Competitive Advantage versus the Albania Solution

New Brunswick and Quebec have some interesting common energy interests, not the least of which is New Brunswick’s electricity interconnection with the United States.

No surprise therefore that the two provinces are talking about co-operation, possibly including the sale of some of NB Power’s assets to Hydro-Quebec.

What  parts of the New Brunswick company might be of interest to Quebec aren’t clear.  One thing is certain, though:  the nuclear division is mired in cost over-runs on the up-grade for the Point Lepreau site.  That might well make it a huge liability for NB Power in any broader sale.

The one competitive advantage the province has is its transmission lines and a strong, continuing relationship with New England customers.  By contrast, Newfoundland and Labrador can’t even figure out if they are still working with Rhode Island.

Expect a local talking point that heads somewhere close to the giant conspiracy theory floated earlier by the Premier.

What you get by putting the real stories together is that NB Power is considerably more attractive than a fanciful project in Labrador that is both far from market and far from existing. A recent Telegram report by Rob Antle [not online] noted that the project is behind schedule in delivering detailed answers as part of the environmental review process.

On top of that it can’t be discounted that political tirades by the current administration have poisoned the relationship with other provinces.  things are evidently so bad that even a willingness by Danny Williams to completely abandon his “redress” position and offer Hydro-Quebec an ownership stake in the Lower Churchill didn’t get even a sniff of interest from the Quebec Crown corporation.

Isolation is not good for Newfoundland and Labrador’s long term interest. The New Brunswick-Quebec connection demonstrates that pretty clearly.

-srbp-

Innovation?

A 10 minute video from the provincial government’s energy monopoly corporation is titled “Innovation in Renewable Energy”.

So what’s so innovative about damming off a river to generate electricity and running transmission lines to market?

Why nothing at all, of course, and in the case of the Lower Churchill project, the ideas from transmission line running around Quebec to the entire project itself have all been around for about 45 years.

There’s even the highly unimaginative and incorrect claim that running a power line down to Soldier’s Pond will “displace” the diesel generators at Holyrood.

And the project is a heckuva long way from starting if the current trends continue.

The only real innovation mentioned is in the discussion of the Ramea wind-hydrogen-diesel test project. 

But that’s one project, it’s a small project and it’s more than five years away from anything significant.  Meanwhile, the rest of the world is much farther along in developing alternative energy technologies.

Maybe what the provincial government should be doing is figuring out a way to turn bullshit into energy.  If that was the case, videos like this show they’ve already got a powerhouse that could displace the entire global output of greenhouse gases until the end of time.

At least when it comes to the Lower Churchill, the current administration has shown it is highly adept at recycling  even if it’s complete lack of planning beyond what was done 20 years ago is painfully obvious.

-srbp-

Americans look to home-grown hydro

The United States can generate an additional 70,000 megawatts of electricity by upgrading existing hydro facilities according to U.S. energy secretary Steven Chu.

The juice would come from newer, more efficient turbines and other technologies that would goose more energy without having to undertake megaprojects and risk additional environmental damage.

This further dims the prospects for the Lower Churchill as the Americans are looking at a wide range of ways to meet future energy needs. 

It also reinforces the idea that megaprojects like the Lower Churchill just aren’t considered to be green anymore.

The Americans are developing real energy plans.  That is they are developing ways of meeting their energy needs in environmentally friendly ways and by encouraging ingenuity. 

By contrast what is called an energy plan locally is nothing more than justifying a bunch of decisions already made to produce a megaproject called the Lower Churchill and create ways of stymieing any development that isn’t controlled by a large, ponderous government monopoly.

h/t RenewNewEngland.

-srbp-

More problems for NALCO power line

Objections are now coming about the proposed power line that would skirt Gros Morne Park.

Hikers and outfitters are concerned the power line will affect caribou and spoil hiking trails in the area.

"We've been working for the past four years in the Portland Creek and Parson's Pond watersheds, and we're hoping that Nalcor will be able to compromise and find a more suitable route further east and north than the proposed route," said Paul Wylezol, chairman of the International Appalachian Trail of Newfoundland and Labrador.

-srbp-

Churchill Falls reversion fails for second time

The Newfoundland and Labrador government  is making quick changes to a 2008 law after lawyers for the Churchill Falls (Labrador) Corporation  - CF(L)Co – raised questions about the impact of the bill on the company’s 1961 lease and rights to all property related to Churchill Falls.

