An Open Letter to Premier Dunderdale and NALCOR’s Ed Martin

An Open Letter to Premier Dunderdale and NALCOR’s Ed Martin

Let me begin by saying that I am completely non-partisan. In fact I would go as far as to say that I find any political party or candidate who would politicize something as important to the public as development of the Lower Churchill utterly reprehensible.

I write this letter as a concerned citizen of Newfoundland and Labrador and for no other reason.

I’ve noticed that since the release of the Lower Churchill environmental assessment the response from official circles have been rife with adjectives such as “Shocked”, “Surprised” and “Disappointed”. I’m confident that after all the hard work having been put into this project these words likely reflect the honest reaction of those involved. In reality however the concerns of the public are not with the feelings of those involved in the project nor are those concerns being addressed through such personal commentary.

What people want are unvarnished facts and details in response to the questions raised by the panel and by the public at large.

In many ways communication is an art form and while government and NALCOR have already expended a great deal of effort and energy in responding to countless questions it’s clear that the answers provided have not been enough to satisfy the population.

In the end it is the public who will pay the cost of development through a combination of their taxes and power rates. They are also on the hook for the social and historical costs if the project is ultimately unsuccessful.

The stakes are extremely high and everyone in the province realizes this, not just the proponents of the project. That’s why, when questions are asked, those posing the queries expect and deserve clear, detailed and comprehensive answers. Responding to the general “gist” of a question or supplying the “broad strokes” isn’t going to alleviate concerns and may in fact amplify them. On this particular project the sharing of as much information as possible must be the order of the day.

Regardless of whether or not it may seem fair to those working on the project, the Lower Churchill is by its very nature tainted by the legacy of the Upper Churchill. They are inextricably bound to one another in the psyche of the population.

The people of Newfoundland and Labrador were led into that particular project by a government bent on a chosen direction and all of us have borne the cultural scars ever since. Make no mistake, this time the people of the province are demanding, and will continue to demand, answers. If those answers are considered inadequate then the project simply will not go ahead, regardless of what anyone says to the contrary.

It may be difficult for those directly involved to understand the broad level of concern being expressed by so many, especially with the quantity of information that has no doubt been gathered, analyzed and modeled internally, but remember that the public is not directly connected to the nuts and bolts of the project and as such require clarity, and perhaps even a little comforting, when it comes to many of the issues.

Those involved should always remember that it isn’t the job of government or NALCOR to sell this project to the public. It was exactly that sort of misguided approach which led to the ouster of the Liberal government in New Brunswick when it tried to market NB Power to Hydro-Quebec. The job at hand is to ensure that the people of the province have all the information necessary to make an informed decision about their collective future.

As an example, when concerns are raised about the viability of the project if Gull Island does not proceed on schedule, or at all, it isn’t good enough to simply say that Gull Island will proceed or that Muskrat Falls can stand on its own.

A more complete answer should include an explanation of the financials and rate projections involved in both scenarios and must identify a plan B for Gull Island, if one exists, should Quebec remain unwilling to allow access to its grid.

It doesn’t cut it when someone like Mr. Martin responds to questions about wheeling Gull Island power through Quebec by saying, "Quebec is bound by the regulatory body in the United States to provide the same open access they enjoy there to others who wish to enjoy it”.

With all due respect, it may not have been the intention but based on our past history with Hydro-Quebec I personally find that sort of response either totally naive or summarily dismissive.

When the Upper Churchill was developed Newfoundland and Labrador was denied access to the Quebec grid. The end result was one of the most lopsided contracts in history. Regulations may exist today requiring Hydro-Quebec to allow access but that same access was recently blocked for this very project. What is the likelihood that Quebec will suddenly decide to open its borders on schedule for the start of the Gull Island development and what if they don’t?

What if we still can’t access the Quebec grid when and if Gull Island is ready to proceed? Is there a backup plan to ensure that the Gull Island project can still be completed? If so, what is plan B and what are the financial implications for the province, NALCOR and rate payers?

If there isn’t a plan B what happens? Could we find ourselves with another Upper Churchill on our hands? Is it possible we might end up with Gull Island nearing completion and still waiting on a commitment from Quebec? If so might the outcome be the same as it was decades ago: bankruptcy or another lopsided agreement.

On the subject of whether or not this truly is the lowest cost solution for our province’s energy needs, again the panel raises some good questions the public deserves to have answered.

Why isn’t lower cost power from Gull Island being developed up front? If it was, would that result in lower rates for rate payers? If not, why not?

Why did the information provided to the review panel suggest that NALCOR simply looked at one side of the equation when it comes to future demand - finding new sources of energy - instead of also considering ways to reduce that demand?

If a cost effective means can be found to stabilize current demand or slow its growth through energy efficiency programs would that allow one of the other power options previously dismissed by NALCOR to satisfy our needs at a lower cost than Muskrat Falls?

Perhaps the analysis has already been done internally on these issues but that information was never put before the panel. If so then it should be made public now. If not then the analysis should be completed as the panel recommended.

One of the power source options noted by the panel is the Upper Churchill itself. NALCOR’s projections go out well past 2060 but appear to completely ignore power from the Upper Churchill. Some of that energy may be available now through recall and all of it is expected to be available in 2041, just over 20 years after the Lower Churchill’s planned completion. Yes there would be costs involved in linking the power to the island portion of the province but why was this, essentially free power, not identified as a potential source to meet future demand?

Perhaps consideration was indeed given to the Upper Churchill but dismissed for some reason. If so what was the reason and if it wasn’t considered why wasn’t it and shouldn’t it be?

Is there some reason we will not be able to access that power in 2041? If so, that’s something everybody absolutely, without question, deserves to know.

As you can see questions abound and with our history of power development in this province, no matter how outlandish any particular question may seem, it deserves a complete answer.

There may be legitimate responses to all of these questions and the many others being asked. I’m sure everyone hopes there are, but it simply isn’t good enough for government or NALCOR to provide cursory or limited responses and say that the project is proceeding regardless of what the panel or public has to say.

As Naive as Mr. Martin’s comments on Quebec registered with me I can’t help sensing a tone of arrogance in the Premier’s position that the project is going forward regardless. That may not have been the intended spirit of the words chosen but it is surely the impression left behind for me.

The public doesn’t simply have a right to ask questions but the historic obligation to demand clear and complete answers.

If additional reviews, beyond those already underway, are necessary then they should happen. Whatever it takes to give the public a comfort level with this development must be done before any project is given final approval.

This is not to say, as the opposition parties have suggested, that all efforts should immediately halt pending those answers.

Politics needs to be removed from the equation completely and I firmly believe any party that plays politics with this issue during the upcoming campaign will pay the ultimate price for taking such a callous approach.

I’m sure the public understands that there are likely hundreds of resources working full speed to gather information, analyze findings, develop project plans and answer thousands of questions. Stopping such a monumental effort isn’t like flipping a switch. Once it’s halted it may be very difficult if not impossible to get it moving forward again. I don’t believe that is what the public wants. As previously stated, I believe what we want are clear, detailed, comprehensive answers.

They say that those who forget the past are doomed to repeat it. It’s an adage Newfoundlanders and Labradorians take very seriously and with good reason. Thankfully, in this respect at least, the legacy of the Upper Churchill is still there to ensure that we remember all too clearly.

While the public as a whole should not condemn the Lower Churchill project out of hand we also shouldn’t let anyone ram the project through unless and until the taxpayers, rate payers and voters of the province - each and every one of us - are comfortable that it is indeed the right thing to do.

I truly believe that all of our elected officials and the head of our Crown Corporation, NALCOR, should expect no less from each of us and that they owe it to the people of Newfoundland and Labrador to show their respect for our concerns by responding fully to each and every one of them.

Vision - A Casualty of Drive by Politics

The most common definitions of “Vision” include:


1. The faculty of sight;
2. Intelligent foresight;
3. The manner in which one sees or conceives of something;
4. A mental image produced by the imagination.

That’s something every Newfoundlander and Labradorian would be within their rights to jot down, seal in an envelope (or place in an email) and send directly to every candidate running in October’s provincial election.

History tells us the world’s most respected leaders aren’t remembered for their ability to win office or hang onto power but for being visionaries and for their ability to engage the public in making their dream a reality.

Where are the visionaries in Newfoundland and Labrador today?

Talk to the average politician and you’ll discover most can’t see past the next poll, next election or next fiscal year. Vision, true vision, extends beyond those false parameters. It reaches far into the future, perhaps to the next generation, the generation after that, or even beyond.

Visionaries recognize the present for what it is, the future for what it can be and are capable of laying the building blocks that inspire others.

As a people why are we so easily accepting of announcements about “slightly lower” unemployment rates or achieving an “average” Canadian wage? Instead we ought to aspire to having the lowest unemployment and the highest wages in the Country.

It goes without saying that we won’t reach such lofty heights overnight, in fact we may never get there, but if we don’t aim for the target we’ll never come close to hitting it.

