Guest Post by David Vardy
There are remarkable similarities between the
business model for Muskrat Falls and a Ponzi scheme, credited to Charles Ponzi,
who instigated the first Ponzi scheme in 1919. 
Bernard Madoff was one of many who built upon the
original Ponzi concept. Madoff met his Waterloo in March  2009, when he pleaded guilty to 11 federal felonies, including securities fraudwire fraudmail fraudmoney launderingmaking false statementsperjury, theft from an employee benefit plan, and making
false filings with the SEC.
 Will Muskrat Falls lead to such a wide
range of criminal charges after the Commission of Inquiry has concluded?
The business model for Muskrat Falls is built upon
fictitious energy sales which created unearned revenues. Electricity consumers
were conscripted to participate in these fictitious sales through amendments to
the Electrical Power Control Act which conferred monopoly power upon Nalcor, so
that all large consumers of power were required to buy power generated at
Muskrat Falls.

Charles Ponzi

These fictitious energy sales were embodied in a
power purchase agreement between Nalcor Energy and its subsidiary NL Hydro.
This agreement was a take-or-pay agreement which required NL Hydro and its
customers to buy the power regardless of whether any market exists for the
power. The PPA was pledged as a mortgage to the federal government who provided
the loan guarantee. Why did the federal government accept such weak collateral
for such a large loan?

This Ponzi deal claimed that energy demand would
rise from 7 billion kilowatt hours to 10.5 billion kilowatt hours within 15
years. This ignored the simple demographics of a declining and aging
population. It also ignored the fact that if rates rise then people will seek
other alternatives. Government can legislate the monopoly power of Nalcor but
they cannot force people to consume electricity when alternatives are
available, such as oil heating, heat pumps, wind and solar power and improved
insulation. Economic analysis reveals that when power rates double the demand
for power will fall by 40% or more. Consumption will drop from 7 billion
kilowatt hours to almost 4 billion. This means that demand for Muskrat Falls
power will vanish, along with the additional revenues needed to pay the $800
million in additional costs.
Compounding the fictitious demand is the
falsification of construction and operating cost estimates. The CBC confirmed the Uncle
Gnarley Blog’s report that cost estimates had been falsified to achieve project
A senior engineer who worked on Muskrat Falls says
Nalcor Energy should be subjected to a thorough forensic audit to find out how
the Crown corporation arrived at the “ridiculously low” initial cost
projection for the hydro megaproject.
“The unit prices used to generate the estimate
were far too low and did not represent the reality of harsh construction
environment of central Labrador,” the engineer said.
“The risks were vastly understated and the
contingencies absurdly low.”
The engineer — whose identity CBC News has agreed
to protect, because he is not authorized to speak publicly about his work on
the project — believes that “the purpose of this estimate was not to
generate an estimate for project implementation, but secure project
The Muskrat Falls project depends upon the timely
release of water from the giant reservoirs at the Upper Churchill. Hydro Quebec
has control over all power generated at Churchill Falls, except for 300 MW of
Recall power and 225 MW of power to replace Twin Falls. The only issue in question
is whether the Renewal Agreement which applies to the last 25 years, from
September 1, 2016 to August 30, 2041, of the 65 year power contract, gives
Hydro Quebec the same rights as they had for the first 40 years.
The Quebec Superior Court ruled in August 2016 that
Hydro Quebec’s rights remained unimpaired until 2041 and did not change at the
end of the first 40 years. Nalcor had relied on a Water Management Agreement to
which Hydro Quebec was not a signatory in order to give the Churchill Falls Corporation
the power to manage the water flow and to allow for the banking of water and
energy between Nalcor and Hydro Quebec. The Quebec Superior Court decision
allows Hydro Quebec to ignore any effort to coordinate power production through
the impotent Water Management Agreement. Without such coordination Muskrat
Falls will not achieve its full energy and capacity output.
Philip Raphals (Muskrat Falls contribution to
the reliability of the Island Interconnected system,
 October 17, 2016)
concludes that unless the Quebec Superior Court decision is overturned on
appeal or made irrelevant by a negotiated agreement with Hydro-Quebc, the power
available to Nalcor will be limited depending on the flows in the Churchill
River. He concludes that the firm capacity available to Hydro – after taking
into account the obligation to deliver 167 MW to Nova Scotia – is probably
limited to about 211 MW, far below the reputed capacity of 824 MW. “The
unavoidable implication is that the capacity balance … systematically overstates
firm capacity available to the IIS, perhaps by up to 400 MW.”

What is the essence of a Ponzi or Madoff scheme?
Surely it has to be “impairment of value”. Impairment of value arises when
fictitious demand for electricity is transformed into fictitious assets and
when fictitious cost estimates are compounded by fictitious supply of power.
Charles Ponzi assured investors they would make a
profit. As long as the money was flowing in it kept flowing out. Ed Martin
promised great returns flowing from Muskrat Falls. On September 29, 2015, in a
press release by Nalcor Energy, CEO Ed Martin said that Muskrat Falls would
generate $60 billion in “savings and revenue to the province over the next 50
years.” The November 24, 2015 response to my ATIPPA request cites an incredible
$61,848,209,000 in savings and benefits, including $27 billion in “cumulative
present worth”
over the isolated Island alternative and $17 billion in dividends.

On December 17, 2012, while announcing the
sanctioning of Muskrat Falls, former Premier Dunderdale made the following
Muskrat Falls will provide the province
with a stable revenue stream and will not impact net debt. The
project will also generate estimated revenues in excess of $20 billion over 50
years once it comes onstream. 
On December 20, 2012 Finance Minister Tom Marshall
said in the House of Assembly that Muskrat Falls
will pay a dividend to the people of
Newfoundland and Labrador of in excess of $20 billion, starting in 2017 for the
life of the project. If we were to include estimates of sales of surplus power
into the American markets, it would be over $24 billion.
The 2015 Budget Speech by Finance Minister Ross
Wiseman contained the following statement about the recovery of the province’s
investments over a mere eight years.
Government’s last equity injection in
Nalcor will be in 2017-18. Over a total investment period of 10 years, the
provincial government will have invested $3.1 billion in Nalcor. Every penny
of that money will be returned to the province by 2025-26.
From that time on, the dividends continue to increase for Newfoundlanders and
 (My bolding.)
Can we hear the voice of Charles Ponzi and Bernie
Madoff in these preposterous claims?

