13 December 2012

$#*! Jerome Says: federal loan guarantee not firmly in place yet #nlpoli

In the House of Assembly on Tuesday, natural resources minister Jerome Kennedy was pretty clear about the sanction process:

“What we have done … [is ] we have slowed down the process in terms of the sanction.”

Asked about slowing down the sanction process on Wednesday, natural resources minister Jerome Kennedy told the House of Assembly:

“I could be wrong; I do not remember saying anything about slowing down the process.”

Interesting.  And an Interesting choice of words.

An experienced lawyer in this province - a guy with many years examining witnesses - used to make an interesting distinction between “remember” and “recall”.

If the witness said “I do not remember” then you can reasonably certain the person has no memory saying or doing whatever.  If they say “I do not recall” then it means they might have a memory but they do not chose to remember.

Re-read Jerome’s comments on Wednesday and judge for yourself.

Then Jerome proceeded to explain what is going on:

Basically, discussions are ongoing in terms of commercial arrangements between Nalcor and Emera. Mr. Speaker, the definition of sanction is broad; it is outlined in the federal loan guarantee. …

as for when it happens, it [sanction]will take place when the agreements are finalized. However, let me say this: at this point we will not be making a decision to sanction until every “i” is dotted, “t” is crossed, and the federal loan guarantee – which is worth a billion dollars to the people of this Province – is firmly in place. [emphasis added]

Kennedy is pretty clear that the provincial government won’t sanction Muskrat Falls until the federal loan guarantee is “firmly in place”. 

Black letters. 

Plain English.

The provincial government hasn’t sanctioned the project so logically that means that the loan guarantee is not  - at the moment  - firmly in place. 

Interesting choice of words again for Jerome since that isn’t what Jerome said on December 3 when he made a ministerial statement about the loan guarantee:

I rise in this hon. House today to celebrate the Government of Newfoundland and Labrador's success on securing an agreement on the terms for a federal loan guarantee for the Lower Churchill Hydroelectric Project with the Government of Canada. [Emphasis added]

Later that same day, during Question Period, Kennedy said:

This nineteen-page document, which was signed on Friday, is a binding, legal document, Mr. Speaker. In fact, at the end of the document it states that it shall constitute an irrevocable legal, valid and binding obligation of the parties, Mr. Speaker. [Emphasis added]

Done deal.  Firmly in place, even.

A couple of weeks later:  not so done, after all.

Sanction isn’t defined in the loan guarantee, incidentally, certainly not in any broad way.   What the loan guarantee does lay out in great detail are something like 20 specific items that have to be in place before the loan guarantee cuts in.  One of the conditions is project sanction of all three major projects. 

Those 20 conditions are what Nalcor and Emera are now working on.  Makes perfect sense. 

But the detail, and in many respects the more important detail, that Kennedy,as referring to is actually in the agreements with Emera.  The joint development agreement for the Maritime Link defines sanction precisely.  Maybe Kennedy was a bit confused as to what documents contained what details.  Here’s the definition of sanction from the joint development agreement:

sanction decision

The joint development agreement for the Maritime Link includes a highly detailed list of things that Nalcor and Emera expect to happen before sanction.   Maybe that’s the detailed definition Kennedy meant.  Anyway, one of the things on that list is completion of the regulatory process in Nova Scotia. 

Now the agreement does say  - clause 5.7 -  that the parties don’t have to run through the checklist.  But if you look at what sanction means, you quickly see that sanction is the commitment to build the Maritime Link. In fact, there’s even a clause that says just that:

sanction effect

So when Jerome Kennedy says that Emera can sanction the Maritime Link before completing the regulatory review in Nova Scotia, he’s right.  But if Emera did that, the company would be taking a bunch of financial risks. That’s because, under the agreement, sanction means the company is committed to sign all the agreements and spend all the money need to finish the project.

What’s more, even if Emera sanctioned the project tomorrow, Nalcor would still have to wait for the loan guarantee until the Nova Scotia regulator finished its work.  Under term 3.5 A (ii), one of the conditions for the guarantee is a non-guarantee credit rating based on information supplied to the Nova Scotia regulator in Emera’s application.

All those details are really hard to keep track of.  The Emera documents are detailed enough.  Then you have to toss in all the conditions in the loan guarantee.  Even if they are just your garden-variety usual conditions – as Jerome keeps saying – they are pretty detailed and complicated.  It’s going to take time to get them sorted out.

They would certainly slow down the sanctioning process, especially since the loan guarantee is not firmly in place until Nalcor, Emera and the provincial governments involved sort out all the details.

But then again, all that may change in the House of Assembly on Thursday.

Jerome might not be able to remember.