There are
some, including this Blogger, who had hoped the Federal Loan Guarantee (FLG)
would not get final approval.  The UARB’S
approval of the Maritime Link scotched that possibility. 

It does seem
bizarre that critics of the Muskrat Falls Project, in this Province, would look
to outside intervention to defeat an unwise, even foolhardy use of public money.  But, when independent assessment is shut down
and essential information denied, the options are scarce. 

Now that the
Government has prevailed, it is unlikely that thousands of Newfoundlanders and
Labradorians will pack our version of “Independence Square” (as the citizens of
Ukraine are now doing) to push-back bad policy and to demand the Government’s

most people have no idea the extent to which their Government has entangled
them. But that has all been said before.  

The question
is: should Newfoundlanders and Labradorians feel more secure about Muskrat
Falls now that the FLG is in place?  The
answer is:  they should not.

One analogy
might liken the award of the FLG to giving the NL Government the bullet,
Dunderdale and company already being in possession of the gun.  But the comparison is only partially
correct.  Nalcor committed at least $1
billion to the Project prior to confirmation of the FLG or even UARB approval.

To be sure,
the FLG would not have been forthcoming without the revised deal with Nova
Scotia. That is when Nalcor, over a barrel,
capitulated upping its commitment from 20% to roughly 50% equivalent power from
Muskrat Falls. 

Anyone who
believes that the FLG was related to the election of Peter Penashue or due to
any triumph in Federal/Provincial relations or because our Federal Liberal and
NDP MPs supported the idea of the FLG, ought to seriously seek a reality

Any observer
of Canadian politics knows that, in the absence of a strong Regional Minister,
few major files get traction in Ottawa. 
Even when we are represented by a Regional Minister progress on any
substantial issue is a tough slog, as former NL Regional Ministers John Crosbie
and Brian Tobin can confirm.  Muskrat
Falls was never going to happen without the FLG notwithstanding the Premier’s
bluster that she would “go it alone”.

For that
reason Wednesday was really Nova Scotia’s day, not Newfoundland and Labrador’s.  The ceremony was held here, but the real celebration
happened in Nova Scotia.  It is an irony
that will not be understood, here, for three or four years.  

Scotia’s Federal Minister Peter McKay has done his Province yeoman service.   We will be picking up a large chunk of Nova
Scotia’s electricity for a very long time.

That said, I
want to return to the earlier question. 
Should you feel more secure now that the FLG is in place?

Does the
issuance of the FLG imply that the Project is more financially sound than
critics, at first, suggested?  No. 

It is
important to remember that financing was based upon a “Power Purchase
Agreement” (PPA) between Nalcor and Newfoundland Hydro.  The PPA is a “take-or-pay” scheme to recover
from the ratepayers (you) the costs of financing the Project plus a
rate-of-return to Nalcor. The PPA will deliver a maximum of 40% of the power
from Muskrat but you will pay 100% of the costs.   The PPA is the foundation of the $5 billion
loan and the FLG.  The Dunderdale
Government has decreed you will pay it back.

Do you
believe that the estimated $6.2 billion will cover the costs of the

I have found
no evidence to take comfort in Nalcor’s numbers.  I have examined several megaprojects
undertaken in NL and throughout Canada; all endured serious cost overruns.   Where will the additional money come from?  I think you already know the answer.
For more on the issue of cost overruns, please see the following links: 

Does the
issuance of the FLG ensure Muskrat Falls’ completion?  No. 
While the Province has issued a “completion guarantee” it can only be
completed if funding for the cost overruns can be generated by the Province.  Otherwise, Nalcor will rush back to Emera to
be rescued and you will witness the beginning of Muskrat’s privatization.

Has Nova
Scotia placed itself in a position where it might install the Maritime Link and
not have the power Nalcor has committed? 

agreements relating to the Maritime Link have no connection with Muskrat
Falls.  The Dunderdale Government has
approved a deal which gives Nova Scotia access to our island power capacity,
like Bay d’Espoir, including ‘recall’ power from the Upper Churchill.  You will be supplying Nova Scotia, every year
for 24 years, Muskrat or no Muskrat at 4.2 cents per KWh.

God, Peter
McKay, you are good!  But, your Nova
Scotian buddies weren’t dealing with a lot of Wall Street sharpies, were they!

Does the
provision of the FLG imply that Quebec Hydro will lose its challenge, in the
Quebec Superior Court,
the Water Management Agreement?  No.