In the current instance governments and Crown
Corporations are the players and the citizens are the victims. Will criminal
charges be laid from this deception and fraud? What role will the Commission of
Inquiry and its forensic audit play in its disclosure and in identifying
whether public institutions acted against the public interest?
In spite of these fictions, the Auditor General
makes the following comments on Muskrat Falls in his recent report:
The existing Muskrat Falls business,
regulatory and financial structure ensures costs, expenses or allowances
related to the Project will be recovered, in full, from ratepayers in the
Province. Because the structure ensures there will be sufficient revenue
generated from ratepayers 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.
I have already expressed, in a previous Uncle
Gnarley post, my disagreement with these statements. No such assurance of
recovery, as claimed by the AG, exists. “Impairment in value” is a virtual
certainty and far from “unlikely”.
In the Public Accounts of the Province, facilities
costing $12.7 billion or more are recorded on the credit side as liabilities,
representing the money borrowed, or to be borrowed (totalling $4 billion). On
the debit, or asset, side they are recorded as fully offsetting share
certificates in Muskrat Falls. Value is based on the $12.7 billion in
construction cost. Inevitably there will be a write-down and that is when the
impairment will be officially recorded, meaning that net debt of the province
will show the impact of the project on our finances.
If the assets are written down to $8.7 billion then
the federal government and Emera will be fully protected but the NL government
will have lost out. The province’s share value will be zero. The debt incurred
by the province will remain, with no offsetting assets, so our net debt will
rise from $14.6 billion (projected for March 31, 2018) to $18.6 billion. If the
write-down reduces asset values from $12.7 billion to $4 billion then the
federal government will lose $3.9 billion as will federal taxpayers while the
province’s net debt will rise to $18.6 billion. Bondholders, protected by a
federal loan guarantee, will be saved harmless.
PlanetNL has concluded that if the value Muskrat
Falls measured by the present value of earnings, a well-accepted method among
appraisers, then the assets will have zero value. In this event we will have
lost our full equity investment of $4 billion. Before this happens will we be
required to inject even more equity capital if the cost escalates further as a
result of our completion guarantee?
Should the AG for NL now investigate the fictitious
unearned revenues, electricity demand projections, cost estimates and the
misrepresentation of power supply available? Should the AG also review the
contingent liabilities of the province to determine if the Public Accounts
fully represent the recourse to the province provided in the loan guarantee
agreement, which can be triggered by further cost escalation (the completion
guarantee embodied in Schedule A section 2 of the 2012 loan guarantee
Yes Muskrat Falls is a Ponzi scheme, grounded on
fiction and deceit. However, the $12.7 billion and rising cost is not fiction.
The costs are real. We must begin with straight talk as to where we are, how we
got here and how to escape from the Ponzi scheme we have constructed for
The appointment of a Commission of
Inquiry should be the beginning of this process but only if the terms of
reference are sufficiently broad and if the Commissioners selected have the
necessary skills for this daunting task.
David Vardy


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

Churchill Falls Explainer (Coles Notes version)

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


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


  1. The MF public inquiry needs to consists of three phases

    1) A 3-6 month duration audit of Nalcor and the MF Project team in particular. this should review their process and procedures used in things such as compilation of cost estimates, and their cost reporting procedures.
    2) A review of several of the known issues on the project to determine what went wrong, and who was responsible for the decision making. Things such as proceding without certainty on the WMA would be one such issue.
    3) A wholesale review of how our democratic institutions were either weakened or bypassed to allow this debacle to happen.

    It would be Part 1: 6 months, Part 2: 2 years and part 3 after that.

    • I am surprised of the BC Site C review being done so quickly and efficiently, having read about half of the 300 pages, and had lots of input from experts and others.
      Good efficiency there in that process. Here our PUB seems stalled…..whatever happened to the Phase 2 of the transmission reliability issue…….can anyone comment, was getting rid of Andy part of that process to terminate phase 2.

  2. Good timing for that piece, David, following yesterdays final report filed for the BC site, recommending a shut down as the least cost option.
    That report of some 300 pages has considerable info on rigged rosy demand forecasts that were not reasonable, and values for the elasticity issue of higher rated destroying demand to other options.
    Is there an error in your number 61 million (should be 61 billion) is imaginary profits.
    To think, our local scallywags might be up there with Ponzi or Madoff! Now that `world class` just as promised. Can we get a hat like Ponzi pasted on Ed Martin and the others scallywags! It does look gangster style, like Al Capone.
    Winston Adams

  3. David this is a well put description of the smelly Muskrat Ponzi scheme. Apart from the phony valuation of the asset, the WMA fiction that Nalcor controls the water flow, the phony demand estimates and revenue from the asset, one other element was fundamental in perpetrating the fraud.

    The regulatory oversight was crushed by Nalcor/SNC Lavalin. Both the Joint Panel Review and PUB were denied the full financial details. They were also both constrained temporally with tight deadlines that did not allow a full investigation of the viability of the 'Rat.

    To make matters worse, as you have pointed out, the AG is creating fictitious accounting to continue the Ponzi scheme. Is it not troubling that this betrayal of the tax/ratepayer by the AG occurs just as he is getting out of Dodge? One last Ponzi pump for the Muskrat and I am off into the sunset. See ya! The (un)Wiseman budget soils the Liberals with the same feudal slime that the Cons concocted.

    You outline the deception well and then rather passively ask should the disgraced AG investigate the phony demand and revenue estimates. Really?? Are you still naive enough to think that the truth, clearly outlined in your analysis, will set him free to virtuously discharge his responsibility?

    David, like a jockey, it is not enough to point that mare towards the finish line when one comes around the last turn. To get to the line you must use that whip to motivate the pony and the phony baloney Muskrat overseers. We are counting on you to motivate the AG and Finance minister with some tough love.

    • See Bruno, the trouble is that Vardy is genuinely a decent human being, who defers to possible good intentions of others, unless one is obviously ethically bankrupt.
      So he has not called out fellow economist Feehan, now silenced on the Oversight Committee, but has him self taken on the important issue of elasticity that will drive down demand, though Feehan is supposed to be the EXPERT on that subject (but a silent expert,gone over to the dark side, I suggest).
      See, ethics is relative: you have a sliding scale, for example Ed Martin, our AG, James Feehan, Dave Vardy, going from low to high on ethics. Vardy is reluctant to use the whip, as you suggest. But he sure used informed rational argument and logic.
      I am sure Warren Buffettwould concur with Vardy`s analysis. Come to think of it, Buffett often uses such comparisons as Vardy in this piece, in a way to make a point for investing. Brings things down where common Joes or Janes can understand when they are being taken for a ride.

    • I am afraid troll "investor" you make little sense. I repeat, ethics are not relative, you have them or not. David is ethical, one of a rare breed in NL. He is also better informed than most about the economics and the political manipulation that resulted in the MF debacle.

      What he lacks is the courage to act on his well founded concerns. This is no time to take a knee before the feudal overlords. This is the time for bold assertive action to address the corruption.

      David needs to use that whip and sprint to the finish line, not wait for the same failed democratic protectors to do the right thing.

      He also, unlike you, is not afraid to use his real name and submit his ideas to scrutiny and debate. You need to adopt his ethical approach.

