If you like the infamous Upper Churchill deal — which hands Quebec 95 cents of every dollar earned and Newfoundland (and Labrador), a mere nickel — then by all means express your support for the Muskrat Falls deal by voting Oct. 11 for the Progressive Conservatives.
This has become a one-issue election. Education and health care can be addressed — and spending adjusted — from year to year, but if Kathy Dunderdale and her PCs have their way, billions of taxpayers’ dollars will be blown on a hydroelectric megaproject that will prove to be financial folly.
On the bright side, your children and grandchildren will be able to curse the “Upper Churchill” and “Lower Churchill” in one breath.
During Wednesday’s televised leaders’ debate, Dunderdale made clear she intends to spend public money to develop Muskrat Falls.
Strangely, and erroneously, Dunderdale referred to it as a government expenditure on “infrastructure.” It is no such thing. Roads and bridges are infrastructure. Water and sewer pipes are infrastructure. Schools and hospitals are infrastructure — although many politicians twist proper vocabulary and pander to their audience by referring to them as “investments.”
Muskrat Falls, properly defined, is an investment. Money will be spent with the expectation that more money will return as profit.
The long-lingering question about the Upper Churchill deal is how Newfoundland’s negotiators could have been so foolish and shortsighted to overlook the effects of inflation.
The common explanation is that, in 1967, inflation was not a primary concern. The inflationary 1970s had not yet arrived.
Theirs was a basic failure: they didn’t ask, “What if …?” What if prices rise? What if the value of hydroelectricity increases?
There is a similar basic failure regarding the Muskrat Falls deal.
Most of the discussion has revolved around the assumptions and statistics of the Muskrat Falls deal. The numbers invariably differ, depending on who is presenting the argument: Newfoundlanders’ (and Labradorians’) power bills will increase, or they won’t, or they won’t increase as much as they would without the Muskrat Falls project; oil prices will continue their unabated rise, or they won’t; demand for power in Newfoundland will continue to increase, or it won’t.
Objective facts — rather than subjective stats — are needed before the government spends $4.4 billion on the project (the other $1.8 billion will be spent by Nova Scotia energy company Emera).
Just as the proverbial alarm bells should have been ringing in 1967 over the possibility of inflation, they should be sounding now — loudly — over the source of that $4.4 billion. It will be public money, via loans — i.e., debt.
It will not be private money, either from firms or individuals.
This leads to the fundamental question that must be asked: why weren’t private investors willing to get involved in financing the Muskrat Falls hydroelectric project?
After all, when profits are likely, capitalists will be there as fast as blue on Tories.
Recall former premier Danny Williams’ showdown with the Hebron consortium. The oil companies initially packed up in a huff, but they eventually came back. Why? There was money to be made.
But Williams couldn’t find private investors willing to put money into Muskrat Falls. People should demand to know why not, and they should ask now rather than in 30 years, with three decades’ worth of lamentation in between.
We know Fortis was invited to invest, and declined. Last spring, Fortis president and CEO Stan Marshall explained the company “will not get involved in minority situations with governments.”
Perhaps there was an unstated corollary: “unless the profit margins justify it.”
Does Muskrat Falls have a profit margin? Private investors didn’t seem to think so. It will apparently take $4.4 billion of taxpayers’ money to find out.
Brian Jones is a desk editor at
The Telegram. He can be reached by email at bjones@thetelegram.com
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Maurice, your comments make sense. Perhaps it would be better to adopt a wait and see approach to the new hydro project. I think the key to all this is be in a financial position that we wouldn't have to cut a deal with a private company to get this done and be able to reap the windfall for ourselves. I just hope that down the road we do not do another deal with Quebec and repeat the sins of our fathers.