Nalcor Exposed

What's the old saying...people lie, the evidence doesn't? Welcome to the world of Nalcor, our illustrious provincially-owned energy company. And, the truth, or the evidence if you will, isn't pretty. If you want to glimpse that evidence yourself you can see it here in Nalcor's Report.

Here's the bottom-line:

1.  Nalcor is in default of the Federal Loan Guarantee;
2.  Nalcor's corporate debt is now over $10 billion;
3.  Nalcor already owes Emera over $300 million in power sales;
4.  Nalcor can't be sold/privatized for at least 38 years; and
5.  Nalcor can't build Gull Island for at least 38 years.

All these things might come as a shock to you, but in this post I'll detail the evidence.

First, Nalcor is in default of the Federal Loan Guarantee (FLG), and in a big way. The FLG requires that Nalcor have established "at all times" a Debt Reserve Fund (commonly known as "sinking funds") to, at "a minimum" cover interest payments for six months on its borrowings for the Muskrat Falls dam and transmission system, the Labrador/Island sub-sea cable link and the Maritime Link. As of December 31, 2014, or a few months ago, Nalcor had zero dollars in any sinking fund for the money borrowed to fund any of these projects. In fact, Nalcor has borrowed the full maximum $5 billion authorized by the FLG to fund the projects, and did so in 2013. So, in fact, Nalcor has been in default of the FLG for almost two years.

 Nalcor's long term debt now stands at $6,248,900,000. That's up from $1,222,200,000 at the beginning of 2013. Nalcor's total liabilities, as of December 31, 2014 stood at a mind-numbing $10.6 billion. $1.5 billion of that is money the Government has directly invested in Nalcor from the general revenue of the Province. $6.2 billion is long term debt. The rest is deferred payments, power/money owed to Emera on account of the Maritime Link, and so on. To cover all these liabilities, especially the long-term debt, we have sinking funds totaling  $267 million. Now, picture this, Nalcor actually withdrew $126.5 million from its sinking funds in 2014. In other words, Nalcor took money from its own funds dedicated to repaying its debt...instead of adding to it. In a further note, Nalcor has decided to refinance, rather than pay off, $425 million of Hydro's long-term debt when it comes due shortly.

Adding to Nalcor's debt problems is the ongoing commitment to Emera for the Maritime Link. Contrary to what many people may think, that 20% of "free" power to Emera has already kicked in. Nalcor is showing that as of December 31, 2014, it owed Emera $330 million dollars for "deferred energy sales", which means Nalcor owes Emera $330 million worth of power from the date the Maritime Link began construction - which means Emera is collecting that 20% in advance - even during construction. At that pace, Nalcor will owe Emera somewhere near $1 billion in free power by the time the power is switched on at Muskrat Falls. Which, of course, means Nalcor will have to dedicate the Maritime Link to solely giving free power to Emera for several years just to pay off the "banked up" "deferred power sales" it owes Emera on completion of the project.

In another strange, and definitely not publicized twist, Nalcor will not be able to build Gull Island for at least 35 years. The FLG states:

"4.8A Additional Debt: No additional debt may be incurred by the Borrowers during the term of the FLG (other than a $10 million line of credit, and additional debt to finish Muskrat Falls, the Island link, and the Maritime Link)

The there is the stipulation that Nalcor can not be sold during the term of the FLG:

"4.11 Change of Control:   ...There shall be no sale or change of control of Nalcor."

In other words, the taxpayers will remain on the hook for all Nalcor's debt until at least the end of the FLG - which is 38 years from now. No option. Stuck.

Combine all these financial facts on Nalcor with the state of our provincial finances, and it's evident this Province is financially...doomed. The gross provincial debt is now over $13 billion, and the government is projecting $5 billion more in borrowing over the next five years. That $5 billion is on the low side unless the government chops about 20-25% of its annual expenses - which is almost impossible in the near term. Impossible because those kind of cuts would take the Province from its current recession into a depression. With 30% of pay cheques in Newfoundland and Labrador being issued by the government, well, it's kind of obvious the impact those cuts would have.

Unfortunately, if Muskrat Falls is allowed to continue and the government remains on its current spending levels (or even close to them) this place is doomed to financial collapse in the not too distant future. It's simple math. All of this is of course predicated on Muskrat Falls coming in on budget and time. Should those two come off the rails, and many knowledgeable people have argued that has already happened, then that collapse is coming even sooner. Either way, it's coming. Look to 2016, after the provincial election, and the first budget to see just how bad it will be. Nalcor, like its birth parent, has acted in such a way as to sacrifice the economic well being of the Province and its people. Irresponsible, unaccountable, gross negligence.  

In NL the Budget Man Cometh

Danny Williams ' big spin was Newfoundland and Labrador would become Master of its own house. Remember that? He created Nalcor for that purpose. His government acted as if this was somehow possible. It wasn't then, and it isn't now.

There is no better modern example of how every economy in the world is dependent on each other than the world-wide economic war happening right now. It's a war the US thinks it's winning, yet it's a war the US has already lost. Hand-in-hand with Saudi Arabia, the US is flooding the market with oil to devastate economies that depend on its revenue. Russia just happens to be the number one oil producer in the world. The aim is of course to drain Russia, Iran and Venezuela of budget revenue, and ultimately ruin the new Eurasian/BRIC alliance while in its infancy.

The problem with the strategy is the intended victims, Russia and China, have historically proven they can withstand any adversity. The 25 million Russians killed while bleeding the German army white during WW II is one example. Ditto for Napoleon. Etc. The Chinese sent 250 million people back to their villages without jobs or income after the last big world economic collapse in 2008. Not even a bead of sweat creased their brow. These are tough populations, used to adversity, and determined. Our side not so much. In a game of mutually assured economic destruction, as is being played out now world-wide, the only sure bet is the populations of Europe and North America are far less willing or able to withstand economic hardship than our fellow human beings on the other side.

Where its all leading for oil is fairly predictable. Putin hinted as much when he recently commented that ISIS was surviving by selling oil on the international black market for $30 a barrel. I take that comment, in the context it was made, as a direct challenge to the Western powers attempting to empty his coffers: "Russia is prepared to see oil fall as low as $30 a barrel in an international game of chicken". Let's say that's true,  what are the ramifications of that strategy for us?

Oil accounts for 33% of all revenue in our provincial budget each year. We are now fully dependent on oil revenue for our standard of living - government and the population. We have borrowed. We are in debt to our eyeballs. An oil  recession in this province would be far more dangerous here than most places. The government has spent every cent of oil revenue in the last 9 years, except the $2 billion or so that is needed for the Muskrat Falls down payment required by the federal loan guarantee. They borrowed a billion dollars last year on top of that to pay bills. This year the deficit looks to be about $600 million or so. That will have to be borrowed as well. That means our gross debt, the money we actually owe, is almost $1.5 billion higher than when Williams was elected , and the oil money started coming in.

But what will it mean going forward? If oil settles at $60 a barrel, as many economists are predicting, our annual budget will lose about $1.25 billion. That is catastrophic for the provincial economy. That is recession. The reason is that this province relies heavily on government spending to drive the economy. Some examples are Muskrat Falls, hospitals, etc. Without that expenditure, the private companies that relied on it die on the vine. Have no illusion, they will die on the vine. That means much higher unemployment numbers, serious drops in real estate values, and all that spirals from that as usual.