    • We make progress, Bruno, as on the last post you said I was a moron. Now you say I make little sense, which implies I make some sense.
      You say David is ethical,I say he is highly ethical.
      You say he is one of a rare breed, so you imply you can breed ethics……..I can accept that, meaning you can teach it, especially by example. Maybe Vardy learned from examples or by study, but you suggest he just was born that way, or if not became ethical one day in the past, instantly…….one day unethical , then puff….ethical.
      Which ever way, the result was good, you will agree.
      Now, if more followed David`s ethics, we could breed more ethics into not so ethical people, I think. As this is a gradual process, it is relative, I suggest ( but this you disagree)
      And you feel I am a troll, afraid to submit my ideas to scrutiny and debate. It does not follow that a valid or good idea needs a name attached.
      I have expressed ideas on thesesubjects: profitable non risky investing; foolish investing in MF, investing some in renewable energy manufacturers; ethical investing; opinions on David Vardys good ethics( relatively speaking); poor ethics of the MF gang.
      Few disagree with me, except you, and even you seem to wobble, a little, wether ethics is absolute or relative.
      Maybe Vardy could settle that question……
      To be absolutely ethical is to be perfect. I would not claim that,nor close to that, nor would Vardy make such a claim I suggest.
      You say you are afraid I make little sense…….maybe you are afraid I make much sense.
      Lets agree we need more ethics here: so for ideas , here`s another…..strengthen our conflict of interest laws here.

    • Bruno, you stay awake at night too long, it seems. You address none of my ideas, which you say are important, rather you you name call A TROLL you call me.
      Yes, nobody I know is absolutely ethical, where good ethics is a virtue.
      But some I do not know, but by history were highly ethical; Jesus, Gandhi, Martin Luther King as examples.
      Thomas Jefferson wrote that Jesus had the greatest set of moral codes of any man in history, yet Jefferson not only owned , but bred slaves for profit. So relatively speaking, despite his famous Declaration of Independence, Jefferson was on the low scale of ethics compared to Jesus.
      And Jesus stated : All men are liars………He did not say except those with the name of Bruno.

    • I can't believe I am saying this but did you forget that your Jesus threw the money lenders out of the temple. Why not emulate him instead of your moral equivocation to the bondholders and perpetrators of the MF scam?

    • You can't believe what you are saying? Suggesting that I likely know what you are saying, or that you appeal to the morality of Jesus?
      Bill Clinton said it depends on what the meaning of the word IS, is.
      So, it depends on what the meaning of the word Threw is.
      And you refer to him as "your Jesus" to imply I admire his moral authority, but perhaps you do not?
      Jesus turned over the money tables ………and that was sufficient……no indication he used physical violence against anyone. But he exposed the moral abuse of the money changers…… you use a good example to show the applications of high ethics without violence.
      As I said…..Jesus was on the high scale of ethics and the money changers on the low. Some might say Jesus was absolutely moral, and equal to God. But history show a lack of knowledge of Jesus until about 30 year old………did he learn ethics over his life time, or born with them. Some say he traveled to India, but likely would have known of the Greek teaching on ethics.
      Seems you accept that he practiced good ethics…..and maybe you think he had an absolute ethics code. If so… he YOUR Jesus?
      You suggest I emulate Jesus and turn over the money changers that fund MFs.
      Was that TD bank? The feds who guaranteed the borrowing? The government here that took us for a ride?
      So where is this moral outrage from our organized churches here, as to this fiasco? And the trickle down effect on the poor?
      They must be of low ethical standard , relatively speaking…….not following the teaching of Jesus .
      Yes follow the money trail . The love of money, the root of all evil. But if not all evil, much evil. 15 billion wasted . Investment? Gravy?
      In defense of Jesus…..he did not use the whip……..that was the slave owners and early British justice here in Nfld. Perhaps you use the term figuritively.

    • Ah, you have no rational argument to defend that ethics are absolute, so you hide that I talk nonsense.
      Meanwhile my monthly check shows my investments now almost 18 percent gain this year , and 23 percent in last 12 months.
      I do not self stroke over this, as it is likely the Trump effect, that can be dangerous.
      If you think I am bluffing on such claims, I can arrange to disclose proof, if you want that.
      A troll is deceitful, and a moron would not last long investing.
      Do you want proof…….
      I debate this point as comparative to the MF folly.

  4. Wow David, you out did yourself in your analogy with the ponzey scheme, put it all into prospective for the average Joe like me. Hope it is a way that we can all relate to, including the brave, fearless media. Hope they include it in their daily, weekly news cast, so it becomes wide spread so all in the province gets the big picture. Think so few that comment has such a wide ranging understanding of it's entirety, you put it all in a nut shell. Yes the common name for muskrat should be known locally and nationally as the ponzey scheme, and those responsible should all be referred to as ponseies, and a through list should be made and widely circulated, as part of a public flogging. It is all worst than we could imagine in our wildest dreams. Even in Danny's.

    • Wondered if Paddy Daley would refer to the Ponzi scheme this morning in this introduction where be blabs on for 30 minutes…..he did not.
      Guess the Steele`s have him under control. Big mouth Patty, but small brain, I wonder!

    • It is worse than that PF. Vardy called Paddy this AM and Paddy tried to call out David for calling it a Ponzi scheme. He will carry Danny's water all the way to hell!

      An amusing aside did you notice that Paddy is now against sport team subsidies at Mile One now that Danny is not the beneficiary? He is a loud empty barrel with no shame.

    • Vardy at time 1:14 on the show, and Dave did an excellent job of explaining the matter…….that MF fiasco is beyond reasonable judgement that this could just go so bad by chance, and crime has to be looked at, and it is a matter of justice.

    • Byes you are all getting way to deep into trying to make some sense of this Muskrat stuff as if there was some intelligent, genius logic behind all of this. Here is the logic, byes I got this great idea for us to get rich, lets come up with a scam based around a bull shit plan that we need for more energy, let the existing system go to shit to justify it, block wind energy, keep up with the new light bulb and thermostat shit as it if we cannot figure this out , tell people the eastern US will pay 20 cents per kwh hour when it is now trading for around 5 cents. And boys lets start employment agencies (skim off the top), get shares in the key players and when it all goes to shit….who cares..the dumb newfs will pay for it all and we will be in the Bahamas….cant you get this????? And there is no panel, committee, board that can go up against this….

  5. The ppl who promoted this in all sectors of our society need to now save some face and put aside their pride and join in the conversation to review this mess.

    Don't forget that all these BILLIONS & most importantly the life safety of the entire workforce on site , along with the downsream communities are in the hands of a highly contested NorthSpur stabilization plan! In light of Mr Vardy's latest contribution, where false assumptions and deciet seem to be the order of the day, a panel on Nalcor's plan should be the first thing government should put in place. That site can be turned to matchsticks is what Dr Bernander said at the LSPU Hall. We can't get lost lives back through the lights! However if it fails, today tomorrow or 2050 we also strand $8- god knows how many billion in the end.

