So haunted by ghosts #nlpoli #cdnpoli

Hear what comfortable words our Premier sayeth:

For generations gone by, the undeveloped hydro-power resources of the Lower Churchill were, for Newfoundlanders and Labradorians, like a treasure just out of reach, tantalizingly close but never close enough to enjoy. The gatekeepers of the natural transmission route through Quebec were denying us fair opportunity to get the power to market, and having been burnt once on the Upper Churchill, we were determined not to let that happen again.

Churchill Falls remains as powerful a totem for some politicians in this province as it ever was.  The crowd currently running this place use it more frequently as their beloved Muskrat Falls project encounters more and more problems.

Their only problem is that they know only the illusion of the thing, not the reality.

Take that bit from Premier Kathy Dunderdale’s marathon oration a couple of days ago as a case in point.

At the time of the 1969 contract to sell power from Churchill Falls to Hydro-Quebec, the Lower Churchill was supposed to be a source of energy for the province itself. You can find the very idea in a piece from the People’s Paper from back in the day, as the hideous saying goes.  Only later on did politicians think about trying to sell the bulk of the power outside and use any  money from those sales to pay for a line to bring electricity onto the island, if need be.

The idea of Quebec as an obstacle is an old one, as well.  The truth is that since the early 1990s they haven’t been a problem.  No one developed the Lower Churchill because they could never make the economics of it work out.  The fools never thought of making the people of the province foot the bill for the whole thing  so they could ship the discount juice outside.

In any event, Kathy Dunderdale herself should know that Quebec isn’t an obstacle any more. In April 2009, her predecessor announced a deal to sell electricity from Churchill Falls to the United States through Quebec.  Surely the Premier remembers these words attributed to her in the official news release three years ago:

“This is a significant development for us to share our excess green renewable energy with the rest of North America through our transmission access through Quebec and our subsequent arrangement directly with Emera Energy,” said the Honourable Kathy Dunderdale, Minister of Natural Resources. “These markets are seeking clean, reliable energy, which we have in abundance. The recall block availability and this arrangement allows us to build our reputation and experience as a reliable supplier of clean energy now and into the future.”

There it is in black and white:  “through our transmission access through Quebec”.

Not around Quebec.

Not under Quebec.

Not over Quebec.

Through Quebec.

Through the "natural transmission route", in the words of the craftsman who put them in Kathy’s mouth.

Nalcor has been losing money on the deal, though.  Electricity prices have dropped through a combination of lower demand in the United States and abundant cheap energy from natural gas.  The reason Nalcor isn’t developing the Lower Churchill for export is that no one wants the power at the prices Nalcor would have to charge for it.  As it is, Nalcor had to promise Nova Scotia a block of power for 35 years for free to get them on board the Muskrat Falls Express.

But through it all, dear friends, based on all that stuff which turns out wasn’t exactly fully, totally and completely in correlation with what we colloquially know as true, “we were determined not to let that happen again.”

And so determined was Kathy Dunderdale “not to let that happen again” that she and her boss tried for five years to lure Hydro-Quebec into taking an equity position – an ownership stake, if you will – on the prized Lower Churchill with the electricity going into Quebec and through Quebec.

We know this because Kathy herself told us all, even if no news media in the province have ever reported it lo these two and a half years later.

Hear what comfortable words Kathy sayeth back then:

Y’know, the Premier has gone to Quebec, and gone to Premier Charest, and, y’know, we’ve had NALCO(R) visit y’know Hydro-Quebec, I’ve been meeting with Ministers and so on. And we say to them, okay, y’know, we’ll set the Upper Churchill to one side, but, y’know, let’s sit down and have a talk about this Lower Churchill piece. Y’know, we know that we have to have a win-win situation here. Because we, as I’ve said earlier this week, we know that if you don’t have win-win you have win and poison pill. Because that’s what we’ve got with the Upper Churchill. So we can have a win-win situation. We know that if you come in here as an equity player that you have to have a good return on your investment. And we want you to have a good return on your investment. But it also has to be a good deal for the people of Newfoundland and Labrador. Now we have been with that message back and forth [i.e. to Hydro-Quebec] for five years. No, sir. No, sir. There is no takeup on that proposal.

In fact, so determined was Kathy that she not let that 1969 contract happen again, so firm was she in her resolve on the matter that she and Danny Williams told the folks at Hydro-Quebec to forget all about it:

we’ll set the Upper Churchill to one side, but, y’know, let’s sit down and have a talk about this Lower Churchill piece

For good measure, Kathy wanted to make sure that Hydro-Quebec actually got a “good return” on their investment in the Lower Churchill.  How good?  Maybe as good as Nova Scotia will get – free power – but alas we will never know. 

Hydro-Quebec, as it turned out, just wasn’t interested.

There are some people, as it seems, who are haunted by the infamous Upper Churchill contract.  They see its ghost at every turn, beckoning them onward. 

And so they follow, mesmerised by the rushing of water and the humming of generators,  deeper and ever deeper into its lair until they can no longer tell what is real and what is illusion.  They talk as though one was the other and that both were the same.

It is then  - and only then – that you know the Ghost in the Turbines has claimed another victim.

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Rumpole and the Better Half #nlpoli

You likely won’t hear much mention of this provincial first but in the midst of the hoopla over Muskrat Falls on Wednesday, the justice minister announced a first for Provincial Court:  a husband and wife will sit as judges at the same time.

Former director of public prosecutions Pamela Goulding, Q.C. will sit in St. John’s. 

Her husband is Chief Judge Mark Pike.

The scuttlebutt in the clerk’s room at Number 3 Iniquity Court has it that Pike and Goulding also have the distinction of being the first married lawyers to take silk at the same time. 

Well, sort of. 

