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Monday, November 14, 2005

Newfoundland and Labrador to Map Energy Future

Last week Newfoundland and Labrador Natural Resources Minister Ed Byrne and Premier Danny Williams presented a discussion paper and announced that the process of public consultation was beginning on the developing a comprehensive energy plan for the Province.

The Provincial government is soliciting input from concerned stakeholders, including members of the general public, with the objective of developing a long term plan that will determine the direction for development and use of energy resources in the province over the coming decades.

The discussion paper is available online through a link on the Province’s official web site: http://www.gov.nl.ca/ and a feedback area has been setup giving the public the ability to provide comments and suggestions.

In addition to the ability to provide input online, public consultations will be held across the province in the coming months. Government’s intention is to develop a plan that will set a course for development and management of its electricity and oil/gas resources up to and including the year 2041 when the controversial Upper Churchill purchase agreement with Hydro Quebec, which has been in place since the late 1960’s, is set to expire.

Why is an energy plan so important to the province?

Newfoundland and Labrador’s offshore oil developments currently account for 80% of Atlantic Canada’s petroleum resources and the Province will soon be producing approximately 50% of the Country’s light conventional crude. The potential for further finds are high and the Province has yet to seriously develop its offshore natural gas industry which has estimated reserves expected to surpass 60 trillion cubic feet.

The province is also a major hydro electricity producer in Canada. Several hydro generating plants exist in the province including the massive Upper Churchill plant, from which most of the power is exported out of the province. In addition to the Upper Churchill and several smaller operations, plans also under review for development of the Lower Churchill Hydro project, commonly referred to as the last hydro electric mega-project in North America.

The province is a major bulk exporter of both hydro carbons and hydro electricity. In 2004 Newfoundland and Labrador exported over 110 million barrels of oil and during the same year, the province’s 247,000 retail customers utilized less than 27% of the 41,400 Gigawatt hours of electricity generated in the Province. The remaining electricity was exported to Quebec at 1960’s prices and sold into the North American grid by Hydro Quebec.

Due in large part to its booming energy sector and speeded along by record oil prices, Newfoundland and Labrador has become a leader in Canadian GDP growth during the past few years yet there has never been a comprehensive management plan put in place for those resources. To date, each project has been developed on a standalone basis, without a common long term goal in mind. The new energy plan is intended to address this uncontrolled and undirected development.

What are some of the major issues?

Currently the Province exports most of the energy it produces. While producing billions of dollars worth of raw petroleum, it has almost no secondary processing capacity of its own. There has been little done with developing energy infrastructure in the province that would allow it to take advantage of its own resources. There is no infrastructure in place for the storage and distribution of natural gas and there is practically no refining capacity in the Province.

Another odd circumstance exists within the Province’s hydro industry. The ability exists in Newfoundland and Labrador to recall a limited amount of power from the existing purchase agreement with Quebec. This power could be used internally in either Labrador or the island part of the Province. While this clause exists in the current agreement parts of the Province, especially communities in Labrador, continue to utilize diesel generators for power because the distribution lines have never been built that would allow the recall clause to provide true value.

These types of conflicts are nothing new to the Province of Newfoundland and Labrador which has been a lesson in contradictions ever since joining Canada in March of 1949. The vote to enter into Confederation with Canada gave the Province the dubious distinction of being the only independent nation to willingly give up its sovereignty, yet many still regard themselves as a distinct culture.

Contradictions abound. The Province has a huge land area yet an extremely small population. Approximately 60% of the population lives in and around metropolitan areas yet the Province’s economy is largely driven by those living in rural areas and working in the resource sector.

While the province is leading the Country in economic growth, it also continues to have the Nation’s highest unemployment rates and as mentioned, it exports bulk energy while segments of its population must generate their own power to heat and light their homes.

How can these issues be resolved?

