Nalcor Royalties – more information

Nalcor, the provincial government’s energy corporation, paid $142,332 in royalties on North Amethyst in 2010.  The company has paid  $317,399 in 2011 on the same project up to the end of June.

That’s information provided to SRBP by Nalcor Energy in an e-mail.  The royalty figures apply only to the White Rose expansion. There’s more information on Nalcor and royalties in a post from last week.

According to Nalcor vice president Jim Keating, “Nalcor forecasts that total royalties paid to the province will exceed $2.06 billion dollars over the full field life of the Hebron, White Rose Expansion and Hibernia Southern Extension Projects.”

Nalcor is liable for provincial royalties on two of the three projects and may be liable for royalties from Hebron.  According to Keating:

The Hebron contract does provide the Province with the ability to apply a 0% royalty rate to its Crown Corporation should the Province choose to do so.  These provisions were included to ensure the current and any future Governments were not limited in their policy decisions.  While the Province may in the future choose otherwise, it has decided to hold Nalcor Energy in the same shoes as other interest holders and is therefore subject to royalty payments under the same terms as the other owners. 

Nalcor holds a 5% interest in the White Rose expansion, a 4.9% interest in Hebron and a 10% interest in the Hibernia southern extensions.

Keating did not provide any details on how the company arrived at the projected royalty total.  SRBP asked for more information  - total quantity of oil,  oil price assumptions etc - after the e-mail arrived on Friday but did not receive a reply in time for this post.  When the reply arrives, your humble e-scribbler will pass it on.

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Resource give-away

The provincial government’s energy company controls billions of dollars worth of hydro-electric and oil resources  - much of it handed over as free gifts from taxpayers - but the company pays very little to the provincial treasury in return.

Nalcor hasn’t paid any dividends to its sole shareholder – the provincial government – since 2006. That’s something the current provincial government is proud of.

In 2008, some valued Nalcor’s 4.9% Hebron shares at $1.5 billion based on prices around US$80 a barrel.  Nalcor has control of those shares along with a 5% stake in White Rose and 10% in the Hibernia South extension. The provincial government paid cash for the equity stakes and handed them to Nalcor.

But when it comes to royalties, though, Nalcor won’t pay a penny for its stake in Hebron under the project financial agreements.*  According to Nalcor, the company is liable for royalties on its interest in Hibernia South and White Rose proportionate to its stakes. Those amounts don’t turn up in the company’s annual report.

Nalcor also controls the provincial stake in Churchill Falls and any Lower Churchill project.  The latter will cost at least $6.0 billion to build with considerable cash and loan guarantee backing from the provincial government.

And in return?

According to Nalcor, the company and its subsidiaries don’t pay  corporate income taxes. Twin Falls Power Corporation does pay corporate income tax, but Nalcor holds a one third stake in that small venture. The total value of Twin Falls electricity sales in 2010 was a mere $5.5 million with net earnings of $3.0 million.

Nalcor and its subsidiaries are liable for the provincial payroll tax and Churchill Falls (Labrador) Corporation does pay a small amount of gas tax.

The company has loan guarantees from the provincial government and is looking for more. But the current provincial government has been waiving any fees for those loan guarantees since 2008.  In 2010, that amounted to $9.1 million Nalcor didn’t have to pay taxpayers. In 2007 – the last year it paid a loan guarantee charge – the company paid taxpayers $13 million.

And that beats the only royalty any part of Nalcor pays for hydro-electricity.  Under the 1961 lease act,  Churchill Falls (Labrador) Corporation pays royalties and rentals.  That amounted to $5.0 million in 2008, $3.7 million in 2009 and $5.6 million in 2010, according to Nalcor’s annual reports.

The total Nalcor paid to the provincial government in 2010 for “accounts payable and accrued liabilities” – the accounting term for these payments – was $10.6 million.

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*Correction - 05 August:  Under the Hebron fiscal agreement, the provincial government may exemption Nalcor from royalties but to date it has not done so.

Here’s the full text of relevant part of section 8:

8.4 OilCo. 

(A) Sections 8.2 and 8.3 [guaranteeing no preferential treatment of parties] shall not apply to OilCo as long as OilCo is a Crown corporation of the Province.

(B) The Parties acknowledge that the Province may:

(1) make amendments to the Petroleum and Natural Gas Act;

(2) make amendments to the Royalty Regulations; or

(3) make an agreement pursuant to section 33 of Petroleum and Natural Gas  Act;

to adjust, vary or suspend OilCo’s liability for the payment of royalties on oil produced from the Lands. 

(C) The amendments or agreement in subparagraph B above shall apply to the royalties payable by OilCo on oil produced from the Lands, notwithstanding any other provision of this Agreement, to the extent such amendments or agreement does not affect the royalties payable  by any of the other Proponents on oil produced from the Lands. 

Bullshit then or now? Nalcor boss changes story on natural gas and Muskrat megadebt project

Ed Martin dismisses the idea that natural gas might be a sensible replacement for burning Bunker C at Holyrood.

Here’s the whole story from VOCM in the event they disappear it:

Nalcor has considered - and rejected - the use of liquefied natural gas at the Holyrood generating station as an alternative to Bunker C oil. Because of the current and projected cost of oil, Newfoundland and Labrador's energy corporation has decided to develop Muskrat Falls hydroelectric power on the Lower Churchill River.