In 2008,  the list of new Queen’s Counsel appointments included Pike and Goulding.  A few days later came the announcement of Pike’s appointment to the bench.  As it turned out, Pike got to the bench before the ceremony to hand out the silk robes.  As a result, he never really got the chance to wear them.

Sometimes judges have to do a spell in the hinterland before getting the plum spots in Sin Jawns.  One of Goulding’s predecessors sat in Harbour Grace for the longest while waiting patiently until a spot opened up in town.

Included the announcement with Goulding was Laura Mennie, Q.C. who will sit in Stephenville.  Mennie took silk in June 2011.  At the time of her Q.C. appointment, Mennie was working for the child, youth and family services department in western Newfoundland and also completing the requirements for a master’s degree in family law at Osgoode Hall Law School.

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The trap of fossil fuels #nlpoli #cdnpoli

Muskrat Falls green.

Right?

Get rid of Holyrood.

Holyrood bad.

No more oil burning.

Must be true.

After all, natural resources minister Jerome Kennedy tweeted a couple of weeks ago that:

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.

…

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 Premier Kathy Dunderdale told the St. John’s Board of Trade not even 48 hours ago of the glorious future when there are no more fossil fuel plants in Newfoundland, thanks to the wonders of her Muskrat Falls project:

What is the best thing we can do for our children 30, 40 and 50 years from now? It is to escape from a thermal future, taking our economy off the trap of fossil fuels, where we are hostage to rising oil prices. We will deliver a secure, sustainable economy to our children, and that is a legacy we can all be proud of.

Yeah well, hang on to your long johns, there, kiddies.

According to Manitoba Hydro International, the Muskrat Falls plan includes the construction of seven new oil-fired  - i.e. thermal – generating plants between 2036 and 2037.

The total cost for these additional facilities is estimated to cost a total of $1.4 billion in the MHI documents on thermal generation. Is that included in the $5.0 billion cost estimate for this project, less the connection to Nova Scotia?

Sharp eyes will notice that Holyrood doesn’t shut down in this plan until 2030.  That’s with Muskrat Falls.  it will run as a line condenser to help with the transmission and, if you follow the discussion, as a small back-up generator for a short period.

Don’t think too hard about those dates, though.  The entire Muskrat plan anticipates that construction has already started.  They begin counting time in 2010 and have initial power flowing by 2017.  You can already slide that back by at least 12 months and possible 18 months or more.

And don’t you recall reading somewhere official that with “Muskrat Falls, the Newfoundland and Labrador electricity system will be run on 98 per cent renewable, emission-free energy?”

You can take that to the bank.

That is copper-fastened.

Well, maybe more like brass, with a bit of tarnish on it. According to Manitoba Hydro International’s financial assessment:

By 2067, the generation capacity mix for the Infeed Option will be based on 65% hydroelectric and 35% thermal.

Good thing we will escape the trap of fossil fuels.

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Dunderfalls #nlpoli

This is a screen cap of the picture VOCM is using on their front page to illustrate a story on Muskrat Falls.

C’mon guys.  This isn’t artsy.  This isn’t creative.

This is just unflattering to the Premier and therefore inappropriate.

Next thing you know she’ll be slicing into the evil people at VOCM who always treat her like shit after she criticises them.

What’s more creepy though is that there is a right hand holding a recorder and another – maybe left -  hand holding the VO mike and the camera appears to be in between.

Helmet cam?

Seriously.

This is just weird.

It’s starting to look like NTV circa 1974 or something. 

Seagulls flying around.

Captain Kangalini or whatever his name was.

Next thing over in The Valley, they’ll be bringing back the VOCM logo girl.

If they do, run for the hills.

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It’s a nice project, but… #nlpoli #cdnpoli

Manitoba Hydro’s limited review of Muskrat Falls is now available publicly.

Manitoba Hydro concluded that the project is indeed the lower cost option of the two they were limited to studying and using all the assumptions they had to use under the question set for them by the people behind the project.

But…

Let’s take a look at a couple of areas of the report.  There’ll be more to follow.

The opposite of good practices

Nalcor should have completed an alternating current integration study before clearing Decision Gate 2 but didn’t.  (Executive Summary, p. 10 and Vol. 2, Ch.4 )

That study would look at how all the bits of the generating and transmission system would play together given the physical characteristics of different parts of the system. The study would look at things like back up systems, load balancing and similar operating requirements needed to maintain power across a range of possible events (e.g. equipment failures, weather problems etc)

As Manitoba Hydro put it:

Good utility practice requires that these integration studies be completed as part of the project screening process (DG2). MHI considers this a major gap in Nalcor’s work to date. These integrations studies must be completed prior to project sanction (DG3).

This stands out for two reasons.  First, it’s the type of study Tom Adams pointed to in his second post on Muskrat Falls.  Ed Martin will have a much harder time now dismissing Adams’ critique.

Second, Nalcor was very proud of the review of clearing Decision Gate 2  done by Navigant.  How did they miss this?  Are there other equally serious problems with Navigant’s other reviews and endorsements of this project?

Manitoba Hydro didn’t look at the Nova Scotia link.  It wasn’t part of their terms of reference.  They did note however, that Nalcor also doesn’t comply with current North American Electric reliability Corporation standards.  Those are the ones that allow the North American network to fit together.

Those are two big reviews that need to be done.  Nalcor says the system review will be done by March 2012.

Lower cost?

One of the most obvious criticisms of the Muskrat Falls project is that Nalcor simply didn’t look at all the reasonable alternatives.

The second one has been the basis for the cost estimates for the two options that Nalcor did assess.  According to its proponents, Muskrat Falls is the right option because:

1. It costs about $2.2 billion less than the alternative, and,
2. That cost differential is all about fuel prices.

You can find that sort of analysis in Wade Locke’s recent presentation in which he endorsed Muskrat Falls.  Not surprisingly, the current administration loves Wade Locke because he agrees with them so often.

