Prov gov’t expropriated after it lost bid to buy hydro asset

Human resources minister Susan Sullivan appeared on local talk radio today responding publicly to a letter by Grand falls-Windsor lawyer Mark Griffin.  In a letter to the Grand Falls-Windsor Advertiser, Griffin raised several questions about government’s expropriation of AbitibiBowater assets including hydroelectric generators.

Sullivan gave radio listeners three reasons for the expropriation.  The first – and most important – is one that government used from the start: no one wanted to see the company walk away with “our resources”.  The line doesn’t hold up any better now than it did before.  The assets weren’t going to leave the province in any scenario and that’s especially true of the hydro generators which could only produce power in Newfoundland.

For many there has been a suspicion from the outset that there was more to the story than met the eye, much more than the nationalist chest-thumping and theatrics surrounding the expropriation bill.

New information points to an answer to the nagging question of why the provincial government expropriated the hydroelectric assets, including Star Lake which never supplied power to the Grand Falls paper operation. It’s an answer that harkens back to the failed Hebron negotiations in April 2006.

In a February 13 interview with Business News Network’s Howard Green, Abitibi chief executive David Paterson said the provincial government moved to expropriate AbitibiBowater’s assets in Newfoundland only after the provincial government lost out in the bidding for Abitibi’s interest in one of its hydro projects. [video link]

“We hadn’t said we were going to sell the assets,” said Paterson, “other than we had a deal on a joint venture power dam and our partner [in that project] was going to buy us out…”.

Paterson said the provincial government  - presumably Newfoundland and Labrador Hydro - had bid for the AbitibiBowater interest in the joint venture but had been outbid by the partner.  He said the provincial government had been “blocking the transfer” to what Paterson described as an existing investor in the province.

“and now they’ve expropriated them as well,” said Paterson.

Ironically,  Newfoundland and Labrador Hydro is reportedly handling the compensation talks with all the companies whose assets were seized. Paterson told the Globe and Mail on 17 December: “[It] basically consists of Newfoundland telling us what they are going to do and we have to comply.”

The description of the partnership sounds like Star Lake, a joint venture between Abitibi and Enel North America.  The Star Lake partnership came in response to a call for proposals in the early 1990s from Newfoundland and Labrador Hydro for a small hydro projects that would displace some of the generation at Holyrood. The project sold power directly to Newfoundland and Labrador Hydro.

Star Lake was expropriated in December 2008.

To date neither the provincial government nor the companies involved have answered any questions about the expropriation. Earlier this month, the province’s natural resources department refused to answer a series of questions on the expropriation posed by Bond Papers. The questions included ones that went directly to the issue of Star Lake: 

1. Why were all the hydro assets expropriated under Schedule C and the various licenses and permissions terminated (Schedule E)?
2. Why was this done in December?
3. Why was Star Lake included when it was a response to an NL Hydro RFP?

If Abitibi wasn’t planning to sell its other hydroelectric assets in the province, the company may have been looking to sell its power directly to the Vale Inco project at Long Harbour. All that stopped, as would the possibility of selling the hydro assets to Vale Inco, one the privately held generation was seized by the provincial government in December.

This also puts a different light on one of the curious lines in the provincial government’s news release on the Long Harbour project:

The company has also agreed that it will pay the island industrial rate for its power supply, surrendering its option to have a better rate should other industrial customers obtain a better rate for whatever reason.

Once government seized the Abitibi assets and all the company’s water rights, Vale Inco didn’t have a choice. The existing assets were gone as were three projects which together could have supplied Vale Inco’s power needs. There wasn’t any way to develop an alternative to NALCO’s government-enforced monopoly position.

The notion of seizing assets after a failed negotiation isn’t new, either. In 2006, the Premier public vilified the partners in the Hebron talks when negotiations collapsed.  He talked openly about the need for legislation which would allow government to seize properties containing commercially viable oil finds if the finds were not developed within a certain period of time.

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Romanes eunt domus

Somewhere in the cupboard, your humble e-scribbler has a coffee mug with the words “Illegitimi non carborundum” on the outside.  Inside there’s a translation of this supposedly Latin phrase: “Don’t let the bastards get you down.”

The only problem is the phrase isn’t Latin at all. It sounds like Latin but according to those that know these things, the phrase is just one of those things that got passed down and transmogrified over the years.

That source of all knowledge – Wikipaedia – has a typically lengthy entry on the whole thing.

