Guest Post by David Vardy
Introduction
Terry
Paddon, the province’s Auditor General will be stepping down at the end of the
month. His swan song was the recent release of his annual report to the House
of Assembly, on the Audit of the Financial Statements of the Province of
Newfoundland and Labrador, for the year ended March 31, 2017.
Paddon, the province’s Auditor General will be stepping down at the end of the
month. His swan song was the recent release of his annual report to the House
of Assembly, on the Audit of the Financial Statements of the Province of
Newfoundland and Labrador, for the year ended March 31, 2017.
In light of the
parlous fiscal state of the Province one has to ask if he told the truth, the whole
truth and nothing but the truth?
parlous fiscal state of the Province one has to ask if he told the truth, the whole
truth and nothing but the truth?
Did he speak truth to power in a language that
both citizens and their elected representatives can understand? In particular,
how did he deal with the Muskrat Falls project?
both citizens and their elected representatives can understand? In particular,
how did he deal with the Muskrat Falls project?
How a Revenue Shortfall
becomes a Regulatory “Asset”
becomes a Regulatory “Asset”
Bonnie
Lysyk, the Auditor General for Ontario, recently released a special audit report,
entitled the Fair Hydro Plan: Concerns
About Fiscal Transparency, Accountability and Value For Money. The special
report relates to Bill 132, the legislation for the Fair Hydro Plan under which
electricity bills of all residential, and some small-business ratepayers, would
be lowered by 25% on average.
Lysyk, the Auditor General for Ontario, recently released a special audit report,
entitled the Fair Hydro Plan: Concerns
About Fiscal Transparency, Accountability and Value For Money. The special
report relates to Bill 132, the legislation for the Fair Hydro Plan under which
electricity bills of all residential, and some small-business ratepayers, would
be lowered by 25% on average.
Bill
132 will enable hydro bills to be reduced by 25% reducing them below the cost
of the electricity used, yet those generating the power will continue to charge
full costs, leaving government to borrow the cash to pay for the shortfall. The
Ontario AG is concerned that the government has created a non-transparent
mechanism to prevent these extra costs from impacting on its budget deficit and
its net debt.
132 will enable hydro bills to be reduced by 25% reducing them below the cost
of the electricity used, yet those generating the power will continue to charge
full costs, leaving government to borrow the cash to pay for the shortfall. The
Ontario AG is concerned that the government has created a non-transparent
mechanism to prevent these extra costs from impacting on its budget deficit and
its net debt.
She
said “the government is making up its own accounting rules” and that “the
creation of a regulatory asset legislated in the Fair Hydro Act violates the
government’s own accounting policies, developed in accordance with Canadian
Public Sector Accounting Standards.” The majority of the 25% rate reduction is
in the form of deferred costs estimated to add an extra $2.5 billion annually
until 2027. The revenue shortfall becomes a regulatory asset for ten years and
then becomes an additional cost which will be an added burden to Ontario
ratepayers and taxpayers.
said “the government is making up its own accounting rules” and that “the
creation of a regulatory asset legislated in the Fair Hydro Act violates the
government’s own accounting policies, developed in accordance with Canadian
Public Sector Accounting Standards.” The majority of the 25% rate reduction is
in the form of deferred costs estimated to add an extra $2.5 billion annually
until 2027. The revenue shortfall becomes a regulatory asset for ten years and
then becomes an additional cost which will be an added burden to Ontario
ratepayers and taxpayers.
The
result of this byzantine financing is that the AG has filed qualified financial
statements. Her report is quite explicit in decrying the approach taken by
government to create the rate reduction, without recording the cost in the
Ontario deficit or in its net debt. The AG indicates, surprisingly, that government took these measures with the
full knowledge that the public accounts would have to be qualified.
result of this byzantine financing is that the AG has filed qualified financial
statements. Her report is quite explicit in decrying the approach taken by
government to create the rate reduction, without recording the cost in the
Ontario deficit or in its net debt. The AG indicates, surprisingly, that government took these measures with the
full knowledge that the public accounts would have to be qualified.
Truth to
Power
Power
Has the Auditor General for NL spoken truth to power with the
same clarity as the Ontario AG? My public service career has taught me that in
speaking truth to power the message has to be clear and direct. Subtlety does
not work. The AG says that “the Province’s economic forecast is based on
assumptions and future expectations and, like any forecast, is subject to considerable risk and change.” (My
bolding). He says that “Given that the current forecast is based on an
assumption of steadily increasing oil prices up to 2022-23, there is risk that the forecast revenue
growth may not be achieved. (My bolding). Do these warnings go far enough
or are they too subtle? You decide.
same clarity as the Ontario AG? My public service career has taught me that in
speaking truth to power the message has to be clear and direct. Subtlety does
not work. The AG says that “the Province’s economic forecast is based on
assumptions and future expectations and, like any forecast, is subject to considerable risk and change.” (My
bolding). He says that “Given that the current forecast is based on an
assumption of steadily increasing oil prices up to 2022-23, there is risk that the forecast revenue
growth may not be achieved. (My bolding). Do these warnings go far enough
or are they too subtle? You decide.
In reading the AG’s report released on October 24, 2017 it is
clear that the NL AG is concerned about the large and mounting deficit. It is
clear that he believes the fiscal forecast to 2022-23 to be optimistic on the
revenue side, projecting higher oil prices into the future than those
experienced over the past two years. The forecast assumes that revenues will
rise by $1.1 billion, with no specifics to substantiate the numbers. At the same
time the projections show a greater measure of fiscal restraint on the
expenditure side than we have witnessed in recent years. Are these projections
based on specific plans or do they represent wishful thinking, easily
circumvented when pressures to spend inevitably escalate with the approach of
the next election?
clear that the NL AG is concerned about the large and mounting deficit. It is
clear that he believes the fiscal forecast to 2022-23 to be optimistic on the
revenue side, projecting higher oil prices into the future than those
experienced over the past two years. The forecast assumes that revenues will
rise by $1.1 billion, with no specifics to substantiate the numbers. At the same
time the projections show a greater measure of fiscal restraint on the
expenditure side than we have witnessed in recent years. Are these projections
based on specific plans or do they represent wishful thinking, easily
circumvented when pressures to spend inevitably escalate with the approach of
the next election?
The AG shows how badly we compare with the other provinces
when we compare our deficit as a percentage of GDP in his Chart 2, below. Only
the province of Alberta has a deficit which approaches ours, when shown in
proportion to GDP. However per capita debt in Alberta remains well below ours
($5,131 for Alberta compared by RBC with $28,948 for NL) and Alberta continues
to operate without imposing a provincial sales tax. Clearly our beleaguered province
is in a league of its own!
when we compare our deficit as a percentage of GDP in his Chart 2, below. Only
the province of Alberta has a deficit which approaches ours, when shown in
proportion to GDP. However per capita debt in Alberta remains well below ours
($5,131 for Alberta compared by RBC with $28,948 for NL) and Alberta continues
to operate without imposing a provincial sales tax. Clearly our beleaguered province
is in a league of its own!
Other issues
While the AG’s report is comprehensive there are key issues
which I would have liked him to explore in greater detail. These include the
following:
which I would have liked him to explore in greater detail. These include the
following:
1. How much money
will we be borrowing from the financial markets of the world and will our cost
of capital rise significantly above the interest rate paid by other provinces?
We tend to focus too much on the current account deficit and too little on the
overall deficit, including current and capital account. In recent years
borrowings to finance “equity” contributions to Muskrat Falls have been large
and this will continue for at least the next three years.
will we be borrowing from the financial markets of the world and will our cost
of capital rise significantly above the interest rate paid by other provinces?
We tend to focus too much on the current account deficit and too little on the
overall deficit, including current and capital account. In recent years
borrowings to finance “equity” contributions to Muskrat Falls have been large
and this will continue for at least the next three years.
