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Muskrat questions continue

Published on January 24, 2012
Published on January 24, 2012
Topics :
Harris Centre , Public Utility Board , Hydro-Québec , Holyrood , Ontario , U.S.

Prof. Wade Locke’s lecture for the Harris Centre at MUN last week was interesting.

As expected, he reprised Nalcor’s position on the proposed Muskrat Falls project more or less in exact detail. Clearly he agrees with and supports its conclusions, honestly and professionally.

Regrettably, little if anything new was added to past Nalcor presentations, tiresomely reiterated since first offered way back in early 2011.

In like manner, no intellectually satisfying answers were given to questions raised elsewhere by interested citizens nor to most queries at the show itself. Professor Locke honestly acknowledged not only his own fallibility but also his expertise being narrowly focused on economic questions, many vitally relevant matters lying beyond.

Two welcome new snippets of information, off-project, however, did come to light.

First, the Harris Centre plans a second exposition, this time by Prof. James Feehan, on the same subject but with different extended content (hopefully) and Locke himself has joined an increasing chorus of public opinion (now shared by former natural resources minister Shawn Skinner) calling on government to abandon its ridiculous stance of ham-stringing  the Public Utility Board’s statutory duty to express a considered opinion on the whole matter.

The continued problem with Nalcor’s (and government’s) decision to date respecting the project’s rationale and validity thus remains painfully obvious.

The basis question is not whether Nalcor is wrong in postulating Muskrat’s power to be more cheaply accessible than alternative combined sources on-island.

The real question is whether or not they are right in forcing that opinion on the public, absent cogent, unbiased information on related issues troubling knowledgeable observers, expressed time and again.

Just some of those issues may be briefly summarized as follows:

• Does Nalcor accept that, worldwide, energy-generation and inextricable-linked politic-economic forces are presently in such serious turmoil that now is decidedly not the time for hugely expensive local commitments with probable irreparable consequence? (Especially so for the “bolt-from-the-blue” Muskrat Falls, left rudderless by its mentor.)

• More specifically, has enough weight been given locally manageable wind-energy possibilities? (Nalcor’s own consultant, Navigant, has said no).

• Has potentially available energy (minimum 530+ MW) from now-extant Labrador sources been investigated as thoroughly as has Muskrat Falls? (This includes Upper Churchill “recall power” of 170 MW, now exported south, Twin Falls 225 MW, Menihek 18 MW and unused CFLCo  power, 120+ MW.)

• Has upgrading on island hydro electric capacity been considered in detail? (Current capacity is 57 per cent utilized — Bay d’Espoir itself only 51 per cent.)

• Has possible acquisition of liquified natural gas for Holyrood oil replacement been given the in-depth attention it obviously deserves? (Jurisdictions elsewhere are actively doing so.)

• What are the details (if any) of negotiations with Hydro-Québec concerning added purchases from Upper Churchill? (Hydro-Québec now sells to Ontario, the Maritimes and into the U.S.)

• What possible use can a 35-year-old, low-capacity sub-sea link to Nova Scotia be for our province upon ownership in 2053, 12 years after Upper Churchill power contract’s final termination? (Twin Falls and lines were shut down upon advent of the larger Upper Churchill in 1976; will this be the fate of Muskrat Falls — and Gull Island — when superceded by access to Upper Churchill power?)

These (and other) concerns are not quixotic but aim squarely at the core of the matter. Nalcor (and government) ignore them at their peril.

Dr. J.F. Collins is a former Progressive Conservative finance minister.

He writes from St. John’s.

Comments

  • Username
    Will we get to see the Interest Rate negotiated on this Project
    - January 25, 2012 at 09:35:29

    JOHN SMITH said "The only difference the worldwide economy makes to this deal is that it makes money even more cheap to acquire, and oil more expensive, making the project more viable". Mr. Smith how are you so sure we will get the best interest rate possible? I bet we will be ripped off on that aspect, as well in this Crony Capitalist Society. By the way will we be shown on paper what we will be paying in interest charges on this project if it gets the Green Light to move forward? As you said Money is really cheap, at the moment, so I hope the interest rate we will be paying, if the Muskrat Falls Project gets the green light will be the going rate for a Government Insured project like this one, that any financier in the World would love to be covering. Matter of fact I hope Nalcor is making sure that they are booking a rate now with the right to change it should interest rates go down further. And. Oh Yes, I want to know what interest rate we will be paying if the Contract gets the Green Light so that I can do an analysis on whether or not we got a good rate was acquired on behalf of the Newfoundland and Labrador tax payers. As I said I don't trust anyone in a Crony Capitalist Society.

