Hydro: different province, same political problem, same political solution

The province is different  - Ontario, this time – but the raw politics underneath a pledge to cut electricity rates for all homeowners is pretty plain to see.

The government has already rolled out tax measures for residents of Northern Ontario as well as seniors to give them a break on their hydro bills. But amid worries that hydro rates will become an election issue, the government is under pressure to introduce measures covering a broader group of Ontarians.

Speculation was rampant throughout the energy industry that the government plans to tackle hydro rates. But energy sources said an across-the-board rate freeze is unlikely. Such a move would leave the Liberals in the unenviable position of following former Progressive Conservative premier Ernie Eves, who froze household and small-business electricity rates in 2002. A McGuinty government rate freeze would repudiate its assertions made in 2004 that consumers would have to pay the real cost of electricity, said energy consultant Tom Adams.

Freezing or cutting energy rates is pretty much the stock vote-buying method found in several provinces, including Newfoundland and Labrador. 

And the arguments tossed out by the local New Democrats and the province’s Reform-based Conservatives are still energy policy bollocks.

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The politics of energy subsidies

From the Atlantic Institute for Market Studies comes a timely rejoinder to the policy in Prince Edward Island of subsidising energy prices out of tax dollars. The arguments in this post refer to the New Democratic Party policy of taxing tax off home heating prices but the concept is the same. The piece is also a timely one for Newfoundland and Labrador where Lorraine Michael recently embraced the policy.  

The argument against the policy of cutting home heating taxes is simple:

It gave people with more than sufficient ability to pay a subsidy they did not need. It encouraged continued consumption at unsustainable levels and it helped the poor not by treating the problem (inefficient homes and too much consumption), but by treating the symptom (high electricity bills).

In Newfoundland and Labrador one suspects that political parties eager – or desperate – for votes in the coming year will lay this sort of policy on thickly to try and buy them up. 

The ruling Conservatives, despite their supposed reform-based Conservative philosophy, are already trying to sell a future deal on the Lower Churchill as a guarantee of stable prices. They don’t talk about the huge subsidies the thing may well involve or that the whole thing will add enormously to the public debt. Incidentally, the likely reason the Premier has stopped referring to loan guarantees as loan guarantees is that he is acutely aware that any Lower Churchill project as he has proposed it will – inevitably – demolish once and for all any claims about the current Conservative administration’s performance in controlling the public debt and deficit.

It’s all bollocks of course.  Energy prices in the province will stay stable anyways without the Lower Churchill.  NALCOR’s own energy demand forecasts don’t support any such megaproject to supply juice to the island portion of the province.  And with a bit of conservation and efficiency, what increased demand there is could go down.

That’s one of the reasons why this AIMS article is interesting:  it specifically points to conservation as an economically sound policy:

the need for some electricity does not undermine the basic math that it is still cheaper and more efficient and, long term, more sustainable to reduce consumption.

At the same time, providing subsidies to allow everyone, but especially low and fixed income Newfoundlanders and Labradorians, to improve the energy efficiency of their homes would treat the problem of high heating bills rather than the symptom.  At the same time, leaving the prices to reflect the cost of production would promote conservation and efficiency.  The whole idea is progressive socially in addition to being economically and ecologically sound.  It beggars the imagination to figure out why political parties would head down a road of subsidies they know is simply  unsustainable.

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Time to retire the old schtick

On a certain level, you can’t blame Danny Williams for saying the same stuff over and over.

After all, audiences like today’s gathering at the Board of Trade keep lapping it up.  They turned out in force, chuckling and applauding in all the right places as if they knew the script by heart.

As the scrum video shows, local reporters from the province’s two television networks never tire of asking him the same old questions over and over, getting the same old answers over and over,  and then passing them yet again to the audience at home as if they heard it for the first time.  

But while some people never seem to tire of re-runs, there are likely an ever-increasing number of people in the province for whom the province’s political news is starting to look like watching some borscht-belt comedian on a 1970s American talk show.  Decades ago, the guy had one joke that sort of worked, yet the host thinks the old codger is a comedic genius.  So he flies the guy back from Florida to inflict him on his audience over and over again.  In the two channel universe of the 1970s or even the 13 channel cable world of the 1980s, audiences didn’t really have much choice.

Just to make sure you have a clear picture in your head, though, think Bobby Bittman from The Sammy Maudlin Show.

Then think of a parody of Bobby Bittman on The Sammy Maudlin Show.

Now you are getting close to the reality that is Wednesday’s vintage Danny Williams speech.  Take an endless recitation of how much money government spent on this that or the other.  Rattle off supposed triumphs. Talk of a new attitude of “confidence, courage, maturity and integrity”. Cliches and pat phrases interspersed with random quotations from Bartlett’s.  As formulaic as The Ropers.