Manitoba Hydro’s Cumulative Present Worth Analysis  (Summary and Vol 2,  Ch. 12) show just how vulnerable those claims are to shifts in their underlying assumptions.

MH asked Nalcor to review their assessment in light of a theoretical closure of the Corner Brook paper mill and the consequent availability of its generating capacity for use by the island system.  The Infeed advantage dropped from $2.2 billion to about $400 million.

Similarly, a change in world oil prices dramatically changed the cost differential.  Nalcor uses forecasts prepared by the internally respected analysts at PIRA Group.  Using PIRA’s March 2010 forecasts, the Muskrat falls advantage drops from $2.2 billion to $120 million.

A change in capital costs – up to a 50% cost over-run on the project – would leave Muskrat Falls a mere $194 million cheaper than the isolated island option.

MH also performed assessment’s in which they varied several factors using reasonable assumed changes.  They reduced the Muskrat advantage in the reported scenarios to less than $200 million and in one instance had them equal. 

Bear in mind that this does not compare Muskrat Falls to other options such as natural gas generation using local supplies.  The preliminary reviews are promising, but neither Nalcor nor its supporters have bothered to do the work.

Also, MH did not run an analysis using a marginally lower fuel price assumption than the one Nalcor used but with a 50% cost over-run on the project.  That’s actually a likely scenario given recent capital cost experience in places like Manitoba.

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Terawatts for Terra Nova and other fun #nlpoli #cdnpoli

Energy analyst Tom Adams points to some problems with the Muskrat Falls project and, in the process,  turns out one of the biggest bits of critical commentary on Muskrat Falls in a while.

You know because the good folks at Nalcor took the time to write a post for their corporate blog that responded to the Adams piece.  Nalcor CEO Ed Martin wrote at the beginning:

I'm compelled to correct the statements made by you, and request the prompt apology you said you would make if your arguments were wrong.

“Correct the statements.”

Remember that phrase.

Ed Martin made the rounds of the local call-in shows, especially the unquestioningly government-friendly afternoon one. No accident that. The Telly ran a story on Tuesday. NTV ran it on Monday night as a blog fight. 

The funny thing is that Ed Martin didn’t actually correct anything.  Sure he claimed that Tom Adams didn’t get his facts straight.  Sure Martin claimed Adams didn’t cover all the information.  After all, there are hundreds of thousands of pages. 

Persuasion by the ton

You can tell this point, the amount of information Nalcor has pumped is so important – and convincing – because Martin and natural resources minister Jerome Kennedy and just about anyone else backing the project will point you to the boxes of documents like they are auditioning for a shot to replace Vanna on Wheel. 

There is all this information, they will say.

Surely we must be absolutely correct in all our claims because there is this pile of  paper.

Try and lift it.

We dare you.

Can’t? 

Then we must be right.

How much weight is it?

A shitload, for sure.  Some people don’t recognise that one shitload is  the average monthly output of “Minister paves road in district” or ”Premier hands out keys to new fire truck” new releases from a typical provincial government department.

One shitload. 

It’s the internal performance measurement for promotions and bonuses in the public service:  “Nelson produced 13 shitloads of happy-crappy releases this year instead of the quota of 12 usually produced by departments of this size.”

It could all be meaningless garbage that no one understands, but that isn’t important in government circles.

Government types measure persuasion, like work: by weight.

But all that is digression…

Your humble e-scribbler has already demolished Ed Martin’s suggestion that the Smallwood reservoir is really there to feed Muskrat Falls. The actual words on the water management agreement as well as 2007 amendments to the Electrical Power Control Act make that pretty clear.

So what about the other big issue, the question of energy from Muskrat Falls? 

How much will there be?

Terawatts for Terra Nova

According to Ed Martin:

Muskrat Falls will generate 4.9 terawatt hours of energy per year.

Adams comes at it another way in his first post.  He looks at a graph of water flows in Nalcor’s own environmental impact study and draws his conclusion:

My area under the curve estimate of the average production rate over the year is 577 MW (taking into account the nameplate capacity). Assuming a theoretically perfect 100% load factor, this corresponds to 5.05 TWh of production — i.e. pretty close to the project estimate of 4.9 TWh of production.

Adams actually gives Muskrat Falls with credit for slightly more energy (5.05 TWh) than Ed Martin does (4.9 TWh) if the water flows are right. No conflict or contradiction there. So let’s take that and work with it.

Terawatts and megawatts and martins:  oh my!

Some of you have no doubt noticed Tom Adams used a figure of 577 MW while the official rating for Muskrat Falls is 824 MW of installed generating capacity.  That comes from installing four generators each with a rated capacity of 206 MW.

Four times 206 is 824.

Simple math.

To figure out the terawatt hours per year involved, you need to multiply that 824 by the number of hours in a year (8760).  So theoretically, if you ran Muskrat Falls flat out all year, the plant should crank out 7.0 TWh.  That’s what you get when you multiple 8760 by 824.

But Muskrat Falls will produce 4.9 TWh according to Ed Martin.  We can also use another Nalcor figure of 4.5 TWh.  Divide that by 8760 and you get rough numbers to compare megawatts, in this case 570 or thereabouts

How does that compare to Holyrood?

According to Nalcor, Holyrood has generators that cumulatively produce 490 MW.  That gives us a theoretical maximum energy output of 4.3 TWh.  Nalcor’s numbers for Muskrat Falls - 4.5 and 4.9 TWh – are only  marginally above what Holyrood does.  To a layman, like your humble e-scribbler, that looks like Muskrat Falls doesn't push out much more than Holyrood, despite the difference in installed capacity.

Now check out the Nalcor’s own water flow chart.  It is based on average monthly flows. 

The period when Nalcor will need water the most to feed domestic demand and at the same time feed Nova Scotia just happens to be the same time when average monthly water flows on the river are lowest.

