Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Thursday, February 18, 2016

Dumping Canadian Hydro Power in the US Market

Electrical power exports from Canada to the the United States have traditionally made sense. The Americans had a seemingly endless need for more and more power that they couldn't keep pace with from their own resources. Conversely, Canada had massive hydroelectric sites - tapped and untapped. However, that hydro power relationship no longer makes economic sense. It can be argued that hydro is severely damaging environmentally, and that far better alternatives like solar, wind and wave make far more environmental sense. However, the argument has never been made that Canadian electrical power sales, created primarily by hydro dams, actually break US law.

Consider the following quote from the US Department of Trade:

 "What is Dumping?

Dumping occurs when a foreign producer sells a product in the United States at a price below that producer's sales price in the country of origin ("home market"), or ar a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the US market is called the dumping margin."


"Countervailing duties. United States law provides that a countervailing duty (CVD) be applied to imports when a foreign government, person or organization is providing a subsidy conferring an economic benefit to a "class of kind" of merchandise exported to the US. Actionable subsidies may include benefits conferred directly on exports or benefits that indirectly subsidize exports."

So, the question is: Do Newfoundland and Labrador hydroelectric power sales to the United States constitute "dumping?". The answer is yes.

The cost of producing Muskrat Falls electrical power and transmitting it to the Soldier's Pond transit station for export, was estimated at 23.9 cents per kwh way back in 2012 when the project was at the DG2 process and he price was in the vicinity of $6 billion (see here). Since then the project is now estimated to be over $2 billion more that originally forecast, and we have yet to see another "cost per kwh hour to Soldier's Pond" estimate. Furthermore, Nalcor must pay transmission fees to Emera of Nova Scotia to use the Maritime Link sub sea cable in order to transmit that power to Nova Scotia and then to the US. It must also pay transmission fees to New Brunswick for using its lines. It becomes very obvious that the cost to produce Muskrat Falls hydro power is atmospherically high.

Then consider that the entire project is being built by a Crown Corporation which is solely owned and subsidized by the Newfoundland and Labrador government, and the same government is investing over $3 billion directly into its construction. Then there is the issue of the Canadian government's $5 billion dollar loan guarantee to build the project, which reduced Nalcor's 50 year bond costs to below 3%. All in all, this project is a state owned and heavily subsidized venture. That in itself isn't a problem, but when you want to take that same power and export it to the United States it becomes one.

In the US 69% of plants are owned privately, but public ownership controls 73% of production - in other words there are a lot of small plants, but the big ones are owned by governments - primarily the US federal government. That is one aspect, but here is another - natural gas generated electrical power in the US is 5 times that of local hydro power (see here). In other words, natural gas generated electricity is a dominant player on the domestic US market.

Is Canadian hydro power sold into the United States at a loss? Take Muskrat Falls power as a case in point. As stated earlier, the conservative estimate of a kwh of Muskrat Falls power to the export point in Newfoundland was 23.9 cents at DG2 - it's much higher now. Now consider that the average price per kwh in the US for 2015 was about 2.5 to 3 cents a kwh (see here). That means Newfoundland and Labrador would be exporting power for sale into the US at about an 800% loss. Clearly, that is dumping in the extreme. In fact, and more importantly, it could cause US producers of natural gas to be less competitive in their own market by artificially depressing the market, and restricting their profits to expand - ditto for solar power or other such production.

Combine the obvious dumping of this province's power with the provincial and federal subsidies used to create it, and it seems like a very strong case of dumping could be made with the US Treasury and Commerce Department. Will it ever come to that? Frankly, I'm surprised it hasn't yet. It seems logical that US private producers would resent Canadian power being dumped on their market.

Saturday, February 13, 2016

Steps from Armageddon

Unfortunately, it now appears the world is heading to that long prophesized war in the Middle East that we have all feared - the battle of Armageddon. The Bible describes it as a massive war in the Middle East where millions of soldiers are consumed. It begins with Russia coming out of communism (Godlessness) and doing God's bidding by taking on the forces of the Eagle (the US). It predicts that Russia will defeat the combined might of the US at the battle of Armageddon, including the Israeli army, and then there will be a large earthquake which will consume the Russian forces there. Forgive me if the biblical interpretations aren't 100%, but you get the idea.

As a young fellow I used to wonder how the "Bear" (Russia) could possibly end up in the Middle East with massive armies. It didn't seem to make sense, However, today, we are mere moments from that exact circumstance. There is no denying it any further.

In my opinion the war in Syria and Ukraine and elsewhere around the globe has to do with one thing, and one thing only - the US dollar. Simplistic as that may sound, it has been obvious as the nose on your face that China and Russia have managed to undermine American world economic dominance. The replacing of the US dollar with the Chinese Yuan, or a Yuan backed world currency, has been an ongoing issue since at least 2010 when it was first publicly advocated at the Davos world economic forum in Switzerland. China's moves since then have shown a steady path toward that goal. The Eurasian economic, and in many ways military bloc, have developed to the strategic level. The Chinese and Russians are using their reserves of US dollars to purchase hard assets (ie: Chicago Stock Exchange, Canadian tar sands, etc), and more importantly to subsidize the economic consequences of their actions. For example, while the West applied massive sanctions against Russia for the Ukraine situation, Russia simply turned to China for financial backing. The Chinese used their US reserves for the purpose. And so it goes.

