Even ex-ministers have questions

Rick Lipsey
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In my experience it is unprecedented — three former cabinet ministers of the party in power, two of them ex-ministers of finance, coming out publicly against the government’s central policy of the day.

Their concern, at its root, is the massive borrowing to finance Muskrat Falls — possibly doubling the public debt. There are other issues, but that is the main one.

Former premier Danny Williams claims now is the best time to do it, with interest rates low and a federal guarantee.

But this begs the question of whether it should be done at all, plus the fact there is no assurance rates will not rise to match or exceed former levels, and guarantee or not, the borrowing must be repaid.

(How current Finance Minister Tom Marshall manages to support it, while in the same breath proclaiming an end to excessive spending, passes understanding.)

To be strictly correct, Loyola Sullivan did not, in the voice clip I heard on the radio, mention Muskrat Falls, but given the timing of his warning — right in the middle of the PUB hearings — his intention is obvious. On the other hand, Dr. John Collins, in his repeated concerns, has been absolutely clear, as has Jim Morgan.

These men can hardly be accused of partisanship, or mischief, or ignorance of the subject matter or the implications of the proposed deal, whether it goes ahead or not. For either way, there will be consequences.

When I met for more than an hour with Ed Martin, the head of Nalcor, at his invitation, I pressed him on the matter of financing — the final cost, the burden on the public debt, the cost of overruns, etc., but to little effect. That was several months ago, and today we are hardly wiser — in fact, the cost, reported this week, could be 30 per cent below or 50 per cent above the

$6.2 billion quoted.

One thing that is absolutely certain is that the burden will fall — I believe unnecessarily — on the people of Newfoundland and Labrador, both as debtors and as ratepayers.

With over 60 per cent of them opposed to the project, according to one reported poll, the Dunderdale government should take the advice of those former ministers and shut it down, now.

 

William R. Callahan

St. John’s

Geographic location: Newfoundland and Labrador

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Recent comments

  • Prescient
    February 21, 2012 - 21:01

    John Smith, in Sept 2006 Hydro forecast that Holyrood would consume 2.4 million bbls of fuel in 2010. In fact, it consumed only 1.3 million. The forecast overestimated needs by more than 80%. Of course it is challenging to make such forecasts, but such uncertainty highlights how risky it is to dam Muskratt Falls and build +2000 kms of transmission lines based on Hyrdo's current forecast of needs decades out. A more incremental approach to add electricity generation and manage demand would not expose us to the debt (and interest costs) that MF will. http://www.pub.nl.ca/applications/NLH2012Capital/files/p2-rfi/P2-IC-NLH-09.pdf

  • William Daniels
    February 21, 2012 - 20:17

    I agree with Peckford. This boondoogle happens "have" will be no more. Dunderdale and Kennedy are trying to ran this through. Stop the money flow to Nalcor now.

  • Cyril Rogers
    February 21, 2012 - 16:07

    PROOF OF WHAT....adding 6 or 7 billion dollars to our already large debt is a financial disaster waiting to happen. We already have the second highest per capita debt in the country and a debt of this magnitude will undoubtedly rank us as having the highest per capita debt...that is a dubious distinction to have for a so-called have province. It is true that rates will go up in future but by how much? With the MF project, it will double within 10 years, contrary to Minister Kennedy's assertions that it won't. They have already been given a 37.5% increase over the next 5 years but, in my opinion, that was to pay for preliminary work on MF, and they used that increase to argue that we would pay higher rates regardless of what developments take place in future. That is a red herring that they are using to obscure their lack of solid reasoning. Granted, some new sources of energy will be needed down the road, mainly to replace Holyrood, not because of any sudden demand. This will require rate increases but these should be more gradual and can be phased in over a couple of decades. The only way rates will increase dramatically is if MF goes ahead. If rates don't increase dramatically it will be simply an accounting slight-of-hand, because they will choose to defer most of the repayments to future generations. After all, the interest payments alone on 6-7 billion dollars will be in the range of 300-400 million dollars per year, especially in the first couple of decades. To put it another way, it will increase the debt for every man, woman and child in this province by $12,000 per person and would require roughly $1,200 to 15000 per household each year just to pay the interest.

  • Proof of what
    February 21, 2012 - 12:10

    There are no facts that MF will be a financial disaster just as there is no proof that it's the least cost option. What we do know is that rates are going to go up, regardless of what is done, and that other alternatives should be analyzed if only to have a thorough analysis.

  • John Smith
    February 21, 2012 - 11:21

    Oh, you mean the Brian peckford who oversaw the building of the Sprung greenhouse? The one who ran away with his tail between his legs, who left us the laughing stock of the country? The ex highschool teacher? Sorry, I would rather listen to the experts. If I did want the opinion of an ex-premier I would go to Mr. Williams. A rhode scholar, self made millionaire, laywer, and passionate Newfoundlander, who live here to this day giving back to the province he loves.

  • Cyril Rogers
    February 21, 2012 - 11:07

    "JOHN SMITH", this insanity will end if and when this government finally wakes up and realizes that this project is a financial disaster for the people of this province. There are plenty of alternatives that can be developed over the next decade, with far less risk and far less upfront debt. It will not be cheap but we will not be saddled with this financial monstrosity either. Simply spending the three hundred million per year(for 10 years) that we will otherwise spend on MF, will vastly improve the grid and bring on other sources of power. After 10 years of MF, we will still be multi-billions in debt and will need to make payments for another 40 years. By that time, much of the MF infrastructure will need replacing so anybody who thinks it will be free power after that time is deluding themselves. By the way, we can also now add former Premier Brian Peckford to the growing list of former prominent Tories who are saying we should abandon or delay this project. What's wrong with these former Tories, John?

  • JohnSmith
    February 21, 2012 - 10:24

    Man, when will the insanity end...this is truly becoming farsical. OK, if Muskrat is so bad, then what? Sit around untill 2017 and see if all the experts were right? We have a group of highly educated, highly reguarded people from this province, who are mandated by law to look ahead and forecast our energy needs. They are telling us we will need enhanced energy supply by 2017. No one rationally disputes this. MHI even went so far as to say Nalcor underestimated the need. So, if we can put that question aside, what then is the answer? If connecting to the grid, ridding ourselves of polutting Holyrood, and stabalizing rates is what we are looking for then there is only one answer. This is not a liability, this is a smart, well thought out development. The fact that we have money, that there is a loan guarantee, that we have private investment, only goes to show the viability of the venture. I have yet to hear any credible argument against the project.

  • Townie
    February 21, 2012 - 09:49

    The fallacy is that we should do things because of cheap money. Cheap money has been created by government to hide other problems in our economy. If we take this argument to its conclusion, we should ensure that we always have cheap money so that we can do everything. The result will, as in the case Musrat Falls, will be piles of debt for a life time.