Wading through Locke on Muskrat (Part 3) #nlpoli #cdnpoli

[continued from Part 2]

Debt

One of the issues Wade Locke set out to address was the impact Muskrat Falls would have on public debt. For some other information on Muskrat Falls and public debt, check this earlier post.

Slide 43 is a table of debt servicing amounts based on the amount borrowed and the rate of interest amortized over a 30 year time.  For example, $3.0 billion at 5% would cost $195 million in annual payments to pay the principle and interest. on the opposite end of Locke’s scale, $8.0 billion at 10% would cost $849 million each year.

Earlier in his presentation, Locke asserted that the provincial government can currently borrow money at 5% while Nalcor can borrow money at 7.5%.

The money to meet those payments would come from only one source:  electricity rates.  As noted right at the beginning of the presentation, the entire project is proposed based on having the ratepayers of Newfoundland and Labrador carry 100% of the cost.

This money would be in addition to other Nalcor costs for producing electricity in the province. The public utilities board is responsible for setting electricity rates in the province. The board must allow Nalcor to recover its costs plus provide a rate of return – essentially a profit – on its operations.  The board will also add an amount for Newfoundland Power, the electricity distributor on the island to determine the rate paid by residential and industrial consumers.

One of the important pieces of information needed to determine the impact on the public debt and rates would be the amount of money, if any, that Nalcor would raise or how it would raise the money.  Equity investors,  borrowing or subsidy from the provincial government all carry different implications for public debt.

There are different possibilities. Locke did not discuss them.  Instead he relied on other information as he presented on Slide 44. Locke did not indicate in the slides or his presentation where he got the information.

According to Locke (Slide 44), Nalcor would generate $550 million from its proposed rate (7.5 cents per kilowatt hour).  This would allow Nalcor to cover a loan of $8 billion at 5% with $100 million left for “other expenditures”., according to Locke. 

He also claims that revenue from “residual power” would generate up to $60 million.  This “residual power” is the power other than that designated for use in Newfoundland and Labrador or the portion shipped free to Nova Scotia. 

As a result, Locke concludes, the extra debt won’t be a problem for the provincial government or Nalcor.  Locke has not explained how he reaches this conclusion other than by the circular logic that since Nalcor has provided enough theoretical money in its estimates to cover the payments, the payments will be covered and therefore there is no problem.

Since Locke does not explore other possible financing options, he has no basis to offer any assessment of how those financing options might affect public debt and public spending.

For example, the provincial government might opt to give borrow money at its lower rate of interest and give it to Nalcor as a gift. That may not be the current plan but it is one way of handling unanticipated massive cost over-runs.  That would affect the amount Nalcor could charge in rates and it also changes the amount taxpayers would have to divert from other expenditures to service the larger, direct public.

There are other curious points in Locke’s slides.  He does not explain why the residual power would net slightly more than 10% of the revenue generated within Newfoundland and Labrador for the same amount of electricity.

Most significantly, though, Locke does not explain where this power would be sold.  There are no current sales for it, nor are there any likely sales given the state of markets in nearby states or provinces.  in other words, Locke is just speculating and his amounts for “residual power” are fictitious.

Financing such a large project has significant implications for public finance in the province.  Locke disposes of the issue in two slides.  They appear to be based on a series of unsubstantiated assumptions or claims such as Locke’s assertion that Nalcor’s proposed rates would definitely give money “left over to retire other provincial debt, to fund other public services or to reduce taxes.” 

At best, those are policy decisions not taken, yet Locke pushes them out there as if they were real benefits.  The assumed benefits are based on other apparently untested assumptions, including the one that Nalcor’s calculations are right.

Assuming the can opener

Locke’s last series of slides (45 and 46) cap off a series of unsubstantiated claims with a flourish of more.

For example, on Slide 45, Locke claims that a connection to the ‘North American grid” would allow other energy developments including onshore wind potential on the island and Labrador or “stranded” natural gas. 

The province is already connected to the North American grid from Labrador.  We do not need Muskrat Falls to facilitate the development of wind energy in Labrador. 

An interconnection to Nova Scotia would allow Nalcor and others to develop wind potential on the island.  We don’t need Muskrat falls to do that.

As for exports, Locke failed to examine any potential export markets.  There are none, especially for very expensive power at Muskrat Falls that grows even more expensive when transported the long distances from Labrador or the island to market. 

Locke does not seem to recognise the logical problem in his claim about gas.  If gas is too expensive to produce electricity to beat Muskrat Falls electricity, then it is highly unlikely that natural gas could make electricity in Newfoundland and Labrador that could be cost competitive in markets where even Muskrat Falls is too expensive to penetrate successfully.

Recall that, as Jim Feehan noted, US producers are making electricity from natural gas next to the market that costs no more than four cents per kilowatt hour to produce and very little to transport.  If Muskrat Falls electricity will cost at least 14.3 cents per kilowatt hour in St. John’s, imagine what it would cost to shop the same electricity to Ontario? No wonder Nalcor can’t sell the power outside the province and could only give it away free to Nova Scotia.

Locke’s Conclusion

Locke’s conclusion essentially repeats the untested assumptions/assertions  of his presentation.

He does add a new one:

Without the extra energy made available by Muskrat Falls, there is serious questions whether or not the mining projects expected in Labrador within the next 10 years can proceed. Currently, we do not have sufficient recall power. If all these projects proceed as expected, we may need another 400 to 500 MW of power. This may require the development of additional resources on the island (hydro, wind, etc.)

His claim that “we do not have sufficient recall power” is simply not true.  In the same way that Locke ignored surplus electricity on the island , he also ignores the 5800 megawatts of electricity available in Labrador for future development.

Churchill Falls electricity is available under  the right circumstances, including a use of the Electrical Power Control Act’s provisions on electricity control and availability within the province.

The rest is just grasping. Labrador also offers other hydro-electric and wind resources that could meet an industrial need.  What’s more, Muskrat Falls could supply a Labrador contingency on its own without an interconnection to the island.  After all, if the island and Nova Scotia would need 60% of Muskrat Falls electricity, the remainder would be insufficient to meet an industrial development of the size Locke suggests.  It would be far cheaper and easier to meet Labrador needs with Labrador power rather than develop “additional resources on the island” that Locke and Nalcor have already insisted either don’t exist or are too expensive to develop.

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Firearms Safety

The firearms instructor who shot himself in the foot – literally – during a weapons handling course just lost the latest round in court trying to get some compensation for the consequences of having the video of his unfortunate incident posted to the Internet.

Follow the links on that one to get every twist and turn of the lengthy story.  It started in 2004.

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Ryan Cleary on ending the seal hunt, circa 2008 #nlpoli

Update:  This is the same column Michael Connors tweeted on Tuesday afternoon, but copied to a different website

Update Update:  And then macleans.ca noticed Ryan…again.

To be fair to Ryan Cleary, this is not the first time he has suggested we need to stop smashing seals over the head and selling off bits and pieces of them.

Sure Cleary’s the guy who has never met a nationalist myth he wouldn’t monger or touchstone he wouldn’t grope, but he has been known to take a different view of the seal hunt.

A quick google search Tuesday night turned up a column of his from April 2008 from the old Spindy.  Someone posted it to an IFAW website.

Try not to giggle at the idea of Ryan Cleary using the word reality.

“REALITY CHECK: Time to Face the Fact the Newfoundland Seal Hunt is Doomed.”

The Independent, Newfoundland and Labrador Newspaper

By Columnist RYAN CLEARY
Saturday, April 19, 2008

Time to face the fact the Newfoundland seal hunt is doomed. We cannot save it, not right now, no matter how right and desperate we are to try.

The forces against the commercial hunt - dark though so many of them may be - have become too passionate and powerful. The animal rights crowd is winning the public relations war with the average Joe and Jane on the world street. The continued battle is doing more harm than good to our economy and international image.

We would be better off if the commercial hunters retreated -at least for now, until a world appetite develops such that the method of harvest is secondary to the mouths that are fed and bodies clothed.

It hasn't been that way in a dog's age. The Newfoundland hunt was once about survival, plain and simple. Every part of the animal was used to keep outport body and soul together. More and more it's about pelts and prices.

That's not enough to justify a hunt. The seal has become the modern-day buffalo in terms of waste.

Given that so many of the world's cupboards appear to be bare or headed there, a new hunger for seal (and our fish, but that's not this week's topic) may not be that far off. It was only last week the Globe carried a two-page feature on the rising prices of food around the planet and a crisis around the corner.