Lawyers for CF(L)Co raised the issue with the provincial government’s  NALCOR Energy company during talks on water management for the proposed Lower Churchill project. 

The changes were tabled Tuesday in an emergency sitting of the House of Assembly.

It appears that - reminiscent of the 1980 water rights reversion bill - the 2008 bill stripped CF(L)Co of its lease.

In the original 2008 bill - Energy Corporation of Newfoundland and Labrador Water Rights Act - the Lower Churchill River is described as including “all waters that originate within the Churchill River catchment area and all rivers that naturally flow within the catchment area or from diversions into the catchment area.”

Clause three of the then stated that

any property in and rights to the use and flow of water, previously conferred by a grant, lease, licence or other instrument or under a statute of the province, or vested in, acquired by or accruing to a person by whatever means relating to the Lower Churchill River are extinguished.  [Emphasis added]

By combining the two clauses, the new bill effectively cancelled the 1961 Churchill Falls lease.  The 2008 law also blocked rights holders from any legal action and stripped them of  any entitlement to compensation.  

The bill became law on June 4, 2008.  There is no indication when cabinet issued the license to the energy corporation, now known as NALCOR Energy.

The changes introduced in Tuesday’s emergency session make it plain that the 2008 water rights law applies only to the Lower Churchill and that, for absolute certainty,  the 2008 bill “ excludes the area described in Appendix A to The Churchill Falls (Labrador) Corporation Limited (Lease) Act, 1961, and all waters while they are in that area.”

Emergency sessions are rare

For its part, the Williams administration is downplaying the session and the hasty changes.  In a news release, Dunderdale said that the act was never intended to cover Churchill Falls.

But the very fact the session was called to deal with one set of amendments to one bill suggests the issues involved are far from routine and that the legal implications of the water rights bill would be significant if left unamended.

Emergency or special sessions occur very rarely and usually only deal with extraordinary issues like war or labour disputes that threaten public health and safety.

Ordinarily – and if the implications of the bill were considered inconsequential or inadvertent -   CF(L)Co and NALCOR could simply have made routine amendments in the regular fall sitting a condition of an overall deal on water rights management on the Churchill River. 

Interestingly, the provincial government also tried to downplay the water rights bill in 2008, even to the point of making apparently misleading statements in the legislature.

In June 2008,  natural resources minister Kathy Dunderdale told the House of Assembly that the bill was needed since government had decided against using the  Lower Churchill Development Corporation as the vehicle to develop the Gull Island and Muskrat Falls power projects. 

But the 2008 water rights bill didn’t repeal the 1978 Lower Churchill Development Act, nor did it remove the LCDC option for development of the Lower Churchill.  The 2008 bill merely extinguished previously existing rights, leases, grants and licenses. 

Deja vue

This marks the second time since 1975 that a Progressive Conservative administration in Newfoundland and Labrador has found itself in hot water over legislation related to Churchill Falls.

In 1980 Brian Peckford’s administration introduced the Upper Churchill Water Rights Reversion Act.  The bill expressly cancelled the 1961 lease.  A subsequent legal challenge by creditors led to a landmark decision by the Supreme Court of Canada that ruled the 1980 statute was illegal. 

One of the influential factors in that case was public comments by politicians that identified the real purpose of the bill as being to undo the 1969 Churchill Falls agreement.

If the 2008 water rights bill effectively expropriated the Churchill Falls complex, it would be the second such move by the Williams administration in 2008.  In December 2008, the Williams administration moved to seize assets of Abitibi, Enel and Fortis including hydro-electric generating facilities. 

Confusion reigns in hydro policy

Revelation of the 2008 water rights ploy is the fourth Lower Churchill-related blockbuster news in a week.

On Friday, natural resources minister Kathy Dunderdale revealed that the provincial government had been trying unsuccessfully for five years to interest Hydro Quebec in an ownership stake in the Lower Churchill project. 

Dunderdale told Open Line Show host Randy Simms and his audience that the provincial government proposed to “set the Upper Churchill [issue] to one side.”