It means massive cuts in government spending on programs and people. It means recession. Now, if Russia carries out its implied intention to ride the oil wave down to $30 a barrel, the consequences are much different. A $30 per barrel drop means Newfoundland and Labrador loses over $2 billion in oil revenue per year. That means depression. That means default on large loans - like the federal loan guarantee on Muskrat Falls. That means Hebron is cancelled. It means an end to all oil exploration, and the end for the many local companies living off servicing the oil industry. It means massive unemployment in the private sector and the public sector. At least in the range of 25%.

Now, you might think this is an exaggeration, but remember that the provincial GDP increases of the last decade have been almost solely based on oil revenue. The economy and society have inflated along with the boom. Personal debt has increased with the expressed idea that oil would keep going up. Government debt ditto. Therefore, the dramatic shock of oil deflation has even more severe consequences than would normally be expected. If you want a really good example, look to the oil bust in Alberta in the 1980's. That was Alberta's first big bust. They were like us. They spent like it would never end. It ended, and when it did people walked away from their houses... Alberta was devastated, and it had a government savings account - the Heritage Fund. We don't have one of those.

At $30 a barrel the refinery at Come-by-Chance is almost certain to close. Ditto for the Hebron development. Those two projects alone would have a massive financial effect in central Newfoundland. Muskrat Falls also comes into focus. Selling power at a loss for the sake of it may be trumped by common financial sense, and that project may be abandoned. As bad as its financial are now, financial arrangements still have not been made with the Nunatukavut or Nunatsiavut governments, which can be expected to be at least $1 billion extra. Then there is the prospect of Hydro-Quebec winning its lawsuit over the water management agreement. That one you can take to the bank. In 2010, the provincial department of Natural Resources estimated such a loss in court would result in billions of dollars in damages being awarded by the courts. It also stated that CF(L)Co would be bankrupted. These are the facts.

There is no bright side to the economic war being waged by the big powers in the world. Not even for them. It's the kind of "battle to the last man" that by necessity means no one else survives. We are and will remain casualties of the "greater good". We are also casualties of a foolish and irresponsible spending policy of the Williams' regime. We are also casualties of our own acquiescence to the Williams' vision.  The problem, and it's a very serious problem, is Newfoundlanders and Labradorians are not being informed of the reasons for it all. It's put down to "lower oil prices" and that's about the extent of the explanation by government. They say only two things are certain: death; and taxes. Add a third: ignorance is no excuse.  

Muskrat Falls Math - into the Abyss

I have yet to read an article that attempts to tackle the complete Muskrat Falls "integrated business case", including especially the costs and returns it is designed to provide. So it's time to tackle that head on.

This week VP Gilbert Bennett, Nalcor stated the average production for Muskrat Falls is estimated at 510 megawatts (MW). That should be a big wake up call for people. Up until now Nalcor and the government had been holding fast to the full production capacity of the planned dam - 824 MW. That represents a 38% decrease in expected production from the Muskrat Falls facility. Ordinarily that would kill a project immediately, but the government has other plans. I'll get to that in a bit, but first the actual production costs compared to the returns for our treasury.

Back a year ago our now departed Minister of Natural Resources, Jerome Kennedy, stated in the House of Assembly that the cost of power produced at Muskrat Falls would be $.25 a kilowatt hour (kwh). That was based on production of 824 MW. That was to break even, and before costs associated with transmitting to Nova Scotia were factored in, and without cost over runs. 824 MW of power equals 4.9 terawatt hours, or 4.9 million megawatt hours of energy per year, or 4.9 billion kilowatt hours - for the purposes of this article we will stick with kwh.

So, if Muskrat Falls could produce full power, full time, it would produce 4.9 billion kwh at an annual cost of $1.225 billion - to break even (remember that number). That is to Soldiers Pond. As the energy converts from DC lines to AC lines, travels under the Gulf, and does that process again, it loses about 5% (conservatively) of it's energy on each end. Then there are the transmission fees Nalcor has to pay to Emera to send power across the sub sea line, etc. I'm not even going to factor that in to keep things semi-clean.

So, the annual budget necessary to run Muskrat Falls at a break even point is $1.225 billion. That doesn't change now that the average production, according to Bennett would be 510 MW per year. What it does mean is the cost per kwh goes from $.25 per kwh to $.40 per kwh. That is bad. Very bad. Now that $.40 per kwh has to be blended into Nalcor's already existing energy production (Churchill Falls is not included - explanation later) of 1850 MW or 11 billion kwh. Right now rates differ depending on where you live in the province and whether or not you are business or residential. Based on stated gross electricity sales of $520.7 million for 2012, the average price per kwh for power is 4.7 cents per kwh ($100 million of that $520.7 million is heavily subsidized Labrador and Industrial customers). 

Blending the current rate with the Muskrat Falls rate puts the new average rate at 13 cents per kwh or 300% higher than the current average rate. Of course that number includes industrial and Labrador clients.

Here is the hitch. All the numbers above are based on the Water Management Agreement being legal/constitutional. Without the Water Management Agreement, Nalcor stated in pre-filed evidence with the PUB, that Muskrat Falls could only run at 20% capacity. This issue is before the Court in Quebec - it will be heard on January 20, 2014. It is also before the Court here with yours truly. What happens if/when the obvious happens and the Water Management Agreement is thrown out?

Well, it changes the numbers radically. That takes the average production at Muskrat Falls down to a mind blowing 102 MW - or 607,142,857 kwh. To put that number into focus, the average price per kwh for Muskrat Falls energy would have to be $2.02 per kwh - by far the most expensive power on the planet by a landslide. In 2012 Nalcor generated that $520.7 million in revenue on 1850 MW. Now it's looking to generate an additional 102 - 510 MW for $1.225 billion a year. The math is pretty clear.

Of course Nalcor is, according to the Premier and Gilbert Bennett, planning on taking 1500 MW a year from the Upper Churchill starting in 2016. Seems they have been taking additional power from the Upper Churchill since June 2012 according to Hydro-Quebec (which is apparently why they filed suit). If that plan was actually legal the additional revenue, based on an average of 6 cents per kwh (the average spot price for 2012) would give Nalcor an extra $534,600,000.00. The Government and Nalcor have been spinning the line that Muskrat Falls will make $400 million in revenue. Seems they are depending on taking that "extra" power from Hydro-Quebec. Like I said, if it was legal then it would be great. It just isn't though. Even Nalcor own 2012 Financial Report states all the power, but recall, "generated at the Upper Churchill" belongs to Hydro-Quebec.

Just one last thing. If Muskrat Falls is projected to generate 510 MW Nova Scotia wants about 300 MW of that power at spot market prices, plus the 25% of generation it gets for free. My math has that total commitment to Emera being 427.5 MW for a blended price to them of 4 cents per kwh - about the same price they have promised to Labrador mining companies. Obviously, the government is not building a dam to give all but 82.5 MW to Nova Scotia. They need that Water Management Agreement to take that additional power from Hydro-Quebec or their deal with Emera is finished. All the economics, and therefore the project, rely on the Water Management Agreement. Bad as Muskrat Falls is for the taxpayer/ratepayers of Newfoundland and Labrador, the death of the Water Management Agreement is a step into the abyss if we continue to build...

Is Newfoundland and Labrador Ready to Lose the Upper Churchill?

Is Newfoundland and Labrador ready to lose the Upper Churchill hydro-electric dam and facilities? Every single Newfoundlander and Labradorian would say a resounding "No". However, we are getting very close to that position, and here's how.

Just say for a moment that Hydro-Quebec or I are successful in the challenges on Muskrat Falls in Court, but Nalcor keeps building the dam and taking power from the Upper Churchill as it apparently is now (according to Hydro-Quebec's Statement of Claim). Where does that leave us? According to the legal opinion given by lawyers at the province's Natural Resources department it leaves us with billions in penalties and costs to Hydro-Quebec  which, according to the opinion, would bankrupt CFLCo unless the provincial government dumped money in to pay the costs off. However, it's not that simple.