    Con O'Brien

  6. From David Vardy's write up, the summary is all the metrics for this project are wrong. The initial capital costs, cost forecasts during construction, power demand forecasts deliberately overstated and finally operating costs badly understated. Our daft AG does not get it. By the grace of God he is leaving. Hope he is replaced by another incompetent fool.

    Muskrat Falls is beyond doubt a product of deceit, fraud and corruption. I cannot wait for the investigation to begin.

    James Pearce

  7. Just like taking candy from a baby… those rotten skeets will be long gone with their plunder, living it up in their Florida condos… meanwhile, the saps paying the loathsome "deficit levy" and the highest fuel taxes in Canada will be stuck holding the bag.

    To gaol with thieves…

  8. It's a Ponzi scheme alright but the politicians named were only pawns. It's pretty clear who's the Bernie Madoff person behind it. The inquiry needs to be able to find out who owns all the numbered companies making the money and trace kickbacks internationally on the Astaldi contract. Perhaps Ed Martin will sing for immunity

  9. The journalists involved with exposing Nixon says with Trump and the Russian connection, they must follow the money and lies.
    LIES: start with the constant story of 824 MW. This is significant power, but when only about 500MW on average is possible (or less) can be delivered that could produce revenue………was that a lie, even now promoted as a 824 MW project.
    If your car engine can deliver 300Hp but the radiator is sized to handle only 150 HP…… it false to advertise it as a 300 hp vehicle!
    If 824 MW is a lie,(intended to deceive) as presented as average power sales possible……..there are likely a hundred or more such lies.

    • 824MW X 8.76 GWh = 7218 GWh when its expected generation is only 4500 GWh a year or 62% of its nameplate capacity. Only about 500MW is correct
      US hydro LCOE 8.17c kWh (cad) MF DG2 starting price 16.4c kWh. Ngas 6.87c – 12.9c kWh.
      505MW natural gas power plant (87% capacity) 3849 GWh HRTs annual generation 1100 GWh. 13c kWh for Ngas power produces 86% of MFs expected generation without the massive capital costs and transmission infrastructure. $2B V 6.2B (now $12B).
      Natural gas plant would've met Nalcor's insane load forecast and if the forecast was incorrect (20 years too early for growth) billions saved in fuel costs. Price elasticity would also see demand fall with continued fuel price increases, completely ignored by MF fanatics. Media takes a lot of blame here for repeating information from proponents and doing no investigative journalism.
      Fuel costs would have had to increase 66% from the medium 9.9c kWh of Ngas LCOE power to match 16.4c kWh.
      Natural gas consult Ziff needs to be put in front of the MF inquiry alongside anyone that signed off on Nalcor's demand forecasts and explain their methodology.
      If they have documented proof that shows Nalcor plugged the demand forecasts after given reports criminal fraud charges can be laid.

    • AC, Nalcor may argue that they can produce peak for 2 or 3 days that meet our cold snap conditions, and deliver about 750 MW short term. But even that is questionable given the flooding already this spring at Mud Lake, and little reliable evidence if such peak power can be safely produced…..
      Yes, MF fanatics………good description of those that twist the truth in a 100 ways to achieve a result.
      When will the media and Nalcor and politicians downgrade the capacity of this project. Nalcors forecast methodology is a big deal, needing to be exposed, as has happened at Site C, BC.

  10. What Muskrat falls represents is the failure of democracy combined with corporate business mentality. This project was conceived with the objective of generating electricity, replacing Holyrood oil fired generators, providing a competitive alternative to the Upper Churchill deal and investing oil revenues in NL's future. It failed on all accounts because a democracy has to have facts and access to information while a business is the opposite. Preventing unfavorable information from getting out to the shareholders and general public is the North American business model and Muskrat falls is just the type of model that fits this philosophy to a tee. We can see this in countless developments around this province where spin doctors are out front and centre in their pursuit of public money. They range from farmers, fishermen, tourism operators, IT companies, Paper Mills and Wind Turbine operators to Hydro dam developers and yes unions too and all have one goal in mind-to raid the public purse for their and only their benefit. This nonsense that government can create economic benefits, enhance the market and create jobs has to stop once and for all. Muskrat Falls is just one in a series of boondoggles that plague this province and it will be our demise not our future. May the last one out turn off the lights.

  11. Good work again, David.
    Like others, my question is, “What are we to do?”
    Are we going to Rise Up?
    Take action?
    What action?
    Peaceful civil disobedience can have a salutory effect on most fronts, but we need leadership using rhetoric, oratory, and organization to counter the powers that have us in this mess.
    As for ponzi schemes, who has the money?
    Is NALCOR stock about to be shorted?
    Someone is getting rich and everyone else loses big time.

    Come on Newfoundland, arise, unite, activate, protest, demand.
    The future is only as bleak as we allow it to become.

    • Good questions Tom. With David you have an informed orator whose integrity is beyond question. He needs to be bolstered and needs soldiers in arms who have the courage to demand action before NL slides into the feudal abyss.

      Who will demand the emperor be held to account? When?

  12. Those who say "rise-up", "hit the streets" just don't get it. There's too many folks making some big coin (rural folks too with no other job prospects) from this fiasco. When the last contractor, embedded or otherwise, receives their pending lay-off notice, then you'll see the outrage when the first light bill is at the post office waiting.

    • That defeatist denial and acquiescence to feudal overlords is why NL is on the brink of collapse. Why don't you demonstrate the courage since you seem to understand what has happened?

      Oh yes, you quake in anonymity, compliant to your greedy feudal overlords!

    • Anom at 08:55:
      You have a point. Jobs and contracts was a big part of the lure of Muskrat Falls as was a lot of other Mega Projects in NL. Taht is a large part of the reason Richard Alexander doesn't include it in his "Another Way Forward" or more appropriately "Anothew Way for Employers Council of Newfoundland to Milk the Public Purse"