Take our natural resource, the province, regardless of which party is in power, has always developed those resources in exchange for the direct revenues (royalties / taxes) they produce and for the limited number of jobs extracting them creates. Why?

Why hasn’t government ensured that every ounce of benefit is squeezed from the resources around us and why haven’t our leaders, past and present, been able to understand that those resources are a diverse package of interrelated opportunities rather than a series of independent revenue streams?

Maximizing benefits doesn’t have to involve a heavy handed approach that might scare investment away and the benefits reaped don’t have to flow directly from selling the resource itself.

Legislation forcing industry into a position where profitability is unduly limited or which unfairly places social obligations on them isn’t the answer either. A far better approach is to create an environment where industry itself can see the economic advantages of increasing its presence in the province. This would require a government that understands how the different pieces of the puzzle are interconnected and can be leveraged.

As an example, based on public statements by NALCOR it would seem that rising oil prices will continue to drive up power rates until such time as Muskrat Falls energy is available. At that time rates will stabilize. They won’t fall mind you, but stabilize.

Based on this it appears higher rates charged (due to the cost of oil) will remain in effect even after the oil is no longer needed, ultimately providing additional revenues to NALCOR when Holyrood closes. After all, when those costly oil purchases are no longer necessary the revenue has to go somewhere.

Likely those hundreds of millions of dollars, along with earnings from selling power outside the province, will be used to repay the development costs of the project and provide a healthy return for NALCOR and the province.

This might seem reasonable enough from a traditional business perspective but NALCOR isn’t an independent business and the power they sell is directly linked to the local economy and to every individual and business in the province.

Newfoundland and Labrador, compared with other Canadian jurisdictions, is somewhere in the middle of the pack when it comes to power rates. According to NALCOR our province isn’t the only place rates are rising and after Muskrat is complete, even with the higher rates, we will continue to sit somewhere in the middle of that pack. This makes me wonder, why is that good enough?

Why are we willing to settle for being “average”?

As part of a longer term view, considering the size of the investment - and its associated risks - perhaps a more visionary approach to Churchill power should be considered.

There’s a difference between thinking inside the box and thinking outside it. In fact it’s been said visionaries don’t even recognize a box exists.

Might the province be better served by cutting power rates as much as possible once the expense of Holyrood oil disappears? This is not to say taxpayers should subsidize power rates, that NALCOR shouldn’t make a profit, or that the loans shouldn’t be repaid, the question is how high those profits need to be and what the plan is for paying down the debt.
We may have a unique opportunity here since NALCOR isn’t developing the project as a privately owned company or publicly traded corporation. As such it shouldn’t have the sole goal of maximizing profits. Its owners are the taxpayers of the province. Ultimately any corporation is responsible for achieving the long term objectives of its shareholders, in this case the citizens of Newfoundland and Labrador.

When it comes to the Lower Churchill, perhaps we should ask ourselves if our primary intent, beyond keeping the lights on, is to reduce debt quickly, increase profits for NALCOR and government, grow the economy and related employment or pursue some combination of the above.

Perhaps the answer is to eliminate the debt quickly and then drop power rates as low as possible while ensuring the future viability of the corporation. Perhaps not. Who knows, but if we examine all our options, including the eventual repatriation of the Upper Churchill , might we be able to focus our efforts on one day making Newfoundland and Labrador the lowest cost jurisdiction in Canada, hell why not in all of North America, for access to clean power?

If we could eventually reach that target what might it mean?

Clearly it would be a welcome reprieve for rate payers in the province and would go a long way toward easing the burden of the less fortunate among us, but what about the bigger picture?

Low rates would obviously reduce the cost of doing business here. If the costs were low enough that alone would increase the profitability of existing enterprises and improve their ability to expand, hire new employees and even increase wages.

With less focus placed on direct profit from our energy reserves and more on offering the lowest possible rates, major industrial players now content to harvest resources and ship them elsewhere for processing might find themselves able to do that processing here at a lower cost and for increased profit thus creating more employment and provincial tax revenue.

It’s often been said that our remote location and distance from world markets is a barrier to developing a manufacturing based economy. There may be some merit in that but with the Northwest Passage, the most sought after shipping route in the world, beginning to open up could our location at its Eastern gateway actually benefit to us in the future? When it does open up, if the infrastructure necessary to take full advantage of low cost renewable energy were put in place, including for the use of Upper Churchill power, what might it mean to the province 30 years from now?

Secondary processors who use our iron, copper, oil or other valuable resources to produce consumer goods around the world might eventually come to recognize the province as a unique location with abundant resources and cheaper power than they can find elsewhere. How many jobs would that create?

Perhaps stimulating industry and employment in this way would generate provincial revenues far beyond existing levels. This broadening of the provincial tax base might even enable a visionary government to lower personal and business taxes. It might result in us becoming one of the lowest cost places to live in Canada while ensuring we are even more attractive to business, guaranteeing the cycle of growth continues to expand.

In the long run such an approach has the potential to be far more lucrative for the people of the province and for government coffers than the status quo.

Picture a future where Newfoundland and Labrador is recognized as a strategically situated treasure trove of raw materials that has the lowest cost power in North America and perhaps even the lowest tax regime. A place with a diversified economy where well paying jobs are abundant and the provincial treasury is flush with cash.

Of course this might sound like a pipe dream and in reality the entire idea is nothing more than rambling on my part. I wouldn’t pretend to know if such a scenario is viable or not but at least it’s a concept, the germ of a direction, the seeds of a vision that extend beyond the next few months or years or even my own lifetime and certainly beyond the next election. In other words it’s far more than any of the parties are putting forward.

With an election on the way we should all question where the long term vision is for our province. What about the fishery or the forestry sector. Where do we want to see our health care system and our schools a generation or two from now and how do we plan to get there? All of these components are intertwined and need to be part of an overall vision.

We may have a small population in Newfoundland and Labrador but we are also blessed with a vast array of renewable and non-renewable resources and a population that I truly believe is willing to work for a brighter future. In fact I’d argue that any government unable to satisfy the needs of our small population, while surrounded by such vast wealth, doesn’t deserve to hold office.

At this point in our history what we need is a visionary leader bold enough to set aside political expediency and take the reins firmly in hand. Unfortunately the closest thing to vision we’ve seen from any of the political parties are promises likely to expire the morning after the polls close. Hardly inspirational.

Muskrat Falls - Perception Can Become It's Own Reality

The Muskrat Falls development has its share of supporters and detractors across Newfoundland and Labrador. At the moment the majority appears to fall into the first category but that could quickly change if the players involved aren’t more forthcoming soon.

I personally believe the project is a good one but that doesn’t mean I don’t have nagging doubts, thanks in large part to the limited amount of information publicly available. My knowledge deficet isn’t because of a lack interest either, not by a long shot. Since the initial announcement late last year I’ve been looking into this as much as humanly possible, but answers are hard to find. I can just imagine what the general public (those less inclined to dig for answers) are going through.

It could be, as the naysayers suggest, that the provincial government and NALCOR are hiding something. On the other hand it could simply be a case of extremely poor public relations on their part. Either way, the people of the province, who also happen to own the resources in question, remain at the mercy of political spin and partisan posturing and that’s never a good thing.

I sincerely hope poor communication is the cause of the current state of affairs, because that’s something that can be easily resolved. The longer things go without clearer answers being put forward the perception will grow that everything is not as rosy as some might say.

Government has said information is already out there and in fairness some is. Projections have been released showing that without Muskrat Fall our power rates will increase faster than with it. Last week it was also announced that the PUB would study the project to determine if it’s truly the lowest cost solution, but how reliable will that review be?

Will the review be based on NALCOR’s assumption that an expected increase in demand warrants development of some kind or will the review be free to challenge that basic premise?

There are documents available on the NALCOR web site showing a large increase in power demand in upcoming years. This, according to NALCOR, means either Muskrat Falls must move ahead or the refurbishment to Holyrood, in addition to development of smaller generation projects, will have to be undertaken. That’s all well and good, but where are the details behind the pretty charts?

Why is demand expected to rise by such a large amount in the next decade and beyond? NALCOR’s historical charts show demand has remained relatively stable for the past 30 years yet the projections show a sudden skyrocket in demand around 2015 and a continued upward trajectory for years afterward. Why is demand expected rise so dramatically? Beyond the Long Harbour project what could account for it? What is the basis of the projections and will the PUB’s terms of reference extend to validating them?

Questions about future demand were posed in a recent correspondence to Newfoundland & Labrador Hydro. Answers have yet to cross my desk but I’ve been informed by a contact person at the corporation that they will be getting back to me this week. It goes without saying I’ll keep readers posted on any new information put forward.

With the checkered past this province has had on major projects like Come By Chance, Sprung Greenhouse and of course the Upper Churchill, it’s not surprising the public wants to be fully assured of complete success this time out of the gate.

There’s no doubt our past is coloring our outlook but Newfoundlanders and Labradorians aren’t the only ones with questions. Concerns over the limited amount of public information are also being expressed in Nova Scotia.

