Cabot Martin: A ‘FRACKING’ Mess

Cabot
Martin, the former policy advisor to three Premiers, Moores, Peckford and Wells,
recently released a Report entitled,
“An Analysis of a Study Entitled Natural Gas as an Island Power Generation Option”.  Martin was reviewing a study by Ziff Energy commissioned by the Provincial Government;
its purpose was to counter the view, held by many, that natural gas is a viable
alternative to Muskrat Falls.

Earlier,
this year, the Government ignored the views of Dr. Stephen Bruneau, a highly
respected academic at Memorial University, who in a public Presentation, gave great
merit to the concept.

The Ziff
Study dismisses natural gas as a viable option. 
It suggests that the capital cost of developing the infrastructure for
such a small customer (Newfoundland) is too high, and that the oil companies
are not interested in a venture which does not offer a sufficient return on
their investment.  Husky Energy quickly
confirmed Ziff’s conclusion. Cabot Martin dismissed the Ziff Study.  Ziff are economists, he stated; they do not
possess the engineering expertise to assess the gas option.

This
article is not about the merits of natural gas.   You can judge the validity of Martin’s
comments yourself.

However, Cabot
inspires two critical questions which individuals, interested in NL public policy,
should ponder.



First, what
should political leaders do when they have encountered a seismic shift in the
foundations which gave rise to a major public policy initiative, making an
expensive and risky concept, Muskrat Falls, less economically viable than first
thought?

Secondly, what
if these policy makers ignore the evidence that such a cataclysm has occurred?

Investment
gurus and politicians, from T. Boone Pickens to the Premier of New Brunswick,
have noted the paradigm shift caused by the shale gas era.  The U.S. is not dithering over its potential.
The economic implications are staggering for industry, government and
especially for individual consumers. Why?  Because ‘fracking’ technologies make the resource
vastly prolific and mineable; many believe ‘shale gas’ presages an era of significantly
lower oil prices.

Why should
we worry about that? Because, lower oil prices will not only destroy the single
underpinning of the Government’s argument for Muskrat Falls’ viability, it will
severely constrain the most important revenue source on which the Provincial
Budget relies.

Martin
states: “One of the greatest challenges to any society is how successfully it adapts
when faced with fundamental change….very large mistakes can be made to the
detriment of future generations”.

Adds
Martin, and this is a key point in his Presentation: “And yet, in the face of this maelstrom of change, Nalcor and the
Dunderdale Government cling stubbornly to Muskrat Falls – the proud keystone
project in an Energy plan drafted in 2006 and made public in 2007. 

Problem is, in today’s energy work, 2007 is
prehistoric”.

Martin’s
comments, echoed by others, should stagger the Premier’s blind confidence in
the Muskrat Falls Project, but they do not.  

Let’s move
on to the second point.

During
Martin’s time as a Senior Policy Advisor to Premier Brian Peckford, he was the
guy in the room who always looked out for what others could not see; in
particular, he took notice of anyone who was inclined to the view that we are powerless
to influence big decisions, whether by big companies or a big Federal
Government.  Martin never shared those
views; he was never intimidated by “big’. 

Now, more
than twenty years later, Martin is again challenging the belief, clasped onto,
evidently, by the current crop of senior bureaucrats and an insecure political leadership this time, that it is too late
to change course on an already outdated energy strategy. 


Disconcerting
too, is that Dunderdale and her Natural Resources Minister sent out to the
Media Husky to complete any re-assurance Ziff could not give.

Dunderdale is
no Brian Peckford confronting Trudeau and Chretien in the 1980s.  Imagine, as Peckford did, this Premier facing
down the heads of a group of international oil companies and telling them, if
they drill federally issued licenses, the Province is not bound to recognize
their claims!  No! No one could possibly imagine
Dunderdale doing that.

But, it is Newfoundland
and Labrador’s loss. 

A capable Premier
would call in the head of Husky Energy, not to ask him IF he might, but to instruct
him HOW his company could assist this Province develop a new gas strategy as an
integral part of developing the White Rose field; that his company is going to join
the Province and a group of capable international consultants, in a combined
effort to satisfy, more cheaply, the electrical needs of NL, using OUR GAS
RESOURCES!  You can be certain, “Yes, Premier”
would be quickly audible from Husky’s man. 
That’s the exercise of power! That’s political leadership.

And, if
Dunderdale possessed that confidence, that skill, Husky would respect the
Premier for her bold initiative.

Likely,
Martin was thinking those thoughts at his Press Briefing.  Likely, he hoped that the media understood,
not just the things he said, but what he implied and what, in a less public
forum, he would say, even more frankly.

In allowing
Husky Energy to bolster the Government’s position on Muskrat Falls, Dunderdale
has weakened an already weak Premier’s Office.  She has raised a white flag in the pursuit of our
fundamental resource interests. Brian Peckford, Bill Marshall (the highly
competent former Energy Minister under Peckford and now retired Supreme Court
of Appeals Judge) and others must be livid!