Now this is not a question of whether they need new water studies or not.  This is also not about the water management agreement. It’s about when the most water is available to make electricity compared to when Nalcor will need to make electricity the most.  They don’t match.

Could it be possible that Nalcor missed something that important?

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Adams and Nalcor: Second Round #nlpoli #cdnpoli

Energy analyst Tom Adams’ latest blog post on the Muskrat Falls project takes direct aim at the water studies used by Nalcor to support its claim that the plant will produce 4.9 terawatts of electricity each year.

Adams writes:

it appears that Nalcor took a study that estimated the energy production available from Muskrat Falls as delivered to an unconstrained interface at the Quebec/Labrador border and applied those study results to the Integrated Island/Nova Scotia system instead. Since the constraints of the Integrated Island/Nova Scotia system bear heavily on the potential output of Muskrat Falls, I believe that there is no basis for you to assert that Muskrat Falls will ever generate close to 4.9 TWh given the system you are now seeking approval for.

Adams appeared on VOCM Nightline and explained his concerns.  Your humble e-scribbler talked to Adams afterward and got more details.

His comments are based on information Nalcor provided to the public utilities board. They are a 1999 study by SNC and an Acres power study done in 1998 and apparently re-affirmed by more recent work described in a four page summary that omits any details.

Adams notes that the water flow studies were based on particular configurations, including building Muskrat Falls as part of a complex including Gull Island. No one has looked at a river system consisting of only Muskrat Falls below the Churchill Falls complex.

Take a look at the table from the Acres study filed with the PUB.  You can see someone’s simple calculation for Muskrat falls.  He or she just looked for the difference between Churchill Falls and Gull and another scenario with Churchill Falls, Gull and Muskrat.

Does that make a difference?  Adams thinks so. 

Your humble e-scribbler might go a bit beyond that.  The higher energy numbers for Muskrat Falls in this table – the ones closest to current estimates – come from a scenario that includes water from two river diversions planned for 1998 but subsequently abandoned. That’s more curious than anything at this point but it suggests Adams may be onto something.

When it comes to delivering electricity to Nova Scotia, Adams has a new point.  He notes that the Nalcor claims about Muskrat’s output come from a different transmission scenario:  one way into Quebec or into Quebec and onto the island.

Adams suggests that congestion on the island lines, especially routing through the hydro lines through the central part of the island, may produce significant congestion.  That congestion could adversely affect how much electricity flows to Nova Scotia.

Is Adams right?

Let’s see if Nalcor answers him this time with something more enlightening than simply claiming that he’s wrong.

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Born Again Fiscal Virgins #nlpoli #cdnpoli

Premier Kathy Dunderdale is singing the usual Tory song before contract negotiations and a provincial budget. 

Yes, folks, in a speech to the St. John’s Board of Trade the Premier was talking about the need to control spending.

We’ve all been down this road before.  Of course, the same people who talk the talk don’t walk the walk.  They’ve been the ones who caused the current fiscal problems the Premier was talking about. 

In this corner, your humble e-scribbler has been warning about the Tory fiscal imprudence since 2006.  It’s one they’ve acknowledged being vaguely aware of since about 2008, at least.  That’s when the Auditor General  of the day warned about it. In 2009, the finance minister and the Premier of the day admitted their spending was unsustainable.

And yet they continued to crank up spending to record levels.

So basically there is nothing in Kathy Dunderdale’s speech on Tuesday that the Tories haven’t said before.  Kathy Dunderdale’s strategy to deal with the problems she and her colleagues created is the same one the Tories have talked about since 2003.  And that’s the one that created the problem she claims she wants to fix.

Think of it like make-work for politicians.  First, you create a problem. Second, announce that you plan to tackle the problem.  Third, tell everyone the strategy you will use is to follow all the policies that caused the problem in the first place.  Repeat annually as needed.

Anyway, just look at one part of the speech if you want to know how seriously out of touch with reality a politician can be:

What is the best fiscal policy response in the face of this reality? Some may suggest that a balanced budget is the best goal in order to avoid taking on debt. However, this would require a dramatic reduction of spending.

If they can’t balance the budget without a dramatic reduction in spending then they are already spending way more than they are bringing in.

D’uh!

So if you are spending beyond your means – and don’t stop -  you cannot really get spending under control, reduce public debt and all the others things that genuinely responsible governments do.

And if you reject balanced budgets because it would mean spending cuts, then obviously you just aren’t serious about all that talk of spending cuts, controls or that thing called fiscal prudence.

After eight years, the unions know all about the born again fiscal virgins.  They aren’t fooling anyone.

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Hebron, the Lower Churchill and Local Benefits #nlpoli #cdnpoli

Apparently, this whole Hebron work thing is much ado about nothing.

Premier Kathy Dunderdale spent some time Monday afternoon chatting with On the Go’s Ted Blades about a recent decision by Kiewit to take a pass bidding on a second topsides module for the Hebron project.

Labour was tight. The company was having trouble delivering on time and on budget.
 
At one point, the Premier said there would be more work.  The size of the topsides has apparently gone from the original estimate of 11,000 tons to 18,000 tons.

So, sez the Premier, there’ll be 18,000 tons of work.

You know, that’s something that always puzzled humble e-scribblers.  When people say there’s tons of work, now you know what they mean.  Don’t look for the number of people on the job.  Forget the number of hours of labour.

Work now is measured in tons.

You cannot make this stuff up.

You wouldn’t.

You’d be afraid to make something like that up because people would never believe that the Premier of the province could say such a thing.

But she did.

Dunderdale also tried to claim that the crowd what has been running the place since 2003 were the first ones to copper-fasten the amount of work to be done locally on an offshore project.  Others, she said, had settled for “best efforts.” 

