoid public retribution.  

There are different classes of mendacity. Society can tolerate political and bureaucratic lies, up to a point. But when the consequences are too injurious — that is to say, when the policy makers or their proxies are reckless enough to have “gambled” (to use Stan Marshall’s word) and lost, or worse, possibly having contrived the fundamentals going so far as to assure billions in profit— a minimum expectation is that the culprits will be held to account.

REPORTERS SHOULD REMEMBER THE ONES WHO LIE

When the media choose to be bystanders, willingly complicit in propagating Nalcor’s persistent falsifications, is there anything to be done but wait for the fallout such misdeeds inspire?

The silence that now envelops the squandering of $4 billion by Nalcor on the Muskrat Falls project — a sum expected to go higher — constitutes an inspiration for some head scratching. We surely need to ask why the perpetrators deserve protection from questions of accountability.

When all the ‘normal’ checks and balances of a modern democracy fail, isn’t that when the media should be on the top of their game?

While the public must take ultimate responsibility for being informed, one aspect of that job should be to keep an eye on how the media treat the social licence that is the claim of their profession.

PREMIER NOT READY FOR CBC's ANTHONY GERMAIN

One of the most worrisome aspects of Premier Dwight Ball's leadership is confirmation that he does not understand the critical issues facing the province and he is blissfully content in his ignorance.

Former Premier Dunderdale suffered the same malady. She, too, seemed confused — especially with respect to Nalcor, the Muskrat Falls project, and the relationship between development costs and market value of the power. The only difference is that Ball is less imperious.

Premiers Tom Marshall and Paul Davis were slightly more articulate but both men either did not understand their briefs or deliberately misled the public. They, like Danny Williams, were never reticent about boasting of the province’s good fortune — Newfoundland and Labrador, they said, was going to earn hundreds of millions from the Muskrat Falls project. Of course, it just wasn’t true.

With the election of Premier Ball, mindlessness to facts received no appeal.

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.

IS IT POSSIBLE “TO MAKE MUSKRAT RIGHT”?

Guest Post Written by David Vardy

The marathon consultations between the province and aboriginal leaders concluded early Wednesday morning with an Agreement to establish an Expert Advisory Committee. This was the outcome arising from occupation of the Muskrat Falls site, along with a hunger strike and demonstrations in Ottawa, in Labrador and on the Island. 

The agreement leaves many questions unanswered, including the composition of the Advisory Committee, its governance and its authority. The outcome will rest in the hands of “science” and “traditional” knowledge but often scientific evidence and research are inconclusive or divergent.

How will divergent views be accommodated to reach a reasonable solution to the risks posed to human health by methylmercury? Will the Expert Advisory Committee agree on measures to remove additional vegetation and topsoil to mitigate the poisoning of mammals, fish and birds?  The Agreement also leaves many questions unanswered, including the resolution of the risk of landslides at the Muskrat Falls site because of sensitive clays. These risks have the potential to threaten the safety of workers on the site as well as Labrador residents.

PREMIER SHOULD PUT MUSKRAT FALLS “ON ICE” PENDING FULL REVIEW

The current crisis over methylmercury levels threatening Lake Melville, after flooding at the Muskrat Falls reservoir, cannot be viewed in isolation from the other issues that plague the project - especially its frightening (and growing) price tag. 

This is a renewed call for Premier Ball to put the project on “ice” at least for this winter.

The interregnum will afford a full review of the methylmercury issue and give the public an opportunity (one they should demand) to examine its economic consequences for them, as ratepayers.

Additional clear cutting and soil removal in the reservoir area can only add to an already over-burdensome cost. The Government’s way of dealing with the environmental issues seems at best incremental. The public can have no confidence the Province can afford to have this project completed.