2. Why did the
2016-17 results on operating account improve so dramatically over the previous
year? How much of this was the result of increased taxes and fees versus
expenditure cuts? Are the projections for the current year realistic?
2016-17 results on operating account improve so dramatically over the previous
year? How much of this was the result of increased taxes and fees versus
expenditure cuts? Are the projections for the current year realistic?
3. What has
government done to improve its forecasting of oil prices.
government done to improve its forecasting of oil prices.
4. Should we be
using the depletion of our natural resources through resource royalties to fund
operating programs? Why have we not created a heritage fund or used the oil
revenues to repay our debt?
using the depletion of our natural resources through resource royalties to fund
operating programs? Why have we not created a heritage fund or used the oil
revenues to repay our debt?
5. What are the
prospects for the province to reenter the equalization program, in light of the
fact that we have been removed because our natural resource revenues, albeit
significantly reduced, continue to be above the national average?
prospects for the province to reenter the equalization program, in light of the
fact that we have been removed because our natural resource revenues, albeit
significantly reduced, continue to be above the national average?
6. Clearly the
fiscal crisis which we face is principally an expenditure problem, as illustrated
by the following Chart 7 from the AG’s report.
fiscal crisis which we face is principally an expenditure problem, as illustrated
by the following Chart 7 from the AG’s report.
What are the key expenditure options which
government must consider in order to achieve an acceptable fiscal balance?
government must consider in order to achieve an acceptable fiscal balance?
7.
The following table is taken from the Public Accounts for the
year ended March 31, 2017:
The
unfunded pension liability has risen from $3.3 billion to $4.9 billion. This
unfunded liability, along with group health and life insurance retirement
benefits, continue to add to the net debt of the province. Have the measures
taken by government been successful in curtailing further growth?
unfunded pension liability has risen from $3.3 billion to $4.9 billion. This
unfunded liability, along with group health and life insurance retirement
benefits, continue to add to the net debt of the province. Have the measures
taken by government been successful in curtailing further growth?
Muskrat Falls
I
turn now to the Muskrat Falls project and to the Observations made by the
Auditor General. Observations 10 and 11 are as follows:
turn now to the Muskrat Falls project and to the Observations made by the
Auditor General. Observations 10 and 11 are as follows:
He
goes on to make the following comments on the top of page 16:
goes on to make the following comments on the top of page 16:
On
the face of it this is simply a statement of fact but, delving more deeply, one
has to wonder if the AG should have gone further, as did his Ontario
counterpart in examining the similarly byzantine financial arrangements
contrived by the Ontario government.
the face of it this is simply a statement of fact but, delving more deeply, one
has to wonder if the AG should have gone further, as did his Ontario
counterpart in examining the similarly byzantine financial arrangements
contrived by the Ontario government.
Remember
the power purchase agreement, which was part of the Muskrat Falls financial
framework, depends on an inappropriate relationship between a fully regulated
utility, namely NL Hydro, which is a wholly owned subsidiary of the
non-regulated parent company, Nalcor Energy, and the parent company itself.
the power purchase agreement, which was part of the Muskrat Falls financial
framework, depends on an inappropriate relationship between a fully regulated
utility, namely NL Hydro, which is a wholly owned subsidiary of the
non-regulated parent company, Nalcor Energy, and the parent company itself.
Remember
that the government in 2012 enacted new legislative amendments to strengthen
the monopoly position of Nalcor, forcing Newfoundland Power and other large
power customers to buy power only from Nalcor and denying them access to lower
prices in a competitive marketplace. These restrictions fly in the face of the open
access policies which are prerequisite to our access to North American
electrical energy markets.
that the government in 2012 enacted new legislative amendments to strengthen
the monopoly position of Nalcor, forcing Newfoundland Power and other large
power customers to buy power only from Nalcor and denying them access to lower
prices in a competitive marketplace. These restrictions fly in the face of the open
access policies which are prerequisite to our access to North American
electrical energy markets.
Remember
as well that the financing for the generation assets of Muskrat Falls was based
upon the backend loading of costs, foisting costs upon future ratepayers, as
has been done under the Fair Hydro Act
in Ontario and by BC Hydro. (See articles by Rick McCandless
as well that the financing for the generation assets of Muskrat Falls was based
upon the backend loading of costs, foisting costs upon future ratepayers, as
has been done under the Fair Hydro Act
in Ontario and by BC Hydro. (See articles by Rick McCandless
a. http://www.bcpolicyperspectives.com/blog/posts/what-would-ontarios-auditor-general-make-of-bc-hyd,
b. https://thetyee.ca/Opinion/2017/10/24/Will-NDPEnd-BC-Hydro-Wild-West-Accounting/?utm_source=daily&utm_medium=email&utm_campaign=241017
c. https://thetyee.ca/News/2017/10/25/Fixing-BC-Hydro-Accounting/).
BC Hydro has been deferring the expensing of costs to
reduce short term rates. In the words of McCandless:
reduce short term rates. In the words of McCandless:
Nalcor
Energy is considered to be a Government Business Enterprise (GBE) whose direct
debt is fully supported by ratepayers, so it is considered “self-sustaining”.
Its debt is not included in the net debt of the province. The corollary of this
is that if it is not fully supported by ratepayers its debt should be included
in the net debt of the province. I am referring here to the $7.9 billion in
federally guaranteed debt.
Energy is considered to be a Government Business Enterprise (GBE) whose direct
debt is fully supported by ratepayers, so it is considered “self-sustaining”.
Its debt is not included in the net debt of the province. The corollary of this
is that if it is not fully supported by ratepayers its debt should be included
in the net debt of the province. I am referring here to the $7.9 billion in
federally guaranteed debt.
The
“equity” borrowed and injected by government is a different matter. It is
deemed to be offset by a financial asset, namely the value of the shares, and
these are measured at the cost incurred for their construction. If they were
measured at market value, and if market value were less than cost, then there
would have to be a write down. In the extreme case where the assets are worth
nothing there would be no offset to the borrowed equity and the province’s net
debt would increase by the full value of the equity borrowed and injected into
Nalcor. The value of this equity is $4 billion, based on construction cost, calculated by taking the estimated capital cost of $12.7 billion and deducting Emera’s
$800 million equity, as well as $7.9 billion of federally guaranteed debt.
“equity” borrowed and injected by government is a different matter. It is
deemed to be offset by a financial asset, namely the value of the shares, and
these are measured at the cost incurred for their construction. If they were
measured at market value, and if market value were less than cost, then there
would have to be a write down. In the extreme case where the assets are worth
nothing there would be no offset to the borrowed equity and the province’s net
debt would increase by the full value of the equity borrowed and injected into
Nalcor. The value of this equity is $4 billion, based on construction cost, calculated by taking the estimated capital cost of $12.7 billion and deducting Emera’s
$800 million equity, as well as $7.9 billion of federally guaranteed debt.
AG
Terry Paddon is assuming that if Nalcor can generate increased revenues by
simply raising rates then it will be able to service its dividend obligations
and operate as a “self-sustaining” business entity. My concern is that the
whole PPA arrangement neglects demand elasticity and fails to recognize that
the enterprise cannot be self-sustaining. It also ignores the demographics and
limited disposable income of ratepayers.
Terry Paddon is assuming that if Nalcor can generate increased revenues by
simply raising rates then it will be able to service its dividend obligations
and operate as a “self-sustaining” business entity. My concern is that the
whole PPA arrangement neglects demand elasticity and fails to recognize that
the enterprise cannot be self-sustaining. It also ignores the demographics and
limited disposable income of ratepayers.