When Dean MacDonald and Brian Tobin agreed to sign the Shareholder's Agreement of 1998, they gave Quebec some powers over that scenario. The Agreement gives Hydro-Quebec a veto over the following as it pertains to CFLCo's finances:

3.3.2 Any sale, assignment, transfer, lease or exchange of all or substantially all of the property of CFLCo or any Subsidiary of CFLCo.

3.4.2 The adoption of the annual operating budget and the annual capital expenditure budgets of CFLCo and any variations thereto which would result in the increase or decrease of any such budget by $10 million in the aggregate or $5 million for any particular budget item.

3.4.4 The issue of any Shares or any Rights, except for Rights attaching to subordinated debt obligations, or the issue of any shares or any debt obligations of any Subsidiary of CFLCo.

3.4.5. Any loan or borrowing on the credit of, or any issue, reissue, sale or pledge of debt obligations of, or the grant of any financial assistance, guarantee or security by CFLCo or any Subsidiary of CFLCo in each case having an aggregate principal amount of $25 million or more (whether it be one or more trenches), except for subordinated debt obligations.

8.1 Pre-emptive rights. Subject to Sections 8.3 and 8.4, no shares or rights may be issued by CFLCo to any shareholders or to any other Person (the "New Issue Securities") unless CFLCo shall have first offered it to N&LH and any permitted transferee of N&LH and to HQ and any permitted transferee for the same pro rata to their respective Pro Rata Shares, at the same price and on the same terms and conditions as those offered in respect of the New Issue Securities.

In other words, Hydro-Quebec could veto CFLCo from going into bankruptcy. Or, more dangerously, it could veto the acceptance of any financial assistance by the provincial government to keep CFLCo from going under.

If CFLCo is without funds to pay Hydro-Quebec the court awarded costs it would be unable to operate the dam. It would frankly be unable to meet its payroll. Should that happen, the Power Contract states:

             Should CFLCo, not being prevented by any event of Force Majuere, be unwilling at any time to operate the Plant, and should the plant then be operable, Hydro-Quebec, if not then in default here-under, shall have the right to cause the plant to be operated for the account of CFLCo in accordance with sound utility practises until CFLCo itself resumes such operations.

So, in other words, Hydro-Quebec can force CFLCo not to accept financial assistance from the province, and it can refuse to let CFLCO go bankrupt, and simply take over the operations of the plant while the bill for damages to CFLCo keeps rising to the point of being impossible to pay.

If the provincial government tried to sell some or all of its shares Hydro-Quebec gets first rights to them. If the provincial government tries to issue bonds Hydro-Quebec gets first rights to them as well. And that's only if Hydro-Quebec doesn't use its veto to stop that from happening in the first place.

Consider though that the province wants the Muskrat Falls dam operational by 2016, and consider damages start from that point, Hydro-Quebec can sit on those damages year over year until 2041. By 2041 those damages would be, or could well be, in the vicinity of $25 billion, not including interest. At that point Newfoundland and Labrador would have no choice, but to surrender the dam in its entirety to Quebec.

Is this what we really want? Are we ready to lose the Upper Churchill to Quebec?

Back Stabbing the People of Newfoundland and Labrador

Financial crunch, requiring deep cuts and discipline, is the state of our provincial government's finances according to our PC government. On the radio waves, on the tv, all we hear is the necessity for cuts and lay-offs, but is it true? Well, frankly no, it isn't.

Despite all the foreboding of impending doom, oil revenues for 2012, $ 2.8 billion, were the highest ever. The province recorded a whopping $883 million budget surplus for the year. Just another in a line of offshore oil fuelled surpluses. It is strangely odd then that the province would lay-off 1200 employees, affecting all those families as well, and cancel numerous programs - including the West Coast Training Centre today. The mantra is austerity. The tool is responsible care taking of the treasury, but is that real? No, not even close.

Consider this: between 2005 and 2012 the province received $12.25 billion in offshore oil revenue - that's an average of $1.3 billion a year since 2005. Now consider this: the gross debt of the province is actually larger today than it was back in 2003, before oil income bloated the coffers. Specifically, the gross debt in 2003 when the PCs took over was $12.8 billion. Today, as of March 31, 2012, our gross debt $13.4 billion. In other words, despite bringing in over a $12 billion in oil revenue since 2003, the province is over a billion dollars further in debt. How can that be possible? It's called poor decision making.

The gross debt is made up of primarily three things: borrowings; unfunded pension liabilities; and group health and life insurance retirement benefits for public employee and politicians. In 2003 net borrowing was $6.5 billion, unfunded pension liabilities stood at $3.56 billion, and group health and life was $1.05 billion. Nine years later, and $12.25 billion richer in oil money, the same categories looked like this: unfunded pension liability $3.09 billion; and group health and life $2.09 billion.

So, if all that oil money came in over the last while where did it go? Clearly the oil profits were not used to really reduce these retirement liabilities. Back in 2003, the provincial government had a total of cash saved and invested of $441,855 million. Today, that same bank account is almost $2.5 billion ($2,442,963,000 as of March 31, 2012 to be exact).

The revenue went way up. The spending went way up. The bills of the future went unpaid, and the difference was left in the bank. It begs the question: Why the austerity program with so much money squirrelled away? There is only one answer to that: Muskrat Falls. Before you roll your eyes and say here we go, take a moment. The memorandum of understanding regarding the federal loan guarantee for Muskrat Falls requires the province to have a down payment of 35% down before it will guarantee any loans.

The province's estimate of its share of the project is about $6.5 billion. Projects this size never come in on budget, and normally have a contingency fund of 25%. Given that, the province is looking at raising at least $8.25 billion. That means the federal loan guarantee would require them to raise about $2.9 billion for their down payment. They had $2.4 billion in the bank as of March 31, 2012.

Bottom line, the province is laying people off, cancelling programs, not expending department budgets in a desperate effort to bank their down payment for Muskrat Falls. Simple as that. We are expendable in the name of a dam. Ask the people who lost their jobs, or the groups that lost their funding or their schools. Ask those desperately waiting for the construction of hospitals, or road paving, or a number of any other services. It's a real point of curiosity that the issue of the funds in the bank is not a bone of contention in our media or for our opposition groups for that matter. It seems that the knife never stops striking the people of this province in the back.

Why Muskrat Falls MUST be Defeated

Why oppose Muskrat Falls? Having studied the project, the industry, and the demographic/economic position of the province there are many reasons. I won't get into any of them here except one. Muskrat Falls, indeed the entire Lower Churchill project, is based on an unconstitutional foundation - the Water Management Agreement imposed by the Public Utilities Board.



As I stood in the Supreme Court of Newfoundland and Labrador this past week a distant decision weighed on my mind - the Supreme Court of Canada decision of 1984 on the Water Reversion Act. So, I began my final argument with a quote from that decision that eerily mirrored the government's language of today:

"It was argued by the Attorney General of Newfoundland and Labrador that control over the power generated at Churchill Falls is essential for the effective management of its water resources and to meet the energy needs of the Province. However, it is not for this Court to consider the desirability of legislation from a social or economic perspective where a constitutional issue is raised."

