THE GUTTING OF THE ATLANTIC ACCORD

Guest Post by Ron Penney

I’ve been following with increasing dismay what has been happening over the past number of years as the Federal Government has, through the guise of environmental protection, eroded the authority of the Offshore Petroleum Board created under the Atlantic Accord to jointly manage the oil and gas industry in the province. 

I was a member of the negotiating team which led to the Atlantic Accord, chaired by the late Cyril Abery, then Deputy Minister for Intergovernmental Affairs, reporting to Bill Marshall, the Minister responsible for the offshore negotiations, who in turn reported to the Planning and Priorities Committee of Cabinet, chaired by Premier Brian Peckford. 

These were a very difficult set of negotiations, particularly with the Liberal government of Prime Minister Pierre Elliot Trudeau, and initially led by the Minister of Natural Resources, Mark Lalonde, who was succeeded by Jean Chretien. Those negotiations were unsuccessful because they refused to meet our two demands: that we would should be given the same right to collect royalties as if the resource was on land, and that it be managed by an independent board composed of equal representation from both governments. 

NOTE TO HYDRO CEO: THOSE “GROWING PAINS” MIGHT BE YOURS

The new Hydro President, Jennifer Williams, is either threading very softly with a Furey Government afraid of taking decisions or has already succumbed to Nalcor’s long established culture of deception.

Because Ms. Williams is still new, we can only hope that her comments to CBC last week are matters of misspeak rather than signs of an evolving attitude. There is good reason to be concerned.

CEO Williams suggested to CBC that it is common for new utility infrastructure to experience “growing pains”.

The comment left the impression that those “growing pains” include the major problems currently plaguing the Muskrat Falls project, which are limiting production to around a third of capacity. After spending nearly $15 billion and years behind schedule, growing pains should constitute only the minor problems identified in a punch list audit during commissioning.

THE LABRADOR ISLAND LINK IS “SUNK COST”

We should be worried that GNL will double down as big problems persist and costs continue to rise on Soldier’s Pond and the LIL, all the way to Muskrat Falls. It seems destined to be a victim of the "sunk cost" fallacy which describes a tendency to sink more money into a scheme in which a large investment of time and money has already been made, regardless of whether the costs outweigh any benefits.

Last week’s post described the chief conclusion of the second Haldar and Associates report that the Labrador Island Link transmission line (LIL) is under-designed and may need salvaging as often as every six years.

The Report was ultimately conducted for Public Utilities Board which wanted more data to help forestall a repeat of the 2014 outage known as #DarkNL.

#DARKNL WAS BAD. A NEW REPORT ON LIL WILL LEAVE YOU COLDER.

 The recent release by the PUB of the second Haldar Associates Report represents a timely and sobering analysis of the findings of its investigation into, among other things, the reliability of the Labrador Island Link (LIL).

The NL public should not need to be reminded that last week marked the seventh anniversary of #DarkNL. That was a week in which many people, especially those living on the Avalon, came face to face with the worst consequences of public sector incompetence, a matter confirmed and chronicled by the Liberty Consulting Group for the Public Utilities Board (PUB). 

It also caused the downfall of an incompetent Premier. Sadly she was replaced, successively, with a bevy of incompetent successors.

GNL LOST IN PUBLIC POLICY WILDERNESS

The Furey Administration’s decision to cut $20 million from funding for offshore seismic surveying, a program ostensibly intended to enhance bidding for explorations rights in the offshore oil sector, is the right one. Unfortunately, the decision is a pause rather than a cancellation.

The distinction is self-evident, but at issue is that the Government of Newfoundland and Labrador really hasn’t spent five minutes on the broader public policy questions of how best to pare the expenses of the Government in pursuit of the balanced budget objective described in the PERT Report.

Cancellation, rather than pause, should have been an easy decision in this case, because more objective industry players, which do not include either OILco or NOIA, will remind that majors and supermajors - Suncor, Equinor, ExxonMobil, Chevron and others - are cash rich again, and more than capable of performing their own seismic programs. Global oil prices are replenishing their coffers, enabling them to pay down debt, buy back shares, and in some cases, double the dividends to their shareholders.