This move came despite commitments by Premier Danny Williams that there would be no Quebec involvement in the Lower Churchill without redress for the appalling 1969 deal that sees Hydro Quebec buy electricity at better than 1/30th the cost for which it is sold to consumers.    Williams has repeatedly railed against the 1969 deal as an example of a resource give-away by previous provincial governments.

The offer of an ownership stake to Hydro Quebec also flies in the face of Williams’ 2006 commitment to develop the Lower Churchill without any outside help:

"It's an opportunity for us to get back some of what we've lost on the Upper Churchill, and the fact that we're going to do this alone is significant," Williams said in an interview.

The Dunderdale revelation came after Williams accused Hydro Quebec of doing everything possible to block the Lower Churchill project. 

Williams also said last week that  his government would no longer plan to string hydro lines from the Lower Churchill through a UNESCO World Heritage site.

-srbp-

Curiouser and curiouser!

Even in the Land Through the Looking Glass that is Newfoundland and Labrador these days, a news release about an emergency session of the House of Assembly to deal with an amendment to  a single piece of legislation is very odd, indeed.

As the official version puts it:

In the course of negotiating a water management agreement for the Churchill River, CF(L)Co advised Nalcor that it felt aspects of the Energy Corporation of Newfoundland and Labrador Water Rights Act infringed upon its water rights lease for the Churchill Falls development. This was not the intent of the act, and government has agreed to amend it so as to avoid any ambiguity.

First of all, one must realise, of course, that NALCOR is the parent of Churchill Falls (Labrador) Corporation or CFLCo.  It holds 65% of the shares, in fact, and the two companies are not completely separate entities.  They are rather closely and intimately connected, in fact.

Second of all, one must also note that the section of the Electrical Power Control Act 1994 requiring a water management agreement came into effect this past January. 

In 2007, the current administration introduced this amendment in the legislature requiring two companies trying to generate hydro from the same river to come to some agreement on water sharing have one imposed by the public utilities board.   For whatever reason the current administration did not give it force of law until early 2009.

Third of all, the original lease that CF(L)Co holds has been around since 1961.  its provisions are well known to a host people inside and outside the provincial government.   in fact, given the history of the lease, it’s probably one of the most well studied and well-understood pieces of legal documentation existing anywhere in Canada.

And that’s the really odd thing.

Well, aside from the oddity of the company effectively negotiating with Itself, and then notifying Itself in the course of negotiations that Itself had a problem with something Itself had been party to previously because that infringed on something else Itself had also been party to much earlier.

You see, there is nothing that would have been noticed during the negotiation of a water management agreement for the Churchill River since January 2009  involving NALCOR, Energy Corporation, Newfoundland and Labrador Hydro or CF(L)Co or whatever name the Crown version of Sybil is using at the moment that wasn’t painfully obvious to NALCOR,  Energy Corporation Hydro or CF(L)Co or Sybil, as she then was, when the provincial government introduced the changes to the EPCA, 1994 in 2007 and then introduced the Energy Corporation of Newfoundland and Labrador Water Rights Act in early 2008.

What seems to be up for discussion here is something  your humble e-scribbler pointed out back in February. 

If that weren’t enough, changes to the Electrical Power Control Act – passed in 2007 but only quietly implemented after the expropriation in December 2008 – ensures that NALCO can enforce its control over future developments through the Public Utilities Board.

If one takes the implication from a set of Hydro Quebec questions about the Lower Churchill environmental assessment, the proposed water management regime appears to require that Churchill Falls be run in such a way as to maximize the generation at the Gull Island and Muskrat Falls dams under all contingencies. 

This might adversely affect CF(L)Co and some of its contractual arrangements to supply power.  It would also seem to go against several sections of the original lease.

If the government news release is clear – and that is by no means obvious – then the emergency session of the legislature is likely to be about passing an amendment that removes the last clause of the water rights act.  That’s the one that requires a water management agreement be reached or that one be imposed by the public utilities board.

What’s so interesting – if that’s the case – is that this is coming in an emergency session and not simply held for the fall sitting.  An amendment to the legislation could have been made later on with the requirement to produce the amendment being made a condition of any water management agreement.

There must be some sort of threat at work here, something much more significant than the prospect of an agreement between  “Nalcor Energy or its subsidiary and CF(L)Co”.  Incidentally, CF(L)Co is a subsidiary of NALCOR. 