The world will eat seal when it's hungry enough to eat seal. It wasn't long ago lobster was the spider of the sea.

As for the politicians defending the hunt - federal Fisheries Minister Loyola Hearn chief among them - he's been criticized in the national media for using the hunt to improve the Conservative lot in the Atlantic provinces.

It sure looks that way. At the very least, Hearn was stunned enough to play directly into Paul Watson's hands. Hearn, the poor over-his-head shagger, can't win. More on that in a moment.

On Thursday of this week The Globe and Mail ran eight letters to the editor under the headline, The many truths about sealing.

A sample of the anti-hunt sentiments:

"I will not vacation in Canada and will avoid buying Canadian products until the seal slaughter stops," writes Pat Ginsbach of Kerrville, Tex.

Anita Rutz of New York mentions the recent loss of four sealers from Quebec. "If they weren't committing acts against God's creatures, they would be alive."

Peter Bowker of Ontario says if government could find $50 million to pay pig farmers not to raise pigs, why can't the same amount be found to pay sealers not to seal? "Or must we admit that the hunt, as it is conducted, is really a cultural ritual, like cockfighting and fox hunting?"

Many Canadians who can sympathise with the economic necessity of the seal hunt can't get past the term "skinned alive," writes Birgit Van De Wetering of Ontario. "It belies the image of warmth and folksiness the Newfoundland Tourist Board is trying to sell us."

Right or wrong, an anti-seal hunt attitude has taken hold. That's the reality.

We are right to defend sealing as part of our heritage. An attack on the hunt is an attack on who we are as a people and where we come from. Remove the emotion from the debate, however, and it's clear the commercial hunt is no longer critical to our survival.

Today's hunt is as much about pride - our God-given right to hunt - as money. That attitude got us nowhere with fish. It's getting us nowhere with seals.

I would argue the hunt has marginal value. The potential loss to tourism alone may far outweigh the benefits of a continued hunt.
God knows the hunt has political power.

The Globe went after Hearn earlier this week in an editorial critical of the Canadian Coast Guard's recent boarding and seizure of the environmental vessel Farley Mowat and the arrest of her captain and first officer. The paper described the move as a "grossly disproportionate response" to the efforts of opponents to document the seal hunt.

For his part, Paul Watson, head of the Sea Shepherd Conservation Society, said the action was taken to seize graphic videotapes of the hunt. The Globe, on the other hand, noted the action was a way for Hearn and his party to redeem themselves with East Coasters.
God knows they need redeeming.

Premier Danny Williams waded into the debate with a guest column of his own in the Globe. He proposes the banning of hakapiks. But such a move will not appease anyone as long as the ice beneath the seal is stained red with blood.

Ironically, ending the commercial seal hunt may spell an end to Watson, who relies on it financially as much as any sealer from Twillingate.

The Globe also carried letters in defence of the hunt. Kyle McIver of Kingston says he finds no difference between clubbing seals with hakapiks, fish asphyxiating on decks or using high-pressure metal bolts to sever spinal cords of cattle. "If sealing is basically akin to agricultural meat production and fishing, then the primary reason to defend seals is reduced to the fact they are cute with big round eyes and soft fur, and the argument fails."

The argument may fail, but the big round eyes will always win. Until the people are hungry enough.

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On Rights, the Charter notwithstanding #nlpoli #cdnpoli

The Department of Political Science Distinguished Lecture series presents Dr. Janet Hiebert on the topic:

Constitutional Experimentation and Canada’s Notwithstanding Clause: Crude Political Compromise or Constitutional Innovation?
February 2, 2012, 7: 00 PM in SN 2109 (Science Building, Memorial University, St. John’s campus)

Comparative political and legal scholars have observed what they consider to be an important constitutional innovation: the emergence of an alternative model of a bill of rights, which has been adopted in several Westminster-based parliamentary systems.

The form these bills of rights take differs significantly from more conventional models, because they do not compel legislatures to comply with judicial interpretations of rights.

These constitutional innovations raise the following two questions:

• How does this new model conceive of the function of a bill of rights?
• Given the conceptual contribution of Canada’s notwithstanding clause to this new model, should Canadians revisit the deep scepticism in which they regard this political power to set aside the effects of a Charter ruling?

Dr. Janet Hiebert is head of the political studies department and Professor of Political Studies at Queen’s University.

She is author of two books about the Canadian Charter of Rights and Freedoms: Charter Conflicts: What is Parliament's Role? (McGill-Queen's University Press, 2002), and Limiting Rights: The Dilemma of Judicial Review (McGill-Queen's University Press, 1996), and has written numerous papers and chapters on the politics of rights and on campaign finance laws in Canada.

Hiebert has served as a member of the Ontario Electoral Boundaries Commission, an independent, non-partisan body with responsibility to readjust the electoral boundaries in the province of Ontario
.
Her current research project examines how the recent adoption of bill of rights in several parliamentary jurisdictions affects political practices, policy development and legislative behaviour (Canada, NZ, UK, Australia).

For more information contact Dr. Matthew Kerby, 864-3093 or kerbym@mun.ca

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Bell 206 L-4 Long Ranger Medical Evacuation #nlpoli

For those following the story on the helicopter used for medical evacuation in the province, here is the one people are talking about.

It’s the Long Ranger version of the Bell 206.  The one in the video below is operated by a medical centre in the United States.  You’ll find 206 L-4’s and later versions like the Bell 407 in use across North America.

Note the size of the cabin. 

Can’t store oxygen except on top of the patient?  Can’t move around enough to perform cardio-pulmonary resuscitation or intubation without landing the aircraft? That doesn’t sound right if the aircraft is properly configured.

Bear in mind that the 206 L-4 is a light helicopter.  Others in the same class – Eurocopter EC-135 or EC-145 – offer comparable space. Sure that patient’s feet are forward in the space that would be occupied by a co-pilot in another configuration but the main cabin area seems to have quite a bit of room.  Again, that’s if the aircraft is properly configured.

Just to give you another perspective, here’s a video of a medical evacuation for a traffic accident victim using a Bell 407.  That’s essentially the 206 L-4 with a different engine and some other minor changes.

Skip through to about the 3:45 point in the video when someone opens the access door.  You can now see the patient in position and get a good idea of the space in the main part of the cabin.

So far the information in the public domain is pretty skimpy.  You can’t tell if this is a real issue or just part of the pre-budget circus of demands and requests.

The union representing the aero-medical staff hasn’t really described the problem very effectively.  Maybe the  problem is the way the aircraft is fitted out, as opposed to the complete failure of the type.  After all, 206s have been in use as air ambulances for decades in this province.

The union also hasn’t proposed what type of aircraft they think would meet the need if the Long Ranger can’t do it. If the 206/407 can’t cut it, how big a helicopter do they need?

According to the CBC online story the union is saying that “consideration should be given to a helicopter similar to those used in search and rescue and offshore.”

That would certainly solve the space problem, but the overall capability of the helicopter (EH-101 or S-92) is way beyond what you typically see in the air ambulance role. The operating cost would be huge in comparison to the 206/407 type.  Outside of Cougar Helicopters, no company in the province operates S-92s and the EH-101 is only used by the Royal Canadian Air Force search and rescue squadrons.

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Kremlinology 37: United in Differences

As the Newfoundland and Labrador news release noted, the energy ministers from the four Atlantic provinces got together on Monday for a gab session.

Those who stood waiting for Jerome!’s latest tweet on Muskrat now know where The Oracle had been all day.

In Prince Edward Island, they issued their own release, including talk of Muskrat Falls.

All the Nova Scotians did was flip out a link to the release from Newfoundland and Labrador. 

Odd that, donchya think?

Odd that PEI did their own thing, but the Nova Scotians didn’t.

Odd given the close relationship between the baymen and the bluenosers on energy issues these days.  They should be on the same wave length right down to the fact that Kathy Dunderdale’s comms director is now issuing releases for the Nova Scotia energy department.

Maybe it’s nothing.

Then again, we are only a week away from the second deadline for Emera and Nalcor to finish their agreement on Muskrat Falls.  Maybe the the Nova Scotians don’t want to draw attention to Muskrat Falls if they have a sense that the deadline may get shifted back again.

Let’s see what happens between now and January 31.

