21 November 2017

Multiple Interlocking Rationalizations #nlpoli #cdnpoli

In announcing an inquiry into some aspects of Muskrat Falls on Monday, the Premier muddled up some numbers that suggest the confusion at the heart of Monday’s big news.  He said that the inquiry will explain how a project that was originally supposed to cost $5.0 billion at the wound up costing $13 billion or more.

Then he announced the terms of reference for an inquiry that focused on the pro forma exercise called “sanction” that happened when the project was supposed to cost $6.2 billion.  The $5.0 billion figure is from November 2010.  That’s when many of the crucial decisions took place but, as far as the terms of reference go, its outside the bounds of the inquiry.

Justice Richard LeBlanc also won’t look at the political decisions behind the project, the relationship between Nalcor and the Premier’s Office, the governance of the corporation, or any of the other major elements of what became Muskrat Falls. All of those aspects would explain the political foundation of the project the Premier mentioned in his news conference but none of them are covered by the inquiry terms.  Instead, the inquiry will focus on the internal management decisions at Nalcor after 2012.

The specific subjects of the inquiry are listed in Section 4, which contains four sub-sections labeled a through d. Let’s run through each of them.

Energy Demand and Sanction

Section 4 (a) directs the commissioner to inquire into “the consideration by Nalcor of options to address the electricity needs of Newfoundland and Labrador’s Island interconnected system customers that informed Nalcor’s decision to recommend that the government sanction the Muskrat Falls Project. 

One supporter of the project famously said there were “multiple, interlocking business cases” for it.  What Nalcor, the government and its supporters actually offered multiple, interchangeable rationalizations.

In November 2010,  the key argument for the project was breaking the stranglehold Quebec supposedly held on electricity development in Labrador.  The project would ship power to markets through Nova Scotia.  The mention of Muskrat as the least-cost source of electricity for the island is found in paragraph nine of what is essentially a 10-paragraph news release plus a list of highlights.
Right off the bat, Nalcor didn’t present the alternatives at the time of project sanction, which is the starting point for the inquiry.  That happened in 2010, although it didn’t really because there is no evidence Nalcor ever examined alternatives to Muskrat Falls. The only mention of alternatives has been to the isolated island scenario, which means Nalcor never evaluated all options anyway.

In 2006 Nalcor did evaluate alternatives to the whole Lower Churchill project but that was for a different concept:  the LCP was supposed to be about power for export only, with local needs as a secondary consideration.  That’s an important detail because another key aspect of the 2010 announcement was that this was the original LCP, but with the tiny dam built first.

There’s also no order in council in which the provincial government approved a proposal from Nalcor.  There’s only OC2012-130 that lets Nalcor use Crown land:

 Under the authority of section 7(2)(a) of the Lands Act, the Lieutenant Governor in Council is pleased to authorize the Minister of Environment and Conservation to issue a licence to occupy Crown land to Nalcor Energy for an area not to exceed 4.3 hectares within the fifteen metre shoreline reservation at Muskrat Falls, Newfoundland and Labrador, for the purpose of hydroelectric generation, subject to the terms and conditions normally applicable to the issuance of such licences.
It’s dated December 4, 2012, well before the infamous filibuster and the actual formal ceremony announcing “sanction.”

This section will also not touch on the decision to double electricity rates and the rationale for paying for the project, all of which was political and all of which was decided in 2010.

Key Points to Retain:

  •  Without an amendment, the inquiry can’t look at decisions taken prior to December 2012 since the terms specifically identify Nalcor’s proposal for sanction as the focus. That happened in December 2012.  
  •  here’s no indication Nalcor presented any project justifications in 2012.
  • There’s also no order-in-council in which cabinet “sanctioned” Muskrat Falls.  It isn’t clear, therefore, what the commissioner will be doing to meet the first term of the inquiry.
  • The inquiry won’t look at the political decision to force domestic users to pay 100% of the cost plus profit (doubling rates), which was taken in 2010, not 2012.

 Cost over-runs

Section 4 (b)  is about “why there are significant differences between the estimated costs of the Muskrat Falls Project at the time of sanction and the costs by Nalcor during project execution, to the time of the inquiry.”