Only
if demand is totally inelastic (coefficient of demand = 0) will revenues
increase proportionately with rates. Estimates of demand elasticity cited in
the Site C inquiry tend to be around -0.4, which means that, with a doubling of
rates, demand for energy declines by 40%. Revenues will increase only slightly,
by only $100 million a year when the additional system costs imposed by
Muskrat Falls add $800 million on top of the existing $700 million revenue
requirement to operate the existing system. If a higher absolute value for
elasticity
if demand is totally inelastic (coefficient of demand = 0) will revenues
increase proportionately with rates. Estimates of demand elasticity cited in
the Site C inquiry tend to be around -0.4, which means that, with a doubling of
rates, demand for energy declines by 40%. Revenues will increase only slightly,
by only $100 million a year when the additional system costs imposed by
Muskrat Falls add $800 million on top of the existing $700 million revenue
requirement to operate the existing system. If a higher absolute value for
elasticity
is used then revenues from ratepayers would
decline as rates are increased. The outcome would be a precipitous drop in
demand as well as in ratepayer revenues!
decline as rates are increased. The outcome would be a precipitous drop in
demand as well as in ratepayer revenues!
The
Premier has announced a “rate mitigation” program. This is what the AG has to
say on this subject?
Premier has announced a “rate mitigation” program. This is what the AG has to
say on this subject?
So
even if government does not embark upon an explicit program of rate mitigation
the PPA will not by any stretch be “self-sustaining”. The AG is recognizing the
problem as a taxpayer problem only when government policy explicitly transfers
the problem from the ratepayer to the taxpayer explicitly through “rate
mitigation”. The reality is that ratepayers will not be able to shoulder the cost
of Muskrat Falls, nor indeed will our limited fiscal capacity enable
taxpayers to assume these costs. The time has come to recognize the reality of
these problems. We do not have the luxury of deferring the problem.
The
AG does recognize that if “expected future revenues are less than the cost of
the asset” then the “value of the asset would be reduced, resulting in an
increase in the Provincial deficit and the Net Debt.” In my opinion this
shortfall is a matter of certainty, given the facts as we know them. In fact I
have long argued that our net debt is vastly understated by valuing the
financial assets which represent the equity in Nalcor at cost and not at market
value.
AG does recognize that if “expected future revenues are less than the cost of
the asset” then the “value of the asset would be reduced, resulting in an
increase in the Provincial deficit and the Net Debt.” In my opinion this
shortfall is a matter of certainty, given the facts as we know them. In fact I
have long argued that our net debt is vastly understated by valuing the
financial assets which represent the equity in Nalcor at cost and not at market
value.
In
the Glossary to the AG’s report on page 78, Financial Assets are defined as
“assets of a government (such as cash, investments, loans and account
receivable) that could be used to discharge existing liabilities or finance
future operations.” In other words they must be liquid assets which can be
offered as “legal tender”. Government’s investments in Muskrat Falls are nothing of the sort!
The
AG states that “the existing Muskrat Falls business, regulatory and financing
structure ensures costs, expenses or allowances related to the project will be
recovered, in full, from ratepayers in the Province.” I totally disagree with
this statement for the reasons I have given above, and as confirmed by PlanetNL’s
posts on this Blog.
AG states that “the existing Muskrat Falls business, regulatory and financing
structure ensures costs, expenses or allowances related to the project will be
recovered, in full, from ratepayers in the Province.” I totally disagree with
this statement for the reasons I have given above, and as confirmed by PlanetNL’s
posts on this Blog.
I
disagree equally with the second sentence of the paragraph on the top of page
16 which reads: “Because this structure ensures there will be sufficient
revenue generated from ratepayer over the life of the project to cover the
capital and operating costs of Muskrat Falls, it is unlikely that the Muskrat
Falls assets would be considered impaired in value on the financial statements
of Nalcor.” For reasons well explained by PlanetNL such impairment is a virtual
certainly.
disagree equally with the second sentence of the paragraph on the top of page
16 which reads: “Because this structure ensures there will be sufficient
revenue generated from ratepayer over the life of the project to cover the
capital and operating costs of Muskrat Falls, it is unlikely that the Muskrat
Falls assets would be considered impaired in value on the financial statements
of Nalcor.” For reasons well explained by PlanetNL such impairment is a virtual
certainly.
Should
the AG have taken the bold step of blowing the lid on the fallacy of the
self-supporting business model and power purchase agreement for Muskrat Falls
and followed in the footsteps of his courageous counterpart Bonnie Lysyk, the
AG for Ontario? I leave it up to you to decide.
the AG have taken the bold step of blowing the lid on the fallacy of the
self-supporting business model and power purchase agreement for Muskrat Falls
and followed in the footsteps of his courageous counterpart Bonnie Lysyk, the
AG for Ontario? I leave it up to you to decide.
David
Vardy
Vardy
Of course the answer to your rather timid question is a resounding yes! To be as polite as possible, Paddon suffers from that peculiar affliction, common among NL civil servants, fealty to political masters rather than the polity.
Thank you again David for untangling the bizarre Byzantine minutiae of provincial financing. It is disappointing that three provinces now resort to short term accounting scams to push deficits down the accounting road. In NL as you point out with the inelastic income implications as demand reduction follows the large increases in price, both the rate and taxpayer will take a beating.
In Ontario and BC the AG's perform their democratic function and spell out the fraudulent accounting issues. In NL Paddon accepts the deception that will have a much more grievous impact on the small population. Please don't leave it to a now better informed but disempowered population.
It is time for bold action among the well informed and connected to avert disaster. Nalcor's secrecy must end now. One of Paddon's peers need to quietly, metaphorically kick him in the ass now. NL's fantasy accounting tricks need to be stopped now. Are you up for bold action to save your province?
This is the second time in 25 years that social upheaval tests the loyalty of the political class. Will it be bold action now to prevent catastrophe or timid fealty to feudal, self serving overlords?
I leave it up to you to decide.
My typo; It should read "elastic income implications".
Too bad the AG just continues to tow the NALCOR and governments line. Just repeating what they say instead if doing a proper Independant assessment of his own which his position demands. But we know that AG's aNd governments can only kick the can down the happy provincial road for so long, then reality hits us between the eyes. He challenges nothing or no one so may as well if ball et al did their own accounting in lieu of the AG's.
Who are we to believe:
The AG who says MF scheme is sound, or Dave Vardy who says the AG is not transparent and enables Nalcor and the government to deceive the people.
Come on folks: all of Nfld Hydro`s and Nfld Power`s assets on the island built up over 100 years is worth only 3 billion dollars, with about 2000MW of capacity.
Mf at 12.7 billion (and likely ending up at 15 billion), may not operate at all, and if so, can deliver only about 500 MW to the Avalon, it total average power, so only one quarter of what the island produces.
Using that metric, MF is worth about not even 1 billion, yet is supposed to be worth 15 billion.
The write down of the value is only a matter of time…….
So, our AG is a Scallywag……hiding the truth from the citizens of this province.
Paint a mask on the face of the AG, like the Take Charge scallywags. Call a spade a spade.
And ….does the AG even understand the issue of elasticity for electricity………seems not to.
Winston Adams
Of course the economy is going into the crapper, the unions are looking to negotiate a new contract. Do you honestly think the reports would be this full of doom and gloom if contract negotiations were over with?
Muskrat Falls is but one crisis. We have another crisis in the next 8 to 10 years and that is the drying up of the Hibernia oil field. It is almost 2 years past the 1 billion barrel mark and the GBS for Hibernia is now tapping into Hibernia South which is approximately 400 Million barrels. This is the result of provincial goverment policy of insisting that oil fields be fdeveloped with maximum employment (ie. short term construction jobs) and in return roylaty payments are deferred until the capital costs are recovered. The floating systems used on the Terra Nova and White Rose fields even though they are smaller fields will return a far greater per barrel royalty than Hibernia or Hebron precisely because of this. It makes me wonder when are we going to see this madness about the Mega project economy simply put to rest?
