12 January 2012

‘eavy ‘angs the ‘ead #nlpoli

Natural resources minister Jerome! Kennedy is wading deeper and deeper into the political morass called the Muskrat Falls project these days and finding that it is a sticky, stinky, mess.

For not one, but two days running, Jerome has been trying to explain to VOCM’s afternoon radio call-in host why Jerome and the Nalcor gang are right and everybody else is wrong. 

On Wednesday,  Jerome talked about a bunch of charts and tables he must have sent over to the host.  They both talked about what the tables showed:  how prices for electricity will be this if Muskrat goes ahead and will be that if it doesn’t.

“Will” as in “guaranteed to be.”

Only problem for Jerome! is that his numbers aren’t guaranteed anything at all.  They are speculation.  They are based on assumptions.  – at best – highly speculative. 

The price might be this. 

Or it might be something else entirely.

It all depends on what assumptions you make. 

Take, for example,  two of the key assumptions.

For Muskrat Falls to make any sense at all, crude oil must go to at least $200 a barrel and stay there.  Anything less than that and taxpayers are better off not building Muskrat. 

Second, Muskrat must also cost the projected price or less.  Odds of that happening are very small.  Jerome! insists that Nalcor has that one covered.  They have included in their estimates a possible cost over-run of 15%.

Unfortunately, the current provincial government (Nalcor and government are indistinguishable) couldn’t deliver pizza and guarantee a mere 15% cost over-run.  Government capital works projects these days are usually at least 50% more than they predict. On some projects they’ve gone 100% over budget. 

You get the point. 

There is only one combination of circumstances where the Danny/Jerome/Kathy idea for Muskrat Falls  works out for taxpayers and a bunch of combinations in which it doesn’t.  You don’t have to be a rocket scientist to know the odds of winning Lotto Jerome! are pretty small.

There are other aspects of the Muskrat Falls case that don’t make sense either, like the potential alternatives to Muskrat Falls, the export prospects and the forecasts for energy demand.  Critics of the project have systematically demolished all of them.  Not one survives to this day intact.

And yet Jerome! and Kathy Dunderdale and Nalcor keep pushing them.

Things didn’t get any better for the MF gang on Wednesday.  Economist Jim Feehan dissected an underlying problem in how the province sets electricity prices.  Tackling that one would encourage consumers to change some of their more wasteful ways they use energy. Lowering demand also lowers the need for expensive megaprojects.  Feehan’s approach could, if current trends continue, allow Nalcor to avoid the most expensive megaproject in the province’s history,  mothball the Holyrood plant and deliver consumers affordable electricity into the future.

If Feehan’s idea isn’t the only solution it’s one of the elements that a responsible provincial government would include in its energy policy for the province. 

Feehan’s commentary is a sign of how the opposition to Muskrat Falls is growing.  This time last year, Feehan thought Muskrat was a great – if pricy  - idea. Having taken a hard look at the project, Feehan has changed his mind.

Feehan’s comments also reflect the way the discussion is going.l  Critics of Muskrat Falls are looking not only at the weaknesses of the proposal itself, but also at the shortcomings of the current administration’s energy policy.

That’s good for the people of Newfoundland and Labrador.

But for politicians like Jerome!, it means that two days of chatting up Paddy will turn into three and maybe more.

And the chances of winning more people to the cause just keep getting smaller and smaller.

Much like the chances that building Muskrat falls the way Jerome! and Kathy want to will deliver any benefit to the people who own the resource.

- srbp -