Nalcor CEO Ed Martin, speaking on VOCM Open Line with Randy Simms on Tuesday, said the corporation would have to construct a plant to liquefy the natural gas, which is a very costly venture. The other alternative is to tap in to the international market for natural gas and have tankers, which are supplying markets abroad, offload material for Holyrood.

But from the that was then, this is now file, Martin didn’t always think that way.

A mere seven months ago, Martin sang a very different tune.

Back then, turning natural gas to electricity was one of the great opportunities that lay in building a line from Newfoundland to Nova Scotia. The Telegram covered Martin’s speech to the Board of Trade

Many of those opportunities flow from the Maritime link connecting the island portion of the province with the rest of the North American electrical grid.

One example: the possibility of generating electricity from natural gas, also known as gas-to-wire. It’s also an alternative to building pipelines to export natural gas.

So the question is:  was Ed Martin bullshitting in December or is he bullshitting now?

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Strangling energy innovation

The Telegram editorialists are finally putting it all together, at least when it comes to the provincial government’s energy company, the Muskrat Falls project and taxpayers:

It looks a lot like the province would prefer all its eggs in one basket. Or, more to the point, the province not only wants to run an energy warehouse, but actually wants to own it all as well. In its own way, that handcuffs consumers in this province. Because one company will decide the most effective way to produce and supply our power. We’ll just pay for it.

Monopoly control is exactly the premise of the Conservative’s energy plan released just before the last provincial election.  Very few people read it and there’s never been much debate about it. But make no mistake:  the heart of the plan is about strangling any alternative to whatever Nalcor wants to do.

It’s about absolute control.

And it’s about talking about wind energy while deliberately preventing any wind energy development outside of some very small token projects.

The reason is simple:  wind, small hydro and conservation would basically make the Muskrat Falls megadebt project utterly irrelevant.

The Telegram editorial notes that the Nova Scotia energy regulator just set a rate for private wind generating projects selling power into the provincial grid.  The rate is 13.9 cents per kilowatt hour.  As the Telegram reminds everyone, that’s below the 14.3 cents Muskrat Falls is forecast to cost;  and that’s if  - by some extraordinary miracle - the thing doesn’t go over budget.

Who pays the extra cost?

Why the people of Newfoundland and Labrador, of course. 

Full freight, plus profit.  Emera gets a share of the transmission cash inside the province as well.

Meanwhile, Nova Scotians will get a giant chunk of Muskrat Falls power for free;  if you want to take the $1.2 billion Emera will spend on a transmission line as payment for the power (it really isn’t), then the price they would pay comes out to be something like 3.5 cents per kilowatt hour.  If Emera wants more power than the stuff they get for free, they will pay about 9.5 cents per kilowatt hour for the extras.

Pretty sweet.

Well, except if you live in Newfoundland and Labrador.

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Okay, so it wasn’t a bus after all

But that doesn’t mean natural resources minister Shawn Skinner escaped completely unscathed from his episode on Backtalk on Wednesday.

Here’s the latest version of a story about comments Skinner made on VO’s afternoon call-in show.  The head on the story was “Retraction”:

The following story appeared on the web in a manner which left the impression that a minister was speaking about the C-NLOPB, when, in fact, he only referenced Nalcor in his call to VOCM Backtalk.

The government is refuting claims by a talk show caller that the auditor general cannot gain access to the books at Newfoundland and Labrador Hydro. On VOCM Backtalk with Pete Soucy, a caller said the provincially-owned utility would not allow an audit. However, Natural Resources Minister Shawn Skinner told the show that claim was untrue.

While the auditor general has complained that he was unable to get the information he wanted from the Canada-Newfoundland and Labrador Offshore Petroleum Board, he has never expressed any concerns about Nalcor or its predecessor, Newfoundland and Labrador Hydro.

There.

That’s clearer.

Not.

Here’s the actual “following story” that this supposedly replaces, although you’ll notice that in the version above, there actually isn’t the bit of the “following story” that it replaces.

The government is refuting claims by a talk show caller that the auditor general cannot gain access to the books from the Canada-Newfoundland and Labrador Offshore Petroleum Board. The A.G. complained recently that he was unable to obtain the information he was looking for.

However, the minister of natural resources, Shawn Skinner, replied on VOCM Backtalk with Pete Soucy that that claim is untrue. He said there is a provision for the auditor general to review commercially sensitive information.

What we actually have here is an entirely new version of Skinner’s comments.

In the new version, the caller was talking about Nalcor, not the offshore board. So Skinner didn’t throw the AG under any sort of bus. VO made the mistake. That was one of the possibilities in the earlier post and, frankly, it makes more sense given the very friendly relationship between the AG and the current administration.

All the same,  if you look at what Skinner was actually talking about, he did wind up raising a rather uncomfortable issue of another sort.  Skinner just reminds us all of  changes that Skinner and his colleagues made to the Energy Corporation Act in 2008 that effectively hid Nalcor from any meaningful public scrutiny and independent oversight.

That’s so much better.

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Wealth transfer

As nottawa noted on Tuesday, the net effect of a provincial tax cut on electricity and a rate hike for the province’s Crown energy company isn’t what might appear at first glance.