The existence of these contradictions speaks volumes about the need for a comprehensive energy plan. One of the primary reasons for the current situation in the Province is the lack of internal development and value added use of the abundant resources available. A well developed plan with the overriding intention of providing primary benefit to the people of the Province will go a long way toward improving the current situation.

Newfoundland and Labrador has a very small and localized manufacturing sector. Ensuring the availability of dependable, economical and abundant energy across the entire Province will go a long way toward growing smaller centers and attracting labor intensive business and industry. This in turn will provide much needed jobs, leading to a reduction in unemployment rates and less of a dependence on the unstable and undependable resource based employment currently driving the rural economy of the Province.

The reality is that although the Province’s hydro capacity may continue for centuries, the oil and gas resources won’t. This is why it is so critical for the people of Newfoundland and Labrador to provide as much input as possible into the development of a homegrown “Newfoundland and Labrador first” energy plan. A plan that will provide for the future growth and sustainability of the Province and ensure that full advantage is taken of the opportunities that currently exist, as well as those that will present themselves in the coming months, years and decades.


crazy american said...

Steve here

I took a quick look at the government site for posting comments and responses to the discussion questions. Unfortunately, it appears that only the submission is available on line, no public site for viewing comments posted.

Hopefully, they will provide a space in which to view the publics comments.

If I missed the location where the submissions can be viewed, I'd be happy to hear about it

NL-ExPatriate said...

I didn't see one either Steve.

I can summarize since I read the report in it's entirity.

Coastal Labrador is getting the shaft and they are able to hide it by creative accounting and usage unrealistic limit rates.

Just go to the end and look at the graphs pay particular attention to the Block usage amounts 1000 kw; 40 kw Labrador Isolated diesel are paying double twice as much 100% more than the island.
20 cents Labrador diesel generated vs 10 cents island interconnected!

And they stated somewhere earlier that NLH doesn't use off peak hour billing breaks. No but they do use Diesel generated limits.

crazy american said...

Steve here.

Below are some rather length comments about the first part of the provincial discussion documents dealing with energy security.

While I do believe these comments are worth considering, I believe the provincial submission should be only those of the people who have to live with the resulting govermental and business actions. For that reason, if for no other, I decided not to post these on the government site.

Feel free to plagiarize, alter bend or fold these comments into your own for the province wide discussion. My real intent was to try to open the eyes of people to the real potential you already have.

One last introductory point. While some readers may think that the crux of my comments deal with exporting to those energy stealing yankees, that's not my actual intent. Honest. It's just that the entire energy issue has caught my interest big time. SO here's my thoughts

To quote from the report

“Security of supply is the availability of competitively priced energy to meet demand in Newfoundland and Labrador.”

The discussion paper then asked the following general questions.

"How can government energy policy contribute to meeting the province’s energy needs over the medium to long terms?

How can our province cooperate with other provinces and the federal government to ensure our energy security?

What steps can the provincial and federal governments take to encourage the necessary investments to maintain the security of supply, for example an East-West transmission grid?

Can, and if so should, the Government take additional measures to ensure competitively priced energy in Newfoundland and Labrador? "

To a significant degree, the conditions in NL are prime for a direction which can remake the province, but it requires both a realistic assessment of the current conditions, and a willingness to undertake a program which in most significant respects ought to be above political affiliation. The current problem in its most simplistic form, is not one of energy availability as a raw natural resource, but is more a problem of energy manufacturing and distribution.

Sometimes, restating the obvious helps to lay the groundwork towards effective solutions. With that in mind here are a couple of obvious points on which the bulk of my comments are directed.

Hydroelectric power is only potential energy when it’s flowing down a river.

Oil reserves are only potential energy when they are still under water and ground.

Both require acquisition (damming and drilling).

Both require refinement (generation and cracking).

Both require distribution.

Without an effective transmission and distribution system neither hydroelectric generation or oil drilling and recovery provides any energy security at all.

