The PUB, Exemptions, and Muskrat Falls #nlpoli #cdnpoli

Here’s some background on the issue of Muskrat Falls and Public Utilities Board exemptions. 

At the end you should know what an exemption is all about, how the exemptions – there are more than one – came about – and what that means for now and in the future as far as electricity rates go.  We’ll deal with mitigation in another brief post next week.

The information here is based on material in the public record plus additional research and information accumulated over 30 years working on public policy issues in the province. That includes the 15 years of SRBP, much of which wound up being about the Lower Churchill project.

Let’s start with what an exemption is.

The Decline of the Forest Empire #nlpoli

While an official with Corner Brook’s municipal government  understandably has to say wonderful things about the economy in the west coast city, a look at some numbers shows the city is feeling the effects of a larger problem in the province.

SRBP took a look at newsprint production levels and the value of newsprint exports from 2003 to 2012.  The numbers are all from the annual editions of the budget document called The Economy.

The picture is not pretty.

Live from the Orchestra Pit #nlpoli

Newfoundlanders and Labradorians got a vivid example on Thursday of the Orchestra Pit Theory of Political reporting.

For those who don’t know the story, the Orchestra Pit theory goes like this:  two politicians are on the stage.  One announces a cure for cancer.  The other falls into the orchestra pit.  The media will cover the guy in the pit.

Well, the guy in the pit on Thursday was Brad Cabana.

A List of Interesting Things #nlpoli

Follow this one for a second.

In 2005, Kathy Dunderdale – minister responsible for the Rural Secretariat  - announced a raft of appointments to the groups that advise government about rural economic development. One of the appointees is a guy named Ted Lewis from Croque.

In November 2005, Lewis went on a provincial government trade mission to Greenland.  he represented a company called Holson Forest Products.

In July 2008, industry minister Trevor Taylor announced $25,000 in provincial money for a company called Quality North to help it expand its markets for manufactured wood panels into places like Greenland and Iceland.  Quality North was formed in 2006 by three people, one of whom was Ted Lewis of Holson Forest Products

On August 12, 2009, Tom Hedderson - the provincial fisheries minister  - announced that Ted Lewis would take over as chair of the board that approves fish processing licenses.

On August 21, 2009,  then-natural resources minister Kathy Dunderdale announced that her department would be giving $10 million to Holson Forest Products  to set up a wood pellet plant in Roddickton.  The head of the company is a guy named Ted Lewis.

By 2011, a news story turned up in the Telegram saying that the company expected to start production in late March.  But, as events unfolded, the company has had trouble shipping pellets because of the cost of routing them through nearby ports. 

Liberal member of the House of Assembly Ed Joyce says he has been having trouble finding out what is happening with the provincial money. The Telegram even wrote an editorial about the problem, largely because one company official complained that the political inquiries were hurting the company.

But if you go to the official record of the House of Assembly, you will see that questions came up in the House on May 15.  On May 16, natural resources minister Jerome Kennedy added some details on the cash:

There was a $10 million investment which included a $7 million repayable loan, a $2 million non-repayable loan, and $1 million under the Green Fund.

Mr. Speaker, Holson has since come back looking for more money and we have indicated that there is only so far as a government that we can go. Beyond Roddickton, we also put $1 million in 2010 to assist harvesters in the Northern Peninsula, of which $830,000 has been spent as of March 31, 2012.

In response to another question in June, Kennedy added even more information.  What’s interesting is that Kennedy used the information to attack the local MHA who had asked a question about something else:

Let me tell you, Mr. Speaker, how this Third Party [the NDP] works. About three weeks ago, I got an e-mail from the Member for The Straits – White Bay North asking if I would meet with him and the owner of the Roddickton plant to discuss what was going on in Roddickton. I wrote him back, Mr. Speaker. I said if Mr. Lewis wishes to meet with me, he can contact me directly. I never heard back from Mr. Lewis.

So what the member opposite did, he tried to interject himself into the middle of the situation. He was obviously told to go away out of it, Mr. Speaker. I would suggest to him that if he is going to come forward with suggestions that he make sure that they are real and they are practical. What we are worried about is keeping this industry alive, keeping Kruger open and benefiting the people of this Province, Mr. Speaker.

