Flawed policy on hydropower...

It was interesting today to speak directly with the Premier - and ask him - about the policy to export any power from the Lower Churchill development.

It is important for all of us to stay on top of this issue and have a say in the development.

I have been posting for over a year now on the policy of exporting Lower Churchill power. Most readers of Sue's Blog know that I support a policy which bans the export of hydro-electric power.

I will now review the conversation I had today with the Premier on CBC's Crosstalk - and hope to add more to discussion.

I began my conversation with the Premier by reminding him of statements he made when Leader of the Opposition.

The first is from the House of Assembly on March 19-2003:

...Iron ore is shipped to Quebec and other countries for processing. Our cheap hydro-electricity from the Churchill is sent to Quebec, where it is used as an enticement for economic development and job creation for Quebecers.

and in a speech on Voisey's Bay on June 12-2002

...I don't need to point out that that is exactly what people say about Churchill Falls and Hibernia and Terra Nova. Once the construction boom is over, that's it, the benefits and short-term jobs are gone. At some point we have to stand up and say "enough is enough". We have to stop the giveaways. We give away our fish to foreigners; our hydro-electricity to Quebec; our shrimp to PEI and Quebec; our iron ore to the United States and Quebec; and our bright energetic young people to all four corners of the world.

The Premier acknowledged the statements and added "bulk - bulk - bulk" to it.

I then expressed to the Premier that I agree with his stand in sending big business the proper message when wanting to exploit our natural resources. And added that I - like him believe that if industry is given the choice - they would rather bulk our resources out rather than build infrastructure in the province. He confirmed that position.

When the Premier walked from the table on Hebron - he said here are our terms if you want this development. He was also prepared to use legislation to help force negotiations - and was only stopped because that required Ottawa's participation. (oil and gas resources offshore - technically belong to Canada).

I further suggested to the Premier that I agree with his gamble on royalties and equity and believe that oil prices will remain high and continue to increase over the mid to long-terms. I then pointed out that if we are correct - then the value of hydro-power is that much greater.

My question was:

Will you send a message to industry - big industry - that if they want to use our hydro resources in Labrador they have to come here and use it and legislate it in a way where we can no longer export power but have infrastructure here to utilize the power. And then when you send that message to industry they know what the rules of the game are - the same way you gave it to the oil companies and I assume will continue to give it to CVRD.

Premiers answer:

It's a good point Sue - you understand this project as good as anybody in the province - and you know that in order to finance a project of that magnitude you have to have some guaranteed power sales. Now some of the things we can certainly look at here for starters that give us some of that guaranteed power purchase - is the removal - of course - of the fousty emissions - for want of a better term - that are coming out of Seal Cove. So we take 600 MW's and we get to the Island - then we have 600 MW's sold on a long-term basis that will be profitable to the province because oil by 2020 - 2022 will reach a cross-over whereby that will pay for itself. The other thing is of course because this a multi-billion dollar project and the numbers have been ranging anywhere from 6 - 10 billion dollars - you've got to have the guarantees in order to secure the financing. Now I've already said though this government will stand behind its financing because we want to make sure that this project is a Newfoundland and Labrador project.....

But I can tell you one thing that we're really actively looking at is bringing industry to Labrador - cause my priority if we're going to bring any major industry to this province - that it go to Labrador first - for all the good - for all the right reasons.

Then I asked:

The question still remains - if industry knows that it has to come here to use it - and they can't pick it up in Ontario when we're finished selling it - if they know they have to come here to use it - do you believe there's value in sending industry that message on this renewable provincially owned resource?

Premier's answer:

What I can tell you - what we are doing - we're looking at - as part of a package of doing this particular project - would be getting some major industry to this province. Now we need to understand that of course that we have to be producing competitive power - Quebec because of the volumes of power that they've got because of some new wind that they are putting on now - are offering cheap power - and I know British Columbia as you also know that there's some very cheap power that's been offered to Alcan or Alcoa or one of these companies out there as well. So you know we have to be in the competitive league in order to get it - but I can tell you I would certainly prefer - as you know - and I'm sure all Newfoundlanders and Labradorians would - I'd certainly prefer to have that industry here - that will be our goal. If we are able to get for some of our power - if we're able to get the spot-market power prices say 14 cents that Quebec might be getting on some of our power - that is very very lucrative and if we're able to get some of that with surplus power - I wouldn't turn a blind eye to that and have to sell it for three cents at home just to bring industry in. So there's a mix there. I think you understand that as good as or better than anybody.

