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Wednesday, September 12, 2007

Newfoundland & Labrador - When is an Energy Plan not an Energy Plan?

Yesterday was not a good day for yours truly.

Like many others my day began with vivid recollections of the travesty that took place on September 11, 2001. The anniversary of 9/11 is enough to deeply sadden any caring person but for me that mood became even darker as the day wore on.

Before noon I lost my longtime companion and best (four legged) friend of over 16 years.

There’s nothing like taking a friend, especially one you’ve had since he was a 4 weeks old, for that last long trip to the local vet. If you’ve never had to do it I don’t recommend it to anyone.

Of course I’m in no way comparing my personal loss to the anniversary of 9/11, but with both events stirring my emotions on the same day I spent the afternoon looking forward to anything that might provide some much needed distraction, if even for a brief moment. Thanks to Premier Danny Williams I found what I was looking for. Unfortunately a brief moment of distraction was about all it provided.

Just before noon yesterday the government of Newfoundland and Labrador released what it billed as a new energy plan for the province. Something everyone had been looking forward to for a long time. On first reading I wasn’t quite sure how to react to it and after further review I realized why.

One question kept popping into my head: When is an energy plan not an energy plan?

The answer came quickly: When it raises questions instead of providing answers.

Don't get me wrong, I see a lot of vision and direction in yesterday's release and while that in itself is a good thing it’s also the problem. The document, while providing some level of detail around gas royalties, for the most part reads more like a strategic vision than an actual implementation plan.

Of course there’s nothing wrong with setting a visionary direction and in all fairness it can't be easy to include a lot of detail in a document intended to span several decades. I suspect however that most people in the province and in the energy sector itself were looking for something with a lot more meat after waiting so patiently.

Maybe it’s just the mood I’m in. Perhaps, under the circumstances, it would have taken a document on par with the Declaration of Independence to fully impress me. Be that as it may, I see this so called plan as little more than a guideline document that will, more likely than not, end up collecting dust after the “Williams Team” eventually moves on and a new government takes its place.

On a brighter note, I like the fact that oil industry representatives were quick to say they are willing to work within the guidelines presented, even though they are not overjoyed about the equity position government expects on future projects.

The way I look at it, it's always a good sign when those who covet what you've got aren’t walking away angry, but it's an even better sign when they aren't slapping each other on the back and high fiving it all the way to the bank.

On that front Williams seems to have struck a balance between provincial need and industry greed.

The weakest part of the plan for me is the province’s direction on clean energy, or hydro power. It’s here that Williams has left a lot of questions unanswered.

In the document the government speaks of connecting the isolated island power grid to Labrador via an undersea cable. The intention is to use some of the power from the proposed Lower Churchill development as a replacement for the oil fired generating plant at Holyrood. This is great news for the environment and with the cost of oil these days it should be welcome news for consumers in the long term.

Where the plan is seriously lacking is around the use of Lower Churchill power to attract industrial development in Labrador.

Though a few references to industrial development and making the people the prime beneficiaries of the resource are peppered throughout the document, nowhere does the plan clearly state that partnering with industrial players and encouraging them to locate inside the province will be aggressively pursued. Instead there are only cryptic references to economic growth. It's almost as if the idea of local industrial growth was added as an afterthought to appease the public.

After touching on the topic of industrial growth the plan moves quickly on to the exporting of power into the North American grid.

Once again, this part of the plan is light on detail and direction and it shouldn’t be.

The selling of Lower Churchill power outside the province brings up a very sore point for many Newfoundlanders and Labradorians. Exporting power is not a preferred option for many. It is viewed as providing a way to foster industrial growth in places like Quebec and Ontario while unemployment continues to soar inside the province and local people move away by the thousands to the very places that would be the recipients of that power.

The public distaste and underlying anger around selling power instead of using it to attract industry is often further aggravated when the prospect of moving that power through Quebec is discussed.

The hangover from a lopsided Upper Churchill contract is still being felt very strongly and in some ways has shaped the psyche of the entire province when it comes to the prospect of making another “bad deal”.