The result is jarring even beyond the idea that merely spending increasing amounts of cash is the only measure of success, that running massive deficits displays “fiscal discipline” or that calling Bank of Canada Governor Mark Carney “a very powerful individual” is not trite.  With all the bravado and self-praise thrown liberally around as well, one has a speech that reeks of insecurity, fear, and childishness.

For Newfoundlanders and Labradorians, the speech was surely embarrassing. What else could it be when anyone  - let alone the Premier of a province – speaks of noble virtues, promises to “take no prisoners” in a political war with Quebec over the Lower Churchill, then immediately afterward quotes Mohandas Ghandi and yet remains completely oblivious to the stupidity of doing so in such a context.

On one level no one could blame any politician for doing what appears to work politically, but on another level,  the Premier’s performance at the Board of Trade was also a sign of an administration that has – to put it plainly - run out of ideas.

That lack of ideas is hurting the province.  The Premier has neither the markets nor the money to erect his $14 billion wet dream.  If he did, then Danny Williams would be building it instead of talking about it.  In the meantime, his obsession blocks out any development of wind or other energy power in the meantime.  That – as strange as it seems – is the government’s energy policy.

What’s more, the opportunity that does exist south of the border is being squandered in imaginary political squabbles.  Neil Leblanc just finished his appointment as Canadian consul in Boston.  As he noted in a recent interview, the northeastern United States is a ripe a lucrative market. 

But, Leblanc noted, it is not good enough for Canadians to say simply that we are here so “Come buy from us”.  In other words, it is not enough to say we have the most phantasmagoric undeveloped green energy planet in all Creation.  Canadian provinces cannot sit and wait for business to fall into their laps. The New England states themselves are also building new energy sources.  Other American states are already building new generation and transmission facilities to supply the eastern seaboard.

"There is time for the Atlantic provinces and Quebec to put their best foot forward. We have a lot of natural resources here, which we can hopefully take advantage of," he said. "It's a win-win situation if we can do it."

It could be a win-win situation.

Unfortunately, as long as Danny Williams uses the same speech over and over again, the best foot is not going forward. 

Far from it.

It’s time for the old schtick to retire.

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Related: 

• Bury my lede at Muskrat Falls
• The Old Man, Old Habits and Old Chestnuts
• Reach for the Screech
• Five years of secret talks on Lower Churchill;  the Dunderdale audio

Statoil explores renewables

Norwegian energy company Statoil is expanding its interest in renewable energy.

The company plans to develop the world’s first floating offshore wind farm.  Possible sites include one off Maine, two off Scotland or another off Norway.

Statoil has other offshore wind farms already in development.

Meanwhile, in Newfoundland and Labrador, the provincial government is focusing its energy future on eventually developing a $15.5 billion hydroelectric megaproject.  According to the 2007 energy policy, everything else is on hold until the future of the Lower Churchill wet dream is settled.

Unfortunately, the future of the Lower Churchill, a.k.a. the Great White Whale, is also up in the air indefinitely.

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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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A summer like no other: torquing in Technicolor on the cheap

One of the great things about summer for perpetual campaigning is that cabinet ministers can spit out sheer nonsense and reporters for the local paper won’t even bother to ask pesky questions.

Like how will an imaginary project could ever  lower carbon emissions in the real world.

And in this bucolic world, where minister’s publicists apparently don’t have to pitch a puff piece, even one of the most incompetent of ministers can sound like she knows something.

The result is better than the stuff pumped out by the official government publicity system:  in this case, the reporter’s name goes on the piece and it appears in a local newspaper. Having gone through a supposed editorial review, the resulting piece suddenly has way more credibility than it actually deserves.

Charlene Johnson – arguably the second biggest bumbler in the current provincial administration  - recently got the chance to dazzle readers of the Western Star with her thoughts on how the province has an opportunity to lead the world in tackling global warming.

“There are opportunities to use energy more efficiently, displace fossil-fuel based power generated by Holyrood with renewable energy from Lower Churchill, and ensure we continue to manage our land and forests in ways that store greenhouse gases rather than release them to the atmosphere,” Johnson said.

If Johnson knew something more than her briefing books or was willing to speak frankly, she’d acknowledge a couple of relevant points here.

The most obvious is that the Lower Churchill doesn’t exist and likely won’t exist within the next decade or two.  As such, any ideas about reducing emissions from Holyrood using the Lower Churchill is just pure bullshit.

Second, the government’s energy plan places economic benefits ahead of environmental ones.  It isn’t about sustainable development or reducing the province’s greenhouse gas emissions.  It isn’t an energy plan or environmental plan as much as it is a business plan.