Now have a read of the Water Management Agreement's opening words:

"it is declared to be the policy of the Province that, amongst other things, all sources and facilities for the production, transmission and distribution of Power and Energy in the Province should be managed and operated in a matter that would result in the most efficient production, transmission and distribution of Power and Energy and, where necessary, all Power, Energy, sources and facilities of the Province are to be assessed and allocated and re-allocated in the manner that is necessary to give effect to such a policy."

In other words, Nalcor is taking over the operational control of the Upper Churchill plant, and will "allocate and re-allocate" the power generated by it so its lower Churchill facilities will be able to function.



Essentially, the provincial government is attempting to achieve most of the objectives of the Reversion Act of 1984, just by different means. As we all know, the Water Management Agreement is meant to allow Nalcor to take power from the Upper Churchill when the Lower Churchill does not have enough water to operate, and then send that power back to the Upper Churchill plant at its convenience. Essentially, recalling power when it wants from the Upper Churchill.



The Power Contract defines recall as:

"...CFLCO may, on not less than three years prior written notice to Hydro-Quebec, elect to withhold from the power and energy agreed to be sold hereunder blocks at a specified load factor per month...not more than 90%, which blocks in the aggregate shall not exceed during the term hereof 300,000 kilowatts for a maximum withholding of 2.362 billion kilowatts per year."

In other words, only 300 MW of power can be withheld by CFLCO. The rest must be offered for sale to Hydro-Quebec. So, if Nalcor wanted to take power from the Upper Churchill it must reach an agreement with Hydro-Quebec to buy that power from them. Then consider the finding of the Supreme Court of Canada on who owns the power produced by the Upper Churchill:

"...the company signed a contract (the Power Contract) with Hydro-Quebec whereby it agreed to supply and Hydro-Quebec agreed to purchase virtually all of the hydro-electric power produced at Churchill Falls for a term of 65 years."

The Supreme Court of Canada found that "virtually all" the power "produced at Churchill falls” must be sold and supplied to Hydro-Quebec - Not from Muskrat Falls, or Gull Island. Nalcor and the government have attempted to change the ownership of power produced at the Upper Churchill, and place it in their control - in direct contravention of the Power Contract - which is unconstitutional.



In fact, the Supreme Court of Canada further stated, and this speaks directly to the Water Management Agreement:

"As soon as the Reversion Act came into force, Hydro-Quebec's right to receive power according to the terms of the Power Contract would be effectively destroyed. Even if the flow of electricity to Quebec continued at the same rate and for the same price after the coming into force of the Act, it would then be in the form of a privilege rather than an enforceable right. All of this, in my opinion, points to one conclusion: the Reversion Act is a colourable attempt to interfere with the Power Contract and thus to derogate from the rights of Hydro-Quebec to receive an agreed amount of power at an agreed price."

The government and Nalcor both argued throughout the hearing that the legislation says "no adverse effects" to previous power contracts are allowed - and that is what the Water Management Agreement says, but that's not the standard set by the Supreme Court of Canada. It said no "derogation" of rights. Derogation of rights means taking away of rights - whether it's adverse or not is subjective and irrelevant according to the Supreme Court.



So why did Williams and company use that phrase instead of the one insisted upon by the Supreme Court? It's quite simple. They tried to make it constitutional by including language that on the face of it seemed to safeguard Hydro-Quebec's rights and therefore be constitutional, but check out what the Supreme Court said on the Reversion Act:

"Where however the pith and substance of the provincial enactment is the derogation from or elimination of extra-provincial rights then, even if it is cloaked in the proper constitutional form, it will be ultra-vires. A colourable attempt to preserve the appearance of constitutionality in order to conceal an unconstitutional objective will not save the legislation."

So, why would Williams attempt to get around Hydro-Quebec this way? People close to him that I’ve interviewed suggest its his ego. That he was so obsessed with getting the best of Hydro-Quebec, and being recorded as the one who did it in the history books, that he became reckless. Perhaps that is true. I don’t know the man enough to be certain. However, I am certain that once the terms of the Water Management Agreement are forced on Hydro-Quebec, they will sue as they always have. When the government and Nalcor argued in Court that I was merely speculating as to what could happen, I brought it to the Court's attention that Quebec has never once left a challenge to their rights under the Power Contract go undefended. That there is a long history of Court bouts and that Quebec has not lost a single case. In fact, on the balance of probabilities, it is almost 100% certain Quebec will do the same in this case as it has in the past. The difference between this time and the Reversion Act attempt in the 1980's is back then the government had the sense to go to the Supreme Court of Canada first before it implemented the agreement or spent any money. That way it was just out the legal fees. This time they are attempting to build an entire dam complex, and transmission system, estimated to cost between $7-10 billion first. Of course that means adding that cost to our gross debt of $13.4 billion. But that isn't where it ends. Once the dam is built, Hydro-Quebec could easily refuse to ever come to an agreement with us, and the dam would operate at 20% capacity until at least 2041. The financial impact of that is permanent financial devastation to the people of the province.



The government's own legal opinion, in the publication "Legal Options", states:

"If a court followed this reasoning, CFLCO would be in breach of the Power Contract once it started diverting power to Newfoundland and Labrador from Hydro-Quebec. In these circumstances, Hydro-Quebec would pursue monetary damages from CFLCO. The amount of such damages cannot be accurately predicted, but would be significant...Any level of damages would be expected to drive CFLCO into insolvency and likely bankruptcy."

Bottom line, even though that legal assessment referred to the Section 92A strategy to get Upper Churchill power, it equally applies to the Water Management strategy.

This is why I have brought the fight to the province and Nalcor, to stop them from allowing Hydro-Quebec to destroy us before they get the chance. Yes, a lot of money has been spent, but nothing compared to what would be in store for us. I just couldn't stand by and watch Williams and company do this to us.

Expose Alderon Iron Ore Corp - Part 2

Alderon entered 2009 as essentially a shell company, and heavily under the influence of Forbes and Manhattan. Enter the Exploration Group, head quartered in Vancouver (run by Mark Marabito), and Altius Minerals of Newfoundland and Labrador. The Exploration Group was shown until recently as a Forbes and Manhattan company. In February, 2012 the Exploration Group made that association clearer by rebranding itself as Forbes West. Forbes and Manhattan's, and Exploration Group's earliest success in Newfoundland and Labrador was launching Brian Tobin's Thompson Consolidated iron ore mine in Labrador. Their other project with a long hisory in the province is Cross Hair Exploration - a uranium exploration company. They were behind the eight ball developing their uranium project compared to fellow promoters Altius.

Altius, incorporated in Alberta on March 5, 1997, traded on the Alberta Stock Exchange, and then the TSX(1999) and TSE(2007). Altius created Aurora Energy in 2003 with Australian, Fronteer Development Group to develop uranium prospects. Australia's Paladin Energy Ltd now owns Aurora with Altius holding shares and a 2% gross sales royalty. On June 23, 2008 Altius announced an agreement to jointly develop its Kami project in Labrador with Norvista Resources Corporation, a Brian Tobin interest. The joint effort failed to produce and Altius turned to Mark Morabito.

Morabito formed a shell company, 0860132 BC Ltd (Privco) and entered into an agreement with Altius known as the Privco - Altius Option Agreement. Essentially, it had the following elements:

1.) Privco gained the right to a 100% interest in the Kami project;
2.) Privco had to assign that option to a mutually agreed public company listed on the TSX or TSE;
3.) Meet seperate exploration funding targets of $1 million and $5 million within a year at the Kami site;
4.) Altius was to receive a 3% gross sales royalty; and
5.) Altius was to receive 50% of the shares in the public company.