For as long as he’s been in office Premier Williams has all but ignored partnering with potential long term industrial partners and instead claimed that his team is actively considering exporting power through a maritime route rather than acquiescing to what many suspect will be exorbitant demands by Quebec Hydro.

While this new energy plan speaks of the afore mentioned undersea link to the island as providing a starting point for this alternate route it doesn't go beyond that. What isn’t mentioned is the very serious capacity issue outlined in a 2005 government report recently acquired by the CBC. That document identifies major concerns with the provincial power grid and its ability to handle any substantial increase in power distribution. The grid is essentially maxed out and as such poses a major problem for any plan to bypass Quebec with the Lower Churchill.

This glaring omission is very concerning to those following the direction of the Lower Churchill development. Though government is still publicly saying that the maritime route is a valid option, the fact that there is no mention of capacity issues and little acknowledgement of industrial power use in Labrador, seems to be a clear signal that government has already made its mind on how it will proceed. It looks like they plan to either hold their noses and use the Quebec corridor after all or, if the public outcry is becomes deafening, shelve the project entirely.

15 comments:

Patriot said...

Hi folks,

I just wanted to take a moment to thank all of those who have offered their condolences to me through the comments section since this artile appeared. You know who you are.

I truly appreciate your kind words and I have to say I'm a little overwhelmed by the support shown by so many of you.

I've opted not to publish those comments on the site as some are of a very personal nature and as one poster noted, they do not directly relate to the article's main thrust.

That aside, once again thank-you so much and know that your kind words mean a lot.

Sincerely,
Myles

Anonymous said...

From ROB (Report on Business)

September 12, 2007

CALGARY -- Newfoundland wants a bigger share in future energy projects, and oil companies say the demand is a reasonable point of negotiation for new projects.

The province of Newfoundland and Labrador yesterday officially unveiled its energy plan, nearly a decade in the making, and the centrepiece was a call to take equity stakes of as much as 10 per cent in key future energy developments. The province said in August it is buying a 4.9-per-cent stake in the undeveloped Hebron offshore oil project.

...Premier Danny Williams named "control" as one of three main energy goals, planning a provincially owned energy corporation to play a major role in future developments.

The whole plan is a reaction to the history of energy development in Newfoundland; the province says that in the past most money went to other people. Mr. Williams cited as just one example the Churchill Falls hydroelectric project in Labrador, where Newfoundland says it got only 5 per cent of the total net revenue while Quebec got the rest.

"When it comes to negotiating better benefits for the province, whether it be with Ottawa or the oil companies, we will no longer settle for less," Mr. Williams told reporters at a news conference yesterday in St. John's. "Gone are the days when our resources have served to benefit primarily others."

Paul Barnes, the St. John's-based spokesman for the Canadian Association of Petroleum Producers, said state equity stakes are common throughout the world beyond North America and Europe. He said his members are prepared to negotiate exact figures for specific deals. "It's not overly concerning to our members that equity participation is on the table here because we experience it on worldwide basis."

The true test of the energy plan's success will be whether oil companies conduct new exploration around Newfoundland, Mr. Barnes said, noting uncertainty in recent years has in part quelled the hunt for new oil.

"We've been saying for some time that the industry needs to know the rules of the game to bring business here," he said. "In recent times we haven't had much exploration activity. If we see increased exploration activity or renewed interest in [exploration rights] sales, we'll know this is successful. But that will take a year or so to see if that's case."

Newfoundland in its plans said there is considerably more oil, as well as natural gas, to be discovered off the shores of the province. The province also yesterday issued a preliminary fiscal framework for natural gas, something companies such as Husky Energy Inc. of Calgary are interested in for the long-term.

Robert Peabody, chief operating officer at Husky, said in Toronto yesterday that the outline of the energy plan is no surprise, and that his company has a positive relationship with Newfoundland.

"Discussions [with Newfoundland] revolve around all aspects of [our development] program, including the equity percentage ... we'd always like that to be lower," he said.