Everything is held hostage to the LC anyway, but the project talks about ways of building new energy generation for export.  It doesn’t address local needs at all.  If it did, the plan would set policies that encouraged energy conservation on the island and the development of new generation that has a low environmental impact. 

You can see this rejection of local needs in the Lower Churchill environmental review documents, for example. The first thing that strikes you is that the LC isn’t needed to meet current or anticipated energy needs on the island. 

Those demands are so minor that a combined program of conservation (including improved efficiency) coupled with new generation (more than 54 MWs of wind) would meet any demand anticipated in the LC documents.  And just remember that document was drawn up in a world where all that hydro from Abitibi’s Grand Falls-Windsor operation was making jobs in central Newfoundland.

As for Labrador, the Lower Churchill documents plan to continue using diesel generation, despite the fact power lines for the Lower Churchill would pass right by some of the communities it plans to leave on diesel generation. As astonishing that seems, that is the project the province’s environment minister is holding out as a way of dealing with emissions in the province.

This is not a new idea, by the way.  The 2005 climate change action plan contains the same fundamental bias in favour of large, expensive megaprojects.  It anything but a modest development of wind energy because wind is supposedly intermittent.  However, experience elsewhere shows that wind can deliver consistent power levels if a series of projects over a wide area are joined together and managed effectively.

There are opportunities for Newfoundland and Labrador in the fight against global warming.  The problem is that the provincial government policy rejects ideas that could take advantage of those opportunities or puts obstacles in their way.

Anyone can see the fundamental problems in the provincial government’s policy – it doesn’t actually have a sustainable development act or a green energy policy, for example – if one had the time or took the time to read.

Fortunately for Charlene, the crowd at the Western Star didn’t have the time to get ready for her.  As a result she gets to spout complete bullshit and have the Star present as if it were gold.

What better way for a bumbling minister top spend August than torquing in Technicolor on the cheap.

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NALCOR: the power of constipation

Supposedly all we need is to know that the provincial government’s energy corporation, d.b.a. NALCOR, is “aligned” and will take all the time it needs in order to arrive at a “quality decision” on whether or not to install emission control equipment on its diesel generating plant at Holyrood.

For now, let’s leave three things out of this discussion.

First, this isn’t the place to rehash the nonsense which is NALCOR’s two, inherently contradictory position on Holyrood.

Second, and related to that, let’s not draw too much attention to the fact that NALCOR chief executive Ed Martin’s proposed solution to the $600 million cost of cleaning up Holyrood’s act is a multi-billion dollar pair of hydroelectric dams in Labrador and a giant set of power lines, the lines by themselves estimated to cost more than three times the scrubber cost, that will stretch out to the Avalon.

And third, let’s not note that NALCOR’s own capital plant maintains that Holyrood will have to continue running for the next two decades at at least one quarter to one third its capacity.  In other words, it won’t be shutting down at all.  As such, NALCOR will have to spend the $600 million or so in order to reduce noxious emissions from the plant regardless of whether the Great White Whale gets built or not.

Why Ed Martin and his boss, the Old Man, continue to pack around about this and bullshit the people of the province is beyond rational comprehension.

Instead of that, let us focus Martin’s suggestion that maybe some new types of generation might allow NALCOR the dirty power at Holyrood with some nice clean stuff. That might be cheaper, sez Martin than the environmental cleaners.

For starters, Martin is already sitting on juice to help replace Holyrood.  He got it as a gift from Danny in December 2008.  The only problem – apparently  - is that the interconnection between the Avalon and the rest of the island cannot carry the whole load. 

NALCOR needs some cash to make things happen. NALCOR has the cash, of course, or the capacity to borrow it, thanks to some generous gifts of public money  - yours and mine – courtesy of the Old Man and his crowd. The company is in a nifty position, frankly, since they get to play at being an oil company without having to pay all the costs.  NALCOR won’t pay the owners of the resource  - you and me - a penny in royalty for the oil we’ve given then.  We get the liability and the cost.  Martin and his crowd get the cash.

Pretty sweet deal, if anyone is asking.  And frankly, given the generosity of the current administration with resources and cash – yours and mine - it wouldn’t be too much if you and me expected Martin to install the cleansers and the new line most ricky tick.  He can spare us the bullshit and just get on with the job.

But it is when Martin mentions wind energy that he turns from a purveyor of  annoying bullshit to profound disingenuousness.

As Martin knows, this province has the smallest amount of wind power installed or under development of any province in the country.  It is a mere 54 megawatts in two sites. Tiny Prince Edward Island has more than twice that already on the go.  In short, this province, the one the Old Man and his retinue proclaim as a current and future energy warehouse is so far back in the field that it is not even close to being able to see the far distant ass the of the last place contender for the Crown.

