How much is Churchill Falls worth? #nlpoli

 The public policy advantage of quantifying or estimating what the Government of Newfoundland and Labrador might get in revenue from Churchill Falls 21 years from now is that it takes discussions today from the world of fantasy and make-believe to something closer to reality.

Churchill Falls Generating Station

People talk about Churchill Falls as if it had magical powers.

It doesn’t.

But what’s it worth?

Well, since the subject relates to the recent Innu Nation lawsuit, Muskrat Falls mitigation, and what could be bone-idle curiosity for some people, here’s an answer.

This won’t tell you precisely what Churchill Falls electricity will be worth in 2041 but it will give an idea of what sort of revenue you could get.  If you aren’t comfortable imagining this is 21 years in the future, then imagine it is the numbers today – because that’s what they are – and the 1969 contract did not get renewed automatically in 2016.

All the information used here comes from sources that are publicly available in Canada and the United States.

Here goes.

The development of our country #nlpoli

Today, the development of Churchill Falls is popularly perceived as a failure.  Newfoundland is portrayed as the victim of a shrewd and untrustworthy lot in Quebec.  They hoodwinked Joe Smallwood,  the Liberal premier of Newfoundland at the time, and have continued to steal from Newfoundlanders through the patently unfair 1969 power contract.

The Churchill Falls power plant cost a little over $1.0 billion (about $6.1 billion in 2015) to build between 1969 and 1971.  With an installed generating capacity of almost 6,000 megawatts,  it was one of the largest if not the largest hydroelectric plant in operation at the time.

Churchill Falls (Labrador) Corporation delivered the project on budget,  achieved initial operating capacity five months ahead of schedule and finished the whole project a year ahead of schedule.

Revenge for the humiliation of Churchill Falls remains at the centre of provincial politics, as it has since the late 1970s.  Redress of the grievance has been the most common term for the political goal of the Newfoundlanders, but as Danny Williams and the provincial Conservatives made it out in 2010, revenge was really their burning passion.  Muskrat Falls was not merely Williams' legacy.  It was the means by which Newfoundlanders would break what he called Quebec's stranglehold on his province's economic future in Labrador.

In this pair of posts, we will look first at Churchill Falls.  The second, coming tomorrow,  will look at the years since 1972, culminating in Muskrat Falls.

The Price of Revanchism #nlpoli

Churchill Falls occupies a unique place in Newfoundland and Labrador's political culture.

Most of what people believe about Churchill Falls is just sheer nonsense.  Made up.  Never true. Completely ludicrous.  But accepted as fact and unshakeable truth all the same.  And that's where things get weird. People use all that foolishness nonsense to make decisions in the real world.

One of the enduring legends is that Newfoundland wanted a corridor to wheel electricity through Quebec,  went to the federal government in the 1960s to look for one, couldn't get it, and thus wound up a slave to Hydro-Quebec in 1969.  It's been a popular story since the 1970s,  after the Newfoundland government nationalised BRINCO.

There's never been any evidence that Joe Smallwood ever put the question to Lester Pearson although lots of people will swear to it and swear by the story as evidence of how Newfoundland has been shagged by whatever version of the foreign boogie-man they favour.  

Danny Williams trotted the story out, indirectly, in November 2010 when he announced he had committed the provincial government to build Muskrat Falls.  Our electricity would never be stranded again.  We would never again be held hostage by Quebec.  The new, magnificent power corridor through Nova Scotia was the way that we would break Quebec's stranglehold over our magnificent future.

Yay!  Hooray! people screamed, including more than a few editors and columnists.

The only thing was that what Williams said wasn't true.

And he knew it.

Revelation: Labrador hydro edition #nlpoli #cdnpoli

“I wonder how I would feel if a province or a region in another province prevented Hydro-Québec from building its transmission line. I would feel exactly like the people in the West do now. I understand them.”  

Quebec City mayor Regis Lebeaume had a revelation.

Great.

Let's have a chat about another transmission line, shall we?

-srbp-

Horse farts #nlpoli

If you do nothing else in the next few days,  take the time to read the decision issued Friday (via CBC) by a Quebec superior court judge in a case brought by the provincial government against Hydro-Quebec.

Judge Joel Silcoff does one thing supremely well:  he summarises about 40 years of dealings between Hydro-Quebec and the Government of Newfoundland – via first Newfoundland and Labrador Hydro, and lately Nalcor – to change, alter, adjust and otherwise frig around with the 1969 power contract originally signed by HQ with Brinco.

Silcoff actually adds a new details to the public knowledge of what has taken place between Hydro-Quebec and the Newfoundland government over the years.  Before now,  the best summary was one produced for Vic Young’s Blame Canada commission over a decade ago.

And when you are done reading the judge’s decision, you can count yourself among one of the few people in the province who have actually read it.  Never mind all the people talking about it or pontificating about what it means.  They likely have not read it, any more than they have read the decisions of the Regie d’energie or Moby Dick.

Hydro-Quebec to get Muskrat Falls electricity #nlpoli

Under a complex arrangement, Nalcor will send electricity from Muskrat Falls to Quebec in place of electricity from Churchill Falls during some months of the year. 

Nalcor hasn’t disclosed any other details of the arrangement. It appears Nalcor’s Muskrat Falls company will swap the electricity  - possibly free of charge - with its affiliate Churchill Falls (Labrador) Corporation, which will send it to Quebec under the terms of the 1969 contract at 1969 prices.

And rather than getting electricity from Muskrat Falls, Nova Scotians could receive electricity from Churchill Falls or any of Nalcor’s other hydro-electric generating stations on the island

You can find aspects of the arrangement in a clip from NTV.

There’s more to it, though.

How to make bad decisions #nlpoli

Premier Kathy Dunderdale sounded genuinely exasperated last week when she chatted at length with Open Line show host Randy Simms about Muskrat Falls.

“Why,” she asked, “would a government want to develop a project that is not in the best interest of the province?”

No government would, of course.

No government ever has.