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  • Username
    Cyril Rogers
    - January 24, 2012 at 15:23:08

    Why do people continually denigrate the opinions of others when they are not in power or if they change their minds on matters once they have been out of office for some time? I am sure Dr. Collins must have found himself in the difficult position of wrestling to state what his conscience dictated when he opposed the Muskrat Falls project. Yet, the Tory hacks and the narrow-minded ones came out with the knifes to attack his record. Like any politican, he made mistakes when in government and did toe the party line but, with the benefit of hindsight and time for reflection, Dr. Collins can speakly freely about his concerns. He raises a number of improtant questions that NALCOR and the government have glossed over and basically ignored because they are bound and determined to proceed. Why? Why the haste? Who stands to gain if the project proceeds in haste? It is not the ratepayers who benefit....we will be stuck with a huge obligation whether we like it or not! Is this not a "common property resource" that the people should have a say in? Oh, but, the common person doesn't know anything, according to government and the Tory hacks who support this project! Well, give us time to learn the real facts and don't jam this projects down our throats. After all, we are the ones who will gag on the huge debt burden!!

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    • Username
      Troubled customer & Taxpayer
      - January 24, 2012 at 16:54:51

      Well said Cyril "Experience is the name everyone gives to the mistakes" Oscar Wilde Maybe we should listen to these voices of experience Ms. Premier for those who do not listen to the mistakes of the past are doomed to repeat them.

    • Username
      Too Funny
      - January 25, 2012 at 09:49:35

      That's rich. "Why do people continually denigrate the opinions of others..." only to follow it up those other opinions as "tory hacks". Hello kettle, pot calling.

  • Username
    Maurice E. Adams
    - January 24, 2012 at 15:22:43

    I understand ---- that while it is clearly beneficial for the Muskrat Falls option (but detrimental to the Isolated option) to do a 50 year 'life cycle' cost comparative analysis, by doing so several KEY factors detrimental to the isolated island option and detrimental to other options and to NL ratepayers come into play --- and in my opinion, intentionally so. ++++++ One, the return of "zero cost" Upper Churchill power 25 year earlier (2041) is not part of the isolated island option (we could save $3 BILLION by then not needing to build the Muskrat Falls generating station). Two, the 50 year time period includes a cost of $1.5 BILLION for the replacement of Holyrood --- even though its life cycle can be extended til 2041 when zero cost Upper Churchill power becomes available (it would then not need to be replaced, $1.5 BILLION saved). Three, the Labrador-island maritime link only has a 50 year life, so its replacement in reality would need to be planned for, designed, approved, funded and built --- BEFORE the end of the 50 year reference question time period ---- but there are no costs included in the Muskrat Falls option for its replacement. Four, shutting down a fully paid for Holyrood asset when it still has 20 years of useful life left in it do not seem to have been factored into the Muskrat Falls option as 'a cost'. +++++ These are just a few ways in which this 50-year time frame and a pre-selected, narrow isolated island option has been "designed" to ensure that Muskrat Falls come out --- not as the 'lowest possible cost" (as required by legislation), but as the 'least cost' of only 2 options ---- 2 options that have been pre-selected, designed, and effectively 'reverse engineered' by Nalcor to ensure that Muskrat Falls comes out on top. ++++ If more reasonable options, designed to get us up to year 2041 were developed and then the use of Upper Churchill power factored in thereafter --- it would be a whole different story ---- but then again, that would negate the need and cost effectiveness and economic viability of Muskrat Falls ---- so that is not on. ++++ This 2 option, pre-selected, 50 year cost comparative 'reference question' prohibits that ---- AND INTENTIONALLY SO.

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  • Username
    Maurice E. Adams
    - January 24, 2012 at 09:59:40

    Even extending the PUB's time period for providing a "considered opinion" would be considerably less than allowing the PUB to fulfill it "statutory duty". ++++++ What is before the PUB is a very narrow 'reference question', one that sets the rules established by Nalcor --- a cost comparison between a single, pre-established (not the most sensible) "Isolated Island Option" and the Muskrat Falls option. Furthermore, even though Upper Churchill power comes back in less than 30 years, the PUB cost comparsion must be done over a 50 year period --- a time period that specifically favours the Muskrat Falls option. +++++ Also, the PUB cannot do its full "statutory duty" because, as confirmed in a letter from the PUB in April 2011 ----- QUOTE: "Nalcor Energy has been exempted from the application of the Public Utilities Act and sections 3(a) and 3(b)(iii) of the Electrical Power Control Act, 1994 by the Lieutenant-Governor in Council under section 4.1 of the Public Utilities Act and section 5.2 of the Electrical Power Control Act, 1994. In light of these exemptions, the Board does not have jurisdiction with respect to any activities of Nalcor Energy and Newfoundland and Labrador Hydro related to the Muskrat Falls Power Development." UNQUOTE.

