The reaction,
last week, to Nalcor CEO Ed Martin’s announcement that another $800 million had
been lathered on to the Muskrat Falls project attracted some interesting
reactions from provincial politicians; in another case there was no response at
all.
last week, to Nalcor CEO Ed Martin’s announcement that another $800 million had
been lathered on to the Muskrat Falls project attracted some interesting
reactions from provincial politicians; in another case there was no response at
all.
Newfoundlanders
and Labradorians seemed to take the news with typical equanimity.
and Labradorians seemed to take the news with typical equanimity.
There were
no street protests, no calls for Martin’s resignation (though there ought to
have been), no demands for the Government to resign.
no street protests, no calls for Martin’s resignation (though there ought to
have been), no demands for the Government to resign.
Public quiescence was maintained possibly
because Nalcor still has cash flow; Newfoundland Power will send the bills
later.
because Nalcor still has cash flow; Newfoundland Power will send the bills
later.
Still, an
additional $800 million is a staggering sum.
The new total is $8.33 billion when interest during construction on
the new overage is included; that is slightly higher than the $8.19 billion
I had reported in my last missive (having been corrected by a ‘qualified’
economist).
additional $800 million is a staggering sum.
The new total is $8.33 billion when interest during construction on
the new overage is included; that is slightly higher than the $8.19 billion
I had reported in my last missive (having been corrected by a ‘qualified’
economist).
Speaking of
which…we haven’t hear from Dr. Wade Locke. Locke is the MUN Economist, who
proclaimed to a capacity crowd filling the Inco Centre, he approved of the
Project.
which…we haven’t hear from Dr. Wade Locke. Locke is the MUN Economist, who
proclaimed to a capacity crowd filling the Inco Centre, he approved of the
Project.
But, it was the
warning he left with an audience in Norman’s Cove, a few days later, that some
remember. Locke is reported to have
stated, if the Muskrat Falls Project exceeds $8 billion it will cease to be the
lowest cost option.
warning he left with an audience in Norman’s Cove, a few days later, that some
remember. Locke is reported to have
stated, if the Muskrat Falls Project exceeds $8 billion it will cease to be the
lowest cost option.
It is
unlikely the folks in that small community found the dismal science enlivened
by the perennial fog that hangs over the isthmus; away from the din and roar of
oil sated St. John’s, and the profundities of the Board of Trade, he may have
found that rural folk can be counted on to give discerning clarity to arrant
nonsense.
unlikely the folks in that small community found the dismal science enlivened
by the perennial fog that hangs over the isthmus; away from the din and roar of
oil sated St. John’s, and the profundities of the Board of Trade, he may have
found that rural folk can be counted on to give discerning clarity to arrant
nonsense.
At $8.33
billion, I thought the Professor might take the opportunity and recant early,
in advance of the more ghastly numbers to come. Not a chance. Locke is quieter
than a Nalcor Consultant with the summer off.
billion, I thought the Professor might take the opportunity and recant early,
in advance of the more ghastly numbers to come. Not a chance. Locke is quieter
than a Nalcor Consultant with the summer off.
Other politicians
were at the ready to fill any void of Dr. Locke’s making.
were at the ready to fill any void of Dr. Locke’s making.
Liberal
critic Andrew Parsons suggested he is worried about the Project’s mounting
construction costs.
critic Andrew Parsons suggested he is worried about the Project’s mounting
construction costs.
“We’ve
always known this was an expensive project,” he told reporters. “And what we
have here now is an extremely expensive project.”
always known this was an expensive project,” he told reporters. “And what we
have here now is an extremely expensive project.”
The Liberal
Opposition has always approached opposition to the Muskrat Falls project with the
ambivalence of a tire kicker. It has
always preferred to attack fringe issues, like transparency and ‘oversight’, without
ever condemning the project. The
Liberals never could muster the leadership to counsel against Muskrat’s risks or
its dodgy economics when there was still an opportunity to kill it.
Opposition has always approached opposition to the Muskrat Falls project with the
ambivalence of a tire kicker. It has
always preferred to attack fringe issues, like transparency and ‘oversight’, without
ever condemning the project. The
Liberals never could muster the leadership to counsel against Muskrat’s risks or
its dodgy economics when there was still an opportunity to kill it.