Not the current government, nor any in the past. Aside from a few naive people, the only ones who think otherwise are the nasty little partisan troll-shits who campaign with slogans like “no more give-aways” and actually believe their own propaganda.  

What goes around, comes around, as the saying goes. That seems to be why Kathy is so frustrated these days. having come to power on the basis of the “no more give-aways” propaganda, she is finding herself on the receiving end of the same sort of foolishness that she and her colleagues used to peddle about their predecessors in government.

Regular readers will recall the warning about this sort of idiocy in a post about the politics of history  in Newfoundland and Labrador:

In eight years time, they may find that many of the changes they hoped for, like massive new industries, will still be little more than the fodder for someone else's rhetoric.

Karma is a bitch, after all.

For all that, Kathy Dunderdale is convinced she is on the right track. As  she told NTV’s Issues and Answers in March, we “need to get to sanction.”

 Nothing will persuade her to change her mind.  And that, of course, is one of the surest ways there is to make a bad decision.

Go back to Kathy’s rhetorical question to Randy Simms.  It suggests that she has tied herself personally to the Muskrat Falls project. When you believe that fervently in your conclusion, you can do all sorts of things that can lead you astray

You can make a bad decision by only listening to people who agree with you.  Kathy Dunderdale has done this already:  she accepts as an expert conclusion the opinion of a lawyer with no experience other than what he’s gotten since taking up the appointment as “consumer advocate”  on the public utilities board.

And you can make a bad decision by dismissing people who don’t.  By contrast, Kathy Dunderdale suggested that former Premier Brian Peckford had very little involvement in energy policy during his 15 years in government serving both as energy minister and Premier.

You can make a bad decision by assuming you are smarter than everyone else.  Take a gander at unofficial Liberal party leader Dean MacDonald talking to CBC’s Debbie Cooper.  After slagging off the public utilities board as being nothing but disgruntled ex-Hydro employees, MacDonald notes that the people at Nalcor are among the smartest people in the world. They are the experts, according to MacDonald.  And by extension they’ve got to be right.

You can hear the same sort of thing in the way Kathy Dunderdale talks about the project:  all the experts and all the smart people back the project, according to Dunderdale.  How strange that Dean criticizes Kathy agree on everything, but yet they are perfect alignment when they talk about Muskrat Falls.  

You can make a bad decision by believing false information.  Kathy Dunderdale tied the two projects together in January in a speech to the St. John’s Board of Trade:

The gatekeepers of the natural transmission route through Quebec were denying us fair opportunity to get the power to market, and having been burnt once on the Upper Churchill, we were determined not to let that happen again.

Quebec does not have a stranglehold on Labrador development.  It’s that simple. 

You can make a bad decision by making a false connection between a current decision and the past one.  Muskrat Falls proponents love to talk about Muskrat falls in the context of the 1969 Churchill Falls contract. In that January speech, Kathy Dunderdale made the approval of the Muskrat Falls project proof that the people of the province have broken the Churchill Falls curse:

Failure to take the right course of action today would be no different than taking the wrong course of action a generation ago.

Rejecting Muskrat Falls – even if it made perfect sense for economic and rational reasons – would be an emotional failure according to Kathy Dunderdale’s construction. 

You can make a bad decision by jumping to a conclusion.  Kathy Dunderdale may like to say that Muskrat Falls is about meeting the island’s energy needs, but the truth is the project was a solution in search of a problem. The current provincial government committed to build something on the Lower Churchill in 2005.  Danny Williams tied his retirement to building the Lower Churchill.  After five years of trying, they couldn’t find any way to make it happen.

In 2010, they decided to build Muskrat Falls alone.  And everything since then has been a series of rationalisations to justify the conclusion they started with.  They did not examine alternatives before deciding to build Muskrat Falls.  They dismissed natural gas as being “purely hypothetical”.  They changed their story to claim they have looked at the alternatives and settled on Muskrat falls only after credible experts explained that natural gas from the local offshore is a viable, cheaper alternative to Muskrat Falls.

There are lots of ways to make a bad decision.

Your intention to do the right thing may not matter at all.

- srbp -

Nova Scotia would get Churchill Falls power for free #nlpoli

If you’ve been following the ongoing Muskrat Falls saga, you will recall that energy analyst Tom Adams raised some questions a couple of months ago about whether or not Muskrat Falls could actually produce the power Nalcor and the provincial government claimed.

The problem basically came down to this: 

• January through to March is when Muskrat Falls needs to produce the most power.
• That’s when Holyrood would be cranking at full tilt to meet demand on the island for lights and heat in the winter months.
• At the same time, the Nova Scotians will need to get their guaranteed block.
• Upstream, Churchill Falls will be cranking at full tilt to feed Quebec under the 1969 contract and the 1998 Guaranteed Winter Availability Contract
• But the water flows in those three months are the lowest for the year.
• And at that point, Muskrat Falls would have a problem generating much more electricity than Holyrood did, despite the fact that Muskrat is – on paper – considerably larger.

Nalcor’s official line is that the water management agreement imposed by the public utilities board gives Nalcor access to the Churchill Falls reservoir. 

With production at Muskrat Falls completely integrated with Churchill Falls, this means that during May and June Muskrat Falls will be producing at full output, and the resulting production not required on the island will be displacing production at Churchill Falls. This energy will be drawn down when rivers flows are lower, and during peak winter periods when electricity demand is higher on the island.

Problem solved.

Yeah, well not really, as you will see in a little bit.

The Others, a.k.a the Ghost and Mrs. Dunderdale #nlpoli

Regardless of any change in the cost of other forms of energy,… we will have stability in this province that few parts of the world could depend on with the same reliability.

Did Premier Kathy Dunderdale say that? During the provincial election last fall, she told The Scope that Muskrat Falls is:

…i the way forward that will provide us a new energy we are going to need to run the place, but it will stabilize those energy prices because we don’t have the volatility of oil anymore.