Kathy didn’t say copper-fasten but that’s one of her favourite little bits of meaningless jargon.  Like referring to something as a piece.  Like the Hebron piece.  Or the Kiewit piece.

But anyway, first time for nailing stuff down right to the gram or work that had to be done in the province.

All that would be wonderful, of course.

Splendiferous even, except that it isn’t true.

Construction of the gravity base for the project was always going to be done in Newfoundland.  That’s the cheapest way to do things.  The provincial government didn’t get anything there they didn’t already have going into the meeting.

And then there is a bunch of small time stuff like a tube called the flare boom. Low tech metal bashing, for sure, and again, nothing of any difficulty to get done in someone’s back yard welding shop.

But the topsides modules, utilities and process module and other big stuff covered in Sections 5.5 B, C,and D of the benefits agreement, well those are all subject to conditions. The conditions are secret. They are considered to be commercially sensitive.

They are not copper-fastened at all.

As for the rest of the project, the Hebron final agreement has more than a few give-aways in it. 
The companies got a huge break on financing research and development.  Kathy and her former boss let the companies skate with a pittance of a cash commitment compared to what the offshore regulatory board rules required.

On royalties, Kathy and her old boss gave the companies a break up front as well.  Instead of an escalating percentage of revenue, Kathy and Danny gifted the companies with a flat one percent for as long as it takes to pay off the project development costs.

When Roger Grimes talked about such an idea, back when oil prices were forecast to stay low forever, Danny tore great strips off Grimes’ hide.  As it turned out Danny gave the oil companies a gigantic break when prices were high.  And Kathy Dunderdale totted out in front of the cameras to tell news media it was a way of giving the oil companies some protection against changes in oil prices.

Just think about that, in hindsight.  Back then  - in 2008  - Kathy was running to protect oil companies against the chance oil prices might drop. 

The poor old multinational multi-trillionaire oil companies. 

Too fragile to take the risk.

A couple of years later – in 2010 – oil prices were going to be high forever.  That is the justification for Muskrat Falls. And what about protecting taxpayers from the possibility oil prices might fall?  Out trots Kathy and then Shawn and now Jerome to say there’s no chance of that happening.

And so the taxpayers of Newfoundland and Labrador, the people who own the oil and gas and the water, having given the oil companies a break must now dig ever deeper into their own pockets to ensure their electricity prices are high. Nova Scotians, meanwhile, will get their power for free, except for three months of the year when Muskrat apparently can’t deliver the juice.

Not much of a local benefit in that. Sure,  Tory supporters will tell you all about what Danny got in exchange.  Like equity stakes.

Hang on a second.

Equity.

No small irony that the two big issues in the province are the Lower Churchill on the one hand and Hebron on the other.  Those equity stakes, including the one in Hebron, were always about one thing:  financing the Lower Churchill. Local benefits were entirely secondary. 

Don’t believe it?

Williams broke off Hebron talks in 2006 because he couldn’t get an equity stake.  Nothing else.  After 18 months of public pissing matches and private suck jobs, Williams  got a deal on Hebron. 

But he didn’t pick up any local benefits that weren’t already on the table in 2006.  The so-called super-
royalty won’t add much beyond what the province would have received under the same royalty regime that is delivering in spades on projects like Hibernia and Terra Nova and White Rose.

Equity was the thing.

The first thing.

The most important thing.

So important that Danny even told Arnold about it:

The Premier also discussed the province's Energy Plan objective of using non-renewable resource revenues to fuel a future based on renewable sources of energy.

At times like this, it is always interesting to go back and see what was running around at the time.  This time look at August 2007 and the rather convenient election announcement of a Hebron deal:

6. Shortage of workers means shortage of work.   

In the last round of negotiations, the provincial  government insisted that any work that could be done in Newfoundland and Labrador had to be done there or the companies would pay a penalty. Reportedly, the companies noted that Long Harbour plus the Lower Churchill would outstrip the local labour and engineering pool making it almost impossible to complete Hebron using only local resources.

Cancellation of Hebron last year meant that workers who would have started work on Hebron have already headed west to the higher wages of Alberta. That made the predicted situation worse, not better and therefore will make it harder for the province to stick with that bargaining point. 

Expect that provincial demand to drop off the table or for Hebron to get preference over the Lower Churchill. Otherwise, the cost of the project will be forced up.

Your humble e-scribbler had plenty of people from the local oil and gas community point that out.  The companies talked about labour force shortages and costs, they said. The final Hebron agreement reflected the limited capacity in the local market to do some of the bigger components for Hebron.  The only things the companies had to do here was what they absolutely had no choice but do here.

Not surprisingly, that old demand for guaranteed local benefits or suffer a penalty disappeared.

And equally unsurprisingly, the provincial government’s news release talked up the GBS and the small stuff – “outstanding local benefits” – but only after they played up the equity.

Makes you wonder why Kathy Dunderdale is talking about Kiewit and Marystown like it was some kind of surprise to her.  She’s known about the whole thing from the beginning:  Hebron, the Lower Churchill, jobs, local benefits and the equity.

The equity.

It’s always been about the equity. That’s what ties it all together.

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Cleary on the Move #nlpoli #cdnpoli

Noob Bloc-NDP member of parliament Ryan Cleary is on the move.

Backwards.

In the most recent seating plan for the House of Commons, Cleary’s seat goes all the way down the opposition side of the House down to the seats right next to the Tories, up in the back row.

The orange arrow shows how far he’s been shuffled.

There are a handful of Conservatives on the opposition side because there aren’t enough seats for all the Tories over on the side normally reserved for government members.

Ryan’s new digs are in the same desk pairing as an independent member of the House.

If you want to get a sense of direction, the Speaker would be towards the bottom of this seating plan.  The government benches are to the right.  The only thing between Ryan’s new seat and the hall outside the House is not much more than a curtain.