The phrase cropped up again in a scrum on Thursday, with a new variation: “illegitimati”.  Same difference.  It’s still mock Latin.

At times like this, it is worthwhile to go back to Monty Python.  A little proper Latin and a properly funny Latin lesson to correct the phrase that translates as “People called Romans they go the house.”

More offshore R&D cash

The Supreme Court of Canada declined to hear an appeal by oil companies into a court decision on research and development rules set by the offshore regulatory board.

That means more money for research will flow in Newfoundland and Labrador from Hibernia and Terra Nova.  White Rose already operates under the new rules that fix a percentage of revenues to be spent on research and development.

The decision will also affect the Hebron field when and if it is developed.

Under the provincial government's agreement with the Hebron partners, $120 million is earmarked for R&D activities.

Despite that spending commitment, Ruelokke says the R&D rules will still apply to the project.

"It'll be bound by whatever our guidelines require."

If the R&D formula works out to be more than the Hebron agreement target, more research and development spending will be required.

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Hydro towers likely to confront cabinet in retreat

The provincial cabinet may be retreating to Corner Brook for a couple of days but they won’t be able to retreat from a number of controversial issues, including their plan to sling hydro lines on 40 metre tall towers through a UNESCO World Heritage site.

The plan apparently came as surprise to tourism operators in the region.  They’ve got serious reservations about the scheme.

“Stand almost anywhere in the park and, given this proposal, the one thing that would catch your eye is a 50-foot transmission tower,” said [Todd] White. “I can’t sell that.”

Letter to the Editor update:  from Greg Knott of Norris Point -

Gros Morne National Park is widely considered around the world to be one of the most beautiful places on the planet and should be preserved as is, at all costs, to protect its visual and environmental integrity for all generations around the world to enjoy ... forever.

 

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Auto sales in NL off big time

According to DesRosiers Consultants, automobile sales in Newfoundland and Labrador dropped 34.2% in January 2009 compared to January 2008.

That’s the biggest drop in the country.

Saskatchewan faired best with a seven percent drop when comparing January to January.

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Paranoid delusions and the pain of loss

The usual crowd on voice of the cabinet minister’s night time show are in a lather over Konrad Yakabuski’s column in the Thursday Globe and Mail suggesting the expropriation of AbitibiBowater’s hydro assets was part of a Machiavellian plot to guarantee low cost power to Vale Inco for its Long harbour project.

Abitibi hydro – 116 MW.  Vale Inco need – 100 MW starting in 2012.

Now there are a couple of things right off the bat. 

First, the world can always be reinvented to fit the paranoid delusion of the moment and the tinfoil hat brigade thrives on paranoia and delusion.  In this case, they loved the Globe for featuring a border war with Quebec despite the facts to the contrary about the border issue.  It’s a pet cause of theirs and they felt vindicated that the Globe had supposedly paid attention to them and what they think is the truth.

Once the Premier stated that there really wasn’t an issue, the same crowd decided – as they now argue – that the evil Globe is just trying to stir up controversy and undermine their local hero. 

Why they pay so much attention to one newspaper is a mystery.

Second, there was no apparent shortage of electricity on the island.  The closure of the Stephenville mill  in 2005 freed up a bunch of megawatts and there is some extra capacity around in the system for the foreseeable future anyway. There are several small hydro projects in various stages of planning all of which could have been developed, if needed, to meet the demand at Long Harbour.

Beyond that it is just too much to imagine that any government would deliberately throw one crowd out of work in order to put another bunch somewhere else to work.

Yakabuski is right that the Crown expropriated the most valuable assets of the AbitibiBowater operation at Grand Falls-Windsor.  The really valuable one in the long run is the hydro generation both from existing projects and the ones on the planning books. The provincial government expropriated not only the mill-related generation but also seized Star Lake which was built to supply power directly into the electricity grid on the island.  They also cancelled all AB’s water rights thereby preventing them from establishing any generating capacity that wasn’t controlled by the hydro corporation.

Yakabuski’s musing really comes apart on the matter of timing.  Once the workers voted down the second restructuring proposal and the company announced the mill would close, the mill was gone. Expropriation simply allowed NALCO to scoop up all the hydro assets, establish a near complete monopoly on electricity generation and do it all for little or no cost. Expropriation didn’t cause the mill closure; it was – at best – a by-product.

The letter that seems to have prompted Yakabuski’s column has to be seen in a wider context as well. There are a great many people in central Newfoundland who never believed for a moment the mill would ever close.  They believed, apparently, that it was all a bluff or that the government had some sort of magical plan that would make all the hurt go away.

