As Cochrane notes at the start of the show, Dobbin is the other director who quit the board of Newfoundland and Labrador Hydro a decade ago over another deal to develop both Gull Island
Watch the interview – it’s about half way into the clip – and notice how the misinformation and false information starts right at the beginning in David Cochrane’s question.
Off to a Bad Start
Cochrane starts by referring to the two deals as different. One of the differences he cites is that the Grimes deal was “much more expensive.”
Not true.
Dobbin doesn’t correct Cochrane’s misinformation.
The Grimes deal was for the dam at Gull Island and a transmission line back to Churchill Falls. Gull Island would be a bigger dam with greater generating power. While the project was larger in that sense, the cost wasn’t greater than the current estimate for the much smaller generator at Muskrat Falls and a line to Soldier’s Pond.
Just to put Dobbin’s comments in sharper focus for you, consider this. Back in 2005, the new provincial government under Danny Williams was talking about developing Gill Island and Muskrat Falls plus the line back to Churchill Falls with all the power for export. The price tag was $3.3 billion. That would have generated the equivalent of about 1800 MW (firm) with an installed capacity estimated at the time to be about 2800 MW.
Muskrat Falls and a line to Soldier’s Pond – for about 515 MW – is currently estimated to cost $6.2 billion give or take another 30%.
So right off the bat, Cochrane and Dobbin are starting from a false premise with mistaken information and a completely erroneous comparison. Erroneous is a fancy word for wrong.
Let’s talk about risk, babeee
Dobbin told Cochrane that he quit the board in 2002 over the issue of risk and associated financing.
Interesting.
What neither Dobbin nor his associate Dean MacDonald have ever acknowledged publicly is that they quit over a framework agreement.
Not a finished deal.
An outline. A bit more than a term sheet, if you will, but far less than a final agreement. There was plenty of time to fix any problems in the negotiation, and there was certainly plenty of time to walk away. That’s one of the reasons why some people, including Roger Grimes, have suggested that their resignations had more to do with politics than principle.
But anyway, let’s take Dobbin’s comments at face value: he was apparently worried about the risk from financing the deal through Quebec that supposedly Quebec would have wound up with the whole thing somehow.
Let’s also allow that, at the time, this may have seemed like a risky thing. If by some chance, poor old Newfoundland couldn’t have met the payments the deal would have been worse than 1969.
One of the curious things about that old deal is that we know what would likely have happened. We know because we saw actual events unfold with the oil deals that were already in place and the ones under development. By 2002, Dobbin and MacDonald ought to have known about them as well.
As it turned out, Newfoundland and Labrador wound up with enough cash as a result of agreements already in place for oil in 2002 to have paid cash for the Gull Island project. Period. Even with final cost that matched what is only a current estimate for Muskrat Falls.
And that’s allowing the 2002 framework went ahead without any changes or further negotiation: a big assumption. Had the provincial government and Hydro, as it then was, continued to negotiate and refine the deal, they might well have negotiated better terms based on Dobbin’s and MacDonald’s advice.
By the time they got around to a final deal, in say 2005, the provincial government would have been poised for big things. Even at that stage, they knew that forecasts showed the province would be off Equalization within five years. While no one could have forecast the massive windfalls that flowed through 2009, the sort of fear, doubt and insecurity that led Dobbin – apparently to run from a potential deal on the Lower Churchill in 2002 were completely baseless.
As it turned out.
So let’s talk about risk.
But fundamentally, Dobbin’s comments comparing the relative risks and benefits of the two deals are misleading, based almost entirely on incomplete or inaccurate information.
Dobbin backs Muskrat Tax on Consumers
Nowhere was that more readily apparent than in his comment about the province making $800 million a year from the project after the financing is paid.
That would be 2068, incidentally, decades longer than the deal Dobbin ditched in 2002. Notice that Dobbin does not say who will be paying it off in the meantime. it will not be the ratepayers of Quebec or anywhere else in North America. Mark Dobbin’s deal won’t be paid for by the people whose only winter electricity bill in this province is to keep the pipes from freezing while they are in Florida.
No.
Dobbin’s dream deal will be financed and then paid for entirely by the ordinary people of Newfoundland and Labrador through their rates. The 80% of the people who, as Kathy Dunderdale knows, pay little if any income taxes because they don’t make enough. They will pay it through their electricity rates, which Muskrat Falls will convert effectively into an electricity tax.
And the windfall of $800 million? That too is entirely on the backs of the ordinary people of Newfoundland and Labrador. When it’s your own money, it isn’t a windfall.
Talk is cheap, Mark Dobbin.
Anyone can find a reason not to do something, Dobbin wrote in the Telegram. It seems that’s exactly what he did in 2002. What Dobbin didn’t say is that some people can find any reason to do something. They will even leave out crucial bits of information to make a case, if they want to do something.
That would be Mark Dobbin, version 2012. Given Dobbin’s appraisal of the financial risks of the 2002 framework proved to be so faulty, what are the odds he is any better at forecasting in 2012?
The way to test Mark Dobbin’s confidence in his own prediction is to get him to finance the project as well. Empty out his bank account of all his savings. Co-sign loans and then pay himself back until 2067.
Don’t be surprised when he starts coughing and sputtering and backing away.
You can always find a reason not to do something.
-srbp-
