Tipping Point - the End Game

It's been just over two years since Williams left office and Dunderdale was sworn in. It was the culmination of many political deals to pave the way for the Lower Churchill project. There was the deal with the Innu of Labrador. There was the deal with Harper. There was the deal with Nova Scotia Premier Dexter. There was the deal with Emera. There was the deal within the PC Party caucus. There was the deal with the corporate community of the province (less than ten families). There was even a deal with the Liberals. So many political and business deals were made over one project that one truly must tip the hat to the old chess master Williams - in that regard.

However, as the saying goes: "The plan doesn't survive first contact with the enemy". It's an old military saying, but it works. Like a well rehearsed play the show unfolded. Williams crafted the necessary legislation to force Hydro Quebec to share the Upper Churchill. He created Nalcor as the vehicle to achieve the project. The one thing he could not do was finance it alone. Since 2006 he pleaded with Harper for a loan guarantee. Harper put him off. Harper is aligned with Enbridge which has a strategic alliance with Hydro Quebec. Why would Harper help Williams and thereby Nalcor? Williams carried on. He eventually reached a deal with the Innu - the New Dawn Agreement. Peter Penashue, then at the Innu Nation, represented the Innu. Still, it took almost three years to take New Dawn from the drawing board to the place where it could be executed, and free the government to proceed with the Lower Churchill.

In those three years Williams set the stage by amending the Electrical Power Control Act, which would force Hydro Quebec to submit to the province on the operations and sales of the Upper Churchill. He also became increasingly desperate for a loan guarantee - culminating in the "ABC Campaign". In the interim he also sold his two offshore companies to SNC Lavalin for an undisclosed sum. SNC Lavalin was then given the Lower Churchill contract. By late 2010 Williams had all his ducks in a row. The agreement with Harper that in exchange for the loan guarantee he would leave politics. And so he did after carefully orchestrating a backroom deal with his cabinet to put Dunderdale in charge. She became the Premier run and controlled by her own Cabinet - rather than the other way around. He even contrived a falling out with Dunderdale, to reinforce his deal, claiming to be deprived of cell numbers for cabinet ministers that had not changed since he was premier. All very contrived, and all pulling on the ores in the same direction.

Then something happened. Actually several things happened. Firstly, and perhaps most importantly, the United States created a natural gas revolution. They built gas fired electrical plants in places like New York where Williams and company had dreamed of selling power. Hydro power was suddenly becoming obsolete. Also, the resistance started. In Newfoundland and Labrador the resistance was started by a handfull of political bloggers. They were/are Peter Whittle, Ed Hollet, Wally Maclean and myself. Dunderdale became so frustrated with the bloggers that she singled them out in her year end interview as "nay-sayers". The war within went viral. The bloggers were determined. They drove the discussion, the opposition, and some would say a political revolution resulted. Citizens, and bloggers, began consistently calling the daily radio shows with concerns about Muskrat Falls. Williams went public denouncing them and all who attacked his project for "no good reason". Dunderdale followed. So did the cabinet. It was a war of hearts and minds.

Yet, the project plodded along. Even before Muskrat falls was officially sanctioned in the House of Assembly, Nalcor was busy excavating the site - once the Innu had signed the three New Dawn Agreements. Harper came fourth with the promised loan guarantee, although it was in the form of a memorandum of understanding and had many stipulations. Williams promoted mining in Labrador, and his own little city on the Island - all of which would need the new power.  Even giants of industry like Brian Mulroney appeared on the scene. He publicly espoused the need for "environmentally friendly policies". He also joined the board of directors of Dean MacDonald's company - a close ally of Williams.

Then things started to go bad. The backroom deal to have Dean MacDonald take over the provincial Liberal Party, and then replace the battered Dunderdale in power, collapsed and he pulled out. The deal to include Penashue in the federal Cabinet fell apart as he was exposed, and forced to resign. Meanwhile Yvonne Jones kept to her deal and immediately pounced on the federal Liberal nomination to replace Penashue, leaving previous Nunatukavut MP Todd Russell justifiably furious.
Things started getting very interesting though when an email was sent to Hydro Quebec.