And on August 13, 2012, Lewis wrote a letter to the Northern Pen explaining the current shutdown. Lewis said that the company needed to find a cheaper way to ship pellets overseas because the price for pellets dropped right after they got the cash commitment from the provincial government. Now that prices are recovering the lowered value of the Euro is causing problems.

The company is still working on the problem, apparently:

Any investment into either of these ports reduces the feasibility of pellet transportation. Roddickton harbour has the depth of water required and the required land base. With the right facility in Roddickton this and other industries can prosper. Thankfully there are plans moving forward to develop the infrastructure – no commitments yet.

Liberal fisheries critic Jim Bennett is only wondering whether or not the fisheries minister thinks that it’s alright to have the processing plant licensing board run by a guy whose company is on the hook to the province government for the better part of $10 million.

Here’s what Bennett told the Western Star:

"Is Lewis in a perceived conflict of interest in his job as chairperson of the Fish Processing Licensing Board, given that his company owes so much money to the government," Bennett questioned in a press release issued Monday.

Via telephone, Bennett said it was not an accusation, but that he would like the minister to review the appointment to determine whether or not there is a conflict.

Doesn’t that seem rather,  errmmm,  what is the best way to put it?

Oh yes.

Lame-assed.

That’s it, Bennett’s comments are lame-assed, weak, and laughable.

-srbp-

Garnishee Tom’s pension first #nlpoli

Spendthrift finance minister Tom Marshall is willing to spend your money and mine to keep the Corner Brook paper mill afloat. As CBC tells us, Tom is keeping the options open:

"It can be a loan, it could be cash, it could guarantees but you know that we've made it clear we are not going to fund operational losses."

Well, you’ve got to admire a guy who is willing to spend public money to help out a bunch of people going through a hard time.

The Incendiary End Game in Corner Brook #nlpoli

As a rule, when a cabinet minister speaks publicly about a private sector company’s significant financial problems, things are not good.

Natural resources minister Jerome Kennedy told the world on Friday and Saturday that Corner Brook Pulp and Paper Limited had a heavy bank debt and an unfunded pension liability of about $80 million.  Kennedy said the mill that hasn’t made money since at least 2006.

Things are so bad that Kennedy  that he expected Joe Kruger was coming for a meeting to tell the provincial government he was closing the west coast paper mill.

So why was Kennedy gabbing about stuff he’d known about for some time but kept to himself?

The Precipice Looms #nlpoli

Not surprisingly, Kruger issued an ultimatum on Tuesday to workers at its Corner Brook mill. CBC quoted the message from the company to the union in an online story:

"The first step to go forward will be to obtain a firm committment [sic] from employees by achieving a satisfactory agreement that will allow CBPPL to be competitive in the market," said the Kruger statement.

"Given the critical situation of the mill, this collective agreement will have to be reached by June 15 so that we can quickly move on to the next crucial step, which will be to submit the pension plan funding relief measures to a second vote and hopefully be able to apply them before the mill’s situation deteriorates any further."

-srbp-

The Kruger Nexus #nlpoli

As an astute reader pointed out in a n e-mail Tuesday morning, the Hebron-Muskrat Falls connection is not really as important these days as the the connection between the future of the Kruger mill at Corner Brook and the plan to develop the Lower Churchill.

Manitoba Hydro International noted that connection in their review of part of the Muskrat Falls project for the public utilities board. In instance, a relatively modest change in the project cost coupled with the closure of the Corner Brook mill, erased the Muskrat Falls advantage:

Also, should the existing pulp and paper mill cease operations, and its generation capacity be available for use on the system (approximately 880 GWh), and should the capital costs of both the Muskrat Falls Generating Station and Labrador-Island Link HVdc projects increase by 10%, the CPW for the two Options would be approximately equal.

Nalcor has no export markets for most of the electricity from Muskrat Falls.

The paper-mill-sized elephant in the room… #nlpoli

From the CBC online story about the meeting between a raft of grim-looking provincial politicians and Joe Kruger:

Dunderdale said she expected there would be a second vote on the pension restructuring plan.
Once those issues are resolved, she said, the government is committed to stepping in to ensure that the mill is sustainable.

