Quebec appeals court decision on Churchill Falls contract no win for Newfoundland and Labrador #nlpoli

Media reports, political comments, and pundit opinions are wrong about the decision last week by the Quebec Court of Appeal in a case about the renewal clause of the 1969 Power Contract between Churchill Falls (Labrador) Corporation and Hydro-Quebec.

The Court decision leaves Hydro-Quebec with virtually all of the electricity produced from Churchill Falls and, most importantly, operational control of water flows on the river.  This will have an adverse impact on Muskrat Falls. As a result, CF(L)Co is likely to appeal the decision.

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The Quebec Court of Appeal ruled last week that Hydro Quebec retained operational control of electricity production at Churchill Falls. It made a minor change to an earlier decision by the Quebec Superior Court in a decision from 2016.

That’s why Hydro-Quebec issued a statement that it was satisfied with the outcome of the decision.

In other words, English-language media reports and political commentary got it wrong when they claimed “Quebec's top court rules for N.L. in Churchill Falls dispute with Hydro-Québec” (Canadian Press) or “A Victory For NL In Long-Standing Legal Battle With Hydro-Quebec On Upper Churchill” (VOCM).

The English-language reports focused on the idea that Hydro-Quebec could only buy electricity from Churchill Falls up to a maximum each month under the terms of an automatic renewal to the 1969 power contract between Hydro-Quebec and Churchill Falls (Labrador) Corporation.  VOCM went a step further in the mistake department my making it sound like both Hydro-Quebec and Newfoundland and Labrador Hydro could sell electricity from Churchills Falls. 

The clue that something was amiss in the English-language coverage is the statement from Nalcor that said the Quebec Court of Appeal “had ruled substantially in favour” of CF(L)Co on the question of Continuous Energy.

Here’s why.

Plain English , Disclosure, and Bad Public Policy #nlpoli #cdnpoli

Right off the start, let's affirm that Nalcor was created by an administration that was, from the time it took office, notorious for its efforts to flout the law in order to keep information secret.

Polling information was the first sign of the problem but that wasn't the last example.  There was a demand by the Premier's Office for $10,000 for copies of speeches delivered in public by the Premier and, ultimately, a complete re-write of the access law in 2012 to make legal what the government had already been doing to keep all sorts of secrets that should have been made public.

It's easy, therefore, to believe that the Energy Corporation Act,  passed in 2007,  follows the same pattern.  In many respects, you'd be right.  For example, we do not know why the government created the energy corporation in the first place.  In second reading on the bill,  then energy minister Kathy Dunderdale famously spoke only 101 words in her speech introducing it.  Not a word of her comments then or later ever explained why the government was setting up Nalcor,  what it was supposed to accomplish and how it would be organised.

The sections of the Energy Corporation Act that everyone is now upset about came along in early 2008.  They were introduced, as the story went at the time, to address concerns from the major oil companies who would be part of a deal announced later that year to develop Hebron.

The issue for this post, though, is about the chronic misrepresentation of what those sections say whenever people talk about the current controversy over embedded contractors.  Here's the way James McLeod summarised the issue from a decision - not yet public - from the province's privacy commissioner:

The Energy Corporation Act, which is the law which creates Nalcor and gives it all its powers and mandate, says the company should withhold information “relating to the business affairs or activities” of any other company that Nalcor works with. 

The OIPC [Office of the Information and Privacy Commissioner] ruled that billing rates of contractors would clearly apply, and that because broader information previously released by Nalcor could be used to calculate roughly how much individual contractors bill, individual company names tied to specific contractors should also be kept secret.

Section 5.4 of the Energy Corporation Act Act says that the chief executive officer may withhold commercially sensitive information belonging to Nalcor and its subsidiaries and shall refuse to disclose commercially sensitive information for a third party.

Notice that there are two parts to that clause.  The first gives the chief the discretion to withhold:  he or she *may* withhold.  The second part gives a mandatory exemption from disclosure:  he or she *shall* refuse to disclose commercially sensitive information

But you can't stop there because the rest of the wording in that section adds an important bit of information next.  The chief executive "shall refuse to disclose..."

where the chief executive officer of the corporation or the subsidiary to which the requested information relates, taking into account sound and fair business practises, reasonably believes...

falls into either of the two categories the section then describes, complete with characteristics.