There are two reasons for that.  Assuming that Martin read the Lower Churchill environmental applications he already knows that there is actually no reason to build the LC if the main reason is shipping power to St. John’s.  There’s really no need for additional generating capacity and, as it stands, NALCOR can now reduce Holyrood to virtually nil capacity.

As for the rest of the province, that is, the largest bit of it, the reason there are no wind farms under consideration is simply because NALCOR and the province don’t want them.  Official government policy subordinates any new generation, from small hydro to wind, to the Great White Whale project.

Put another way, innovation is dead as a doornail in Newfoundland and Labrador. The provincial government’s energy policy is working against the best interests of the people of the province.

Ed Martin’s comments to CBC recently could just as easily have been summarised with a parody of the old Mexican bandito line:  “Innovation?  We dun need no stinkin’ innovation.” Martin merely affirmed the power of constipation that afflicts the administration and its energy company, at least when it comes to innovation and energy.

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A plan versus not-a-plan

Rhode Island just unveiled its green energy plan.

You can tell it is a plan because there are clearly defined targets with measureable goals to be achieved in order to reach the goals. The plan centres on four subjects:

1. advanced manufacturing,
2. energy efficiency,
3. innovation, and,
4. wind power.

The plan maps out activities in two phases within each of the four areas. There’s also a reference to a state energy strategy. Notice that the strategy has some defined policy goals:

• increase energy supply
• reduce demand, and
• stabilize prices.

These are goals that relate to environmental sustainability as well as affordability (for consumers). 

Compare that – if you dare -- to the local provincial energy “plan”.  There are no clearly defined goals or targets. There are simply vague statements like “environmental leadership”  or “effective governance” that are labelled as goals.

No one can tell where the province is going in this plan.  That’s just as well because not only won’t we know where we are when we get there, there really isn’t any set of signposts or milestones that can be used along the journey so that people can tell if we are headed in the right direction in the first place.

Rather, you can find vague platitudes like this one:

Ensure that any future fiscal regimes provide maximum returns to the people of this province and are designed to respond to changing
circumstances.

In places, actions become ends in and of themselves.  The equity stakes and development of the energy corporation are set as actions goals but there is no clear description of how they relate to what the plan refers to as goals. One can wander through the pages and never understand how having a state-owned energy company with a merely 10% of a particular project gives “environmental leadership”, for example.

Plans -- properly laid plans – are a key part of making government effective, accountable and transparent.

The Rhode Island plan contains all the necessary elements of a plan.  Look at it five years from now and you’ll be able to tell quickly and easily if the state is making progress to actually reach the targets set.

The Newfoundland and Labrador has lots of words in it but there is no way of knowing if the targets are being met. What’s worse, the goals aren’t really goals.  if owning a 10% equity stake was a major objective, the provincial government would not, at the same time, also look to sell the stakes for a quick buck.

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h/t renewnewengland.com

Samsung signs energy deal with Ontario

Under a deal announced Thursday, Samsung Group of South Korea will develop 2500 megawatts of wind and solar energy in Ontario at a cost of $7.0 billion.

Samsung will also create 16,000 manufacturing jobs in Ontario.

Meanwhile, in Newfoundland and Labrador, the energy warehouse…

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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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Converting principles to cash: more stuff they don’t want you to know, let alone think about

Natural resources minister Kathy Dunderdale on the potential that more oil in White Rose would be a good thing for the province’s energy corporation, and demonstrating the whole “control” philosophy:

This is outstanding news for the people of this province and it certainly proves our critics wrong. Our decision to take equity in these resource projects is already paying tremendous dividends. Our government is taking greater ownership in the development of our resources in the best interest of the people of the province, and for the greatest benefit of the people of the province.

Of course, the whole thing depends on the price of oil over time staying way up where it is now and going even higher.

Well, that and that other bit of government energy policy Kathy and her pals don’t like to talk about:

a corporation that perhaps some day may have enough value in its assets overall as a result of the Hebron deal and the White Rose deal, possible Hibernia deal, possible deals on gas, possible deals on oil refineries and other exploration projects, where hopefully we might be able to sell it some day and pay off all the debt of this Province, and that would be a good thing.

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Five years of secret talks on Lower Churchill: the Dunderdale Audio

In early September, natural resources minister Kathy Dunderdale revealed that the provincial government tried unsuccessfully for five years to get Hydro-Quebec to take an ownership stake in the Lower Churchill project.

A key component of the offers to HQ included the pledge to set aside any talk of redress for the 1969 Churchill Falls contract.

The talks were never revealed publicly until Dunderdale’s admission.