On June 8th a panel discussion on the Lower Churchill project was held in Halifax. That panel, organized by the “National Roundtable on the Environment and Economy” included executives from Emera and NALCOR, Nova Scotia’s deputy minister of energy and academics from Dalhousie University. The public and media were not permitted to attend the closed door session or listen in on the discussion.

Brennan Vogel of the Halifax-based Ecology Action Centre was a participant on the panel and later said, “It’s really hard to accept at face value that this is the best option on the table. We need to see more clarity provided by government.”

Vogel said he believes the Nova Scotia government and Emera are set on the Lower Churchill option even though it will not be the lowest cost solution for rate payers in his province. The motive, he believes, is because it will be a more profitable solution for Emera itself.

“We know Nova Scotia has a monopoly electrical utility so, in the absence of competition to result in fairer prices for Nova Scotia ratepayers, we’re perhaps being left in the dark…as to what the best options on the table are for providing stable, secure, renewable electricity,” Vogel said.

When you take the concerns of some people in Newfoundland and Labrador in conjunction with those comments out of Nova Scotia it’s fair to say that public relations on this project are sorely lacking.

Back here in Newfoundland and Labrador, the lack of solid numbers in the public domain leaves a great deal of room for speculation and our collective past ensures that much of that speculation will be for the worse.

It’s a sure bet that most Newfoundlanders and Labradorians would love nothing more than to see the Lower Churchill become a wildly successful project. It’s also a good bet that a large majority are happy the project will not be dependent on Quebec, but the removal of Quebec from the equation is not enough to sell it to the people. An alternate route has been a dream of a lot of people for a very long time but it’s doubtful anyone would be satisfied with doing so if it means the entire project becomes a boondoggle.

As time goes by less and less people are willing to simply accept the official line that it’s the best option without clear evidence to back that statement up. For NALCOR and the provincial government to expect otherwise would require them to live in a fantasy world. If that is indeed the case let’s hope their fantasy doesn’t extend to the project itself.

Muskrat Falls - Cutting Through the Political Rhetoric

There’s been a lot of political rhetoric around development and distribution of power from Muskrat Falls since the project was announced late in 2010. No doubt that rhetoric, on all sides of the political aisle, will ratchet up as the October provincial election draws closer.

It’s unfortunate that the public, as voters, taxpayers and power consumers don’t yet have a clear picture of whether or not the project is the best approach for Newfoundland and Labrador.

The reason for that lack of clarity falls first and foremost on the shoulders of the communications personnel at NALCOR and within government, but there is plenty of blame for others to share as well.

The various political parties have been using this project as a wedge issue for their own political benefit rather than ensuring that it benefits the province’s people.

Meanwhile, the media has gleefully reported their rhetoric rather than doing the research needed to inform the people of the province, so much for investigative journalism.

It’s also unfortunate that most people are not engaged enough to dig into this on their own. By not doing some basic searches on the web, asking questions of NALCOR and Hydro management and demanding clear answers we also share in the blame for our own ignorance of the situation.

Of course most people simply don’t have the time or inclination to do that sort of leg work and in reality they shouldn’t have to do it. If communication was better at the source they wouldn’t have the need.

As a result we are left to sift through talking points from the most unreliable sources of information out there, politicians.

Like most of you I have a pretty full personal life and a job that keeps me quite busy. Time is precious but I’ve managed to do some limited digging regardless. After all it’s our future that’s at stake and the stakes are high.

A certain level of information is available publicly but it takes a bit of effort to find it and to separate the facts from the myths.

One source of data is the initial backgrounders and announcements issued when the Lower Churchill agreement was first announced. These are available on the provincial web site and at NALCOR online.

Other information is can be gleaned by reading through various regulatory and government submissions and documents, not necessarily related directly to the project, available on the NALCOR and Hydro web sites. Some of those documents predate the project announcement but provide a level of clarification for the reasons why Lower Churchill is on the agenda.

There is also some information on power rates, though understanding most of the numbers requires a Masters degree in accounting.

Regardless, I’ve determined a few things for myself that I’m more than willing to share.

First of all, based on official submissions by Hydro – pre Lower Churchill – it’s clear that the island portion of the province is approaching a wall when it comes to available power. By 2015 we will essentially reach our limit and by 2019 have a shortage of power to meet demand.

This is the reality that manifested itself in NALCOR examining various options for ensuring a stable energy supply, both to meet requirements in the near term and allow for future growth.

The two primary avenues examined in recent years were the interconnectivity of the Lower Churchill at Muskrat Falls and the ongoing use of Holyrood, in conjunction with development of a number of smaller island projects.

According to the documents, the latter alternative brings with it several concerns, which is likely why Muskrat Falls eventually became the preferred option.

On its own Holyrood will not have the capacity necessary to meet the needs of the island in a few short years and having been commissioned in the 1970’s it’s now nearing the end of its lifecycle.

If the Holyrood option were chosen NALCOR/Hydro would be required to install scrubbers to reduce toxic emissions, undertake major upgrades to the installation and to develop several smaller generation facilities (a combination of multiple hydro, thermal and wind stations) simply to meet user needs. Each of these requirements would take several years to complete.

Even with those steps taken the corporation would be leaving itself open to the whims of fluctuating fuel prices. The Holyrood plant currently burns approximately 18,000 barrels of oil per day during peak generation.

The corporation might also be subjected to additional costs if carbon emission limits are put in place by Ottawa.

Even thought the installation of new scrubbers would remove many toxins from the air they do not stop CO2 from being emitted. Holyrood emits more than 600,000 tons of CO2 each year, making it less than environmentally friendly.

If Ottawa were to setup a cap and trade system, as has been widely talked about (essentially putting a price on carbon emissions), the cost of purchasing carbon offsets for Holyrood would lead to additional expenses well beyond the refurbishment and the rising cost of oil. All of which would be a factor in future power rates for consumers.

These additional costs, which would be subject to the whims of the market are in addition to the cost of development for the other smaller projects necessary to meet island demand. With all of that taken into account, the documents I’ve read indicate that the “status quo” approach would only meet demand until about 2029, leave little room for growth and require even further development projects going forward.

These and other issues are likely a big part of the reason why the Muskrat Falls option was the direction decided upon.

The current government has publicly stated that the project will stabilize power rates and that it’s the lowest cost option available. Meanwhile the province’s opposition parties say it will more than double consumer rates and that other options should be examined, though they don’t specify what those other options might be.

As I’ve said before, it’s difficult to separate the facts from the fiction when it comes to this project.

I don’t have the answers but I hope what I’ve provided will at least spur others into digging a little deeper themselves, perhaps even finding information that supports or refutes what I’ve gathered myself.

If nothing else hopefully the information put forward, beyond the rhetoric, will convince the public not to place too much stock in the political positions being staked out by any of the parties heading to the polls in October.

In an effort to provide as much information as I can, below are some diagrams I’ve found on the NALCOR and Hydro sites identifying the current power rates in the province, projections for the cost to consumers under both the Muskrat and Holyrood options and a graph showing the rising cost of fuel at Holyrood over the past few years.

I hope it helps.

The first chart identifies the current island interconnected rate per kilowatt hour - 9.584 cents.

The second chart identifies NALCOR's comparative analysis of revenue requirements for Muskrat Falls vs. the Holyrood option. Note that this chart is depicted in Megawatts rather than Kilowatts but what it shows, according to NALCOR, is that in the 2016 - 2019 time frame both options will cost about the same but in the following years Muskrat Falls (the blue line) is a much less expensive option. Precisely what the rate per kilowatt hour will be to consumers is not identified but it's clear that this would also be affected going forward.

This final chart idenfies the cost per barrel of oil used at Holyrood over the past 10 years. This indicates a doubling in those costs over the period. No projections of oil costs going forward were available, nor were any assumptions about the cost of carbon emissions should regulations be put in place.

Has Harper sold Dunderdale down the Churchill River?

Did Kathy Dunderdale and the PC caucus of Newfoundland & Labrador shoot themselves in the collective foot during the last federal election campaign, or will Stephen Harper repay the favour given him by the Premier, if not the NL voters, and honour his committment to back the Lower Churchill project?

If the Dunderdale government plans to ride a federal loan guarantee for the Lower Churchill into the next election they’ll need to have it signed, sealed and delivered before voters go to the polls. That might prove difficult, if not impossible, to accomplish before the October ballot with news out of Ottawa today that the guarantee will not be included in next week’s federal budget.

During the federal campaign Kathy Dunderdale threw the entire weight of her caucus behind Conservative candidates, even going so far as to appear at a Harper rally in St. John’s where the PM announced his backing for a “loan guarantee or equivalent financing”. Now, with the federal budget slated to be delivered next week it’s been revealed that the guarantee won’t be included.

A source inside government has told the media that the PM is still behind the deal and will make an announcement once negotiations are completed, but is that good enough for voters? Will that statement alone carry Dunderdale through the next election or is the public in Newfoundland and Labrador far too suspect of Stephen Harper to accept his assurances?