Please read the Premier's comments again and consider the following:

The Premier says we need guaranteed power sales to finance - let's agree with him - why do those power sales have to be guaranteed by export? They don't! We can get guaranteed power sales in Labrador from industry.

The Premier says he would prefer to use the power for industry here. What's the likelihood of that happening when the Premier and his "energy team" is running around the country talking about our available power to export?

Further - I can tell you the advice the Premier is getting must be weak - if he does not understand and believe that not only is Lower Churchill power competitive - it is one of the best remaining hydro developments in North America.

One must consider the Premier demanded and says he has received what he preferred for Hebron development. This despite Exxon and Chevron's multitude of oil and gas resources globally some of which are much more competitive than Hebron - therefore what's preventing our Premier in setting down the rules for hydro power?

Hydro is owned and controlled by the province - unlike the oil and gas offshore and our fishery. We can legislate and negotiate whatever terms we want for our power.

When the Premier references the spot-market - we cannot bank on those sales as they do not constitute long-term power contracts - which is what the Premier says is required to finance the project. So then we get to selling the power to Quebec - Ontario - or the Maritimes for 5 or 6 cents (4 - 5 net after marketing - and transmission costs) versus selling it to industry here for 4 to 5 cents. Compare the two potentials and understand that only one of them will employ the thousands of young graduates and skilled tradespeople on a long-term basis. Industry!

I will be commenting further over the next few posts on specific industry information. I leave you with this to think about. In my opinion the Premier should employ people who are able to deliver to him his preference - industry for Labrador - because right now the best team is not in place.

When the Premier first talks about taking 600 MW's and removing the thermal generation in Holyrood as one power contract - without first being able to provide a significant potential contract with an industry for Labrador - something is flawed with the policy - and it's best to fix that right now.

Why won't this Premier set the rules for industry relative to hydro development?

His comment on energy in Quebec and BC - is some form of admission to being inferior to these provinces in our relative potentials. We are not. The comment on wind in Quebec - no basis for it - incorrect. Yes they have wind installed - it is supplementary not additional and is not as cheap as hydro-power - that's why they continue to develop their hydro potentials.

Be back soon with more info and questions...

Will Hebron attract the "Homing Pigeons"?

Don't count on it Premier.

Homing pigeons is how Williams likes to describe Newfoundlanders and Labradorians who move away to find jobs.

Every time he says this - I get a little annoyed at his comparison and his false belief that people who have been forced to establish themselves in another province or country - will just pack up and come home should short term opportunity present itself.

That's a natural weakness from somebody who has not been forced to make ends meet - or somebody who goes paycheck to paycheck barely paying the bills - no reserve for investment for pension or otherwise - or somebody who has the lights cut off or telephone disconnected.

Make no mistake many of these people work hard day in and day out - and are those who primarily vacation at home - hunt a moose - catch a few trout or a rabbit. They don't need the advertising from Tom Hedderson to tell them what their vacation realities are. And I suppose - if you must vacation at home - we are lucky enough to have the best place in the world to do it.

A story out of the Edmonton Journal yesterday expresses what some "homing pigeons" feel about the Hebron announcement.

Barry Shortt originally from from Burnt Point said - in part...

He thinks the project will jump-start the Newfoundland and Labrador economy and create more jobs, but he plans to stay put.

"Most of these people travel to Alberta to find work and return when work arises at home," Shortt said. "As for professionals, they settle into a good company and start a family here, so they will probably stay."

Stephen Ennis originally from St. John's said - in part:

... he misses the sense of community in St. John's, but doesn't see the project as a reason to move back home.

He came to Edmonton unemployed, but now has an established career as a plumber-gas fitter and calls the city his home, he said.

"I'm not interested in going back to Newfoundland because you have to look at the opportunities and the position Alberta is in right now"...

Then there is:

Dominic House, 54, came to Fort McMurray from St. Alban's Bay, N.L., in 1979.

"This is home for me, it's where my kids were born and Alberta has been good to me," House said.