First, there’s not going to be a drop in cost for consumers, as some might have thought.  He based the calculations on a monthly bill of $300 per month before taxes:

$339.26 is greater than $339. The government isn't giving you a discount this October at all. In fact, your monthly bill is actually going up. So much for "reduc(ing) the cost of living for all consumers". And on a year-over-year basis, they're sticking it to you slightly more, because the increased rates take effect this month, while the as-yet-imagined HST discount won't start until October.

Second,

all of those millions of dollars … that are going "back" into the hands of taxpayers represent millions less on the government's books in the form of tax revenue. But an equivalent or slightly higher amount is now flowing from rate payers into NALCOR's coffers, where it can be safely spent with far less public scrutiny. (Like this, for example).

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Fortis on Lower Churchill: No thanks

Fortis had a chance to join in the Lower Churchill project but passed on it because the company has a policy of [not] taking a minority interest in government projects. [edit]

According to the Telegram’s Saturday edition, Fortis chief executive Stan Marshall told shareholders that:

“One of those principles is that we will not get involved in minority situations with governments. That is an absolute rule I have observed.” 

Fortis is currently partnered in the Waneta hydro project with a pair of power companies owned by the B.C. government to build a $900-million power plant.

“You’ll note we own 51 per cent,” said Marshall. “We would not have gotten involved with less than … 51 per  cent.”

Following the  shareholder meeting, Marshall was asked why the company avoids minority stakes.

“Simply when things go wrong we’d like to be able to rectify them,” he told reporters.

“If you’re going to go in with a partner you’ve got to know that partner very, very well, have a lot of commonality.

“Governments … their agenda can be very, very  different than a private enterprise.”

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Nalcor issues deceptive release linked to Muskrat Falls megaproject

The province’s energy company issued a deceptive news release on Thursday, apparently as part of its campaign to drive up electricity prices in advance of the Muskrat Falls megaproject.

The headline on the release states that:

Rising oil prices cause increase in Rate Stabilization Plan Adjustment for electricity consumers

The Telegram picked up the false headline and ran with it, even though, the first line of the release states that the company has merely filed an application for a rate increase.

So rising prices haven’t caused anything yet and they may not cause it at all.  The public utilities board must review the application and receive public comment before making a decision.  Many things could affect the application, including Nalcor’s has $10 million windfall from the Enel expropriation that they could apply before forcing customers to pay more for electricity.

That’s not the only misleading statement in the release, but it sure doesn’t look good when the headline is completely and utterly false to begin with.

The company also claims that “If we maintain the status quo of electricity generated through Bunker C oil at Holyrood,rates will continue to rise into the foreseeable future.”  That’s true but only if Nalcor neglects it responsibilities.  If the company promoted conservation, used its existing renewable resources to greater advantage and brought wind and new small hydro on stream, the price of electricity wouldn’t inevitably rise.

Nor will the cost rise if the price of oil drops.

Both of those things don’t draw the sort of connection implicit in the release between inevitable price increases and the idea that Muskrat Falls is a solution to the problem.

When a company has to rely on such deceptive claims, you can be sure it has no substantial arguments in favour of its proposal.

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Selling cheap power to Quebec

The always reliable labradore has unearthed some fascinating information about a power deal between Nalcor and Hydro-Quebec.

Bottom line:

• Nalcor took forever to publicly announce the deal, and
• They are selling power into Quebec for about 20%
• of what Labrador and Newfoundland customers are paying.

Not bad, eh?

They even get a volume discount, something that will not be available to the residential consumers who will be bearing the full cost of Muskrat Falls in the future just so Nalcor can sell more cheap power to customers outside the province.

That’s the only way the “economics” of the current proposal make any sense to the people behind the scheme.

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Muskrat Falls power may never go to New England: Nalcor

From Nalcor vice president Derrick Sturge:

"Whether all of the energy ever flows to the New England market - who knows? A significant portion of that (40 per cent) may never hit New England. It may end up in Prince Edward Island or New Brunswick. But the key is that there is the option to flow to the (New England) market."

And then he said the thing is going up with or without a federal loan guarantee.

Newfoundlanders should keep an eye on their wallets with this guy Sturge and his buddies around.

They have no markets for the power outside the province.

That’s why Sturge uses all the conditional language like “may”.  It may go there;  then again, it may not.

Count on the “not’ given that the front end of the story makes it plain that Nalcor and Emera couldn’t actually settle on a price.  Muskrat Falls power was just too expensive.

So in exchange for Emera partnering on a line to Nova Scotia they’ll get free power for 35 years.

Talk about the price is right.

Free is always the right price, except if you are Nalcor customers in this province.  For you guys, Nalcor will be jacking up Newfoundland electricity rates and adding another five billion or so to the public debt.

And for what?

Well, since Nalcor’s own figures show there is no demand on the island that couldn’t be met other ways besides Muskrat, the answer to that question remains as much a mystery as why Kathy Dunderdale threw Shawn Skinner under a political bus last week with the Matthews’ debacle.

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Pushback in New England on hydro lines

Environmental concerns are causing problems for a proposed electricity transmission line that could help carry Labrador electricity into the United States.

The Northern Pass project will carry electricity from Quebec into New Hampshire and on to the rest of New England.

Some local residents in New Hampshire are concerned that the proposed route will damage the state’s tourism industry. 