In January 2012, she told the St. John’s Board of Trade that:

Our government firmly believes developing the hydro-power resources of the Lower Churchill is the key to a sustainable future for our province over the long term. Muskrat Falls is a venture that will pay for itself through lower energy costs, new export revenues and new opportunities for economic development here at home.

Maybe natural resources minister Jerome Kennedy tweeted it one day:

Hydro avoids the volatility of oil.

Might have been Nalcor’s Ed Martin:

Muskrat Falls translates to lower and stable rates for customers.

None of them did.

Premier Frank Moores said it in 1974 when local politicians first turned their attention seriously to developing the Lower Churchill. No matter what happens in other parts of the world, no matter what other technologies exist, hydro-electricity would be the future for Newfoundland and Labrador.

Economics had nothing to do with it, if you follow the comments from others involved in the project.  As Philip Smith notes in his account of the development of Churchill Falls*, the Lower Churchill generated more power than the island part of the province needed in total. Environment and technology made difficult the task of running lines across the narrow gap between Newfoundland and the mainland.

The provincial government found some of the finest minds of the time, American consultants, to look at the project.  They pronounced the scheme “economically viable and socially desirable.”  Advances in underwater transmission in Scandinavia made the underwater link to the mainland a better bet than it might have been a decade earlier.

Moores was sold:

It is the intention of the provincial government to use power created from the Lower Churchill within the province only.  It is clear to us that this position is in the best interest of all Newfoundlanders.

A second consulting firm, more smart minds from Winnipeg and Montreal, took on further studies.  They predicted that there were “excellent prospects” for new industries to use the power.  Their forecasts held that the whole 1800 MW output of Gull Island would be absorbed on the island by 1988.  With the federal government helping to underwrite the project, the Canadian consultants predicted that island consumers would get the power for 14 mills per kilowatt hour, at a time when the going wholesale rate for power if sold to or through Quebec was less than eight mills.

The past weighs heavily on the mind of politicians in Newfoundland and Labrador.  They go back to it regularly.  Kathy Dunderdale, Jerome Kennedy, finance minister Tom Marshall, and the crowd at Nalcor have invoked the historical totems of Churchill Falls and Bay d’Espoir to justify their Muskrat Falls project.

What they are talking about is not the actual events, of course, but rather the imagined version of events they or others hold to be true.  They are a form of cultural short-hand.  They are metaphors for other ideas. They are coded speech.

What we are talking about here is not an academic abstraction, nor is it about competing interpretations – narratives, if you will – of local history.  Newfoundland history, as used by politicians, is a living language.

But it is a language that has no basis on reality.  It is entirely fictitious. The people who speak about the past are, like Paul Oram, fundamentally ignorant of the past.  Oram was not an historical revisionist, as the title of that old post suggested.  To be a revisionist requires a familiarity with both the events themselves as real occurrences and the competing stories of what those events mean.

Rather, Oram was a typical political actor of the modern Newfoundland stage.  History for such an actor is not about concrete events involving people who behaved in the sort of complex world in which all of us live, simultaneously at the moment.

Their history is plastic. It can be moulded to suit any need.

Their history is not, to paraphrase Calvin, an exercise in interpreting the past to suit our current biases.  Nor is history solid.  Rather, history for them is air. 

Former Premier Brian Peckford intruded into the Muskrat Falls world on Tuesday.  His letter to Premier Dunderdale is a simple thing. The second sentence of the first paragraph is the basis for his understanding of the project and the issues:

Of course, as you know, I was heavily involved in this enterprise when I was Minister of Mines and Energy and as Premier.

Dunderdale dismissed Peckford with her characteristic arrogance:

But a message from afar, about a debate that you haven’t been engaged in, or public information sessions that you haven’t participated in, then you know it’s difficult for me to deal with.

But before she got to that she started from a very curious place:

I don’t know how close Mr. Peckford ever was to the energy files here in the province in terms of a new development. I know a great deal of work went into (Upper Churchill) redress.

This is not Dunderdale admitting her lack of knowledge of Peckford. Far from it.  That is Kathy Dunderdale dismissing Peckford out of hand as knowing nothing about the subject.

If he had something useful to say, then she’d listen. But he doesn’t know anything so just pay no attention to him.

But it is Dunderdale who clearly doesn’t know anything.  She is ignorant, both in the sense of not knowing anything and in the local sense of being rude.

The Premier is profoundly uninformed of events that happened in her adult lifetime.  She can’t be posing or pretending. One must be not only completely unaware of the truth but also assured of its irrelevance in order to make such an obviously ridiculous comment with such complete self-assuredness.

What is truly remarkable about Dunderdale, Kennedy and Marshall is that they speak of history.  They tie their decisions to the past. “We must learn from the mistakes of the Upper Churchill,” tweeted Kennedy last month.  “I don't want to spend my nights wondering if I'm going to be the new Joey Smallwood,” Kennedy told an audience in Corner Brook.

For all that sort of comment, Kennedy, Dunderdale, Marshall and the others have no sense that they are displaying exactly the characteristics – arrogance and tunnel vision, among them – that led to the events in the 1960s they wish to avoid.

Such is their understanding of what our history is.

- srbp -

*  Philip Smith, Brinco:  the story of Churchill Falls, (Toronto:  McClelland and Stewart, 1975)

So haunted by ghosts #nlpoli #cdnpoli

Hear what comfortable words our Premier sayeth:

For generations gone by, the undeveloped hydro-power resources of the Lower Churchill were, for Newfoundlanders and Labradorians, like a treasure just out of reach, tantalizingly close but never close enough to enjoy. The gatekeepers of the natural transmission route through Quebec were denying us fair opportunity to get the power to market, and having been burnt once on the Upper Churchill, we were determined not to let that happen again.

Churchill Falls remains as powerful a totem for some politicians in this province as it ever was.  The crowd currently running this place use it more frequently as their beloved Muskrat Falls project encounters more and more problems.

Their only problem is that they know only the illusion of the thing, not the reality.

Take that bit from Premier Kathy Dunderdale’s marathon oration a couple of days ago as a case in point.