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I

Wading through Locke on Muskrat (Part 2) #nlpoli #cdnpoli

[continued from Part 1]

Oil Prices

In Slide 20, Locke turns a comparison of the cost elements of Muskrat Falls and Nalcor’s isolated island scenario into a chart. Locke notes in red at the bottom of the slide that the only difference between the two scenarios is fuel prices.

In Slides 21 through 26, Locke looks at the pricing assumptions Nalcor used for crude oil and finds them in line with other assessments.  In Slides 26,  27 and 28 Locke transitions to a discussion of current prices for natural gas.

Gas

In general, Locke spent the greatest amount of his presentation on natural gas.  He did not, at any point, offer an assessment of possible alternatives to Muskrat Falls.  The sections on gas – imported, local and shale – contain omissions and errors that seriously affect the usefulness of Locke’s comments and the validity of his claims and conclusions.

Instead, Locke’s presentation appeared to refute or attack potential threats to the project he previously endorsed. His language in describing shale gas very much suggests an adversarial as opposed to analytical approach in his treatment of these potential alternatives.

Imported Natural Gas

Starting at Slide 26 and continuing through to Slide 37, Locke looks at imported natural gas prices in great detail.  He looks at possible future price scenarios based on anticipated demand growth.

While Locke spent a huge amount of time on this issue, his analysis starts from an unfounded premise.  That is, he starts with the assumption that the construction costs for a natural gas plant are the same as for any other thermal generation (the Nalcor Holyrood scenario). 

You will find this starting point in the comments on Slide 20:

While the isolated Island is $2.2 billion (PV 8%) more expensive, the difference is driven by fuel costs.

Maybe there is an alternative fuel, like natural gas, that can eliminate this differential. Let’s look at this more
carefully.

One would expect that an experienced economist like Locke would construct a straight forward comparison along the lines of the Slide 19.  That one had all the costs of the isolated scenario on one side and Muskrat Falls on the other.

Locke could have used existing information for some of it. Bruneau’s 2005 study proposed a configuration and gave a preliminary cost estimate. Locke claims to have reviewed it but for some unknown reason he simply ignored it as a basis for comparison.

D’oh!  -  Ignoring the Obvious

Unfortunately for Locke – and his audience – he didn’t do that really obvious comparison.  All Locke had to do was calculate a few values, like the capital cost, the total natural gas fuel cost for the same time period as in the other comparisons and there’s the whole thing.

But that isn’t what Locke did.  He never discussed the capital expenditures.  Nor did he ever equate the total cost of fuel a natural gas plant would need to deliver the electricity needed across the entire period used in the other comparisons.

Instead, Locke just launched into a lengthy discussion of the unit price of natural gas and the potential factors that may drive natural gas prices up to the point where natural gas can’t beat the project he has already endorsed.  Of course, without knowing the total amount of fuel needed or the relationship between units of natural gas compared to oil, Locke’s discussion is irrelevant.

And, of course, since his cost of Muskrat Falls electricity in the earlier slides (7.5 cents per KWH) omitted transportation costs, you wouldn’t necessarily have had a fair comparison across the board anyway.

Unexplored Alternatives

Unfortunately for the audience at Locke’s presentation, Locke’s colleague Jim Feehan didn’t get the time during the Question and Answer session to delve into some related issues that Locke skipped over.  For example, Feehan noted that natural gas electricity is currently available in the United States for two to four cents per kilowatt hour.

If Nalcor could import that electricity through Nova Scotia for 10 cents per kilowatt hour, you would have a source of electricity in the long-term that would be competitive to Muskrat falls without the risk to the taxpayers locally. Feehan just didn’t have the time to get into that discussion.

Locke did note the low cost of natural gas in the US at the moment. 

Offshore Gas

One slide.

That’s it.

The slide amounts to a series of excuses for ignoring natural gas.

Locke’s first two bullets contain the same arguments Nalcor used to justify the fact it did not study natural gas as an alternative to Muskrat. They aren’t any more convincing when Locke repeats them than they were when Nalcor pushed them out.

The SRBP favourite bullshit line:: “…there are no public plans to develop Grand Bank gas for use at Holyrood…”.  Of course there aren’t.  Nalcor is already committed to Muskrat. They aren’t going to study potentially cheaper alternatives when they have made their choice.

That doesn’t mean they got it right, though.  One would have thought Locke would review this in greater detail in a presentation that purported to compare Muskrat to the alternatives. Instead, Locke just uses crap logic to justify his own analytical failing: essentially, his argument is that he didn’t study local natural gas because Nalcor isn’t going to build it because they want to build Muskrat Falls.

One bullet point was pure bullshit:

• None of the currently available studies on natural gas can be used to definitely say that domestic natural gas is viable to use as a fuel source for producing electricity at Holyrood. …

No one said it was.  They are starting points.  Locke should have – at the very least – made an assessment of them, but as we know he just didn’t bother.  This is the sort of thing one would expect from an advocate for Muskrat falls, not an analyst.

One bullet point is wrong, as it turns out:

• There is not even a natural gas royalty in place at this time.

Your humble e-scribbler thought so as well.  According to the natural resources department website, though, the province has a natural gas regime.  The pdf file dates from April 2010.  While the website claims there is a regime, it hasn’t be set down in regulations like the generic oil royalty regime.

Shale Gas

Locke spends three slides discussing shale gas. Rather than view it as a potential alternative, Locke considers it a threat to Muskrat Falls (Slide 40):

• Maybe economic to produce at $4-6/MCF, and would constrain NL’s options

…

• In the short term, lower natural gas prices, which will compete with hydroelectric imports and reduce the revenue potential from exported hydro electric projects such as Muskrat Falls and Gull Island. In fact, this will have implications for our ability to develop Gull for the export market (at least in the near term).

That’s a huge indication of the fundamental pro-Muskrat bias Locke brought to his presentation.

At no point did Locke assess Nalcor’s interest in shale gas on the west coast of Newfoundland or the potential availability of shale gas in the St. Lawrence basin as a source of feedstock or electricity. If Nalcor or a local private sector explorer finds shale gas in the province, we could have a ready supply of cheap, easily accessible fuel for a gas plant that is available in less than 10 years.

[Next:  Debt and Locke’s conclusion]

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Muskrat Falls and debt: some quick points #nlpoli #cdnpoli

There are some big misconceptions out there as a result of the way people in government talk about debt. That has implications for any discussion of Muskrat Falls.  Here are some quick comments, coming in part as a result of Tory MHA Paul Lane’s call to Open Line Monday morning.

The gross public debt in March 2010 (the most recent year for which we have audited figures) was $12.56 billion. It’s not likely to be significantly below that number today.  That's the sum total of everything owed by the public either directly through the provincial government or indirectly through corporations like Nalcor.

Net debt. People like to toss around the term net debt.  It’s an accounting term and basically represents all the liabilities less any cash or other assets on hand.  If you follow that link from the 2010 auditor general’s report you will see the provincial government had about $4.0 billion in cash laying around.

One way to look at net debt is to think of it as what your debt would be if you had to shut down tomorrow.  You could take the cash on hand and pay down your total liabilities by that amount.  What’s left is what you’d have to deal with.

But here’s something to bear in mind.  When you figure out what you have to pay every year to service the debt (principle and interest), you are working on the basis of what you owe.

What we owe is $12.5 billion or something pretty close to that, not $8.0 billion.

Muskrat Falls:  No matter how you slice it, Muskrat will show up on the public accounts as part of the debt we all collectively owe through government.

To say it is stand alone or separate from everything, as Paul Lane did on Monday, is just misleading.

To say it’s no problem because that there will be money to cover it through electricity rates is also misleading.

The revenue for Muskrat Falls rates won’t be coming from Nova Scotia, Quebec, Ontario or anywhere else.  Under the current plan, It will come entirely from Corner Brook, Quirpon and Carrick Drive.

If government and Nalcor have to borrow $5.0 billion to finance the project, then you can add that to the public debt.  If there’s cash coming in to pay the annual costs, then it won’t be so much of a problem.

But it will still show up on the books as debt.

And the same people are liable for it either way.

Finance minister Tom Marshall told Open Line on Friday that he wants to list the generating plant and lines as assets so the provincial government’s net debt will remain the same.

He can take that up with his accountants.  It doesn’t change what the taxpayers must pay off.  And until the project starts bringing in money, the public debt will climb according to how much gets borrowed.  The money for that annual debt servicing payment will have to come from somewhere, as well.

You can’t escape debt.