In other words, there isn't mandatory, automatic, and broad secrecy for something that is left undescribed and vague.  The Act places the decision at the discretion of the chief executive officer about whether or not to disclose information AND gives that person some guidance as to what "commercially sensitive information" means beyond the definition in the act at section 2 (b.1).

In the embedded contractors case,  Nalcor boss Stan Marshall determined what would go out the door and what wouldn't, based on whatever advice he got from lawyers.  No one has apparently asked Stan to explain his reasoning and, for sure, no one at Nalcor these days is likely to volunteer a simple piece of factual information.  These folks, after all, still release pdfs of documents that are designed to frustrate copying and pasting for data analysis.

We can make a reasonable assumption, though, that because some of the contractors  - maybe the one-man shops - consider the information to be commercially sensitive for them,  Nalcor won't release it.  That's a legitimate protection of third parties. Nalcor just needs to explain that.

As for the privacy commissioner, it's doubtful he buggered up the plain English of all this.  And from McLeod's story, it appears that the commissioner has picked up on the idea that two partial disclosures could lead to the disclosure Marshall decided against.  That's legitimate as well.

But before we think about changing this section of the Act,  everyone needs to get their facts straight, stop, and think hard.

Bad public policy usually comes from  a lack of consideration. That includes times when there hasn't been adequate debate in the House but it also comes, as in the recent Muskrat Falls inquiry, when the government makes a hasty decision based on something on Twitter or open line that itself was driven by a few noisy voices with a raft of agendas and interests, and often precious little knowledge of what is going on. That doesn't mean we should not have an inquiry but it does mean government folks should have made a decision based on facts, information, and knowledge not a few people losing their minds on Twitter..

In the case of the MF inquiry,  three of the terms are actually already known and one of them - the PUB exemption - actually dates from 1998.  It looks for all the world like the folks who drew up the terms of reference didn't know the facts themselves or what they were really trying to find out.  They also left out crucial time periods (anything before 2012)  and crucial actors (all the politicians) in the debacle.  The PUB bit is actually just a sideshow.  The result will be a long, costly, and ultimately inconclusive commission that will miss most of the details needed to avoid a similar debacle in the future.  That's the opposite of what the government promised when it announced the terms of reference and the commissioner.

Words matter.  Disclosure is important.  Facts are crucial.

And in the embedded contractors story,  that last element is in short supply.  We could all make lots of mistakes as a result, just as we made lots of them in the past - like in Muskrat Falls - by ignoring facts that were,  as in the Energy Corporation Act,  in plain sight all along.

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Ball, Coady confirm secret talks with Quebec on Labrador hydro #nlpoli #cdnpoli

Premier Dwight Ball confirmed in the House of Assembly on Wednesday that officials from this province are talking to officials in Quebec about significant development of hydro-electric assets on the Churchill River.

We know that something very serious is going on  - in secret  - because of the way that Ball and natural resources minister Siobhan Coady answered questions in the House from opposition leader Paul Davis about recent media reports about comments from Quebec and Ball's reply to the story.  Ball was very obviously playing with words at every turn in the House. Every answer to an opposition question had a too-cute-by-half quality to it,  giving the unmistakable feeling that Ball wasn't telling anything close to the truth.

Ball has done this before, most recently when ambushed by reporters on his return from a golf and hockey vacation in the middle of the Muskrat Falls protests.  With his public support in the low double-digits,  and with a severely damaged reputation from his performance in the the Ed Martin fiasco in the spring,  Ball's passive-aggressive performance in the House on Wednesday betrays a rather curious strategy.  Ball's performance just reinforces the negative impressions people have of him  - he has trouble telling the truth - without winning him any new supporters.

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.

CF(L)Co v. Hydro-Quebec (Court of Appeal) #nlpoli

The full text of the Quebec Court of Appeal decision in Churchill Falls (Labrador) Corporation v. Hydro-Quebec:  pdf

Sucks to be you Update:  Did CBC NL suck back this tweet linking to their story on the Churchill Falls decision:

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What's next for Nalco? #nlpoli

Just so that everyone is clear on this, it has taken Dwight Ball every single day from May 23 until June 2 to admit that he knew Ed Martin had received a severance payment on his departure from Nalcor despite the fact that Martin has supposedly resigned.

In effect,  Dwight Ball - as the chief representative of the only shareholder in Nalcor  - approved of the severance with his silence.  The same thing went for natural resources minister Siobhan Coady.

What's more, Ball reminded us all again that whatever happened with respect to Martin's contract was solely at the discretion of the Nalcor board, which has since resigned.