At the time of the 1969 contract to sell power from Churchill Falls to Hydro-Quebec, the Lower Churchill was supposed to be a source of energy for the province itself. You can find the very idea in a piece from the People’s Paper from back in the day, as the hideous saying goes.  Only later on did politicians think about trying to sell the bulk of the power outside and use any  money from those sales to pay for a line to bring electricity onto the island, if need be.

The idea of Quebec as an obstacle is an old one, as well.  The truth is that since the early 1990s they haven’t been a problem.  No one developed the Lower Churchill because they could never make the economics of it work out.  The fools never thought of making the people of the province foot the bill for the whole thing  so they could ship the discount juice outside.

In any event, Kathy Dunderdale herself should know that Quebec isn’t an obstacle any more. In April 2009, her predecessor announced a deal to sell electricity from Churchill Falls to the United States through Quebec.  Surely the Premier remembers these words attributed to her in the official news release three years ago:

“This is a significant development for us to share our excess green renewable energy with the rest of North America through our transmission access through Quebec and our subsequent arrangement directly with Emera Energy,” said the Honourable Kathy Dunderdale, Minister of Natural Resources. “These markets are seeking clean, reliable energy, which we have in abundance. The recall block availability and this arrangement allows us to build our reputation and experience as a reliable supplier of clean energy now and into the future.”

There it is in black and white:  “through our transmission access through Quebec”.

Not around Quebec.

Not under Quebec.

Not over Quebec.

Through Quebec.

Through the "natural transmission route", in the words of the craftsman who put them in Kathy’s mouth.

Nalcor has been losing money on the deal, though.  Electricity prices have dropped through a combination of lower demand in the United States and abundant cheap energy from natural gas.  The reason Nalcor isn’t developing the Lower Churchill for export is that no one wants the power at the prices Nalcor would have to charge for it.  As it is, Nalcor had to promise Nova Scotia a block of power for 35 years for free to get them on board the Muskrat Falls Express.

But through it all, dear friends, based on all that stuff which turns out wasn’t exactly fully, totally and completely in correlation with what we colloquially know as true, “we were determined not to let that happen again.”

And so determined was Kathy Dunderdale “not to let that happen again” that she and her boss tried for five years to lure Hydro-Quebec into taking an equity position – an ownership stake, if you will – on the prized Lower Churchill with the electricity going into Quebec and through Quebec.

We know this because Kathy herself told us all, even if no news media in the province have ever reported it lo these two and a half years later.

Hear what comfortable words Kathy sayeth back then:

Y’know, the Premier has gone to Quebec, and gone to Premier Charest, and, y’know, we’ve had NALCO(R) visit y’know Hydro-Quebec, I’ve been meeting with Ministers and so on. And we say to them, okay, y’know, we’ll set the Upper Churchill to one side, but, y’know, let’s sit down and have a talk about this Lower Churchill piece. Y’know, we know that we have to have a win-win situation here. Because we, as I’ve said earlier this week, we know that if you don’t have win-win you have win and poison pill. Because that’s what we’ve got with the Upper Churchill. So we can have a win-win situation. We know that if you come in here as an equity player that you have to have a good return on your investment. And we want you to have a good return on your investment. But it also has to be a good deal for the people of Newfoundland and Labrador. Now we have been with that message back and forth [i.e. to Hydro-Quebec] for five years. No, sir. No, sir. There is no takeup on that proposal.

In fact, so determined was Kathy that she not let that 1969 contract happen again, so firm was she in her resolve on the matter that she and Danny Williams told the folks at Hydro-Quebec to forget all about it:

we’ll set the Upper Churchill to one side, but, y’know, let’s sit down and have a talk about this Lower Churchill piece

For good measure, Kathy wanted to make sure that Hydro-Quebec actually got a “good return” on their investment in the Lower Churchill.  How good?  Maybe as good as Nova Scotia will get – free power – but alas we will never know. 

Hydro-Quebec, as it turned out, just wasn’t interested.

There are some people, as it seems, who are haunted by the infamous Upper Churchill contract.  They see its ghost at every turn, beckoning them onward. 

And so they follow, mesmerised by the rushing of water and the humming of generators,  deeper and ever deeper into its lair until they can no longer tell what is real and what is illusion.  They talk as though one was the other and that both were the same.

It is then  - and only then – that you know the Ghost in the Turbines has claimed another victim.

- srbp -

Dunderdale using rigged deck against public on Muskrat Falls

Whenever anyone moans about the 1969 power contract with Hydro-Quebec they can thank the last four Premiers of Newfoundland and Labrador – from Beaton Tulk to Kathy Dunderdale – for guaranteeing Hydro-Quebec’s unaltered command of Churchill Falls power.

In order to hide her own financially disastrous Muskrat Falls megaproject from public scrutiny, Kathy Dunderdale is using a cabinet order issued in December 2000 when Beaton Tulk was the placeholder Premier between Brian Tobin and Roger Grimes.

Take a look at the order – Regulation 92/00:

3. Newfoundland and Labrador Hydro is exempt from the Electrical Power Control Act, 1994 and the Public Utilities Act for all aspects of its activities pertaining to the Labrador Hydro Project as defined in section 2.

But how is the Labrador Hydro Project defined?

That’s where you get to see the gigantic mess that Tulk started and the rest have continued.

The exemption order doesn’t just apply to the Lower Churchill and all the transmission facilities associated with it, as most people assume.

Nope.

Here’s the very first thing included in the definition of  the “Labrador Hydro Project”:

… generation and related facilities at Churchill Falls , Labrador

In one clump of eight words, cabinet destroyed any power the Public Utilities Board had under the Electrical Power Control Act, 1994 to manage electricity in the province to make sure that ordinary citizens get the cheapest possible electricity. 

Under the EPCA, 1994,  the PUB was supposed to be able to review electricity generation in the province to make sure consumers don’t get wallet-raped in order to have heat and light to their homes.  Newfoundland Power or Newfoundland and Labrador Hydro could ask the PUB to review demand and supply in the province.