Its author poses a series of questions that really should be seen through the lens of that shock. Many people in central Newfoundland are looking for answers for what, to them, must appear to be an impossible outcome of this whole process.

People naturally come up with all sorts of possible explanations for really bad things and this letter must be seen in this light. Great plots make for good fiction but they are usually not the stuff of the real world.

In the real world, bad things happen for perfectly understandable and far less complicated reasons.

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NL new home starts forecast to drop by 17.4%

Canada Mortgage and Housing Corporation (CMHC) is forecasting that new single home starts in Newfoundland and Labrador will be down 17.4% in 2009 from 2008. Re-sales of existing single family dwellings is expected to drop 14%.

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That’s what that noise was…

The giant pop was the bubble that was protecting the province from the global economic meltdown as it burst.

Former finance minister Tom Marshall:

“We have a horrible, global economic slowdown, which appears to be much more severe than people expected,” said Marshall. “We’re seeing job losses everywhere and firms going bankrupt or teetering on bankruptcy. How protracted this recession will be, I don’t know, but it looks like it is going to be severe.

“When times are good, you run a surplus. When they are bad, you run a deficit and spend money. When consumers aren’t spending and businesses are not investing and exports are down, government has to step in and start spending and creating employment. That’s what we’re doing and I’m glad we’re doing it.”

Of course, since Marshall ran cash deficits in the good times, so there’s something there that doesn’t add up.

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Recycled “stimulus”

There is an unprecedented, historic level of money in yesterday’s provincial government pre-budget spending announcement that is recycled cash from last year or money previously committed.

That’s pretty clear if you read comments by former finance minister Tom Marshall in the province’s other daily newspaper, the Western Star:

There will also be $16 million to finish off the new long-term care facility in Corner Brook.
The province is going to spend $50 million in health equipment and another $40 million on maintenance and repairs of current facilities, though Marshall did not have a breakdown of how much of those monies will be directed to Western Health.The new law courts under construction in Corner Brook will receive $7 million so that project can be completed in the coming year, while Sir Wilfred Grenfell College will be getting a share of the $9.4 million the province will spend on new residences at the Memorial University campuses in Corner Brook and St. John’s. The total cost of the Grenfell residences will be nearly $5 million, while new accommodations at the larger campus will eventually cost $67.5 million.

Leftover work from last year, including jobs on the Lewin Parkway and the off-ramp at Humber Village, will be among the $70.7 million o be spent on the province’s roads. Schools throughout western Newfoundland can expect to see some of the $30 million announced for repairs and maintenance  in K-12 schools.

It isn’t clear at this point how much of the money is actually new nor how much will actually be spent.

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Freedom from Information: The “secret” inland fisheries review

Former Provincial Conservative cabinet minister and retired supreme court judge Bill Marshall has been conducting a review of the province’s inland fish and wildlife enforcement program but there have been no news releases about the project. 

The only reference to the review on the government’s website is in a question last fall from opposition House leader Kelvin Parsons on December 17, 2008, the last day the House sat before Christmas:

Mr. Speaker, after receiving information from a concerned citizen, our office submitted an Access to Information Request regarding the William Marshall review of the Inland Fish and Wildlife Enforcement Program. Executive Council withheld most of the information and we were forced to appeal to the Information and Privacy Commissioner. He recommended the release of the information in accordance with the legislation, yet government is still hiding these documents. It has been eight months and this issue is still not resolved. [Emphasis added]

I ask the minister: Why is government withholding significant amounts of information related to the Marshall review?

The information on the review turned up when your humble e-scribbler started searching the Internet for any references to the subject of what initially appeared to be a  routine decision by the province’s information commissioner on Monday. 

The inland fisheries program falls under the justice department but for some reason the access to information requests was handled by the government’s central bureaucracy.

In the decision, information commissioner Ed Ring summarised the initial access to information request as follows:

Under authority of the Access to Information and Protection of Privacy Act (the “ATIPPA”) the Applicant submitted an access to information request dated 18 April 2008 to Executive Council (the “Department”), wherein he sought disclosure of records as follows:

“I am requesting under the Access to Information Act information related to [author’s name] review of the Inland Fisheries and Wildlife Enforcement Program. This request includes:

- the budgeted amount of the review.
- travel and entertainment expenses by [the author]
- all documentation related to this review.”

The identity of the applicant and of the individual conducting the review were withheld by Ring in keeping with the privacy sections of the province’s access to information law.  Both are revealed in the transcripts from the House of Assembly.