  13. What's new: "The Moral of Muskrat Falls" The Economist 19 August 2017

    Anitas Affordable Apartments Bookstore Supports a Selection of Videos, Links and Public Items about Muskrat Falls Hydro Dam, Grand River Mishtashipu [Lower Churchill] The Nalcor Crown Corporation Boondoggle, Newfoundland and Labrador, Canada:
    Videos: Beatrice Hunter Labrador Land Protectors, Billy L R Gauthier Land Protector speaks with Justice Minister, Denise Cole Labrador Land Protectors, Eldred Davis Labrador Land Protectors,
    Friends of Grand River/Mistashipu, “Into the Wild” starring Dennis Woodrow Burden “Living Local in Labrador” Port Hope Simpson, NunatuKavut, NL, Canada and Books, Justin Brake Journalism Is Not A Crime…Labrador Land Protectors, Liz Solo: Everything is Leaking, Marjorie Mayflower Flowers Labrador Land Protectors, Robert Way Labrador Scientist,
    Links: #MakeMuskratRight: Labrador Land Protectors, Citizens wanting an RCMP Investigation into NL Government and Nalcor !! Contribute Labrador Land Protectors – Legal Fund, Delilah Miriam Saunders Labrador Land Protectors, FREE Jim Learning Labrador Land Protectors, Jerry Kohlmeister Labrador Land Protectors, Labrador United, Homes Not Bombs, Land Protectors, Living Local in Labrador, make muskrat right-rigolet, Muskrat Falls Water Bottle Campaign, operation: mighty and united, NEW Online Auction, Labrador Land Protectors Peace Camp, Ottawa Local: Make Muskrat Right, Port Hope Simpson Phs Town Council, Solidarity with Labrador, The Truth About Muskrat….Stop The Dam Insanity, United Nations Panel says Halt Construction of British Columbia's $8.8 Billion Site C dam until Full Review of Affect on Indigenous Land…, Your Voice On Labrador,
    Further Links: Bloodwise The Blood Cancer Research Charity, Innu Nation, Government of Canada, Government of Newfoundland and Labrador, Qalipu Mi'kmaq First Nation, Secretariat of the Permanent Forum on Indigenous Issues, Truth and Reconciliation Committee of Canada, Truth and Reconciliation Committee of Canada Calls to Action, United Nations Declaration on the Rights of Indigenous Peoples, United Nations Universal Declaration of Human Rights, Nalcor Energy, Nunatsiavut Government, Nunatukavut Government, Public Items [Humanitarian, religious and spiritual, environmental, economic, political, legal, legal and historical] supporting Labrador, Labradorians, The Labrador Land Protectors Civil Rights Movement, NunatuKavut, Nunatsiavut, Innu Nation and Qalipu First Nation Campaigning against Nalcor Crown Corporation Hydro project, Muskrat Falls, Newfoundland and Labrador [NL] Canada

    All Links Available at: Anitas Affordable Apartments Bookstore

    • Now you got it and the x boss of Fortis is positioned right in place..What a coincidence. Drive it to the ground and then the savior that caused all this, after screwing us out of the 12.6 billion, will give us back $4 billion to save us.

  14. Mr Vardy.
    Thank you for the excellent article. However, I wonder if you could clarify something. You state that "If the write-down reduces asset values from $12.7 billion to $4 billion then the federal government will lose $3.9 billion". Are you saying that any decline in the value of the asset below the value of the federal loan guarantee will be assumed by the Government of Canada? In that case, NL's exposure would be limited to the total cost less $7.9B. I should be able to find the answer to that question in the documentation of the loan guarantee but the language is pretty opaque for a layman.

    • Bernard
      You are correct that I am assuming that the federal government has no recourse to the province and that NL's exposure as you say is limited to total cost less the amount of the loan guarantee, $7.9 B but the language of the FLG is not perfectly clear.
      David Vardy

    • Makes me wonder if the govn assumes their NL exposure is limited , as they continue to spend like drunken sailors, and PENG2 says complete but not operate is a option! And govn seems so little concerned as most on this blog.
      Ball, yesterday on NTV, says it must be finished, even if little power needed on the island as we have commitments to NS. Originally , according to Ed Martin, the project was needed and sound for the island needs alone, and anything to NS or export was GRAVY. So a complete reversal.

  15. In respect of Vardy's statement " goven cannot force people to consume electricity when alternatives are available….demand for power will drop 40 % or more if rates double"
    Here is the status on my ongoing monitoring for a Cold Climate minisplit heat pump heating a 1000 sq ft house.
    Month…….kwh…. HDD…….CDD

    The 6 month period from Apr to Sept showed 945kwh , so $94.50 assuming 10 cents per kwh and no HST
    That turned out not to be the warmest 6 months for heating, as from May to Oct is 792kwh, so $79.20……….so $15.30 less
    Notice that the June and Oct kwh is almost identical, although the sum is at its highest in June.
    Oct is so good due to this being a attic mounted unit, with benefit from solar gain, as we get little sun in June, typical cloudy capelin weather. And also. the earth temperature lags the air temperature , the maximun ground temperature was 62 F on Sept 2.
    HDD is Heat Degree days, which reflects expected heating from outdoor air temperature, as reported from the airport weather station.
    CDD is cooling degree days.

    $79.20 for 6 months includes air conditioning , which is about 5 percect
    It also includes $18.00 for electronic standby load (40 watts, even if not running).
    This unit is of about 12 year old design series , and installed 7 years. Newer models are about 15 percent more efficient, and have lower standby loads.
    It appears with the latest models , this 79.20 cost would be about 55.00 for 6 months of the warmest part of the year. I would estimate a COP of about 4 to 5 for this period, so about 318.00 to 395.00 if baseboard heaters were used, so a 75 to 80 percent reduction during this optimum season. The coming months will have a lower COP. Full year heating cost is expected to be from 260.00 to 300.00
    The indoor set point is 21C in summer, 22 for spring and fall, and 23 in winter.
    Such units using best practices will have very detrimental impact to the island power sales, as Vardy says, and also reducing peak winter load.
    However they are ALL ELECTRIC, and do not use fossil fuel (unless burned by the power companies in electricity production).
    Winston Adams
    Winston Adams

    • For those liking a bit more detail
      The mean temperature C for those months were: 1.3; 3.9; 12.2; 16.3; 15.7;13.1; 8.2
      Frosty nights: 17 both in Apr and May, 1 in June, 2 in Oct.
      While June had a mean of 12.2 and Oct colder at 8.2, the heat load was essentially the same for reasons stated.
      And while Aug was a little cooler than July, Aug needed less heat, for reasons stated.

    • Our Fernie Family Housing Society are building a new all purpose apartment building, adjacent an existing seniors (1970's) building. Luckily, we have a central hot water heating, gas fired, system which can be upgraded to source ground/geo heat.

      We are studying the application of some of the principles at the attached site;

      Any thoughts?

    • Checked to see where Fernie was in BC, assuming on the coast, and it showed present temperature at Fernie at -12C, and so on the east side of the Rockies.
      Meanwhile here on the Avalon it is +13C this morning…..expect we will have a Bermuda climate here in 30 years! Oh, the poor polar bears, and the crab fishery here may vanish.
      With gnd source, with lower temperature water, about 115F, the heating coils or rads need to be much more capacity. Compared to 180F, coils need about 4 times more capacity, extra rows etc to get the same capacity. But gnd source HP is excellent for heat and AC. New bldgs also going with a version of minisplit or a type that connect to dozens of rooms. While air source ,they are being used in Toronto, where winters are cold.
      Vancover shows for heating. air source HP reductions for heat, of 70 percent or more.
      I read online that Fermie area is a coal exporting area for coal to Asia……with 100 car trains exporting coal….is that near you.
      Generally for air source hps, a area protected from snow and winds , and southern exposure is good ( some of the attic mount advantages) but I envision also, outdoor mounted in a greenhouse type enclosure, that allow full circulation of air in and out, would be very beneficial. Typical minispits have little if any weather protection, and are more at risk in adverse weather.
      Architects can be creative for enclosures, when understanding the mechanics of air flow needs……enclosure could even boost, via thermal mass, day time solar gain, for improved efficiency once the sun goes down.