The deal was announced on November 2, 2009. On Decenber 3, 2009 a private placement of 10,000,000 shares was issued by Alderon at $.15 per share. The offering was carried out by Delano Capital Corp, owned by Julian Bharti - Stan Bharti's son, and Axeman Capital Corp, which had a history of brokering offerings for Forbes and Manhattan companies. On December 8, 2009 the Annual Meeting of Alderon authorized a 2 for 1 reverse share split as required by the Privco sale agreement. On December 16, 2009, barely one month after the Altius Option was announced, Mark Morabito announced he had entered into an agreement to sell Privco to Alderon.

2009 was a transitional year for the company as it entered the Forbes and Manhattan fold as a shell company with a future purpose. Its annual financial statement for the year showed a cash balance of $4,920.00 and an accumulated deficit of $20,631,963.00. It was now in the hands of Emprise Capital for the apparent purpose of rescuing it to the point that it could be functional - even as just a shell company. Emprise was to receive 3,500,000 shares as compensation for debts owed to it by the company. The company had reached such a low point that on June 30, 2009 a cease trade order was issued by the BC Securities Commission for failure to provide audited financial statements. The order was revoked upon their submission on August 13, 2009. Alderon was ready for a change for the better. That started in 2010.

On January 15, 2010 Alderon issued another private placement of 10,000,000 shares - this time at $1.00 per share. Delano Capital was again a broker on this placement, as was Axeman Resources Capital and PI Financial Corp. http://tinyurl.com/9raoa5x
On January 19, 2010 Alderon completed another requirement of the Privco purchase and replaced its entire board with the Forbes and Manhattan team: Out - Jeff Durno, Robert Chisholm, Aron Buchman and Craig Goldenberger; and In were - Mark Morabito, Stan Bharti, Bruce Humphrey, Brad Boland and Patrick Gleeson. In addition, Altius as the controlling shareholder gained the right to name three members to the board, but chose to name two - John A Baker, and Brian Dalton. On February 19, 2010 Alderon listed on the American NASDAQ exchange.

On March 3, 2010 the Privco/Alderon deal was completed. Mark Morabito received 5,000,000 post consolidation shares in Alderon for acting as essentially the middleman between Alderon and Altius. Altius received 31,778,081 post consolidated shares, and a controlling interest in Alderon. Alderon also agreed to fund exploration on the Kami project of $1 million in the first year and $5 million in total in the first two years http://tinyurl.com/9kvrmhn . Altius had already completed aerial reconnaissance on the Kami project in 2006-2007, but there remained drilling, etc ahead.

On November 26, 2010 Alderon announced a private placement of 7,300,000 share units http://tinyurl.com/9sc4mrf . The price per unit was $2.20 and entitled the holder to a warrant of one common share and one half a common share exercisable at $2.80 for a period of 24 months from the closing of the offering. The original offering was valued at $16,060,000.00 with an additional over-allotment option of upto $4,015,000.00. The Alderon press release named Haywood Securities as the lead underwriter. However, Delano Capital Corp, owned by Stan Bharti's son, claims to have conducted the transaction: 9,125,000 units at $2.20 per unit for $20,075,000.00. The press release states there is a 6% commission, so one could assume the return for Delano Capital Corp would have to be around $1,204,500.00. The purchaser of these share units remains confidential.

In Part 3 of this series the Americans and the Chinese arrive at Alderon; Alderon gets political; and Muskrat Falls gains a new champion in Alderon.

Expose Alderon Iron Ore Corp - Part 1

Alderon Iron Ore Corp came to everyones attention in the province when former premier Danny Williams was named Special Advisor to the Chairman in 2012. A little known company that was suddenly the next Thompson Consolidated mine. It has been in the press advocating its need for Muskrat Falls power yet we know nothing about it. This series will attempt to answer some of those questions.

It all began with the incorporation of the name Comanche Resources Inc, under the Company Act (British Columbia), March 21, 1978. A little less than a year later, February 28,1979, its name was changed once more to Shawnee Oil Corporation. While it was difficult getting any information on these two names, both reappeared in the United States in later years - now defunct and registered as inactive foreign for - profit corporations. On June 11, 1981 the company changed its name yet again - this time to Enfield Resources Inc. Again, not much information was available, and again the same name reappeared in the United States. Enfield Resources Inc was formed in Delaware, May 20, 1986 and appeared in US bankruptcy court on March 10, 1989. Whether or not there is a reason behind this U.S link or it is simple coincidence is anyone's guess.

The story really starts to take life on June 30, 1989 when the company name is changed one more time - Pacific Summa Capital Corp. The records show one Dennis Kozak President and Director, with an office at Suite 411-850 Hastings Street, Vancouver, BC. It appears for the first time as a publicly traded company on the Vancouver Stock Exchange under the symbol PSU.

The Vancouver Stock Exchange (VSE) was essentially the wild, wild west of stock trading in North America. Wikipedia describes it well during the period:
" In 1991, it listed some 2300 stocks. Some local figures stated that the majority of these stocks were either total failures or frauds. A 1994 report by James Matkin (Vancouver Stock Exchange and Securities Regulation Commission) made reference to 'shams, swindles, and market manipulations' within the VSE. Regardless of the low opinion several held in it, it had roughly four billion dollars in annual trading in 1991."
To be clear, this in no way suggests the companies mentioned in this article were involved in such activities, but it gives you a sense of the backdrop to this story.


On June 28, 1991 Pacific Summa Capital Corp changed its name to Pacific Summa Environmental Corp, and issued a share swap of one old for one new share. It signalled a change in the company's focus as it tried to market two products which it had US patents for: Enviro Hazmate (fire extinguisher); and Zeomix (material for toxic clean up). The company entered into an exclusive distribution deal for Zeomix which was subsequently cancelled. On June 16, 1997 the BC Securities Commission filed a Cease Trade Order against the company due to outstanding annual fees. On September 16, 1997, the Securities Commission banned Kovack from trading in the companies stock, because he failed to file insider's disclosure documents. Other members of the board at that time included Gerald Jardine, John Toljanich, and David Van Dyke. On March 10, 1998, Kovak resigned as President of the company. The company itself was suspended from the VSE on July 16, 1998. The Cease Trade Order was revoked on July, 27, 1998. Gerald Jardine took over as President and the company delisted from the VSE on November 26, 1999. Significantly, Mark Brown took over as CEO. On November 27, 1999 the company joined the TSX venture exchange. Its high value was on the VSE at $3.35 a share, and its low value was $.01 a share on the TSX when it delisted on August 8, 2000.

The next day, Pacific Summa Evironmental Corp was renamed as Traux Ventures Corp. The company by this time was carrying a deficit of $10 million dollars from its previous years, had failed to launch any successful projects, and left many disappointed investors in its wake. To launch Traux the Board of Directors initiated a 30 to 1 reverse share split. That freed them to launch yet another share offering to recapitalize the company. On April 30, 2001 Reza Mohammed took over from Mark Brown.

Reza Mohammed ran a large number of exploration companies from his tiny office in Vancouver. The companies all had the same fax and phone number, and board members - particularily one Anita Algie. Mohammed was a realtor in the Vancouver area, and earned a degree in the mid eighties. Some of the companies he ran included: Tellford Management; Cuda Capital Corp; Titus Capital Corp; Gold Key Capital Corp; etc. The one director that stands out on most of his companies was Peter Born. Born not only sat on Mohammed's boards, but he also sits on the Advisory Board of Forbes and Manhattan - a relationship that will become crucial to Alderon. Mohammed also sat on the Board of Directors of Castillian Resources Corp. Castillian was, and remains, a Forbes and Manhattan interest. It's at this stage of the company's life that Forbes and Manhattan becomes an influentual factor in the company.