If the recent federal election returns were any indication it would appear that the latter is true. That could be very bad news for the Dunderdale government.

With no loan guarantee in place she had better hope the legacy of the William’s government provides her with enough momentum to overcome what could prove to be a gaping hole in her election platform.

According to a government source, "It (the guarantee) will be provisioned for and accounted for going forward but (while it won't be in the budget) it doesn't have to wait until the next budget to go into effect."

Perhaps this is true and Harper simply wants to avoid the huge fuss with Quebec that would surely come from highlighting the agreement in the federal budget. If that’s true however, and the guarantee doesn't require parliamentary approval, why is it that during the election campaign he told voters that in order to ensure the loan guarantee (or equivalent financing) a majority Conservative government would have to be elected. Otherwise, he said, the opposition parties might side with Quebec and vote against it.

Liberal MP, Gerry Byrne, (no doubt as much to score political points as get at the facts) has raised the issue in recent days as well. According to Byrne, “They were the ones that said it needed parliamentary approval. Now they're suggesting it's an order in council done by cabinet that can approve the Lower Churchill loan guarantee. So they're either lying now or they lied during the election campaign. The bottom line is we were misled."

Hard to argue with that logic regardless of the source.

Whether political rhetoric or not, Byrne also said he believes the government has no standing authority to offer such a loan guarantee without parliamentary approval.

"I've got a formal question presented today to the parliamentary budget officer to confirm or refute that understanding." he went on.

I'm sure many newfoundlanders & Labradorians will be interested in the response provided to Mr. Byrne's question.

Although the provincial government has said in the past that a loan guarantee (or equivalent funding) is not essential to development of the Lower Churchill project, such a guarantee would save provincial taxpayers hundreds of millions in interest expenditures.

With initial work on the project now underway money is already flowing out the door. The provincial legislature is now on summer break until the October election and the Canadian Parliament, once the budget is passed, will also be taking its summer break. Under those circumstances the odds of finalizing any sort of agreement before the next provincial election is low at best.

It’s a difficult situation the Dunderdale government must surely be considering after hearing this news today.

As Gerry Byrne pointed out today, the absence of Muskrat Falls in the budget should raise alarms, especially as the federal government has signalled it will include other campaign spending promises in the budget

One of those expenditures is the more than $2 Billion dollars in compensation to Quebec for implementing the HST many years ago. A promise widely seen during the campaign as Harper's way of placating Quebec over his Lower Churchill promise, making it even more concerning that the promise to Newfoundland & Labrador will be excluded from the budget while the one to Quebec is there front and center.

Open Letter to Premier Dunderdale

Open Letter To: Premier Kathy Dunderdale
Premier of Newfoundland & Labrador

cc. Minister Shawn Skinner
Minister of Natural Resources

cc. Multiple media, MPs and concerned individuals

May 13, 2011

Premier Dunderdale:

In November of 2008 the provincial government, under then Premier Danny Williams, made a submission to the environmental joint review panel evaluating the Romaine Complex Hydroelectric project in Quebec.

At about that time I personally sent you an email, in your capacity as Minister of Natural Resources, asking about our province’s position on the project and on our government’s exclusion from the environmental assessment process. It was in response to my correspondence that you made me aware of the submission to the panel and, as I did at the time, I would like to take this opportunity to once again thank you for your direct and timely response.

I believe the submission, which encompassed many topics including environmental concerns, discrepancies in the maps provided to the panel among other issues was the appropriate direction to take at the time. I also believe the submission addressed many of the concerns a lot of Newfoundlanders and Labradorians have with the project.

2.5 years have passed since that submission and I’m sure many in the province are interested in what has happend since that time.

As I understand it, the environmental assessment process is now complete and work is advancing steadily on the Romaine project. I would like to know what the joint review panel’s responses were to the province’s 2008 submission.

Specifically I am interested in detailed information on the panel’s responses to all of the concerns expressed.

In addition I hope you can provide a clear picture of where we now stand with respect to retaining complete provincial control over the headwaters as outlined in the submission and copied here.

(Begin copy of pertinent section from original panel submission)

Finally, the Province wishes to take the opportunity to re-affirm its water rights in the portion of the Romaine River watershed on Newfoundland and Labrador lands. The Government of Newfoundland and Labrador and its Minister responsible for water resources, without compensation to the proponent, shall not be restricted to:

• use water of Romaine River watershed on, in, under, or flowing through or adjacent to the Newfoundland and Labrador – Québec boundary on Labrador lands for purposes related to management, research, protection and conservation of water resources, aquatic life and aquatic habitat;

• establish standards and measures for the protection of water resources on, in, under, or flowing through or adjacent to the Newfoundland and Labrador – Québec boundary on Labrador lands;

• use water or authorize the use of water on, in, under, or flowing through or adjacent to the Newfoundland and Labrador – Québec boundary on Labrador lands for the purpose of fighting fires;

• establish flood control measures, develop flood plain management strategies and designate flood risk zones with respect to water resources flowing on, in, through, under or adjacent to the Newfoundland and Labrador – Québec boundary on Labrador lands;

• carry out or authorize hydrologic data collection and hydrologic research with respect to water resources on, in, under, or flowing through or adjacent to the Newfoundland and Labrador – Québec boundary on Labrador lands; and

• use water or authorize the use of water on, in, under, or flowing through or adjacent to the Newfoundland and Labrador – Québec boundary on Labrador lands for any other beneficial purpose that is in the Government’s interest and the other residents of Labrador.
(End copy from original panel submission)

I trust that your office, or that of the Minister of Natural Resources, is able to provide copies of any documents issued by the review panel in reference to the province’s submission along with information on any actions the panel took on those concerns.

If no responses were forthcoming and no action was taken by the panel I would like to know what other steps the provincial government has taken or is now pursuing to ensure that our rights are protected in regard to this project and to our provincial border with Quebec.

I’m sure you will recall, though many Newfoundlanders and Labradorians may not, that in 1976 the government of Newfoundland and Labrador attempted to buy back 800,000 kilowatts of Churchill Falls power at a reasonable price for use (through sub-sea cable) on the island portion of the province.

In response to this request Hydro- Quebec demanded that we sell Quebec between 7,000 & 10,000 square miles of southern Labrador or, barring that, pay 10 times the amount the utility was paying our province for that same power. By all accounts, at the time, the provincial government refused both of these less than generous offers.

The reason Hydro-Quebec and the Quebec government so desperately wanted that territory is because headwaters are located in Labrador and without complete control of those waters development on the rivers could not move forward. It’s no doubt difficult to secure investment and financing, due to the uncontrollable risk, when you don’t control all the source of the water used to generate the power.

This has me wondering what might have changed since that time.

Why, in the opinion of your government, does Quebec have enough comfort with the future of those headwaters to proceed on downstream developments in 2011 when they did not do so in 1976? What guarantees must they believe they have, from Ottawa, the province or elsewhere, in order to invest billions if they cannot control the future of those waters?

I look forward to your timely response and once again I thank-you for your many past responses to my queries on several issues of importance to everyone in Newfoundland and Labrador.

Sincerely,

Myles Higgins

Election 2011 - Did principle trump pandering in Atlantic Canada?

“You can’t always get what you want, but if you try sometimes you just might find… you get what you need” – Rolling Stones

Perspectives change. Often those changes are quite dramatic.

A perfect example is the perspective of people in Newfoundland and Labrador who, like others across Canada, are parsing the structure of a vastly redefined post-election Parliament.

Before proceeding further I’d be remiss if I didn’t re-affirm my long standing and deeply held belief that adherence to principle is always far more important to the long term good than simply caving into external pressures or the temptation of seemingly self serving actions.

Principle should always trump personal gain, pandering and opportunism.

This is as true for individuals as it is for governments at any level.

When you make a promise you do everything in your power to keep it and when you believe you’re right you fight with everything you have to defend your position. End of sermon.

Those sentiments were clearly on display during the federal election as most Newfoundlanders and Labradorians once again refused to support Conservative party candidates. In fact, the only Harper candidate elected this time out was a newcomer to the political scene. One who barely eked out a win by a few hundred votes. By all accounts his victory came in spite of his party affiliation rather than because of it and was due to the stature of the man himself. Not exactly a ringing endorsement for the Harper government.

The actions taken by voters in the Province are something all Newfoundlanders and Labradorians should take pride in today. It once again proves, regardless of what certain individuals in parts of Canada might say, that the people in Newfoundland and Labrador are fiercely principled and willing to stand by those principles, no matter the short term pain.

With that clearly said, we now must live with the choices made by a broader Canadian electorate. The odd yet somehow poetic result is that this time around, standing by a principled position may have placed the Province in a far better position than anyone could have imagined.

At the outset of the campaign nobody in Canada would have predicted the near implosion of the Bloc, that the Conservatives would win such a solid majority or that the NDP, thanks largely to Quebec frenzy, would form the official opposition with more than 100 seats in Parliament. These are the realities of Canada today and they may actually work in Newfoundland and Labrador’s favor.