"The East Coast has been a tremendously successful business for us. We have a good relationship with the Newfoundland government, one of the best relationships. It's always been a productive and constructive relationship, and I don't really expect that to change."

Anonymous said...

Just announced:

Newfoundland to get five per cent stake of Husky Energy's White Rose project

ST. JOHN'S, N.L. (CP) — Premier Danny Williams says Newfoundland and Labrador has reached a tentative deal with Husky Energy (TSX:HSE) for a five per cent equity stake in an expanded area of the White Rose offshore oil project.

Williams made the announcement today while delivering a speech to the St. John's Board of Trade.

Williams says he reached the deal earlier today with Husky chief executive John Lau.

The deal marks the second time the province has gained equity ownership in the offshore oil sector.

Last month the province reached a tentative agreement to develop the Hebron offshore oilfield with a 4.9 per cent equity share.

Husky Energy holds a 72.5 per cent working interest in White Rose, with Petro-Canada (TSX:PCA) holding the remaining 27.5 per cent.


The question is how much is the cost and what does the royalty regime look like.

I bet that'll be fodder for the Liberal brain trust over the next week.

It must really tick them off that Williams keeps blasting these good news stories out day after day while the Libs are struggling to keep their heads above water.

Ussr said...

"Robert Peabody, chief operating officer at Husky, said in Toronto yesterday that the outline of the energy plan is no surprise, and that his company has a positive relationship with Newfoundland."

May I add a correction to Mr Peabody Patriot.Our Province is NOT Newfoundland ,but rather Newfoundland AND Labrador.So ,if Mr Peabody has such a GOOD relationship with us,why then can he not remember the name of our Province.

I be he knows the names of the wells that he wants to drill off the Labrador cost .Damb right.

Stephen said...

Hey Patriot,

I know you've mentioned it before and here again so I thought I'd give you this link regarding upgrades to the network on the island. Yes, things are at capacity and yes infrastructure isn't in good shape but it appears that $45 million has already been lined up for upgrades:

http://www.nlh.nl.ca/hydroweb/hydroweb.nsf/PublicNews/187E84A23050E944A32573370049EEBD?Opendocument

WJM said...

So ,if Mr Peabody has such a GOOD relationship with us,why then can he not remember the name of our Province.

Perhaps for the same reason that John Hickey kept referring to the non-existent company, "Newfoundland Hydro", tonight on VOCM.

Anonymous said...

Danny Williams thinks the province is called NewfoundlandLabrador.

Ussr said...

Thanks for the link stephen.By the sounds of this Patriot Mr Williams has it in his mind to keep the Holyrood plant going.

"The application contains two proposals for almost $400,000 of work at the Holyrood Generating Station"

"Significant work will also be carried out on Hydro’s isolated diesel plants along the Labrador coast including over $740,000 for the replacement of diesel units and related equipment in Norman Bay, Cartwright and Black Tickle."

My question here would be ,"WHY".
Why in the name of god are we spending this money for up-grading when they should be scraped.This is lack of vision for sure Patriot.

The Grid does need up-grading yes,but do just that.The Province only needs one back-up diseal station to keep going with all that power coming from the ChurchHill .What the heck is going on,I dont understand.

Anonymous said...

The plan says the Holyrood station will be shut down if lower churchill can be used as a replacement. Even it it is developed it would be at least 8 years before first power so the upgrades to Holyrood are probably just to clean it up and keep it going in the medium term. I wouldn't put too much into the money being spent as evidence that they plan to keep it running.

A better plan needs to be in place for Labrador though. If the transmission lines are going to be brought so close to certain communities why not run them into them? Why not look at wind or some other source instead of diesel for remote communities?

There is a big hole there.

Stephen said...

I agree. The whole energy plan is skimpy and nothing here was new or unexpected - it's is essentially rhetoric and a list of principles.

I was really hoping to see some concrete plans about the Lower Churchill and plans to use its electricity for industrial development. Everything in the Energy Plan focuses on North American energy needs, not the possibility for tertiary industries in NL. Also, it doesn't make any real mention of a possible connection to New Brunswick which, if we are to pursue export of electricity, I would have preferred. Avoiding Quebec and building infrastructure links between the Maritime provinces, in this case, would have been much more attractive.