As then-Premier Clyde Wells put it in 1994:

[The Electrical Power Control Act]  authorizes the Public Utilities Board to redirect any power - any power, no exceptions - to meet the needs of the people of this Province. Not expropriating anything from anybody. It is to manage the power that is generated in this Province in such a manner as to first and foremost meet the needs of the people of this Province. It makes no specific reference to Upper Churchill. It makes no specific reference to power companies. It makes no specific reference to any individual generator of power.

But with Churchill Falls exempt from the Act, those sections of the Act that would protect consumers are useless.

Kathy Dunderdale can get on open line and talk all she wants about legal opinions that warn against using powers under section 92a of the Constitution Act, 1982.  Truth is there is no risk:  there are no powers since she and her current cabinet colleagues decided to to uphold the December 2000 exemption.

Tulk and his cabinet may have signed them away, but every cabinet since then has endorsed them.  Kathy Dunderdale and her cabinet are actually proud of their decision.

It gets better, though.

In the fall of 2000, the provincial government issued a series of orders that exempted every major hydro-electric project on the island portion of the province from the EPCA.  Those exemptions still exist even though several of the projects are now owned entirely by Nalcor as a result of the 2008 expropriation bill.

What that means for consumers is that Nalcor alone can decide what it wants to do with those sites. Even if there was plenty of electricity available for Nalcor to meet provincial needs at the lowest possible cost without building Muskrat Falls, there is no way the Public Utilities Board could force Nalcor to halt the megaproject and do the sensible thing.

Once a line to Nova Scotia flows through, Nalcor can ship discount power out of the province from its island generating sites and force local consumers to use super-expensive Muskrat falls power all thanks to decisions dating from the fall of 200 and endorsed by every administration since.

So the next time Kathy Dunderdale talks about independent reviews or asking the PUB to do anything, just remember:  legally, the regulatory deck is stacked against consumers.  The whole thing is a giant set-up to favour Nalcor and its corporate partner Emera.  Beaton Tulk may have started it, but Kathy Dunderdale and the current cabinet have made it their own.

Just in case you think Kathy Dunderdale doesn’t like Hydro-Quebec, just remember that she and her predecessor spent five years trying to get HQ to take an ownership stake in the Lower Churchill. 

And she never said boo to anyone until long after her secret efforts failed.

- srbp -

Hydro: the wet weekend round-up

1.  A foundation of purest sandstone:  For those who are still following these things, the Telegram’s Rob Antle has a tidy little summary of the case which is the bedrock on which the provincial government’s legal challenge of the 1969 Churchill Falls power contract rests.

Self-Check:  How many paragraphs down did you get before you realised that – in and of itself - the case has absolutely nothing whatsoever to do with the 1969 ruckus?

2. More money for Quebec, yet more billable hours edition: The papers in la pas-si-belle-pour-Danny province have been filled with stories about the hearings over transmission and the promise to sue over good faith or lack thereof.

3.  Rien could possibly be further from the verite. In a scrum the other day, Hisself could recall the pages on which appeared stories in La Presse about the whole Labrador hydro thing from one angle or another.  Helene Baril’s summary of the issue in her January 12 story is tidy and accurate.  Ditto one on the 19th of January.

Not so another one on the 19th in which she writes:

Quatre ans plus tard, le premier ministre Danny Williams est toujours aussi déterminé à développer le Bas-Churchill sans l'aide de personne, et surtout sans celle d'Hydro-Québec.

Still prepared to develop the Lower Churchill without Hydro-Quebec?

Hardly.

Malheureusement en anglais seulement, 

Perhaps it’s time someone worked up:

a.  a French translation of the Dunderdale comments and,

b.  a French version of “Nothing could be further from the truth”.  ‘Pfft”  - another DW staple likely to be heard many times in the next few months -  already translates itself.

-srbp-

The fly in the soup clinging to the hair

Writing in the Globe on Christmas Eve, Fabrice Taylor noted the strong performance of Labrador iron ore in the market place, bouyed by increased global demand.

Then he notes the relatively high value of the Canadian dollar against its American counterpart. 

The hair in the soup is the Canadian dollar. Part of the drop in Labrador's financials, mentioned above, is because of volumes and pricing, but a good part is also from foreign exchange. Some pundits see the dollar going to par with the greenback. That's only another nickel or so but it would hurt.

He’s right.

But the exchange rate isn’t the only thing in the soup threatening the fine meal. There’s a fly in the soup, as well, namely the medium to long term cost of operating the mines in western Labrador.

That’s not a labour problem or a dollar problem or a market problem or an ore problem.

It’s an energy problem.

Or more specifically the threat by the provincial government back in 2006 that it would expect the mines in western Labrador to start paying commercial rates for power come 2014. 

And if commercial rates weren’t in the cards, well, the mining companies expect to be paying considerably more than they are currently. 

Never mind that the companies own two thirds of Twin Falls Power Company, built near Churchill Falls when it was still called Hamilton Falls.  And never mind either that the companies agreed to shutter their power station so BRINCO could push more water through its new plant at Churchill Falls.  In exchange the companies got a block of power for about half a cent a kilowatt hour and anything beyond that for about a quarter of a cent per. 

Either way, the prospect of higher power costs will play a role in the future of Labrador west.  Low cost power will be crucial to sustaining the mines, especially in a high dollar world, so when threats get tossed around companies tend to take notice. 

That threat is till out there.

Plus the threat’s been reinforced by the seizure last Christmas of hydro assets belonging to three companies, one locally owned and the other running a project not connected at all to the paper mill at Grand Falls.  Longstanding agreements were brushed aside by a simple vote in the legislature.  Agreements entered into in good faith and executed in good faith were crushed overnight, forcing at least one of the companies involved to default on loans.  A court case was extinguished without compensation.  Any company with any sort of operation in the province would have been insane not to revisit all their legal options.

And in Labrador west, it would be at all surprising to find out that the companies operating mines there are keeping a wary eye on what happens in St. John’s.  That power contract issue hasn’t been resolved yet and it’s much more a looming crisis than anything connected to the Churchill Falls renewal in 2016 could ever be.

