Are We Being Used Here?

It is fairly obvious to the dedicated observer of Newfoundland and Labrador politics that all is not well behind the scenes with the Muskrat Falls project.

Since it's inception, the Muskrat Falls project has been an enigma. Born to bypass the "Quebec stranglehold" on this province's export of power, yet only able to transmit a measly 500 MW of power on the Maritime Link. Heralded for being a green power revolution in the province, yet causing the amount of thermal energy in the province to actually increase. Meant to supply the ever increasing consumption of electricity to the Island, but the demand has actually decreased to 1992 levels - and the population is aging faster than any other on the continent. Promised to provide cheap, stable rates for the next 100 years, but easily the most expensive power to be produced in North America.

My questions about Muskrat Falls began with the capacity of the sub sea cable to Nova Scotia - 500 MW. It became immediately obvious that such a small cable was not capable of exporting any serious power into other markets, particularly given that Emera was given about 170 MW of that capacity for no charge as partial compensation for financing the link. I am not alone on this thinking. The CEO of Emera, in conversation with the US Consulate, had this to say:

In a section subtitled, "Are we being used here?", the author wrote that Emera was worried about being manipulated by Williams.
"The unknown factor, as Spurr explained, is N-L Premier Danny Williams. Spurr explained that N-L had been the victim of bad resource deals in the past which have left Williams very cautious if not suspicious in his business negotiations," the cable says.
"Given that legacy, Spurr remarked that he and his senior colleagues are equally cautious in dealing with the premier, with knowledge it makes more financial sense for N-L to do a deal with Quebec than with them," the author wrote.
"In fact, Spurr indicated he wouldn't be surprised if William ended up doing just that, and leaving Spurr and colleagues to speculate that Williams might be using them to exert more pressure on Quebec to offer a better deal for N-L."

So here we are, nine months after the original dead line for the Emera/Nalcor term sheet to be signed, and no deal. The question is: why not? There is also no formal loan guarantee in place despite federal commitments to do so. There are no completed environmental assessments for either the Maritime Link or the Island link between Newfoundland and Labrador. There is no word what so ever on the status of the $375 million requested from the 3P Canada Fund to subsidize the cost of the Maritime Link. Nothing.

What we do have is shuttle meetings every now and then between the premiers of Nova Scotia and this province. We get assurances that everything is fine, not to panic, and the hope that the Emera/Nalcor deal with be inked by November, 2012 - "hopefully" in Dunderdale's words. So what is going on?

Well, going back to that conversation between the Emera CEO and the US Consulate - "Are we being used here?" Good question. In my opinion, the answer to that question is yes, but not for the reason the CEO believed. The key requirement for Muskrat Falls to proceed is a federal loan guarantee. Without it there is no Muskrat Falls dam. Former Premier Williams had pursued such a guarantee from Prime Minister Harper since 2006. Finally, during the last federal election, Harper agreed to it - conditionally. The primary, central piece to the guarantee is a deal between Emera and Nalcor. Unfortunately, that agreement makes no business sense, and can not possibly earn the provincial government anything but massive losses.

Danny Williams was and remains a businessman. It is hard to believe he would enter into an agreement to export power at such massive losses. He was also a tactician, and often belligerent opponent of the federal government. What ever it took to get his way - including taking down the Canadian flags on all provincial buildings. Given his business sense, and his mercurial relationship with the federal government, and given a loan guarantee is necessary to do the Muskrat Falls project, I am left with the belief that Mr Williams' strategy was to use the Maritime Link to get the loan guarantee and then kill the deal, but still retain the guarantee.

With Emera out of the equation, the Newfoundland and Labrador government would be able to cancel both the Maritime link and the Island Link (which Emera is also slated to be partner in). That would leave a Muskrat Falls dam to provide power solely in Labrador - where all those mines are being developed. Unfortunately, for the PC government, it appears that strategy is back firing.

The federal government is now insisting it will not give the guarantee without the project being officially sanctioned. In order for the project to be officially sanctioned the Emera/Nalcor deal must be signed. Either Dunderdale, or Nova Scotia Premier Dexter appears to be having cold feet. On the one hand Dexter, whose popularity right now at home is about 27%, must provide the cheapest alternative power to his province. Despite the fact Nova Scotia Power is a private company (Emera subsidiary) its rate increases have caused calls for it to be nationalized by many quarters in that province. He has to deliver the cheapest possible deal or face political oblivion and unrest. To underscore the point, it has been reported by Jim Morgan on the radio show, VOCM Backtalk, that Emera has been in negotiations with Hydro Quebec for the last three weeks. I had that report confirmed by an independent media source as well.

