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Questions to ask and points to ponder - 1

I’ve made much in this series about the need for more investigative reporting into the Muskrat Falls issue. And last week, I received an email from a journalist, pointing out that “no one is saying what we’re not covering, no one is offering questions that haven’t been asked. Lots of ‘not good enough’ but little suggestion for improvement.”

In fact, I have been working on an item that highlights questions I have, or areas that have not been thoroughly explored. Without further ado, let’s get into them.

 

 

Is Muskrat Falls the least-cost option?

This has been talked to death but it’s all heat and no light. The media should be pushing the province to release the research reports (prepared before November 2010) that informed this critical decision. There’s no excuse for them to refuse – we own this project and have every right to see the supporting research. My gut tells me that the research is weak – that the province is biased toward this development – but I would be happy to be proven wrong. Just give me the facts, please.

 

How reliable are the budget numbers?

Whenever a Muskrat Falls critic suggests that the project could go over budget by 100 per cent or more, government accuses them of being “alarmist.” Actually, they are expressing valid concerns. Manitoba Hydro International, the people who are telling us that Muskrat makes sense, is behaving like a drunken sailor in its own province, selling power at a loss through its Wuskwatim project and planning to push ahead with two more questionable projects. Check this link for more (and note the rate increases being foisted upon Manitobans):

http://www.winnipegfreepress.com/opinion/editorials/rate-shock-168111206.html

In 2009, Nalcor announced plans to drill three exploration wells on the west coast, at a cost of $14 million. They ended up drilling two wells, at a cost of $23 million. If they can’t get that right, shouldn’t we be skeptical about their Muskrat Falls numbers?

Mega-projects are infamous for going over budget – the only question will be how much? Perhaps the best example of a mega-project gone wrong is the Mackenzie Valley pipeline, which launched in 2002 with an initial budget of $7.5 billion that subsequently increased to $16 billion. That’s more than double. It does happen. It could happen here.

 

What if it goes sideways?

Going way over budget is not “alarmist,” it’s a credible and probable scenario. It is our money, our natural resource, and we’d be stupid not to ask what will happen to electricity rates in a worse case scenario. Don’t patronize us by calling it “fearmongering.” Get out the calculator, work up the numbers and give us an honest, respectful answer.  We need to think about the ramifications of going way over budget, as well. For example, if it is determined that going over budget by double will have a similar effect on our power bill, how will that affect people? The economy? Our competitive position as a place to live and work?

  

 

Tell us about the people involved

When Danny Williams announced Muskrat Falls in November 2010, there was no mention of power requirements in Labrador. Just months after resigning he resurfaced as a director with Alderon, an iron ore discovery in Labrador, and was talking about the need for Muskrat Falls to fuel mine development. Did correspondence with Alderon begin while Williams was premier? Alderon should be asked to provide a copy of the letter in which this position was first offered to Williams. Matters of salary and other confidential issues can be redacted – we just need to see the date.

And what about the party affiliations of key players? For example, consumer advocate Tom Johnson – who has endorsed Muskrat Falls – was appointed by the PCs and practices law with Tom Williams, chief fundraiser for the PC Party (and Danny’s brother). Gilbert Bennett of Nalcor worked with Danny Williams at his cable company and Brian Crawley – a VP with Nalcor who is now leading the Muskrat charge – is Williams’s former chief of staff. I’d like to see a diagram that shows ‘friend and party’ appointees, and their positions of influence within the Muskrat Falls schematic.

 

The Natural Environment

This one is given shortest shrift, perhaps because Muskrat Falls is in remote Labrador. Still, we need to stop and think about what we are destroying – and what the impacts of that will be. How about concerns raised by the federal-provincial review panel, about possible increased mercury levels in Lake Melville? Has that been explored more thoroughly, since it was flagged in the report?

And then, there are the falls themselves – a spectacular sight indeed, and a majestic piece of nature. What are we losing by developing it? The best answer to this question was provided by CBC reporter Tara McLean, who took a trip up the river with former trapper and PC politician, Joe Goudie. You can listen to those pieces here (take some time, put on your earphones and really listen):

http://www.cbc.ca/labradormorning/2011/09/26/a-journey-through-time/#igImgId_17539

  

 

The North American energy environment

When Muskrat Falls was announced, scarcely anyone had even heard of shale gas. It is now common knowledge and is already revolutionizing the North American energy environment. According to numerous sources, there is enough shale gas to keep America in cheap power for the next hundred years. If you’d like to learn more, just read the first few pages from this pan-industry report:

http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf

Our leaders in government and Nalcor keep reminding us that we are opening up new markets for our hydro power, and that the Nova Scotia link will make sense in the future. But there are serious questions to be raised about that. After all, Hydro Quebec is still making long-term power agreements with other customers for a fraction of what Muskrat will cost. It is apparent that Muskrat power will never be competitively priced in the spot market, unless we dump it at a loss. Is that a reasonable statement to make? If so, is this a sensible long-term energy strategy? Have we really thought this through?