Hair in the soup?

Try a fly.

And a geezly big blue bottle one at that.

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Energy audio and video roundup

1.  From CBC New Brunswick, a panel discussion involving the leader of the New Brunswick Conservative, Green and New Democratic parties and energy minister Greg Byrne.

2. From CBC Newfoundland and Labrador on 01 Dec 09, an interview with former premier Roger Grimes on the latest developments in the Churchill Falls saga.

3.  CBC Radio Crosstalk with guest Jim Feehan discussing Churchill Falls.

4.  Premier Danny Williams scrums with reporters after a speech in Calgary. At no point does Williams point out for the Alberta reporters that he spent five years trying to get Hydro-Quebec to take an equity stake in the Lower Churchill without any discussion of redress for the 1969 contract but couldn’t get them interested.  That was at the same time that he insisted that he wouldn’t cut a deal with HQ without redress.

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Too bad wishing didn’t make it so

There are times you have to feel sorry for Ed Martin. 

The fellow was hired out of a successful career in the oil industry to try and create a professional, competent energy company on behalf of the people of Newfoundland and Labrador. 

After four years, he’s managed to create a company with a pretty good reputation in the oil patch locally.  There’s plenty of knowledge and expertise behind the blue windows on the Arterial.

Too bad for Ed that he and his gang are saddled  with a bunch pulling his strings who are viewed in some quarters as being like a crowd of petty potentates of some mythical banana republic.

Take, for example, this latest charade on Churchill Falls.

Ed Martin knows that left to his own devices he could deliver the goods on an energy deal. Martin isn’t the kind of fellow who would take a battleaxe to the head of someone he wanted to do business with.  When asked by Hydro Quebec and the Lower Churchill last August, Martin was the consummate professional:  confident, factual and assertive.

Even in the most recent version of the story to come dribbling from the government benches, this Article 1375 thing looks more like a political lash-up than a serious idea.  if you believe it, after three years of carrying on discussions of its own with lawyers and other geniuses, the provincial government decided to share the fruits of its labours with Martin.  Ed then got a separate legal opinion and off went a letter.

We must note at this juncture that Kathy Dunderdale established without question on Wednesday that her retraction of the “we are planning to sue everyone” story was bogus.  Well, it was a big clue she was going to deliver a nose puller anyway when she came down to the scrum accompanied by government’s chief lawyer at the time,  but now anyone can say with confidence that if there was inaccurate statement of facts in 2008 by Kathy Dunderdale, it wasn’t that the government was considering legal options related to Churchill Falls. Let’s just put it that way.

What Kathy and the former chief lawyer for government told the legislature on Wednesday constitutes an admission that, for all practical purposes,  cabinet runs NALCOR and its various subsidiaries.  The board of directors is irrelevant.  There are notional walls between the interlocking directorates of NALCOR but ultimately the thing is, a la Nigeria, pretty much a government department not a stand-alone corporation.

If the company were the company and government were the government, cabinet ministers would not spend three years and multiple trips to Montreal to look after business that should properly be left to the officers of the company.  If the company were not merely an adjunct of the government, Danny Williams and Kathy Dunderdale would not have spent five years carrying on secret discussions with Hydro-Quebec officials and politicians in Quebec trying to cut a deal on the Lower Churchill, without redress for the 1969 contract.

Should this latest bit of theatre ever get to court, Hydro Quebec will quickly and easily establish the crass political manipulations behind the little campaign about fairness.  They will be able to construct a longer chain of events and comments by the Premier and others which colour the actions of NALCOR and its subsidiary.  

At the very least they can throw up a plausible argument  that bad faith has abounded but that Hydro-Quebec has not been the perpetrator of it.  As a rule judges do not like this sort of stuff.  The current administration found out just how much judges dislike people jerking others about in Ruelokke or Henley v. Cable Atlantic.

Perhaps that is why the Premier is so shy about taking another of his cases to court.  What was it he said?  Something about the vagaries of court decisions?

Get real, people.

And at the end of it all, odds are good that -  as in the water rights reversion case -  Newfoundland and Labrador will be screwed by people playing at being lawyers and politicians.

This whole game of charades goes nicely with the question posed to Martin on Monday about the issue and the political tie-in to the legislature opening.  The simple answer for Martin should have been:  there is none.  Instead he had this enormous and intricate answer about going into decision mode, grunting, groaning and sweating before finally producing the Golden BB of a letter.

Someone, somewhere actually thought in advance of an obvious question and took the time to contrive an elaborate and prepared answer and rehearse Ed in it such that the end result all but screamed “bullshit!”

Sad that Ed should be put in such a spot.

To his credit, Martin continues to carry himself with great dignity.  Faced with the rejection by Quebec’s deputy premier of the idea of re-opening the contract, Martin told reporters:

"We made a good strong decision here. Obviously, we stand by it. We need to hear back from Hydro-Québec and, when we do, we'll determine what the next steps are," said Nalcor CEO Ed Martin.

He said Nalcor is giving Hydro-Québec until Jan. 15 to deliver an official response.

They won’t need that long. 

Martin’s HQ counterpart, Thierry Vandal, told The Gazette :

"It's more of the same," Vandal said in an interview yesterday with The Gazette.

"It's one for the lawyers."

He isn't budging from the view that "this is a valid contract and we expect it to be respected."

But you know, the more you look at this, the more you think that maybe there actually could be a successful resolution to the 1969 case and even development of the Lower Churchill if only…

if only you could just get the politicians out of the whole affair.

Too bad wishing doesn’t make it so.

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The 1969 Churchill Falls Power Contract

For those who might be interested in these things, here’s the 1969 power contract between Hydro-Quebec and Churchill Falls(Labrador) Corporation in pdf format.

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Hydro Quebec has leverage on Danny Williams

If Premier Danny Williams listened to Opposition Leader Danny Williams he’d know what went wrong with efforts to develop Labrador hydroelectric power.