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Related:

• Locke and Muskrat Falls:  some quick points (January 2012)
• Debt, electricity rates and Muskrat Falls (August 2011)
• Undisclosed risk:  financing the Lower Churchill (January 2011)

Wading through Locke on Muskrat (Part 1) #nlpoli #cdnpoli

An hour-long presentation, 48 slides and an interview with David Cochrane.

For all that, some apparent confusion lingers about what Memorial University economist Wade Locke included in his presentation and what he didn’t.

Let’s see if we can pick our way through the entire thing and assess Locke’s comments in detail.

The Topic

“Muskrat Falls:  The Best Option?”.  That was the title of the presentation on January 17.

The advance publicity included these questions, suggesting that the talk would cover the topics they mention.

“Is this the best option for meeting the province’s need for energy? Will we be paying too much to generate electricity? Are there other technologies which will provide lower cost energy and still meet the expected demand? Are the costs of the project, the estimated cost of oil and other important factors realistic? Will the province be burdened with unmanageable debt?”

The poster for the event contained fewer questions but the general sense remains of what the presentation would contain.

The Slides and the Video

In keeping with its usual practice, the Harris Centre broadcast the presentation via the Internet and made both the slides and the video available online the day after the session.

Locke also appeared on CBC’s On Point on Saturday. 

What follows, as far as Locke’s comments are concerned, is all taken  from those sources.

Locke and Muskrat Falls

Slide 2 is Locke’s outline for the presentation.  His outline included these points:

• Introduction
• Why get involved?
• How did NALCOR Derive the Price?
• Island Load Forecast Production Mix
• Can we price ourselves out?
• C.D. Howe Study
• Cost Comparison of Alternatives
• Calculating the Supply Price
• Oil and Gas Prices
• Lower Fuel Cost – A Viable Alternative
• Is Natural Gas an Alternative?
• LNG
• NL Electric Bills
• Shale Gas
• Debt Burden
• Conclusion

Slide 3 is the Introduction.  Locke notes that "he has been “on the record as supporting the Muskrat Falls Development as a good for the province” but that David Vardy’s assessment caused Locke “to look more closely at the issues.”

On slides 4 and 5 Locke deals with some of the public comments made online about him and his relationship to Nalcor and the provincial government.  Locke states that he is “not under contract to NALCOR or the provincial government for anything pertaining to Muskrat Falls.” [Emphasis added]

On Slide 6, Locke gives the three questions that he believes needs to be answered.  Even with the introduction, this suggests that Locke’s presentation will address these questions:

• Do we need the power?
• Can we avoid the need?
• What is the least cost alternative?

Deriving the Price

Slides 7 and 8 describe the process by which Locke suggests that Nalcor derives what Locke terms as the “price associated with Muskrat Falls.” Locke doesn’t make clear what price he is referring to. He also doesn’t give any firm indication where he gets the information.   The use of wording such as “would have” makes the whole thing appear highly speculative and uncertain.

The most significant comment in this pair of slides, though, is Locke’s reference that the cost of the project “is 100% equity financed (NL Gov.) and that the required rate of return would be 12%.”  This appears to come from PUB Exhibit 15.

There are very few public comments about how Nalcor and the provincial government propose to structure the corporate ownership of the project. We’ll take a deeper look at this as we progress through the slides and in a future SRBP post on project financing.

The second most significant comment is this one:

Eight, this gives them a revenue flow that ignores initially the potential revenue from the residual energy and the Nova Scotia 20% commitment…”.

This confirms that the financial model for the entire project, including a guaranteed profit for an equity interest holders, is based entirely on the sale of power within Newfoundland and Labrador.  There are no export sales at all.

Locke does hint at the potential for other sales in the last bullet on Slide 8.  What he doesn’t do here or anywhere else is examine the potential export market, the cost implications of the proposed routing, or the physical capacity on the proposed line to Nova scotia that would limit the export potential of that line.

In other words, Locke holds out a prospect here of export sales without assessing – at any point – if this prospect is real or entirely theoretical.  That’s a major shortcoming of his presentation.

The Need

Slide 9 is a graphical representation of the forecast demand on the island for 2010 to 2067.

This is not new information. You can find details in the joint environmental assessment panel documents and the public utilities board documents. 

Locke’s comment on the bottom seems to be a defence of the people who made the forecast: “ I have no reason to believe that they are motivated by anything other than to do their job as best they
can.”  Locke offers no assessment beyond stating that he thinks the forecast is “reasonable.” He does not explain why he thinks this or how he came to the conclusion.

Note, however, that except for the arrival of Long Harbour in about 2016 and two other years where annual growth is forecast to be above 1.0%, growth is consistently less than one percent.

Note as well, that demand isn;t forecast to exceed 10,000 gigawatt hours until about 2036, i.e. five years before the end of the 1969 Hydro-Quebec contract for Churchill Falls power.

This information appears to come from PUB Exhibit 16.  This is a document Kathy Dunderdale has erroneously called a strategy.  Exhibit 16 is a planning document.  It describes the demand forecasts, generation capacity and planning assumption that Nalcor uses to manage the island electricity system using two scenarios.

Comparison of Total Production Mix;  Isolated Island versus Infeed

In Slide 10, Locke presents what is essentially the stock Nalcor comparison. It matches PUB Exhibit 99.  On the left, the generating requirement after 2036 is met by an increased thermal output from what appears to be a thermal generator replacement for Holyrood that burns Bunker C, like Holyrood.

Blow the slide up, if you need to and see if you can find any amount of wind energy.  Essentially, there isn’t any beyond the modest amount already in place. In the “Infeed” scenario, wind appears to vanish as a power source.

“Infeed” means Muskrat Falls.

The Feehan Straw Man

Locke devotes six slides (Slides 11 to 16) to deal with the approach proposed by Memorial University economist Jim Feehan in a paper released on January 11, 2012. That’s about 14% off Locke’s presentation not including the title slide and the introduction and conclusion.

Locke misrepresents Feehan’s paper, particularly on slide 15 when he refers to jacking up prices by 80% above current levels. Feehan did not suggest price changes as a way of avoiding increased generation by wiping out the demand need. 

Feehan suggested using a different pricing approach to induce a change in how demand grows.  A change in the pricing approach would also reduce the difference between what it costs Nalcor to run Holyrood – when it does – and what Nalcor recovers from the current electricity rate on the island.

When Locke notes in red that on slide 13 that “It does not appear that NL is highly subsidized relative to other jurisdictions” there is no information in the presentation to back that up.  Slides 13 and 14 only show the cost per kilowatt hour for electricity paid by consumers in Canada compared to an average.  It does not give any information on the difference between what the electricity costs to produce and what consumers pay.

Slide 16 contains incorrect information.  Locke claims that “In July 1, 2011, rates rose by 7% because fuel costs increased from $84/bbl to $103/bbl. That is, prices are going up anyway in the presence of higher oil prices.”  Prices may move up and down based on several factors including oil prices and the amount of oil used by Nalcor to generate electricity. This is an important distinction.

Supply Price

This slide (17) is a bit of a head scratcher and Locke did not explain what all the lines meant.  The slide excludes significant information and anyone reading this slide who wasn’t familiar with the issues could be easily mislead as a result.  The “supply price” is the assumed cost of generating electricity at Muskrat Falls.  The figure is given as a cost per megawatt hour.

Problem:  this slide excludes transportation and other costs that would added to give a final cost to the consumer.

Locke did not indicate what “energy adj. [usted?] for inflation” means.

Slide 17 repeats the supply price information. It also omits crucial information to determine the cost per kilowatt hour for consumers.  As such, the slide lowballs the costs and also gives a false comparison were someone to compare this cost to the ones presented on slides 13 and 14, for example.

This slide also contains the claim that:

The higher the required return, the higher the monthly electricity cost to the ratepayer and the larger will be the dividend to the shareholders and the better off are taxpayers (more expenditures, lower taxes or reduced public debt).

Nothing in the presentation deals with those concepts. Locke doesn’t give any clue as to where he got these ideas from.

Certainly, logic suggests that a higher rate of return would require a higher cost to the consumer.  A higher rate of return does not necessarily mean that the dividend would be greater for the shareholders of the public and private sector companies involved in a project.

Another Unsubstantiated Claim

And on the last claim, Locke has absolutely no information to support his contention that taxpayers would be “better” off paying a higher profit margin and consequent higher unit price to companies in the public sector or private sector.  Each of the three benefits Locke claims would flow are all matters to be decided by a future provincial government at a future time based on factors Locke doesn’t consider in this presentation or anywhere else.