Right.

So what exactly has Dwight Ball's knickers in such a bunch?

Seriously.

Offense and Defense #nlpoli

If you're not on offense, you are on defense.

And in politics, if you are on defense, you are losing.

The Liberals wound up on the defensive yet again Wednesday with the resignation of Ed Martin and the entire Nalcor board.

To be sure, Williams-era appointees like Martin or former board chair Ken Marshall have been responsible for the mess that is Muskrat Falls. The province will be better off seeing the backside of them if only because they can no longer make a very bad situation they alone created all the worse.

The political problem for Premier Dwight Ball and the Liberals is in how Martin left.

Actions and words #nlpoli

The provincial cabinet has known since January - at least - that the powerhouse at Muskrat Falls is only 15% completed despite a huge payout to the contractor.

That's what Nalcor reported to the committee of provincial bureaucrats named by the Conservatives to get a report from Nalcor every now and again.  They can't do anything else except receive the reports and pass them on to cabinet.  They still do it under the Liberals.

The company hired by cabinet to conduct yet another review of information supplied by Nalcor that government already had included a little table of progress on major components at Muskrat Falls.  The powerhouse is a major component.

But it isn't on EY's table, shown at right and released earlier this month.  It's lumped in with "spillway" and shows it is supposedly almost 40% complete.

There's a lot of difference between 15 and 40.

Old whine still sour #nlpoli

"I'm concerned that we have an aging asset,”  natural resources minister Siobhan Coady told CBC in explaining the most recent break downs at the Holyrood generating station.

About two years ago, in the midst of darknl,  then-Premier Kathy Dunderdale said pretty much the same thing:  “We've talked incessantly, it seems to me, over the last number of years about the aging facility in Holyrood and the fact that that facility needed to be replaced.”  Before that, Nalcor and its supporters used “aging infrastructure” and the inevitable climb of oil prices as the excuse to build the multi-billion dollar Muskrat Falls project.

The old whine in new skins isn't any sweeter in the ear whether it is coming from Coady or Dunderdale.

Indeed, what’s most disturbing about Siobhan Coady's media interview is that in the two years since darknl we have learned that the lines someone fed Coady are not true.

Yet someone still fed Coady the false lines and Coady used them.

Hyping the stock, yet again #nlpoli

Any oil company seriously interested in bidding on an exploration license offshore Newfoundland and Labrador isn’t likely to need the hyped presentation by the provincial government Thursday.

Exploring offshore is expensive.

Always has been.

Always will be.

Exploring beyond the 200 mile exclusive economic zone, in upwards of two kilometres of water, just makes the oil and gas all that much more costly. to find and more costly to produce.

The Line They Didn’t Need #nlpoli

For some time now, Nalcor has needed an extra line from Bay d’Espoir to increase the capacity across the Isthmus of Avalon. 

They just kept finding excuses not to install it.

In January 2014,  Nalcor chief executive Ed Martin told CBC’s Ted Blades that  the line would be the most expensive option with additional generation on the Avalon being more cost-effective.  Nalcor’s analysis, according to Martin, showed there was no justification for the extra line. 

Reality check for the Ontarians, please #nlpoli

If nothing else, media coverage about energy talks between Ontario and Newfoundland and Labrador shows just how much people don’t know about what is going on in the country.

Not a crowd for half measures,  the National Post ran a story on Monday morning that was rife with basic factual mistakes.  They even started the piece with a statement that had two facts in it, both of which were simply not true.

“Ontario is the latest customer to line up to purchase Newfoundland and Labrador’s growing supply of hydroelectricity…”

That’s gotta suck, big time #nlpoli

All the country’s provincial and territorial leaders – except for Saskatchewan and Nova Scotia – are in Newfoundland and Labrador this week for their annual conference.

What an  opportunity for Paul Davis in an election year.  He gets to show himself off looking all leader-like and premieral or whatever the word is for it.

The first day of the meeting the premiers and territorial leaders discussed aboriginal issues in Goose Bay.  In the afternoon, Davis laid on an all-expense-paid trip to the super exciting megaproject at Muskrat Falls.

And then everything went horribly wrong.

Confidence Builder #nlpoli

The public utilities board asked Liberty Consulting to review Hydro’s decisions in 11 projects.

Hydro is looking for a rate increase.  The board wanted to make sure the increase was justified.

