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):
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):
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:
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:
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.