What’s the New Energy Plan?

This Labradorian suspects there is more than meets the eye on the proposed hydroelectric development in Labrador. Who really stands to benefit and who’s being taken for a ride?

“…as a lawyer, one of the tricks I would use – and I am not going to say I would use it in trying to create reasonable doubt, but one of the tricks I would use to confuse the issues, sometimes you can argue there is a doubt inherent in the confusion.”Government House Leader on Muskrat Falls, May 3rd 2012.

Besides being a confusing statement in itself, I actually concede that this principle works. If you flood the people with enough information, especially enough information on one side or aspect of the argument, people get caught up in the confusion.

It’s a common ploy of politicians, governments, and corporations – set the tone of the debate on one side, while working the angles for what you really want so when the tide turns (especially if you expect it to, or cause it to, turn) you’re ready to guide people through the rapid confusion. This is very common during election campaigns – one guy promises to pave your roads with gold, then after the election says it’s not feasible right now, so here are some dirt roads instead and so on.

I think they call it bait and switch

But, far be it from me to accuse any corporation, this government, any previous government, any opposition part(y)(ies), any previous MHA, or especially any Premier or previous Premier of participating (knowingly or otherwise) in any political scheming or background game playing, particularly on the subject of a $6.2 ($8? $10?) Billion dollar project such as Muskrat Falls. We’ve all seen where that kind of talk gets you, albeit sometimes temporarily.

Whether intentionally confusing or not, we the public have been embroiled in debate about the pros and cons of a New Energy Plan! (renamed for fear of trademark infringement) for years now. I mean seriously, we’ve been talking about Gull Island and Muskrat Falls essentially since the first development up stream. Most notably, however, were the more recent (almost) deals of Tobin/Bouchard in 1998 and the Grimes/Landry one in 2001.

The former, possibly overly ambitious, was blamed for getting in bed with Quebec by giving them ~35% ownership of the project, despite the fact Quebec was going to finance most of it (and the current “Anglo-Saxon” route gives a 20% ownership to Emera, but Anglos are good guys right?). The second was blamed for getting in bed with Quebec by signing a 100% purchase agreement (but Newfoundland and Labrador would own the facilities, and recall power).

But note the differences (and similarities)

Between the two projects there was recognition of a need to supply Labrador Industry with power. Whether through recall power, or through up front supply contracts, Labrador Industry needs 500MWh now (p.54) or 800MWh in the VERY near future (if you believe the Liberals) or 1300MWh (or more if you believe the PCs) to develop the $10 to $15 Billion dollars worth of minerals. CANADA FACT: ALCOA now smelts aluminum with Labrador power in Quebec because the Grimes deal fell through. Though the Grimes Gull Island deal had no Island in feed, it did not cover the Muskrat Falls portion which could have been developed later for that purpose.

Now if you look at the current deal a few things stand out. The first noticeable thing is that the project was divided into two parts for some reason (Muskrat Falls station and the power lines). The second thing I notice is that the power line portion is estimated to cost less than it did in 1998. The third thing I notice is that construction has commenced, money (8% of this year’s budget!) has been provided to Nalcor, and deals have been made (with Canada for a loan guarantee and Emera to pick up 20% of the tab).

But I also suspect something else is going on

For some reason, despite all the chest puffery, our government refuses to go it alone. Mainly because we can’t afford it I suppose, but likely because the risk is too high for anyone to finance us. I tend to think that something is always going on, but there’s something that I can’t quite put my finger on that doesn’t sound right in either of these deals. Maybe it’s just a lack of strength of merit for the project itself, or our relatively weak position in confederation. But it seems like our current (and previous) government is simultaneously gung ho and soft on this project.

For instance, one of Danny Williams’ top goals was to develop this project. Two weeks after announcing a tentative deal he steps off the stage. One could argue it was the best deal he could get, so he decided to finish it up. But some would argue the deal is less likely to succeed without him there. So why leave, when he clearly could have taken it across the finish line? One reason might be that if it fails because of the countless landmines (Innu at the time, NunatuKavut, federal loan guarantee falls apart, public opinion collapses, opposition parties gain ground, Emera/Nova Scotia quits etc) he isn’t to blame – he did a great job right? Conversely, if the project succeeds despite the hurdles he’s ever more the hero for starting it. After each and every hurdle this project has cleared, however, the current government’s position has softened (the prevailing impression that you’re a traitor if you oppose it has changed to allowing a debate in the fall, for example).

But where is Danny now?

You got it! Labrador mining. He’s not a stunned feller; in fact I highly respect his cunningness. So much so that I find it hard to believe that he’d go work somewhere that has no hope of getting a power supply to ensure the success of his business. As you know, currently 100% percent of Muskrat power is slated to leave Labrador. Maybe it’s just random that the project was separated into two parts (Muskrat Falls and an in feed to the island). But then again, would the people of this province support spending upwards of $3.5-$4 billion dollars solely to build power capacity on the mainland so that industry (and thus the economy and population) in Labrador can grow?

Or would you build public support for a project that has sole benefit to the populous portion of the province, with a back up plan in case the in feed option falls apart (those southern Labrador Inuit have beaten the province before on this turf too)? Seriously, we’re talking over half the project cost on power lines, that don’t have extra capacity to handle future development (Gull Island). The cost of the power lines has been shown to be enough money to replace and build on the power needs of the island with other sources.

So what would it look like when the tide changes?

I suspect the Muskrat Falls project is relatively sound, if the power stays on the mainland. I also suspect that the Labrador-Island Link has too many hurdles to clear before power can start flowing by 2017, if it ever does. So my observation is that the province wrangled a sweet deal from the federal government, during election time, for a federal loan guarantee. I also believe Nova Scotia was brought in in order to activate those federal interest powers (section 92 – interprovincial), and to secure legitimacy for the loan guarantee and extra funding for the project. If the project goes ahead as is, everyone can pat themselves on the back for paying more to avoid Quebec for some reason.

However, if the riskiest/costliest/not-yet-federally-legally-environmentally-or-Aboriginally-approvliest portion of the project falls through, there are options right? I mean, all those industries up in Labrador have been bawling for power, and have been promised it. Construction on the dam plant itself might even proceed while we try to “save” the island in feed option (I’m thinking years ahead before that side falls apart). At the end of the day we might even have a half finished power plant up there when we finally throw our arms in the air and say, hey, let’s make the best of this project and sell the power up in Labrador – use those profits to replace Holyrood at that time.

Which is exactly what I suspect was the plan all along

Oddly, I also believe people in this government aren’t (at least fully) aware of that plan. Nor do I believe are the next up-and-coming government(s) – this goes well beyond political parties. Or maybe it’s just this big lovely political football to score points off the feds, Quebec, the Aboriginals, or whomever else to boost the polls every now and then – maybe they just don’t want the game to be over until all the points have been scored.

Or maybe this government is aware of all of this and wants the debate in the fall to be the last possible out. (unless the U-Boat sinks the development – haha

Either way, I don’t believe this project is going the way everyone thinks it is.

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