The news was all the more astonishing given that Premier Danny Williams stated repeatedly between 2001 and 2005 that he would not cut a deal with Hydro-Quebec on the Lower Churchill without some from of compensation – redress – for the inequitable 1969 contract that sees Hydro-Quebec buy virtually all the Churchill falls output for fractions of a cent per kilowatt hour.

To date, not a single conventional media outlet has reported Dunderdale’s comments.

Amazingly, not a single conventional media outlet has picked up the very obvious point about setting aside any grievance over the 1969 contract despite Williams repeated pledges to make redress a part of any Lower Churchill deal that involved Hydro-Quebec. 

That grievance is a core part of Williams’ intervention in the New Brunswick Power proposal.  On Friday, he noted the appropriateness of the Atlantic Premier’s meeting at Churchill Falls since “it symbolizes exactly what's happened to Newfoundland and Labrador at the hands of Hydro-Quebec.”

While excerpts have been posted at Bond Papers and at labradore previously, this is the first time, the audio file has been posted: Kathy Dunderdale, September 4, 2009, live on VOCM Open Line with Randy Simms (he’s the fellow pictured with mayoral chain ‘round his neck).

 

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Related:

• “Williams miffed Hydro Quebec rejecting ownership
  stake in Lower Churchill”, September 4, 2009
• “Churchill Falls reversion fails for second time”, September 9, 2009
• “NL caught screwing with Churchill Falls:  the quotes”, September 9, 2009
• “ Hydro Quebec not an issue:  Ed Martin”, September 10, 2009
• “R.I contradicts Dunderdale; no legislative problems and state still interested in Lower Churchill power”, September 16, 2009
• “Lower Churchill unviable for the foreseeable future”, October 29, 2009 [Market assessment by industry analyst]
• “Lower Churchill long way off”,  November 9, 2009 [Comments by Premier]
• “Lower Churchill definitely a long way off”, November 18, 2009 [problems in finalizing land claims deal]
• “Danny Williams and the Philosopher’s Stone:  Control and Resources” November 17, 2009
• “Danny Williams and the Philosopher’s Stone:  Converting Principles to Cash”, November 18, 2009

Danny Williams and the Philosopher’s Stone: Control and Resources

“Securing equity means having greater leverage to control our own destiny.”

“The principle of making our own way and taking control of our resources is the right one.”

Two quotes from the Speech from the Throne,

House of Assembly, March 2008

_______________________________________________________________

Control is a key principle in Danny William’s political philosophy.

Control of the province’s natural resources is a core point in most of his administration’s public statements on oil, natural gas and electricity.

The word occurs twice in his recent letter to Shawn Graham about the proposal to sell NB Power to Hydro Quebec. There’s the reference to “New Brunswickers who no longer control their energy destiny.” Then there’s the contrast: “ But we took control of our own destiny and Nalcor Energy is now a crown jewel in our province’s energy assets.”

Williams also raised the concern about control of transmission routes supposedly resting in the hands of Hydro Quebec and of the control of rates resulting from the sale of NB Power.

Energy and control go together, as Williams made clear when he announced in 2006 that the provincial government would “go-it-alone” on the Lower Churchill. he made the following comments in the House of Assembly on May 8, 2006:

“...but the big message here is that we are masters of our own destiny, that Newfoundlanders and Labradorians are in control of this project for the benefit of Newfoundlanders and Labradorians."

- "By taking the lead we are in full control of the project, unlike the circumstance with the last government; that project, basically, was going to be controlled by Quebec. It would have been marketed, it would have been financed, the transmission would have been done by Quebec. The control of the project, the project management, would have been done by Quebec. As well, if there had been an overrun on the project, the last Lower Churchill project that was proposed by the Grimes government, in fact, we could have lost the project; because, if there had been an overrun, we would not have been in a position to be able to finance it….”

But control is not just a principle behind energy initiatives. Being “masters of our own destiny” is the same idea in other words and it crops up repeatedly in Danny Williams’ speeches and comments as an idea central to government policy.

Control is a principle of the administration’s policy. It is a guiding rule, an essential quality, or the basis for action.

Control in the Energy Plan

The relationship between resource control and equity is established clearly in the Conservative party’s 2003 election platform.

The section on resource development puts it this way:

The power to control development of offshore oil and gas is of little value unless the Province has the know-how to deal with technical issues and field assessments equivalent to the expertise of the major oil companies, and sufficient ownership in production licences to influence development decisions.

• A Progressive Conservative government will either restructure Newfoundland and Labrador Hydro as an energy company, or create a new Energy corporation, with a mandate to retain equity in the Province's oil and gas resources. This will be done on a go-forward basis.