John Harrington is a retired newspaper publisher.  He told North Country Public Radio:

“What’s being threatened is the only thing we really have left, which is tourism. All for the convenience of people far to the south. And we’re going to wind up with this huge scar right down through the narrowest and most fragile part of New Hampshire.”

Then there’s the question of whether or not big hydro is actually green. Only Vermont currently accepts hydroelectricity from large dams as renewable and green and therefore eligible to count in state-mandated energy calculations.  Most New England states require that a percentage of electricity in the state come from renewable, green energy sources.  Both the American federal and some state governments also give cash incentives to renewable energy projects.

In some states, debate is already raging about the implications of renewable energy policies.  In last fall’s gubernatorial campaign, incumbent Deval Patrick’s Republican challenger included support for big hydro as part of his campaign platform. 

In Connecticut, Northeast utilities senior vice-president James Robb told a conference last November that without big hydro, “ it will be very challenging to meet those goals” of increasing the use of renewable energy sources to 25% of generation by 2025.  Robb said that there are projects but many are uneconomical.

Still, the big hydro projects don’t meet existing guidelines.

The main concern regarding hydro is that the flooding resulting from dams causes leaves and other foliage to decompose, emitting methane, one of the worst greenhouse gases. The Canadian officials [at the November conference]  argued that the water in their provinces is so cold that the leaves don’t decompose.

“I’m struggling here in New England with how New England is going to meet its renewable requirements. Without Quebec and Newfoundland & Labrador, you will struggle to hit that,” said Ed Martin, president and CEO of Nalcor Energy, which is based in the hydro- and wind-rich Newfoundland & Labrador. “Hydro is part of the mix that has to happen if you are going to meet the goals in New England.”

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A cheaper, green alternative to Muskrat Falls

Natural resources minister Shawn Skinner has hit on a cheaper, less risky green alternative to the Muskrat Falls megaproject.

He didn’t mean to do that, of course.  he was actually trying to justify Muskrat Falls by claiming the project will give the province energy security by allowing the island portion of the province to import power from the mainland in the event of an emergency.

The major way of doing that would be through the tie to Nova Scotia, according to Skinner. As the Telegram quotes Skinner:

“We’re anticipating to mostly use it to export excess capacity, excess electricity into the Atlantic provinces and the northeast United States, but in the event of a catastrophe … it would be possible for us to import electricity,” Skinner said in a recent interview.

That’s certainly true, but that isn’t a rationale for building a very expensive dam in Labrador and a very expensive power line from that dam to St. John’s especially when the island portion of the province doesn’t need the juice. 

But let’s just allow for a second that the island needs power. Skinner has actually given Newfoundlanders and Labradorians a far better option to meet the province’s energy needs that building Muskrat Falls.

At $1.2 billion, the line to Nova Scotia would actually meet the island’s energy needs and give the energy security Skinner is talking about. Nalcor or Newfoundland Power could import power from the mainland if it is needed. 

But more importantly the line from Nova Scotia and an upgrade to the line across the Isthmus of Avalon would help bring to market all that stranded central Newfoundland hydro seized by government in the botched expropriation.  In addition, it would allow for wind and new small hydro projects on the island.  Right now, there’s no place for that extra power to go when it isn’t needed on the island.  A link to Nova Scotia would take care of that.

And all that wind generation and small hydro – far cheaper than Muskrat Falls  - would help displace the thermal generator at Holyrood with green energy that is far cheaper than the $5.0 billion dam and power line project that is at the heart of Danny Williams’ legacy project.

The line would cost $1.2 billion compared to $5.0 billion for the dam and line to St.John’s.  Emera is already committed to the Nova Scotia line.  If Nalcor split the bill 50/50, then the actual cost of Nalcor would be a mere $600 million plus annual operating costs.  Nalcor and Emera wouldn’t need a federal loan guarantee or any federal financial help at all in that scenario.  Nalcor could fund its share from offshore oil revenues.  Heck, the provincial government could build it’s share of the line right now for cash since it has billions on hand in temporary investments.  Talk about the perfect go-it-alone, stand-on-your-own-two-feet, “have province” option.

On top of that, there are plenty of private operators ready to build wind projects on the island;  the only thing stopping them right now is Nalcor and government policy.  In other words, there’s no practical reason not to pursue the cheaper, green options.  Private sector companies could build the projects either alone or in partnership with Nalcor. 

Unfortunately, the tie to Nova Scotia is the last thing on the list of things to be built for the current version of the Lower Churchill. And right now Skinner and his colleagues are obsessed with a very expensive very risky project that could wind up going way over budget. 

Given the soft markets for electricity in the near-term, it would actually make economic sense to wait a while to build the entire Lower Churchill until the markets will buy the power with long-term deals.  That’s much better for consumers in the province who, right now, are staring at a government hell-bent on doubling their electricity rates by 2017 and saddling them with $5.0 billion in debt on top of the $12 billion they currently owe.

There’d be an added bonus in building the Nova Scotia line first:  Nalcor would have export infrastructure plus it would have a megaproject to its credit to prove to investors it can deliver complex engineering work on-time and at or under budget.

On top of that, a policy that encouraged private sector investment for wind development would go a long way to reversing the image the province has gained since 2003 of a banana republic where the government is closed for business.