Rather, there might not be much hope of a deal at all in the near term.  Instead,  CF(L)Co  - perhaps at the insistence of one of its shareholders – is protecting its interests and ensuring that the legal problems inherent in the EPCA amendment and the water rights act be eliminated now, without question or condition.

And if it was anything else, like say a repeat of the old water rights reversion act, then the thing would have been trumpeted in news conference held by the Premier.  Something says he just wouldn’t be able to resist the temptation to grandstand against any slight. 

Nope.  This is something government is trying to downplay, somewhat.

But rest assured:  emergency sessions like this one don’t happen every day and they sure as heck don’t come for a routine amendment, even if it is one intended merely to avoid “ambiguity”.

There’s something big behind this.

And it may not be pretty for the Lower Churchill project.

-srbp-

Paying not to produce electricity

A drop in electricity demand in North America will see Hydro Quebec paying some of its suppliers not to produce electricity in the next year, according to le devoir.

Selon les documents déposés devant la Régie par la société d'État, ses surplus d'approvisionnements s'établissent à 11,3 TWh pour l'année prochaine. Le chiffre inclut les volumes d'énergie différés par le passé. De ce volume important, Hydro-Québec souhaite désormais soustraire les 4,3 TWh de la centrale de Bécancour. «Notre contrat avec TCE nous permet de payer pour la non-livraison d'électricité», a commenté Guy l'Italien, porte-parole d'Hydro-Québec. «Cette option nous coûte, dans le contexte actuel, moins cher que si nous décidions de prendre possession de l'électricité pour la revendre sur le marché.» La Société n'a pas été en mesure hier d'indiquer si des clauses similaires étaient présentes dans ses contrats d'approvisionnement avec d'autres de ses fournisseurs.

HQ is looking to shutter a natural gas generator operated by TransCanada Energy and pay the company $250 million under the terms of the contract between the two companies.

In the near term, HQ may also wind up with a significant surplus of generating capacity as it looks to bring the La Romaine and other projects on stream.  HQ will go ahead with the megaprojects since it has the capital and will look to recover its costs over a very long time span.

A drop in energy demand and competition from other electricity generators will likely also lessen the chances the provincial government’s cherished Lower Churchill project will find favourable capital arrangements.  The $6.0 to $9.0 billion project remains chronically about two to three years behind schedule in its most recent iteration. 

The project also doesn’t have a single customer to date outside consumers on the island portion of province.  They would be – in effect – forced to subsidise the massive project by virtue of having an infeed line strung to the Avalon peninsula even though demand on the island could be met through other less costly means.   Other than that, there are no signed power purchase agreements.

Interestingly, as demand has lessened, interest in the project has increased, particularly within the Maritime provinces.  Federal cabinet minister Peter Mackay and Prime Minister Stephen Harper recently toured the proposed dam sites by helicopter.

Of course, weakening demand and a proponent jammed up for cash and pushed along by its own hyper-torqued rhetoric might create a much better circumstance for energy buyers looking to strike a favourable long term deal.  That’s very similar to the situation that led Brinco to sign a disastrous deal with Hydro Quebec in 1969, with the backing of the provincial government.

-srbp-

h/t to Claude Boucher.

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.

-srbp-

It’s not easy being green

Well, at least not under a variety of American state and federal laws in New England especially if you are proposing a hydroelectric project like the Lower Churchill.

Sure, we all think of hydro power as pretty friendly to the environment and a source of energy that is pretty low on carbon emissions.

Heck, in the ruckus over erections in Gros Morne, the provincial government has been pretty quick to talk about how green – as in environmentally friendly  - the Gull Island and Muskrat Falls projects are.

As an aside – in some of the online discussions,  some people have been talking about ripping through the park because it’s a way to sell the power to the United States.  Let’s get this clear:  there is no current proposal to build any transmission lines to the United States through Gros Morne park. 

The line that Danny Williams would drive through a UNESCO World Heritage Site ends just west of St. John’s.  It’s the same line Brian Tobin proposed in 1998.

That’s right. 

It’s a line to bring Lower Churchill power to townies, not Yanks.

And while we are at it, Holyrood will not close either even with the infeed.

The comments coming from some quarters makes plain just how much fundamental ignorance – lack of information, awareness and understanding  – there is out there about major public issues.

But anyway, back to green energy and American markets.