With ABC remaining a factor, the election of Labrador’s Peter Penashue as the Province's single Conservative MP presents interesting possibilities going forward. Perhaps just as important is Quebec’s version of ABC that played out during the campaign. These separate actions by two long time adversaries could in fact have resulted in the best of many possible outcomes that might have developed on voting day.

Make no mistake, the history of Federal/Provincial relations hasn’t changed. Stephen Harper turned his back on a promise to exclude non-renewable resource revenues from the equalization formula and essentially gutted the intent of the Atlantic Accord a few years back. Both actions led to a loss of billions for Newfoundland and Labrador. Harper also failed to move on his promise to make 5 Wing Goose Bay an integral cog in the Canadian military.

Those are indisputable realities, but there might, just might mind you, be a better chance of Harper’s latest election promises being kept than there has been in the past, even after the province’s voters refused to let him to buy votes with those promises.

On the issues of a loan guarantee (or equivalent funding) for the Lower Churchill and an increased role for 5 Wing Goose Bay nothing is guaranteed but the possibilities are far brighter today than they were a few short weeks ago. In fact they have a better chance of coming to fruition now than they would if this election had resulted in a minority Parliament for either party.

With the Bloc no longer a major force in Ottawa and a majority firmly in hand, Mr. Harper will face little if any opposition to his Churchill Falls promise. Any excuse not to honor that promise will be difficult to sell.

During the campaign both the Liberals and NDP made similar promises in spite of Quebec’s vocal opposition to the project. One would hope all parties will stand by their commitments but with the NDP now serving as a voice for Quebec and the Liberals looking to rebuild support there, either party could easily succumb to an urge to curry favor in Quebec at the expense of Newfoundland and Labrador.

In a minority Parliament, or if either of today’s opposition parties had formed government, that reality could have been devastating for the Province. This isn’t the case in the current configuration.

Allowing the Conservatives an opportunity to slip their oversized foot ever so slightly through the door has sent the clear message that voters most surely remember the broken promises but some are willing to offer one last chance at redemption. If Mr. Harper is to have any hope of growing his party’s fortunes in the province the onus is now squarely on his shoulders to accept the opportunity provided.

After multiple elections, any chance of widespread Conservative gains in Quebec is a long shot at best. Mr. Harper knows his party’s future, beyond the current term, depends largely on an ability to retain and grow support in other regions, including Newfoundland and Labrador.

Most of Canada, with the exception of Quebec, supports the development of the Lower Churchill thanks to a growing awareness of the mistreatment Newfoundland and Labrador has suffered at the hands of Hydro Quebec. In addition the entire Atlantic region stands to benefit greatly from the Lower Churchill project and, as the last bastion of Liberal support these days, Conservative strategists must be eyeing the area with a glint of lust in their eyes.

While an ABC hangover may continue to reveal itself from time to time as long as Stephen Harper is party leader, the Conservatives surely realize that strong support for the Lower Churchill will go far in building loyalties throughout the region and help drive a stake into the heart of a critically wounded Liberal party.

The Lower Churchill project isn’t the only issue that has a better chance of being advanced under the current federal configuration.

While Stephen Harper’s newly minted Labrador MP, Peter Penashue, is a strong advocate for that project he’s also solidly behind growing the role for the airbase at 5 Wing Goose Bay. How much influence Mr. Penashue can bring to Ottawa remains to be seen but as Newfoundland and Labrador’s lone representative on the Conservative bench he is most certainly up for consideration in the new cabinet.

His chances of gaining a cabinet position may be enhanced in light of Harper’s campaign message - in fact his message for the past 3 years - that the Province would be better served electing someone who can fill a seat at the cabinet table. Once again, the time has come for Mr. Harper to walk the walk.

Simply having the good fortune of being elected as a member of the top finishing party isn’t the only thing Mr. Penashue brings to the table. He also brings a world of experience thanks to his years as a respected native leader and pivotal role in the successful negotiation of Innu agreements on Voisey’s Bay and the Lower Churchill.

When you consider the combination of such a strong proponent for Labrador development, including 5 Wing Goose Bay, and Mr. Harper’s long stated position on protecting Arctic sovereignty, the possibilities become clearer. This may in fact be one last chance to ensure the survival of 5 Wing. Time will tell.

On May third many Newfoundlanders and Labradorians, like many Canadians, awoke to an election result very few expected. In direct opposition to the feelings of true blue Tories the first reaction of many was likely despair and disillusionment, but as they say, every cloud has a silver lining.

When life gives you lemons you make lemonade.

Issues remain that find the Harper government and the province of Newfoundland and Labrador miles apart. That hasn’t changed. Marine Atlantic and Fisheries management, among many others come to mind. Never the less, both the Lower Churchill and 5 Wing Goose Bay are two very important files for Newfoundland and Labrador.

After multiple broken promises, when Danny Williams first tapped into the sentiment of the electorate and pushed ahead with the ABC campaign Canadians wondered if he could deliver the Conservative goose egg he promised. He did, yet many believed the Province was only hurting itself as a result.

After sticking to their guns once again in 2011 the Province has proven, contrary to popular belief, that the electorate does indeed have a long memory. The people of Newfoundland and Labrador have provided a glimmer of opportunity for Mr. Harper to gain support in the Atlantic region at the same time offering one last gasp of life to the Liberal brand if he doesn't.

Today there isn't a politician across Canada, regardless of party stripe, who doubts for a second the Province's willingness to act on it's convictions going forward. At the end of the day that legacy may pay far bigger dividends than the previous 60 years of hat in hand politics ever did. If so ABC effect will far outweigh any short term lack of government representation the Province has experienced over the past few years.

Just as Mr. Harper forced his way into a majority government in large part due to solidly reading the possibility of wide spread Liberal/NDP vote splitting in Ontario, Newfoundland and Labrador may have finally turned the corner on being bought off with crumbs and has managed navigate its way into the best of many possible election outcomes.

As election 2011 heated up, the parties, candidates and leaders pandered to anyone that they believed might help them win. The best part of the entire spectacle is that the people of Newfoundland and Labrador awoke to a new and potentially brighter reality without sacrificing their principles one iota in the process.

The Lower Churchill - A tale of Two Agreements

Development of the Lower Churchill hydro project is top of mind in Newfoundland and Labrador these days. Thanks to a simple loan guarantee promised by the three major federal parties, not to mention Quebec’s near apoplexy over what amounts to one of many campaign promises that may never be fulfilled.

With a Provincial election slated for October former Premier, Roger Grimes, has also re-entered the fray by re- asserting that a deal he negotiated with Hydro Quebec several years ago was far better than the one his successor, Danny Williams, produced.

As the saying goes, the devil is in the details. Unfortunately details of both agreements sorely lacking leaving many to scratch their heads in confusion.

The current agreement, which is the subject of all those wails of anguish emanating from Quebec, is the Danny Williams edition. It would see Newfoundland and Labrador partner with Nova Scotia on an 80/20 cost shared basis to develop the 800 megawatt Muskrat Falls.

20% of the power would flow to Nova Scotia for the life of a 35 year agreement. Of the remaining 80% just over 300 megawatts would be used inside the Province with the remaining 300 or so sold on the open market. All revenues from those sales would accrue to Newfoundland and Labrador.

At the end of the agreement, the assets, including the Nova Scotia allotment, would revert back to Newfoundland and Labrador to do with as they wish.

It sounds like a reasonable arrangement but there are some, primarily in the Province’s opposition ranks, who question why power rates in Newfoundland and Labrador will be higher than those in Nova Scotia after the development comes online.

There may be some political meat on those bones, but in reality consumer power rates are determined by the utilities and regulators inside each Province and are dictated by many factors that go far beyond a specific project and its limited power output.

It may be an over simplification but essentially the agreement boils down to a simple narrative: Each Province pays a percentage of the development costs and shares a proportionate amount of the power for 35 years. At the end of the agreement the assets belong to Newfoundland and Labrador.

The Roger Grimes plan on the other hand is far less open to summarization, at least not with anything even remotely resembling a simple narrative.

According to Mr. Grimes, he would have developed the larger 2200 megawatt Gull Island site.

That deal would have seen the province borrow the development funding from Hydro Quebec in return for Quebec gaining sole access to the power source, minus Newfoundland and Labrador’s requirement for 300 megawatts or so, under a 30 year agreement.

For the life of the agreement Newfoundland and Labrador would be guaranteed $100 million per year in revenues. At the end the Province would stand to make $800 million each year on the power.

Some this might consider this reasonable, but what do the numbers, as great as they sound, really mean unless put into some sort of context.

Unfortunately context has not been forthcoming from Mr. Grimes. What results is a knowledge vacuum leading to wide spread speculation, not all of it pretty.