Cheap, green energy to meet the needs on the most populous part of the province at a low cost and with the potential to bring new revenue from exports?

Job done.

No wind, please. We’re Nalcor.

The Telegram reported on Saturday that the provincial government’s energy company isn’t really interested in developing wind energy until after they get the hugely expensive Lower Churchill up and running.

Oh yes, and they also want to sell power to Ontario some day in the misty future despite the crowd up along having a bit of a glut of power.

Regulars readers of these e-scribblers will find the first one to be a gobsmacking revelation of the magnitude of finding out that Liberace was gay.

The second one’s just funny because it really a case of Nalcor putting a very brave face on a very badly bungled job.  After all, they rejected flatly Ontario’s interest in building the project five years ago. 

Then after another five years of trying desperately to interest Ontario, Quebec and anyone in northeastern North America with a electric socket in the power they came up with nothing other than this brilliant plan:

• make the people of Newfoundland and Labrador bear the entire cost of the project and,
• let Nova Scotians get 35 terawatt years of electricity for free.

And it is funny. 

Your humble e-scribbler doesn’t relish the thought of the New Brunswick- like electricity prices that are headed to consumers on the island – guaranteed to at least double within the decade – and the extra burden of hauling around all that public debt but what else can you do but laugh?

If you didn’t laugh at the sheer stupidity of the idea, you go completely off your nut.

Heck, you might even believe that the Conservatives were seriously interested in sound management of the province’s finances.

Right. 

Laughter it is, then.

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HQ signs new power deal with Vermont

Starting next year, Hydro-Quebec will ship power to Vermont under a new 26 year power purchase agreement, according to the Montreal Gazette.

The starting price for the power is US$58.07 per megawatt hour.

By contrast, and if it goes ahead, the recently announce Muskrat Falls project in Labrador will produce power in 2017 for about $143 per megawatt hour according to Newfoundland and Labrador Premier Kathy Dunderdale.*

Under the new agreement, Vermont utilities will purchase up to 225 megawatts of energy, starting in November 2012 and ending in 2038.

The agreement includes a price-smoothing mechanism that will help shield Vermont customers from volatile market prices, the utilities said.

Under the proposed 824 megawatt Muskrat Falls project, the only confirmed customers are Newfoundland and Labrador  - where the power isn’t needed – and Nova Scotia where Emera will receive 35 terawatt years of power in exchange for building a $1.2 billion intertie between Newfoundland and Cape Breton.

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*Edited to clarify the reference to Muskrat Falls

NALCOR issues update on Parsons Pond

News release as issued:

Nalcor Energy – Oil and Gas update on Parsons Pond drilling program

September 9, 2010, St. John’s, NL - Nalcor Energy – Oil and Gas (Nalcor) announced today it spud the second well of its Parsons Pond Drilling Program, Nalcor et al Finnegan.

This is the second well of a three-well onshore exploration drilling program. The program is providing valuable information which will enable Nalcor and its partners to further assess the petroleum potential in this area. “We expect this program will incent further exploration and advance the development of the basin,” said Jim Keating, VP [vice-president] Oil and Gas, Nalcor Energy.

The first well of the program, Nalcor et al Seamus, spud on February 16, 2010, reached the planned total drilling depth of 3,160 metres in May 2010 and is scheduled for further testing this fall.

Nalcor Energy has an average of 67 per cent gross working interest in three onshore exploration permits on the island’s west coast.  In addition to Nalcor Energy Oil and Gas Inc., there are four other  partners with varying holdings in the three permits: Leprechaun Resources Ltd.; Deer Lake Oil and Gas Inc.; Investcan Energy Corporation; and Vulcan Minerals Inc. 

Nalcor Energy – Oil and Gas is also a working interest partner in the White Rose Growth Project, Hibernia Southern Extension and Hebron offshore projects.

-30-

Media Contact:  Dawn Dalley, Manager, Corporate Communications  t.709.737.1315   c.709.727.7715  e. ddalley@nalcorenergy.com

Bury my lede at Muskrat Falls

The Proponent [NALCOR Energy] has failed to justify the Project in energy and economic terms and has not provided an assessment of greenhouse gas (GHG) emission reduction in possible export markets as required in the detailed criteria provided in the EIS Guidelines.

You can find that statement as an attachment to a letter, dated January 26, 2010,  from the joint review panel appointed to conduct the environmental review of the Lower Churchill project.

The attachment lists, in painful detail, the areas of the NALCOR submissions to date that come up so short that the panel could not commence full public hearings.

But just look at those words:  “failed to justify”. They tell you, in the clearest way possible, why the Lower Churchill project is on hold. That’s something premier Danny Williams didn’t admit, incidentally until May 2010, but it is true.

NACLOR failed to justify the project on energy or economic grounds.

And those deficiencies are the reason the provincial cabinet is not even close to giving the thumbs up to start construction.

Forget the Premier’s claims about Hydro-Quebec. They are simply a diversion, a smokescreen. They are, as noted here many times, a complete nonsense given all that is in the public domain and the Premier’s own comments in April 2009.

As a result of that letter from the joint review panel, NALCOR spent another eight months pulling together more information in an effort to meet the review panel requirements.  NALCOR submitted the information to the joint review panel on August 9 and the panel began distributing the information to interested parties for comment on August 12.