So while the pols are laying on the tough talk in a fairly obvious effort to sway the mulligan vote, what the rest of us should wonder is how much public money the politicians plan to pour into the mill to keep it running.

-srbp-

Death watch in Corner Brook for province’s last paper mill #nlpoli

Kruger, the owners of Corner Brook Pulp and Paper, are reassessing the viability of the mill in the west coast city on Friday after unions at the mill rejected a company proposal to restructure the company’s pension plans.

In a statement issued Friday, natural resources minister Jerome Kennedy said:

We are facing a grave situation, one which could potentially lead to the closure of Corner Brook Pulp and Paper Limited. Kruger is now reassessing the viability of its operations in Corner Brook. This obviously could have very serious ramifications for the employees and the entire Corner Brook area.

The provincial government wants the company and the unions to negotiate a settlement to the dispute.

Built in 1923, the mill at Corner Brook was the second paper making operation in Newfoundland after the Anglo-Newfoundland Development Corporation mill at Grand Falls.  AbitibiBowater announced that it would close the mill at Grand Falls in 2008.  The provincial government expropriated the mill and all of AbitibiBowater’s assets in the province before they could shut the mill.  Ab closed its Stephenville operation in 2005.

The Corner Brook mill is heavily subsidised by the provincial government.  It is the largest private sector employer on the west coast of the island.

-srbp-

If she said that about the fishery… #nlpoli

Premier Kathy Dunderdale, answering media questions about the future of the province’s last paper-making machine:

“[Kruger are] going to run their operation in consultation with the union on how they can manage their operations here in Corner Brook so that they can compete and compete globally because that's what they need to do,” she said.

Manage operations of the plant so they can compete globally.

Sensible idea.

And the provincial government isn’t going to interfere.

Watch the whole scrum.

Dunderdale talks about the company needing to run efficient, lean operations, “especially in this kind of a climate”.  She means a globally competitive business climate in which plants are closing up because they can’t compete.

Note as well that Kathy Dunderdale acknowledges that neither she nor natural resources minister Jerome Kennedy know about running paper making operations.

Then the scrum switches to the fishery and immediately Kathy Dunderdale changes her headspace.  Suddenly she knows so much about the fishery that she needs to have overwhelming control of the industry – by her account – in order to sort things out.

Dunderdale’s premise in the fishery is that everything should continue as it is, with the government presumably dictating how much companies should take in losses each year.  After all, that’s what fisheries minister Darin King was talking about recently when he told the world that he and his cabinet colleagues had rejected OCI’s processing proposal.  The provincial government looked at the company’s financial statements and made up its own mind about how much work needed to be done in the province.

Now neither Dunderdale nor King know more about the fishery than they do about forestry and papermaking. Yet,  King insists that when it comes to the fishery, the government is interested in getting the most out of the industry for the province.

Two resource industries.

Both facing significant economic pressures that come, ultimately, from the need to operate lean, efficient operations in an intensely competitive global economic environment.

And yet the provincial government follows a policy in one diametrically opposed to the policy they follow in the other.

No need to wonder for a moment why the fishery remains in a mess.  The current provincial government is just the last in a long line of cabinets that simply lacked the political will to come to grips with the fishery problem and fix the problems.  The simplest fix would be to treat the fishery the same way they treat the forestry.

Kathy Dunderdale knows, though, that if she said about the fishery what she said about the forest industry, the dinosaurs would lace into her from all sides.  When you listen to what King and Dunderdale told reporters and how they said it, you’d be making a pretty big ass of yourself if you assumed that King and Dunderdale even thought of doing such a thing in the first place.

- srbp -

Corner Brook braces for job losses #nlpoli

An internal Kruger memo leaked to news media suggest that the papermaker is planning to lay off upwards of 135 workers at the company’s operation in Corner Brook.

The memo notes that comparable plants in North America function with 250 employees compared to the 385 current on the books at Corner Brook.  The memo also indicates the Corner Brook mill produces paper at $140 per ton compared to $100 per ton elsewhere.

The provincial government heavily subsidizes the Corner Brook mill already.

- srbp -

Telly takes wind out of Muskrat

The Telegram editorial on Thursday linked the Muskrat Falls project with the recent announcement by Kruger Inc of a wind energy project in Quebec:

Power, apparently, is cheaper in Quebec. Hydro-Québec says its 2,000 megawatts of wind power are being purchased for an average cost of 8.7 cents a kilowatt hour. That's a huge difference - especially because we're also supposed to be selling power into North American markets.