The Federal
Government clearly decided not to link that question with the FLG, although
that would have been a prudent measure.  NL
has chosen to assume all of the risk of Muskrat regardless which way the Court decides.

Would you like to be
reminded of the power capacity of Muskrat Falls if the Quebec Court defeats
the Water Management Agreement?

According to
figures supplied by Nalcor, rather than 824 megawatts, the Project will supply
only 170 MW of firm power in the absence of the Water Management Agreement.

What will
the Dunderdale Government do if they lose the case?  An answer would be speculative. But, according
to the UARB, the cost to NL of obtaining its approval of the Maritime Link was
in the range $706 million to $1.422 billion (page 70).  Nalcor complied.  Dunderdale said it was a good deal. The Premier has been given enough money to dig a big hole, but as to value any has been awarded to Nova Scotia to provide cover for her and Ed Martin’s folly.

How will
Dunderdale satisfy Quebec?   Quebec has a
longer term view than does the Government we elected.  I think you should be very concerned.

What can we
do now?

Do you mean
in the absence of showing our displeasure, peacefully, and attempting to rid
ourselves of this Government, Ukrainian style? 

We can wait
for the bills to come in.
Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.


Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.


This is the most important set of negotiations we have engaged in since the Atlantic Accord and Hibernia. Despite being a small jurisdiction we proved to be smart and nimble enough to negotiate good deals on both. They have stood the test of time and have resulted in billions of dollars in royalties and created an industry which represents over a quarter of our economy. Will we prove to be smart and nimble enough to do the same with the Upper Churchill?


  1. Well, Mr. Sullivan, us "naysayers", in the absence of any details, can concede only that the Premier has negotiated a reasonably good deal on the loan itself. However, as you so candidly point out, we are still on the hook for any additional equity injections…if and when the project goes over budget. Of that I am certain, given the history and nature of such undertakings.

    The biggest challenge may yet come from Hydro Quebec's court challenge and I have very little faith in our government's ability to win that case….so, as you asked, where will the additional power commitment to Nova Scotia come from? I will dare to speculate and say that Holyrood may very well see an uptick in output in future years. Then, instead of producing power for us in the range of 10-12% per year, we may very well see it going into the 25-30% range. So much for reducing our reliance on oi!. Alternatively, if they continue with their plan to mothball Holyrood, they will have to look at wind and/or upgrade the transmission lines from Central or the Bay Despoir dam. All of these things could have, and should have, been don, to allow for the closure or upgrade of Holyrood….for our own purposes. Now, we are doing it totally for the benefit of Nova Scotia.

    I totally subscribe to your view that Peter McKay has done a tremendous job of delivering this project for the benefit of Nova Scotians. We, in the meanwhile, are left holding the bag, and our people will be paying for Nova Scotia's cheap power for decades. I always felt that the feds would come through on the loan guarantee….if it were to benefit Nova Scotia. Otherwise, they would have broken their promise to our province…..the only one I have ever wished they would break.

    When I hear politicians of any stripe saying this is a good project for us, I have to ask: "What are you drinking?" Because, all of the available evidence indicates this is a monstrous deal for us….in a negative sense. I truly hope people like you and I are wrong….but every indicator suggests we are being sold out by our own politicians and the business elite.

  2. Regardless of any cost over runs we have mortgaged the future of this province for absurdly expensive electricity we likely don't even need. The phrase " too green to burn" comes to my mind as I bow my head in shame to be a Newfoundlander. After 64 years of confederation is this what we have come down to, a bunch of backwater hicks too green to burn? Ed Martin, Ms. Dunderdale, et al., will be salted away in a few years and likely well taken care of, but the bulk of Newfoundlanders will toil in servitude to pay back the billions misspent in our name. There will be no revolution and likely few protests to compare with what is happening in Kiev, but when the oil runs out and the energy warehouse looks a little empty I hope people remember that it didn't have to happen like this.
    John Darryl Pippy

  3. When I hear politicians of any stripe saying this is a good project for us, I have to ask: "What are you drinking?" Because, all of the available evidence indicates this is a monstrous deal for us….in a negative sense. I truly hope people like you and I are wrong….but every indicator suggests we are being sold out by our own politicians and the business elite.

  4. Yes, the make-work project would have gone ahead without the Loan Guarantee. If Ed Martin (the real Premier) is willing to go ahead with billions in overruns barreling down the track, he is willing to go ahead for the cost of a "mere" additional billion or so in borrowing costs.

    He can explain it all to the judicial inquiry in 2018.