Also joining Traux at this time was Senator Edward Lawson. A veteran of the Teamsters Union, Lawson was appointed as an indepedendant Senator by Pierre Trudeau and became a Liberal Senator when Paul Martin won the Liberal leadership. Senator Lawson was very involved in mineral exploration companies. Lawson's lawsuit against Sun media over a story outlining his relationships with stock fraudsters David Ward and Ed Carter created national headlines. Interestingly, the US department of Justice filed suit against the Teamsters executive (Lawson included) alledging the executive, and 26 mobsters, had conspired to hijack the union from its members. The issue was settled when the executive agreed in writing to reform the Teamsters. Lawson took over the role of Chairman of Traux.

Traux followed the path of its earlier incarnations. It achieved little. It traded alot of stock. Its overall deficit remained about $10.5 million. Its highest stock value was $.58 per share on November 17, 2003, and its lowest was $.115 on June 3, 2004. It delisted from the TSX on August 31, 2004.

On September 1, 2004, the company's name changed again - this time to Aries Resource Corp. As had become the norm the Board authorized a reverse share split of 4 old for 1 new share. Members of the Board at this time included Reza Mohammed, Senator Lawson, John Kowalchuck, Anita Algie, and John Harper. Notably, all the original Pacific Summa directors were gone at this point. A significant entry into the company was a 2 million share purchase by Doctor's Investment Group, a Bahamian registered company, owned by Michael W Taylor. Aires made an application at this time to transition into the Business Corporations Act (BC), and on the same day shareholders passed a special resolution to change its authorized capital to an unlimited number of common shares without par value. The next four years proved to be generally fruitless for the company. Its accumlated deficit increased to over $11 million. Thomas Tough, a director of Desert Sun Mining Corp, a Forbes and Manhattan interest, joined the Board. At the annual general and special meeting of September 4, 2008, shareholders passed a motion for a 10 to 1 share reverse and a name change to Alderon Resources Corp.Nineteen days later the stock completely collapsed. Reza Mohammed resigned as president on August 12, 2008. The saviours of the company were to be Emprise Capital Corp who invested in the company, appointed its Jeff Durno as president, and Robert Chisholm as director. In the words of Emprise: " Complete restructure and reorganization (of Alderon)".

The first few decades of the company's life saw it swing from one interest to another. It sold large amounts of shares, did numerous reverse share splits that crucified investors who were unlucky enough to invest, and fed numerous officers with handsome management fees. It went from oil exploration, to mining exploration,to capital fundraising, to environmental promoters, and back to mineral exploration. One thing it did not do was achieve any purposeful, positive return to its shareholders. It ended this era with a sorry $.01 per share worth. In the wild, wild west days of the VSE it behaved as most did. In its transformation to the TSX it did no better. By 2001 it was becoming infiltrated with people closely aligned to Forbes and Manhattan. The stage is now set for the Forbes and Manhattan remake - that is Part II.

Referendum - Refer It

I always enjoy a good debate with the knowledgable and gregarious host of the VOCM Backtalk radio show - Paddy Daly. Paddy admits to reading this blog on a fairly regular basis, and I certainly listen to his show daily. Today the big debate was a referendum on the proposed Muskrat Falls project.
His first question to me via twitter today: " Was the last general election a referendum on MF (Muskrat Falls)?"
My answer to that was, quite frankly, no. You may recall during the election that the only dollar figures available on the Muskrat Falls project were the DG2 (decision gate 2 ) numbers provided by Nalcor. Unfortunately, DG2 numbers were based on a project definition of 5-10%. In other words, the $6.2 billion projected at the time was one hell of a ballpark figure. The public were confused, and the opposition, official and unofficial, ridiculed the numbers to the point the government was on the permanent defensive. As a result, the public chose not to make Muskrat Falls a re-election criteria, and instead it focused on the economy and a sudden influx of new fire trucks to small, rural communities. The media also chose to dismiss Muskrat Falls as a serious election issue, and instead focused primarily on the fall of the provincial Liberal Party in the polls and the race for second place. Under those circumstances, there was no chance to have the provincial election act as a referendum on Muskrat Falls.

Of course, the fact that the PC Party gained a majority, albeit reduced, certainly gives it the legal right to act unilaterally and force the project through - as it did with Bill 29. The problem is, as they found out with the political fallout from Bill 29, these things eat your political capital faster than a starved man feasting on a steak. The all important high ground, or moral high ground as some refer to it, falls just as quickly. Without the high ground the government loses the ability to legislate and certainly dooms its re-election. Normally given such a scenario the many backbenchers, and some ambitious cabinet ministers, would apply enough internal pressure to halt such a proposal. However, this is Muskrat Falls. Logic is not a word that one could apply to this government's approach. For instance, there is Natural Resource Minister Kennedy's comments on buying power from Hydro Quebec as an alternative to Muskrat Falls:

"So we could be buying power from Quebec that is generated in Labrador. There is something immoral about that, but unfortunately, as the current power contract currently exists, it is not illegal."

Minister Kennedy has a perverse definition of "immoral" considering most people would consider not purchasing power at say five cents a KW from Hydro Quebec in favour of power that will cost 20-30 a KW from Muskrat Falls as immoral if there is a cheaper alternative. The source of that power is really quite irrelevant to most people. This is just one of many examples of the lack of logic that is rampant in this government's approach.

Paddy then has this to say:
" I would be surprised if the majority of NLers wanted a referendum on MF."
Tough one to argue. On the one hand Paddy has no proof to back up his assertion, and on the other hand I have no evidence they do. That being said, what logical person could be upset at the prospect of being able to exercise their democratic right, on a clear question, regarding a serious financial matter that will single handedly shape the financial future for generations?

If elections were enough to give a government the right to do as it pleased we would have never witnessed a referendum in this country. We have had separatist governments in Quebec elected with the known sole goal of splitting the country up. Was their election a referendum on separatism, and their victory an instant endorsement of that goal? No. They held a referendum, and lost. The government of PEI held a referendum on the fixed link. The BC government held a referendum on the HST. The New Dawn Agreement had to be appoved by a majority of the aboriginal community in the one and only referendum on Muskrat Falls to date.

So Paddy ol b'y, an election is an election, but a referendum is the way we must go on Muskrat Falls.

When Regimes Fall - NL Style

The last few months have born witness to the death throws of the PC govenment of Newfoundland and Labrador. In local terms: " the bottom's out of her b'ys." It began with the sudden, and unexplained departure of one Daniel E. Williams - as he likes to be referred to in legal wranglings. That was followed by the unprecedented fixing of the subsequent leadership non-race. Then there was one sorry blunder after another. The polling numbers steadily fell. The blunders continued. And so on.

The last few months however have signalled a whole new phase, and a steady decline into the absurd. A place so low, so dark, so desperate that it reminds me of other places and other actors. Different circumstances, and different geographies, but bare with me.

When a regime begins to fall, anywhere in the world, what is the first sign of panic? The first sign of desperate people clinging desperately hard to power? They turn inwards. They refuse to acknowledge the opposition around them. They become insular and isolated. They ignore the art of compromise and embrace their tools of power. Power has become their only reason and purpose. They crack down firstly on those that forment the desent. They try to isolate them, marginalize them, demonize them, and when all this fails, as it inevitably does to those that attempt to halt just progress, they turn inward. It could be Syria, Egypt, Yugoslavia, South Africa, East Germany - you get the idea.