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    • Username
      Actually
      - January 24, 2012 at 11:31:51

      You don not understand how projects are evaluated in finance or economics. Actually a project is suppose to be evaluated over the life of it. If not all large scale projects would be rejected because of their high up front costs vs their long revenue stream. For example, no one would build office buildings if they only considered 10 years of revenues. 50 years for a project of this size seems reasonable.

    • Username
      There are other options
      - January 24, 2012 at 14:57:31

      Well 'Actually'', if that is the case, why use the MF lifespan as the standard that any alternative must be measured against. A combination of solutions, including near term continued usage of thermal, augmented with alternative energy sources and recall of some Churchill Falls power progressing to 2041 when any future or less green needs can be displaced totally by Churchill Falls is a viable and possible alternative. I've yet to see any consideration given to that scenario. NALCOR only positions a simple either - or proposition. There are many other possibilities that they refuse even to explore.

    • Username
      Troubled Customer & Taxpayer
      - January 24, 2012 at 15:22:15

      Actually I believe that Mr. Adams does know of what he speaks. The period of time that you assess a project is important. The longer the periodtand the larger the upfront capital he more risk of assumption error. This is why alternatives must be fairly assessed with a keen eye on sensitivity to assumptions. As Yogi Bera said " Predictions are very tough especally about the future"

  • Username
    MBC
    - January 24, 2012 at 09:59:34

    Isn't it time the brains at MUN engineering department made a few presentations and give us their opinion on all the alternatives for this project??

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    • Username
      Fred Penner
      - January 24, 2012 at 10:27:57

      You are absolutely correct. Dr Collins apparently believes he is "aiming at the core of the matter" but in fact there are several errors in his assumptions which render his arguments largely irrelevant. At the end of the day...things proceed more smoothly when no one has any actual knowledge. It is high time that the engineering expertise that performed the analysis explained itself. This is the only way that those who believe will be separated form those who know and the truth made clear to everyone.

  • Username
    Maurice Rogers
    - January 24, 2012 at 09:58:02

    It would have been nice if Collins had practiced what he now preaches when he was in office, instead of adding to our debt. For that reason, I do not place much weight on what he says. However, I fully agree that other reasonable alternatives need to be explored. I also believe that the load forecast assumptions need to be reconsidered. For example, one of the assumptions was that there would be a paper mill operating in Corner Brook and that is looking less likely which will free up more hydro. At the same time we don't want to avoid one disaster by replacing it with another disaster created with endless studies like we have in the fishery. Give the PUB more time, explore other reasonable alternatives and re-examine how the load forecasts were estimated. We got time.

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  • Username
    hydro
    - January 24, 2012 at 09:57:39

    yes, Mr. Collins is right, Bay d' Espoir needs to be expanded and supplemented by wind power so water can be stored in its reservoir for peak winter periods and this would require a new power line to the avalon, which nalcor had already before the pub. Wind power was considered at the upper churcill 10 years ago to increase plant capacity during the entire year by increased water storage in its reservoir, but lower churchill devolopment put a end to that.

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  • Username
    John Smith
    - January 24, 2012 at 09:57:05

    The only difference the worldwide economy makes to this deal is that it makes money even more cheap to accquire, and oil more expensive, making the project more viable. Wind will not, and cannot be a viable alternative unless we are connected to a stable source of energy, like the line to the mainland. The recall power at the Upper churchill is already being used, and is making us money. Why waste money on small hydro, when is a few years the money will have been spent, and we will once again be at an energy deficit. LNG would require that a whole industry be built arond delivering the gas onshore, costing untold billions, for only a small amout of gas. There will be no furhter negotiations with HQ on the upper churchill, as they allready have markets for that power. There is not one valid question in this letter.

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    • Username
      Troubled Customer & Taxpayer
      - January 24, 2012 at 14:53:52

      "Risk comes from not knowing what you’re doing." Warren Buffett I can only say Mr. Smith you have never added any knowledge in any of your comments, My Collins on the other hand has asked for some, fair game.

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