    • Elk Valley coal operations, 5 open pit mines of metallurgical, (Steel making), Teck Mining, major local employer. A Strip and Ship fossil fuel operation, with a humongous carbon and GHG emissions footprint. The emissions are transferred to Asian processing facilities, ending up in "Our atmosphere". Bob McDonald on CBC, US gov. Report on human caused climate change, highest CO2 in history, very much in the news. Hopefully those who are preparing the NL Carbon mitigation Plan, (long overdue), are paying attention. Google Fernie and look at the terrain near Elkford coal operations, Elk River Alliance, Wildsite, etc. for background.

    • Robert it is sobering that CO2 is now at 403 ppm, keeping in mind that 350 ppm is the level required to stave off serious climate disruption.

      The last time the planet had this much CO2 sea level was 90 feet higher than it is today. We ignore the runaway train and keep pumping carbon without effective action (in Canada) or even an admission that climate change is real (in the US).

      The more scientists learn the more they know they underestimated the rate of ice sheet meltdown and sea level rise rates. It is all quite sobering!

    • Robert, I see that some senior facilities are using commercial wood pellet for heating, about 15 such operation in Canada I believe, a truck brings a load about every 3 weeks and unloads into an automated bin.

  16. So Winston , you are saying, proving you are heating your 1000 sq. ft. Home for a total cost of 300$ a year. That's amazing and difficult to believe, but I do since you produce very detailed data. How are the guys in Nova Scotia doing, some of them must be sharing data. Realize they all may not be using attic location, but guess some are. How are they doing cost wise for outside location.

    • Yes, having a permanent record of data specific for heating. Plan to show the actual charts on UG, may wait to capture the cold winter months, as this most critical, especialy for reducing oil burning at Holyrood (reducung grid peak load). I already have this for a R2000 house, but the 1000 sq ft unit is 30 years old, so more typical. Technically this is referred to as end use monitoring, a best practice component for power companies to forecast ( but here they refuse to do it, so they can say deny knowledge).
      Nova Scotia I estimate have installed more than 100,000 minisplits. I suggest none are using attic mounting, as nobody had tried it, and there is lack of awareness for this method.
      NS is very advanced in quantity of units installed and still give incentives (but reduced some from years past) as does NB.
      I have data from CMHC for HP saving for Halifax. I will dig it out and post.


    • As to CMHC, their data says high efficiency air to air HPs can produce 3 to 10 kw of heat energy for each kw it consumes.
      3 is a reasonable year round avg for here, I seem to achieve about 6 at best in optimum conditions for this summer, and will be lower winter time. 10 is off the wall, and seems not practical or to be expected, although for heating hot water, at times units achieve about 8 for some systems but for short durations.
      CMHC refers to Cold Climate minisplits with inverters that can heat 100 percent of a house needs to -20C without backup heaters. Units must be sized properly.
      As to how much does it save?
      CMHC uses a comparison of a HP replacing a ducted existing furnace, so still using a duct system. Their test replaces a 13 kw duct electric system,or oil system, a two story house of 1973 construction,
      For Halifax it saves 65 percent in energy over oil , and $1978.00 per year, as to electric , it saves 53 percent and $2243.00 per year .
      For Vancover , it saves 70 percent over electric, and $1570.00 per year.
      Note that electricity is more expensive in Halifax.
      Minisplits is generally not a ducted system, and non ducted is typical 30 percent more efficient.
      So for Halifax, minisplits could achieve say 68 percent instead of 53 percent, mounted outdoors, and more dollar savings.
      There are about a dozen studies of performance of what contractors generally install, so results vary widely, because systems are often poorly sized by contractors.
      Proper testing should be for good design, sizing, installation and operation to see their optimum perforance. There is very little of that, because for residential, no engineering is done, just contractors rough estimates. Not a good way to go, when customers want maximum savings……..who do you turn to? I would propose guidelines for contractors for best practices, guidelines that follow evidence based monitoring of tests, as performance varies with climate from site to site. Climate data is known, whether St john's , Gander or Argentia etc, so allowance for locations can be rather accurate.

    • The unit in the attic must have continuous air flow from outside, into the unit and up the stack, all accomplished by the the unit fan.
      Mounting the unit outdoors closer than 6 inch to the wall would be against mfg recommendations, so the trick is to have the necessary airflow. This setup does NOT just recirculate attic air……..that does not work.

  17. Minister Coady said at the Mining conference Thursday that the government will keep power rates at 17 cents per kilowatt-hour to remain competitive and this includes subsidizing industrial customers. This means that the NL taxpayer will subsidize electricity rates to residential and industrial ratepayers up to the actual cost of electricity post-Muskrat. Reducing electricity use will be helpful but will not INSULATE taxpayers from paying their share of the cost for this MUST-FINISH-at-all-costs project. For NLers there will be no escape, short of leaving for greener pastures.

    • They can't be allowed to get away with this sleight of hand. They must be shamed when they ignore the rate and taxpayer are essentially two pockets of the same pair of jeans.

      Keeping rates at 17 cents will mean less health care and education spending or does Ball(less) intend to run deficits right off the fiscal cliff?

    • Every time a politician utters that phrase, keep ratepayers below 17 cent, their sentence is incomplete , because the second part should be and the taxpayer will pay, X number of $ per year, yes an exact an exact amount like 20 percent of your income or what ever the number is, and yes they should know, even if it is up dated monthly. And I would expect the brave fearless media should be hounding them every time for that up dated number … But they are too busy and too dumb, but run with that little number, 17cents, and try to be the first to parrot it on their news cast or what ever media outlet they are in. If they know the 17 cent number they should also know the other number, for taxpayers. Otherwise, they are just barking up a tree.

    • I agree that ratepayers and taxpayers are pretty much the same people but sorry, Bruno, your suggestions are now ridiculous!! Get a grip. Negative has its attributes but you must acknowledge the truth when it surfaces even if it only does so only occasionally.

    • Sorry Anon 18:23 but what "truth" have I missed? If the full cost of MF is not paid by the ratepayer in that horrid take or pay deal,the taxpayer (the other pocket) must pay up. The alternative to a budget that will sink NL is a massive cut to services.

      If the truth is extreme, deal with it, don't kill the messenger.