Putting aside operating expenses and using a simple approach for comparison, it isn’t difficult to get a picture of the scale of revenues Gull Island represents.
It’s known that Gull Island has a generating capacity of approximately 30% that of the existing Upper Churchill power station. By extension we can assume that gross revenue from the project would be in the order of 30% as well.

Since it’s been said that Hydro Quebec reaps about $1 Billion a year from the Upper Churchill while Newfoundland and Labrador (the owners) receive $100 million for a total of $1.1 Billion a year, at 30% of the size, Gull Island could be expected to generate about $330 million using today’s rates.

Using these numbers, if Newfoundland and Labrador is to receive $100 million a year it means Hydro Quebec would be the recipient of $230 million. Over the 30 year life of the agreement Hydro Quebec would receive only $6.9 Billion in return for financing an expected $6 to $7 Billion dollar project. Newfoundland and Labrador, over the same period would see $3.5 Billion.

Clearly this cannot be the case as rates will rise but the comparisons are valid between both projects.

Many in Newfoundland and Labrador may despise Hydro Quebec, with good reason, but love them or hate them nobody is likely to portray Quebec’s crown corporation as a charitable organization.

They are clearly not in the business losing money, or even investing simply to break even, so obviously Mr. Grimes’ estimates are based on rates far higher than exist today. The question then becomes how much higher might those rates go?

Clearly former Premier Grimes must, by the very nature of his assertions, have estimated that market rates would climb at least 130% over that 30 year period. He couldn’t have said Newfoundland and Labrador revenues in the end would be $800 million a year otherwise. It’s the only way his assertions hold water, well almost, but we’ll get to the other possibility later.

Remember, Gull Island is only 30% the scale of the Upper Churchill but to be worth the $800 million a year in revenues put forward it would have to be 70% the size. Since the river isn’t growing, to get from 30% to 70% only a sharp rise in market rates, at least 130%, would have to take place.

It may sound like a huge increase in rates but actually it’s rather conservative, less than 5% per year on average over the life of the agreement, even lower factoring in compounding affects over time.

This begs the question: If rates rise, even by this conservative amount, how much would Hydro Quebec actually stand to profit beyond their initial investment and a reasonable rate of return?

I’m betting most Newfoundlanders and Labradorians would love to know. Keep in mind that Hydro Quebec has clearly learned from the original Upper Churchill project just how profitable it can be when power prices rise dramatically while purchasing costs remain fixed, in the case of Mr. Grimes’ plan, fixed at $100 million per year for the life of the agreement regardless of market value.

Rising power rates could potentially (and would likely) see Hydro Quebec make far more from its loan to Newfoundland and Labrador than it would at standard borrowing rates. In fact it would likely be a great deal more than the Province would pay in interest by simply borrowing from a more traditional source.

Guesstimating what market rates will be in 6 months is difficult. Speculating with any kind of accuracy what they’ll be in 30 years is impossible. Only two things are certain. Rates will increase and Hydro Quebec wouldn’t guarantee a dollar figure like that without hedging their bets and making sure they get a handsome profit. It wouldn’t make any business sense for them to do otherwise.

In reality nobody knows just how high those rates might rise or how much Hydro Quebec might gain from such a deal but I’m sure it’s something Newfoundlanders and Labradorians would love to know.

Add to this the possibility that Hydro Quebec, under such an agreement, would be the sole creditor on the project. Given the right conditions this would mean they could take possession of the entire asset.

It isn’t hard to understand why the Grimes’ position might be so unnerving to people in the Province.

Of course all of this is all pure speculation based on the limited amount of information provided in those far too rosy snippets put forward by the former Liberal Premier.

For example, Mr. Grimes’ $800 million a year revenue figure (post loan agreement) might not have been based on Newfoundland and Labrador selling its power into the open market at all. He might have been suggesting that Hydro Quebec would continue to purchase the power and simply pay that flat amount as a fixed price to the Province while rates continue to rise and Hydro Quebec’s profits continue to grow exponentially.

Whether or not a fixed price agreement is what Mr. Grimes was trying to sell is a point that certainly requires clarification.

If the Upper Churchill contract taught Hydro Quebec anything it’s that Newfoundland and Labrador might indeed elect a government that would foolishly sign a potentially disastrous fixed price agreement.

That decade’s old contract has also left the people of Newfoundland and Labrador hoping with all their hearts never to elect such a government again.

We can only hope the lessons of the Upper Churchill were not completely missed by former Premier Roger Grimes and others inside the Liberal party of Newfoundland and Labrador.

While the jury is still out on both the Grimes and Williams approaches on the surface the current agreement brings to mind the adage.

“you get what you pay for”.

Mr. Grime’s approach on the other hand, whether rightly or wrongly, reminds me of a far different adage.

“Fool me once shame on you, fool me twice shame on me.”

Better a Broken Promise than None at All

Mark Twain once said, “Better a broken promise than none at all.”

I wonder about his philosophy.

With a federal election again sullying the picturesque landscape of Newfoundland & Labrador those promises are flying around faster than a poorly discarded grocery bag in a force 5 hurricane.

After decades of living under the thumb of Hydro Quebec (thanks to the now infamous Upper Churchill Power contract) and after being denied access on Quebec’s grid in an effort to market Lower Churchill power, Canada’s political Czars have finally seen fit to “promise” Newfoundland & Labrador a loan guarantee for development of a portion of the Lower Churchill river in partnership with Nova Scotia.

Or have they?

Let me start by apologizing for the length of the following but as much as the various political machines would like everyone to believe this is a simple matter, it most assuredly isn’t, thus the need to use far more than the 50 words or less the leaders of the parties are so expert at casting out.

To begin, just what have Mr. Ignatieff and Mr. Harper actually promised?

After piecing together various comments from both men, their statements differ depending on where they’re campaigning and in which official language being used, here’s the result.

Michael Ignatieff likes the idea of co-operation between provinces and regions but… since he hasn’t seen all the details he’s only willing to say he stands behind the project and would likely support a loan guarantee.

This may be seen by devout Liberals as a promise but it’s a little too ambiguous to truly pass the smell test.

Speaking of undesirable odors, Mr. Ignatieff also said he would like to see the entire Lower Churchill project developed in future, not just the currently planned Muskrat Falls section. His belief is that other provinces, he specifically identified Quebec, should play a part in developing the remaining, and much more valuable, Gull Island portion of the river.

On this point I smell something very fishy indeed and not at all in Newfoundland & Labrador’s favor.

The question then becomes: After the election, should he win, do Michael Ignatieff’s words indicate that he might try to tie a possible loan guarantee to some form of agreement with Quebec on development of the Gull Island generating station?

After living with the fallout of the existing Upper Churchill contract nearly my entire life (with thirty years to go if I live well into my seventies) I have to wonder about statements like that. Remember it was Ottawa’s refusal to defend the Constitutional right of provinces to access markets that played such a big part in the existence of that one sided contract in the first place.

I shudder consider a scenario where Newfoundland and Labrador is locked into an arrangement that only permits hydro development on terms agreeable to Hydro Quebec and the Quebec government.

As for Mr. Harper, he’s said he’ll provide a loan guarantee, or equivalent funding, as long as the development meets certain criteria.

If (and only if) the project meets a test for financial feasibility, regional development value and greenhouse gas reductions will a loan guarantee be put forward.

On the surface those criterion sound perfectly reasonable but what exactly are the measurements of each and what constitutes a pass or a fail?

These non-specific criteria, though mana from Heaven to Conservative followers, are in fact an off ramp a two year old could drive an eighteen wheeler down.

Repeatedly when speaking about his “promise” Mr. Harper has also crowed about how much the project will mean for regional co-operation and for reducing Canada’s greenhouse gas emissions. He’s even spoken of the virtues of power produced in Newfoundland and Labrador serving as a replacement for dirty power generated in Nova Scotia and New Brunswick. I don’t disagree with any of this but I’m quite struck and very concerned by something he has, almost intentionally it seems, not said.

Not once has Mr. Harper made any mention of Newfoundland & Labrador’s intention to sell excess power into the lucrative U.S. market.

The ability to reach those markets is what Quebec has denied to Newfoundland and Labrador for generations and it’s exactly what every politician in Quebec is railing against ever since Mr. Harper’s “promise” hit the news wires.

Could it be that the Harper Conservatives plan to use, as part of his mysterious approval criteria, the caveat that power generated by the Lower Churchill project, with federal assistance, can only be used to benefit Canada as a whole (read: only sold and used within Canada)?

Such a move would, of course, destroy Newfoundland and Labrador’s energy and financial aspirations and would guarantee that any power not purchased in the Atlantic region would inevitably flow to the end of the line, so to speak. Not into the U.S. at all, but into Quebec.

In such a scenario, any energy not required by the region and locked out of the U.S. market would be virtually worthless to everyone, with the exception of Quebec. A move like this would allow Hydro Quebec to scoop that power up at fire sale prices and re-sell it, inside Quebec boundaries of course, thus freeing up more of Hydro Quebec’s own power for sale elsewhere at a staggering profit.