The truth of the matter is this: the West has lost the economic war. It's over. It has been for awhile. The West is simply "dog paddling". Signs of this are: negative interest rates by Western central banks; zero or near zero inflation rates and economic growth; and the inability of traditional stimuli to fire up economies. It's over. We simply sit on the very cusp of complete economic collapse. The same applies to the Eurasian economies, except they are far less indebted than we are (Russia's government debt to GDP ratio is 16%, Canada is 86.51 %, the US 102.98%)  That part of the war is lost. The US/Saudi deal of the 1970's that allowed the US dollar to replace gold as the reserve currency is also undone. Saudi has been made redundant by technology for oil recovery, and by Russian and American production. In other words, the American cartel on oil has been irreversibly broken.

So all this leads us to today. One economically decaying super power facing the inevitable consequences of its own economic lack of discipline facing the rising contenders. The battlefield is switching to arms from dollars. The battlefields are the Middle East and the Pacific Rim. Turkey and Saudi Arabia, one a NATO ally, the other a US oil ally, are mere hours from starting the events that will lead to the battle that "consumes millions". A Turkish invasion of northern Syria is guaranteed. Today Saudi Arabia transferred fighter jets to Turkey to assist. That alliance also points to the almost certain invasion of southern Iraq by Saudi Arabia. That in turn will lead to the direct intervention of Iran against Saudi. If you ever watched Harry Potter, this is the real game of "Wizard's Chess". The Americans will come with their full military might to intervene (if you believe the Bible - which I do). Israel will for the most part stay pat and watch it unfold. However, even Israel will be turned on once the Americans have been defeated (if you believe the Bible - which I do).

The only question really left in my mind is: " Is this a bad thing, or is this simply God's will?". If it's God's will, and the Bible certainly says it is, then it's not a bad thing. Myself, I kind of hoped that humanity could rise above this kind of result, but that simply doesn't appear to be the case.

Monday, February 8, 2016

The Phoney War

We are living at a time of phoney war - at least that's my theory. A phoney war is a period where war-like moves are made, but the major powers of the day are not yet engaged in actual fighting. The most recent example of this was Hitler's moves in Europe before 1939 - like the Czech and Slovak Republics, etc. Acts that really ought to be considered acts of war, but for "pragmatic" reasons the world over looked them in hopes they would satisfy the aggressor. Those moves are happening today.

Consider Turkey for a moment. Turkey is at once fighting the Kurds on its own territory, and in northern Iraq, supporting ISIS and others against the Kurds in Syria. The problem in the geo-strategic sense is that Turkey is asserting its own perceived interest at the expense of world peace. It is breaking international law by fighting a "hybrid war" against Syria, and is on the verge of making that a very real conventional war in Syria - along with Saudi Arabia. Saudi Arabia is making similar moves in Yemen. In the Yemen case, Saudi has already invaded with conventional forces so there was not much pretense there of a phoney war.

In the big picture, however, today we are in a world scale phoney war. For some time I have thought on the reasoning the United States has "betrayed" its long time partner Saudi Arabia and allowed fracking to undermine the world price of oil. Purely examining today's events might leave you scratching your head. The US breaks its long time agreement with the Saudis, world control of oil for using US dollars in its purchase and sale. However, take a step outside the box, look at the many places of near war in the rest of the world, and a very real strategic move may be afoot.

My theory is this: the US is weaning itself off Saudi oil, and putting itself in a position of self-sufficiency, to insulate itself against a Middle east war that will see Saudi, Iraq and Iran lose the ability to export oil. Really its the only sensible conclusion to come to. The transition period was the last five years. Mass fracking in the US has resulted in over 4800 capped oil wells. Over production of oil has resulted in mass storage of oil reserves. Together, the result is a stockpile of strategic oil in the US, but also in Russia. The two big foes are insulating themselves against oil shortages at the same time in this phony war.

If that theory holds true, then I would expect a Middle East war to break out really at any time. Certainly the flash points are Iraq and Syria. Turkey, along with Saudi Arabia and some other minor allies will make a move on Sunni Iraq and northern Syria at the same time leaving rival Iran to address two fronts at once. Clearly that will bring in the Americans and Russians - although I would bank on the Russians being there in large numbers first. In any case, the damage to the oil fields of Iran, Iraq, Syria, and Saudi Arabia would be on a massive scale. Given the technology and weapons possessed by both sides, massive damage to oil infrastructure is only a logical result.

It's funny how today's phoney war eerily points toward the biblical prophecies of the Battle of Armageddon. It's something that nobody wants to think is possible, but the signs seem to be growing all the time. It's as if we have a little self-destruct mechanism and are programming ourselves toward this fate. Of course you could always argue it's the will of God as expressed in the Bible. We have a hard time seeing it from that point of view, because we can't believe God would wish that upon us. But, God is God for a reason. We have human minds which are but a spec in the big picture. That being said, I hope I'm wrong in my observations, and analysis. Nobody should want or thirst over a phoney war. They always lead to the bigger one.  