Dunderdale’s
inability to recognize that good public policy must be allowed to emerge amidst
change, is bad enough.  Worse is that, under
her leadership, we have become, as big oil always wanted us to be:  partisan, pliable and parochial. 

It will
take some time to re-assert our place, as stewards of our own resources, we
once earned. 


But, it won’t begin until this
Premier is gone.

GROUP SEEKS PUBLIC SUPPORT FOR CABOT MARTIN RESEARCH AWARD

Cabot Martin’s sudden passing, in September, has stirred his friends, colleagues, and others familiar with his work, to honor him and encourage continued work in applied research and public policy development.

GILBERT BENNETT AND THE CONSEQUENCES OF CRONYISM

$1 million is not bad farewell for a fellow whose work performance represents one of the principal reasons for a twenty million dollar Public Inquiry, and who failed so badly in his job so badly that NL Hydro is still trying to define the mess that he (and others) has left behind.

THE “ODE”: SHORT CUT TO POLITICAL CORRECTNESS LANDS MEMORIAL IN HOT WATER

As much as anything else, it is also a simple love song to a people and to their place. It is deficient in the language of inclusion, yes, sexist by the standards of today, too, but only those who misunderstanding the language of respect ascribe to it offense whether to aboriginal, to gender, or to religious belief.

7 COMMENTS

  1. The abuse that Cabot Martin has received by the sitting government is deplorable. Mr. Martin is merely trying to educate the ignorant. They have been warned, and choose to ignore. At their own peril.

    The combination of a aging population and very low energy costs means that North America is ripe for an extended period of low inflation, if not even stagnation. We are at that point in the economic cycle.

    However, the "stable" energy prices that Dunderdale and others quote are premised on a 2% annual inflation.

    Just as Brinco failed to recognize inflation in negotiating the Upper Churchill, Nalcor have not considered the potential for energy price stagnation into the future.

    The long term stability of energy prices brought by Shale gas in North America is really the unheralded smoking gun of the Muskrat Falls debate.

    We will be paying twice the market value for energy for many years to come. The Government need to clear the shit from their eyes and really look at the entire project objectively, in the context of what is happening in the entire world, and not their own little magical place.

  2. Husky and Nalcor seem to be running the PCs not the other way around in regards to Muskrat Falls.

    Does Husky have unlimited rights to Grand Bank natural gas? Or can a more cooperative gas company come in and make a 30 year supply contract for Avalon power generation?

    180KM offshore V 1,100KM from Labrador, scaling demand V take or pay 57 year PPA, Known MW capacity V 824MW rated generation with possible WMA conflicts, $1 billion for similar MW natural gas plant v unknown cost for MF damn + transmission.

    Natural gas infrastructure could cost $3-5 billion but there is over 60 TRILLION cubic feet of natural gas in the Grand Banks. NL via royalties alone will pay off any initial gas infrastructure (possibility a PRIVATE company would pay for 100% of the NG-I for lower royalty rates).

    Labrador can replace diseal generation with natural gas, lowering their carbon footprint.

    Gas is sold @ 1000 cubic feet – Grand Bank gas therefor has 60 billion units to sell.

    Grand Banks gas for domestic use equals 2-4% of current known reserve: Husky can surly make profit+ from the remaining 95+% when market prices match their pricing points.

    Natural gas and LNG have a much MUCH better long term export market V Muskrat power. USA becoming energy self sufficient through shale gas and new energy technology – even HQ is going to see their market value drop heavily in the next 30 years as a result.

    Alec C

  3. It won't begin until this titular premier, and the real power behind the throne – the Nalcor head office – are gone.

    The tail is wagging the dog. It has to stop. If destroying Nalcor and the PC Party are the cost of accomplishing this, it's a bargain.

  4. You refer to a seismic shift— that low gas prices and possible lower oil prices will bring to the MF scheme. I referred to the quantum jump in efficiency for heating, reductions of 65 percent,in my submission to the PUB. Remember, gas still puts out half the CO2 as burning oil. It is looked at as a interim solution while more sustainable solutionsa come along. Efficiency enables us to skip the gas phase, except as a back up source, and go green. If we were Nova Scotia, with little hydro , efficiency would not be enough, but here— I can't understand why Martin and others don't realize this.Really Nova Scotia needs all of MF, if they can afford it. Maybe when Nalcor defaults Emera will pick it up. Bt 2050 we need to reduce fosil fuel burning worldwide by 80 percent to meet the necessary environmental levels. Gas for N.S. cannot achieve this level. And gas for Nfld improves but far from eliminates the CO2 problem. I see only 2 ways for Nfld to displace CO2. One is the expensive MF. The other less costly, is efficiency plus wind plus small island hydro additions. Winston Adams

  5. Wind can easily be integrated into our grid, in conjunction with rapidly-responding gas turbines when wind levels are low. That combo, plus small hydro, if necessary would be more than sufficient for this Island but we do need the efficiencies that Winston Adams is promoting as well. All of these, in combination, would be well less than half the cost of MF.