Interestingly, that’s the same day Premier Danny Williams held a surprise news conference to accuse the Government of Quebec of interfering in a funding request to Ottawa for a project that, as the public subsequently learned doesn’t actually exist. As it turns out, a power line between Nova Scotia and the island of Newfoundland is merely a hypothetical project that depends on construction of the Lower Churchill. Still, the local media dutifully reported his claims without question and the story went national just like a spark touched to dry embers in the hot, dry woods of a central Canadian summer.

Sheer bunk though, all the same.

You’ll also find that quote from the environmental panel in a Telegram news story, dated Saturday August 21*, under the headline “Nalcor weighs risk and reward”. The article starts out with this line:

The province’s energy corporation has laid out a possible development scenario for the Lower Churchill.

That isn’t news, by the way, even though the most important idea is supposed to go right at the start of a news story.  The development scenario and the rest of the stuff at the front and in the middle of the article is exactly the same stuff that’s been talked about by NALCOR and its predecessor dating back to the 1990s.  It’s the development scenario laid out in the original environmental submission this time around. The complete document record of the review is available online.

You have to read all the way to the end of the Telegram article, though, to find any reference to the environmental panel’s January decision.  And even then the fact the panel told NALCOR their work was fundamentally lacking is presented as if it were merely the innocent stimulus to further action by glorious team at NALCOR:

Timelines associated with the joint federal-provincial environmental assessment panel have dragged on longer than expected.

The panel said Nalcor’s previous filings were lacking.

A pesky inconvenience at worst.

But as a result of this little setback, NALCOR did all this wonderful work, which the Telegram has now told us all about.  Now the panel will “now assess those filings before deciding how to proceed.”

Yay, NALCOR.

In the news business, they call it burying the lede.  That’s a news story that starts out with secondary information and puts the main point farther down the piece.  News stories are usually written with the most important thing at the top and the least important information at the bottom.  Some call the style an inverted pyramid because the big part is on top.

The style evolved over time and it has a number of advantages.  People skimming quickly through a newspaper can get the main point of each story by only reading the first sentence or first paragraph.  Editors running the story who are also jammed for space can safely hack off stuff at the end without losing the important information.

What makes this Telegram story stand out is that it doesn’t just bury the news, it puts the kernel of hard news in a place where editors would normally cut.  Not only that, but people may not even read all the way to the end.  And if they only read the first bit, they’d be fooled into believing that everything is hunky dory with the Lower Churchill when – as a matter of fact – it isn’t.

This Telegram story could easily have been written in the provincial government’s communications department.  But it wasn’t.  And that’s where an article like this  gets it’s persuasive impact on readers.

In the marketing world, a favourable news story is worth considerably more than any amount of paid advertising. That’s because the news story comes with the perception that the news is vetted by a reporter and a layer of editors and ultimately the producer or owner. If it is in the paper or on the air, it must be newsworthy and the information in it implicitly comes with a stamp of truthfulness.

Research tends to bear out that perception.  A 2008 Ipsos poll of Canadians reported that 69% of respondents had trust and confidence in conventional Canadian news media to report the news “fully, accurately and fairly”.  A more recent Gallup poll of American audiences suggests that Americans have considerable faith in conventional news media, even if it is lower than Canadian.

The distortion of reality, the burying in a wider sense, isn’t just confined to this sort of writing. You can find it as well in the stuff that doesn’t get reported locally at all, ever. A good example of that more recently was a story in the Toronto Star on energy issues.  It appeared five days before the Telegram puff piece on NALCOR and it goes to one of the major problems with the Lower Churchill project:  a lack of markets.

The massive, state-of-the-art Bécancour cogeneration electricity plant is capable of powering 550,000 homes. At the moment, however, the only action its gas turbines are getting comes from the dehumidifiers that prevent them from rusting out.

Apart from providing steam for an industrial park neighbour, the plant, 150 kilometres northeast of Montreal, sits largely idle, victim of policies and planning in a province overrun with electricity.

Such is the extraordinary electricity surplus in Quebec that several hundred million dollars are being spent and lost each year dealing with the problem, and consumers are footing the bill.

Hydro-Quebec has so much surplus capacity that it can afford to shutter this plant and others.  The company is still building more hydro and wind capacity.  it forecasts a surplus for 2011 that is enough to power 77 billion 100 watt light bulbs for an hour.

Try and think of the last time any one of the conventional local media reported any discussion of the Lower Churchill that did anything but report government pronouncements or reaction to government pronouncements?

Keep trying. 

There might be one or two, but by far they are outweighed with the sort of stuff the Telegram ran in late August burying the news about the Lower Churchill from last January under a mountain of cotton-candy fluff.

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* 2009 average paid circulation for the Saturday Telegram was 40,166 according to the Canadian Newspaper Association.

Transcontinental claims the Telegram reaches 78% of adults in the St. John’s census metropolitan area and 88% of “managers and professionals.”

Updated 0848 to clarify a sentence.

Maine’s energy future

Maine Governor John Baldacci can easily list off the elements of his state’s energy future.

“This year Maine signed a Memorandum of Understanding on tidal energy with Premier Dexter of Nova Scotia, on offshore energy research. There is a huge development in Eastport with the Portland-based Ocean Renewable Power Company. We can learn from each other and share our experiences with each other.