There is no indication of the scope of the review or of when it started. The Executive Council withheld large portions of the record citing several sections of the access law. The opposition office appealed the Executive Council’s decision to withhold the sections.

Executive Council also withheld information on the basis that the review was not completed.  Justice minister Tom Marshall gave that reason as his answer to the question posed in the legislature.  The applicant did not seek a copy of the final report specifically nor did its request – as quoted by the information commissioner – relate solely to the report.

Ring rendered his decision Monday, noting the excessive delay in responding to the opposition office appeal was due in large part to problems getting a response from the Executive Council official responsible for co-ordinating access to information requests.

Part of the delay was apparently due to a staffing change at Executive Council.  However, between August and October, the information commissioner’s office had little success in getting the new co-ordinator to respond to efforts to resolve the appeal informally.

In his decision, Ring accepted that some of the deletions in the documents sent to the applicant were legitimate.  Others were not.  Reference in an e-mail to the fact that cabinet had reached decision on an unspecified matter was deleted in its entirety citing the section of the act that requires information be withheld if it can revealed advice, deliberations of cabinet or policy recommendations.

In other instances, entire paragraphs were deleted from documents on the grounds they contained personal information.  Ring noted that the privacy section of the legislation  - section 30 - could have been satisfied by merely deleting the names of certain individuals or other specific information.

The most curious part of Ring’s decision comes in a discussion of something referred to as “non-responsive records.” Ring noted:

Finally, the Department has identified some records as not being responsive to the Applicant’s request. The Applicant’s request was very broad, and access was sought to “…all documentation related to this review.” It appears to me, that some of the information that was considered non-responsive and thus not provided to the Applicant could fall under this broad request, in that it might be considered to be related to the review. For example, any information that was provided to the author or discussed between government officials as a result of the review is, in my opinion, responsive to the request, and should therefore be provided to the Applicant (subject, of course, to any appropriate exceptions).

Neither the access to information law nor the government’s access to information policy manual contain a definition of  “responsive” or “non-responsive” records.

The terms come up frequently in reference to access requests but they appear to be inventions of government officials. They have no legal meaning since they are not in either the access law or the regulations.  However, they are so common-place that everyone has come to use them.

For example, a Telegram inquiry about purple files used in the Premier’s Office in preparing for media interviews yielded the official response that there were “no responsive records.” The Telegram learned of the files when a reporter received a copy of an e-mail from a government communications official asking for purple files to be prepared for the Premier. The premier himself confirmed that such files were routinely prepared for him as part of interview preparation:

"When I am provided with a personal file it's an information file to get me ready for an interview with the press," he told reporters at the news conference. "It is not the down and dirty on you or you or you or anybody else."

In the inland fish review case, it really isn’t clear how Executive Council officials could identify documents or information that related to the review and yet were “non-responsive” to a request for “all documentation.” On the face of it, it seems that officials have invented entirely new categories of documents and information that serve only to further stymie efforts to access information under provincial law.

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Math problems at provincial finance

That 60 cycle hum you hear is not the turbines spooling up on the Lower Churchill.

Nope.

That noise would be the intense spin – torque would be a better word – the provincial government is putting on its infrastructure announcement this snowy Wednesday. 

The reason for the announcement:  the provincial pollster – CRA  - is in the field.  With the nurses taking a strike vote and with a certain amount of anxiety out there about how bad the budget will be, the government party must have felt the need to make it appear that something good was happening in the budget to keep those polling numbers high.

Note the word “appear” in that sentence.

This is all about appearance.  If the provincial government actually wanted to do something, then the legislature would be called back and the new budget would be introduced.  They could run with it tomorrow since the thing is settled and has been for weeks. 

If it wasn’t about appearance, a bunch of cabinet ministers wouldn’t be sent to Labrador to announce things already announced.  The hospital in Labrador West is now officially the most announced project that never appears in provincial political history.  The Lower Churchill still holds the record for most costly non-project.

And if they had been really smart, then no one would have been proudly pointing out that all this was just re-cycling old news, as natural resources minister Kathy Dunderdale did with CBC last night or one of the political gaggle did at the news conference in Goose Bay.

This budget announcement is apparently not about math.

We are told that infrastructure spending will be about $800 million.

We are told it is a record.

We are told that:

The $800 million the Provincial Government will spend on infrastructure in the 2009-10 fiscal year represents a jump of $285 million – well over 50 per cent – from the 2008-09 fiscal year.