Turns out that American state and federal governments are working to develop new, renewable sources of energy.  They are looking at a system of emission credits and what sorts of projects would qualify for credits. 

If the current trend holds, Big Hydro projects  - just like nuclear plants  - won’t count toward renewable energy credits.  New England states have various rules in place currently that look at qualifying hydro power from plants of less than 100 megawatts.  In some states, even these small hydro projects must not change the water level (i.e. no dams) or otherwise impact the natural environment.

A bill currently in the United States Senate – HR2454 the American Clean Energy and Security Act 2009 – limits hydro that qualifies for certification to incremental power from technological upgrades to existing plants, generation from existing dams built for other purposes and “hydrokinetic generation”, that is power generated by ocean currents, wave action and the like.

So two honking great dams across a river, even a few thousand miles away, isn’t necessarily where the Americans are looking. Missing MOU anyone?

Not surprisingly, some states are looking to find a local economic spin-off from new energy sources.  Rhode Island recently adopted a bill mandating the state electricity distribution company to enter into long term power purchase agreements for upwards of 90 megawatts of power from new renewable sources locate din Rhode Island.  They are looking at a $1.5 billion wind farm project  - among other things - to help meet that requirement.

This doesn’t mean that the New England markets are closed to hydro power from Canada but it does mean that proponents of the Lower Churchill are not looking at easy pickings.  

If states and the US federal government are getting stickier about local renewable projects, there’s a very good chance they’ll get stickier about imports as well. 

That’s the thing about American democracy:  people get to participate.  If an environmental lobby builds up against a project like the Lower Churchill, the thing could have a rough ride.  Imagine what might happen if environmentally conscious consumers managed to figure out that the same people promoting this hydro megaproject are the same people who turn up on CNN promoting some old-fashioned seal bashing.

There’s anothing thing too:  look closely at some of this legislation, like say the Rhode Island bill, and you can see limits on the length of the purchase agreements with a maximum of 15 years.  That’s also an issue to think about given that a project the size of the Lower Churchill would likely be financed over a period twice or three times that.

Are states going to be willing to sign PPAs over such a long period?

Would bondholders be prepared to offer up cash with the prospect that markets could go soft half way through the bond life? How about American lenders who are already hurting through the recession and who may still be leery of investing large sums even after the recession ends?

Any way you want to look at it, the Lower Churchill project is still a very long time from starting.

There are currently no power purchase agreements of any kind with any customer. No PPAs means financing will be much tougher on a project that was estimated to cost at least six to nine billion dollars when talk about the project was revived in 2005-2006. Imagine what it will cost in two years time.

The environmental review process won’t finish until 2011 and that alone puts the project two full years behind the schedule mapped out in 2006.  Hydro Quebec is already well on its way to having power to market from new projects by the time NALCOR is looking to start construction of the Lower Churchill. They’ll have a goodly chunk of their new projects done by the time Muskrat and Gull Island turbines start turning, even if the current 2018 timeline for first power could be met.

On top of that there are serious questions that still exist within the Innu community about the draft land claims agreement between the provincial government and the Innu.  Bear in mind that the federal government should be in there as well, but so far hasn’t offered any comment on the darkness that has befallen the New Dawn.

And all of that is without considering the potential for even a teensy bit of public backlash over environmental issues.

It really isn’t easy being green, is it?

-srbp-

Romaine clears environmental review

The Romaine hydro project in Quebec cleared the joint federal-provincial environmental review panel on Friday.

In making its decision, the panel noted that it worked within the legal boundary between Quebec and Newfoundland and Labrador:

Par ailleurs, elle a évalué les effets environnementaux du projet selon le tracé de 1927 du Conseil
privé et ne se prononce aucunement sur la validité de cette frontière entre le Québec et Terre-Neuve-et-Labrador.

Quel shock for the League of Professional Victims.

For those whose French isn’t that good here’s a rough (not literal) translation:

In addition, it evaluated the environmental effects of the project according to the boundary set in 1927 by the Privy Council and does not come to a conclusion at all about the validity of this border between Quebec and Newfoundland and Labrador.

It comes to no conclusion since it had no grounds on which to question the whole issue. So much for the twaddle pushed by the League that somehow this decision would see the federal government endorse a border change. Apparently only one private individual appeared before the committee to recommend that the border be erased altogether.