Pension Liability is the elephant in the room folks.
A 1.6 BILLION increase in 4 short years……
It seems all the politicians did in recent years was pass this issue over to the unions so the elected officials could wash their hands of the TOUGH DECISIONS to come !!
Do I hear a Richard in the room, but think he would have written more than 2 lines. As for Hibernia gbs ya ok , but you are about 25 years late in coming to that conclusion, kinda late to be saying that now, without presenting any technical evidence to back up your claim.
No, I am no Richard, just a future public service pension recipient who is very very worried with the mess the gov pension plan is in. I DID MY SHARE by paying my portion into it ! While NL Gov raped the fund and squandered the money. Now we all face the problem of paying for it.. taxpayers once or twice – me 3x
The Telegram editorial : Dire Straits,, ……….seems to think the AG was frank and transparent ……and that we are headed for hard times……..suggesting the report should be required reading.
Maybe they should have said UG is required reading.
Saying the AG report is fine is like saying all the reports supporting MF as the least cost was fine ……..but we now know the difference.The naysayers were largely ignored by the main media.
There is the truth……then the whole truth and nothing but the truth. The AG may have got part of the truth, but lacking the rest.
The Telegram, as usual, supports the elites……the government agencies that deceive us by part truth and deception. Telegram analysis as usual, me thinks. And no name to the editorial………maybe Russell, but who knows.
PF
The telegram = Fake News
I almost threw up when i Read an article about the financial problems in NL from the Newfoundland and Labrador Employers' Council and their mall mouth Richard Alexander. Everything he mentioned was to belittle the civil service and place the full blame at their feet but yet he didn't have the balls to mention the fiasco called Muskrat Falls and all the money poured into it via Nalcor. Did he mention the royalties given up when the Hibernia and Hebron GBS was built or the sinkhole called Muskrat falls? Nope because it is in the Newfoundland and Labrador Employers' Council interest to see such Mega projects regardless of the failures to be implemented and provide subsidized contracts for the very sum he represents. Richard Alexander is mute when it comes to criticism of these type of failures because the Newfoundland and Labrador Employers' Council is by far the biggest beneficiary of such government nightmares.
Well put but the most important word is a typo. "provide subsidized contracts for the very sum he represents" should read scum he represents.
When Danny Williams gave a speech (or was it a rant about Stan Marshall) to the St. John's Board of Trade ( or is it the St. John's Board of Lobbyists) last February the Newfoundland and Labrador Employers' Council with Richard Alexander as their representative Lap Dog and others in the business community were as silent as the air in a cave. They were well prepared to lick his arse if he offered them a few tidbits of his Galway development but yet not one questioned his integrity when he tried to rake Stan Marshall over the coals because he told the truth about Muskrat Falls. What a despicable bunch of business leaders that reside in this capital city of ours. I am hoping that Ottawa does take over our finances and then the federal civil servants put the likes of Richard Alexander out to pasture with his pathetic lobbying for privatized Health Care so the local yahooing business community can make their subsidized profits.
What I learned from the 2008 collapse of financial institutions, was that cute expressions such as "non asset backed investments" were invented in order to follow the "too big to fail" policies which followed. Given Boondoggle debt financed projects; Ontario Nuclear, Muskrat, Site C, Ontario renewable, come to mind, and having vastly inflated Liabilities, inventive accountants, urged on by you know who, come up with outrageously overvalued "Assets" to bring the accounts into "Balance".
In reference to the last piece: Beothuk
I see in New york they auction off offshore for wind developers, just recently 42 million paid, Did Mercer but offshore wind rights in Nfld?
NY intending to have 2400MW of wind by 2030
Mfs now testing 9.5 MW wind turbine gear train systems in USA at University, each about 50 million invested in this testing………..what is MUN doing…….testing wind from Wade Locke!
Larger turbines enables wind development with lower than average wind speeds………..advantage for wind being close to the load.
In sunny California, they have too much solar power generation………….needing storage etc to balance the system. Storage important for wind and solar, and storage is now more economic than before.
Statoil is getting into renewable wind in a big way.
PF
PF
Using the Canada-NS offshore analogy, This federal/provincial have assumed the Crown Share ownership, with respect to offshore oil and gas. They are currently out for bid on drill permitting. To my knowledge, nowhere in Canada does this one industry management scheme apply to renewable energy, not even for hydro development. Any industry/person is still "free" to develop solar, wind, tidal, geothermal on titled property. Consider Bay St. George and Beothuk, what agency "owns" the Crown Assets RE? Is it possible that NALCOR has become that public entity?
https://goo.gl/aUCbSD In a chilling similarity to what is currently happening to the Grand River Mishtashipu Lower Churchill Boondoggle..
Mr. Vardy, on a CBC TV interview earlier this week Anthony Germaine asked Wade Locke "what is the effect" of the unexpested higher costs of Muskrat Falls and the need for more borrowing on the financial/fiscal situation that the province finds itself in (paraphrased).
Locke replied that "those are factored into the debt numbers already".
Would you care to comment?
Maurice
The question has been raised as to whether the impact of the increased costs of Muskrat Falls has been fully reflected in the numbers. In my opinion there are adjustments which need to be made to adjust the net debt of the province to reflect the growing divergence between the value of the assets as valued by construction cost and the market value of the assets. The accounts do not reflect impairment of value arising from cost escalation and from consumer resistance to higher power rates. You cannot get blood from a turnip so the assured cost recovery and self-sustainability are a chimera.
David Vardy
Thanks David,
I get the gist of it.
We are in dire need of some straight talk (and its clear we cannot expect it from Locke).
Maurice
Locke is correct on this one. The money went from the NL government in annual chunks and is therefore included in the provincial debt. A dishonest political answer is inappropriate in any case and in this case also.
Yay David! Great job.
Me?
We shouldn’t let politicians anywhere near the money.
They seem to either steal it or lose it to scoundrels, the pattern continues, and we the electorate pay the piper.
And, did anyone see the link between record quarter bank profits and the little nudge up in interest rates?
Tor
Missed the record bank profits item, and I an investor in banks……goes to show …..not a gamble or a worry…….they nickle and dime you…….so why not own part of them. My net worth ticked up more than usual, so maybe a result of what you say.
And interest rates at record lows for years…..GICs paid 19 percent in the 1980s……..trust we will not see that again or there will be a lot of empty houses……….younger generation loaded up with debt……make no wonder they are not concerned about MF………no financial sense.
INVESTOR
I beg to differ on the younger generation not being concerned about MF or having no financial sense. As someone who is trying to break into the housing market, which has been speculated to death by "investors" from the boomer generation, going to in debt is one of our few options. I know people putting childcare on their credit cards because it costs 60% of their income, what else can they do when they also have a mortgage and hydro bill to pay? I suggest you step back and take a look at the bigger picture of what is truly driving the financial decisions made by those who are younger than you, because lack of financial sense is pretty low on the list, and DESPERATION is a hell of a lot higher. If you're so damn well versed in the world of finance, maybe you should start lobbying government to include financial and civic education in primary and secondary education so the trend caused by greedy "investors" doesn't ruin the whole damn planet once it's done ruining this country.
You lump me with greedy investors, and dismiss the younger generation who pile up their credit card debts (interest charges bout 24 percent a year).
My generation, the boomers, did not expect things on a silver platter, and want all overnight.
I took on a mortage at 13 percent 4 years after university graduation. Paid $3000,00 for my first new small car, My siblings first new cars were more than twice that cost. Completed half of my house construction myself. Bought a truck 9 years after graduation. Skidoo, after 23 years after graduation. First trip to Florida 12 year after graduation.
Built a detached garage 15 years after graduation. Had a little to spare for a GIC 12 years after graduation, and finally moved to the Greedy Investor about 25 years after graduation……..to stock investing.