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Muskrat Falls: more pesky details #nlpoli #cdnpoli

Tom Adams’ blog post is attracting much attention in Newfoundland and Labrador on Monday.

No surprise in that, given that Adams’ did some calculations of water flows and came to the conclusion that for at least part of the year, Muskrat Falls wouldn’t be able to meet its commitments to ship electricity to Nova Scotia.

But Adams hit such a nerve that Nalcor boss Ed Martin posted a comment on his own corporate blog that purports to correct Adams’ inaccurate comments.

Martin doesn’t really provide anything concrete.  He just points to the mass of stuff filed with the public utilities board.  Some of it comes from the best minds available, donchyaknow. Lots of well worn lines but nothing that specifically refutes anything Adams said.

And then Martin points to the water management agreement imposed by the public utilities board on Nalcor and Churchill Falls (Labrador) Corporation in 2009:

I’m not sure if you are aware of legislation in our province that requires a water management agreement to be in place between Nalcor and Churchill Falls (Labrador) Corporation (Churchill Falls). The legislation requires the two power producers to use available storage, primarily in the Churchill Falls reservoir, and their respective generating facilities to optimize the production of power while maintaining the contractual obligations of Churchill Falls to its customers.

The first sentence is a bit condescending but look at the last bit:  “optimize the production” while maintaining the contractual obligations of Churchill Falls to its customers.”

Priority for Churchill Falls

Not exactly.

Clauses 3.1 and 3.2 of the water management agreement give Churchill Falls customers more than an equal status with Muskrat Falls.

While we can’t be sure Martin is aware of the actual words in the water management agreement and their implications, here they are for greater certainty:

3.1 No Adverse Effect

The parties acknowledge that pursuant to Section 5.7 of the Act, nothing in this Agreement shall adversely affect a provision of a contract for the supply of Power and Energy entered into by a Supplier and a third party prior to this Agreement, or a renewal of that contract (collectively "Prior Power Contracts"), and that all provisions of this Agreement and ancillary documents and agreements shall be interpreted accordingly.

3.2 Acknowledgement of Prior Power Contracts

The Suppliers acknowledge that the following are the sole contracts for the supply of Power and Energy entered into by a Supplier and a third party prior to this Agreement:

(a) the power contract entered into between Hydro-Quebec and CF(L)Co dated May 12, 1969 as well as Schedule III of such power contract which relates to its
renewal (the "HQ Power Contract" );

(b) the Churchill Falls Guaranteed Winter Availability Contract between Hydro-Quebec and CF(L)Co dated November 1, 1998, as amended on March 29, 2000;

(c) the sublease entered into between Twin Falls Power Corporation Limited and CF(L)Co dated November 15, 1961, as amended on April 15, 1963, November 30,
1967 and July 1, 1974 and renewed pursuant to an agreement dated June 9, 1989,and the operating lease between the same parties dated November 30, 1967, as
amended on July 1, 1974 and November 10, 1981; and,

(d) the power contract entered into between Newfoundland and Labrador Hydro-Electric Corporation and CF(L)Co dated March 9, 1998, as amended on April 1, 2009.

Note the reference to section 5.7 of the Electrical Power Control Act, 1994. That was part of a package of amendments to the EPCA then-natural resources minister Kathy Dunderdale rammed through the House of Assembly on the second last and last day of the spring 2007 session.

Provision of an agreement void

5.7 A provision of an agreement referred to in section 5.4 or 5.5 shall not adversely affect a provision of a contract for the supply of power entered into by a person bound by the agreement and a third party that was entered into before the agreement under section 5.4 or 5.5 was entered into or established, or a renewal of that contract.

During the very brief discussion in the House – it wasn’t a debate by any means - Dunderdale mentioned this clause specifically:

The amendment will ensure the delivery commitments under existing contracts are honoured, including the 1969 power contract for the Upper Churchill. This protection is explicitly written into the amendment.

When you look at the details,  it’s pretty clear that the water management agreement gives priority to any demands related to Churchill Falls.  As long as there’s enough water and there is no conflict, everything on the river will be fine.

But what happens when the water flows needed at Muskrat Falls don’t match with the needs of Churchill Falls?  Well, Muskrat loses every time. 

This is something that the current administration voted for in 2007.  It’s included in the 2009 water management agreement.

No dispute on Nova Scotia?

With that firmly in your brain, go back and read Ed Martin’s blog post again.

Notice what’s missing.

At no point does Martin mention the problem of delivering electricity to Nova Scotia in the peak winter demand months of January to March.  Churchill Falls will be cranking water down stream to run Muskrat Falls so water management is not an issue.

The problem Tom Adams identified is that Muskrat Falls likely won’t crank out enough electricity to feed the entire island in place of Holyrood and ship electricity to Nova Scotia at the same time.

Surely if Nalcor wanted to specifically refute Adams, they’d have mentioned that big issue specifically.

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I am my own grandpa, legal version #nlpoli

This one seems tailor-made for the legal geniuses who came up with the ;aw in this province that allows you to vote in an election that doesn’t exist to fill a vacancy the legislature that doesn’t exist either at the time you vote.

An inmate in a state prison in the United States sued himself for violating his own civil rights. 

You have to read the story to discover that the real point of the suit was to try and get cash from the state.  The inmate contended the state would have to pay for the violation since the inmate  - being an inmate - was a ward of the state.

The judge tossed the case because it was “ludicrous”.

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Nalcor will have problems supplying MF power to Nova Scotia? #nlpoli #cdnpoli

Energy analyst Tom Adams has an interesting observation on why Nalcor and Emera are having a hard time finishing their agreement.

