Nalcor Steals From the Upper Churchill 2015

Now you won't find a single Newfoundlander who thinks taking power from the Upper Churchill dam is stealing. It's just taking our power that the Quebecers are stealing from us under the guise of the Power Contract 1969. Simple as that. Well, it's not as simple as that. Emotionally perhaps, but legally not so much.

For some reason, as yet unexplained to the public of this province, Nalcor, via its wholly owned subsidiary Newfoundland and Labrador Hydro, and its majority controlled CFLCo, has stolen power from the Upper Churchill. A lot of power. Way more power than it is allowed under the Power Contract. Yes, the contract the Supreme Court of Canada has already found is binding (1984 Reference Question).

For fiscal 2014, 2014 sales from the Upper Churchill to Newfoundland and Labrador Power (NLH) were $6, 067,000.00 according to CFLCo's financial statements. However, and it's a huge however, in fiscal 2015 NHL was sold $43,610,000.00 worth of power from the Upper Churchill representing almost 30% of CFLCo's sales for that year. According to the Power Contract, NLH can only buy about 6% of the power generated at the Upper Churchill. That means that NLH took 500% more power in 2015 than it was lawful to do. In other words, they stole it.

Correspondingly, Nalcor lost $51 million in oil sales revenue on the year. Was that massive power grab of Upper Churchill power an attempt to make its balance sheet look better than the $19 million over all it did lose? Hard to say, and legally speaking makes no difference. The bottom line is Nalcor, presumably with the approval of the Davis PC government, stole $37,000,000.00 in power (once you subtract the ordinary $6,067,000 from the gross sales for 2015 of $43,610,000.00.

What does that mean for us? It means the taxpayer/ratepayer is now liable for that in damages - plus interest, plus costs, including special costs. It also means our provincial utility is stealing. Shocking as it may seem, and yet to be discussed in the public for some reason, the quiet release of Nalcor's 2015 Business and Financial Report here says it all. 

The PUB Complaint on Muskrat Falls filed

Today myself and five other people filed an official complaint with the Public Utilities Board (PUB) here in the province. These people come from all over the province - Labrador, the Northern Peninsula, and here on Random Island.

The provincial government designed its Lower Churchill strategy around pushing public oversight of the project beyond us. It exempted Nalcor from PUB scrutiny. Ditto for the entire Lower Churchill project, including transmission lines, dams, everything. It had the whole deal sown up, except for one thing. In order to allow for the Churchill dam projects, Muskrat Falls now and Gull Island later, the government amended the Electrical Power Control Act in 2007 to allow it to effectively force CFLCo to break the Power Contract with Hydro-Quebec. When Hydro-Quebec's directors on the CFLCo Board vetoed the proposed Water Management Agreement, leaving the door open for Nalcor to go to the PUB. The PUB dutifully implemented the agreement as they were required to do under the Act.

The government had a plan. It can be found further on in the Electrical Power Control Act. Specifically, it allows the government to declare a "State of Emergency" if for "some reason" it should be in a situation where it does not have enough power or water to supply the power "needs" of the province. The way to look at this is the government is essentially creating its own state of emergency. The Supreme Court of Canada has already ruled legislation like this is unconstitutional. The government knows this. There plan is simple: build the dam by legislating away any legal opposition; have the dam and more importantly the transmission lines built before their case with Hydro-Quebec goes to Court; and when the Court sides with Hydro-Quebec declare a state of emergency.

Under that state of emergency the provincial government appoints an Emergency Coordinator, who decides who gets what power, including Hydro-Quebec and the Upper Churchill. The state of emergency stays in place until the government decides it's over. There is no legislated criteria for when it starts or when it ends. All of this has been tested in the Supreme Court of Canada, and all of it has failed - completely. That's my problem. I know it's going to fail. When you know something is going to fail, and you know your fellow Newfoundlanders and Labradorians are going to be sacrificed in the process, you have two choices: do nothing and let it happen; or do something and try to stop that sacrifice. I chose the latter.

I have already filed a lawsuit that is going through the Courts, and is in the Appeal Court now. And, today, myself and five others filed an official complaint with the PUB over that same Water Management Agreement. The government had to open their flank by giving the PUB the power to order a water management agreement, but in doing so they also left the power with the PUB to rescind the agreement. Perhaps, even more importantly, the Public Utilities Act requires that when a complaint is filed, and it involves a question of law, the PUB must refer it to the Supreme Court of Newfoundland and Labrador, Court of Appeal for a judicial reference. Essentially, the agreement will be judged on its constitutionality. So, while the government has done everything it can to avoid a judicial review of the water management agreement until the dam is built and it's too late, they left the power with the PUB to do just that. All it took was five people to sign an official complaint to put it before the PUB. That's what we did today. Now it's up to the PUB to follow the Act and send it to the Appeal Court for it's day of judgement. The official complaint is below:

    

Nalcor and Hydro-Quebec's "Management Order" over the Upper Churchill

For the last few months I've been awaiting the hearing in Quebec Superior Court, between Nalcor and Hydro-Quebec, over recall rights and management of the Upper Churchill dam. The hearing was scheduled for January 20, 2014. Subsequently, it came to my attention the hearing had been put off. I was quite interested by this change as the french girl repeated the date of the hearing twice to me on the phone - so January 20th was a firm date.

