Nalcor issued a news release on Monday to correct inaccurate statements about the water management agreement between Nalcor and Churchill Falls (Labrador) Corporation.
Sounds good, except that Nalcor didn’t identify who made the statements.
Nalcor didn’t indicate hat the statements were.
Nor did the company indicate how the statements were inaccurate.
So basically, the company corrected nothing about nothing.
While that is telling – Nalcor claims aren’t backed by evidence - that’s not the interesting thing.
Take a look at this comment included at the end of the release:
The water management agreement between Nalcor Energy and Churchill Falls defines how the two companies manage the flow of water on the upper and lower Churchill River to optimize and maximize output of the river,” said Gilbert Bennett, Vice President, Lower Churchill Project.
A word shall mean…
Legal documents are funny things. They usually spell exactly what they are about and what the people affected by the documents are supposed to do.
In the case of the 2010 water management agreement, you can search for the word “optimize” until you are blind.
It isn’t there.
The objective of the agreement (article 2.1) is to:
- co-ordinate power generation and energy production on the river in order to
- satisfy the delivery requirements of all suppliers, and to do those two things in a way that
- “provides for the maximization of the long-term Energy-generating potential” of the river system, “
- “while ensuring that the provisions of any Prior Power Contracts are not adversely affected.”
The word “maximize” is there but turns up in relation to the long-term potential of the river. There’s nothing about managing the river water flow to squeeze the most out of it.
Even in the preamble, you can’t find the ideas Gil Bennett refers to in the quote. The public utilities board cites provincial policy, which is to ensure the “most efficient production, transmission and distribution of Power and Energy”.
But what is right there in plain language is the protection the water management agreement gives to the existing commitments that CFLCo has to Hydro-Quebec and to a couple of mining companies working in western Labrador.
They get priority. Nothing in the WMA can be interpreted to adversely affect those agreements. The primacy of those existing contracts is set out in article 3.1 and 3.2 of the water management agreement. article 3.1 refers to section 5.7 of the Electrical Power Control Act, 1994.
You will find the word “optimize” three times in comments made by then-natural resources minister Kathy Dunderdale when she introduced that section and other amendments to the Act in the House of Assembly in 2007. But the word “optimize” never appears in the Act.
Imagineering Electricity
Bennett’s statement on Monday is like a bunch of claims Nalcor has made about the water management agreement and what it contains. They don’t stand up to scrutiny.
For example, since February, Nalcor has repeatedly claimed that the agreement will allow the company to store electricity at the reservoir that serves Churchill Falls and then get that stored electricity back later on when Nalcor needs it from Muskrat Falls.
Technically, it’s a bit complicated: you can’t actually store electricity the way Nalcor officials describe it. At some times in the year, Nalcor will actually send electricity from Muskrat Falls to western Labrador and to Quebec via CFLCO. That will allow CFLCO to meet its commitments using less water. That stored water will supposedly flow in times of the year when Nalcor needs the water at Muskrat Falls.
The Coffey Complication
And that’s where Bern Coffey comes in. Nalcor’s release was apparently aimed at a commentary by Coffey that appeared in Saturday’s Telegram. It’s available online if you have a subscription to the Telly.
Coffey argued that:
Because the CF(L)Co-Nalcor water management agreement explicitly acknowledges the priority of HQ’s contractual rights, the “right-to-use” status of any water Nalcor was to “store” in the Churchill Falls reservoir is unclear. What is clear is that, without HQ’s consent, Nalcor has no right to “store water” in the Churchill Falls reservoir if such storage would “adversely affect” HQ’s contractual rights.
Now go back and read Nalcor’s release. Yep. They didn’t address that point, either.
What the company did do is confirm the obvious: first, Nalcor noted how “ Churchill Falls meets its contractual obligations to Hydro-Quebec is at the discretion of Churchill Falls. This obligation can be met from the upper Churchill or a combination of the upper and lower Churchill developments respecting the rights of Hydro-Quebec while meeting obligations to maximize output of the river.”
Second, “Hydro-Quebec has not objected to this.”
Why would HQ object? Nalcor proposes to increase the water level at the Smallwood reservoir at no expense to Hydro-Quebec. CFLCo must manage the Smallwood Reservoir in such a way as to give priority to meeting the company’s contractual obligation to Hydro-Quebec. Hydro-Quebec has a significant interest in CFLCo. Hydro-Quebec can’t lose.
The Real Problem
The fact that Nalcor cannot directly address Coffey’s commentary is a big problem for those of us who will be paying the bills for Muskrat Falls. It means they can’t.
The more substantive problem, though, is that the water management agreement clearly subordinates Muskrat Falls to Churchill Falls and hence under articles 3.1 and 3.2 of the water management agreement to Hydro-Quebec.
Muskrat Falls is a run-of-river facility with no water storage of its own. It can only produce electricity based on the water that flows in the river. That’s one of the reasons why Newfoundland and Labrador Hydro typically looked on Muskrat Falls as a second choice to be built only after Gull Island and its reservoir.
As it is, as long as there is no conflict in the interests of Hydro-Quebec and Nalcor (Muskrat Falls) everyone will be happy. But Nalcor has no access to electricity from Churchill Falls beyond what it receives currently under the existing agreements. That’s the real problem. Nalcor can help store as much water as they want at Smallwood. Nalcor gets no benefit from it under the water management agreement or anywhere else.
If Nalcor could point to a specific provision of the water management agreement that proves otherwise, they would. It’s a logical proposition.
It’s like the logical deduction you can make when a news release that claims to correct inaccurate statements, doesn’t. Logically, Nalcor seems to have replaced engineering with imagineering.
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