17 July 2012

High Politics and Muskrat Falls #nlpoli

“[M]ega-projects”, writes political scientist Will Jennings,” exhibit a ‘performance paradox’ …being prevalent and popular among planners despite suffering from extremely poor track records in terms of completion times, cost escalations and shortfalls in projected revenues and economic benefits.”

Jennings looked at several projects to see why the projects tended to take a long time to finish or experienced huge cost over-runs or generally didn’t live up to expectations.

This week SRBP is looking at Muskrat Falls using Jennings’ four categories of factors that affect project performance.  The first of these is “high politics”.

In a provincial context, high politics takes place at the level of the Premier and the Executive Council or cabinet.  It is distinct from “low politics” that takes places at the bureaucratic level within a provincial government. 

Ray Blake used this description, borrowed from international relations,  in his recent examination of the Term 29 controversy between Newfoundland and the federal government in the late 1950s. Will Jennings did not define “high politics” but in reading “Executive politics, risk and the mega-project paradox” you can figure out that he is essentially using the terms in a way very similar to the way Blake talks about high and low politics.

For our discussion of Muskrat Falls, let us define high politics to include not just the decisions by the Premier and cabinet but how the politicians frame the question, that is, how they define the question they are answering.

Defining the Problem:  the political imperative

For the past six months or so, natural resources minister Jerome Kennedy and other provincial Conservative politicians have defined Muskrat Falls as the result of asking and answering two questions:

  • Does the province need the electricity?
  • Is Muskrat Falls the lowest cost way to provide that power?

Of course, this is not how they came up with Muskrat Falls.  This is merely their rationalisation after the fact.

Muskrat Falls is driven entirely by a political imperative.  It began in 2004 as part of the Lower Churchill project.  That project had nothing to do with meeting provincial electricity needs.  It was all about building the project, primarily for export.  As no export markets existed, the focus of the project changed. Over time, Danny Williams himself tied the project to Williams’ retirement.

According to information provided to the public utilities board during its review, Nalcor only looked at building Muskrat Falls first in 2010.  Before that, they were focused on Gull Island, the larger of the two dams.

term sheetBefore the year was out, Danny Williams announced a deal to develop Muskrat Falls. The term sheet for the project appears to have been finalised in an all-night negotiating session that ended the morning of the announcement.  The picture at right is the date and time stamp on one page of the term sheet.

Other information presented to the PUB confirmed that Nalcor cobbled together supporting information for its Muskrat Falls option based on a collection of studies and reviews, some of which were 30 years old. Nalcor did not conduct a system integration analysis, which would be a standard industry practice at Decision Gate 2 according to Manitoba Hydro International. Nor did Nalcor analyse alternative options to meet any domestic electricity needs.

Muskrat Falls was conceived in politics,  born in the politics of Danny Williams’ retirement and legacy and continues as a political centrepiece of the Conservatives who continue in power after Williams has left the centre stage. For them it is many things:

  • the fulfilment of a very old dream to get around Quebec,
  • an asset for future generations,
  • the connection between offshore oil and Churchill Falls, and,
  • “the key to a sustainable future.”

It is most emphatically not about the answer to two simple, practical questions.

And so it should come as no surprise that the project is already experiencing significant cost over-runs, is well behind schedule and has experienced embarrassing set-backs (the PUB) and changes of direction (debate in the House) that resulted from inadequate planning.