His first job was as a truck driver. Eventually, he worked his way up to a job with the human resources department of the same company, he said.

House said he would never think of moving back to the East Coast for a job that would likely be temporary.

"You're looking at a lot of jobs for the construction phase. If you have a permanent job in Alberta, why would you leave?"

And that probably says it all right there. Hebron means numerous construction and building trades jobs for a relatively short period - then it's all relative to supply services and working on the rigs.

Hebron will drive the economy and the revenues are great for the treasury - more particularly the long-term - one anticipates - generous returns as a partner and recipient of royalties.

Getting those "homing pigeons" to return is going to happen when Newfoundland and Labrador establishes long-term industry prospects like we see with the IOC or will see with the processing facility for nickel. It's the jobs that will be around for 25 -50 years that will bring a person home to Newfoundland and Labrador - and that's where energy is key.

We can build the Lower Churchill facilities and while doing so - the engineering and building and construction trades will be booming - but if we don't use the resulting energy to power industry - the exodus begins again.

Quebec - Ontario - Nova Scotia - New Brunswick - and the New England States really don't mind if Newfoundlanders and Labradorians build the project - they only care they can access the reliable - renewable - cost competitive - superior energy - to develop their industries. If that happens - I can predict where our next generation of Newfoundlanders and Labradorians will be living.

If our Premier does not get this - there is no Hebron - that will ever stop the out-migration of our people and the continued decimation of rural Newfoundland and Labrador.

Yesterday I heard Kathy Dunderdale express they are gambling on the price of oil remaining above $50 a barrel for the next 20 or so years. I would agree and say our treasury will be the better off for the gamble. If the Minister and Premier want us all to believe that - then they must accept how valuable Lower Churchill power will be over the same period. That's what happened with the Upper Churchill. So while Quebec pumps over 80,000 jobs into their economy last year - while we grow 500 - remember what drives that province. Energy and the industry attached to it.

We must not export Lower Churchill power. Industry must be told they won't pick it up in Ontario - New Brunswick - or the USA - if they want it - they must come to Labrador and use it.

Then and only then Premier will homing pigeons return.

Think about it - if a homing pigeon is currently in Alberta with a guarantee to be fed for 30-40 years - or can fly home for 4 or 5 years - only to return to Alberta again - then don't be surprised at the choice made.

Oil and gas are temporary - finite - the fishery and renewable energy is where the real policy choices have to be made.

When you have the whole of Labrador lined with refineries as Edmonton's east side does - then you can say - we got it - we got it.

Williams held his News Conference in the wrong Venue

As Sue's Blog has already posted - I support and have supported the Premier regarding his position on Hebron.

Now - unfortunately all positive feelings on the MOU for the development - have been removed and replaced by my feelings of contempt of an individual who believes he is above even his own principles.

When Williams stated that this resource development would not be brought to the floor of the House of Assembly for debate and ratification - he and he alone placed himself squarely in the college of Stephen Harper - Paul Martin - Loyola Hearn - and John Efford. Premier you are now misleading your own people.

During the Voisey's Bay negotiations and subsequent Statement of Principles you stated that such deals must go to the peoples House - whether the deal or good or bad - you felt anybody could miss something and maybe the wisdom of 48 could prevent serious errors or loopholes.

You are now saying that because a deal or MOU is brokered by you - the same should not apply. Not only is this arrogant but it borders really close to a dictatorship (one man rule)mentality.

What I can say now is this - neither you or nor Gerry Reid are sincere when stating resource deals should be brought to the HOA for debate and ratification because neither of you tabled legislation during your tenures to assure this.

I will take Lorraine Michael at her word and therefore she stands as the lone voice of democracy and principles of openness and accountability.

Listening to Paul Oram on VOCM open-line this morning was nauseating as he tried to justify Williams being above all others - therefore the checks and balances of our elected institution should not apply. Paul Oram - as an individual grown man - should really stand back and listen to what he actually said this morning - and try to find where he left his common sense - and rethink hero worship of a human being.

Gerry Reid is no better than Williams - both used the concept of bringing resource deals to the HOA for purely political gains as opposed to doing it because it's right.

It is time that government introduced and passed this legislation to ensure that any leader falsely believing they are above error or scrutiny are put back in their place in a thinking democracy.