“NORTH SPUR DESIGN UNSAFE” CONCLUDES HYDRO ENGINEER - INSISTS PANEL OF EXPERTS CONDUCT REVIEW

Guest Post Written by James L. Gordon, P. Eng. (Ret'd)

Marine clay, commonly known as “quick clay” and as “sensitive clay” by geotechnical engineers is clay deposited through salt water where the particles pick up salt, which alters the properties of the clay. The clay becomes “sensitive” since it has a propensity to liquefy when disturbed or saturated. It has been avoided by dam engineers due to its sensitivity.

Wikipedia defines marine clays as – “Marine clay is a type of clay found in coastal regions around the world. In the northern, de-glaciated regions, it can sometimes be quick clay which is notorious for being involved in landslides. Clay particles can self-assemble into various configurations, each with totally different properties. When clay is deposited in the ocean the presence of excess ions in seawater causes a loose, open structure of the clay particles to form, a process known as flocculation. Once stranded and dried by ancient changing ocean levels, this open framework means that such clay is open to water infiltration. Construction in marine clays thus presents a geotechnical engineering challenge.”

This explains the controversy surrounding the North Spur dam at Muskrat Falls since it will be the first hydro dam built on a quick clay foundation.

LIBERTY REPORT KICKS LAST LEG FROM UNDER MUSKRAT FALLS PROJECT

Likely everyone remembers #DARKNL. January 2014 - successive days without power followed by rolling outages - tens of thousands of people huddled in the cold and the dark.

It didn’t sit well with anyone – just ask Kathy Dunderdale.

The PUB initiated an investigation into the root cause of the power failures. The Liberty Group, a Consultancy, was hired to conduct the inquiry - which had two phases.

The Phase I Report, released last year, gave exhaustive details of the poor management culture at NL Hydro, the dreadful state of maintenance on Hydro’s generating assets, and the need for more generating assets to enhance reliability – which led to a new generator (sort of) installed at Holyrood.

The Phase II Report dealt with an “assessment of the adequacy and reliability of the IIS (Newfoundland island system aka “Isolated Island Service”) to meet customers' load both up to and after the interconnection with Muskrat Falls.”  It was released August 19^th. 

Liberty is quoted frequently in this Post. It is best that this narrative is described in the Consultant's own words.

TIME FOR NALCOR TO TELL THE TRUTH TO THE PUBLIC

The recent Decision of the Quebec Superior Court rejecting Nalcor’s interpretation of the Upper Churchill Renewal Contract constitutes a very significant loss for Newfoundland and Labrador. 

The loss is felt not just because Nalcor was barred from accessing surplus energy from the Upper Churchill. It skewers the concept of water management on the Churchill River, a Plan essential to maximizing the power potential of Muskrat Falls - especially the plant's capability to meet maximum scheduled demand. Water management is pivotal to any claim to viability of the project.

The Water Management Agreement (WMA), approved by the provincial PUB, is best understood as an “energy bank”, one that makes provision for an independent coordinator to record power delivered to the Upper Churchill from Muskrat and from the Upper Churchill to Muskrat when the plant was capable of producing surplus energy. In that way the water flows are coordinated and their conversion to electricity maximized.

Water management is a perfectly sensible idea. But it can’t be implemented if the legal authority to operate it is void.

NEEDED: THE "RIGHT" FEDERAL GOVERNMENT SUPPORT FOR MUSKRAT FALLS

Guest Post Written by David Vardy

Introduction

Overtures have been made to seek further federal support for the Muskrat Falls project by raising the $5 billion cap on the loan guarantee. The purpose of this paper is to propose an alternative mechanism for funding. Surely the federal government must bear a greater share of the financial burden. The previous federal government enabled this project to go forward. They were complicit in the approval and sanctioning of this project without normal PUB scrutiny and in defiance of the advice of the joint federal provincial environmental panel.

The sanctioning was done without a strong business case and without due process. The recent admission by the Nalcor Chair that the project’s capacity is far in excess of the energy needs of the province and admitting it to be a “boondoggle” confirms the position taken by the two regulatory tribunals and by many critics, including the undersigned.