Some people had mortgage rates higher than 13 percent….and survived. Some friends bought timber from torn down buildings on American bases for their house construction…..this in the 1970s.
Now people complaint with 4 percent rates, want all the toys and expensive vacation at an early age, relatively speaking.
And there are indeed greed investors……that caused the crash of 2008, and may cause another.And there are those who invest not at all, who want everything yesterday, on borrowed money………….MF on borrowed money.
Few of the younger generation cared about MF……….maybe now that the boondoggle is being exposed , especially on this blog……..but how many of your generation protested MF.
I did.
Your idea of financial and civic education is a good one, including where investing crossed over to greed, but I am a poor lobbyist. i do not donate to politicians.
Hold accountable those responsable for this mess………as the younger generation is left holding the bag for decades.
Most on this blog are older…….speaking up for the younger.
Of the younger, if you mentioned UNCLE GNARLEY……how many are familiar with this blog.
Uncle Gnarly should be known to most all, especially the younger. Find out why your future has been compromised, and raise hell.
Investor
I know nothing, like John Snow, about investments; I earn it I spend it.
But I am intrigued as I figure the Smart guys are starting to short NALCOR by now.
Tor ….how do you short Nalcor? To short Nalcor is to short Nfld, being govn owned. Maybe the bonding companies concerned.
One could short Fortis, but now at only 6 percent of their revenue from Nfld, is not a good bet to short them.
Most know little about investments, so not a crime or shame, but what of Wade Locke, and the Boards of all Nfld agencies…….expertise is essential. Wade just got it wrong, by chance? A 15 billion error? And no one , hardly , cared to say otherwise, except the muffled words of Stan Marshall, knowing there would little negative impact on them if it went ahead.
Why didn't Marshall yell from high heavens, in 2012, and intervene at the PUB, of the boondoggle that would come?
Investor
Well said investor @ 1649, even though I sorta understand the dt comment. But you reply was superb….
Our power companies advertise that for heat pumps, to maximize your energy saving, consult Take Charge. There , they only say use a unit with HSPF 10 or more.
Any cracker jack person know what this means, if this a reliable indicator for our climate for best performance, especially winter performance……. when most heat is needed.
Anyone hear the truth-challenged actor who played a starring role in the ED MARTIN SEVERANCE DEBACLE… DWIGHT BALL… on CBC radio earlier today blathering on about his bloody "7 year plan" as he dismissed the Employer's Council's report regarding the dire realities of the province's financial prospects?
That's the report that revealed that NLers are paying the highest taxes in Canada, to finance the most bloated, over-paid government in Canada.
That bloody Ball and the rest of those GD hustlers still think they're dealing with a bunch of brain-dead rubes who don't have the intellectual capacity to comprehend the basic financial concept of compound interest.
Just who the hell are those f*ckers trying to kid?
Apparently we voted in danny Williams twice so yes they are dealing with a bunch of brain-dead rubes.
You make good points, ALfie, but I suggest not more than 1 percent of adults understand the financial concept of compound interest….so incompetence rules the day.I am sure most small business owners do not appreciate compound interest concepts.
Investor.
Not only that, anyone who thinks Dwight Ball will still be around 7 years from now is as naive as the brain-dead rubes Alfie mentioned.
Ball and the rest of that gang of incompetent dimwits, and their cronies and hacks… will have long-since washed their hands of the mess.
I only hope that when the province becomes insolvent, there won't be any money left to pay out the pensions of those effin culprits.
So who are we to elect? Another ambulance chasing lawyer like Chess Crosbie who seems to have nothing but contempt for health care workers? A downtown girlie as head of the NDP who wants to borrow even more? I say on the next ballot, Commision of Government from Ottawa should be a choice.
Absolutely… any federal bailout MST be contingent on the establishment of an arm's length administrative commission, and the dis-empowerment of each and every NL politician from making any decisions involving provincial finances.
Look at the deplorable state of affairs… with the resources and land-mass of this province we should all be as well-off as the Alaskans. Yet these bloody fools prove time and time again that they couldn't run a kiddy's lemonade stand, let alone the affairs of the province.
Theses idiots have turned the place into a northern banana republic… the laughingstock of Canada. We'd all be better off under commission of government.
It is interesting that some are discussing some of the benefits that Commission Gov. in the 30's and 40's did for NL. Hope Simpson's Salt Fish Corporation broke the merchant cartel and price fixing, from which the Fishermen had alternatives to the Crosbie/Hickman/others. What needs to be done is to break up the NALCOR cartel on energy and have power generation made competitive, fed into a nationalized grid. This can be done within the existing government, if there is a political will. It is disappointing that the voters in NL are incapable of coming up with a more free market economy. Recent polls continue to support the status quo.
Seems some are coming around to my way of thinking, that I have stated on this blog before, and I am not speaking politically , but we as a people are incapable of governing ourselves. We proved it before and we may prove it again in the next few years. But the first step is recognizing that fact, and then and only then may we see the way forward to governing ourselves. And it is not by looking for another saviour, as we have done in our pass, we as a people can be our only saviour, it's the power of the people engagement and not by leaving it to the so called elected, and putting our complete trust in one leader even if elected by a major majority of the people. Constant viligamce, engagement, involvement and education in our very existence needs to be front and centre at all times. Amen.
Elected, should read elete
You mean "elite".
How shaken the confidence in the NL political system become? That these dodgy skeets and inept fools comprising the majority of NL politicians have run the place so far into the ground that there are now calls for the establishment of administrative commission.
What a disgrace… bloody-well ridiculous.
This is from The CBC's news site in an interview with Richard Alexander of the Employers Council of Newfoundland and Labrador and it shows his true colors. In it he wants the provincial government to eliminate the temporary gas tax increases in next year's budget and at the same time he states "The government spends more on sick leave than on road construction,". Well which is it Richard? If we are going to reduce the deficit then road construction and repair will also have to be reduced and this is the reason for your argument and the reason you didn't mention it in your rant I think. Road construction and repairs benefits your organization's members (which is heavily represented by construction companies) ten times more than spending on Health Care and sick leave and you dare not touch capital works projects in your little rant about government spending.
This also from the CBC interview. "Alexander said the one of the main reasons for overspending within health care is the cost of operating hospitals." Actually poor lifestyle due to consumption of alcohol, addictive drugs and JUNK FOOD is the main cause of spending on health care in this province but yet you are dead set against a tax on junk food to help eliminate it from our diet altogether. If we are going to have a discussion about health care it has to include both the sedentary lifestyle and bad eating habits of Newfoundlanders something which you are not prepared to do for it would mean the closure of many if not all Mcdonald's, Kentucky Fried and Tim Hortons and other such unnecessary businesses in order to become a healthy population and I might add these companies probably contribute to your lobbying organization called Newfoundland and Labrador Employers' Council. As usual the Newfoundland and Labrador Employers' Council offers nothing but self serving ideas on how the public's taxes should be spent.
You are right about the poor diet being the cause of a health care crisis. The Burger Queen finance minister previously jumped around the subject of a tax on junk food precisely because she was so closely affiliated with the fast food industry. The amount spent on junk food is in the hundreds of millions of dollars annually and it would probably be spent on more healthy foods if it was taxed more. the jobs would transfer to the fresh fruit and vegetable industry if that were the case but ask a NLer to give up their beloved Tim's? I don't have much faith they will.
Some time ago, on this blog there was a piece saying some 20 percent , 600 million a year could be saved on health care.
Alexander says about 200 million.
And being proactive about health care with proper food, exercise, and taxes on junk food is a no brainer…….so why not happening……
And if Alexander does not find fault with Muskrat it shows his colors.