“We are working collectively as a region. It’s important that we are in sync, especially with the issues surrounding Hydro-Québec and New Brunswick’s nuclear plans.

Newfoundland and Labrador didn’t make the cut.

Wonder why not?

Maybe it has something to do with the current administration’s obsession with a $15.5 billion wet dream for which there are neither markets nor money.  There are plenty of other generation and transmission opportunities, smaller and more financially feasible, even on the island of Newfoundland. 

None will be developed  - including a connection from the island to Nova Scotia – unless it involves the Great White What of the Lower Churchill.

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Williams, Dexter ink secret energy deal …but with whom?

A service contract between a public authority and a private sector concessionaire, where the public authority pays the concessionaire to deliver infrastructure and related services, Typically, the concessionaire, who builds the infrastructure asset, is financially responsible for its condition and performance throughout the asset lifetime, or the duration of the agreement.

P3 Canada Fund definition of public-private partnership

Newfoundland and Labrador Premier Danny Williams and Nova Scotia Premier Darrell Dexter have apparently signed a deal to build underwater electricity transmission between the two provinces in partnership with a private sector company or companies.

Williams revealed the agreement when he launched into yet another tirade against the province of Quebec during a hastily-called news conference in St. John’s last week.

Williams said that the two provinces applied for federal funds in late June under the federal government’s public-private partnerships infrastructure funding agreement.

But that’s all he said about the secret deal.

Six weeks after the provinces reached an agreement, the people of both provinces still don’t know when the deal was signed, the conditions of the agreement, how much taxpayers will be on the hook for or the proposed financial arrangements with the private sector company or companies the two governments are or will be partnering with.

In his scrum, Williams very obviously avoided giving a simple, direct answer to a question on costs. He said only that the project cost would be billions depending on which combination of dams and transmission routes NALCOR built.

The cost of the project is currently estimated at more than $14 billion, including an interconnection to the United States. A study completed for the Nova Scotia government earlier this year  - reported by the Chronicle Herald but no longer on line - put the cost of the interconnections between $800 million and $1.2 billion.

Williams also made the false statement in his scrum that the decision of the Regie de l’energie – presumably meaning the May decision – had blocked NALCOR transmission through Quebec.

Meanwhile, though, the public doesn’t even know the name of the company or companies involved in the new secret deal on an intertie to Nova Scotia.

And obviously, there has to be a private sector partner or partners involved even if the two provincial governments haven’t said anything about that aspect of the deal.

The federal government established the $1.2 billion P3 Canada Fund in 2007 to “develop the Canadian market for public-private partnerships for the supply of public infrastructure in the public interest.” The fund will supply qualifying projects with a maximum of 25% of the projects qualifying direct construction costs. 

Typically, public-private partnerships include private involvement in everything from design to the long-term operation of public infrastructure. As the fund’s annual report puts it,

[t]he P3 procurement model is unique in that the private sector assumes a major share of the responsibility for the delivery and the performance of the infrastructure – from designing the concept, architectural and structural planning to its long-term maintenance.

The public sector gets needed infrastructure at reduced risk and cost.  Among the examples cite din the annual is the Confederation Bridge between PEI and New Brunswick.

In order to qualify for assistance under the fund, the private sector partner must have a substantive, continuing role in the project.  It must design or build the project and finance or maintain and operate it. [Round Two application, s. 5.2] 

In a P3 project, the private sector partner would also typically share in the profits of a long-term project as well as adopt risk. In some scenarios, as the application appendices suggest, the project may offer potential spin-off money-making opportunities for the private sector partner separate from the core public interest in the project.

Infrastructure assets developed by public authorities are rarely used to generate additional revenue. In some instances, private sector providers are motivated to develop opportunities for revenue beyond the public authority payment stream and this could be used to reduce the cost to the public authority.

Applicants must submit a business plan for the project between September 2010 and March 2011.

While Danny Williams mentioned a connection between the secret deal and the Lower Churchill, the Nova Scotia intertie is a separate project.  

It’s also bizarre that Williams mentioned possible shipment of power from Nova Scotia to Newfoundland and Labrador.  Demand projections used in the Lower Churchill environmental review show that demand on the island isn’t strong enough to support development of the Lower Churchill, let alone warrant importing power from Nova Scotia.

And if the intertie carried Lower Churchill power, there’d be no need to send Nova Scotia power into Newfoundland and Labrador.

A connection to Nov Scotia without the Lower Churchill would facilitate the development of untapped alternate energy potential on the island of Newfoundland.

To do that, though, the provincial government would have to abandon the 2007 energy plan and Williams’ obsession with the Lower Churchill.

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Fact Check: the mainstream and Williams/Quebec

The following quotes all appeared in recent media stories about Danny Williams’s comments on energy developments and Quebec.

Neither of them is true.

1.  Montreal Gazette:  “…after Quebec's energy regulator refused to grant a request from Nalcor Energy, Newfoundland's energy corporation, for capacity on the Quebec power grid.’

2. CBC:  “particularly after regulators in Quebec in May dismissed Nalcor's bid to move power to U.S. markets on Quebec's transmission system.”

3.  Telegram (Transcontinental):  “after Quebec’s energy regulator decided not to grant Nalcor Energy’s request for capacity on the Quebec power grid.”