But you have to wonder - if Hydro-Québec is bringing 2,000 megawatts of wind power on stream at 8.7 cents a kilowatt hour before Nalcor brings 824 megawatts of power on stream at 14.3 to 16.5 cents a kilowatt hour, who will be subsidizing the off-island sale of power of Muskrat Falls to make it competitive with power that costs a third less?

And just why is Muskrat Falls clearly the provincial government's only choice - and Nalcor the only possible supplier - to meet our energy needs again?

- srbp -

Dunderdale admin pours more cash into Corner Brook paper mill

On top of the millions in subsidies it has already provided to Corner Brook Pulp and Paper (Kruger), Kathy Dunderdale’s administration announced on Monday that it would pay $4.3 million over three years  to help workers at the mill upgrade their skills.

The only logical step next is for Kathy Dunderdale and her cabinet to give Kruger a receipt for the whole shooting match.

After all, taxpayers basically bought the mill piece by piece.

In related news, an economics professor at Memorial University thinks these sorts of subsidies don’t work:

[Michael] Wernerheim has high praise for the province's forest management strategy and for wanting to lay out a new path for an industry in decline, such as supporting smaller operations, like saw mills, and putting a greater focus on forests as ecosystems. 

But he found the government spends too much time, effort and money on continuing to support failing ways to protect jobs in the newsprint sector. 

"These short-term initiatives to protect jobs can retard the restructuring of the industry that we all want to see happening," he said.

- srbp -

Coming or going?

Calamity Kathy Dunderdale, Danny Williams’ hand-picked choice for deputy premier, thinks the future of Corner Brook is built on manufacturing:

The minister said Corner Brook Pulp and Paper, despite its challenges, is a fundamental piece of the economy, thus has the support of the provincial government to help the company through these difficult times. She said both government and Kruger share a positive outlook of the mill’s future. Combined with that, the provincial government has created a new strategy to revitalize and diversify the forestry industry, particularly the integrated sawmill industry.

Quoted in the same article, finance minister Tom Marshall has another thought:

Marshall said it is important to create a knowledge-based economy in this area of the province to replace a declining manufacturing-based industry, something he contributed mainly to the competition of low cost producers around the world. He said the plan is to create an energy warehouse, utilizing the Labrador hydro and alternate sources such as wind, to offset that impact of lower labour costs of those competing manufacturers.

Now not only are these two ministers saying completely contradictory things at the same time, the finance minister is also proposing another nonsense.  Not only is Marshall’s future based on things that don’t exist – and likely won’t – but he is proposing to use cheap power as an offset to cheap labour costs overseas.

The Labrador hydro project is basically a fiction.

Wind power, and other forms of alternate energy, are basically a non-starter thanks to current government policy and the obsession with the Great White Whale.

As for giving away power, the last time that was tried, the people of the province wound up with Churchill Falls and the phosphorous plant at Long Harbour.  Given that the finance minister is advocating the use of public money for such a hare-brained scheme should cause a great many people to lose sleep.

Not the least of the bleary-eyed and stressed-out crew would be the people who believe the current administration is a Reform-based Conservative Party that wanted to “get our fiscal situation under control.”

- srbp -

Kremlinology 15: as warm and fuzzy as your old blankie

Last fall was rough on the provincial Conservatives.

Back to back resignations followed by the by-election loss in the Straits and the strong Liberal vote in Terra Nova.  That’s old news to Bond Papers readers.

Things are rough for the Conservatives in Corner Brook as well.

Between the push-back over the Grenfell mess and the possibility that the Kruger mill may shut its doors permanently, there are plenty of reasons for provincial Conservatives to be sweating the possibility of a strong anti-Tory hum on the Humber.

You can tell things are rough because the Premier took the time to head to Corner Brook last week for a party fundraiser – a point the conventional media neglected to point out - encouraged the Kruger unions to give the company whatever it needs to save the mill and pick a fight with people who had pissed him off:  He took a shot at Grenfell principal Holly Pike and others. 

The local paper – The Western Star – warned him about the problems before the speech and then spanked him publicly for his attack on Pike after the speech.