 

Why aren’t we benefiting from our own resources?

Quebec has an inventory of 35,000 megawatts available for sale inside their province and externally. That, combined with the enormous shale gas resource, is almost certain to keep energy costs down for decades. Yet here in Newfoundland and Labrador, our costs are going to start high in 2017, and continue increasing at one percent per year – compounded annually – for 55 years (cost overruns will further increase rates). Government calls this “stable” pricing. I worry that we are signing up for high cost energy while the rest of eastern North America enjoys much cheaper pricing.

Government brags that this province is an “energy warehouse.” If that is the case, why aren’t we paying wholesale prices? Why are we paying more for energy? Why aren’t we benefiting from our own hydro resource, by selling it at a profit and using that revenue to reduce energy costs here?

There’s one other tangent that I don’t understand, and would love to have explained. On its web site, Nalcor says that power costs will increase at the “stable” rate of less than one percent per year. However, in this submission to the PUB, Nalcor says it will sell power to NL Hydro at a price escalation of two percent annually:

http://www.pub.nf.ca/applications/muskratfalls2011/files/rfi/CA-KPL-Nalcor-127.pdf

It explains that apparent discrepancy this way: “Hydro will not sell Muskrat Falls power directly to Newfoundland Power or its industrial customers. Rather, the cost of Muskrat Falls power will be blended into all of Hydro’s other regulated costs to arrive at an overall average cost such as has been presented in PUB-Nalcor-5.”

I would like Nalcor or an intrepid reporter to explain how that works, so that I might ask for a similar arrangement from my bank manager.

Tomorrow I ask more questions, including whether Quebec is really being as obstructionist as the province suggests.

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Recent comments

  • Austin Brown
    September 06, 2012 - 19:34

    I hear lots of talk about cost overuns which I don't belive anyone knows what the final cost will be except that it will most likely be a lot more than what nalcor and the gov. are saying right now. I hear people like Danny trying to justify their actions ( Going ahead with this project before it is santioned by the Government or or properly debated by the people) by saying now that it is needed to fuel mining in Labrador when he said when he announced the project that none of the power from the development would be used in Labrador. Nalcor VP Gilbert Bennett said in response to questions from people in Labrador coastal communities that they couldn't get power from the project because it wouldn't be brought down to usable electricity until it reached soldiers pond on the Avelon. So what is the truth? Is it or is it not going to be brought down to usable consumer electricity in Labrador before it goes to the island or not and if so how will it be transmitted and where? Will there have to be more envornmental hearings on this change in plan and what will it do to the cost or the project? My greatest concern is that not only are we leaving our children and greatgrandchildren the burden of paying for this massive blunder but we are putting their lives at risk with these massive dames of water hanging over their heads 24/7 and not knowing when it will come rushing down the river valley leaving this community and others that sit at the waters level a floating mess of ice, snow, trees, houses, poles and everything else in it's wake. Is this another case of don't care because of where it's located and the kind of people that would be affected because I don't think it would go ahead anywhere else in this province if the possibility of it spilling over into the residents back yards, one would think that safety of people would come first before the question of do we need the power on the island or how much will it cost to get it to the island. My second greatest concern is the amount of chemicals that will be used to keep the transmission line from Muskrat to Soldiers Pond free of brush. According to Nalcor's info thats how they will keep the brush from growing on the line which I belive is something like 400ft wide the whole ways and affects every waterway, berryground, plants & animals from central to the strait of Labrador and across the island to Soldiers Pond. It is beyond me, how anyone can see this as a green source of electricity when this much landmass and waterways will be contaminated with chemicals.

  • EDfromRED
    September 06, 2012 - 19:04

    The PC's must be promised cushy jobs for when they get turfed, to keep steamrolling this project while their poll numbers keep going down the toilet. A government that hold it's own people in contempt is not fit to rule.

  • Simon Lono
    September 05, 2012 - 15:29

    If a big downtown developer started excavating and laying a foundation for a building in order to save money in advance of getting a permit to build from city council there would be holy hell to pay. But it's ok for Nalcor to spend $100Ms of public now to "save money later" in advance of any project sanction from government? I'd like to know who authorized that!

  • Cyril Rogers
    September 05, 2012 - 14:40

    Mr. Meeker, you raise a lot of valid questions and concerns, none of which we will truly get any answers to. The government and NALCOR will obfuscate and stick to their planned agenda because this is a done deal, from their perspective. I just heard MHA, David Brazil, on VOCM Backtalk and he, like every single PC MHA I have ever heard speak about Muskrat Falls, continues to spout the same drivel. They claim it is not sanctioned but are talking out of both sides of their mouths. I despair of any of them having the intestinal fortitude to stand up and say anything critical or for any of them to question the sanity of this project. I thank you again for raising some crucial issues!