The fact is Hydro Quebec can dump all Nova Scotia's power needs for decades in one nice, cheap, multi decade contract - and it looks as though it's in the works. It may be that a political deal is no longer needed by Nova Scotia for power. That might suggest Nova Scotia's political minister Peter MacKay may no longer care to support the Muskrat Falls project. Without his support the Prime Minister may no longer have to supply a loan guarantee. After all, the loan guarantee was to Nalcor and Emera - not the respective provincial governments. That is an important difference. Suddenly, it looks as though Dunderdale is left in mid stream without a deal, and unable to use that deal to secure that necessary loan guarantee. What was her quote a month or so ago - "For me, at the moment, it’s a Minister MacKay problem.” That was on the face of it a rant against search and rescue, etc. However, attacking possibly the second most powerful person in the federal government seems to indicate the fracture is much deeper, and serious.

What we are left with is a game of chicken between the federal government and the province. On the one hand the feds are happy to sit back and watch Emera negotiate with Hydro Quebec. On the other hand Newfoundland and Labrador can't get a federal signature on that guarantee until Emera signs on with Nalcor. And somewhere in between, shuttling between the two provinces, Premier Dexter tries to avoid a political damned if you do, damned if you don't. Surely there are a few people right now asking themselves:

"Are we being used here?"

Backroom Ballet

So the numbers are out and the panic is in. Environics polling numbers place the NDP in first with 38% - the first time ever in Newfoundland and Labrador. The ruling PCs, who have enjoyed polls of 50-60-even 70% - are now behind the NDP at 35%. The Liberals, who were in free fall before the last election, and then stabilized in the high teens as the Official Opposition, are now registering a respectable 26%. Essentially, these are transitional times.

Yes, it can be argued that really the PCs have been in a constant decline since the leadership debacle that followed Danny Williams retirement. Issue after issue that has surfaced since that time has caused the government to trip over its own feet. You can go all the way back to the "near appointment" of Williams confidant, Elizabeth Mathews, and the government getting caught out in a lie. You can look at the endless, obvious propaganda put out regarding Muskrat Falls. There is of course the very public, absolutely suicidal Bill 29 filibuster. The one constant during this time, and remains to this day, is the sheer arrogance in how these issues have been handled. An arrogance born not of confidence, but of mission.

You could look at things in this way, and say it's just the natural result of an old government going into decline - that's the spin Dean MacDonald has put on it. That's how it is viewed by the public. Or, you could look at it as an ordered, backroom transition of power. To do so, of course, is to invite yourself to be called a "conspiracy theorist" by those that would prefer such things remain out of the lime light.

The basic thought in Newfoundland and Labrador politics is that governments are run by a "strong man". That all those MHAs that are elected with him/her are simply there to do as they are told. Of course that isn't true. It's a simplistic way to sell politics to the electorate - pure and simple. Never-the-less, that's how things have been sold. The trend of late has seen Liberal strong man Brian Tobin leave the Premier's chair. He was replaced by Roger Grimes - who was betrayed by Dean MacDonald. Grimes was then quickly replaced by businessman, turned sudden/reluctant politician Danny Williams. Williams left, and hand picked Dunderdale (his Grimes). Now, under Dunderdale's watch the Party is in a full death spiral. Coincidentally, sudden/reluctant Dean MacDonald has surfaced to take over the Liberal party in November of 2013 - slightly less than a year before the next election in October, 2014.

Where was Dean MacDonald during the last election? Why did he not run as a candidate, or step up for the leadership when the Party was left leaderless with the sudden resignation of Yvonne Jones? As a multi-millionaire, where have his fund raising capabilities been as the Party languished in $800,000 of debt? Quite frankly, he has been sitting it out. Waiting for Williams to finish so he can have his turn. In order for that to happen the once mightily strong PC party had to be brought down in popularity - a lot. This is exactly what has transpired.

The swing from PC support to Liberal support is clearly evident in the last poll. The NDP are doing well, but the Liberals are gaining more PC supporters than the NDP. While, at the moment that does not place the Liberals in even second place, a further decline in PC support will likely bolster the Liberals significantly.

The big question is how did Dunderdale manage to accommodate Danny and the boys? Was she a dupe/patsy that was used for her ego to be the fall guy for the Party? Likely yes. Has she been getting really "bad advice" to help the destruction of the Party along? Without question. Do the caucus members of the PCs have loyalty to her? Very Doubtful. Ms. Dunderdale has truly taken the poison chalice. She is getting bad advice, and being held in check by a Cabinet that is on board with putting the ship into the rocks. Their one and only primary mission, other than bringing the Party down, is to ram Muskrat Falls through at any price. It won't matter how badly they are viewed in public, or how severely the media brutalize them. The price won't matter. The terms won't matter. The plan is all that matters - right Danny?