The Sir Robert Bond Papers: Grits and Cons play dodge-fact over Labrador hydro talks #nlpoli

“There are no discussions between this government and the  Quebec government.”

That’s part of a statement sent out by email to local reporters from natural resources minister Siobhan Coady’s office.  You can’t find it on the government website or the party website.  Coady was responding to a release from provincial Conservative leader Paul Davis challenging Dwight Ball to state the administration’s plans for the province’s hydro resources in Labrador.

Words matter. No one has suggested that the two governments were talking about anything.  The talks would take place between Nalcor and Hydro-Quebec and, whether we take Nalcor boss Stan Marshall’s own words or the local scuttlebutt,  the talks are going on between the two companies.

dodgeball photo: Dodgeball DodgeBall4.gif
They can’t dodge a wrench, either

Coady and Premier Dwight Ball need to stop playing dodge-fact. They suck at it.

Coady’s misleading denial is the same as Ball’s deceptive statement mentioned in yesterday’s post that there are “no talks about Hydro-Quebec taking over Muskrat Falls.”

No one said anything about HQ “taking over” Muskrat Falls then or now.  The rumble around town is that Nalcor and HQ are in talks that would see HQ taking a major role in an expanding Lower Churchill project.

To really signal the administration’s her difficulty with a simple, true statement, Coady tried to claim the Tories were “fearmongering.”  That just comes across as looks silly.  The simple truth is that if Nalcor and HQ weren’t talking, both Coady and Ball would have said precisely that.  Based on the way Ball and Coady are carrying on, we know something’s up.  We should be even more concerned given the fact that – yet again – Coady and Ball prefer to be cute rather than make simple statements that deal directly with the issue.

Constable Clueless Strikes Again

As for the Conservatives, they don’t get off much better in the fact department.  Davis’ statement said that the “Muskrat Falls project was designed to ‎end Quebec’s longstanding stranglehold on our hydro exports by creating a new route through the Maritimes to give our province new leverage after Quebec played hardball for decades, costing us enormous amounts of potential revenue a year,.”

That was what Danny Williams claimed in 2010 but, as Williams surely knew at the time and Davis should know now, it just isn’t  true.  Changes to American trade rules in the late 1990s made it impossible for Quebec to trade electricity into the United States without opening up their grid to competition.  They did, which is how Nalcor was able to sell electricity to Emera starting in 2009.  In fact, when Williams announced the deal in 2009 he said that the deal proved the stranglehold was a thing of the past.  Williams claimed the Muskrat deal with Emera broke the stranglehold, but it wasn’t true then and it isn’t true now.

The Road to Perdition

Last week’s two-part summary of hydro-electric development in Labrador since 1949 made it plain that by the late 1990s, two specific changes in the province’s situation brought us close to deal on Lower Churchill development.  One change was the FERC rules on open access to transmission. That broke Quebec’s stranglehold on development by providing access to the shortest route between Labrador and potential, profitable markets.  The second was the advent of oil production.  Even at oil prices forecast in the early part of this century,  oil royalties meant that Newfoundland and Labrador was no longer desperate to develop the Lower Churchill.  
As a result, the primary obstacle to Labrador development became a combination of a market and transmission line capacity, not politics.  Danny Williams brought superficial considerations  – like politics – back into the equation.   In the process, he failed to develop the Lower Churchill on a sound financial basis.  He spent a lot of time trying to blame Hydro-Quebec for his failure to develop the Lower Churchill but in the end, simple economics made his project completely idiotic.  
No one wanted the power because it was too expensive.  But with a desperate political need – for Williams to leave open politics – Williams and Nalcor concocted the Muskrat Falls project as a way to solve a completely fictitious problem.  They cooked up a wild scheme to force local taxpayers to cover all the costs of the least attractive option on the Lower Churchill. 



Brian Tobin and Roger Grimes came as close as possible to developing the Lower Churchill successfully.  They had a market for the power,  interest in developing the transmission grid and, as it turned out, enough cash from oil to ensure the provincial government and its energy corporation could have covered any cost over-runs.

Sadly, that project went into the bin.  Grimes’ successor had a solid proposal from Ontario and Quebec to provide a market for Lower Churchill power.  Williams rejected it out-of-hand.  Then he spent four years trying desperately to find someone to buy his dream.  Williams failed.
And 12 years after the Grimes project died, we are over a barrel. We’ve maxed our credit with Ottawa. We owe perpetual megawatts to Nova Scotia, have no friends left in New Brunswick, can’t offer anything marketable to New England, and are essentially left to beg for assistance from Hydro Quebec.

It’s a sad position, made all the worse by the province’s politicians and their foolish political statements.
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The Sir Robert Bond Papers: Worst possible time for HQ deal #nlpoli

If the rumblings from Labrador are correct, an opinion column in lapresse – “Why Quebec should regain Labrador” – this weekend both fits right in and provides a cautionary tale for us all.