Of the 11 projects, the consultant found:

• “Liberty found Hydro’s decisions and actions imprudent in seven of the eleven specific projects or programs set for examination by the Board. Liberty identified adverse cost consequences associated with six of these seven projects or programs, laying a foundation for consideration of the propriety of their recovery from customers. Liberty found planning and execution of the seventh project imprudent, but concluded that Hydro would have borne essentially the same costs even in the absence of such imprudence. 
• Of the remaining four specific projects or programs, Liberty found that Hydro had acted prudently with respect to three. Liberty did observe significant weaknesses in the supply planning process related to one of these projects, the new combustion turbine, but not to a degree that would constitute imprudence. For the fourth, Liberty concluded that while Hydro acted prudently in making its decision, some of the costs incurred were influenced by imprudent prior actions.
• The twelfth area of Liberty’s review consisted of an identification of 2014 actual capital costs and operating expenses that could be attributed to imprudence. This identification lays a foundation for later efforts that seek to identify any such expenses that may form part of Hydro’s estimation of a 2014 Revenue Deficiency of $45.9 million.”

“Liberty found that the costs that Hydro could have avoided in the absence of the instances of imprudence found by Liberty were:

• Actual 2014 capital costs of $10.9 million (as reported by Hydro)
• Actual 2014 operating expenses of $13.4 million.
• Estimated 2015 operating expenses of $2.6 million.

With that sort of report, you just know that Nalcor has just gotten everything exactly right at Muskrat Falls.

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The Jewel in the Crown #nlpoli

If you are a Newfoundland politics junkie who hasn’t been reading Uncle Gnarley,  then you’ve been missing out.

You can fix that by reading the latest offering from Gnarley – a.k.a. Des Sullivan – about Nalcor and the idea of having bureaucrats play at being entrepreneurs.

While you’re at it,  you might also want to read a couple of SRBP posts to go with it:

• “The sound of silence” and
• “Newfoundland and Labrador Hydra”

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Nalcor promising Boston cheap electricity courtesy of NL taxpayers #nlpoli

Muskrat Falls is over budget, big time. The latest estimate is $7.4 billion and climbing on a project that was forecast at $5.0 billion just four years ago.

The project will wind up behind schedule, most likely.

There’s a good chance Nalcor won’t have enough control over water flows on the Churchill River to meet its forecast firm generating capacity from the smaller dam let alone the theoretical project at Gull Island.

But that hasn’t stopped Nalcor from pitching Muskrat Falls and Gull Island to the good folks of Massachusetts with electricity at prices that would be – conservatively – about one third of what Nalcor’s owners will have to pay for electricity from Muskrat Falls.

Nalcor following wrong energy path #nlpoli

Think back to last December.

A couple of Nalcor guys bragged about the company’s strategy of importing electricity when they needed during the months when prices were low and then exporting our own electricity when electricity prices were high.

Brilliant idea.  It worked for Hydro-Quebec for most of the past 50 years.

There’s only one problem:  it won’t work any more.

The Sound of Silence #nlpoli

With all the talk the past couple of days about the relationship between the provincial government and the provincial energy corporation, it might be a useful time to ask a fairly simple question:

What does Nalcor do?

Might seem like such an obvious question that it you are laughing, but hang on a second and let’s see what turns up if we go back and look at what the Conservatives said in the past about the energy corporation.

The Confidence Campaign #nlpoli #darknl

The provincial government started its campaign to gain control of the political agenda on Thursday with its announcement that it would appoint someone to do something sometime in the future.

The conventional media outlets didn’t report Premier Kathy Dunderdale’s announcement that way.  The Telegram, for example, called it an “independent” review but acknowledged in the second sentence of its brief story that Dunderdale “doesn't know the shape or scope of the review”. 

CBC went farther in its online story, saying that the “independent review” would “look at the current electrical system in Newfoundland and Labrador; how it operates, how it is managed, and how it is regulated as the province moves from an isolated system to an interconnected system.”

But really, all of that is just an unsubstantiated claim, given that the news release includes these words in a quote attributed to the Premier:

…over the next six weeks my government will work to draft terms of reference and identify an independent body to conduct a review.

Crises within crises #nlpoli

The action of the Soviet Union, Winston Churchill once said, “is a riddle, wrapped in a mystery, inside an enigma.”

Some people in Newfoundland and Labrador likely felt that way after Day Three of Kathy Dunderdale’s one woman crusade to deny that the province is experiencing a crisis.

Most people just cock their heads to one side and mouth the three letters W, T, and F.