Last year’s “unprecedented” infrastructure spending was valued at $673 million.  An increase of “well over” 50% of that amount would put infrastructure spending this year at $1.009 billion.

If $285 million – the size of the increase – is actually more than 50% of last year’s spending, then we have discovered something very interesting.  Despite announcing $673 million in “unprecedented” capital spending last year, the provincial government may have spent a not altogether unusual amount of somewhere around $500 million. That’s about 25% less than announced.

Based on that precedent, capital spending in 2009 will actually be around $600 million, not the $800 million torqued on Wednesday.

And it’s not like this is the first time something coming from provincial finance didn’t add up. Different figures keep appearing from Jerome Kennedy’s department all the time.  Like Equalization.  Numbers magically appeared all through that fiasco a couple of weeks ago that had never been seen before in public, including in the province’s audited financial statements.

Lucky for the finance crowd and their government publicity machine they can still hypnotise some people with the magic of PowerPoint slides.

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Churchill Falls “go-it-alone”: not so much edition

It’s not like you haven’t heard this before but the provincial government isn’t going alone on the Lower Churchill if the Lower Churchill goes at all. 

[Gilbert] Bennett indicated that the go-it-alone option is not the only one on the table for the potential megaproject.

"The preferred alternative is for us to lead the development of the project," Bennett said.

"That statement has been made certainly by government on many occasions. From our perspective, our job at this point in time is to collect the data necessary to give government the information they need to make a decision. So I'm not going to comment on partners, sources of equity, at this point in time."

This story – from the Wednesday telegram confirms what Bond Papers said in 2006: the thing is more show than substance and the thing can only work if other people chip in to pay for it.

When the project was announced, though, the Premier wasn’t quite so equivocal as to call going it alone merely a “preferred” option:

- "The purpose of the announcement today was to indicate that the Government of Newfoundland and Labrador, and the people of Newfoundland and Labrador, are going to do this project themselves."

- "...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..."

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Lower Churchill EIS: first observations

NALCO released the environmental impact statement for the Lower Churchill development on Tuesday.  Following are some initial observations on certain sections.

1.  Need:  The project is justified based on meeting current and future domestic demand including industrial development, export potential and maximising local benefits.

a.  Domestic demand: NALCO’s own figures forecast load growth at “1.1 percent on the Island and 0.2 percent annually in Labrador. Forecasts indicate that by 2027, an additional 582 MW of generating capacity will be required to meet the demand in the Province, an increase of more than 29 percent over requirements in 2007.”

The report varies the power measurement units (megawatts in some places and gigawatt hours in others).  This makes it difficult to assess clearly the actual domestic demand and supply situation without an independent analysis.

The EIS mentions possible small hydro projects but puts the total potential at 60 to 100 MW instead of 150 MW.  As well, the EIS does not include the upwards of 150 MW of capacity NALCO acquired in the December expropriation of hydroelectric assets on the island.

b.  Industrial Development:  The EIS lists a series of potential industrial developments and estimated energy demands. For the most part these are fanciful projects that have been kicked around for decades without ever being seriously contemplated.

Still, even if by some chance these projects all materialised and needed new power sources, the requirements for most of the Labrador projects could be met using Churchill Falls power under the recall option in the original contract. Additionally, CFLCo could divert additional power beyond the original contract amounts through an agreement with Hydro-Quebec.  Such an approach would be attractive to HQ since it would increase the profitability of CFLCo.

Project	Power Demand (MW)	Status/Notes
Aluminum smelter (Labrador)	560	Studied since 1970s.  Unlikely, based on market demand, costs etc. Would require large amounts of power at or below production cost to offset costs of importing raw materials and transportation to markets.
New iron ore mine (Labrador)	255
Uranium mine	35 to 45	Could be met with power from CFLCo.
Silicon smelter (Labrador)	50	Promoted since 2000, the project for western Labrador has thus far failed to materialize.
IOC expansion (Labrador)	20 to 30	Currently on hold pending changes in markets.  Power need could be met through Churchill Falls recall.  IOC is a partner in Twin Falls Power Corporation which currently supplies power to western Labrador through an arrangement with CFLCo.  Power demand for the expansion could be met easily through the existing recall arrangements under the 1969 Churchill Falls contract.
Voisey’s Bay underground mine (Labrador)	40 to 50	VBNC currently meets its electricity demand using thermal generation.  Expansion could be powered using same method. Potential exists for small hydro development closer to project than Lower Churchill.  Transmission lines from LC to VB would add significantly to project cost.
Refinery (Newfoundland)	175 to 235	Second refinery project died in 2007.  Only reported dead publicly in 2008. Current status:  dead.
Nickel refinery (Long Harbour)	80	Can be met with existing capacity, additional capacity expropriated from AbitibiBowater or development of added capacity through wind generation and small hydro.