It doesn't normally happen in democracies - although it has. Take the civil rights movement in the US as an example - although they eventually accepted the just change. Another, closer to home example, could be Quebec's "Silent Revolution". The point is, most democracies are governed by constitutions that restrain their governments from acting against the just democraltic rights their countries are founded upon. So what happens when a government, in the developed, democratic world does just that? We have such a case now in Newfoundland and Labrador.

Our Public Utilities Board was castigated, marginalized, and demonized by the government (and its supporters) when it refused to endorse the Muskrat Falls option. It was sent to the dog house with the Premier actually commenting publicly that she had lost confidence in it. An act so contemptous, so arbitrary, so cowardly that those of influence and common citizens alike, in any other province would have revolted. Yet, hardly a word is muttered about the outrageous treatment given the Board. It did result in a small compromise by the government though - an agreement to hold a special debate on Muskrat Falls and a study of natural gas alternatives. However, the government is guaranteed to win a debate where they hold the vast majority of the seats, and they chose a company to do the natural gas study that was already on the record as saying it was not feasible. So a compromise, but in name only. A compromise that was so obviously designed to appease rather than to address that it lost its relevance almost immediately.


Then came the moment. The all encompassing moment. Bill 29. An Act to ammend the Access to Information Act. In an almost suicidal move the government decided to be exceptionally democratic about an exceptionally undemocratic move. It held a four day filibuster in the House of Assembly to pass a law that essentially turned access of information into a ministerial perogative. The new law gave individual ministers the right to veto what ever they chose to from their ministry. The public revolted. Not in the streets, although some did, but rather in their hearts and minds. It was as if for once they saw the government as it actually was and not how the government had been portraying itself for some time. The opinion polling numbers for the government began to plummet almost immediately.

The government's response? A new policy that bans individual MHAs from advocating for their constituents directly to the government departments concerned. The new policy mandates that all MHAs must put their inquiries to a Minister's Executive Assistant, and that no other channel may be used. Essentially, they rendered every MHA obsolete - especially politically. In effect, complete power and control of a constitutional responsibility was taken away, and a fundamental pillar of democracy, the citizen's vote to elect their own representative in the House of Assembly, was severely weakened.

The end result of Bill 29, and the new policy on MHAs power to represent, is to transfer absolute power to the individual ministers in Cabinet. A now complete inward turn. A desperate, undemocratic, and flagrant move by men and women to deprive their own citizens of the rights they should have become acustomed to by now. A move reminiscent of the Senatorial days of the decaying Roman Empire. A move gently similar to the now deceased, or in the process of becoming so, Arab dictatorships and their secret and self-rewarding deals. Over the top comparisons you say? Dramatic and off topic? Reflect on the times, reflect on the signs, and see the truth that the government of Newfoundland and Labrador has become.

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?"

Masters in Our own House

2012 marks uncharted territory for the province of Newfoundland and Labrador. Unlike years before, the province is facing the crushing realities of the world market place on its best laid plans for economic expansion. It is about to experience the boom/bust cycle that is all too familiar to oil driven economies - like Alberta. The 2007 Energy Plan, the "Masters in our own House" manifesto, was meant to usher in a new era of strategic development. Then Lt Governor Ed Roberts read the Speech from the Throne, as crafted by the Danny Williams government:

"Our people are proud nationalists who believe it is only by affirming our identity as Newfoundlanders and Labradorians that we will realize our goal of economic equality within the federation...Our people are ready to take charge of our future and, under [Premier Danny Williams's] leadership, our province will achieve self-reliance by becoming masters of our own house."
"We as Newfoundlanders and Labradorians aspire, not to perpetual subservience, but to self-sufficiency."
"Our people are not content to tolerate a future of relying on others economically. However, our people have now also learned that we will achieve self-reliance economically only by taking charge of our future as a people."

"Our province will achieve self-reliance". Therein lies the fatal flaw. Just as there is no such thing as a "self-made man" the idea that a people, any people, can be "self-reliant" is a concept hundreds of years outdated. In the age of globalization there are no "islands" protected from the deflationary waves. The western world finds its economies being rationalized to those in Asia, and not the other way around - as was originally envisioned.

Still, the nationalistic governments in Newfoundland and Labrador peddle the idea that somehow the power over the future lies in their hands. That the province is an entity unto itself, and the only thing holding it back is the negative attitudes that disagree. So it boldly, with blinders firmly attached, moves forward. It scored some victories with the oil companies for equity shares in offshore projects when oil was at an all time high. It scored a victory for $2 billion in offset payments from the feds when Martin had a minority government and was facing an election. However, when all things were equal it lost. It lost the Abitibi expropriation battle. It lost the recent NAFTA battle with the oil companies over research and development subsidies. It lost countless battles with Hydro Quebec. On and on it goes.

The problem is that despite all these lessons it does not appear to learn. Fast forward to today. The government is trying to force ExxonMobile to build all three $100 million modules in the province, or pay a large fine for not doing so. Exxon has stated the province can not build the third module on time, due to a lack of resources, and it must therefore build it outside the province or face costly delays in first oil. The Premier has threatened them with fines and "troubled waters" if they proceed. The Mayor of St. John's even boycotted a meeting with a top Exxon official in protest. Its the typical us vs them mentality that takes over when the government of Newfoundland and Labrador doesn't get its way. When it can't "take charge". Because controlling economic forces is not something any country can "take charge" of, let alone a province, in a global economy. It is not an achievable goal.

The province can spend its oil royalties as it sees fit. It can build the Muskrat Falls dam as long as it has enough money saved to leverage the rest in financing. It can do all that. But, it can't make iron ore mines any more attractive on the stock markets in a time of obvious, long term, international declines in consumption. It can't force private investors to invest and buy the mines shares on the stock market. It can not keep its young people from voting with their feet and leaving - a record 4000 or so did in the first quarter of 2012. It can not control the price of oil. It can not even accurately project its income each year from oil revenues. As of today, Brent crude futures are trading at $90 a barrel - 30% below budgeted revenues. The trend is downward as the world market place gets hammered by sovereign debt, consumer debt, and the resulting decline in demand. It will be a long term problem-decades long.

It begs the question: How is the provincial government reacting to the change? The answer is the same as usual. Fighting others to perpetuate the myth that we are "masters in our own house". No updated financial document to amend the budget to reflect the obvious massive deficit coming for this year. No plans to halt the Muskrat Falls development despite the mining companies in Labrador being frozen by the chill of world wide deflation. No plans other than the original - hell or high water - blinders firmly on. As we used to say in the army: No plan survives first contact with the enemy. To put the icing on the cake, the PC government passed Bill 29, which essentially guts access to information in the province, so that it can hide all those pesky little bits of reality that might make it known its not masters of its own House.

The New Official Secrets Act - Bill 29

The House of Assembly just wrapped up a historic filibuster on Bill 29, AN ACT TO AMEND THE ACCESS TO INFORMATION AND PROTECTION OF PRIVACY ACT http://tinyurl.com/75xa3sp . The four day, marathon session was covered nationally by every major press outlet, and of course locally in both the news and editorial pages province wide. The Centre for Law and Democracy, an internationally recognized organization on access to information, had this to say when asked for comment by the CBC:

"The new cabinet exception is, well, breathtaking in its scope... I think it’s one of the widest exceptions of that sort I’ve seen anywhere... The Newfoundland one, or the proposed cabinet exception, really takes it to another level... I don’t think I’ve ever seen one as broad as that. It really throws in the kitchen sink... What we see in other countries, and in Canada as well, is that governments often abuse those exceptions,and the way the thing is worded now, it’s really wide open to that kind of abuse.”