That last bit is a sure sign of how bad things are for the Tories.  What they said was nothing strong at all, but in a province where  - since 2003 - the conventional media like to serve warm milk and cookies editorially, a couple of simple declaratory sentences can come across like  a cross between the 95 Theses and the Declaration of the Rights of Man.

The real sign of the troubled times in Tory circles is the remarkable change in tone.  Suddenly ‘stachless health minister Jerome Kennedy took the trouble to call an open line show this week when it isn’t polling season and nothing is exploding.

He talked at length about the changes he wants to bring after the budget is over.  Kennedy wants to start travelling around the province, talking to the great unwashed masses in their own native habitat. He wants to get real opinions from real people on things the government could be and should be doing.  

We are not talking complete farce here.  Kennedy spoke in calm tones and used language about including people.  A lesson he learned in the by-elections, so Kennedy said.

That’s right in line with another sign, namely a recent tour by several cabinet ministers of towns along the coast of Labrador.  Even Tommy Hedderson took the time to get out of St. John’s and visit real people in real towns.  Hedderson you may recall was the guy who – during the Straits by-election – talked about how wonderful it was to get back into that part of the province for the first time since 2001.  Yes, the fisheries minister hadn’t been able to visit a district with fish troubles until his Leader dragged him along to go save the Leader from political embarrassment.

And let’s not forget the funding announcements.  Before Christmas it was the new hospital for Corner Brook which – we now learn – may well be a tertiary care centre to rival the one in Sin Jawns.  There is money for Grenfell, the bags of which was something the Premier duly noted as he pointed how some people were insufficiently grateful for his generosity.

One of the Labrador ferries will be relocating to Corner Brook, at least for the winter at least for now.

Now there’s Terry French heading to Corner Brook to make an announcement on funding for the provincial government’s arts centres. That’s on top of the money French already announced for the local stadium.  This was not, the finance minister would assure us, a sign that budget allocations have already been made for 2010.

These sorts of things may be old hat everywhere else in the civilised world but in this province since 2003, they are almost unheard of.  Until now, the whole business of keeping in tune consisted of letting cabinet ministers work from an office set up wherever in the province they happened to live.  And even then, the main duty of the ministers-at-home was to keep an eye on dissent and make sure everyone stayed in line. Think hard hat and shovel and road paving in Labrador if you want a classic example of the cabinet minister without a real portfolio.

Now undoubtedly some wag will point out that Jerome! is just angling to replace The Boss.  Shave the ‘stache, they will say and they are right.

But that doesn’t mean that the cabinet as a whole might not also be working along with Jerome to change their collective political fortunes.  While The Boss is busy tilting at hydro towers in New Brunswick, the guys who actually will be running for re-election in 2011 might be noticing they don’t have much time to shift the whole tone and approach of the administration.

Angry just doesn’t work all the time in politics, as any experienced politician and political scientist will tell you. People grow weary. And when the anger is directed inward, when people get smashed in the head for just having an opinion, it doesn’t take too long before people start to look for an alternative to the anger ball.

That’s one of the big lessons from last fall, if you really are clued in about provincial politics. Things started to shift.

And when the shift started, the local Tories seem to have decided to make a shift of their own.

Coming on like a warm, fuzzy blankie seems to be aimed at making sure that whatever alternative people move toward, it will still be blue.

Just a blue without all the anger in it.

-srbp-

Will Danny expropriate this one too?

Kruger is talking cuts and concessions at the major private sector employer in the premier’s own district.

So far, not a peep from the provincial government.

-srbp-

Kruger announces two week shut-down

Kruger announced Friday that Corner Brook Pulp and Paper Limited - the only paper mill left in the province - will idle the entire Corner Brook facility for two weeks starting October 12.

The company cites the high dollar and weak newsprint prices as the reason for the shut-down.

-srbp-

Having big guns helps

Paper maker Kruger may be getting additional financial help from the provincial government to keep its mill in Corner Brook operational.

There’s nothing new in this.  The provincial government has been subsidizing the forest industry for years.

What makes this a bit different is that the area has such strong representation in government.

No one is explaining to forestry workers why subsidies are bad, as fish minister Tom Hedderson did a few weeks ago when people wanted some cash to help out that troubled industry.

