13 April 2016

The Rasputitsa #nlpoli

Before we even get into this, let's be clear:  the EY review commissioned by the provincial government was never, ever about cancelling Muskrat Falls.

Not even remotely or theoretically.

Dwight Ball said so in December:  "cancelling this project is not what this review is about.”

The provincial government just wanted the external contractor to give it a better sense of what the project would finally cost.  Faced with a record deficit on top of the government's financial problems, the Liberals wanted to know how much they were on the hook for.

That's it.

The interim report received last week from EY doesn't do any of that.  Indeed, the interim report just confirms what we already knew:  the project has serious management problems, it's over budget and badly behind schedule, and there are risks of significant further cost over-runs on top of the ones that have roughly doubled the price tag from the original estimate in 2010 .  The interim report also recommended what the Liberals were planning to do anyway.  That's the bit about changing the Nalcor board for other folks and adding some additional oversight to the project.

What's missing from the report are details like the cost estimates and details of the problems with the project.  We will get the cost estimates, apparently but they won't come until after the current budget debate is over.  They will come for the cost of another $600,000 on top of the million we already forked out to get an interim report that sheds no new light on Muskrat Falls.  But at least the report fits: we now face massive cost escalation in the cost of estimating the costs of a project whose costs are already escalating seemingly beyond control.

SRBP can save you the suspense on that cost thing. This project won't likely deliver commercial power before 2020 and the final bill - all inclusive - will be more than $10 billion. That's astounding but at least that too is consistent: nothing that Nalcor has told us about this project - cost,  need,  timelines - none of it has been true.

Speaking to reporters outside the House of Assembly,  natural resources minister Siobhan Coady said that cancelling the project wasn't in the best interests of the province. People should ask her about that. Ask Coady for the evidence on which she based that decision. Coady can't offer any evidence because at every juncture the evidence mounts that the project is a disaster.

The project is less than half complete, as EY confirmed, even though the original cost of $5.0 billion covered by the federal loan guarantee is spent.   Some portions are only 35% finished.  What's worse, the contract for the major part of the construction - the powerhouse - is not only way off schedule but is also deeply flawed.

Nalcor signed a contract with Astaldi that pays the company based on labour expended, not on the basis of the amount of work completed.  It is the opposite of what Nalcor told us they had done. The result is that the contract doesn't create any incentive to the contractor to finish the work on time and on budget. The longer it takes and the more labour they use, the more they make.  Astaldi may renegotiate the contract with Nalcor but taxpayers will pay a heavy  - and unnecessary  - price for someone's incompetence.  No one at Nalcor will pay for their deceit.

According to EY:  "The scale of this aggregate cost impact is in excess of the Project contingency level."  In plain English, that means the shag-up in the Astaldi contract is such that the existing cost over-run allowance in the project budget won't be enough to cover it.

Evidence does not matter, though.  This project has been unstoppable since 2010.  And in the new Liberal cabinet,  the three ministers responsible for this project - Dwight Ball, Cathy Bennett, and Coady - are all on record as backing it, without doubt.  Ball said last fall that we cannot let the project fail. Bennett led the pro-business lobby for Muskrat in 2012 that relied on everything except business reasons like profit or return on investment to justify their love of the project.  Pride,  not love, was all we needed.  And earlier this year, before she had the EY report,  Coady said that the project was too far gone to stop.

Too far gone to stop.

Not in the best interests of the province.

Neither is true.

Coady is relying,  as we told you before, on decision-based evidence making and other logical fallacies.

As every other rationale for Muskrat Falls exploded for the fairy tale it is, what the politicians are left with is the most miserable excuse of all.  The Liberals have just picked up the same lines as their Conservative predecessors.  Muskrat Falls for the Liberals is, as it was for the Conservatives, just another make-work project.  Push Coady a bit and she might break out of her jargon long enough to admit that the Liberals are continuing with Muskrat  to keep all the high-paid jobs going in the province.

That's what Coady means now by "best interests of the province."  Make work project.  The folks at Nalcor have been using that as a rationale all along.  That's why they talk up the jobs created and the like.   Now that rationale - the immediate economic benefit - is the only one left. The others have all been shown for the falsehood they always were.

We are looking at a couple of years of recession.  On top of that,  megaprojects like the Long Harbour plant and Hebron will be winding down.  Ball and Coady would never add to that by shutting down Muskrat Falls even if shutting it down made the most sense.  They could not stand the screaming from Yvonne Jones, for one thing, at the loss of this mega-pork project for her beloved Labrador.  But the loss of the jobs and the other spending throughout the province would be unthinkable.

The Liberals are so fixed on finishing Muskrat Falls that they will back Ed Martin and his team at Nalcor not because they are clearly the most competent but because Ball, Bennett, and Coady think that Martin and his folks are the only ones who can finish Muskrat Falls.  Repeated,  documented failures  - the unmistakeable evidence of darknl alone - are meaningless to the current Premier and his team.

"There is no reason not to have confidence” in Ed Martin and his team,  Ball told reporters last December. The phrase is more awkward and even more absurd now than it was then, if that is possible. Ask Ball again now that more evidence has mounted against Martin and his team and Ball will back Martin to the hilt.  Go ahead.  Try it.  See what Ball says.  Is there a ball of value in Martin,  Premier Dwight?

Too far gone to stop.

Not in the best interests of the province.

Such thinking by Ball and his ministers is stunningly short-sighted. The only people paying for the whole stinking pile are local taxpayers, most of whom make less than $40,000 a year.  No one benefits from Muskrat Falls in the long run, except people outside the province.  The higher the costs go - and they can only go higher - the more people pay.  Nalcor's estimate last fall - already out of date - is that rates would double by 2020.  They will now go higher.  It's really simple.

Muskrat Falls adds $10 billion to the public debt on top of the $10 billion already there and not counting the $10 billion more the government will add over the next few years coping with its overspending problem that started under the Conservatives.  Ball and his crowd had a chance to reset the whole damn thing, to cut losses, to find people who know what they are doing even if they could not bring themselves to halt Muskrat Falls altogether.

They refused.  They stared evidence in the face and ignored it.  Instead, they clapped Martin on the back and told him we would spend as much as he needed to finish Muskrat Falls.  We cannot afford to let it fail.  It is in the best interests of the province.

Irony.  We cannot afford to finish it either.  Ball will have to try and find ways of getting someone else to come on board if this thing keeps going as it has.  Breathe new life into the Lower Churchill Development Corporation, maybe, and try to sell half the mess to the federal government.  Convert the loan guarantee to an equity stake.  The proposition would be as stark as it would be truly filthy in all its implications:  let the province go under,  Uncle Ottawa, so you have to take over the whole thing anyway or step in now and bail us out.

Which is cheaper?

Just the thought of that chills the blood colder than the river itself in winter.  From a "have" province, the fulfillment of dreams, to a bankrupt all in a decade.  They should change the name to Williams' Falls as a reminder of who started this in the first place.

Some people have joked that Nalcor boss Ed Martin is like Rasputin, with his wicked hold over the rulers of Russia a century ago.


Muskrat Falls is the rasputitsa,  the sodden muck that the ground of Russia and the Ukraine becomes in the spring and in the fall.  Men, women, children, horses, cars, trucks all can disappear into the ground never to be seen again.

Muskrat Falls is the rasputitsa and the politicians of Newfoundland and Labrador have fallen into it. They are stuck fast and sinking and we are all being dragged slowly, inexorably down with them.