    • Don`t kill the messenger,who tells the truth says Bruno. Yet as to my truth on this blog,Bruno says I speak no sense…..I am a MORON.
      There is truth, and then the whole truth, which for this format is difficult.
      I agree with much of Brunos point of view, but if if not 100 percent, he takes offence, attacks others, including me, who are also messangers, with opinions that differs some.
      Bruno has a few characteristics of a troll, but not enough to officially be one. So, not a troll I suggest. Perhaps he just needs to take a breath before attacking, sometimes.
      Investor (Anom)

  18. No you may be right 1944, but it is usually controlled by the almighty buck, and in our case the debt and deficits. If our net debt is some 15$billion and muskrat adds another 15$ billion to the debt, that's 30 $ billion for a small province like nl. And it appears muskrat will not generate enough revenue to pay the operating cost, what do you call that, agree very little to do with e equals mc squared, but a hell of a lot to do of how this province will be run.

  19. If the outgoing Auditor General for the province was incompetent as is apparent from the statements in his Muskrat report, that you have pointed out, it is too late to fire him now but not too late to hire a competent person for the job?
    As to the incompetence or fraud contained in the present worth analysis between the isolated island option and burning oil at Holyrood, it is based upon the ridiculously high prices predicted for oil out 50 or 60 years into the future. Was it incompetence or fraud? Neither one looks good on a resume. The one result that should come from an inquiry/forensic audit is that legislation is adopted by the province to prevent this kind of fraud being visited on the people by their elected politicians ever again.

    • The problem is you have the laws and regulations to prevent this fraud. Both the federal JRP and NL PUB are designed to ensure public oversight of major projects.

      Apart from a few we "naysayers" warning the the democratic controls were being undermined by political interference, no one seemed to see the danger of allowing politicians with a feudal bent from short circuiting regulatory function. Why was the media, the Opposition, the public so willing to forego democratic oversight for feudal autocracy?

      What will prevent the next autocratic bully from again using the public purse to build a monument to ones vanity at public expense? What will prevent another shadow corporate entity beyond public scrutiny like Nalcor, from dealing with fraudsters with a blank cheque from ratepayers?

      If the democratic institutions are not vigorously defended from bullying strongmen, things never work out well. Legislation and regulation are useless unless they are upheld and defended.

      Sadly the answer to your question is both incompetence and fraud from the highest strata of NL society. The solution stares back at you from a mirror. Will you defend your democracy and the visionary "naysayers" the next time or genuflect again to the feudal overlord?

    • High forecasted prices for oil is one issue, but with that was the NEGLECT of DSM and energy efficiency and the effect of elasticity effect of higher prices driving down demand, to create a unreasonable future demand forecast.
      One must assess the sum of the parts, and many other issues such as undetermined stability of the North Spur, risk to transmission (cited by Liberty) and the need to keep Holyrood after MF……….so a complete fiasco…… AC has noted in his comment: fiasco by Muskrat Falls "fanatics".
      Fanatics seems appropriate when data was so tilted to mislead and get the thing sanctioned asap……….and maybe fanatics still in charge?
      Winston Adams

    • Anon 10:35 you need to take personal responsibility for evaluating the evidence yourself, if you are presented with contradictory evidence.

      When you were warned the spur is not stable what did you do? When the dubious economics were questioned by both the JRP and PUB what did you do? In short you were and are willfully blind.

    • I suggest the revolution is needed between the two ears. Ideas, debate, analysis , consensus etc, evidence based decisions.
      Peaceful opposition to authority that rule and abuse. But it is a slow process……maybe too slow to prevent the debt crisis from swallowing us up. Too bad so few joined forces with the Land Protectors, and will suffer the debt consequences.
      But there seems to be an awakening…………mostly a result from the naysayers on this blog.
      That most are silent until the high power bills arrive, or services reduced , or taxes raised…….is unfortunate……as they may set the seed for a Bonfire. But better to avoid the Bonfire and awareness by more of the public to the fiasco is badly needed.
      Long live UG.


    • Anon 12:33 you are hilarious. So the "visionaries" that did the analysis, decried the abuse of regulatory process, gave informed testimony at the neutered regulatory hearings are to blame for being ineffective politically?

      A bit self serving for a sniper from the comfort of an anon keyboard is it not? Apart from that the guy that burned down the NL parliament is that bully from Gall Way is it not? Perhaps we can make some money selling Danny masks on the anniversary of NL going belly up.

  20. I suggest to those of you on this most auspicious blog, that you pay very careful attention to those decisions to be made regarding NL's energy futures. It is apparent that a primary cause of the damaging actions on power generation, grid expansion, energy demand, urban sprawl, make work projects, etc. resulted from a weak or nonexistent carbon mitigation policy. Given that Government policy wonks are rolling out this plan very soon, a "lessons learned" approach is highly recommended, or the same bad result may reappear.

  21. Is Ches Crosbie the leader we need?
    His web site newsletter refers to Bomshells , charisma etc,and has his announcement speech: with emphasis on the P word…our party, our people and our province.
    He goes further on the P word; "we have too many pandering, power-seeking politicians with popular platform promises" How is them apples?
    He then explains his platform: First , rebuild our economy….second , restore confidence in government…..finally, revitalize that essential component of a vibrant democracy , the Progressive Conservative Party.
    But logic says Ches has all of these backwards……getting the PC party back in power has to be first, otherwise he can do nothing!
    But not to worry, because Ches says, "let's take a break from all the serious stuff for a minute…"here's how to make a delicious side-dish for your favorite hearty autumn meals": the Balsamic Onion Casserole….with instructions and directions.
    When the bonbshells go off……do I hear Ches say ; Let them Eat Cake?

    Being this season, nearing Nov 11, he included the poem In Flanders Field, with these lines "take up the quarrel with the foe"………hmmmmmmmmm , what does that mean?
    He displays a photo of an actual poppie…not a crime.
    But he includes a photo of himself with Jim Lester, who wears a real poppie, a Legion poppie. The poppy is trade mark registered. Did he get permission to show this ……as display of the poppie on websites is against the regulations (56 pages of poppie regulation) of the Canadian Legion!.
    Has Ches broken the law…. again? For political purposes?
    Poppie for Progressive's political purposes………how is that for the P word?

    • Breaking news again….balls et al tells Lynn of ntv, that gotta finish strong boys. And she accepts that as if it were self explanatory. That's ok, maybe for the average Joe to utter those words, but the premier of the province, mu God what a vocabulary. Lynn's next quest question should have been, now mr. Premier explain to the people of the province what exactly does that mean, but she accepts it as though it were sliced bread, which we all understand. What a useless bunch of so called media, even beyond laughable, where is there brains, or did they ever attend any kind of formal training for those positions, or guess that's the kind of people ntv hires, net wits, so don't pressure the premier , be very nice to him. What a farce.