2.  Cost:  The project, consisting of two dams and hydro lines connecting to Churchill Falls, is estimated to cost $6.5 billion.  This seems low based on the recent Montreal Economic Institute study of Hydro-Quebec and some media reports are carrying the estimated cost of the project at $10 billion.  Both figures apparently come from the proponent.  This suggests the project is considerably less well developed than it appears.  Were it close to actual development, the costs would not be varying by over 50% in the time it took to revise this EIS document. ($6.5 billion to $10 billion)

As a Crown corporation, NALCO debt is backstopped by the provincial government and therefore affects the province’s financial status.  As current structured, this project is larger than the current provincial government accumulated borrowings and approximately the same size as the provincial government current net debt (assets less liabilities). 

3  Timelines:  The project will not complete the environmental review process until late 2010 or early 2011.  If built, the project would require a decade to bring fully on stream.

This is considerably at odds with comments by NALCO chief executive officer Ed Martin who claimed as recently as October 2008 that problems in American capital markets would delay the project by a mere six months. By contrast, the Premier has been lowering expectations on the project timelines since early 2008.
A proposal by Ontario and Quebec in 2005 suggested project sanction in 2007 with first power by 2011 at the earliest. This was rejected in favour of the so-called “go-it-alone” option which envisaged first power in 2015.

4.  Land claims agreements.  The Innu land claims vote originally scheduled for January 31 was cancelled with reports the Innu Nation and the provincial government had returned to the bargaining table to discuss “outstanding issues.” There have been signs of problems with the agreement since shortly after it was signed on top of contentious periods during the negotiations.

The EIS does not discuss the most recent developments, noting only that the land claim is still being negotiated (p.25) and that the provincial government and Innu Nation signed an agreement in September 2008 that “resolves key issues related to the land claims (Innu Rights Agreement), Innu redress for the upper Churchill hydroelectric development and the lower Churchill (Project) IBA.” This may not be accurate.

5.  Power purchase agreements.  No sign of any at all anywhere with any body.  They are crucial to securing long-term financing. The EIS merely describes a standard, theoretical structuring of mostly long-term agreements supplemented by short and medium-term contracts. 

6.  The Long Way Around, a.k.a the Anglo-Saxon Route.  Originally conceived by Joe Smallwood as a negotiating ploy for dealing with Quebec, the idea of stringing power lines to the island and then on to the Maritimes remains more fantasy than reality.  The concept has always floundered on the basis of cost.  The ASR remains a rhetorical device for this project. 

A line to the Avalon peninsula from the Lower Churchill  is being sold in part because of its potential to be extended southward to the Maritimes.  The Nova Scotia Liberal Party leader recently met with Premier Danny Williams to discuss the ASR.  NALCO and Emera signed a memorandum of understanding to explore the possibility of moving power from Muskrat Falls and Gull Island to Nova Scotia.

The EIS mentions this project only obliquely.

7.  Project linkages or Do they not talk to each other in the office?  The Lower Churchill project is justified in part on the basis of replacing thermal generation at Holyrood.  The EIS contains no proposal for meeting that requirement. Instead, the line to Newfoundland is referred to as an addition.  All the same, it appears that this document has not been updated in some time.  Either that or people within the office don’t talk to each other.

EIS comment on the line to Newfoundland sent for environmental review within the last two weeks:

At the time of this filing/submission, Nalcor Energy expects that there has or will be a registration and project description filed for the proposed Nalcor Energy Labrador‐Island Transmission Link project.

8.  Alternatives: When you are the proponent of a megaproject that is largely driven by political considerations, you are likely to give short shrift to alternatives to the politically-favoured project.

a. Conservation:  Estimated to reduce demand growth (2007 to 2027) from 29% to 17%. The implication of this is not discussed at all since it dramatically alters the demand profile being used to justify the project.

b.  Wind:  Wind capped at 80 MW due to what NALCO describes as problems with management of demand flow.  NALCO already has contracts for 54 MW.

c.  Natural gas:  EIS gives a cursory discussion of natural gas noting only that the technical and economic feasibility of gas-fired generation has not been established.

d.  Added capacity:  A vague discussion, at best, this section does not catalogue the existing alternative hydro generation sites. 