This issue should be viewed in conjunction with Government’s recent referral to the banking firm of Rothschild of an unconfirmed number of assets for valuation. Together, the decisions confirm that provincial public policy remains a haphazard, ill-defined, even kneejerk process.

BOOSTER BUMBLING

 Guest Post by Ron Penney

ON A WILD GOOSE CHASE - SEARCHING FOR THE ELUSIVE BOOSTER SHOT 

Like those of you who are of a certain age, I was very much looking forward to getting my booster shot, particularly with the advent of the omicron variant, which has proven to be much more contagious, although so far a much more benign variant. 

The evidence is that the two doses does not provide much protection from getting  the variant but does protect against hospitalization and fatal outcomes for those who are fully vaccinated. The booster shot gives much more protection from infection and lessens the severity of symptoms even more. 

The objective has to be to not overwhelm our hospitals, as they also experience the loss of health care workers who have to self isolate because of possible exposure. So far our hospitalizations are very low, but the experience of other jurisdictions demonstrates that this is unlikely to last. 

PUBLIC SHOULD BE MORE WARY OF PREMIER FUREY IN 2022

Premier Furey’s year-end declaration that the “deficit must be tamed with broad action, not big bombshells” might sound encouraging if only we could point to any plan, even a “broad” one. But Furey has no such intention. He and his little band of insiders, Cabinet passively looking on, are focused on the sale of NL’s most valuable strategic assets. At any cost he isn’t prepared to impose on the Government — and the public — spending practices that reflect the more responsible behaviours employed in other provinces.

Following release of the PERT Report of Moya Greene and her advisory committee in May 2021, Furey commented that “this is the pivotal moment in our collective history… the problem is clearly laid out before us. We are not on a sustainable path.”

The statement reflected a fiscal circumstance which Greene defined as total provincial debt obligations of $46.3 billion, an abominable figure in a place occupied by only a half million people. Otherwise, the Government’s response was silence. Moya returned to London to be heard from no more.

TOP TEN POSTS UNCLE GNARLEY BLOG 2021

The annual ritual of presenting the “Top Ten” posts of the year, based on Google’s counter, is repeated below.

I owe a great deal of gratitude to several writers, especially to Ron Penney and PlanetNL who, especially in the second half of the year, kept the Blog going as I was otherwise engaged. Their ideas and analysis are widely acknowledged. This year David Vardy was busy offering his vast skillset to Moya Greene and to the Premier’ Economic Recovery Commission. The job done he continues to write; his latest contribution is entitled “Muskrat Falls An Unmitigated Disaster”.

We welcomed a post from one new contributor, Catherine Penney. We also mourned the loss of the Bard of Pynn’s Brook, John Tuach; we will miss his poetry and the enormous insights that he inscribed in each turn of phrase.  

MUSKRAT FALLS: The Millstone Reaches A Major Milestone

Guest Post by PlanetNL

PlanetNL41: The Millstone Reaches A Major Milestone

PPA Payments Commenced; Capital Cost Understated; 2022 May Get Rough

A letter sent to the Public Utilities Board from NL Hydro on November 25, 2021 contains sobering news about an important milestone. 

It reported that all four turbines at the Muskrat Falls (MF) hydro generation have passed their initial run-in tests resulting in the plant being considered fully commissioned and in-service.  Ditto for the Labrador Transmission Asset (LTA), the new HVAC line that connects Muskrat to Churchill Falls. With completion of the construction phase for these two major assets, payment is now due for their operation. 

Is this happy news or grim news?  If you’re a ratepayer expected to pay off this unneeded megaproject, likely forced to spend way more on your electricity costs, maybe mad as hell is a more apt feeling. 

NALCOR GONE IN NAME ONLY

Guest Post by PlanetNL

PlanetNL40: Nalcor Gone in Name Only

Misrepresentation of Fact Still A Problem

After the Commission of Inquiry into the Muskrat Falls Project, ratepayers and the public at large might have reasonably hoped and expected that the Utility would change its stripes and try straightforward honest truth for a change.  Apparently, it is a tough ask. 

The recent changes to restructure the Executive ranks and the elimination of the Nalcor side of the business brought a glimmer of hope for real change.  The signals are already there, however, that not much will change in how the utility interacts with the public regarding Muskrat Falls and anything connected to it.  Which just happens to be almost everything they do.