[In Part 2, SRBP will start at Slide 20]

- srbp -

Muskrat Falls: The Kennedy Tweets #nlpoli #cdnpoli

Here’s a string of tweets from natural resources minister Jerome Kennedy on Friday night:

Jerome Kennedy @jerome_kennedy
Let me try and simplify Muskrat Falls. First question, do we(NL) need the power? If yes, then question # 2,what are we going to do about it? 

Jerome Kennedy @jerome_kennedy
MF cont'd. If we need the power what are our options: Muskrat Falls, refurbish Holyrood with small hydro and wind,Gull Island,or do nothing. 

Jerome Kennedy @jerome_kennedy
MF cont'd. Gull island is not an option at present. To do nothing is not an option. So, do we do Muskrat Falls or refurbish Holyrood. 

Jerome Kennedy @jerome_kennedy
MF cont'd. Nalcor argues that MF is $2.2B cheaper than Holyrood.Manitoba Hydro will examine this question and they are independent of govt. 

Jerome Kennedy @jerome_kennedy
The cost of oil makes Holyrood so expensive. At peak it burns 18,000 barrels of oil per day. Experts tell us that oil will continue to rise 

Jerome Kennedy @jerome_kennedy
Why the cost of oil will continue to rise-not enough supply to meet demand, activities in the Middle East and growth in China. Makes sense. 

Jerome Kennedy @jerome_kennedy
MF cont'd. Cost of fixing up Holyrood is $600M. Forecasted cost of oil between 2017-36 is more that $7B.Hydro avoids the volatility of oil.

And then came this one:

Mark Watton @mark_watton
@jerome_kennedy You know, if the House were sitting, you could do this using more than 140 characters at a time. #nlpoli in reply to @jerome_kennedy

Followed by complete silence from the minister.

Interesting synopsis of the government argument, though.  Interesting because of what it leaves out.
There’ll be more from SRBP in the days ahead.

- srbp -

More Tweets Update:

Jerome Kennedy @jerome_kennedy
MF cont'd(No.8) - Environmental benefits - Closing Holyrood is the equivalent of taking 300,000 cars off the road.Reduces GHGs by 1M tons/yr.

Jerome Kennedy @jerome_kennedy
MF cont'd (No.9) - Economic Benefits- peak employment of 2700. Job preference to Labradorians. Billions in income and taxes .Little talk of this.

And yet more tweets (Jan 22):

MF No.10 - Power rates continue to rise due to the price of oil. Critics argue that rates will double because of MF.This is simply not true. 

MF No.11-The average ratepayer will pay $217 monthly in 2016,pre-Muskrat.This is projected to rise to $232 in 2017 when MF starts up (▲$15). 

MF No.12-With Muskrat Falls the average user's rates are projected to go up from $232/mth to $246/mth between 2017-30. Rates will rise $14. 

MF No.13-Without Muskrat rates are projected to go up $57 between 2017-30,as compared to $14 with Muskrat.MF will stabilze [sic] and reduce rates.

Old Harry review delayed at proponent request #nlpoli #cdnpoli

From the Canada-Newfoundland and Labrador Offshore Petroleum Board [paragraphing changed for online readability]:

The C-NLOPB has received a request from Corridor Resources Inc. to issue a prohibition order under the Atlantic Accord legislation, which would prohibit Corridor Resources Inc., the interest owner in Exploration License 1105 (known as Old Harry) from commencing or continuing any work or activity on those portions of the offshore area subject to EL 1105 until the Board notifies the interest owner that the update of the Strategic Environmental Assessment (SEA) of the Western Newfoundland Offshore Area has been completed.

Under the Atlantic Accord Act, a prohibition order can be made by the Board in the case of an environmental or social problem of a serious nature.  A decision to make a prohibition order is a Fundamental Decision under the legislation and must therefore be ratified by both governments.  If a prohibition order is made, the environmental assessment would be placed on hold and the term of the license would be suspended.

As a result of Corridor’s request for a prohibition order, the C-NLOPB is delaying the independent review of Corridor Resources' environmental assessment of the proposed exploration drilling program for License Area 1105 until such time as the C-NLOPB has fully considered the proponent’s request.

On December 22, 2011, the C-NLOPB filed the complete environmental assessment documents for Corridor Resources’ proposed drilling program in License Area 1105 with the Independent Reviewer, Mr. Bernard Richard.  The Independent Reviewer was preparing to launch the public review process in mid-January.

The SEA for the Western Newfoundland Offshore Area was completed in 2005 and amended in 2007.  The deadline for public comments on the draft scoping document for the SEA update was January 18, 2012.

“We need to fully consider the proponent’s request for a prohibition order before proceeding with public consultations on the environmental assessment,” said Max Ruelokke, Chair and CEO of the C-NLOPB.  “We have therefore informed the Independent Reviewer, Mr. Bernard Richard, of the need to delay his plans to launch public consultations until this matter has been addressed by the Board.”

The environmental assessment documents for the project will remain on the C-NLOPB’s website for public access and review.

Media Contact:

Sean Kelly M.A., APR, FCPRS
Manager of Public Relations
(709) 778-1418
(709) 689-0713
skelly@cnlopb.nl.ca

- srbp -

Paying Attention 2: Muskrat Edition #nlpoli #cdnpoli

You learn a lot when you pay attention to what people say.

Like natural resources minister Jerome Kennedy when he says that “it seems that they [the public utilities board] perhaps want to assume unto themselves a greater role than is contemplated by the terms of reference.”

The provincial government wanted the PUB to do a simple job:  confirm that given this particular set up, Muskrat Falls is the right choice.  The set-up was comparing Muskrat Falls to a situation in which Nalcor does nothing to change the existing energy supply on the island and oil prices run to double what they are and stay there.

In other words, compared to being totally irresponsible, is Muskrat Falls the lowest cost option?

The answer to that question is, not surprisingly, a resounding yes.

The problem is that if you look outside that one scenario, Muskrat Falls isn’t the answer.  It could be part of the answer at some point 25 years from now, but it sure isn’t the lowest-cost way of meeting likely electricity needs before then.

The problem for Kennedy and the provincial government is that the PUB wanted to look at those other options.  They did want to go beyond the set up the provincial government wanted. 

But were they doing something wrong?  Not if you think that the public utilities board should do their job as laid down in the Electrical Power Control Act, 1994 even if, as in this case, they were neutered by exemptions issued to Nalcor (then NL Hydro) in 2000 by the Liberals and continued under the Tories.

The provincial government’s situation gets worse when you look at the question Jerome Kennedy and Kathy Dunderdale hold out as the “critical question” of the whole discussion:

Is Muskrat Falls the lowest cost option for the people of Newfoundland and Labrador for electricity generation?

The answer to that is an unequivocal “no”. There are cheaper ways of meeting the need in the near term.  A $300 million power line across the isthmus would let Nalcor bring stranded surplus power in central Newfoundland onto the whole island grid and replace Holyrood.  Natural gas from the offshore is a potentially viable solution for the longer term that could be developed in time to meet the need a couple of decades and more from now.

Right now, those alternatives are possible ones, identified by a handful of observers. Having the PUB look at them, in detail, with expert opinion, would mean that those options go from theoretically viable ones to the kind of proven options that kill Muskrat falls in its tracks.

Nalcor doesn’t give a crap if that happens.  They are engineers and economists and other professionals who just want to get on with the job of running an energy company.

Muskrat Falls isn’t their project.  It’s one option among many.  Odds are they’ve already run enough scenarios to understand that what the critics are saying is as close to correct as you can get.

Having the PUB study this project closely only causes a problem for politicians.  After all, Muskrat Falls is a political option chosen for political reasons and nothing more.   The politicians are firmly convinced they are right, they are sincere in their beliefs and none of them want to “lose”, as they would see it.

And if you pay attention to what politicians like Jerome Kennedy say, you can see all of that.

- srbp -

Paying attention #nlpoli

In order to understand what is going on in the world around you, then you just need to pay attention.

Paul Wells makes plain the value of careful reading – i.e. paying attention – in a post at macleans.ca on the letter from the federal health minister to her counterparts in the provinces about health funding.

Go on.

Read the post.

The reward is what you’ll learn.

Wells does a simple dissection of an official statement by an important person. You can learn an awful lot by considering what words mean.

Too bad more of that doesn’t go on locally.