The relationship is mapped out more plainly in the 2007 energy plan released in time for the 2007 election campaign. So important is control that it is the second principle guiding the plan, after sustainability:

Our Principles

1. Sustainability

…

2. Control

We will exercise appropriate control over the development of our resources to ensure they are managed and used in the best interest of the people of Newfoundland and Labrador. We will assume an ownership interest in the development of our energy resources where it fits our strategic long-term objectives.

The idea is repeated again in what, by now, is a familiar formulation in a discussion of energy resource management (p.13):

We will take more control than in the past over the development of these resources and the benefits they generate.

Having identified the importance of control and the connection to management, management, the plan then re-affirms that equity stakes in energy projects are the first lever used “to ensure sound and effective management and to maximize benefits over the long term.” (p.18)

Control and equity stakes are thus intimately connected in the Conservative philosophy.

The 2003 campaign platform identified the key role to be played by a new energy corporation in holding the equity stakes and thereby serving as the means by which the provincial government would exercise the sought-after control of energy resources.

As well, the energy corporation has other key control responsibilities set out in the energy plan:

- “If the Provincial Government [sic] lifts the moratorium [on small hydro projects], it will institute a policy that the Energy Corporation will control and coordinate the development of small hydro projects that meet economic thresholds and are viable for an isolated island system.”

- “One of our goals is to maximize our benefits from resource developments. We believe this means the Energy Corporation should control the development of all small hydro developments for the benefit of all electricity users and determine whether to do this alone or with private sector partners.”

- “To maximize these benefits [from wind power], the Provincial Government believes the Energy Corporation should control the development of all wind projects and determine when to develop alone or with private sector partners.”

- “Due to the strategic importance of generation and transmission to the future of Newfoundland and Labrador, the province, through NLH [Newfoundland and Labrador Hydro], will retain ownership and control of its existing transmission and generation assets”

To anyone familiar with the Williams administration, none of this will be new. in fact, it will be so familiar that one might wonder the point of such an extensive recitation of the relationship between the principle of control and the idea of equity stakes in Danny Williams’ philosophy.

That will become clear in the second instalment of this series.

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So where’s NALCOR?

The 17th annual bilateral (U.S.-Canada) conference on energy issues is taking place in Boston this Thursday and Friday.

The conference theme is North American Energy:  Forging Ahead in the Current Economic and Environmental Climate.

Everyone who is anyone in energy issues on the northeast of the continent will be there as a sponsor and on the program.

Except the scrappy little energy company that Danny Williams would like to flip  some day. 

That’s right.

NALCOR Energy is nowhere to be seen.

All the big players are there as platinum level sponsors.

Newfoundland and Labrador is being represented by the provincial government which booked in for the second cheapest sponsorship level ($1500).

And the Newfoundland and Labrador representative on the program is none other than than…

Nope.

Not the Premier.

Jean Charest is a keynote speaker, though.

Nope.

Not Ed Martin.

Not even Kathy Dunderdale.

There’s only Wes Foote, an assistant deputy minister in the natural resources department.

And he’s not even an electricity guy.

Wes is the oil ADM.

If you really want to develop the supposed energy hub of North America surely goodness you’d be out there marketing the heck out of the oil, gas and electricity opportunities in Newfoundland and Labrador at a conference where all the people who matter are showing up.

And you’d be using the state-owned energy monopoly to do it.

But NALCOR isn’t there at all in a prominent spot.

What gives?

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An energy warehouse

How can it be that Prince Edward Island is getting 15% of its energy needs met by wind power but all Newfoundland and Labrador has are two small projects pumping 27 megawatts each and a“demonstration project” at Ramea?

And that’s it!

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Scoping out the wind energy deficit

The current issue of The Scope includes a front page feature on wind energy in the province or – to put it more accurately - the lack of any serious development of wind energy.

Maybe one of the answers is that everyone talks about an island when in fact there is a huge landmass on the mainland potion of the province that is ripe for wind energy development.  Heck it’s even got a connection so people can ship the power to where it is needed on the eastern part of the continent.

There’s just one obstacle.

Care to guess what it is?

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When small could mean big

As renewNewEngland.com reports, the Maine state legislature recently passed an initiative designed to encourage small, locally-owned green energy generation concepts. The bill was signed into law on June 26.

The new law establishes a six-year pilot program to encourage the development of community-based renewable energy in Maine, defined as a majority locally-owned facility that generates electricity from an eligible renewable resource.  The pilot program has an overall program cap of 50 MW, 10 MW of which is reserved at the outset for projects that have a generating capacity under 100 kW or are located in the service territory of a consumer-owned utility.  To be eligible for the program, renewable energy projects must (1) have a generating capacity of 10 MW or less, (2) secure a resolution of support from their local community (projects with a capacity of less than 100 kW are exempt from this requirement), (3) be connected to the grid, and (4) have an in-service date of September 1, 2009 or later.