Key Points to Retain
  •   This will be the guts of the inquiry.
  •    It will be technical. 
  •    None of it is political.

Hello, 1998

Section 4 (c)  is about “whether the determination that the Muskrat Falls Project should be exempt from oversight by the Board of Commissioners of Public Utilities was justified and reasonable and what was the effect of this exemption, if any, on the development, costs and operation of the Muskrat Falls Project.”

This one is weird, as if the person who wrote the term had no idea what end was up.  The decision to exempt the LCP from the public utilities board was taken in 1998 because the project was entirely for export.  The PUB was entirely about domestic rates.  In the original scheme there’d have been almost no cost to pass on to consumers.

In 2010, cabinet did not have to decide anything about exemption since it was done long before it took office.

So given the amount of time the Premier spent blaming the former Conservative government for the mess he and his colleagues have cleaned up (not really – ed.),  giving the inquiry the power to call Brian Tobin to the stand is just nutty.

Key Point to Recall

  •   The exemption order predates the Conservatives return to power in 2003.

Oversight Committee Mania

Section 4 (d) is about “whether the government was fully informed and was made aware of any risks or problems anticipated with the Muskrat Falls Project, so that the government had sufficient and accurate information upon which to appropriately decide to sanction the project and whether the government employed appropriate measures to oversee the project particularly as it relates to the matters set out in paragraphs (a) to (c), focusing on governance arrangements and decision-making processes associated with the project.”

The adequacy of governance structures is a political question  - or one about internal government operations - but this term is written to focus on what Nalcor told people in government at the time of sanction in 2012.  In effect the wording precludes any discussion of the long-standing relationships involved in decision-making by and about Nalcor and focuses on whether or not Nalcor told government enough.

Since it doesn’t look like the key decision for government was in 2012,  this one might wind up being a lot more fun than informative.  A clever lawyer – like Jerome!  - should have a field day with this bit. As well, since the term is written to focus on what Nalcor did,  the fact the government made a certain decision gives the politicians an automatic excuse, if they want to take it. 

That’s really part of the problem with the whole inquiry terms of reference.  It is structured on the assumption Nalcor brought this forward in the same way it pursued Cat Arm or one of the other projects.  Nothing could be further from the truth.  This one has been primarily about politics since 2003 and arguably as far back as 1998.  

With a faulty set of assumptions underpinning it, this circumscribed inquiry can’t possibly find any meaningful answers to how we got into this mess in the first place.

That last sentence is the big take-away.


SRBP has followed the Lower Churchill project more closely than anyone outside government.  There are both short posts and detailed ones covering the entire thing since 2003 up to 2017.  There’s a tab at the top linking to some of the posts and others are easily accessible by using the search function.

 Feel free to use it and if you want to pose a question on something you may have missed you can find me @edhollett on Twitter or at ed_hollett@hotmail.com

20 November 2017

When a change is not a change: the NDP and Muskrat Falls #nlpoli #cdnpoli

One newsroom.

Two different interpretations of  federal NDP leader Jagmeet Sing's position on Muskrat Falls.

In Sarah Smellie's online story,  Singh had a few concerns and is "not comfortable" with the project.
But he didn't outright condemn the project. 
 "Right now I'm concerned … I'm concerned about those two pieces and I want to make sure that those are addressed. I'm not comfortable with a project that doesn't have those things addressed."
Yet,  in the story that went to air,  the provincial NDP were opposed to the project, as provincial leader Lorraine Michael had always been according to the voice-over.

New Democrats bobbed their heads up and down approvingly because that is the story they want us to believe.  It is the story they fervently believe in their own hearts:  Lorraine Michael and the NDP have always opposed Muskrat Falls.

The problem is that the story isn't true.

02 November 2017

The Poppy

According to the Royal Canadian Legion's Poppy Manual, the Legion will never authorize  the display of a poppy on "blogs or discussion groups even of a remembrance nature, as the Legion cannot control the text content of such forums [sic]."

A symbol of the defence of freedom can't be displayed in Canada on a website where Canadians exercise their freedom of speech.

Remembrance is impossible when the Legion has already forgotten.