You can learn an awful lot by looking at what people say.

- srbp -

Muskrat Falls: Cum on feel the Noize #nlpoli #cdnpoli

According to natural resources minister Jerome Kennedy, criticism of the government’s refusal to give the public utilities board the time it asked for to complete a review of Muskrat Falls is “political white noise by those who are adamantly opposed to the project and will never agree, no matter what.”

That’s a weird idea given that the most recent person to say the PUB should be given the time it needs is none other than Muskrat Falls lover Wade Locke.

You can tell the provincial government is under intense pressure when its chief salesman for the $6.2 billion megaproject has nothing but personal smears for anyone who speaks unkindly of anything related to the project.

Kennedy also said that critics of the project are now focusing on the PUB deadline because “they’re finding difficulty in criticizing the project.”

Denial is not just a river in Egypt,after all.  Truth is that so far the project’s critics have been able to call every single aspect of the proposal into question, including the notion that it is the lowest cost option to meet the electricity needs in the province.

That’s likely why Kennedy and his colleagues want to stifle further detailed public discussion. As it turned out, though, their decision to cut short the PUB review has just undermined public confidence in the process, let alone the project. 

Incidentally, two public opinion polls by NTV News found that support for Muskrat falls plummeted from 71% of respondents in February 2011 to 42% by October.  That was before the most recent series of problems for the provincial government, including the pissing match with the PUB.

- srbp -

Kennedy slices into NDP’s Muskrat falls hypocrisy #nlpoli #cdnpoli

Natural resources minister Jerome Kennedy belled the NDP cat on Wednesday for the provincial party’s flip-flop on Muskrat Falls. As the Telegram reported in its Thursday edition,

… Kennedy was particularly hard on criticism coming from the NDP, saying the current tone represents a break from deceased federal leader Jack Layton.

“The NDP has been making a lot of noise in the last little while, but it’s my understanding that Jack Layton supported the project,” Kennedy said. “Does the NDP still support the project? They’re not answering that.”

Jerome is right, of course. 

And not only about Jack Layton’s support. 

Bloc-NDP members of parliament Ryan Cleary and Jack Harris campaigned on a pro-Muskrat Falls ticket during last year’s federal election, as did provincial party leader Lorraine Michael who joined them on the campaign trail.

Enterprising news editors will no doubt be scrambling for shots of Lorraine cheering Jack’s visit here as she cheered Jack on and looking through Lorraine’s old news releases.

Lorraine supported the Lower Churchill project.  Her only criticism at the time it was released is that the deal was not as big as the original promise.

But make no mistake:  Lorraine backed Muskrat Falls.

However, she’s been shifting her position as public opposition to the project mounted.  You could say she’s trying to pull an Aylward.  Former Liberal leader Kevin Aylward shifted his potion almost 180 degrees on the project during the latter days of last fall’s provincial election. 

Now Michael is trying to sound like she isn’t backing the plan to deliver cheap electricity to her New Democrat pals in Nova Scotia.  Here’s how the Telegram quoted her from another Muskrat story from Thursday’s paper:

NDP Leader Lorraine Michael said she’s open to being convinced that going ahead with the project is a good idea. Nothing Locke said moved her, though.

She said she’s hoping to see independent, in-depth examination of alternatives to Muskrat Falls before the project gets sanctioned.

“If there was an in-depth analysis that was done on an alternative like the wind power — an in-depth analysis — then I’d like to see it,” she said. “My understanding is that no in-depth analysis has been presented.”

The spring session of the legislature should be interesting if only for the political cat-fighting among members of three political parties all of which support Muskrat Falls to one degree or another.

The Liberals back the project as well.  Their only objection, as described by natural resources critic Yvonne Jones is that there is no guarantee any power will go to Labrador.

Power could go there, of course, but Jones apparently wants some other guarantee. her objections are best described as superficial or trivial.  She’ll fold up and back the thing when it comes down to it.

But a crushing public debt?

The enormous cost piled on the backs of ordinary people of this province while others get a free ride?

Not a worry for Jones and the Liberals apparently.

Kennedy will have an easy time of it in the House lined up against the likes of the NDP and the Liberals.

- srbp -

Locke admits assessment was “probably not” fair #nlpoli #cdnpoli

In an interview with the Telegram that appeared in Thursday’s edition, Memorial University economist Wade Locke admitted that his assessment of Muskrat Falls probably offered an unfair comparison with alternatives.

When asked by The Telegram, “If that doesn’t include transmission, is that a fair comparison?”
Locke answered, “Probably not. You’d want to include transmission as well.”

The impact of Locke’s omission was to hide almost 50% of the estimated cost per kilowatt hour for the project. As SRBP noted on Wednesday, that rendered his comparisons useless.

It also meant his conclusion – that Muskrat Falls was the cheapest solution – had nothing to support it.  “Unfounded” would be the polite word for it.

No word on whether Locke will get a do-over.

No word either on whether or not the Western Star editorial team will retract their Thursday editorial in light of Locke’s admission.

Under a headline “A trusted opinion”, the crowd on the west coast called Locke’s voice “independent and dependable”.  The editorial said that Locke’s opinion “will almost certainly carry more weight than many other opinions.”

D’oh!

- srbp -

Rumpole and the New Math

The voice rasped down the phone line even before the receiver hit my ear.

“On the Upper Path these days,” the familiar voice solemnly declared, “four plus four is five and a half.”

“What?” your humble e-scribbler asked, figuring this must be the latest bit of gossip on the illegal drug trade or prostitution in Sin Jawns.

“On Duckworth Street, stunned arse. You know where that is, do you?”

He repeated himself slowly and carefully as if his audience were deaf or feeble minded or both.

“Four and four is five and a half.”

“What in the name of God are you talking about?”

“I’ll make it easier for you.  Test your numeracy skills, then.  You’re always going on about that.”

A sip of coffee and a pause was enough of a reply in whatever game he was at today.

“What is two times four?” he said, sounding for all the world like a school boy who had discovered his first play on words.

Another slurp and more silence.  Experience teaches that it is best just to let him ramble when he is in one of these moods. He knows you are listening and just needs to act out the little drama.

“What is four plus four?”

“Eight” went the reply, with only a hint of boredom.

“See,” says the familiar voice, “that’s why you will never be a justice of the Supreme Court of Newfoundland and Labrador.  No matter how hard you try, no matter what political arse you kiss, no matter how proper you are or how many times you stand up for truth, justice and fair play, you cannot ever get to sit with those learned men and women of the highest court in this land.”

“You,” he said, pausing on each word, “do not know the New Math.”

The voice then summarised a recent decision from the Supreme Court’s Appeals Division of an appeal of the sentences in an armed robbery trial. 

A young fellow turned up last year appealing the sentence in a robbery case.  He’d pleaded guilty to two sets of offenses committed six days apart.

In the first robbery, the young fellow and another man went into a convenience store in town with handkerchiefs on their faces and knives in hand. They tried to rob a customer and when that didn’t work they made off with cigarettes and lottery tickets.

The young fellow who showed up in appeals court “pleaded guilty to robbery with respect to the theft of the cash, cigarettes and tickets (s. 343(d) of the Criminal Code), attempted robbery of the customer with intent to steal her purse (s. 463(a) of the Code), wearing a mask with intent to commit an indictable offence (s. 351(2) of the Code) and breach of an existing probation order (s. 733.1(1)(a) of the Code). He was sentenced as follows for these offences:

Robbery (Count No. 7) 4 years

Attempted robbery (Count No. 9) 3 years, concurrent

Wearing face mask (Count No. 8) 1 year, concurrent

Breach of probation (Count No. 10) 1 day, consecutive”

In the second incident, the same young fellow “demanded and received $115 in cash, as well as some cigarettes. He then fled the store. He pleaded guilty to one count each of robbery, wearing a face mask and breach of probation. For these offences he was sentenced as follows:

Robbery (Count No. 1) 3 years (less 141 days pre-trial custody), consecutive to the robbery sentence for the Hamilton robbery

Wearing Face mask (Count No. 2) 1 year, concurrent

Breach of Probation (Count No. 3) 1 day, consecutive”

The quotes are from the appeals court decision issued on January 12.  As the decision puts it, the “net effect of the sentencing was that the appellant was sentenced to a total term of imprisonment of seven years (less 141 days) plus two additional days (for the breaches of probation).”  There was a lifetime firearms prohibition and a DNA order but those two didn’t factor into the appeal.