Insiders in
the Liberal Party like former Nalcor Director, now MHA, Cathy Bennett and
policy peon, Dean MacDonald, lent no backbone to Dwight Ball; not that he was
inclined to warn Danny’s boys of public risk for private benefit. Many of the people who attended the recent
Liberal Fundraising Dinner would not be happy with more than feint criticism of
the project.
the Liberal Party like former Nalcor Director, now MHA, Cathy Bennett and
policy peon, Dean MacDonald, lent no backbone to Dwight Ball; not that he was
inclined to warn Danny’s boys of public risk for private benefit. Many of the people who attended the recent
Liberal Fundraising Dinner would not be happy with more than feint criticism of
the project.
If Ball were
able to say: ‘I told you not to do this’, he might now be enjoying the status
of one with real moral authority heading into the next election. But he can claim only the same boast as the
NDP. That’s not much.
able to say: ‘I told you not to do this’, he might now be enjoying the status
of one with real moral authority heading into the next election. But he can claim only the same boast as the
NDP. That’s not much.
MHA George
Murphy described the announcement as “unsettling”. The PUB should have been able to do its work, he declared. The
NDP, too, would now like to sermonize, but like the Liberals, it was not
prepared to go to the wall against Muskrat or for the PUB. It is tough to go against the tide of Union
interests or when there exists strong public support of a bad idea. Leaders
choose to lead or to follow.
Murphy described the announcement as “unsettling”. The PUB should have been able to do its work, he declared. The
NDP, too, would now like to sermonize, but like the Liberals, it was not
prepared to go to the wall against Muskrat or for the PUB. It is tough to go against the tide of Union
interests or when there exists strong public support of a bad idea. Leaders
choose to lead or to follow.
The public is
never wrong and it does not reward followers; which brings me to Premier Tom Marshall. He had a comment on Ed Martin’s Muskrat
Eulogy, too. Having been warned long ago
of the cost overruns by Vale and by other megaprojects, the Premier decided
they could now be used as ‘benchmarks’.
never wrong and it does not reward followers; which brings me to Premier Tom Marshall. He had a comment on Ed Martin’s Muskrat
Eulogy, too. Having been warned long ago
of the cost overruns by Vale and by other megaprojects, the Premier decided
they could now be used as ‘benchmarks’.
“I look at
some of the other projects,” Marshall said. “I’m very comfortable. I look at
what’s happening with Vale and their project, and with Hebron.”
some of the other projects,” Marshall said. “I’m very comfortable. I look at
what’s happening with Vale and their project, and with Hebron.”
Like falling
objects, look out for a changing narrative on Muskrat Falls.
objects, look out for a changing narrative on Muskrat Falls.
Pretty soon
most people, including the Liberals (after the next election) and the NDP, will be totally against it. Take note: they always were!
most people, including the Liberals (after the next election) and the NDP, will be totally against it. Take note: they always were!
This is the key story behind this one, as reported yesterday by CBC:
Labrador Iron Mines Holdings Ltd. says it has suspended all operations at its mines for the year, due to the low price of iron ore and a refocus by the company to cut costs.
The company said 2014 will be a "development year" as it concentrates its efforts on developing its Houston Mine, located near Schefferville in northern Quebec. The project is slated to begin production in April 2015, pending the completion of financing.
Labrador Iron said it is also looking to lower costs by renegotiating with major contractors and suppliers, and has already put in place savings initiatives in various areas including mining equipment rates, rail car leasing rates and corporate and administration costs.
It said it has enough cash to continue operations over the next year, but is looking to obtain financing if the price of iron ore continues to decline.
"However, there are no assurances that LIM will be successful in obtaining any required financing, or in obtaining financing on a timely basis or on reasonable or acceptable terms," it warned in a statement.
"If LIM is unable to obtain adequate additional financing on a timely basis, the company would be required to curtail all operations and development activities."
John Kearney, the company's chairman and chief executive, said the company was able to reach its sales target of approximately 1.7 million wet metric tonnes of iron ore for 2013, but this was done "at the expense of product quality," affecting the grade and consistency of the ore.
For the fourth quarter ended March 31, it said it had a net loss of $20.5 million, or 15 cents per share, compared with a net loss of $71.3 million, or 65 cents per share, in the same period a year earlier.
For the financial year ended March 31, the company reported a net loss of $105.2 million or 83 cents per share versus a net loss of $129.7 million or $1.56 per share a year ago
So, there is no market in Labrador for Muskrat, no need on the island (and far cheaper alternatives there) and no export market in a world with surplus 5.5 cent power.
Can't we just rename some things for legacy purposes and be done with this?