If this is how Williams is going to respond to openness and accountability - he should have booked a space at the Basilica or the Cathedral for the announcement.

The voter must now really reflect on what or who they vote for. If you elect Williams now - in great majority - we give him the continued right to rule by decree - and worse carry on with the Lower Churchill development in the same atmosphere as the Upper Churchill fiasco. He should not be permitted to hold himself above everybody else or even more scary - believe he actually is.

These Tory Puppets should think long and hard about supporting let alone praising this stance.

What a sad day - following what should have been a celebratory occurrence for the people and the Province.

The Premier by allowing the closure of the Stephenville Mill - changing his mind on the status of the Metis - and now this refusal to place the MOU before the House of Assembly - is choosing to keep company with the Prime Minister (Steve) right Dan?

A + for the Hebron MOU - stay tuned...

As one Newfoundlander and Labradorian who stood squarely behind the Premier on his position with big oil - I am not disappointed. The benefits announced from the Memorandum of Understanding signed off by both sides are extremely beneficial to the people of our Province.

As I also believe strongly in equity positions on major resource developments - this 4.9% is something I support fully. That is exactly what Norway has done to make Norsk Hydro what it is today.

The equity position is great. 4.9%

The super royalty is great. 6.5%

The stated intent on local engineering - design - and construction work is great.

The Research and Development commitment is average.

$120 million over the life of the project.

The Education commitment is poor.

$1 million pre-sanction to College of North Atlantic and Memorial University of Newfoundland to enhance skills training.

On the choice of platform - Floating Production, Storage and Offloading (FPSO) - or Gravity Based Structure (GBS) - myself and the Premier may disagree but both would have exceptional benefits for the province - if the legal agreement delivers the objectives of the MOU.

Here's the difference for me:

The FPSO can be costed over more that one project and is significantly cheaper. The GBS is one project - one unit and currently is a permanent structure in the water.

This means cost recovery or time to royalties may be increased with the GBS. On the Premier's side of this however is the GBS is more labour intensive especially for building and construction trades. So one might say what we lose on the cost recovery/royalties we make up for through increased employment and perhaps materials supply.

I would and have argued that the FPSO technology is an area where facilities such as those found in Marystown benefit greatly from gaining expertise in building and maintaining them - in a fashion that additional work from FPSO's not involved in our oil patch would be achieved. In other words an industry developed on but not dependent on our resources.

Having said that it is believed that GBS is better for heavy oil projects.
Further the GBS is now being looked at for LNG applications. Perhaps we can develop an industry based on these structures.

Considering the engineering expertise employed by government and the oil consortium - I yield - to that decision.

All in all this is an advanced MOU which satisfies the Province's benefits list for the Hebron development.

Danny Williams was right to hold off until equity - super royalty - and employment/construction/engineering targets were achieved.

This MOU is a superior and an advanced position for a province in deals with oil companies/consortiums.

I do not believe the oil consortium gained anything tremendous in this MOU. I do believe the Province gained substantially in this particular project.

I do believe the additional benefits to some or all of the consortium partners will be found outside this deal in future ventures. We will get into that next week.

Now it's back to the Lower Churchill.

Keeping our eye on the ball...

On this day of oil frenzy - I am not commenting on until I see the meat - we must keep our eyes on the ball. Lower Churchill Power


First of all most of Sue's Blog readers know I am not a fan of Atlantica. This new corporate version of the 4 Atlantic Provinces - which best I can tell boosts Nova Scotia and New Brunswick first and foremost

Now the latest - seems Newfoundland Power has jumped into energy policy and the Lower Churchill by selling the concept of an Atlantic transmission line to Atlantica participants

Recently Atlantica (AIMS) held a conference where energy was discussed.

Here is what the Newfoundland Power representative said - according to Charles Cirtwill acting president of the Atlantic Institute for Market Studies.

Newfoundland Power took that opportunity to outline the significant benefits of the Lower Churchill development. Access to the energy generated by this clean and renewable hydro-electric project could enable provinces and states throughout Atlantica (and beyond) to shift to lower-cost, reliable energy while taking off-line older, and arguably less clean, coal-fired generation capacity.