There is extensive discussion of the environmental issues, including the potential impact on migratory caribou herds. The panel recommends that the Quebec ministries involved develop a plan with the Government of Newfoundland and Labrador to protect the caribou.

-srbp-

Selective perception

The Telegram’s front page story on Friday reports on a study released by the Montreal Economic Institute that, according to the Telegram, shows that Hydro Quebec profits hugely from the Churchill Falls power development.

Shocking!

What’s actually much more interesting is what the study was about.

Amazingly enough, it wasn’t about how much money Hydro Quebec makes of Churchill Falls.

Rather, the Montreal Economic Institute study argued that Hydro Quebec should be privatised because it is wasteful and inefficient.

The title of the report – conveniently omitted from the Telegram story -  is one that would surely ignite even more gnashing of teeth in these parts than the amazing revelation about Churchill Falls:

“How would the privatization of Hydro-Quebec make Quebecers richer?”

The title on the news release is even better:

“Privatizing Hydro-Quebec would give $10 billion more a year to Quebecers”

By privatizing Hydro-Québec, Quebecers would get $10 billion more out of it per year through improved productivity, higher electricity rates and an end to costly subsidy programs for aluminum smelters, according to a Research Paper published by the Montreal Economic Institute. The new private company would be required to pay substantial annual royalties to the government, says the study, prepared by Claude Garcia, member of the board of directors of several corporations and former president of the Canadian operations of Standard Life.

Standard Life. 

Hmmm.

That would be one of the companies whose hydro-electric assets in Newfoundland and Labrador were nationalised by the the legislature last December.

The paper is far more provocative than the bit excerpted by the Telegram, especially in a province where the government is already committed to create in Newfoundland and Labrador a Crown corporation that is the mirror of Hydro-Quebec.

 

-srbp-

Whose line is it anyway?

In this case a transmission line for the Lower Churchill.

A couple of weeks ago, former Premier Roger Grimes took issue with a comment by noob finance minister Jerome Kennedy that the Lower Churchill transmission line would be a good project for federal infrastructure spending.

The Telegram story - not online - quoted Grimes:

"There has been no routing actually planned for a transmission line,"says Grimes. "If they have a transmission line already planned, already designed ... then why don't they tell us where it is?"

He was reacting to Kennedy who the Telegram quoted as saying:

"That's something that we could start immediately, it's something that
we wouldn't have to wait for the environmental assessments because, essentially, we'd simply be building a transmission line," said Kennedy at the time.

Kennedy said Transportation Minister Trevor Taylor delivered a similar
message to federal Infrastructure Minister John Baird just days before.

Similar comments were made by [Premier Danny ] Williams in a year-end interview with The Telegram.

Williams did mention the Lower Churchill in that year-end interview.

Williams also took issue with Kennedy’s comments in the Telly story on Grimes’ comments saying that Kennedy had spoken out of turn. There would need to be an environmental impact assessment. Williams also said that Grimes simply didn’t know enough about what was going on:

"Poor Roger is talking through his hat. He doesn't have the background,he doesn't have the information," says Williams.

"We've been working on this plan for a long, long time, we've a lot of
engineering done," says Williams.

Of course, Grimes and Williams have been at odds over the Lower Churchill for years and of all the province’s politicians, Grimes seems to have a unique ability to get under Williams’ skin.

But that’s not the only talk of transmission lines since the New Year. Emera president Chris Huskelson told the Halifax Chronicle Herald that without a line to Newfoundland, it made no sense – presumably economic sense - to try and ship power directly from Labrador into the Maritimes.

"Newfoundland decides to bring energy to the island, it makes perfect sense to bring energy further to Nova Scotia. If they decide not to bring energy to the island, it won’t make sense to bring it to Nova Scotia."

Then to cap it all, Ed Martin, president and chief executive officer of NALCO(R) and Hydro told the Chronicle Herald that shipping power across the Cabot Strait to Nova Scotia is one of the options Hydro is looking at for the Lower Churchill. Hydro and Emera signed a memorandum of understanding a year ago to explore the possibility of shipping power from the Lower Churchill to Nova Scotia. But as Martin said this weekend:

"It’s looking like somewhere in the Sydney area would be an excellent landfall for us," Mr. Martin said of the proposed undersea cable.