Hydroelectric power to meet the needs of all segments of the province can be made available if a transmission and distribution system could get it from where it’s at to where it needs to be. Further electric generation can become another form of major revenue and still meet the province’s medium and long term needs. More comments about this below

Oil and gasoline needs can be met at much lower prices than those encountered in the last several months if an effective production and distribution system were already in place.The dilemma is getting it on shore, getting it processed, and getting it distributed. So when you step back and look at the entire system, the missing ingredients are two fold not singular dimensions.

Refinery capability is needed to reduce the dependence on outside production of usable petroleum products. Transmission and distribution is needed to reduce the lack of locally available power.

An Electric vision.

Hydroelectric generation is currently already in excess of the current province needs, but for all practical purposes is not available for the next 25 years until the upper Churchill contract expires. What is needed here is additional generation capacity through lower the lower Churchill bid, and likely over the next 20 years through hydroelectric projects currently on hold on the island.

What is the missing ingredient is an effective distribution system to reach all the needed points in the province, and secondarily an effective export mechanism as an alternative to Hydro Quebec.

Case in point is the Abitibi understanding announced by the province within the last couple of weeks. If the power capability of lower Churchill Falls were already on line, would the cost of power in Stephenville have even been an issue? Probably not.

The lower Churchill Falls power must flow towards the island.

But that power must not flow only to the island. The proposal to route the transmission lines from Labrador to Newfoundland are both too simplistic and frankly unintentionally parochial in nature directing the primary trunk line to the Avaoln peninsula before transforming it to lower voltages for nearby transmission and distribution. What would be the additional cost to run the lines essentially along the line of route 510 through Labrador with distribution lines dropped off to the coastal communities? Has this question even been considered? This would reduce some of the generation costs along the Labrador coast – I grant that northern communities like Nain would not benefit, but it would be an improvement on current conditions. Also, this would lay the necessary infrastructure for the minerals industry in the future of Labrador as well, not just in the western corner near Schefferville.

The proposed island routing of the transmission lines in the request for submissions of interest routed the transmission directly towards the Avalon peninsula. It might be better to have the transmission line run the length of the western coast with a large routing towards Saint John’s, but where excess capacity can be used for economic development and recovery along the western lines of the province. This has added benefits as well regarding alternative energy resource generation.

The potential for wind power in the western sections of the Island has been referenced numerous times. The problems with basically creating electricity out of thin air have more to do with the location that the power is created, and the locations where the power can be used. Again a pre-existing transmission system to which the wind farms can tie would be a second decade program for generation of power.

The investor interest in electric power transmission to the island is likely limited by the expected customer base. Frankly, you got enough potential electric power, that if it were all online now, you wouldn’t be able to use it effectively due to the loss of population. But, by running the transmission down the island, a secondary line to Cape Breton and the rest of the Canadian power grid can be achieved to export excess electric capacity while also allowing for an alternate routing from Labrador. I stress the word excess here. Provincial needs can then be met first, and I suspect more competitive electric transmission fees can be reached than through tying onto Hydro Quebec’s infrastructure thus making the additional distance less than the additional ongoing revenues. It’s unclear that this would have any effect on the upper Churchill agreement, but I would suspect that it might.

A government electric energy policy should look at the transmission and distribution of power as not only a provincial responsibility, not only as a provincial priority, but also as a provincial opportunity. This change in view is absolutely necessary for making a future vision become a reality.

Put it in your pipe(line) and grow it.

Refinery and gas distribution capacity must be treated as strategic initiatives.

Oil from the well head only tells a portion of the revenue and expense stream. Despite the apparent abundance, this industry will have a limited life span within the province, and when it’s gone, unless handled in a competent manner will be equivalent to the cod disaster in the impact on the province.

Having said that, Newfoundland can be the basis for a refinery not only to meet it’s own needs, but also by recognizing the potential marketplaces, a major refinery and distribution industry can and ought to be developed on the island.

