I made an interesting mistake in my column on mining and Muskrat Falls on the weekend. Something of a mistake of omission rather than commission — not like the extremely irritating new television advertisements for a saline solution that you can squirt up your nose to relieve congestion, which sport a host of people working on the ocean who claim that because of the maritime environment they live in, they have no idea what a stuffed-up nose even feels like.
But a mistake just the same.
I was writing about the question of what kind of special deal for
electrical power mining companies are looking for in Labrador. A recent study on mining potential in Labrador talked about the existing rates mining companies pay, because of their particular history. The companies get their power at $5 a megawatt hour — the suggestion seems to be that kind of rate is a reasonable benchmark for what miners could pay. I pointed out that the generation cost of Muskrat Falls power is $7.6 per megawatt hour.
In fact, it isn’t.
Muskrat Falls will produce power at 7.6 cents per kilowatt hour, or $76 per megawatt hour.
As with all decimal-point errors, it was a mistake of 10-fold accuracy: if Muskrat power were sold to new mining companies at anything close to the rates being charged to current users (the result, I pointed out, of those companies being a special case, because they have their rates as a result of trading off their own hydroelectric facilities), it wouldn’t just be a case of giving new mining companies a discount, it would be giving them a windfall.
Why? Because they’d get power for a fraction of what it cost to produce.
What kind of fraction? Well, if you make power for $76 a megawatt hour and sell it for $5 a megawatt hour, you’d be offering it up for around one-fifteenth of its cost of production. And, to put that in even more interesting context, under the first round of Muskrat costs, we were told Muskrat power would cost around $210 per megawatt hour or so delivered to regular old customers on the Avalon. That would mean mining firms would pay one-forty-second of what you or I would pay. (At least one firm is already telling its shareholders it can get power for $40 a megawatt hour from Churchill Falls, or close to one-half the cost of production at Muskrat.)
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Leave all that aside for a moment, though.
Normally when I make a mistake on the Muskrat Falls issue, it takes about 3.5 seconds for the provincial government or Nalcor to call for a correction.
I still haven’t heard from them.
Who have I heard from?
Well, several well-recognized opponents to the project pointed out the error in my math mere minutes after my column was posted on The Telegram website. They weren’t angrily demanding a correction, they were merely pointing out that what looks like an impending jammy deal for mining firms was actually even more spectacularly jammy than I had pointed out.
And as for ordinary citizens? Well, the topic seems to be confusing enough that most people have checked out of the debate.
When Muskrat Falls was first announced, iron ore mining companies were not even on the radar.
It now appears that mining companies are an integral reason for the need for building this project.
It’s economic growth that Labrador, and the province, could certainly use. It’s employment and royalties and jobs that we could use — but it’s also an industry that will exist to profitably mine a resource we now own, and that will walk away as soon as the profits do.
If we’re all going to be asked to put our shoulders to the wheel to pay for this behemoth — a project which we need because of increased demand for power — anyone involved in creating that increased demand should have to pay at least their fair share of the costs involved.
Maybe you can sell a lot of saline by telling people that folks who live by the sea never get colds. But if you live by the sea, it doesn’t take much attention to realize you’re being sold a bill of goods.
Russell Wangersky is The Telegram’s
editorial page editor. He can be reached by email at rwanger@thetelegram.com.
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How do you propose to negotiate with Quebec? BTW nobody said antyhing about taxpayers subsidising MF. Ratepayers yes but taxpayers are a different cross section of the residents of NL.