Here’s Danny Williams in November 2002 in full fury over a proposed deal on the Lower Churchill:

Mr. Speaker, could the Premier please tell the people why he did not use the Lower Churchill as a bargaining lever to address the inequities of the Upper Churchill contract? Would the Premier explain why he quit on the objective of every single Government of Newfoundland and Labrador since the deal was signed over thirty years ago?

Leverage.

Before he got elected, Danny Williams said there would be no deal on the Lower Churchill under his administration without redress for the 1969 Churchill Falls contract.

He rejected a joint Hydro Quebec/Ontario Hydro/SNC Lavalin proposal to develop the Lower Churchill in partnership with Newfoundland and Labrador Hydro.

Williams gave away what he himself described in 2002 as leverage.

That part was reported by the conventional media.

Then Williams went a step further.

After rejecting the proposal out of hand in order to “go-it-alone” and in complete contradiction to his own stated commitment on redress,  Williams then spent five years secretly trying to get Hydro Quebec to take an ownership stake in the plan to develop 3,000 megawatts on the Lower Churchill leaving the 1969 contract “to one side”.

According to the province’s natural resources minister:

“We know that if you come in here as an equity player that you have to have a good return on your investment. And we want you to have a good return on your investment.”

That part of the saga – Williams secret efforts, without redress - hasn’t been reported by the conventional media and likely never will.

At the same time as he was trying to court Hydro Quebec as a business partner, Williams lambasted Quebec as politically volatile:

Three weeks ago, in a bid to garner support for the massive Lower Churchill hydroelectric project in Labrador, Williams said Canada should reduce its reliance on energy from Quebec because the province is too politically unstable.

"The more we can spread out our energy supply means that we won't be totally dependent on Quebec for energy which, given the volatility of the politics in Quebec, could be a very, very sensitive situation in the years to come,'' Williams said Sept. 27.

He later apologised if anyone took offense but would not withdraw the remark.  Williams said he was only described the “reality.”

Not surprisingly, Hydro Quebec wasn’t interested in any Lower Churchill deal involving Danny Williams. 

With the Quebec market gone and the Ontario one looking less promising, Williams and his crew looked elsewhere.  

A potential deal with Rhode Island (not that far from New York city - died for an obvious reason:  Lower Churchill power was simply too expensive.  By the time the very expensive project got its power all the way to Rhode Island – along with all the American-side wheeling charges -  Rhode Islanders just wouldn’t/couldn’t afford the bill.  And let’s not even start talking about the depressed prices and forget the race to develop cheaper alternatives that are just as or even more green than Gull Island and Muskrat Falls.

Not content with the failures to date, the Williams’ administration then tried to undermine the 1969 contract with a clumsy legal ploy that would have given control of the entire Churchill River to the provincial energy corporation.

That failed too.

With no markets, no money could be raised.  And with no markets and no money, the very expensive project just wouldn’t fly. Even Danny Williams had to admit the obvious, recently.

And now, with that as prologue, Danny Williams and his energy corporation are turning back to an idea he rejected five years ago: redress for the 1969 Churchill Falls deal.

Theirs is nothing more than a dolled up version of an old whine:  “Aw come on, it’s just not fair.”

And it isn’t fair, really.

But that doesn’t matter, as Danny Williams, opposition leader, and Danny Williams, lawyer, know very well. Without some sort of leverage, there isn’t any way to get at the 1969 contract and amend its terms.  Whatever leverage he had, Danny Williams has managed to either fritter it away or take a giant axe to it.

About the only saving grace for Newfoundlanders and Labradorians is that Hydro Quebec is unlikely to take the request to renegotiate the deal seriously; not likely that is, unless there is a chance of making it even sweeter for them in other ways.  There are always things that could get better for Hydro Quebec.

Take, for example, the tax free status of the project until 2016.  In the early 1990s, HQ wanted to have that extended as part of a Lower Churchill deal.  The idea fell on the deaf ears of the Liberal administration of Clyde Wells.

Maybe Danny Williams would be more amenable given that he is quite obviously jammed up:  he needs a political score for the 2011 election much more than Hydro Quebec needs any talks or more money.

Then there is the issue of shares.  Right now Hydro Quebec holds about 35%. Danny Williams has already said that he was willing to see Hydro Quebec gain a good return on its investment.  Perhaps more shares in CFLCo and a new corporate structure could be worked out in exchange for cash.  That way, Hydro Quebec gains back some of the cash it would have to pay the corporation it already owns a significant chunk of:

[Claude Garcia] also noted that new benefits to the project operator, Churchill Falls (Labrador) Corp., would also provide some juice to Hydro-Quebec because it has a one-third interest in it. Nalcor Energy holds the remainder.

And after all, Williams is on record as saying that  - at some point – principle converts to cash.

Even without the prospect of a deal, Hydro Quebec can win big concessions just for talking.  They can get Williams to shut up about transmission on the Lower Churchill.  They can get him to withdraw NALCOR’s current procedural assault on Hydro Quebec Transenergie’s wheeling rates.

Maybe there’s something else no one has even thought of yet.  After all, re-opening the contract, as NALCOR has asked, means putting everything on the table.

Hydro Quebec actually has nothing to lose in entering talks quietly.  In fact, they have everything to gain.  On the other side, Danny Williams and NALCOR – like BRINCO 40 years ago – are in a tough spot.

Leverage.

It’s great when you have it.

Sucks when you don’t.

And right now Danny Williams and NALCOR have no leverage.

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Kremlinology 12: Dead caribou edition

Odd -  dontcha think  - that members of the Innu Nation chose the last part of last week to challenge the provincial government on caribou hunting in an area where previously they’d been generally supportive.

Every year, usually in the spring, some Innu from Quebec cross the border and take down a few of the very few remaining caribou in the Red Wine herd.  There’s always a flurry of news coverage and righteously indignant news releases from the provincial wildlife minister.

This year, the controversy arose in November, coincidental with the Churchill Falls/Lower Churchill meeting of Atlantic Premiers and involved some of the Innu from Sheshatshiu.