Distance from marketplace is not a realistic impediment. For example the distance from Newfoundland to New York City is less than two thirds the distance the current natural gas system in the US transports Gulf of Mexico natural gas to the northeast megalopolis. While applicable to the natural gas transport mechanism, a similar view makes the current expensive importation of finished petroleum products irrelevant. If you are manufacturing and shipping finished goods out the door instead of shipping raw materials out and then back, it has to be less expensive to manufacture and ship finished products out as a revenue generation mechanism.

Why would it be a good idea to create the manufacturing capacity far in excess of the provincial needs?

Here are the basic reasons.

First, because of the relatively small distance in relation to the larger markets of the North East United States and Ontario especially as compared with the US gulf coast and western provinces. What this means is that manufacturing and refining capacity has a ready market where the refined product can be transported at a competitive advantage.

Secondly, because it allows the province to be able to build on its resources, not merely exploit them.

Third, in each instance where infrastructure enhancements would exceed local consumption, the formation of infrastructure serves both enhanced export revenue, but concurrently provides an improved base for expansion of the local economy.

Fourth, it requires a talented and trained work force to not only construct but run the manufacturing sectors which this manufacturing capability represents, thus improving quality of life, and providing a local outlet for the drain of population to remain inside the province.

Lastly, development of manufacturing and distribution within the province is the only method by which energy security can be effectively assured using the discussion papers own definition.

Again to beat the point into the ground, the goal of energy security can only be met through effective manufacturing, transmission and distribution. These three ingredients are just as critical to long term security as the undeveloped resource itself.

Just my two cents worth, but I believe it's a good investment

Patriot said...


I understand your being a litle reticent about posting on the government site, but you make some very good points that should be considered. Thank-you for giving permission to use your words as we see fit, but these are your ideas and as such you should deliver them to the appropriate parties.

As I said, I understand your feelings, but never the less, I would like to request that you post the comment on the provincial government site. Ideas shouldn't be hidden. They all have value whether they are local ideas or not.

Don't underestimate the acceptance level in this Province for outside comments.

We often complain in NL that everyone thinks they know better than us how we should do thing. I think this attitude has largely grown from the many uneducated and mis-guided statements we have heard from people who have no understanding or empathy for our people. I personally don't believe you fit into that category in any way, shape or form.

My suggestion is that you send the comment in and I would be willing to bet that I'm not the only one who feels that way.

crazy american said...


Thank you for your kind words. It is appreciated. If these opinions and ideas are of benefit, consider it a small repayment of the kindness that your fellow citizens offered at Gander. I for one will never forget that.

Regarding the submission, I will dress them up and extend the additional thoughts regarding the other portions of the energy discussion and submit them to the province over the next several days.

NL-ExPatriate said...

Couldn't agreemore with Myles comments about your comments Steve.

I find your comments very insightfull an am glad your taking an interest in NL.

Very good points you make about the secondary industry and the power correlation.

If you had the chance to read the Royal comission on NL place in Canada. You will realize NL has for far to long been had the colonial perspective on our resources and jobs. The report highlights the need for more emphasis being put on capital building and less on job creation with the real profits going to outside interests with no real interest in the long term development of the NL economy.

At first it was britain with NL being a colony and now we in NL are letting Canada use NL as a colony and taking our raw resources and leaving no real long term infrastructure and industry for a sustainable economy.
This is why I keep promoting CO-ops as an alternative for the status Quo.

OH if and when you decide to visit NL I would recommend staying Howley if you wish to explore Gros Morne National Park. The rates at the motel in Howley are much more reasonable than in Deer Lake and it is only 30 minutes from Deer Lake. You will alao have the oportunity to see lots of wild life if you drive into the back country. I saw 35 caribou 5 moose this summer when I did this drive in a fire fly 6 inches clearance, most only 10 -20 feet away.
Here is the link to the Howley Tourist Lodge run By Roddy Kelly.