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Lower Churchill EIS released

NALCO released the environmental impact statement for the Lower Churchill project on Tuesday.

The environmental review will not be completed until 2010/2011, marking yet another slide back in the project timelines since 2005/06.

The project will take a decade to complete.

Current estimated cost  - for two dams and the feed to Churchill falls - is $6.5 billion according to the EIS.  This seems low.  Some media are reporting an estimated cost of $10 billion which is closer to cost estimates based on other hydro projects described in the recent study of Hydro-Quebec by the Montreal Economic Institute.  The $6.5 billion does not include the cost of the line to the island.

 

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Local crude holds above US$40

While the most widely reported front-month crude price – West Texas Intermediate – continues to sit below US$40, the benchmark for local crude  - Brent - continues to trade above US$40 on world markets.

The price differential between WTI and Brent hit US$11 per barrel temporarily on Friday.

Brent averaged US$55.50 (approx CDN$69) in trading in the fourth quarter of 2008.

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NALCO handling expropriation talks: AbitibiBowater

The province’s energy corporation is handling talks on compensation with AbitibiBowater for the latter’s expropriated assets, according to AbitibiBowater chief executive officer David Paterson in a Globe and Mail story Tuesday.

Abitibi executives are dealing with the pending transfer of assets through talks with the province's hydro utility, which is handling the issue of valuation. "We are in a dialogue indirectly with the government through Newfoundland Hydro," Mr. Paterson said.

Still, he said, the process is very one-sided. "[It] basically consists of Newfoundland telling us what they are going to do and we have to comply."

He said the expropriation legislation does not give the company any right to a judicial hearing. As a result, the determination of value "is at their whim."

The carrying value of the assets is US$300 million, according to documents filed with the Securities and Exchange Commission in the United States.

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The border war that wasn’t

Told ya.

Meanwhile the tinfoil hat brigade which usually bitches about the Globe and Mail not covering their stories now blame the Globe for covering their story.

Go figure.

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Ruelokke, Rowe and the Rule of Opposites

A couple of years ago, you couldn’t swing a dead cat without hitting a comment by Danny Williams to the effect that Max Ruelokke as head of the offshore regulatory board would be a really bad thing.

How bad?

Andy Wells would be better kinda bad.

The hysteria surrounding that nationalist cause of that moment – Ruelokke is hardly a Newfoundland name, is it? – prompted at least one local journalist to question the value of the rule of law since it was obviously [insert eye roll here]working against “us”.

Ruelokke and the offshore board are looking a lot like O’Brien/50% and the 1985 Atlantic Accord: something that was officially “bad” when it suited the current administration’s purposes but which turned out to be good in actual experience.

It’s yet another manifestation of The Rule of Opposites:  what is correct is the exact opposite of what the official government line was at the time.

Hibernia management and Development Company and Petro-Canada are suing the offshore regulatory board over its rules on local research and development.

At issue: new offshore R&D spending rules brought in by the Canada-Newfoundland and Labrador Offshore Petroleum Board in 2004.

Those rules require HMDC and Petro-Canada to spend a percentage of their annual offshore revenue on research, development, education and training activities in the province.

That money was estimated by the board in 2007 at $25 million annually, depending on world crude prices.
Under the new rules, the board has the right to suspend production licences if oil companies fail to meet their R&D spending obligations.

Both HMDC and Petro-Canada say the board has unilaterally changed the rules in midstream and they question its authority to do so.

Incidentally, the Hebron deal includes a huge give-away on research and development but that’s another story.

So this case has been working its way through the courts with the offshore board winning at every turn. The oil companies are now headed to the Supreme Court of Canada for the last legal round of the fight.

Odds are they’ll win again.

But you can’t help but notice that this is running contrary to the predictions from a certain segment of local public opinion.

The courts appointed by Ottawa, the courts that ruled “our” oil wasn’t our oil in the early 1980s are here standing by the crowd at the offshore board led by Max Ruelokke as they protect Newfoundlanders and Labradorians yet who, we were told emphatically, would not act to protect the best interests of Newfoundlanders and Labradorians.

And the appeals court justice who dissented from the majority opinion  - i.e. who sided with the oil companies - was a guy Jerome Kennedy recommended to go to the Supreme Court of Canada last September 6.  Kennedy’s recommendation of Mr. Justice Malcolm Rowe – along with Mr. Justice Leo Barry - was faithfully reported by the voice of the cabinet minister at the time, even if they don’t like you reading stuff from that long ago. (you can find the story through google but clicking on it generates and “error” message.)