As you may or may not know, I have filed a lawsuit against the Government of Newfoundland and Labrador, Innu Nation, and Nalcor over the constitutionality of the New Dawn vote and the water management agreement/power control act amendments. On January 18, 2013 I sent an email to Hydro Quebec informing them of the nature of my lawsuit, and requesting they advise if they wish to intervene. Coincidentally, two hours later, the same person I was speaking with held a press conference. The story went essentially like this:

 "Quebec’s Crown-owned utility, which declined comment Thursday on the consultant’s report, changed its tune the following day.
'Normally we don’t comment on such third-party reports,' Ariane Connor, a Hydro-Quebec spokeswoman, said in an interview.
“But having had a chance to look it over quickly over the last 24 hours, we’re very surprised by the analysis and the conclusions of the report.'
Connor said the utility may want to be part of the regulatory hearing to “present our view” because it wasn’t consulted about the study."

What does that mean? It means Hydro Quebec's ambush was tripped. Hydro Quebec has always known that Williams' Electrical Power Control Act amendments forcing Hydro Quebec to share the Upper Churchill were unconstitutional. The law regarding this issue was decided in the 1984 Reversion Act review by the Supreme Court of Canada. However, like any good soldier, they were lying there waiting for Williams and company to deliver us to them. After all, without a valid water management agreement both of the Lower Churchill dams would only produce 20% firm power - as per Nalcor's evidence given at the Public Utility Board hearing. With Muskrat Falls built, and unable to operate, Newfoundland and Labrador would be at the mercy of Quebec. We would be unable to defend ourselves having completely maxed our borrowing on the construction of the dam, and the terms of the loan guarantee would require the surrender of these assets if the province were to default. All nice and cozy for Harper, Hydro Quebec and company. What they needed for this plan to succeed was silence.

That was the tipping point. After years of saying almost nothing, Hydro Quebec suddenly had a big interest in dumping their glut of power in Nova Scotia. They are scheduled to speak at the hearings in Nova Scotia now. Brian Mulroney's good friend Pierre Karl Péladeau just stepped down as President and CEO of Quebecor to become non-executive chairman of Hydro Quebec - not pulling a salary if that rings any bells. Jim Prentice, former Conservative cabinet minister, and vocal proponent of the Muskrat Falls deal, had this to say just days ago:

“It essentially means Canadian hydroelectricity, although we see it as renewable — the ultimate renewable energy — it doesn’t qualify as renewable energy in those states, because the renewable portfolio standard doesn’t recognize it. So basically you have a state-level interference with the market, and my point is if the North American market is going to work efficiently, we need the same standards on both sides of the Canada-U.S. border, and these renewable portfolio standards get in the way of our ability to sell Canadian hydro.”
This comes as the United States moves closer towards energy independence, he said.
“If you look at the numbers in terms of energy production in the United States and imports and exports (between) Canada and the U.S., it’s increasingly clear that the U.S. is moving towards energy independence.”
Combining the resources of Mexico, Canada and the U.S., Prentice predicts those nations will be energy independent by 2020. He said it becomes all the more important to keep the marketplace open and free from what he labels “sub-national impediments,” such as those state laws.

Asked about the implications for such standards with respect to Muskrat Falls, Prentice said they do not help.
“Well, it’s not helpful, and we need to make sure that across the United States, Canadian hydroelectricity is recognized as a renewable energy that is good for consumers.”

The deal is coming apart, and Williams and company are watching as the ground shifts beneath their feet. Hydro Quebec's massive debt grew $10 billion from just 5 years ago to a whopping $ 43.5 billion. That's over three times the gross debt of this province. It has mass surpluses of power it can not sell - - last I heard it was 5000 MW, almost the entire production of the Upper Churchill. Hydro Quebec now realizes it must abandon the idea of laying the trap for Williams and company, and instead move to secure the Nova Scotia market directly for it's own survival. This is what it is in the process of doing. The only remaining question is: At what point does the Newfoundland and Labrador government realize and accept the tipping point has been reached and the jig is up? Here is my suggestion: Be prepared to write off the money already spent and stop the bleeding here; send the Electrical Power Control Act amendments and the water management agreement to the Supreme Court of Canada for review to determine it's constitutionality; accept the political consequences; reimburse expenses. This is the end game. We are in it now.