Sunday, February 7, 2016

The Muskrat Liberals

There are two kinds of Liberals in Newfoundland and Labrador right now - those that oppose the project (as was the case for the party officially til Dwight Ball took over), and those that support it. Basically, it boils down to business interests vs the peoples interest.

As much as Ball appears to be a flip-flopper of gargantuan proportions, as much as he appears to be deceiving the public even pre-dating his election, Ball is firmly in the "pro-business" camp on Muskrat Falls. Oh ya, remember that group of pro-business backers of Muskrat Falls :"I believe in the power of ? Remember them? Created by Peter Woodward in Labrador and Leo Power on the Island. Yep, they believed in it so much that they took the website down and erased all evidence of it ever existing - including the list of names on it that supported the project so publicly. But, you can still find a page or two of it here thanks to Peter Whittle of Polemic & Paradox.

Bottom line is that it existed, and the people who created it still exist to. Take Nancy O'Connor, Director of Communications, Office of the Premier. Her profile is here. You will notice that she worked on Cathy Bennett's Liberal leadership campaign while she did her 6 month contract for Bennett's company. You'll also notice  in her biography there is no mention that she worked for Nalcor on the PR campaign for Muskrat Falls. In fact, her firm was hired by the business crowd to create the "I believe in the power of NL" website and PR campaign. At the time I did a blog on Ms. Connor's involvement with the campaign and Nalcor (the blog). In 2015 she was given the cushy job of Senior Communications Officer to Ball - on the peoples' payroll. After the Liberals won she got her new job as "Director  of Communication".

It's a telling sign of Ball's, and the Liberals pro-business voice, that this person was hired on even before the election. It's also a telling sign she worked for Cathy Bennett's leadership campaign first. Bennett of course has been a huge supporter of Muskrat Falls from the beginning, and was of course Chairman of Nalcor's board of directors. Then of course you have Al Hawkins, who sat on Nalcor's board as well, and was named by Ball as Minister of Transportation and Works. Not to be forgotten in all this is Shioban Coady, now Minister of Natural Resources, and theoretically in charge of the Muskrat Falls project. I did a blog on Coady before all this (here) . I would just add in the recent campaign she ran as "President of Novocom Inc" "an international resource procurement company with partners in Hong Kong, Australia and Singapore". (her Liberal bio) That's all fine and dandy, and sounds very impressive... until you find out that in fact Novocom is simply a numbered company run out of her very modest home in St. John's, which lists her husband as the only director, and is in fact "not in good standing" with the province's corporate registry. Talk about trying to pad your resume...

In any case, Coady was associated with Alderon Mining in Labrador. Remember them? Those are the folks that Danny Williams was with, joined their board as a "strategic adviser", etc. They were all the rage and now they are a penny stock (as predicted here). Coady belonged to the pro-Muskrat Falls business group "I believe in the power of NL". She's been a strong advocate for it from the get go. So have all her friends.

And now, shock of all shocks, Coady won't put the closure of the Muskrat Falls project as an option for dealing with the massive debt crisis in this province. Another shocker - Ball won't end it now either. Bennett, who is in charge of the province's destroyed finances, won't float the idea either. In fact, Ball and Coady gave us this disingenuous excuse of an "investigation" into the Muskrat Falls project to "open the books" on it. What a load. The company doing the "investigation" had contracts with Nalcor and the government even before it was named to do the study. In a supreme twist of irony, the same company that was in charge of creating the "independent oversight" process of the Muskrat Falls project is now doing the review of the project - one would assume that the oversight process would be a part of that. I contacted the company and asked for comment regarding the conflict of interest inherent in working for two entities that you're essentially doing a review of. There spokesman at first promised a response, and then, shocks of shocks, disappeared never to be heard from again.  You cannot make this stuff up. This is what passes for politicians, policy and intelligence amongst Newfoundland and Labrador's "political elite" (b'ys, I say those two words with the sharpest tongue in cheek you can possibly imagine).

To put it bluntly, don't expect anything other than a white wash of Muskrat Falls by Dwight Ball and the Liberals. The Muskrat Liberals are bent on finishing Danny Williams' project. They don't care what it costs us. They don't care how many people lose permanent jobs in the public sector to help stabilize the budget. They don't care what programs they have to cut, or how much they will have to increase person taxes and fees. They don't care. The only thing they do care about is bullshitting you enough so that you believe they do care, and that they are People-Liberals. They aren't. They're Muskrat Liberals. To the core. It will come back on them just as it did for the PC's - perhaps worse. The first sign of their betrayal will be the next budget. Watch and see how many people fall before the ax, but Nalcor will remain untouched. That should make Ed Martin and Gilbert Bennett happy. Those two Danny appointments. Those 2 PC appointments. Oh wait, they're still there. I guess they're Liberals now. Muskrat Liberals.