Wade Locke realized his backing of Muskrat Falls has damaged his credibility and no one has seen him since the Harris center presentation(Nalcor rehash).
On one slide Wade says there's a 5% demand decrease for each 20% price increase for electricity, yet this was not reflected in residential demand projections.
Industrial demand only has Long Harbor in the additional column, CBPP is on vote-buying life support and LIM is idling down because they are operating at a net loss in Labrador.
Where does Nalcor get their 12,000 GWh(+50% current) demand projection by 2067? Industrial demand is plummeting and the population of NL is set to drop 10% in the next 20 years. 23,000 GWh of electricity will be available in 2041 at the lowest cost possible from Churchill Falls. MF Least cost option glazes over UC power available 26 YEARS before MF contract runs out.
Nor did the govs fav economist point out the increased costs in relation to the home heating rebate with costly MF power. Currently $30 million a year is spent on the HHR @ our current 12.4 cents kWh, what will this number be when power is 20 cent kWh – $100+ million?
Nalcor nor Wade got independent accreditation from multiple North American utilities nor suppliers involved with natural gas power.
Organic Battery technology doesn't put a damper on the 1200 KM of transmission lines required for MF to reach the Avalon? Any energy storage source that can offer a stable medium for utilities powered by an intermediary generation (wind solar, spilled hydro) puts a mac sized hole in MF.
Populist anti-intellectual media "personalities" rarely talk about scientific advancements or have guests/interviews that counter their preconceived notions. NL requires far less op-ed media and detailed investigative journalism, because both opposition and government don't install confidence with major issues.
WMA court battle, costs up 40% from the initial snake oil salesman pitch on MF, advancements in technology, grid efficiency – NOPE continue HMS Nal-inac at full speed ahead says the navigator Ed Martin, black ice be dammed.
It wasn't Locke's finest hour. He started out the lecture with an Accountant type disclaimer up front. I mean the one they give when they haven't audited. Locke said that he wasn't being paid, he had a full time teaching and consulting load in addition to preparation for the lecture. A day later in a Telegram interview he wasn't sure if the transmission costs were in or out (they were out for much of his presentation).
Locke's numbers on natural gas were off by about a factor of four as in 400%. His capital projections were about double those used by Stephen Bruneau (which were backed by comparative projects). His natural gas costs were short term Japanese contract prices for LNG which are about 60% higher than European prices and 500% higher than shale gas prices in US. He didn't factor in the efficiency factor of combined cycle natural gas to Holyrood (61% to 35%) meaning that the conversion of 1mmbtu to a barrel of oil is about 3.3 not the 6 he quoted. Those numbers are why rates are in the 4 to 5 cent range in the US.
In terms of Locke's $2 B threshold. I believe that was based on the total project including the link which is now just north of $10 B when NS costs and interest during construction are factored. This is versus $6.2 B quoted in Locke's presentation.
Mr. Locke, the government, and NALCOR….all of them have put the blinders on when it comes to examining alternatives, and in knowing when the cost got to the point where it was absolutely out of control. It was never economical based, as it was, on some mythical price for oil.
One of the fatal flaws in his argument was to look at the traditional means of generation at Holyrood, as compared to switching to the use of natural gas. Or, alternatively, developing wind resources…. and using a converted Holyrood plant only as a back up. Two wind farms would have adequately handled peak periods, and then some, in the winter. Also, the additional transmission lines would have brought extra power to the Avalon, instead of simply having it stranded due to the bottlenecks in the current system.
The need for a rapid ramp-up type of system at Holyrood was evident due to the "lack of wind on a cold winter day in February" to paraphrase Mr. Martin….and one of the few statement he ever made that I could somewhat concur with. However, these days in Newfoundland are rare indeed! Not getting wind is most unusual on the island!!
From everything I have read and researched, the two wind turbine farms would have cost around $1 billion and the conversion from oil to LNG for Holyrood around $600 million. These costs, plus new transmission lines to handle additional capacity, would have cost around $2 billion in total…as compared to a cost of $20-25 billion for Muskrat Falls, during the construction and the 50-year payoff period. This does not include ongoing maintenance, replacement of the underwater transmission lines, etc.
Of course, the reason it was all skewed in favour of Muskrat Falls, to begin with, was due to the government's interference in the PUB process. Both government and NALCOR knew, beyond a shadow of a doubt, that a fair hearing on the issue would have blown the Muskrat project out of the water. That's why they dictated the terms of reference to attain a pre-ordained outcome…. while selling the people of the province down the "Muskrat river". It will be to their everlasting shame and our complacency, as a people, that this will be a millstone for the next 50 years and one that will hamper any hope of financial independence and sustainability.