And if he wants to eliminate the gas tax, instead of using this for conservation and climate change improvements …..it shows his colors………
We need a conversation, and all must share in a solution.
For Ball to dismiss it as a paper argument…….with no value….. we need roads, hospitals and competence in spending our tax dollars. But to do nothing seems a step along the road to disaster and hard hard times.
WA
Anom @ 14:31: I tend to agree with Ball that this is a paper exercise. It is actually something called Economic Shock Therapy and is thought at the Chicago School of Economics. It is a common practise used by corporate and financial elites that want to gain control of democratic regions. Essentially what they advocate is that democratically elected governments spend too much, tax too much and are highly inefficient. Their end goal however is to reduce regulations, taxation and government departments to a point where they are inoperable and then turn these very same areas of government into a profitable venture controlled by corporate elites and for corporate elites. They have been successful in gaining control of the largest economy in the world and the mere mention of a deficit like is here in NL sends them in a tizzy with their spread sheets and calculators. We must be weary of groups that advocate reduced spending (it usually means increase government contracts for companies), reduced taxation (they leave that problem for another generation) and increased efficiencies (which means companies that pay rock bottom wages and draw on a desperate and vulnerable unemployed labor pool). There are many in the Donald Trump administration that are well versed in this theory and are now putting it into practice. Don’t be surprised if this practice is implemented here in NL. Richard Alexander has been lobbying hard for that since ten years or more.
Anon @ 09:13 "we must be wary of groups that advocate reduced spending" ?? Surely you jest! It was and still is the root cause of our dilema with MF topping the list. Next on the list is our bloated Civil Service. We simply cannot sustain the size of the Civil Service given our meagre ability to even pay our massive debt yet no one has the balls to take the first step for fear of not getting re-elected thus affecting their pensions and here in lies the continueing problem—spend, spend, spend because at "crunchberry time" it won't be our problem and around and around goes the merry-go-round.
First when Danny Williams came on the scene he did in fact fit the bill as our "saviour"–a wealthy businessman who was not in it for the money. But Oh how we were duped! We had a history of bad governance but DW tops the list–hands down. MF would never have happened but for his intention of insuring Galway had sufficient power with Quebec being on the losing end. He was and still is a "force to be reckoned with" in Govt circles for fear of his backlash. Exposing those who caused and are still causing our continueing self crucification is essential.–Spending MUST be reduced.
The problem with reduced spending is that if private industry was able to deliver these services government wouldn't have to deliver them in the first place. Universal Health Care and universal education is a case in point. Private enterprise can deliver health care and education cheaper and more efficiently but not universally across all the population. This is certain the case in the USA where those that can afford decent insurance or access to private schools get the best of care and education but a large portion of the population don't receive any. What Richard Alexander is advocating is government spending redirected towards private contract corporations that rake large profits of the top and with minimal wages paid. He is on record as promoting this system.
And it was DW who increased the civil service up to 49 000 from around 40 000 which even at that number was extremely high. When Clyde Wells left power the civil service was at around 35 000 strong and successive governments, to reduce the unemployment numbers around St. John's and increase the capital city's economic base have increased it beyond what this province can with stand. It is no incedent that Galway was in full swing just two years after DW left government.
Never heard of Alexander until this week, and I agree that going too far in either direction can be bad. But we spent too much, and what is worse , so little efficiency, so much waste, weather health, roads,or electricity.
Recall UG piece on health issues…….and for calling clients in advance for expensive scans, as too many no snows.
I see this week that notices are posted in hospital now on this……….but no call procedure in place that I know of.
We now have a 46 million PET scan, I estimate full costs at about 10,000.00 per scan ( in the USA An MRI might run as low as 500.00.
Imagine the cost for no shows for PET scans here.
Maybe someone can explain why such a problem to call clients as reminders……..unbelievable the waste of resources and man(woman) power. Third world style operations……..and leads to suggestions such as Alexander.
And inefficiencies are fostered by government attitudes.
Winston
I'm not advocating the privatization of Government Services but at a staggering number at 49000 civil servants in a province with only 500,000–thats 10% of the total population working for Government. This is unsustainable. Negotiating with the unions for wage and benefit increases should not happen given our dire financial straits. The Public Service should be reduced substantially to get us on a level playing field. Threats from the Unions to "not to consider staff reductions" should not be influencing the Government. Unions are a good thing and our standard of living would not be as it is today if not for them but they need a reality check—The Public Service is way overbloated and its long time this was addressed. Reducing the Public Service to a realistic level, not privatizing it, is what I mean by one way of reducing expenses.
The problem is that a reduction in the civil service would send the economy of St. John's into a tailspin from which it may never recover. Any massive reductions of say ten thousand civil servants would have to be done over a ten year period to avoid massive shock to the provincial economy and municipal revenues. We may just have to accept that a certain level of services from government is vital and the only way to pay for them is through a decent level of taxation. There are areas that government should not be in and one of them is electricity generation and distribution. Privatization of Nalcor, selling off NL Hydro and establishing a more market oriented electrical grid and distribution could raise enough capital to reduce the debt if we couple it with government reductions but it will mean inviting outside interests to take part in such ventures. There may be small savings of a few million here and there but nothing done would mean anything substantial in the long term. I think the first thing we must accept is that we will never have the standard of living enjoyed by other areas of the country.
Good point but a start must be made. I agree privatization of NL Hydro and Nalcor should happen but as we stand right now with the MF fiasco and the huge albatross around our neck, doing so will certainly leave us with serious consequences.i.e losing the UC along with MF and an altering of our border in Labrador. Either way you cut it we're in for a huge loss. Private industry will not assume control of MF unless we give away the house along with it.
We are over the proverbial barrel. How's that for a legacy Danny!!
I asked yesterday if there was a Richard in the room and everyone on gone bezerk on him, and I love it. Yes, Richard likes to jump on the ill, the sick, government employees, and the aged, but the 15$ billion mind boggling boondoggles he thinks that's the best thing since sliced bread, and never utters a bad word against it. Yep, the kinda guys that got us in this mess and wants to keep us there. It took seventy years to get us a net debt has of 15$ billion, on government services, roads, health care, and yes sick leave Rick by, but less than a decade for you and your types to plung us into the muskrat sinkhole, 15$ billion, that as holes like you are glorified. Get a grip for Christ sake and bring your head out of where the sun never shines.
So well put. It amazes me how meek the interviews are on CBC when it comes to these NL Mafia.
How that other Hydro mega project got approved.
http://www.huffingtonpost.ca/dermodtravis/all-the-little-white-lies-they-told-us-about-site-c_a_23255991/?utm_hp_ref=ca-homepage
Interesting is is not Robert that the themes at MF and Site C are so similar? Exaggerated demand, regulatory short circuiting, on time and on budget lies, fraudulent contractors hired with a proven record of lies and deception.
Of course all of this is empowered by self serving politicians willing to undermine the treasury for short term political gain. Will BC come to its senses and stop the madness?
Thanks for your sharp eye, on the Huffington Post piece. White lies……truth but not the whole truth. There is a link to power forecast for Site C that is interesting, and typical, as to Muskrat situation.
First deception: Show by any means that there is a demand for the power. Once you fool the people with that one,a forecast that WE NEED IT, it is easy sailing to just keep going to boondoggle.
Winston
I have advocated for years, the breakup of Provincially owned and operated Light and Power Corporations; Ontario Hydro's nukes, Sask/NS/AB coal thermal, Hydro dams, etc. all run over non-smart grids, accounting irregularities, and rate fixing to satisfy political/corporate needs, not the consumer, monopolies, etc. etc. The only part of the system which needs to be nationalized is the grid. Let's demand more competition on the generation side.
Dismantle the provincial power corps.
Thisa question number 4 which the AG should know the answer. A heritage fund was not created because we let politicians forego future royalties in exchange for short term construction jobs on the Gravity Based Systems_A Mistake bigger than Muskrat Falls as far as I am concerned.