This has all the hallmarks of a growing trend south of the border to focus on private sector development of small energy developments.  It’s based on the belief – apparently -  that small is not only less harmful to the environment but that local initiative and local capital can successfully combine to meet a portion of the nation’s energy needs.  The approach is supposed to create jobs and, since it is handled by the private sector and costs are relatively small, stimulate the growth of local businesses.

Compare that to the official philosophy in Newfoundland and Labrador that is touting an energy megaproject that thus far has no customers outside the northeast Avalon peninsula.  Incidentally, even your humble e-scribbler’s sister missed the point that the infeed the provincial government is trying to ram through Gros Morne is designed to bring power to townies, not Yanks. 

There is no plan in public at this point to extend any power lines south of the island of Newfoundland.  There likely won’t be if customers can’t be found for the juice.  Anyone who has read any part of the environmental review documents for the infeed to Soldiers Pond will understand that the thing is justified entirely on a supposed power shortfall on the island within the next decade. 

They plan to meet that supposed need with Lower Churchill power at a cost of $6.0 to $9.0 billion.  As the 2007  energy plan puts it:

This demand is forecast to grow at a fairly steady, moderate pace over the next several years. This would result in a need for new sources of supply on the Island prior to 2015, and later in Labrador.  As a result, we plan to develop the Lower Churchill project, which will include  a transmission link between Labrador and the Island.

Anyone reading the environmental impact documents will also realise that the provincial government’s energy company has effectively ignored the potential for small hydro developments or other small electricity projects to meet local need.  Even when an energy corporation official talks about wind power, it is obvious the corporation is fixated on the export market.  And when they think exports, big is all they seem to see.

There’s been a moratorium on small hydro projects in the province since the late 1990s.  While the provincial government committed two years ago to make a decision on the moratorium this year, odds are the decision won’t be made on time.  Even if it is made, the energy plan links the Lower Churchill and alternative sources for the island in an “either/or” proposition.  If the government proceeds with the Lower Churchill, alternatives are dead issues.  If the Lower Churchill dies, then small generators are the way to go.

As for private sector capital investment,  you only have to consider that one of the effects of the expropriation bill last December to see the official attitude to the private sector.  While everyone fixated on Abitibi, the expropriation also included seizing control of just exactly the kinds of small hydro that Maine and others are encouraging and hand them over to the provincial government’s energy corporation.  Star Lake  - totally unrelated to the Abitibi mill - was one of the casualties of the expropriation, as was the Exploits River partnership, a joint venture between Abitibi and locally-based Fortis. 

If that doesn’t convince you, consider that in the event small hydro projects go ahead, the energy plans mandates that only the provincial government energy corporation will be involved:

If the Provincial Government lifts the moratorium, it will institute a policy that the Energy Corporation will control and coordinate the development of small hydro projects that meet economic thresholds and are viable for an isolated island system.

And it’s not like the energy corporation has been very efficient at exploring alternatives to its current obsession with megaprojects.  The earliest proposals for wind energy farms on the island turned up over a decade ago. However, it took another six years for a small project to start on an isolated island and another  seven years for a report to examine the issues involved in wind generation and another two years after that before the first larger demonstration project started.

If Newfoundland and Labrador followed the approach of other jurisdictions, the people of the province could reaping the big economic and environmental benefits of innovative, small energy generation.

Unfortunately, the provincial government’s energy plan is fixated on government monopoly and megaprojects. The only things big in that are costs and - of course - project delays.

The Lower Churchill was supposed to start in 2009.  By the latest estimates, the earliest it could start construction is after 2011.

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Lack of royalty regime hampers further oil development

Not surprisingly, some people attending the NOIA conference in St. John’s are wondering what is next on the horizon.

As CBC reports, there is much talk of developing smaller fields in the Jeanne d’Arc basin.

There is also the recent announcement by StatoilHydro of a significant oil find at its Mizzen property, farther offshore than the three existing projects and Hibernia South and Hebron both under development.

Regardless of its size, Mizzen poses a number of challenges, not the least of which is the cost and technical issues of developing a field – even one of upwards of three billion barrels of oil – in deep water.

There are at least two others.

One is the impact of the United Nations Convention on the Law of the Sea (UNCLOS). Mizzen is well outside the 200 mile exclusive economic zone but may not lie outside the definition of the continental shelf.   If this is the case, the coastal state – namely Canada – would be required to set aside a portion of the revenue (maximum seven percent) from any development for distribution to the other states which are party to the convention.

Article 82

…

2. The payments and contributions shall be made annually with respect to all production at a site after the first five years of production at that site. For the sixth year, the rate of payment or contribution shall be 1 per cent of the value or volume of production at the site. The rate shall increase by 1 per cent for each subsequent year until the twelfth year and shall remain at 7 per cent thereafter. Production does not include resources used in connection with exploitation.