There is no doubt any conditions of this sort would mean the law of supply and demand will benefit Quebec alone, certainly not Newfoundland & Labrador.

Do such scenarios sound a bit too dastardly for Michael Ignatieff or even for Stephen Harper to consider? Perhaps, but a similar approach isn’t without precedent.

A number of years back Ottawa pulled the same stunt when they sold the then bankrupt Come by Chance oil refinery, also situated in Newfoundland & Labrador. The people of the Province wanted the refinery back online and access to the jobs that would come with the sale. Ever the fair bunch that they are the feds agreed to a sale under the condition that beyond what oil would be produced for use in Newfoundland and Labrador, not one single solitary barrel would ever, ever, be sold inside Canada’s border. It never has and never can be.

At that time it was the Irving family screaming and being placated by Ottawa. What’s to stop Hydro Quebec from doing it this time around?

Adding to the mass confusion around these so called “promises” are statements made by characters other than the federal candidates themselves.

Bloc leader, Gilles Duceppe, has called these “promises” a slap in the face for Quebec and said Ottawa is using Quebec tax dollars to help Newfoundland and Labrador unfairly compete with Hydro Quebec.

Quebec Premier, Jean Charest, has said that it isn’t right for Ottawa to subsidize power rates in Newfoundland and Labrador since Ottawa never helped Quebec develop its power grid.

Ontario Premier, Dalton McGuinty, is screaming blue murder that Ontario tax dollars are being used to support Newfoundland and Labrador. As a result, he says, Ontario wants support from the feds for its projects, the price of which McGuinty will, “…determine later”.

As they say, never let the truth get in the way of a good lie.

Suppose for a moment that which ever party forms the next government actually keeps their promise to Newfoundland & Labrador, without locking the Province into a catastrophic agreement, what would that actually mean?

It means that regardless of what Mr. Duceppe, Charest or McGuinty say, a loan guarantee doesn’t actually require money from any federal taxpayers, no matter where they live. It's like a co-signature on a loan, nothing more.

Consider as well that while crying about subsidization more than 70% of the profits of Hydro Quebec (a provincial corporation) are a direct result of locked in 1960’s prices for energy Quebec resells at a monumental profit thanks to the afore mentioned Upper Churchill contract.

Even developed at the kind of lower interest rates a loan guarantee would bring Newfoundland and Labrador's Lower Churchill project could never come anywhere close to producing power as cheaply as Quebec is getting power from the Upper Churchill, so who is subsidizing whom?

Never mind as well that Quebec’s & Ontario’s grids are fully inside their respective Provinces while the proposed transmission system for the Lower Churchill would cross provincial boundaries and travel under the ocean, which is within federal jurisdiction. Ottawa should play a role.

Let’s also ignore the fact that with the borrowing power of both Ontario and Quebec, at least in the past, has been similar to that of the Federal government meaning loan guarantees of any kind would have had little if any benefit to either Province.


Add it all up and it’s one heck of a situation isn’t it?

So far Newfoundland and Labrador has received little more than weak election promises, no contract has been drafted and no passing or failing grades have been given to the project by Ottawa, yet look at the fuss.

If, even after all the concerns I’ve expressed so far, these promises are actually fulfilled in the end, Newfoundland and Labrador will only receive a loan guarantee which actually costs taxpayers nothing, zip, zero.

Well…

It’s here that I have to also admit to being guilty of not letting the truth get in the way of a good lie since I’m willing to wager my substantial penny collection that these “promises” will actually cost taxpayers a great deal, though they shouldn’t.

Just days after the “promises” were made, in order to placate the complainers, agreements have been made on the $2.2 billion dollars (of real taxpayer money) Quebec wants for introducing the HST decades ago.

It’s also been reported that Ottawa will help Quebec with building a new bridge. It’s not yet clear if this will be in the form of a loan guarantee or actual tax dollars but coincidentally the bridge project is valued at almost exactly the same $6 billion dollars or so the Lower Churchill project is expected to come in at.

I can’t wait to see what kind of goodies the Ontario government will milk the situation for over the coming weeks, especially after Mr. McGuinty’s statement that he’ll determine the value of what he wants later.

As I said at the start of this lengthy commentary, nothing is as simple as the political parties would have us believe.

In the end Newfoundland and Labrador may actually end up with nothing from the federal government, not even a simple signature, or perhaps worse, find itself locked into an agreement that destroys its financial future. Either way, you can hang your hat on the fact that Ontario and Quebec will surely benefit from the carrot now being dangled in front of voters in the Province.

As McGuinty, Charest and Duceppe have said in the past few days, this promise will cost a great deal of taxpayer dollars, but they failed to mention that Ontario and Quebec are the provinces that will receive those dollars, not Newfoundland and Labrador.

Based on the numbers being bandied about, by the time this election is over what should have been a free promise to provide a free loan guarantee for the Lower Churchill project will assuredly end up costing taxpayers far more than the entire Lower Churchill price tag itself, with not one penny going to the proponents of the project.

So, was Mark Twain correct when he said, “Better a broken promise than none at all.”?

I’m not convinced, but it’s pretty clear Mr. Twain didn’t spend much time in Canada.

How much does a Quebec stadium cost to build these days anway by the way? Hmmmmmm....

What Kind of Shell Game is Stephen Harper Playing?

What kind of shell game is Stephen Harper playing and why are the political elite in Newfoundland and Labrador willingly stepping up to be conned once again?

During the 2006 federal election Stephen Harper promised – in writing – that if elected his party would exclude revenues from non-renewable resources when calculating equalization payments to the Provinces of Canada. The logic being that since those revenues are finite they should be used to allow Provinces to diversify, pay down debt and grow their economies in preparation for the day when the resources run out. They should not be considered on the same footing as other types of revenue.

It was that commitment which paved the way for several Conservative MPs to be elected in Newfoundland and Labrador in 2006, including the now locally infamous Fabian Manning, who would later stand next to Stephen Harper in the House of Commons and laugh, clap and cheer (literally) as Mr. Harper ridiculed Newfoundland and Labrador over the issue claiming the Province wanted to “Have its cake and eat it to…”.

Even after signing a letter to the Provincial government of Newfoundland and Labrador to the effect, once elected, Mr. Harper walked away from his commitment.

So much for election promises, even ones in writing with a clear and distinct signature (sure looks like Stephen Harper’s to me).

Fast forward to the 2008 election and, thanks to the broken promise, the Province rallied behind Premier Danny Williams, leaving nothing but scorched earth at the feet of every Conservative MP who dared to stand with Stephen Harper. Not a single Conservative was sent to Ottawa, except that is for Fabian Manning who, after losing his election bid, was rewarded with a Senate Appointment (another broken promise by Harper who said he would not appoint senators). One can only surmise Mr. Manning’s appointment was Harper’s way of thanking Manning for his very public betrayal of constituents and his Province.

During that 2008 campaign every elected member of the Newfoundland and Labrador Legislature participated in the ABC (Anyone But Conservative) campaign that drove the Tories out, including all members of the local PC party. Some even campaigned along side Federal Liberal hopefuls, not the least of which was Newfoundland and Labrador’s new Premier, Kathy Dunderdale.

After the broken promises and public ridiculing that flowed directly from Mr. Harper’s commitment on non-renewable resource revenues, the 2010 election campaign has led to a resurgence in Newfoundland and Labrador, not of local politicians willing to stand up and fight, as was seen in 2008, but of the sort of pre-Danny Williams politicians the Province has been accustomed to for generations. The self serving spineless kind.

No worries about broken promises this time around, no siree. Now they all say "...this time is different".

This time Mr. Harper has said he’ll back a loan guarantee for the Lower Churchill hydro project. We don't have a signed agreement and never mind that a few hours before the big announcement on Thursday Mr. Harper told a crowd in Halifax that there was still a lot of details to be worked out and nothing was final, "...this time will be different".

Never the less, Danny Williams is barely out the door and suddenly we find Premier Dunderdale (remember her, she’s the one who walked the campaign trail at the side of a Liberal MP in 2008) is crowing about how great this deal will be for Newfoundland and Labrador.

Fabian Manning (yes, he’s back) has left the senate and is running in his old riding again. In fact former provincial politicians, former Williams' cabinet members no less, are tripping over each other in a scramble to get to the Harper trough in time for feeding.

They’re coming out of the woodwork, but for what?

Do they really believe that Stephen Harper will keep his promise, even after Quebec has publicly said, time and time again, that they do not want Ottawa to help with the development of the Lower Churchill Project?

Just this week Gilles Duceppe called it a slap in the face to Quebec.

I can picture what the next few months will bring, it won’t be only Fabian Manning standing in the House to cheer on Mr. Harper as he belittles NL over this latest commitment, it’ll be all the Conservative MPs the people of Newfoundland and Labrador might be foolish enough to send to Ottawa.

Here we are, barely a week into the 2010 election and, with Williams now out of the picture, the political hacks from Newfoundland and Labrador are once again showing their true colors, looking out for number one.