Pierre Gingras  – right – spent 31 years with Hydro-Quebec (1966 to 1997) building large hydro-electric projects like Manicouagan and James Bay.

Gingras thinks the time is right to rescue tiny Newfoundland from itself and a very old injustice done to Quebec.  After all,  Gingras notes, people in Quebec should recall that, owing to what Gingras calls the “shenanigans of certain [but unnamed] financiers”  the Privy Council  in London tore Labrador from Quebec in 1927 and gave it to the British colony of Newfoundland without any protest from Canada.

“On se rappellera que le Labrador a été arraché au Québec (et au Canada) par le Conseil privé de Londres en 1927, à la suite des manigances de certains financiers, pour être rattaché à Terre-Neuve, alors colonie britannique, et ce, sans la moindre réaction du gouvernement du Canada.”

Quebec cannot buy power from Muskrat Falls as it is right now, according to Gingras, since the existing transmission lines are at maximum capacity.  But a new transmission line costing $3-4 billion would make it profitable to develop Gull Island.  Such a project would also allow for the development of many smaller projects in Labrador and along the Quebec North Shore that are currently held up, according to Gingras, by the uncertainty over the border.

Talk of a potential deal with Hydro-Quebec on the Lower Churchill has been swirling for months.  Stan Marshall has done nothing to dispel public concern with his comments in August that he is busily improving the relationship between Nalcor and HQ.  In June, Marshall said that Nalcor was looking at ways of boosting revenue from Muskrat Falls in conjunction with Nalcor’s existing partners Emera and Nyro-Quebec.

Nor did Premier Dwight Ball calm concerns when he said a couple of months ago that there were “no talks about Hydro-Quebec taking over MuskratFalls.”  That sounds like one of his patented denials using very precise and misleading language. The deal apparently in the works would have HQ buy a significant interest in a much larger project that, as Gingras described it, would involve development of Gull Island.  That isn’t about taking over Muskrat Falls, so Dwight’s comment would be literally true, even if it did not tell the whole truth.

The worst possible time

This is the worst possible time for Nalcor to be talking with Hydro-Quebec about the Lower Churchill.  Nalcor and the provincial government are more vulnerable than ever before. Not only is the Muskrat Falls project spiraling out of control and unable to deliver its promised electricity,  the provincial government is in the midst of its worst financial crisis since 1933.  

Then there is the fact that the current government is in third place in the polls and the Premier is at the lowest point in the polls for any Premier since we have had polling information.  The last time a politician was even half as desperate to make a deal on the Lower Churchill, Danny Williams cut one for Muskrat Falls. It guaranteed free electricity for Emera for 35 years,  partially privatized the electricity grid in Newfoundland, and bound the province into the current mess.  Don’t forget either that Williams himself spent five years desperately – and secretly – trying to get Hydro-Quebec to buy the Lower Churchill.

Dwight Ball has already made it clear he, too,  is desperate to complete the Lower Churchill, despite the incontrovertible evidence that it is a mistake. His administration never completed a proper assessment of the alternatives to continuing the project, as it seems.  Ball is in an even more desperate position than Williams was, if that is even possible. The government is vulnerable, therefore, to even the weakest offer that would beggar the provincial position and give Hydro-Quebec precisely the level of control of resources that Gingras is proposing.

Make no mistake,  the provincial position had been strengthening in the late 1990s.  It has deteriorated sharply since 2003, most significantly since October 2010.  There is no reason to believe that the current Liberal administration – pot-committed to the ludicrous Muskrat Falls project – could produce a viable deal even with Stan Marshall. Indeed,  Marshall is already jammed into an impossible position since Ball and the current Liberal administration have denied him the most power option anyone has in any negotiation:  walking away from a deal. Marshall was interested in examining all options when he took over as chief executive at Nalcor.  Dwight Ball has made it plain his only option is to finish the project.

Ball and Marshall don’t have many options. The federal government cannot increase its financial exposure in the project as it currently stands. It is a boondoggle and, as a recent court decision in Quebec confirmed, Nalcor does not control water flows on the river.  As such, Muskrat Falls can scarcely produce enough electricity to meet the freebie Williams and Ed Martin gave Nova Scotia.   The federal government will not pour more cash into it.

Having cut off every option for himself, Ball is clearly left with Hydro-Quebec and its deep pockets and experience as the only way to go.  That’s why Ball must stop any discussions involving Hydro-Quebec and the Lower Churchill immediately. If he persists and, God forbid, he tries to implement a deal,  Ball will precipitate a political crisis the likes of which the province has never seen.  Given the government’s precarious financial state, such a political confrontation crisis over what can only be an inevitably bad deal on the Lower Churchill would be one the province cannot afford.

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