Adams believes that a detailed analysis of Muskrat Falls generating capacity and electricity demand will create a situation where “Nova Scotia gets nothing or close to nothing when customers there need it most.”  [Emphasis in original]

As Adams lays it out:

During the times of the year when Holyrood would have been running near capacity, all on-island generation [in Newfoundland] will be running flat-out (as it does today) and Muskrat Falls will not be able to supply enough power to move any significant amount of power to Nova Scotia. This is because in Jan./Feb./Mar. the maximum output of Muskrat Falls will be about 500 MW due to the seasonality of water flow. This maximum output is after taking into account the operation of the Upper Churchill facility upstream which is contractually bound to maximize winter production for sales to Quebec.

Hang on, some of you will be saying.  Adams has left out 324 megawatts.  He mentions 500 MW but the Muskrat Falls dam is supposed to produce 824 MW.

Yeah, well, not really according to Adams.

Adams took a closer look at information Nalcor supplied to the public utilities board.  Adams believes that the Nalcor information presents an ideal scenario.  In actual operation,  Adams believes the plant will crank out 577 MW.  According to Adams, “this corresponds to 5.05 TWh of production — i.e. pretty close to the [official] project estimate of 4.9 TWh of production.”

In the summer months,  Nalcor won’t have any trouble meeting its commitments to ship free electricity to Nova Scotia.  There’s plenty readily available on the island from the surplus generating capacity in central Newfoundland. 

Interesting idea.

Would explain a lot, too.

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Cost over-runs: Manitoba #nlpoli

Want to know how far off cost estimates can be for a project like Muskrat Falls?

Look no further than Manitoba where the same people who reviewing Muskrat falls for the public utilities board are in spot of bother over plans and costs and what consumers will wind up getting nailed for:

Keeyask is a 600-megawatt generating station and Conawapa is 1,360 megawatts. In comparison, the 1,340-megawatt Limestone generating station was completed in 1990 at a cost of $1.43 billion. Conawapa's cost is 5.5 times higher.

The cost of the nearly complete Wuskwatim generating station has risen from the 2004 estimate of $900 million to $1.6 billion, an astonishing 78 per cent, and shows the higher cost estimates for the proposed projects are valid.

American demand is down. 

Natural gas prices are in free-fall according to the article linked above, and as such, the price for electricity from natural gas is dropping along with it.

Anyone who thinks Muskrat Falls is somehow immune from all those considerations is just being naive.

But rest assured we are covered.  Nalcor has a 15% cost over-run built into its cost estimate of $5.0 billion for the Muskrat Falls dam and power line to St. Jawns. 

15% is greater than 78% isn’t it?

Didn’t think so.

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Muskrat Surprise! #nlpoli #cdnpoli

Paying attention pays its rewards.

On Saturday, The Telegram’s Russell Wangersky showed the benefit of paying attention to the fine print if you want to understand how far off Nalcor and Wade Locke are when they try and conjure up a price per kilowatt hour for Muskrat Falls electricity.

You don’t have to check fine print to understand how poorly Nalcor and the provincial government thinking has been on Muskrat Falls.  All you have to do is look at the front end of the clip that NTV used last week of Ed Martin at the news conference announcing that Nalcor and Emera were going to miss their second deadline to finish a deal on the project.

Here’s what Martin said:

"Yesterday, for instance, we were talking about a particular topic, some new points came up which are very helpful to make sure we think through prior to conclusion, and it's no time to make a snap decision at that point."

New points.

Not old ones.

Not changed ones.

New ones.

Completely new.

Never though of before.

Yesterday.

Seven years after Nalcor started planning the most recent version of the Lower Churchill

14 months after Nalcor signed a fairly detailed set of terms that would form the basis of the agreement with Emera.

Someone brings up some “new points” that no one had thought of before.

And now they need some time to think those posers through.

Holy Homer Simpson Moment, Batman.

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From the Earth to the Moon… in a sealskin spacesuit #nlpoli #cdnpoli

Over at the Ceeb, John Furlong does his usual superb job of cutting through the bullshit.  This week it’s dissecting the noise this week over what Ryan Cleary said, or what people claim he said and such.

Over at the Telegram, Pam Frampton goes at the same subject with similar observations.

Different style.

Same subject.

Both worth every second of your time.

When you are done with those two gems, compare that with Ryan Cleary’s observations on his own experience rendered by Geoff Meeker in his Telegram blog.

Ryan talks a good tale about what good journalists do and about bravery, the connection between what scares him and what he used to write about and about the relationship between reality and where he is.  Where the first two columns are about Cleary’s comments and reaction to them, Meeker writes about Cleary’s favourite subject:  himself.

The one thread you won’t see in Cleary’s usual pile of self-serving and entirely risible twaddle is the simple fact:  as soon as the first tweet of criticism hit, Ryan Cleary ran from his own comments as fast as someone’s fingers could type the release. He wrapped himself in the sealskin flag. 

He turned his back on the brave position he took and instead held aloft the banner of self-praise for his new role as champion of “conversation”,  debate and that other spin-word “dialogue”.

Cleary told Meeker that being in Ottawa, one is on the moon.  His riding is Earth, presumably the place of reality and presumably where Cleary loves to be.

How odd then, that as soon as he appeared in the real world – the one of his comments on the seal hunt – Cleary could not strap on his rocket pack fast enough and head home.

Read all that this weekend.  Afterward, if you are not better clued into the world as it is,  there’s something seriously wrong.

That’s where Meeker, Frampton and Furlong live.

Their subject?

On the moon.

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Bad Sign 2: Muskrat Falls financials #nlpoli #cdnpoli

The Telegram’s Russell Wangersky dissects Nalcor’s claim for Muskrat Falls electricity costs in the Saturday paper.

It’s simple.

It’s concise.

And, most importantly, you can understand it without being a math whiz.

What you see are the holes in Nalcor’s submission to the public utilities board.  You can also see information that was readily available to Wade Locke.  He ignored it for some reason. 