4. Should we be using the depletion of our natural resources through resource royalties to fund operating programs? Why have we not created a heritage fund or used the oil revenues to repay our debt?
Gbs seems to work quite well for Hibernia, but understand what you mean by cost more to build a gbs rather than fpso like white rose. But maybe a really stable platform was required way off shore for helo safety as opposed to a floating platform, that would seem rational to me, but not sure if that was the real reason. Also as our first attempt at production maybe the thinking including the oil companies, that the gbs platform was required. But Hebron may be a different quintile of fish. As both types we had years of experience on the Grand Banks in production and a comparison for weather and ice conditions experienced. So we may ask if a second gbs was required for safety reasons with choppers especially. So maybe Hebron was was built just to create onshore jobs. Would have to ask the experts especially mobile Exxon etc. , and how much control the provincial government had in deciding the type of structor used. Have to ask Danny I guess on that particular build, as he was premier when Hebron was being built, the only one that Danny had any control over. But I am no expert, just my opinion, and would leave it to the offshore oil experts to explain further. But agree it could reduce royalties in paying of a greater construction cost for onshore jobs at bull arm, etc.
When the Hibernia GBS was being constructed, Gulf Oil pulled out of the consortium and John Crosbie had to scramble to come up with $1.8 Billion in federal "investment" to enable the project to be completed. The situation is reminiscent of Muskrat Falls in that the economics weren't there at the time since oil prices were so low and Gulf was looking elsewhere for a better return. Had there been a Floating System planned the capital costs wouldn't have been much more than the $1.8 Billion subsidy provided by Crosbie and royalties accrued to the province would have been much much much higher and earlier AND over longer time. This is a little known sideline in the Mega Project disasters that have plagued NL for the last 50 years or so and is common in just about every single mega project that has been built. Bottom line? We traded long term financial benefits for short a term boom in construction jobs that enabled politicians to get reelected.
At Anom 10:03
To add to your paragraph, what people don't realize is that these "subsidies" from Ottawa are all calculated into the equalization formula. There is also the PIP (Petroleum Incentive program) grants which up until 1984 provided a subsidy to oil exploration at 80% of the costs of drilling in frontier areas. The total amount spent on the offshore from this program was in the range of $2.5 Billion which in today's dollars would be a huge sum of money. I lie you think that any future development of any kind should be assessed on the basis of government revenue or long term jobs and by long term I mean 30 to 50 years so people can build a life on that industry and not provide an election platform for politicians.
What Anonymous at 10:03 fails to calculate in the comparison of Muskrat Falls and the Hibernia GBS is that no one could ever apply the same record of incompetent management at MF to the GPS. Bear in mind that when NLers pay for Muskrat they will be paying for construction jobs as much as some of the grossest incompetence ever recorded on a megaproject in North America. There is a difference.
Don't forget what suckers NL politicians have been, deferring or reducing royalty payments for "super royalties"after the project costs are recovered by the oil company.
This scam pays greedy politicians a couple of hundred million up front to shore up the present budget in exchange for "super royalties" or reduced revenue overall. It also means the government assumes all the risk for a price nosedive as happened this decade.
The nincompoops that did this are not only incompetent, they are corrupt too.
Yes, 10:03 and don't forget Murphy oil picking up 5 percent or so. But all the comments seemed to be political or fincincial based, was there not a safety factor to consider, being 200 miles off shore choppers need a stable platform from which to operate in adverse weather conditions as opposed to a floating platform. Wether that was proven in practise would need to ask the operators and people that fly the choppers on a regular basis. And why this smaller gbs is being built in Argentia, is this for onshore job creation, or did husky/white rose deem it necessary. Muskrat, government/nalcor has total control, in the oil business oil consortiums make most if the decisions without government interference, which is the way it should be, by following the government regulations, and of course negotiations fir royalties, and trade offs that happens for work on shore, and most if it in Asia. So no real comparison between muskrat and offshore oil. And of course the biggest difference is we have made billions from offshore oil, where as muskrat will just cost us the rate payers and taxpayers billions.
Anom 13:43:
I think you are missing the point of the original post by anom at 14:25. The GBS’s weren’t built as a concern for safety since two fields (Whitrose and Terra Nova) are but a few miles from Hibernia and Hebron. The idea of a GBS was conceived by Norway for its Stavanger field which was a mere 60 miles from the port of Stavanger and the field itself was ten times larger (around 20 Billion Barrels) than all the fields on the Grand Banks at around some 2.8 Billion Barrels total. When Hibernia development was being planned, then Premier Brian Peckford wanted at total of 15 separate topside modules for the GBS systems all built at locations here in NL. The oil companies played along with this until Gulf oil pulled out and the number of topside modules was reduced to with I believe 3 built outside Nl for technical and financial reasons. A new Premier Clyde Wells with John Crosbie was able to secure financing from the federal government in part because of this strategy otherwise Hibernia development would have been delayed by as much as ten years. The point of the original post if I am reading it correct is that the gravity based systems although profitable may not have been the best option for NL since royalties were given up in return for what was the dream if dozens of these structures built for oil fields on the Grand Banks and around the world. By the time Hibernia was in production, most people realized that the Grand Banks fields weren’t able to support GBS’s on that big a scale for the simple reason the quantity of oil just wasn’t there. Even though we have gained Billions of dollars of revenues, there was some $19.5 Billon spent of GBS for Hibernia and Hebron with high paid construction jobs that are long gone. The royalties that were given up may have amounted to around $10 Billion to $12 Billion in return for these jobs. As for Muskrat Falls, well it is just a continuation of this Mega Project mentality that has plagued Newfound land since the building of the railroad in the 1890’s_poorly planned, not the best option and with certain future consequences.
13:43, think you are missing my point. As you know chopper landings and take offs are much safer in adverse or marginal weather conditions from a fixed seabed platform than a floating platform as white rise and terra Nova are even if they are just a few miles away. If a chopper is heade for white rose, and sea condition are marginal then can be diverted to the fixed platform for landing. Think that was the thinking at the time, but with improvements in technical capabability of choppers it may be as safe fir landing on the floating as the fixed, would have to ask the choppers the fly daily at the present time. And of course Hibernia was the first production on the Grand Banks. And how much royalties do you give up in the name of safety, I suspect quite considerable. As for the political aspects, yes lots of jockeying for jobs on shore by different politicans and governments. But to say Hibernia now was a mistake in lieu of a floating platform 25 years or so later, is a big stretch. But assuming it was, why build a second fixed platform, Hebron, in the last few years and yet to produce any oil. Was Hebron built as a gbs for political reasons, more on shore jobs, safety reasons or fir what other reasons if Hibernia was a mistake 25 years ago??? Maybe Danny knows as he was premier at the time Hebron was planned and his only project in the offshore oil.
As previous posters stated, the second GBS was built to create construction jobs and Muskrat is a continuation of this policy. This is the only area the provincial governments have any control over-large projects with local construction jobs for a few short periods. Coming in at $14.7 Billion, the Hebron GBS will be years (possibly in 5 years-more if the price of oil drops) before the province receives any royalties but the jobs are now gone. As for safety, the floating systems for all intensive purposes are fixed as far as helicopter landings go. The original concern was for icebergs colliding with systems but with Terra Nova and White Rose, they just have the ability to disconnect and move to safety when ice threatens their operations. The floating systems were a better option for the small oil fields on the Grand Banks with a larger share of royalties going into the provincial coffers. The only problem with that is mis-spending by provincial governments and that is something we have to demand accountability.
What the hell is the difference between a ratepayer and a taxpayer? All one and the same to me. Not much balancing to do on that end. It's not even moving from one pocket to another. That scales is screwed.