Very damning wording for any government to receive from an independent body, let alone on the issue of access to information - a basic right in a democratic society. Well, at least most of us view it that way, except, apparently, Justice Minister Collins who disagreed:

"Mr. Speaker, the right to information is an important one, one that we have to protect and guard," Justice Minister Felix Collins said during question period Tuesday. "But it is not absolute."

He then goes on to essentially tell it as it is with the changes to Section 18 of the new Act:

“The auditor general will have access only to those records that the clerk says he can have...
by expanding the list of cabinet records, it expands the list to which he does not have access.”

Worrisome as those words are, and they should concern any and every free thinking person, the really severe, and potentially dangerous words are found further down in the Act.

Section 24:

     24. (1) The head of a public body may refuse to disclose to an applicant information which could reasonably be expected to disclose

(a) trade secrets of a public body or the government of the province;

(b) financial, commercial, scientific or technical information that belongs to a public body or to the government of the province and that has, or is reasonably likely to have, monetary value;

(c) plans that relate to the management of personnel of or the administration of a public body and that have not yet been implemented or made public;

(d) information, the disclosure of which could reasonably be expected to result in the premature disclosure of a proposal or project or in significant loss or gain to a third party;

(e) scientific or technical information obtained through research by an employee of a public body, the disclosure of which could reasonably be expected to deprive the employee of priority of publication;

(f) positions, plans, procedures, criteria or instructions developed for the purpose of contractual or other negotiations by or on behalf of the government of the province or a public body, or considerations which relate to those negotiations;

(g) information, the disclosure of which could reasonably be expected to prejudice the financial or economic interest of the government of the province or a public body; or

(h) information, the disclosure of which could reasonably be expected to be injurious to the ability of the government of the province to manage the economy of the province.

Essentially, this section gives the "head of the public body" complete authority to refuse any information that could relate to any economic, scientific, or techincal information. That would include any information on Muskrat Falls, mining, etc.

Section 27:

   27. (1) The head of a public body shall refuse to disclose to an applicant information that would reveal

(a) trade secrets of a third party;

(b) commercial, financial, labour relations, scientific or technical information of a third party, that is supplied, implicitly or explicitly, in confidence and is treated consistently as confidential information by the third party; or

(c) commercial, financial, labour relations, scientific or technical information the disclosure of which could reasonably be expected to

(i) harm the competitive position of a third party or interfere with the negotiating position of the third party,

(ii) result in similar information no longer being supplied to the public body when it is in the public interest that similar information continue to be supplied,

(iii) result in significant financial loss or gain to any person or organization, or

(iv) reveal information supplied to, or the report of, an arbitrator, mediator, labour relations officer or other person or body appointed to resolve or inquire into a labour relations dispute.

(2) The head of a public body shall refuse to disclose to an applicant information that was obtained on a tax return, gathered for the purpose of determining tax liability or collecting a tax, or royalty information submitted on royalty returns, except where that information is non-identifying aggregate royalty information.

(3) Subsections (1) and (2) do not apply where

 

(a) the third party consents to the disclosure; or

 

(b) the information is in a record that is in the custody or control of the Provincial Archives of Newfoundland and Labrador or the archives of a public body and that has been in existence for 50 years or more.

This section backs up Section 24, and specifically uses the wording: "shall not disclose". There is no maybe, no 'it's up to the discretion of the head of the public body'. It very interestingly refers directly to the issues of royalties. This is interesting in that royalties collected from offshore oil are already well documented publicly. They are not a secret. Does it refer to mining royalties? Does it refer to a potential Royalty Trust Agreement for the financing of Muskrat Falls? This section would cover those. So it would appear the government's intentions are to keep these agreements secret - otherwise why single them out specifically in the Act, and leave no room for a head of a public body to do otherwise? The timing of this legislation, prior to the DG3 numbers on Muskrat Falls and its financing, contracts is suspect at best and does nothing to quell the very real suspicions of ordinary, thinking people. Most would consider common sense.

Section 43.1:

43.1 (1) The head of a public body may disregard one or more requests under subsection 8(1) or 35(1) where

(a) because of their repetitive or systematic nature, the requests would unreasonably interfere with the operations of the public body or amount to the abuse of the right to make those requests;

(b) one or more of the requests is frivolous or vexatious; or

(c) one or more of the requests is made in bad faith or is trivial.

This section is arguably the most dangerous to the basic democratic rights we all enjoy - or thought we did. Essentially, it gives the head of any public body the right to deny any request they feel like. It reminds me of the "Conduct unbecoming a member of the Canadian Armed Forces" provision in Canadian military law. It's a catch-all charge. One that if no other charge sticks this will. That is Section 43.1 - a catch-all clause. It gives a Minister the right to dismiss media requests for any information. Same goes for the Official Opposition. Same for the ordinary citizen. It is as undemocratic as you can possibly be without saying you are dictatorial - in words anyway. 

The Canadian Charter of Rights and Freedoms guarntees us:

Fundamental Freedoms

 

Fundamental freedoms

2. Everyone has the following fundamental freedoms:

(a) freedom of conscience and religion;

(b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication;

(c) freedom of peaceful assembly; and

(d) freedom of association.

The question begs answering: How can one have the freedom of belief and opinion without the knowledge to form it? How can the media be free, and communicate truthfully when it is denied the information to form that truth? How can citizens form the beliefs and opinions that allow them to reason and judge the performance of their government without open and honest access to information that is neither censored nor filtered? This is not a case of martial law. This is not a case of internal insurrection. This is not a case of state secrets at a time of war. No, this is a case of the government of Newfoundland and Labrador being at war with its own citizens. A secret war. A war that requires an "Official Secrets Act" - Bill 29. 

The Alderon/Williams Lawsuit Letter

As some of you may know, I was served with a letter from Alderon Iron Ore Corp two weeks ago today. The story begins with a phone call received on my business phone on May 9, 2012. It was a 416 number, and a woman asked: "What area of town is your business in?" I responded: "the east side." She then asked: " what is your address?" I asked: "Why do you want to know my business address?" She said: " I want to see your work." I said: "You can see our work on our business website." and hung up.

For curiousity, and because I knew a person from Toronto wouldn't be stopping by to see my work, I phoned the 416 number back. Low and behold if it wasn't the number of Cassels Brock law firm in Toronto. Several attempts to contact them for clarification for the need of my address failed to receive a response. The matter has now been sent to the Law Society of Upper Canada in the form of a compaint. You see, it's not legal for a law firm to misrepresent itself to gain information. But I digress. It just so happens that the senior partner of Cassels Brock was named to Alderon's board of directors, along with Danny Williams, on March 28, 2012. Danny Williams was granted 1,125,000 share options on the date he joined the board ( he has since acquired an additional 100,000 shares under 10981 Newfoundland). That compares to John Vettese/director (Cassels Brock) 300,000 share options; John Baker (Altius) 400,000 share options; Todd Burlingame 250,000 share options; Brian Dalton (Altius) 400,000 share options; Gary Norris 250,000 share options; and on it goes. Suffice it to say that of all the directors of Alderon, Danny Williams got the biggest number of share options of any director or officer in the company. Why that is the case? I do not know.

But there is a little background for you. Here is the document served on me by Alderon, although it appears to be almost completely about Danny Williams. Just a quick pointer: You will note that almost all comments on it that Alderon says are defamatory are quotes from the radio host, and not me. You will likely also notice the many references to discussing the Muskrat Falls project, which considering Alderon came out this week publicly campaigning for the project, seems a little rich. More on that later, but for now here is the letter (click on each letter to view):