  22. Folks all great stuff but we all know who is the father of the Ponzi scam.There is one name and one name only. Why is everyone so afraid to say his name, oh right he has most of the 12.6 billion. Sorry to be anonymous but don't want my golf membership revoked.

  23. Yup…we all know the authors of the authors of the ponzi scheme, mainly Danny, Eddie and Cathy D. But when ball was elected his response was gott get her done boys, dam the fincincial torpedoes. So with that statement, ball et al became the owners of muskrat, and Danny and Cathy breathed a sigh of relief. So ball and all now owners muskrat. And the silly fool doesn't even know it.

  24. There is considerable material and evidence from the BC site C inquiry that is applicable to a review of our power need here : evidence of downward declines on loads going forward that we need to be aware of now……not 5 or 10 years from now. Learn from their exposure of the folly of the Cite C fiasco.Is the government paying attention……seems it is not, dismissed by Ball without reading the report I suggest.

  25. There is considerable material and evidence from the BC site C inquiry that is applicable to a review of our power need here : evidence of downward declines on loads going forward that we need to be aware of now……not 5 or 10 years from now. Learn from their exposure of the folly of the Cite C fiasco.Is the government paying attention……seems it is not, dismissed by Ball without reading the report I suggest.

  26. With regard to Philip Raphals analysis based upon the Quebec court ruling on the water management agreement(WMA), NL has available at Upper CF the Twin Falls Block at 225MW and the 300MW recall power and associated energy, as you have pointed out. Once the MF plant is completed surely some effect can be given to the WMA to improve the situation at MF so as not to waste power and energy through spillage by utilizing exchanges with the 525 MW and reservoir storage at CF by supplying the Labrador load with MF power. This should not require any interference with our present obligations to HQ which expire in 2041?

    • The anon@13:27

      Most of the time for sure, some kind of a modified WMA should be workable w/o interfering with HQ CF scheduled production.

      However, during some peak winter demand, HQ just needs all the CF power it can get, and would just not penalize itself by providing some of it to NALCOR.

    • With the original WMA; Nalcor wanted to use (for free) the Smallwood reservoir to store/stabilize Muskrat production.

      It granted Nalcor the ability to draw back that power from CF, including during peak winter time – thus negatively affecting the peak time capacity available to HQ.

  27. From Heritage Newfoundland and Labrador – The Construction of Come By Chance Oil Refinery

    During the mid-1960s, American entrepreneur John Shaheen, owner of Shaheen Natural Resources Company and various other petrochemical businesses, arranged with Newfoundland and Labrador Premier Joseph Smallwood to construct an oil refinery at Come By Chance, then a small hamlet on Newfoundland’s east coast. The plan, however, was ill-fated and in 1976 caused one of the single largest bankruptcies in Canadian history to that date. It also greatly added to Newfoundland and Labrador’s mounting public debt.
    In 1967, however, Shaheen’s proposal seemed straightforward: build the refinery, import crude oil from the Middle East and produce a versatile range of products. The refinery would process approximately 100,000 barrels a day for sale in North America and employ up to 1,000 people. Both Shaheen and Smallwood believed Come By Chance was a suitable site for the oil refinery because of its ice-free, deep-water harbour and easy access to a railway, highway, and the world’s shipping lanes.
    Financing Questioned
    Shaheen, who had previously built an oil refinery at Holyrood in 1960, seemed an ideal candidate for the Come By Chance undertaking and quickly earned Smallwood’s full support. Unlike the Holyrood project, however, which Shaheen built without any loans or guarantees from the province, the Come By Chance refinery required government assistance.
    Smallwood announced on April 20, 1967 that the province would float a $30-million loan to help with the construction.
    The Government of Canada later criticized Smallwood when he arranged for the province to own the refinery through three Crown corporations – the Provincial Building Company, the Provincial Refining Company, and the Provincial Holding Company. The plan provided Come By Chance with a unique economic advantage over other competing refineries, as Crown corporations are exempt from Canadian income tax and provincial taxes. Realizing it stood to lose a great deal of revenue in lost taxes, the federal government introduced legislation in 1968 to prevent similar arrangements from occurring in the future.
    Construction Begins
    Nonetheless, Ottawa agreed by 1970 to build a $20-million wharf and docking facility at Come By Chance – able to accommodate 320,000-ton oil tankers – which the Provincial Refining Company would repay over a 25-year period. That same year, the British company Procon Limited accepted a $155-million contract to build the refinery. By mid-1972, a crew of some 2,000 labourers had built 8,370 square metres of office space, 27,900 square metres of warehouse space, and two giant storage tanks able to hold more than 600,000 barrels of crude oil. Workers had also laid a spur track to the railway and an access road to the Trans-Canada Highway.
    Shaheen, meanwhile, needed a supplier to provide the refinery with crude oil. In 1968, he signed a $480-million contract with oil giant British Petroleum Trading Limited, agreeing to buy 100,000 barrels of crude oil a day for 10 years. To afford this costly endeavour, Shaheen asked for and received credit from Ataka America Incorporated, a subsidiary of a Japanese trading company, which agreed to finance the refinery’s crude oil purchases for a fee of two cents per barrel.
    When the refinery produced its first barrel of oil in December 1973, employment at Come By Chance had reached an impressive 100 per cent, with many workers traveling to the small community from surrounding areas. Shaheen predicted the facility would pay for itself in six years; it went bankrupt in half that time.

    I guess on the books the refinery would have been worth more than $1.


    • So what are the lessons learned?
      Would NL, given similar prospects do the same all over again?
      What are the benefits and risks of continuance of Come By Chance Refinery now?
      Does anyone in NL really give a —-?

    • are the answers.

      1. None
      2. Yes they would because the Joey and Danny said so.
      3. Come By Chance is in private hands now and from what I can gather are doing ok.
      4. They only give a —- when it affects them directly. I firmly believe the expansion of the welfare state has not been good for society and NL in particular. Just listen to the open line shows and all you hear is "what is governemnt going to do to fix this?" It boggles the mind.


  28. In the report to the MF Oversight Committee by Nalcor up to the end of September and dated November 3, 2017, there is a table on page 10 that shows financing and other costs increased from $1.3 billion in September 2015 to double that amount in June 2017 at $2.6 billion( less than 2 years). This seems like an incredible increase in such a short period of time. Interest rates have not changed that much to my knowledge. They give various explanations that appear somewhat vague.
    I wonder, David Vardy, whether you would care to try and pick the bones out of this increase and the explanations provided by Nalcor for the benefit of us simpler people?


    “The benefit of the guarantee was that no one had to look at the merits of the underlying project,” says Steve Halliday, managing director and head of global credit trading and distribution at TD.

    Mr. Martis explains. Whatever the future has in store for Lower Churchill itself, there is nothing that can arise that will interfere with the trust’s payment obligations, he adds. “The guarantee of the federal government is just as constant as the rising sun. It’s always there.”