I find it truly ironic that that these same politicians continue to preach self-sustainability to municipalities while demonstrating an completely irresponsible and nefarious use of the public dollars generated primarily from oil wealth.
What do we really have to show for it, Mr. Locke??
People continue to sleepwalk through the MF minefield, seemingly oblivious to the danger that lurks ahead. The signs are everywhere, and getting more ominous, but it is also obvious that the politicians don't want to face the truth. It doesn't matter which party they represent….they are, all of them, letting the province down.
When the final costs come in….not one politician will be able to say, "I fought it all the way". That, in and of itself, is a major tragedy and one that totally perplexes me. Surely someone, in one of the parties, has clued in by now that this is a virtual disaster. If not, do they know something we don't? I would submit that they are being neglectful, stupid, or muzzled if they have not challenged the status quo by now.
Just wondering if the NDP will be around after the next election.
All good points in this blog post and the comments. Ditto Rany Simms' column in The Telegram today. The present and future demand fundamentals do not exist on the island to justify the expense of Muskrat Falls and never did. The extra cushion of power we need could be provided by a couple of small wind farms such as the one in Fermeuse or a gas turbine and the third line from Bay D'Espoir. For the record, Wade Locke made the comment about $8B being too much when he appeared as guest speaker at the Irish Loop Chamber of Commerce in May 2012. It is extremely perplexing and disheartening that neither of the Opposition parties, nor anyone on the government side, has had enough backbone to come out and call this thing a dud, if not a fraud, which is what the Muskrat Falls project really is. The old cliche that people deserve the government they elect is proven true again. All the fight seems to have gone from Newfoundlanders. It's enough to make you wonder whether it was ever there, with a few notable exceptions, in the first place? What Newfoundland desperately needs, but alas doesn't have, is a young Richard Cashin type, someone with energy, integrity and courage enough to speak the truth and do the right thing in public life. The only real opposition to the project for the most part has come from a very few of us in the media and a few of our elder statesmen and bureaucrats, such as Ron Penney and David Vardy, who are now retired. The age 40 to 60 generation looks to be a wash when it comes to living up to our civic duty. That includes many journalists, almost all of the academic community at MUN and espeically the politicians.
Craig Westcott
Topsail
Craig…I'd like to remind you that Mr. Simms applauded the creation of Nalcor and the whole "energy warehouse" propaganda. He also said, "We all know that high oil prices are here to stay." as former open line host.
Mr. Simms could have used his positions both as former VOCM Open Line host and current Mayor of MP to be extra critical of this project although I suspect even he was compromised and likely conflicted.
I believe that the Board of Trade are complicit by their silence as are many of our civic leaders.
The full court press never did materialize and we will pay dearly for this massive white elephant.
Keith
Both Baie d'Espoir and Cat Arm were designed with the ability to add an additional 25% turbine capacity. This would add an additional 175 MW peak output but would not increase the total power output as it would drain the reservoirs faster. However they could add another 175 MW of wind at about $2.5 M per MW and set it up for pumping water into the reservoirs when the wind output is not needed. There is also an ideal energy storage advantage in central whereby water that normally flows north could be pumped into the Baie d'Espoir reservoir that flows south so that the height the water is lifted is less than it flows down producing more energy out that put in. This is a very unique opportunity.
The wind studies conducted for Nalcor used older (ten year old) wind technology which is about ten per cent less efficient than newer systems. They also used a higher cost of capital than they used for Muskrat. The external gas studies used a new hub at a $5 B cost for our own offshore. Everything was set up as a straw man approach so Muskrat would look like the winner and then off course they underestimated the costs for Muskrat.
If Quebec wins that court case on water management rights then they will dictate when the water flows into the system. Their big market is the New York air conditioning systems in the summer so I suppose that is when we will get full output from Muskrat. The contracts Quebec has in place to supply US customers leads me to believe that they have a NAFTA case to continue to control the water flow. The fact that the upper Churchill extracts about 7 time more energy out of the same reservoir water leads me to believe that they also have an environmental case to control operational time.
We can easily be further under the mercy of Quebec with this project.
On the other hand if we do in fact control the water flow (WMA) after 2016 then we could seek redress on the Upper Churchill. In effect they have the plant and equipment but we control the raw material. That could make this venture pay but not sure why we had to risk $10 B to test it.