Amazing as it seems, in the case of the offshore board – like Equalization - you really can’t go wrong most times by taking the government position of the moment and thinking the opposite.

And what about those oil companies like ExxonMobil that were “bad” in 2006 but which are now called “our offshore partners” by everyone from the Premier to his official spokesperson in natural resources?  Well, judge for yourself.

Your humble e-scribbler didn’t accept that they were enemies when some people wanted you to think that.  These days, they aren’t friends.  They are just companies doing business in the offshore and they should be treated as such. 

In the case of the suit against the offshore board the companies are just doing what they think is in the best interest of the people they represent: their shareholders.

That’s basically what the offshore board is doing on behalf of the people of Newfoundland and Labrador. Funny though how what happened is exactly the opposite of what some people wanted you to believe.

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And what about Signal Hill, 2012?

As it turns out, 2012 marks the anniversary of several major events in Canadian history but so far there has been very little talk of any commemorations.

The last battle of the Seven Years War took place at and around Signal Hill, St. John’s in 1762.

Other major North American battles of that war have been marked already and there was a plan to mark the anniversary of the capture of Quebec with a re-enactment of the battle. That plan fell victim to an outcry from Quebec separatists. The event was supposed to draw thousands of tourists including the history enthusiasts who  re-enact these sorts of events.

Well, those people who won’t be going to Quebec should be gearing up to come to St. John’s in 2012.

At the same time, 2012 marks the 200th anniversary of the War of 1812.  The Newfoundland Regiment played a significant role in several battles, including the defence of York. There are re-enactors for that war as well and they too will likely be getting ready for the big event three years from now.

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Hydro towers through UNESCO World Heritage sites: the editorial view

The Telegram Saturday editorial takes a dim view of NALCO’s proposal to string high voltage transmission lines through Gros Morne.

The problem is that the Gros Morne proposal, on the face of it, is hardly an acceptable option for a national park. Between a rock and a hard place, indeed.

Indeed it is.

One of the comments from a reader suggests that it is preferable to do this than keep a diesel generator running at Holyrood.

Fair enough at least for a proposition.

But the NALCO proposal doesn’t address the current electricity demand and the current utilization at Holyrood to cement the case that this massive transmission project – at least $2.0 billion in added taxpayer debt – is actually the best solution to the Holyrood problem. 

Electricity demand is not exactly skyrocketing on the island.  Two major industrial projects have died since 2005 and the Vale Inco project at Long Harbour will only suck 75 megawatts a year, when it comes on line some time around 2012.  In the meantime, the expropriation bill gifted NALCO with almost 150 megawatts of power that costs virtually nothing to run.

On top of that there are at least six other small hydro projects that have been frozen in place since the late 1990s. According to the province’s energy plan, that moratorium is due to be reviewed in 2009.

Meanwhile, Kruger was looking at a site at Silver Mountain.  NALCO itself completed studies on two others in 2006, one at Island Pont (36 MW) and another at Portland Creek (23 MW).  On top of that, AbitibiBowater had three sites under consideration in 2006:

• Badger Shute (24 MW)
• Red Indian Falls (42 MW), and
• Four Mile Pond (24 MW).

There are others.

One of the problems facing any development of those alternative sources of power is the stranglehold NALCO now holds on development in the province.  The energy plan makes it clear that the government now considered NALCO to have a monopoly within the province even before it expropriated several private sector developments including Star Lake:

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. However, in the long term, the province, through the Energy Corporation, must maintain full control over any new hydroelectric generation assets. We will do this by adopting a policy that no new water rights for hydroelectric generation will be issued except to the Energy Corporation or another company acting in partnership with the Energy Corporation.

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. 

NALCO isn’t famous for getting things done expeditiously.  It has taken the company the better part of a decade to implement several small wind power projects.  Efficiency and effectiveness aren’t the usual order of the day at any Crown corporation and as a recent study on Hydro-Quebec shows, taxpayers usually aren’t well-served by the behemoths.

Between a rock and a hard place, as the Telly-torialist put it,  doesn’t even begin to describe what else NALCO will come up with besides stringing power lines through a UNESCO World Heritage site.  Next thing they’ll want to add upwards of $10 billion to the public debt for something or other without any sign of a way of paying for it beyond borrowing.

Oh, wait.

They have already.

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