As a result, Locke’s lengthy presentation turns out to be even weaker than it first appeared.  Your humble e-scribbler didn’t even come close to describing the inadequacies of Locke’s recent assessment.

What you will also see are the fundamental concerns so many people in the province have about Muskrat Falls and the rush to build it.  The cost of the project is enormous, the rationales are flimsy and the people who will inevitably pay for it are the taxpayers of this province.

Alone.

Jerome Kennedy tweeted a bit this week.  One of his claims was about the rate for the average consumer would pay.  Kennedy’s numbers – taken from Nalcor – just don’t add up.  Wangersky’s column makes that pretty clear as well.

Read what Russell says.

Read all of it.

And then look again at all the news about Muskrat Falls this week.

If your blood isn’t running cold in your veins at that point, you must have the electric blanket turned up on bust.

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Bad sign #nlpoli #cdnpoli

The basic problem in the fishery is that the provincial fisheries minister has too much control over the industry and  - inevitably - tends to use it all for political purposes rather than for the good of the industry.

So fisheries minister Darin King’s answer to the current mess in the industry is to go looking for more power for the fisheries minister.

Nothing good can come of that.

Nothing.

But it also shows just how fundamentally screwed up things are.

Oh yes, and you can’t slide a sheet of paper between the parties on their fisheries policy. King’s latest idea is straight out of the same worn-out playbook the provincial Liberals pushed in the last election. And it’s the same as the bullshit the NDP is pushing with their claim that the problem is corporate greed.

Damn fool ideas from the lot of them.

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The old nothing could be further from the truth ploy #nlpoli #cdnpoli

Ed Martin from Nalcor and Chris Huskilson from Emera held a news conference in St. John’s on Friday to announce that they will not have a deal on Muskrat Falls finished by the January 31 deadline.

They issued a short, joint statement in addition to holding a news conference.

Ed Martin:

We have made significant progress on the agreements and we are nearing completion; however, we will not have all the detailed work completed by January 31 as previously stated.

We do have the majority of agreements completed. This consists of thousands of pages of contract details. Our next steps are to finalize all the detail in the agreements and complete our internal reviews and due diligence.

Both parties are committed to a quality outcome and we want to ensure clarity in these agreements.

Chris Huskilson:

The principles of the term sheet are still the foundation of all discussions and they have not changed.

We understand that there will be some people who will believe this is more significant than it is and we feel compelled to emphasize that our relationship is strong, the term sheet principles remain and they are guiding our work.

We continue to make progress and we will ensure that people are informed once we have finalized the agreements.

This is the second deadline the companies missed.  Last November they slide the deadline from the end of that month until the end of January.

They announced the development with a simple statement:

“We are making good progress on the agreements,” said Ed Martin, President and CEO of Nalcor Energy. “However, we need more time to complete the volume of work required. Our relationship with Emera remains strong and both parties are committed to a quality outcome. These are important agreements and we’ll take the time to do them right."

Nalcor and Emera are targeting year‐end for completion of key agreements and both parties will then conduct review and due diligence prior to the end of January.’'

"We remain committed to the principles of the Term Sheet and look forward to finalizing an agreement with our partner Nalcor this year,” said Chris Huskilson,
President and CEO of Emera Inc. “This is an agreement that will be mutually beneficial for our customers in the region for decades to come. The additional time we are taking is modest in the grand scheme of things.”

Note the similar words.

But note the differences:

This time there is no new deadline even though they have completed “the majority” of the agreements.  Last fall they said they would finish the agreements within a month and then allow another month for “due diligence”.

This time they actually came to St. John’s to make a big deal about the missed deadline. That made sure people would wonder about the high level of sensitivity the companies had to the possibility that some people might get the wrong idea. 

Whoever those unnamed people are, they have enough influence to frighten the shit out of the two companies.  You can tell because Huskilson actually mentioned their concern in his bit of the statement: "We understand that there will be some people who will believe this is more significant than it is …”

As it is, the big show in St. John’s telegraphed that maybe the deal isn’t so secure after all.  Think of it like trotting out the deathly ill despot so people won’t speculate that he is about to kick off.  They usually only do that right before he snuffs it, thereby confirming the rumours were right all along.

And if you really want to know how not to reassure people, try this line from Nova Scotia Premier Darrell Dexter in Friday’s Chronicle Herald:

"They're now not even going to bother to set another deadline because they feel they're close to getting it completed, which I think is all a very good thing. It's all very good news, in fact."

It’s the Rule of Opposites, or the rule of opposites or the rule of opposites or the rule of opposites.

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The old victim ploy #nlpoli #cdnpoli

In a scrum on Friday, Premier Kathy Dunderdale decided to attack the Telegram’s editorial writer. 

She attacked the paper for things the Friday editorial did not say.

For good measure she claimed that she would now suffer further attacks from the newspaper in retaliation for her comments.

For anyone who read the editorial, she was full of crap.

Obviously full of it.

Painfully, blatantly, obviously full of it.

Just like the editorial painfully skewered the Premier and her administration for stuff they did and the implications of it.

Since the Premier was so obviously full of crap in her scrum, there are only a few possible explanations:

• She didn’t read the editorial but relied on a summary by the best experts available..
• She read it but didn’t understand it.
• She didn’t read the Auditor General’s report but relied on a summary prepared by the best experts available.
• She read the AG’s report but didn’t understand it.
• She didn’t read the letters that went to the AG but relied instead on what the best experts available told her they said.
• She read the letters but didn’t understand them.
• Stung by the truth of the editorial and the damage she’s done to her own credibility, she decided to play the victim card and make herself out as the aggrieved party.

That last one is a rather calculated, cynical ploy but at least it is the only explanation that doesn’t make the Premier out to be lazy or stupid.

Take your pick.

The only thing we know for sure is that the Premier wasn’t right.

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