The young man and his lawyer thought that the judge didn’t get the totals right when he sorted out consecutive and concurrent sentences for all the offences.

After a lengthy explanation, the appeals court noted that the trial judge had followed the law in pretty well everything except the notion of “totality”.  That is, he not only looked at the individual sentences for the individual crimes, he also had to look at the amount of time it all added up to.

At this point, it is just as well to let the Chief Justice’s words speak for themselves:

(vi)  A Fit Sentence

[95] No issue was taken with the one year sentences for wearing a face mask or the three years for the attempted robbery. I do not propose to say anything further about them.

[96] Counsel for the appellant did not dispute the proposition that sentences of four years and three years for the Hamilton and Blackmarsh Robberies, respectively, were fit. Counsel for the Crown, although stating that he had “no issue” with those sentences, submitted that four years for each would be more appropriate.

[97] I agree that, in the circumstances of this case, parity requires a four year sentence to be imposed for the Hamilton Robbery because that was the sentence meted out to Mr. Hutchings’ co-robber. The sentence for that robbery can also be considered as a benchmark for the other. There is little to differentiate between them except that a customer was also involved in the Hamilton Robbery and there were two robbers. Both were convenience stores, the modus operandi was the same, only a small amount of money or merchandise was taken and the events took place at night. Mr. Hutchings must bear more responsibility for the Blackmarsh Robbery because he acted alone. It was also his second robbery in a very short time. These factors countervail to some extent for the fact that the Hamilton Robbery involved both a customer and a store employee. Given the sentencing judge’s identification of the prevalence of armed robberies in the community and that there is a need to protect people working in or using convenience stores late at night, a fit sentence for the second robbery should be four years.

[98] While this sentence is somewhat higher than the levels of sentence imposed in other comparable cases in this jurisdiction (See R. v. Sheppard (1997) 147 Nfld. & P.E.I.R. 304 (Nfld.C.A.) (no criminal record; one robbery with mask; severe gambling problem; four years reduced to three on appeal); R. v. Butt (1986), 59 Nfld. & P.E.I.R. 89 (Nfld.C.A.) (armed robbery of gas bar; four years reduced to two years less a day because of psychiatric illness); R. v. Pardy (1994), 126 Nfld. & P.E.I.R. 218 (Nfld.SCTD) (one robbery of service station, masked; prior convictions; three years); R. v. Power (2006), 262 Nfld. & P.E.I.R. 30 (NLSCTD) (robbery of restaurant; psychiatric disorders; joint submission of three years accepted), it is nevertheless justified given the present community problems with this type of offence, and the concern for the safety of vulnerable workers, as identified by the sentencing judge.

[99] As far as the sentences for breach of probation are concerned, a sentence of one day, as imposed by the sentencing judge is inappropriate. Sentences can range between one month and sometimes less to upwards of six months. See Murphy (six months); Oxford (three months). In Oxford, the Court accepted statements in prior cases that sentences for non-compliance with probation orders could be one month or less even where there are prior convictions.

[100] In the current case, Mr. Hutchings has several convictions for failure to comply with court orders. In light of the requirements of specific and general deterrence, I am satisfied in the circumstances that sentences of two months for each offence are necessary to achieve respect for the observance of court orders.

[101] I have already indicated that I agree that the two robberies should be considered separate criminal adventures and that the sentences, other things being equal, should be served consecutively. The robbery and attempted robbery at the Hamilton convenience store were part of the same criminal adventure and the sentences are appropriately made concurrent with each other. It is also appropriate to make the sentences for having the face masked concurrent with the respective robbery sentences, as they were part of and arose out of the robbery events. Sentences for breaches of court orders are generally an exception to the normal rules respecting consecutive and concurrent sentences. They should normally be made consecutive. I see no reason to depart from that approach here.

[102] Accordingly, before considering totality, the overall sentence would be eight years for the two robberies plus four months for the two breaches of probation orders for a total of eight years, four months.

[103] It is now necessary to consider totality, the application of which is engaged because some sentences are consecutive to each other.

[104] The most serious offences here are the robberies. The normal level of sentence for armed robberies of convenience stores-gas bars by a young person, masked, late at night where the money or merchandise taken is relatively small could range from three to five years. When compared with the total sentence of eight years four months that would otherwise be indicated, this would be a factor calling for a reduction in the overall sentence.

[105] There were two offence events. While not a rash of robberies, neither was it a single isolated incident. The two events occurred within a short period of time. Although the gravity of these offences can be regarded as not as serious as, say, large scale robberies where violence is actually perpetrated, they are nevertheless of great concern. Weapons were involved, Mr. Hutchings was masked and the offences were carried out at night when the victims were more vulnerable. The total sentence must reflect these factors.

[106] Mr. Hutchings has a lengthy prior criminal record spanning from late 2006 to mid-2009, involving a total of 26 offences, eleven of which were convictions for failure to comply with a previous undertaking, recognizance or probation order. Of the remaining 15 offences, nine were committed as a young offender and two as an adult. The sentencing for these offences occurred in four clusters as a youth and once as an adult. The sentence for the adult offences was 30 days intermittent plus 2 years probation for 2 counts of theft under $5,000 and 2 counts of failure to comply with a prior court order. The most concerning sentence as a young offender involved a conviction for armed robbery in 2006, where Mr. Hutchings was sentenced to 9 ½ months involving a combination of secure and open custody plus an additional 159 days supervision order and 12 months probation. This is a significant sentence in the context of a young offender where the emphasis is on rehabilitation. With that exception, none of the other youth sentences involved any significant amount of custodial time. The sentence for the current offences will be Mr. Hutchings’ first substantial period of imprisonment as an adult. The committing of the current offences does indicate, however, as the sentencing judge noted, that Mr. Hutchings “has not gotten the message” from the sentences imposed for his prior offences. That said, even though the sheer number of prior offences is a matter of considerable concern, a sentence of eight years, four months is a substantial movement from a thirty day intermittent sentence which was the longest period of jail time he had previously received as an adult, or even from 9 ½ months, which was the longest period of custody he had previously received as a young offender.

[107] Mr. Hutchings’ young age has to be considered in relation to his prospects for rehabilitation. Notwithstanding the absence of a pre-sentence report, the fact of his age should be taken into account insofar as his behaviour may be at least partially attributable to immaturity. While eight years, four months might not be considered a “crushing” sentence, it certainly will take away from him a substantial portion of his twenties which are important to a young man who is still maturing and developing those things, like job prospects and relationships, that provide the base for a productive life. This factor also points toward modifying the total sentence.

[108] Mr. Hutchings suffers, as noted by the sentencing judge, from a drug problem, a circumstance that often fuels the type of behavior for which he was sentenced. Some of the cases cited previously (e.g. Sheppard, Butt, Power) recognize addictions, such as gambling and alcohol dependency, or emotional or psychiatric illness as factors that may mitigate the severity of a sentencing disposition.

[109] Other appellate decisions recognize that it may be appropriate to reduce an overall sentence when an offender is being sentenced for multiple robberies committed in close succession. (See Wozny).

[110] Taking all these factors into consideration, and noting that a number of them point toward a reduction in overall sentence, I am satisfied that a sentence of eight years, four months is unduly long or harsh when measured against the gravity of the offences and the offender’s degree of responsibility. While recognizing the serious nature of this type of offence and that a considerable term of imprisonment is nevertheless warranted, a more appropriate overall sentence that will still recognize the inherent gravity of the offences would be five years, six months.

[111] To achieve this result, I would impose sentences as follows:

For the Hamilton Robbery:

Robbery 4 years

Attempted robbery 3 years, concurrent

Wearing a mask 1 year, concurrent

Breach of probation 2 months, concurrent [changed, for totality, from consecutive to concurrent]

For the Blackmarsh Robbery:

Robbery 1 year, 6 months consecutive [reduced, for totality, from an otherwise appropriate sentence of 4 years] (less 141 days pre-trial custody),

Wearing a mask 1 year, concurrent

Breach of probation 2 months, concurrent [changed, for totality, from consecutive to concurrent]

Summary and Disposition

[112]I would vary the sentence imposed by the sentencing judge as follows: for Count No. 1 on the Information to one year, six months (less 141 days pre-trial custody); Count No. 2 to one year concurrent; Count No. 3 to two months concurrent; Count No. 7 to four years consecutive; Count No. 8 to one year concurrent; Count No. 9 to three years concurrent; and Count No. 10 to two months concurrent.