It’s too bad they can’t show a little intelligence and moral fibre. It might not serve their greed and avarice but it's something that might serve the Province far better.

At this point one can only hope the voters of Newfoundland and Labrador, if not the politicians, are willing to stand by their principles.

Quebe's Shameful Power Play - National Post

From the National Post
The Bloc Quebecois are the W.C. Fields of politics -- they never vote for anything, they always vote against. Paule Bruelle, a Bloc MP from Trois Rivieres, provided the latest example of her party's ability to drain any room of positive energy by calling on the federal government to turn down Newfoundland and Labrador's application for $375-million in federal infrastructure funding -- not on the grounds that it may be a bad investment but because it would provide competition for Hydro-Quebec.

Newfoundland and Labrador, through its energy subsidiary Nalcor, and Nova Scotia's energy giant, Emera, have sought $375-milion in federal funding from the government's Private-Public Partnerships Canada infrastructure fund to help build a transmission link between a new generating plant at Lower Churchill in Labrador and Nova Scotia. The logical route would be through Quebec but Hydro-Quebec has already closed down that option by complaining it needs all its existing transmission capacity and the province's regulator has agreed.

Not only does the Bloc not want Newfoundland and Labrador's new green hydro power to go through Quebec, it wants to stop it going around Quebec too.

The worrying thing is that Jean Charest's Liberal government agrees with the separatists, claiming that federal funding would create an unfair trade advantage and result in a government subsidy for each kilowatt of electricity transported to Nova Scotia.

Only a Quebec government could make such a statement without feeling a sense of shame. The province likes to tout its green-energy credentials, but its environmental record is almost entirely dependent on the notoriously one-sided 72-year deal to buy Newfoundland and Labrador's hydro power, generated by the Upper Churchill Falls, for a fraction of its market price.

It seems hard to believe but the 1969 deal, which has seen Quebec make $20-billion to Newfoundland and Labrador's $1-billion, is about to get worse for residents of the Rock.

In round numbers, Quebec currently pays $2.50 per megawatt hour and then sells on the power at the market price of between $40-60 mw/h. Bad enough you might think, but that amount is set to fall to $2 per megawatt hour from 2016 for the remaining 23 years of the deal's duration. Wars have started over less.

This is the background to the screaming match that is brewing between Mr. Charest and Newfoundland and Labrador's Danny Williams. Mr. Williams is appealing the Upper Churchill deal on the grounds that there has been such a fundamental change in market conditions because of open access to the United States that there has been a breach of good faith.

The case is likely to be mired in the Quebec court system for years.

Undeterred, Nalcor has struck a deal with Emera that will see a new $2.9-billion generating plant at Muskrat Falls, linked by a new $2.1-billion transmission line to the Rock and then connected to Nova Scotia by the $1.2-billion subsea link. Newfoundland will keep 40% of the power generated, Nova Scotia will take 20%, leaving the remainder for sale to markets in the northern United States, a market where Hydro-Quebec is already strong. Muskrat Falls will leave Newfoundland and Labrador 100% emission free.

Ed Martin, Nalcor's chief executive, was in Ottawa Tuesday, trying to drum up support from the federal government. He said the deal will remove two to three megatonnes of carbon from Canada's total emissions and create about 6,500 jobs a year during the seven-year construction period. "It's a great investment opportunity for Canada and I don't want to leave them out," he said in an interview.

Whether or not the numbers add up is for the federal Finance department to decide. Ottawa's 8% stake in the Hibernia project that Nalcor has already bid upon adds the possibility of a side deal being added into the equation.

But what is clear is that the federal government should ignore bleating from the Bloc and the Quebec government about unfair trade practices, experts though they both may be on the subject.

The decision should be made on what is in the national interest -- something over which Mr. Charest, far less the Bloc, loses any sleep. If this federation is to flourish, Ottawa needs to speak for Canada.

By John Ivison

Deal Inked on Lower Churchill Development

After decades of waiting and wondering the people of Newfoundland and Labrador learned today that the Provincial government has inked an agreement with Nova Scotia for development of a portion of the Lower Churchill Falls hydro project.

The agreement was announced at a press conference today attended by representatives of NALCOR (Newfoundland and Labrador’s energy company), Emera (owner of Nova Scotia Power) and the Premiers of Newfoundland & Labrador and Nova Scotia, Danny Williams and Darrell Dexter.

At this point all that is publicly known is that both NALCOR and Emera will partner in the development which will see 800 megawatts of power produced from the Muskrat Falls section of the Lower Churchill. The Larger Gull Island generating station which had been a part of the original development plan for the river will not be developed at this time and no timetable for its development was given.

NALCOR will build a generating facilities at Muskrat Falls (Cost 2.9 Billion). This facility will be fully financed and owned by Newfoundland and Labrador.

Emera, a publicly traded company, and NALCOR will jointly develop the transmission route to wheel the power from Labrador, through Newfoundland and on to Nova Scotia.

The subsea link between Labrador and Newfoundland will be built as a joint venture 71 per cent owned by NALCOR (cost 2.1 Billion) and 29 per cent owned by Emera (Cost = 600 million). Emera has agreed to finance 20% of the ongoing maintenance costs for the life of the agreement.

The subsea link, also known as the Maritime route, between Newfoundland and Nova Scotia will be built and wholly owned by Emera. (Cost 1.2 Billion)

It would seem there are still details to be determined relating to the Maritime link itself as officials with Emera have said that they are still negotiating agreements with NALCOR to build the subsea transmission link between the two provinces in return for access to 20 per cent of the energy from Muskrat Falls for a period of 35 years.

At the end of the 35 year contract the undersea transmission line will revert to Newfoundland and Labrador ownership for the sum of 1 dollar.

Investments by all parties into the project total an estimated $6.2 billion.

Click here to view Fact Sheets (NALCOR and NL Govt.)

Although both Provinces have asked the federal government for a loan guarantee and funding assistance to develop the sub sea link they announced today that they will move forward even if funding itself is not provided.

The entire development is still subject to regulatory approval in both provinces as well as to the approval of the boards of directors of NALCOR and Emera. In addition a native land claims treaty in Labrador must be ratified by Ottawa before the project can proceed.

Based on past history and the political implications of any Churchill Falls power contract, one might also expect that the voters of Newfoundland and Labrador will also have their say in the future of this deal.

Construction is expected to begin in 2013 with first power transmission by 2017

Based on what is known so far there are still many outstanding questions the people of Newfoundland and Labrador will be asking in the coming days.

The answers or lack of them is likely to have serious implications, either positive or negative, for the current Provincial government in the next election, scheduled for less than a year from now. Far more importantly they will have a far reaching impact on every individual in the Province for generations into the future.

Some of those questions include:

1) What are the remaining issues to be addressed in the reported “agreements” to be reached between EMERA and NALCOR for building the Maritime Link?

2) What is the overall capacity of the Labrador to Newfoundland link and the Maritime Link to Nova Scotia? Will one or both have the capacity to wheel at least a portion of the undeveloped portion of Lower Churchill Power if Gull Island is developed?

3) How will the proponents (NL and EMERA) finance their shares of the project? Is this financing in place or is the project contingent on finding financial backing?

4) Putting aside the employment created by this development, what is the actual return on investment for Newfoundland and Labrador in the short and longer term? In other words, will this project provide the Province with increased revenues in its coffers?

I’m sure as the next few days and weeks go by and we begin to learn more about this agreement a longer list of questions will begin to form. Hopefully answers will be given when those questions are asked. As they say, the devil is often in the details and while an agreement has been announced one has to wonder exactly what those details include.

At any rate, today is a time to have a quick (and well deserved) celebration before digging into the details in earnest (as we all should) to ensure that our future is as bright as it appears today.

Each and everyone in Newfoundland and Labrador needs to take some time to look at this with their eyes fully open and unfiltered by political bias or spin from any direction.

It does nobody any good to simply attack the deal for the sake of attacking. It also does no good to approve of it simply because it’s being presented by a popular government. Remember, nothing is written in stone until the people of Newfoundland and Labrador say it is. The strong people of New Brunswick proved that point not so long ago when the Provincial government there tried to ink a deal with Hydro-Quebec.

On the surface the agreement seems reasonable, and I hope it is, but until all the questions are answered nothing should be allowed to proceed. Nobody should ever forget the Upper Churchill. NEVER. If more questions were asked back then perhaps things would be far different in the Province than they are today.

Ask informed, unbiased and non-politically motivated questions. Probe the situation fully and rationally to determine where this deal ranks among past options.

the Province can’t run away from this or any deal because it has been burned in the past but neither can it simply accept the deal on blind faith.

Once bitten, twice shy. The outcome of this, for good or for bad, rests squarely on the shoulders of the public. If Newfoundlanders and Labradorians have learned anything from the Upper Churchill it’s that once a final agreement is in place there’s no going back.

This time around can be no excuses and nobody else to blame for not ensuring a better outcome.