Here’s what actually happened:

NALCOR started talks with Hydro-Quebec’s energy transmission division on access to the Quebec grid in order to transmit power from the future Lower Churchill project.  HQ conducted studies based on the route and load options NALCOR indicated it was interested in studying. The goal of the studies were to determine whether capacity existed on the existing infrastructure to handle the new demand or if the companies (NACLOR and HQ) would have to build new transmission lines.

Premier Danny Williams has consistently stated that NALCOR would pay reasonable prices for transmission including the construction of new transmission facilities.

HQ completed the studies and informed NALCOR of the results.

NALCOR submitted five complaints to the Regie de l’energie for adjudication.  None of these was an application for access to the Quebec grid.

Among other things, NALCOR sought to stop the clock on timelines under Quebec’s open access tariff rules that give a company with power to ship 45 days to either book the space or to signal an intention to book the space.

As well, NACLOR sought a ruling on what was including in the Quebec management grid.  One effect of the ruling on one appeal, if NALCOR had been successful, would have been to displace existing power generation and transmission from Churchill Falls in favour of non-existent Lower Churchill power. 

NALCOR lost each of the five appeals.  None of the decisions prevented NALCOR from proceeding with acquiring space on the Quebec grid.

The Regie did not, at any time, refuse to grant, decide not to grant or dismiss NALCOR’s bid for access to the grid.

As it appears, NALCOR opted for its appeals because it did not have a project and power to transmit, nor did it have a prospect of developing it within the time frames originally proposed.  It opted instead for administrative delay tactics. 

In June 2010, Danny Williams told the House of Assembly that NALCOR did not pursue other contracts for transmission at the time  “because we did not have any power to sell.”

Earlier that same month, Williams confirmed that the Lower Churchill is up in the air indefinitely.  The Telegram buried the comment  - a nugget of hard news - at the end of another story.

However, when it did have power to sell, NALCOR successfully concluded a contract to wheel power through the Quebec grid.  At the time – April 2009 – Danny Williams declared that the transmission deal was historic as it opened the way for future developments. The NALCOR appeals to the Regie de l’energie predated the April 2009 deal.

The facts of the Regie decisions on NALCOR appeals are contained clearly in the decision of the Regie on NALCOR”s appeals. They are available in English and French from the provincial natural resources department’s website as well as from the Regie de l’energie in French.

It is understandable that mainland reporters might rely on other news reports without checking the details.

It is inexplicable why local reporters continue to make false statements when the correct information is right in front of their faces as to what actually took place.

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The Old Man, Old Habits and Old Chestnuts

labradore lays bare the foolishness that is the Old Man’s latest anti-Quebec tirade.

Score one for His Premierness’s crack research and intelligence team; after all it was just three weeks ago that Quebec’s intergovernmental affairs Minister — unlike some provinces, they actually have one — telegraphed his province’s opposition to federal subsidies for transmission lines.

…

Curiously, these nefarious Quebec plots seem to cycle at about three-month intervals; His Premierosity exposed the previous one back on May 12th.

And yes, ladies and gentleman, the last time the Old Man got in a back-risking lather was during the month his pollster was in the field collecting numbers.

Funny how that happens.

Regular readers of these scribbles will recall that the Premier’s foray into the anti-Quebec realm prompted this rather neat diagram of The World as the Old Man Sees It.  Thousands of you read it, no doubt laughed and – in a great many cases- downloaded it as the wallpaper for your computer desktop.

Perhaps it’s time to get some tee shirts made up. They’d go like hotcakes.

Levity to one side – and it is hard not to snort at this same old story being recycled yet again -  your humble e-scribbler would be remiss if there were not reminders of the following salient points:

1. There is no Lower Churchill project the power from which would presumably course down these currently non-existent but hopefully federally-funded transmission lines.  NALCOR has no customers and doesn’t have the $14 or so billion the thing will cost.
2. Not so very long ago, Danny Williams was working feverishly to get Hydro Quebec to take an ownership stake in the Lower Churchill, with no redress for the Churchill Falls contract included.  This would be – of course – completely contrary to his pre-2005 comments/commitments on the subject.  This is the biggest story of 2009, if not the entire Williams administration to date.  It remains one story that the conventional media in the province have steadfastly – and one must say now very deliberately – refused to mention for almost a full year. They have determined it is an “un-story” despite the evidence from natural resources minister Kathy Dunderdale’s own mouth.
3. There is no Lower Churchill project.
4. Your humble e-scribbler first discussed the whole idea of the permanent campaign and the quarterly poll goose in a series of posts in 2006.  There’s “The ‘Danny’ Brand”, “Playing the numbers”, “The media and the message” and “The perils of polling.”
5. There is no Lower Churchill project.
6. The bit from the CBC story after “particularly”  is false:  “Williams has had a tempestuous relationship with Quebec officials, particularly after regulators in Quebec in May dismissed Nalcor's bid to move power to U.S. markets on Quebec's transmission system.”  The Regie d’energie did no such thing. Anyone who read the decision in English or French would know that. Your humble e-scribbler’s challenge from May remains unanswered.
7. There is no Lower Churchill project.
8. This bit is absolutely true:  “when we have a situation when one province is deliberately trying to thwart at least two other provinces, and indirectly affect four other provinces, that's sad."  And the Old Man should know since the last time it happened, he did it.

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