Ussr said...

"Avoiding Quebec and building infrastructure links between the Maritime provinces, in this case, would have been much more attractive"

Stephen,I would totally agree here.Quebec has shown nothing but contempt for the province when it has come to the ChurchHill.

They must feel that they are entitled to that power and by rights they are,legally.But,in 32 years we get control of that resource back.Do they think that we are going to be Push-Overs yet again.Held captive by geography.

I was really hoping that the province would not hold it-self in such a position.Up-grades must be done to make the system compatible for export energy.We cannot limit ourselves to thinking that this is all we can do.We must make the resource so cheep that Indusrty will be knocking on our door to come here.And,if we act now and invest this money correctly ,we will have the power to do just that.

Lets not stop at generating 2,800 from this project.Lets look at the larger picture and see what we can do with wind farms off Labrador and around the Island.

Jobs.We have the potential to light up half the eastern sea-board of the United States.Lets look beyond the nay sayers and think big .

It has been shown to us that once we get Canada out of the picture,this Province will achieve the greatness that has so long escaped us.

Patriot said...

VOCM is reporting:

Combined Councils of Labrador to Meet With Government
September 14, 2007


The president of the Combined Councils of Labrador is looking forward to meetings with government concerning the province's new Energy Plan. Stanley Oliver told VOCM Night Line with Linda Swain the session will be held in the next week with senior government officials, and Hydro to discuss what the plan means for Labrador. The councils have expressed concern the framework doesn't address the needs for power on the north and south coasts of Labrador. Oliver is looking forward to getting some answers.

I have to say, I couldn't agree more. Labrador deserves far better than they've been getting from the provincial government.

As I've always said, Labrador has the same trouble getting recognized by the NL government as the province itself has with Ottawa.

Ussr said...

"As I've always said, Labrador has the same trouble getting recognized by the NL government as the province itself has with Ottawa."

And many us us would agree with that statement Pattriot,but how can we get ahead when we cant even provide a united front agaisnt a Governement that loves what it sees in our province now.A divided people.

And anyone who thinks differant should really learn to get out of the box and have a look in.I know for a fact that power from Labrador is a hot topic in Ontario.As a matter of fact it has been in many a newspaper how Ontario is going to use that power.I know I know.Dont shoot me yet.

People here feel that they are entitled to that power just as much as Labrador itself.
Because its Canada and Canada has its right to that clean crisp power befor anybody else.This is the attitude in Ontario.

I in no way feel that this is right and i hope that no one shoots this messenger.

Im just trying to show how central canada views this resource ,even if it is out-side thier province.They feel that just because its Labrador and Newfoundland that they should be feed power because "All those damb "Newfies" are taking our jobs in Ontario anyway,so why shouldnt they do something for Ontario".

Can you get over that attitude?

Patriot said...

Hi USSR:

I won't "shoot the messenger" and I do know that this is the attitude of many in places like Ontario. My response to this is if we leverage this energy to attract industry to the province (especially closest too it in Labrador) then there wouldn't be some many so called "Newfies" taking those jobs in Ontario.

Personally I don't see anything wrong with using some of the Lower Churchill power to get rid of the mess at Holyrood, but if that's going to happen the provincial governemnt should also:

A: connect that power to nearby communties where the power lines will only be a few KMs away.

B: Find a way to replace the diesel power generation in remote communties. (If running lines is too expensive then look at wind or tidal power, whatever works)

C: Partner with a major industrial giant like Alcan, Alcoa or others to use at least some portion of the power to attract industry in Labrador.

Unlike some folks in Labrador, I see us all as being the same people. I don't see this as Labrador's resource any more than I see the oil as Newfoundland's. These are all provincial resources that should benefit the entire province.

I know there will be benefits for all simply because increased provincial revenues translates into provincial service improvements and what not, the problem I have is that these folks are the ones who are directly adjacent to the power and with the new energy plan they don't seem to be getting any DIRECT benefit from it.