“And that,” the voice chuckled down the phone line, “is how four and four gets you five and a half.

Next time, I’ll tell you how seven times 13 is 28.”

- srbp -

Locke and Muskrat Falls: some quick points #nlpoli #cdnpoli

Memorial University economist Wade Locke delivered a presentation on Tuesday night about Muskrat Falls, a project he had already endorsed publicly.

The Harris Centre at Memorial University, the Atlantic Provinces Economic Council and the MUN economics department’s Applied Economics Research Initiative sponsored the talk.

The pdf of Locke’s slides should be available from the Harris Centre website along with the video of the presentation plus the question and answer session that followed.

You can tell the topic is hot for two reasons.

First, they packed the main hall plus a couple of fair-sized rooms in which people could watch via the Internet.

Second, Locke started out his talk with a pre-emptive declaration that he was doing the talk on his own, that he wasn’t sponsored by anybody, under contract to anybody and that he valued his professional reputation above all else.  Locke insisted he believed everything he was saying, which should be pretty much a given.

Here are some quick observations:

You will pay for it all, plus profit.  Right up front, Locke pointed out the most obvious thing of all, namely that taxpayers in this province will pay for the entire project, plus a rate of return of as much as 12%.  Now Locke never said it straight out.  In fact, Locke never made it plain at any point during his talk who actually was paying the bill.

But it was there, just as your humble e-scribbler noted in October 2010.  That’s not clairvoyance.  That’s just what comes from research.

Toward the end of his presentation, Locke blew off any concern about the debt since that would all be recovered from the rates, no matter what.

Wade just never noted that the people in the room would be covering the entire shot.

Plus profit.

When an online question asked about Nova Scotians getting the electricity cheaper than the people who own the dam, Locke blew it off as an irrelevant consideration from an economic standpoint.

Situating the Estimate.  That’s what they call it in staff college.  You present the information that fits your pre-conceived solution.

And having already endorsed Muskrat Falls, presumably before he really knew anything about it, Locke basically recited the reasons why his initial conclusion was right and everyone else is wrong.

Locke started by torquing his description of the cost of the project.  A mere 7.5 cents per kilowatt hour.  As Jim Feehan pointed out in the Q and A, Locke had lowballed the number.  The cost of delivered Muskrat electricity would be 14.3 cents per kilowatt hour based on current estimates.

At least.

And that of course made all Locke’s subsequent comparisons useless.

They were useless because they effectively compared a misleading – bordering on the false – Muskrat cost to a cost for some alternatives.

Once you realise that Locke torqued the cost, you’d have to be suspicious of the basis on which he presented the costs of other projects.

Did he highball them?

Maybe. 

Problem is we don’t know.  People would have a right to be suspicious because Locke didn’t make it clear how he got either his Muskrat figures or his other cost figures for projects he contended were more costly.
Locke blew his own credibility, at least among people who actually knew what he had done.  Expect to hear more about that in the days ahead as word spreads.

Burn, Straw Man, Burn.  Early on the presentation, Locke savaged colleague Jim Feehan with a caricatured presentation of Feehan’s paper for the C.D. Howe Institute.  Locke presented Feehan’s argument [as] though Feehan believed government could use pricing to wipe out demand such that Muskrat wouldn’t be necessary.*

Feehan didn’t say anything close to that. 

Locke even trotted out the melodramatic – and ultimately childish -  line Ed Martin tried on about old people in the winter.

Feehan sorted Locke out at the end but Locke’s comments about Feehan were insulting to Feehan professionally and to the audience’s intelligence.  For a guy who defensively moaned about his own professional reputation at the front end of the talk, Locke had no trouble tearing into a colleague based on what was utter crap.

Controlling the Escalation.  As much as Locke got weepy over old people and high electricity prices and for all his teary comments about the impact of policy ideas on real people, Wade didn’t give a toss about Muskrat Falls and the impact its high prices would have on the same people he supposedly wanted to defend.

Locke referred to Muskrat Falls as giving government the ability to control price escalation.  The alternative – a completely false one – was to be at the mercy of fluctuating oil prices. 

Muskrat Falls will take care of the potential hike in electricity because of oil prices by guaranteeing the prices will shoot up regardless of what oil does.  And if oil goes down in price, local consumers will be stuck paying for Muskrat.

Former PUB consumer advocate Dennis Browne noted during the Q and A that Locke’s assumption of escalating electricity prices due to oil was false.  Electricity prices don’t jump up every year, like clockwork, and they sure don’t jump every time oil prices go up. 

Locke didn’t really answer Browne’s point.

Humour High Point:  Moderating the Q and A, Harris Centre director Dr. Rob Greenwood said that the Harris Centre was a spin free zone.  Evidently, Locke’s presentation  - after the price bullshit alone – wasn’t covered by the anti-spin rule or Rob didn’t pick up on the heavily torqued comments by the presenter.  Either way it was about the funniest thing that happened during the evening.

What debt problem?  There isn’t one according to Locke.  He flashed a slide that showed annual costs Nalcor would pay for given amounts based on certain interest rates. 

Worst case scenario, as your humble e-scribbler would put it: the gross public debt would show up as close to $20 billion (the current $12 billion-ish plus an additional eight billion in borrowing from Locke’s slide).

That would add annual debt servicing costs of $800 million for Nalcor.

That would show up on the annual public accounts, incidentally.

The debt would be funded, of course, because local ratepayers would be forced to pay the full amount need to pay the loans plus deliver a guaranteed profit.   But…

Locke didn’t do any calculation of the wider implication of any of that.  He just said any added debt would be no problem since there’d be revenue to cover it.

Yep.

All those old people on fixed incomes would be paying the guaranteed high prices Locke ranted against at one point and ignored at another.

What the Harris Centre should do next:  Locke’s presentation was weak.  All his pre-emptive apologies at the front end couldn’t cover over the flaws.

Locke’s analysis was far from complete and he torqued too many details for it to meet the standards people should be getting on such an important subject from the Harris Centre.

Aside from apologising to Jim Feehan for Locke’s remarks, the Harris Centre should organize a series of talks on Muskrat Falls.  The public would definitely profit from a better presentation on behalf of the project proponents as well as a fair presentation of arguments by Feehan and David Vardy.

40 slides too many:  Opponents of Muskrat Falls can explain in a few minutes why they have doubts about the project.

Simple.

Clean.

Factual.

Give a  knowledgeable supporter of the current administration and Nalcor, one hour of uninterrupted time, 48 slides densely packed with verbiage, and an attentive audience and he still can’t  explain why Muskrat Falls makes sense.

That should tell you all you need to know.

- srbp -

*  [word in square brackets added to earlier version for clarity]

If this is bad… #nlpoli

Bloc NDP member of parliament Ryan Cleary thinks that Marine Atlantic’s 4.5% fare increase will put the province at a disadvantage when it comes to tourism and economic development. 

Cleary is also concerned about the impact on ordinary Newfoundlanders and Labradorians:

“Living in Newfoundland and Labrador is not cheap. This fare increase will eventually further increase the cost of goods in our province — including food, which is already far more expensive than in other parts of the country,” Cleary said.

So if Marine Atlantic’s rate increase is so bad, according to Cleary, why is he so enthusiastic about driving up electricity rates in Newfoundland and Labrador by 45% or more and selling discount electricity to people in Nova Scotia and elsewhere in North America.

- srbp -

Sucking eggs, debating Muskrat Falls and other wastes of time #nlpoli

Former natural resources minister Shawn Skinner thinks there House of Assembly should debate the Muskrat Falls deal.

Ditto his replacement, Jerome! Kennedy who likes to quote a supposed 1980 endorsement of the project by former Hydro boss Vic Young as proof there’s been enough talk about the whole thing.

Ditto the province’s New Democrats, who thing there should be a “special” debate.

The Liberals will likely go along with the idea, as well so that puts them all in agreement.

Debate implies a disagreement, though.  To have a debate, you would have to find people in the House of Assembly who are fundamentally opposed to Muskrat Falls.

Otherwise it would be like the Abitibi expropriation debate where everybody spoke in favour of the seizure bill and never voiced any concern for it, at all.

Find one member of the House of Assembly who is actually, unquestionably, unequivocally opposed to the Muskrat Falls project.

Find one.

Until you can, there’s no point in talking about a “debate” in the provincial legislature.

It’s just a waste of time.

- srbp -