Having big guns helps.

Of course,  having those big guns a wee bit worried doesn’t hurt either.

You can tell they are worried about local public anxiety about the future of the Kruger operation when a news release appears advising that every provincial politician from the Corner Brook area will be traveling in a pack on Wednesday.

-srbp-

Gros Morne international status threatened

Gros Morne national park could lose its designation as a UNESCO World Heritage site if NALCOR Energy, the provincial government’s oil, gas and hydro company, succeeds with plans to string a series of high-voltage electric transmission lines through the park.

There are alternatives but NALCOR has dismissed them already as being either costly or technically difficult.
The lines are part of a transmission infeed to bring power from the as yet undeveloped Lower Churchill river to eastern Newfoundland.

The Telegram has that as the front page story on Saturday.

The Gros Morne transmission plan generated opposition from environmental and tourism groups, along with Parks Canada, which must approve the project.

In February, Hospitality Newfoundland and Labrador (HNL) chairman Bruce Sparkes first raised the spectre of Gros Morne losing its spot on the United Nations list.

"It is a UNESCO World Heritage Site and it's been suggested that if you put this corridor down through it, it (may) lose the designation," he says.

"We believe Parks Canada is correct in opposing this."

No one from HNL or Parks Canada would comment for the Telegram.


Deputy premier and natural resources minister Kathy Dunderdale was also unavailable for comment.  While Dunderdale was consumed with the fisheries crisis this week, her office couldn’t even deliver a statement by the Telegram’s deadline, as the department had apparently intended.

In February, Bond Papers and others first raised the issue of slinging transmission lines through the park.

The Premier backed the idea:

“When park officials look at what the trade-off happens to be for the benefits we get at the end of day ... I think they will see the benefit,” he said.

One of the trade-offs would presumably be the international designation.  According to the Telegram only two sites have lost the designation.

When the park was established in the 1980s, transmission towers through its pristine natural beauty was described as “the most serious threat” to Gros Morne.

The power lines may not be needed.

A NALCOR official recently told a business group in Gander that adding more wind generation to the island system would not be a good idea until the transmission line is built.  The transmission line would allow surplus power to be exported.

[ NALCOR manager of business development Greg] Jones told The Beacon the province can only produce a limited amount of wind energy because it can cause water to spill from hydro dams if excessive amounts are produced. This roadblock will be eliminated with the introduction of a transmission link in 2016 for the Lower Churchill hydro project.

The infeed is being justified, in part, on the grounds that the island will need additional power sources by as early as 2013. 

However, the environmental assessment documents for the project project only modest growth in residential and industrial demand in the future.  That was before the AbitibiBowater paper plant in Grand falls closed and before Kruger decided to shut down one of its paper machines at Corner Brook on what appears to be a permanent basis.

Jones’ comments suggest that current and future demand on the island can be met with much smaller, less costly alternative generation sources.  Adding wind power now would add to the current surplus, if the full implication of Jones’ comment about water spilling over hydro dams is clear. 

But that also means that added wind power and small hydro developments could continue to displace the Holyrood generating plant and still meet the island’s energy needs.  Holyrood burns oil to generate electricity and has been a subject of ongoing environmental controversy.

While the plant is currently operating at a severely reduced capacity, due to low demand in the summer months, the infeed proposal would require the plant to operate its three generators year-round in order to stabilise the power transmission from Labrador.

The government’s 2007 energy plan committed to replacing Holyrood with other forms of generation.  Also in 2007, natural resources minister Kathy Dunderdale highlighted replacing Holyrood as one of the reasons for building the infeed.

In Dunderdale’s scenario selling Lower Churchill power to consumers in eastern Newfoundland  was one way the government planned to under-write the cost of the multi-billion dollar Lower Churchill project. 

No other power purchase agreements have been identified.  A memorandum of understanding with Rhode Island on a block of 200 megawatts appears to have gone no where since it was signed in 2007.

-srbp-

BLTN Update:   CBC is running the story as well, on Monday.  The most interesting feature of this online story are the comments from a raft of pseudonyms - most of whom apparently like the idea of slinging power lines and steel girders through a park where right now the tallest power line is on a wooden poll. 

Nature schmature.