As well, often times when infrastucture and service budgets are drawn up Labrador doesn't always get what it needs. This is a typical political situation regardless of which party is in power (spend the money where the most votes are) but that doesn't make it right.

By the way, If Ontario wants the power they should be allowed to purchase any excess but if there is any way to do it, I don't believe we should have much of that.

Anonymous said...

It looks like at least some of the message is starting to get through. I guess the proof (if they really act or not) will come in the next few years, after the election.

Read on:

Natural Resources
September 14, 2007
Province Committed to Energy and Industrial Development in Labrador

Attracting energy intensive industrial development in Labrador is a priority for the Provincial Government. Through Newfoundland and Labrador Hydro (Hydro), the Provincial Government will work with interested developers to ensure that sufficient power is available on-time for economically-viable projects, said the Honourable Kathy Dunderdale, Minister of Natural Resources, in outlining the direction for development in Labrador as contained in the province’s Energy Plan, Focusing Our Future.

"We are fully committed to making electricity available to any company or business interested in setting up in Labrador," said Minister Dunderdale. "Transmission lines can cost hundreds of millions of dollars and we need to understand the size and timing of any additional demand so that we can plan, design and build any required facilities. This is sound energy planning for taxpayers and ratepayers."

The Provincial Government and Hydro are currently working with a number of potential developers interested in establishing industrial operations in Labrador to understand their needs. Hydro's legislated mandate is to deliver least cost, reliable power to its customers and Hydro has committed to having electricity service available in time to meet developers' needs.

"Labrador has key energy assets and the development of these assets will provide significant employment and business benefits for Labrador," the minister said. "New Labrador transmission infrastructure will be constructed as needed to support energy intensive industrial development. Increasing power demand in Labrador will grow the economy and further power development, including the Lower Churchill Project."

In the Energy Plan released Tuesday, the Provincial Government committed to building transmission lines to the north and south coasts of Labrador when it becomes more cost effective to do so than the current cost of diesel generation. As a regulated asset, new transmission infrastructure will be paid for by all interconnected ratepayers in Labrador. Currently, power generation in these communities is subsidized by over 70 per cent. In the Northern Strategic Plan, the Provincial Government provided an additional rebate to ensure that these residents pay the same rate for electricity for basic needs as other residents of Labrador. The rates these residents now pay for their lifeline block is lower than general service rates on the island. The Energy Plan also commits to reviewing commercial rates in conjunction with the Lower Churchill Project.

"The cost of running lines to the north and south coasts is between $375 million and $400 million to service 3,500 customers," said Minister Dunderdale. "This is over $100,000 per customer and building this infrastructure would impose a significant rate increase on these customers and all Labrador ratepayers. At this point, diesel-generated electricity is more cost effective for these customers."

The concept of tapping into the DC transmission link between Labrador and the island is technically challenging and, at approximately $300 million for transmission and a DC/AC conversion facility for the south coast, the cost is also greater than continuing to provide diesel-generated electricity to these communities.

Once the transmission link is constructed, Hydro will enter into a Power Purchase Agreement with the Lower Churchill Project for the purchase of power to offset thermal generation at the Holyrood Generating Station, which will assist in financing the project.

A key action of the Energy Plan is the reinvestment of Provincial Government revenues from non-renewable resources into the construction of renewable infrastructure, of which Labrador will principally benefit. The Provincial Government is committed to directing a portion of its oil and gas revenues to advance energy developments in Labrador.

"We are a single province with a single destiny. We have a vision for Newfoundland and Labrador that includes the principles of adjacency, meaning those closest to the resource will be the principle beneficiaries," said Minister Dunderdale. "We are committed to developing Labrador energy resources and infrastructure in a way that supports and attracts development and provides long-term and sustainable employment and economic benefits for the people of Labrador."

-30-

Media contact:
Tracy Barron
Director of Communications
Department of Natural Resources
709-729-5282, 690-8241
tracybarron@gov.nl.ca

2007 09 14 12:50 p.m.