That’s potentially a significant cost to both Newfoundland and Labrador and to the companies.

That links to the other problem, namely the absence of an oil or gas royalty regime in the province.  Hibernia, Terra Nova, White Rose and Hebron all have royalty regimes.

The 2007 energy plan wiped out the existing generic oil regime. While the plan promised to replace it and issue a new gas regime, neither has emerged in the intervening years. There is no sign of either coming in the near future.

Even the development of smaller fields on the Jeanne d’Arc basin not associated with the existing projects is affected by the lack of a royalty regime.  The Hibernia South agreement is proposed using the Hibernia royalty regime developed in 1990 and amended in 2000, with some minor amendments.  Other projects would not have that as a basis, nor would it have the Terra Nova, the generic regime used at White Rose or the amended generic regime used for Hebron.

As Danny Williams said in 2005, oil companies don’t like risk.  Really though it isn’t that they dislike risk as much as they prefer predictability.  Even a volatile political climate is manageable, but when it comes to money, the companies like to have a good picture of what their costs will look like over time. That’s where an established royalty regime comes in handy.

In the meantime, some exploration will continue.  Seismic is pretty straightforward.  But when it comes to drilling holes and maybe looking at production, the lack of a predictable financial regime tends to make oil companies skittish.

The situation today is much the same as it was three or four years ago.  There are more exploration and development prospects for Big Oil than there is available capital.  They will put their money where they can figure out the financials.  Anything they can’t calculate  at all will go to the bottom of the pile in favour something somewhere else, even in a part of the world where the politicians in charge change with the sound of gunfire.

Now that Hebron and Hibernia South are pretty much done, the provincial government should turn its attention to restoring stability in the offshore financial regimes.

Above all else, that is what will determine the location of the next project or if there is a project at all.

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NALCO: the power of confusion

A sample of the conflicting policy statements on the Lower Churchill, Holyrood diesel generating plant and the rationale for slinging hydro lines on 43 metre tall towers in a UNESCO World heritage site.

A.  Premier Danny Williams:

"The reason that those lines are actually going through that park and the existing transmission corridor is to take out the dirty emissions that are coming from the Seal Cove-Holyrood plant," said Williams, referring to an oil-burning generating plant in eastern Newfoundland. [CBC story, 24 Feb 09]

B.  NALCO environmental impact submission on the hydro line project (2009):

A key purpose and rationale for the proposed Labrador – Island Transmission Link is to put in place infrastructure to further interconnect Newfoundland and Labrador with the North American electricity system and thus, set the stage for further development and growth in the province’s energy sector and overall economy.

It will also play an important part in ongoing efforts toward securing adequate, reliable and sustainable electricity supply for Newfoundland and Labrador, to address the current and future needs of the province’s residents and industries. [Page ii. Punctuation, capitalisation and italics in original] [Bold added]

…

A key rationale for the project is to put in place infrastructure to further interconnect the province with the North American electricity system, in order to facilitate the future import and export of electricity between mainland North America and Newfoundland and Labrador, and thus, help set the stage for further development and growth in the province’s energy sector….[Page 1] [Bold added]

Similar phrasing appears repeatedly throughout the document’s 199 pages.  Holyrood does not appear as any part of the rationale until page 8. The energy plan makes reference to the Holyrood displacement, but NALCO’s proposal downplays the Holyrood issue in favour of the general development of interconnection “to facilitate the future import and export” of electrical power from the province.

C.  NALCO 20 year capital plan (2008) on the role of Holyrood:

It is important to consider that whichever expansion scenario occurs, an isolated Island electrical system or interconnected to the Lower Churchill via HVDC link, Holyrood will be an integral and vital component of the electrical system for decades to come. In the isolated case Holyrood will continue to be a generating station; in the interconnected scenario its three generating units will operate as synchronous condensers, providing system stability, inertia and voltage control.

Holyrood will not close. The plant will continue to operate under NALCO’s 20 year capital plan with or without the infeed from Labrador. This is in direction opposition to the province’s energy plan released the year before.

D.  The energy plan (2007) commitment on Holyrood:

In the long-term, the current level of emissions from the Holyrood facility is unacceptable. The Provincial Government, through NLH, has investigated the long-term options to address Holyrood emissions and decided to replace Holyrood generation with electricity from the Lower Churchill through a transmission link to the Island. This replacement provides an excellent opportunity to partner with the Federal Government to reduce GHG emissions.

The energy plan envisages the export of wind-generated electricity from the Island.  The infeed environmental document indicates that wind generation is being capped at 88 megawatts because of problems with grid stability.

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