Cirtwill then adds:

The proposed route for this energy would bring the power via undersea line from Labrador to Newfoundland and then from Newfoundland to New Brunswick. Yes, New Brunswick, not Nova Scotia – despite the fact that Nova Scotia is significantly closer to Newfoundland and that undersea power lines are very expensive. I was curious as to why, so I asked.

It turns out that, first off, "pancaking" of transmission rates (stacking one rate on top of another) would drive up the price of Lower Churchill electricity. Apparently, the longer undersea power line is cheaper than the pancaked rate of running through two provinces. Second, Nova Scotia has only a single connection to the continental grid, increasing the risk of service interruption due to breakdowns or maxing out the capacity of the existing infrastructure; whereas New Brunswick has just upgraded some of its linkages to the grid and is exploring how to do more.

These types of barriers are not only going to keep Lower Churchill electricity from travelling through Nova Scotia (and make it more expensive for consumers than it needs to be even if it goes through New Brunswick), they are also limiting the potential for further expansion of our own renewable energy projects. Proponents argue that the potential for Nova Scotia to become a centre of renewable energy is virtually limitless. They are quick to point out, for example, the innumerable potential locations for wind farms (locations that would not, by the way, require us to put one in Anne Murray’s, or anyone else’s, backyard).

The problem is, they have limited ability to ship the power off once they generate it; and even if they could send it along to market, pancaking and other inefficiencies guarantee them a higher cost product when it comes time to sell it to you and me.

Atlantica isn’t just about ports and roads and bridges. Saint John is fast becoming an energy hub. Nova Scotia, indeed all of Atlantica, needs to be seriously exploring the potential of becoming a sustainable energy gateway.

First of all Atlantica is not real - however when AIMS makes such declarations we should be looking behind doors or under beds because a bogeyman is close. Cirtwill speaks of the Atlantica concept in such real terms - you and I are left to wonder why our Premier has not told us about the deal yet. Or whether Williams even knows the discussions are taking place in Halifax on Newfoundland and Labrador resources and the benefits it can bring other provinces and states.

This is however the hangover of presenting the Lower Churchill as an export project designed to help everybody else where their economies or environmental problems or industry woes. This type of talk - which is essentially other provinces divvying up our power before we develop it - is because Danny Williams will not treat this power potential with the same level of detail and protection "accorded" to oil and gas.

Now if all this is not enough - the Atlantica ghost held another preach-in called "Reaching Atlantica: Business Without Borders" 2006 in Saint John - New Brunswick.

According to a story in the Telegraph-Journal - Tim Curry director of the Atlantica Centre for Energy had this to say during that get-together:

"It's an energy age and people are going to be increasingly mindful about the diversity and security of energy sources.."

"It doesn't matter what you're doing. If you're going to plunk money down to build a manufacturing plant or any other business that is critically dependent on a source of energy, then you're going to look long and hard at the energy regime in the area where you are looking..."

"If you don't have both secure and diverse energy supplies, you're not going to invest. Not anymore."

Well you can't say it better than that - if you want manufacturing - smelters - heavy industry - you use power (energy) to attract them. If we export the Lower Churchill then what?

By the way what information does Newfoundland Power have on all the transmission route potentials - that we the people do not have. Will Fortis be the one to build and operate the transmission grid for exports? Is that the private sector Williams alluded to recently?

Clearly the discussion of Lower Churchill Power is very public and open in Ontario - New Brunswick - and Nova Scotia - not here! Clearly the only reason it is being discussed is the anticipation that other Provinces and States might get their hands on this superior renewable power supply.

And again - our media asks nothing.

If one wanted to be a dictator - there's no better place than Newfoundland and Labrador to fulfill that personal need for "power".

Hibernia - an Income Trust??

Now that would have been interesting - Hibernia as an income trust.
Finance Minister Jim Flaherty told a finance committee the feds had received several proposals to just that.

Now that one would have kicked the provincial coiffers - the odd thing is - the feds remain a partner in the Consortium which includes Exxon Mobil Corp., Chevron Corp., Petro-Canada, Murphy Oil Corp., and Norsk Hydro A/S.

Can you imagine that one - the feds hiding under an income trust - reducing taxes?

The only thing Flaherty did not say was if it was seriously considered by any adninistration.

For the complete story PRESS HERE