"Not only is it distance-wise one of the closest points to Newfoundland, but it’s close to the Lingan plant, which is a significant emitter for Nova Scotia (Power) . . . but nothing is final yet."

Nothing is final yet.

Well, nothing is really clear in all of this. As labradore noted in a post on Sunday, not so very long ago, Martin and Hydro were talking about shipping electricity into New Brunswick from Cap St. George on Newfoundland’s west coast. That was certainly the option examined in 2005, as reported by both the Telegram and Stephen Maher of the Chronicle Herald. Sea Breeze Power of British Columbia was proposing an underwater line from the coast of labradore to Prince Edward Island or Nova Scotia.

This isn’t a new idea. As Bond Papers reported in 2007, the idea of underwater transmission lines for Lower Churchill power goes back to the 1970s although officials were quick to note that it wasn’t an attractive proposition:

For one thing, according to Vic Young, president of Newfoundland and Labrador Hydro, the 77-mile cable across the Cabot Strait is an extremely poor prospect. Although a study two years ago stated it was technically possible, its capital and maintenance costs would be enormous. The electricity delivered would cost about twice what it would if brought down overland.

But all this talk of transmission lines and environmental assessments gets really curious when one looks at the Lower Churchill proposal which is now in the hands of a joint federal-provincial environmental assessment panel.

The only transmission lines mentioned in that proposal are for two running from Muskrat Falls to Gull Island and then a single line back to Churchill Falls. From there, power would head into Quebec through the existing interconnection.

The project is described very straightforwardly in the agreement between the federal and provincial governments on the environmental review panel:

The Proponent proposes a project/undertaking consisting of hydroelectric generating facilities at Gull Island and Muskrat Falls, and interconnecting transmission lines to the existing Labrador grid.

…

Interconnecting transmission lines consisting of:

• A 735 kV transmission line between Gull Island and Churchill Falls; and,

• Two 230 kV transmission lines between Muskrat Falls and Gull Island.

The 735 kV transmission line is to be 203 km long and the 230 kV transmission lines are to be 60 km long. Both lines will be lattice-type steel structures. The location of the transmission lines is to be north of the Churchill River; the final route is the subject of a route selection study that will be combined on double-circuit structures.

No proposal has been presented publicly for any other transmission lines related to the Lower Churchill. There’s nothing in Quebec or New Brunswick and Nova Scotia. In Both Quebec and New Brunswick, Hydro has simply filed an application for wheeling - moving power through the existing grid - but there’s no discussion of new transmission lines.

While Danny Williams might claim Roger Grimes isn’t up-to-speed on the project, existing public information suggests the Premier and his finance minister aren’t exactly coming clean on the whole thing either.

In fact, Grimes might well be closer to the truth given that if a new transmission line – say through Quebec – is being contemplated there’s been nothing done to make it possible within the next couple of months.

As Grimes noted – and the Premier concurred – a transmission line would have to go through an environmental assessment. That idea would be a wee bit more complicated politically if the line through Quebec was expressly intended to carry power from the Lower Churchill through Quebec to another market.

If there’s another line Kennedy was thinking about, like say across to eastern Newfoundland, there’s still a provincial environmental process that would at least have to be considered. The major problem there is one of cost. Figure on a project costing upwards of $2.0 billion by the time it is done.

The cost of that little make-work venture would be borne entirely by the ratepayers of eastern Newfoundland who, it should be noted, don’t really need all that extra power and certainly wouldn’t get it right away, anyway. Hydro just expropriated over a 100 megawatts of generating capacity from AbitibiBowater and there is surplus power in the grid since the Abitibi Stephenville mill closed in 2005. The Inco project at Long Harbour will suck up some of the juice but there is no great demand for power on the island in the near term.

As for timing, those lines – even if they were built over the next couple of years – would be more than a decade old before any Lower Churchill power coursed through them. The Lower Churchill project will take nine years to complete. The proposal in the environmental review called for construction to start in 2009 with first power in 2014 and the completion of the whole thing in 2018.

But even if the environmental assessment is finished this year it would be well into 2010 before anyone would start digging dirt in Labrador.

Even 2010 would be an optimistic start-time these given that Hydro doesn’t have a single customer for the Lower Churchill power and the money markets are a wee bit skittish these days what with the shortage of capital in the markets.

