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Trouble with abstract concepts? Then hold onto your chairs. And welcome to the decision gate process.

Whenever the Muskrat Falls project comes up, there’s regular discussion of Decision Gate 2 (DG2) and Decision Gate 3 (DG3) numbers. Right now, the project has passed DG2 and the provincial government is waiting — and has been for some time — to see the DG3 numbers.

But what are they? Not the DG2 numbers and DG3 numbers, but what is this strange gating process?

Well, it may sound a little peculiar, but it’s a process where a major project moves ahead through specific — and sometimes quite arcane-sounding — steps on the way to being approved.

Here’s how Nalcor describes it: “The owner of the gateway process, or gatekeeper, is Nalcor Energy’s CEO and president, with responsibility for the implementation and stewardship of the process delegated to the responsible vice-president. The gatekeeper consults with the Nalcor board of directors and seeks shareholder alignment and approval. Within the project, the phases are managed by cross-functional teams and are referred to as gateway phases, while the gates (known as decision gates) are structured decision points at the end of each gateway phase. … For each decision gate there are a number of gate requirements that have been agreed with the gatekeeper. These gate requirements must be produced to an acceptable quality to facilitate efficient and effective decision making regarding the forward direction of the project. …

“Certain gate requirements may be considered by the gatekeeper, board of directors or the shareholder as ‘showstoppers,’ which means that the decision gate cannot be passed until those gate requirements are fully satisfied. An example of a showstopper would be environmental approval to proceed with the construction. The requirements for each gateway phase are developed specifically for the project and are developed with consideration of both standard project execution best practice, but more importantly with the consideration of the overall risk spectrum and tolerance for the project.”

Here are the five steps that Nalcor is using to look at the Muskrat Falls project: “Decision Gate 1 — approval to proceed with concept selection; Decision Gate 2 — approval of development scenario and to commence detailed design; Decision Gate 3 — project sanction decision; Gate 4 — approval to commence first power generation decision; Gate 5 — approval to commence decommissioning.”

It’s cradle to grave, and right now, the costs we know of — and what the entire Muskrat Falls discussion has been about to this point — are merely the ones available at the start of the detailed design process. There is an amount added in for escalation costs and a 15 per cent contingency, but the thing about DG2 numbers is that they have a broad margin of error.

How broad? Here’s Nalcor again: “-15 per cent to -30 per cent on the low side to +20 to +50 per cent on the high side, depending on the technical complexity of the project, degree of project definition (i.e. percentage of design complete), appropriate reference information, and the inclusion of an appropriate contingency determination.”

So bring on those DG3 numbers and we can have a real discussion about what this project actually is.

Geographic location: Decision Gate

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  • Cold Future
    September 13, 2012 - 12:34

    If we needed power and absolutely had to shut down Holyrood generatiing plant down, it is preferable that we take an ecomomically viable approach rather than shooting our feet off by developing an expensive project for export which ratepayers have to subsidize so the power can be sold at discount rates to the benefit of mainland consumers. We would also be cutting of our noses to spite our faces as well because Hoyrood can be modified at reasonable cost and then provide clean cheap reliable power well into the future. Muskrat would be economically viable at $3 billion, is a scary money loser at $6.2 billion and an economic disaster at $9 billion.Why take the risk ?- for political reasons? to save face? because we have a majority government and we can ram it through? What a leaving for the grandchildren !

  • Maggy Carter
    September 13, 2012 - 09:15

    This Muskrat proposal becomes more bizarre by the day. If (or more realistically when) it is sanctioned and built, it will provide fodder for academics, historians, policy and planning experts, and legal scholars for decades to come. If it fails (which we hope will not be case), if it threatens or damages the fiscal position of the province which is only now earning some degree of credibility, or if it becomes a crippling burden on the ordinary ratepayers and taxpayers of the province, then there will be a push for a royal commission of inquiry to ascertain how such a wrong-headed project could have survived the scrutiny of the checks and balances that our system of government purports to have. Should that happen, NALCOR's interpretation of the gateway process will hold more than passing interest. Using language that would puzzle any corporate lawyer, Ed Martin as CEO of NALCOR is not only assigned the role of gatekeeper but the implication is that the board of directors are merely another group to be consulted. Project sanction appears not to be contingent on the board's overt approval. It does mention that the gatekeeper will seek shareholder 'alignment' (whatever the hell that is). One wonders whether the NALCOR board with its newly minted, woefully inexperienced, but politically trustworthy members (i.e. - they will cease barking and heel whenever ordered to do so), have ever been offered instruction regarding their fiduciary responsibilities in accordance with Canadian law and judicial precedent. Despite their undoubted coverage under liability insurance policies, Canadian courts have become far more demanding when holding board members accountable for the actions of the corporations they purport to control. No, there is much about this process leading to project sanction that could keep investigators busy for years. Any future government commissioning such an inquiry would, of course, as a first order of business make clear that the powers of the commissioner would trump the gag legislation passed by the Dunderdale government such that the Commissioner would have full access to the records not only of government, but NALCOR and its subsidiaries as well as that of Cabinet itself. We know of course that much of the record will have long been expunged before then. In this day and age, however, (unlike the days preceding Churchill) the destruction of digital records is not always as easy as calling in the shredding companies.

  • OMG
    September 13, 2012 - 07:47

    Another day to rattle the Muskrat gate.

  • George S.
    September 13, 2012 - 07:28

    There were many, many people who contributed to the decision making to develop the Upper Churchill and penning of associated agreements. We seem to peg everything on Joey Smallwood. Maybe we should do it right for the Muskrat Falls Project. The Government of NL should set aside $100,000, and erect a huge marble mural. The mural would have the names of everyone who participated in the process: Martin, Williams, Dunderdale, Kennedy, Keating, Bennett, (the other) Bennett, etceteras. Everyone! In the coming decades, we will be able to celebrate their brilliance and never forget their business prowess and vision. Or, just maybe, we will always remember the people who directly contributed to the bankruptcy of Newfoundland. Put your legacy where our money is folks!

  • Maurice E. Adams
    September 13, 2012 - 06:49

    I think the DG 2 numbers had a margin of error of -30 to +50 percent (as the project was only a little better than 5% defined). However, to have passed DG2, other options such as natural gas (and others) should have first also been properly assessed/studied and NOT tossed aside on the basis that --- "we looked at that".

  • Eli
    September 13, 2012 - 06:41

    Anybody who asks critical questions stands to be ridiculed and branded a traitor. The editor is on a fine line here. Here's hoping he can walk the tight-rope.