The spokesperson was Peter Penashue who – again just coincidentally -  has also been front and centre lately, discussing the latest round of never-ending discussions to finalise a land claims deal that was supposedly finalised last fall and which Penashue recently said actually wouldn’t be done for another three years or so.

On the caribou issue, Penashue was hammering away at the supposed lack of consultation between the Innu and the provincial government on wildlife management.

More interestingly though, here’s how the Globe contrasted Penashue from five years ago when the Quebec Innu were doing the spring hunt and Penashue today:

"No one knows for sure if Red Wine woodland caribou were killed, or, if they were, how many," he wrote then in The Globe and Mail.

"The hunt in the Red Wine caribou range was not just an illegal protest, it was completely inconsistent with Innu values. ... Putting a threatened caribou herd at further risk can never be justified on the basis of aboriginal rights."

He said last night that "I obviously wouldn't concur with" that statement now, saying that he had lost faith in the provincial government's ability to manage the caribou.

Interestingly, Premier Danny Williams described the Innu land claims agreement as being crucial to the Lower Churchill:

Williams recently told a Telegram editorial board that if the New Dawn Agreement with the Labrador Innu isn't ratified, the Lower Churchill deal would die.

That’s from a story in the Saturday edition which isn’t on line.

The timing is rather interesting, though. 

If the Innu were really close to settling the land claims issue with the provincial government that is so crucial to the Lower Churchill project, then it seems odd the point man on the New Dawn agreement would be out on such a particular day in such a conspicuous way tackling the provincial government for its lack of consultation.

We’ll all know something is up for certain – he said perhaps only somewhat facetiously  - if the Fan Klub starts linking Penashue to Hydro Quebec and Shawn Graham.

And the Pentavaret.

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Yet more on the NB Power, Hydro Quebec, Danny Williams racket

 

1.  Shawn Graham had some strong words in advance of yesterday’s meeting of the Atlantic premiers. At the end of the meeting things were not much different.

2.  An independent panel will review the NB Power deal.

3.  A quick review of recent events will show that as far as the argument goes from Newfoundland and Labrador, something under the bed is still drooling.

4.  Note the reference in that 2006 post to selling power by avoiding Quebec.  Little did your humble e-scribbler  - or anybody else in the province for that matter – know until recently.

4.  The completely invented (i.e. false) nature of some of the comments used in the pure emotional arguments about the boogey man are glaringly obvious if you know something of the actual story.  Danny Williams said yesterday that “it's obviously symbolic that we're here today at the place where the original Upper Churchill deal was done.”  That’s in the Telegraph-Journal story in the first link.

Apparently they were in Montreal, not Churchill Falls.  Yes, Williams was being his usual hyperbolic, figurative, never-literal self, but that sort of comment is taken as fact by too many people – perhaps even Williams himself – given how little is evidently known about the 1969 boogey man in the first place.

Take as another f’rinstance, the tale of Ottawa’s role in the whole affair as described in the story about the power corridor. 

5.  And if you want a sense of the reason why hysteria, fantasy and emotion are so powerful, consider Russell Wangersky’s observations on the nature of modern media and the audience they work hard to serve.

We're conditioning ourselves to expect the crack cocaine of immediate gratification - and when we can't get that short, sharp shock immediately, we move on to somewhere where we can.

Indeed we are.

And his words are worth the time given that so much of what he says is both a cause and a symptom of a very current issue in the province. It’s a topic tackled around these parts before:

On another level, though, what the Premier meant in that case is actually irrelevant. What it is simply worth noting that not a single reporter thought it worth asking a simple question. Not one thought to ask what he meant, just to be clear. Inquisitiveness - supposedly at the core of the journalistic profession, let alone the source of our species' progress - was absent.

Not one wanted to know.

Reporters reflect the society in which they work. There's no way of knowing if the Internet has changed the way people are thinking or if it merely facilitated a trend already present. Television was decried as an idiot box and in some respects, Carr and others are simply transferring the epithet to the box sitting on or under many of our desks.

The source of the change is not as important as the consequences of the shift, the lessening desire to know things.

Chenza at court, the court of silence, as the Tamarians would say.

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Danny Williams, Hydro Quebec and the Lower Churchill

For the record – via labradore – with full audio of natural resources minister Kathy Dunderdale's September 4 comments to randy Simms of VOCM Open Line to follow:

Y’know, the Premier has gone to Quebec, and gone to Premier Charest, and, y’know, we’ve had NALCO(R) visit y’know Hydro-Quebec, I’ve been meeting with Ministers and so on. And we say to them, okay, y’know, we’ll set the Upper Churchill to one side, but, y’know, let’s sit down and have a talk about this Lower Churchill piece.

Y’know, we know that we have to have a win-win situation here.

Because we, as I’ve said earlier this week, we know that if you don’t have win-win you have win and poison pill. Because that’s what we’ve got with the Upper Churchill. So we can have a win-win situation.

We know that if you come in here as an equity player that you have to have a good return on your investment. And we want you to have a good return on your investment.

But it also has to be a good deal for the people of Newfoundland and Labrador.

Now we have been with that message back and forth [i.e. to Hydro-Quebec] for five years. No, sir. No, sir. There is no takeup on that proposal.

That’s right folks. 

Danny Williams tried unsuccessfully and in secret for five years to sell a chunk of the Lower Churchill to Hydro Quebec with no redress on the Churchill Falls contract. Oddly enough that put Williams efforts at selling the Lower Churchill – without compensation for Churchill falls right back to around the time he said no deal was possible without compensation.

As CTV reported in April 2005:

Williams reiterated Monday that any deal with Quebec will have to include some kind of redress to the province for the unfair split of profits from the Upper Churchill.

But he offered no specifics on what redress could entail.

Update: In December 2002, Williams told a crowd gathered to protest a deal on the Lower Churchill that

“Our position here tonight … is that there should be no deal on the Lower Churchill until there’s redress on the Upper Churchill.”

That was reported in the Telegram on December 4, 2002 in a story titled “Tories rally – election style”.

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