Heaven forbid that work might start without those contracts in place and with the work being funded out of the public treasury or whatever cash the energy corporation might have laying about. That’s what happened last time with BRINCO as some people are only now realizing. The company borrowed cash and started work in the mid-1960s. Hydro Quebec took maximum advantage of the BRINCO foolishness and with the latter in a financial bind managed to secure the sort of contract concessions it had been seeking from the start.

All the bluster at the time about running power down through Nova Scotia was just a tactic to improve the bargaining position with Hydro Quebec. Ditto the talk of running a line through Quebec with federal backing. There’s no evidence the request was ever made, even though many people insist on repeating the story. In the end, Hydro Quebec got everything it was looking for from the start and then some.

Maybe what we have here with all this talk of transmission lines is the same sort of bluster and political posturing we saw 40-odd years ago.

Certainly there is nothing in the public domain to suggest that anything Kennedy referred to is real.

Maybe Roger Grimes knows a lot more than Danny Williams will ever give him credit for. And when it comes to contracts, it’s not like the two haven’t been at odds before with Williams having to change his position when the facts were in. Anyone remember Voisey’s Bay?

-srbp-

Lower Churchill falls further behind

According to the Globe and Mail, Hydro-Quebec is negotiating its first long-term power purchase agreement in decades to ship power to New England for 20 years beginning in 2014.

New England is a major market for hydro and long-term power purchase agreements are the way to secure financing for a project like the Lower Churchill.  Thus far, Newfoundland and Labrador Hydro hasn’t been able to secure a single contract – erroneous reports to the contrary -  nor is there a sign any contract is forthcoming.

Both the Premier and NALCO(R) boss Ed Martin spent most of 2008 lowering expectations for the long awaited development of the 2800 megawatt facility.  As recently as October, Martin blamed uncertain financial markets for the apparent decision to slide back project sanction by at least six months. In February, the Premier repeated a comment he made in January that the odds of the Lower Churchill going ahead were “50/50”.

Financial problems with the project – lack of secured markets being chief among them – are likely the reason the Premier keeps insisting on federal financial backing for the project, even though it supposedly one on which he intends to “go it alone:”

"It was an opportunity for the federal government to right the wrong of the Upper Churchill, whereby we are losing, like, a billion and a half dollars a year."

But Williams maintains the feud is over now, and says he hopes for co-operation from Ottawa on funding a new penitentiary, a federal ocean agency, the Lower Churchill project and transmission line.

Linking the Conservative family feud with the Churchill Falls deal is curious.  While it plays well with the local tin-foil hat brigade – see the comment on the Globe story from “Calvin St. John”, for example – the federal government didn’t play a role in that project except as a Joe Smallwood negotiating ploy. 

Linking the 1969 BRINCO deal with the federal government isn’t a sure-fire way to secure federal cash.  A more successful approach would have been to look at a deal with both Ontario and Quebec of the type that the provincial government had in hand yet specifically rejected when it decided to “go it alone” three years ago.

There’s also no telling how the Abitibi expropriation will play with investors in Canada. American investors likely won’t look favourably on it at all.

-srbp-

AbitibiBowater hydro assets

Undoubtedly, there will be plenty of hype and posturing about the hydro-electric assets in which AbitibiBowater has an interest. 

There's already been plenty of silly talk about "repatriating" assets.  Had successive governments not interfered in the operation of the mill it might have been re-organized and saved.  As it is, the closure of this mill is a mess created by all the players.  None can escape responsibility.

Expect NL Hydro to purchase these assets from the private sector partners, one of which is Fortis, with the power being sold to Vale Inco.

In any event, here is a brief description of the assets. 

1.  Exploits River Hydro Partnership.  Partnership between Central Newfoundland Energy - a Fortis subsidiary - and AbitibiBowater. 30 megawatts.  Initial operational capacity (IOC): November 2003.  Supplied power to AbitibiBowater operation at Grand Falls-Windsor with surplus power sold to Newfoundland and Labrador Hydro under a long-term power purchase agreement.

2. Star Lake Hydro Partnership.  Partnership between CHI Canada Limited and AbitibiBowater. 18 megawatts. IOC: October 1998.  Star Lake displaces oil-fired generation at NL Hydro's Holyrood plant.

-srbp-