The difference between a rate payer and a taxpayer is that a ratepayer will pay for the MR debacle directly, whereas a taxpayer will pay for the MR debacle indirectly.
The most unfortunate example is the poor wretch who goes through the effort and expense of converting his electric heat and hot water to oil-fired, thinking that by so doig he'll avoid the inevitably skyrocketing electrical bills forthcoming.
But the monstrous MR boondoggle must be fed one way or another, so as revenue from electrical sales decreases due to the actions of our poor wretch… that bloated, over-paid group of inept dimwits collectively referred to as the NL government must make up the revenues elsewhere. So in addition to their despicable "deficit levy", they consequently impose an "energy levy" on all furnace fuels, propane, even the jugs of kerosene sold at Canadian Tire… and while they're at they'll also likely jack up provincial taxes on gasoline and diesel for good measure… so as to make up revenue shortfalls needed to feed the MR monstrosity.
So yeah… there's really no difference between ratepayer and taxpayer… at the end of the day they'll both pay for the Muskrat boondoggle, and pay dearly indeed.
The provincial taxpayer and electricity ratepayer are pretty much the same people, residential and business. Therefore the same people will pay for the big rat and whether one calls the flow of money, direct or indirect, is sort of academic.
Oh yeah, firewood too… the energy levy will also be imposed on the sale of firewood, as well as jacking up the fee for cutting permits astronomically.
And while they're at it, those arseholes may also implement a provincial fee on the installation of backyard clothelines, as well as a surtax on cold-water laundry detergents such as Arctic Power.
To anon at 17:59 Oct 26……HSPF
1. This is a seasonal indicator of performance, concocked by manufacturers, and rather deceptive.
2. Take Charge says units vary for cold temperature, some only good to -10C, other to -20C.
3. HSPF alone does not tell which is which, and allows low quality units to be used.
4. Another standard in addition to HSPF is required that states COP under cold conditions. Nova Scotia uses -15 C, and required a minimum of COP of 1.75. They show a large number of models and manufacturers that qualify, and this gives assurance…..info all posted online, and good guidelines for here.
5. To avoid giving this performance metric of COP @ -15C, the customer is much more likely to have a low quality unit and loose thousands of dollars in savings over the life of the unit. And the power company sells more power! Sneaky, and misleading to give only HSPF
Others are asked to comment if I am in error.
Winston Adams
I started school in the 1950s. The books included a story of Bunga, a black boy living in Africa.
Africa has always been the backward , dark continent…..to be saved by British missionaries, but exploited by the British slave trade, and racist attitudes, even today, and certainly by Rhodes ( who set up a scholarship in England, that our Ches Chosbie seems to be proud of).
But this blog deals mostly with the fiasco of Muskrat, not Africa.
Fellow Nfld engineer Robert , now retied in BC, put me onto the BC site C fiasco………and the Huffington Post piece , with a link to the "independent review " of the BC Hydro power forecast.
This a measily 12 page report, of little value, to bless the forecast.
As most reports seem to come in at about 700 dollars a page, this should not have been more than $10,000.00 to give assurance of a 8 billion boondoggle in BC.
Which gets me to the Muskrat forecast, already gone off course.
The question …Do we need the power ? ……….was a no brainer it seemed, not worth asking, although Maurice Adams asked often, in his Telegram letters.
So why the Africa reference?
Africa is still decades behind in power generation and distribution, with countries only 20 percent having power connection, but with growth rates of 5 percent a year! We cannot get a 0.8 percent growth rate, and is now declining.
But one amazing thing………they are far ahead of us on understanding and implementing power forecasting methods.
We now know that Nalcor was not world class.
What about Nfld Power? They are joined at the hip in forecasting, and their methods.
But for us to be way behind African nation, in power forecasting…………..shameful!
The Road to Muskrat started with an exaggerated forecast, and false assumptions, and using forecasting models that were not best practices. And this continues today.
We need to learn from Africa on how to forecast……..
Just how GD backward are we here to have let this Muskrat madness run a muck?
Forecasting seems like a small detail…….to which Wade Locke, and others paid little attention.
We need to send student to Africa it seems, if we want a better Alternative Plan to more Forward.
Space here does not allow the details of proper forecasting methods….but who would thing Africa decades ahead of Nfld Hydro, Nalcor, and Nfld Power!
The Internet is so handy on studies done worldwide, and allows to see if we are world class or not. Absolutely not.
Winston Adams
As an example, how much money is being spent by MUN for research on alternate energy systems (ie heat pumps, conservation and efficiencies) or on housing insulation and energy storage systems?
We use power forecasting methods here that were discredited by the early 1980s.
Studies and better methods were adopted in the USA and elsewhere by the 1980s, and places like Africa have adopted such `world class methods` ……..but not here…….and so :the boondoggle, even Locke now says forecasts were off………but why!
As to MUN…..there research is to reinforce the boondoggle, so nothing of value on what you suggest, that I know off, big bucks come to them from the power companies to help reinforce the idea that MF is a gravy train.
Pray tell, what CORE SCIENCE is going on for the things you mention. A 300 million dollar new building and a 400 million backlog of maintenance on existing building that they cannot afford to fix!
Same approach to build an unnecessary MF while letting our island power assets decay, leading to DarkNL.
Those in charge need their ass kicked, then terminated with cause. Expect we all go down together…..as nothing being done to correct things……..little chance of getting on tract………where is Ches Crosbies bright ideas!
WA
Has there ever been an Energy Audit done on MUN campus? GJ/student? How does it compare with similar campuses in the nation? the continent? What recommendations were reported? Actions? Faculty of Engineering, time to stand up.
Robert, I thought to engage MUN Engineering on verification of my minisplit heat pump setup (attic mounted) and superior performance……and really little interest on their part.
I am heating 1000 sq ft for not more than 300.00 a year, and the engineer at MUN, wothout looking at the data or setup, just states performance of minisplits heatpumps is mostly a MYTH. This one of a dozen silly comments he made, like Nfld has a 4 month heating season ( I record 12 months heat is needed, thought very little in July and Aug.
So, I gave up on MUN for expertise or interest.
Winston
I hear your pain Winston. Under the National Energy Program in the 80's, Federal funding to reduce energy losses and promote new technologies for buildings, both existing and new. There has been millions of square meters of building space, renovated and built on campus since the 80's. The prerequisite to accessing funding under the NEP was the Energy Audit. Somewhere, buried in the Director of Physical Plant's file should be some EAs.
Oh I get it now, The Mulroney Tories, and one Mr. Crosbie loudly touted the demise of the NEP and Public Works Canada, the main promoters of building science, including energy efficiency. The Fed Liberals, under Stefan Dion tried to wake us up regarding GHG reduction, and green technologies, and he was cast aside also.
Nfld Power was impressed with HP results , but rather than inform contractors of best methods for max energy savings, they suggest I notify AHRI group. This an association of mfg , who promote HSPF (seasonal) standard, which allows many loopholes for transparency of performance.
ASHRAE engineers have pointed this out, the shortcoming of AHRI.
Yet AHRI is who Nfld Power suggested…….and Nfld Power themselves promote AHRI, a misleading standard for best performance.
NS does not mislead their customers this way.
So here not a single mfg or model is approved …just this vague unreliable HSPF indicator. Hard to believe what they do and no one challenges them. Fool most of the people most of the time approach.
Winston
Robert , closing in on OCT month heating kwh, neck and neck whether lower or higher than June…………… one would expect June to be much lower, but not the case…2 days to go.
WA
If we the people own Nalcor should we not sell off some of the assets to make electricity affordable ??
Also can some explain how we own a company that produces power then sell it to nl power without seeing any profit then we have to buy it back at a higher rate ? Is this really what happens?
If we the people own Nalcor should we not sell off some of the assets to make electricity affordable ??