19 September 2016

Worst possible time for HQ deal #nlpoli

If the rumblings from Labrador are correct, an opinion column in lapresse - "Why Quebec should regain Labrador" - this weekend both fits right in and provides a cautionary tale for us all.

Pierre Gingras  - right - spent 31 years with Hydro-Quebec (1966 to 1997) building large hydro-electric projects like Manicouagan and James Bay.

Gingras thinks the time is right to rescue tiny Newfoundland from itself and a very old injustice done to Quebec.  After all,  Gingras notes, people in Quebec should recall that, owing to what Gingras calls the "shenanigans of certain [but unnamed] financiers"  the Privy Council  in London tore Labrador from Quebec in 1927 and gave it to the British colony of Newfoundland without any protest from Canada.

"On se rappellera que le Labrador a été arraché au Québec (et au Canada) par le Conseil privé de Londres en 1927, à la suite des manigances de certains financiers, pour être rattaché à Terre-Neuve, alors colonie britannique, et ce, sans la moindre réaction du gouvernement du Canada."
Quebec cannot buy power from Muskrat Falls as it is right now, according to Gingras, since the existing transmission lines are at maximum capacity.  But a new transmission line costing $3-4 billion would make it profitable to develop Gull Island.  Such a project would also allow for the development of many smaller projects in Labrador and along the Quebec North Shore that are currently held up, according to Gingras, by the uncertainty over the border.

Talk of a potential deal with Hydro-Quebec on the Lower Churchill has been swirling for months.  Stan Marshall has done nothing to dispel public concern with his comments in August that he is busily improving the relationship between Nalcor and HQ.  In June, Marshall said that Nalcor was looking at ways of boosting revenue from Muskrat Falls in conjunction with Nalcor's existing partners Emera and Hydro-Quebec.

Nor did Premier Dwight Ball calm concerns when he said a couple of months ago that there were "no talks about Hydro-Quebec taking over Muskrat Falls."  That sounds like one of his patented denials using very precise and misleading language. The deal apparently in the works would have HQ buy a significant interest in a much larger project that, as Gingras described it, would involve development of Gull Island.  That isn't about taking over Muskrat Falls, so Dwight's comment would be literally true, even if it did not tell the whole truth.

The worst possible time

This is the worst possible time for Nalcor to be talking with Hydro-Quebec about the Lower Churchill.  Nalcor and the provincial government are more vulnerable than ever before. Not only is the Muskrat Falls project spiraling out of control and unable to deliver its promised electricity,  the provincial government is in the midst of its worst financial crisis since 1933.  

Then there is the fact that the current government is in third place in the polls and the Premier is at the lowest point in the polls for any Premier since we have had polling information.  The last time a politician was even half as desperate to make a deal on the Lower Churchill, Danny Williams cut one for Muskrat Falls. It guaranteed free electricity for Emera for 35 years,  partially privatized the electricity grid in Newfoundland, and bound the province into the current mess.  Don't forget either that Williams himself spent five years desperately - and secretly - trying to get Hydro-Quebec to buy the Lower Churchill.

Dwight Ball has already made it clear he, too,  is desperate to complete the Lower Churchill, despite the incontrovertible evidence that it is a mistake. His administration never completed a proper assessment of the alternatives to continuing the project, as it seems.  Ball is in an even more desperate position than Williams was, if that is even possible. The government is vulnerable, therefore, to even the weakest offer that would beggar the provincial position and give Hydro-Quebec precisely the level of control of resources that Gingras is proposing.

Make no mistake,  the provincial position had been strengthening in the late 1990s.  It has deteriorated sharply since 2003, most significantly since October 2010.  There is no reason to believe that the current Liberal administration - pot-committed to the ludicrous Muskrat Falls project - could produce a viable deal even with Stan Marshall. Indeed,  Marshall is already jammed into an impossible position since Ball and the current Liberal administration have denied him the most power option anyone has in any negotiation:  walking away from a deal. Marshall was interested in examining all options when he took over as chief executive at Nalcor.  Dwight Ball has made it plain his only option is to finish the project.

Ball and Marshall don't have many options. The federal government cannot increase its financial exposure in the project as it currently stands. It is a boondoggle and, as a recent court decision in Quebec confirmed, Nalcor does not control water flows on the river.  As such, Muskrat Falls can scarcely produce enough electricity to meet the freebie Williams and Ed Martin gave Nova Scotia.   The federal government will not pour more cash into it.

Having cut off every option for himself, Ball is clearly left with Hydro-Quebec and its deep pockets and experience as the only way to go.  That's why Ball must stop any discussions involving Hydro-Quebec and the Lower Churchill immediately. If he persists and, God forbid, he tries to implement a deal,  Ball will precipitate a political crisis the likes of which the province has never seen.  Given the government's precarious financial state, such a political confrontation crisis over what can only be an inevitably bad deal on the Lower Churchill would be one the province cannot afford.