I contacted the Superior Court registry in Montreal requesting clarification. The man on the other end was adamant there was no longer a hearing scheduled for the 20th, and said there was very little on the file - except one thing. That one thing was an "Ordannance De Gestion" - english translation: " Management Order". I was set back by this for a few reasons. First, at the time, I wasn't quite sure what a "Management Order" was. Second, I wasn't aware of any hearing or the like since the suit was first filed by Hydro-Quebec. The gentleman at the Superior Court would give no details though, other than to speak to Nalcor's (Strikeman Elliot) or Hydro-Quebec's (Norton Rose Fulbright Canada) lawyers.

Luckily, I knew how to order a copy of the order and did so. I tweeted Nalcor and the provincial government asking for a copy. No reply. Then today I sent another request, even though it was ordered, on twitter and copied in a local journalist. Nalcor came back with "we sent you a tweet two days ago", which of course, they didn't. Apparently, our world class people at Nalcor do not understand that every tweet they send is logged in their tweet record. In any case, they did dutifully send me a copy by email this evening - my $6.50 down the drain for my Quebec copy.

The nuts and bolts of the "Management Order" is an agreed upon approach by Nalcor and Hydro-Quebec to manage their proceedings - an agenda if you will. We might call it a case management order. Anyway, there are a few, very important details regarding this order.

The first detail that comes to mind is why is this order not public? Why was their no press release from Nalcor or the government? This court case has been prevalent on the minds of many in the province given past experiences with Hydro-Quebec and courts. It also shows the two utilities, through their lawyers, could actually come to an agreement - even if it is just how one is going to sue the other. After all, the order was given on October 3, 2013 by Chief Justice Francois Rolland of the Quebec Superior Court. That is three and a half months ago. Not a word from the government or Nalcor. Remember that.

The second, and by far more serious detail, is the length of time detailed in this agreed upon path. It begins on July 22, 2013 with the launch of Hydro-Quebec's suit, and ends on August 7, 2015. Yes that's 2015, and it's not a typo. That is the schedule. During this time the plan outlines exchanging of documents, examinations and all that type of legal stuff. That is not the end of it though. Really, that's just the beginning. Then it goes to the Quebec Superior Court for the actual hearing, then it likely gets appealed to the Quebec Appeals Court, and then likely to the Supreme Court of Canada. Realistically, it might not be fully resolved through the courts until 2018.

That should really shock a lot of people in the province of Newfoundland and Labrador. What it effectively means is Hydro-Quebec has covered its interests at the Upper Churchill. It has legally filed its opposition to the taking of power over the 300 MW allotted by the Power Contract. Its has also legally filed its opposition to Nalcor ignoring Hydro-Quebec's right to have the plant managed according to its needs, not Nalcor's, which again is enshrined in the Power Contract. So Hydro-Quebec is covered. It doesn't need all the power the Upper Churchill uses anyway given its surplus of wasted power over the last few years is as mush as all the power produced at Churchill Falls. Essentially, it can now sit back and watch as Nalcor continues to take power, manage the facility, break the Power Contract, all based on Williams' water management agreement, and then reap huge damages that will bankrupt CFLCo. It's almost been made too easy for Hydro-Quebec.

But I don't care about Hydro-Quebec. I care about Newfoundland and Labrador. It's a hard place to be right now, watching it all go down. One government bound and determined to build its gallows. Another watching with glee. How much better can Hydro-Quebec get it than being awarded costs for power taken that they can't even sell on the market? Now that is ironic.

If there is any sense of pride, or even just plain old self-preservation, the people in this province better stand up and fast. Only a complete and utter fool could build a dam that he can not run at more than 20%. Mind you, Napoleon decimated his once proud army in the vast Russian countryside. Hitler did the same. The Romans got too over extended. But, I am not aware that any of them did it purposely with full knowledge that they were driving their own into the ground. That's not the case here. Williams and Dunderdale had and have, before them, all the information not to make such a tragic and frankly stupid decision. Yet they did. Nalcor's hiding of the fact that while they build Muskrat Falls the very court case that will undermine it's use has been established - with their agreement. Kept from the people. The people being led like lambs to the slaughter - quietly.

Here is the order, the agenda is in French and English:

Alderon's Muskrat Falls Headache

A few weeks ago, Alderon Iron Ore Corp's Mark Morabito went "off his head" during a radio interview with VOCM during an open line radio show. He blasted the provincial government for not passing the environmental process for the Kami mining project in Labrador. He also criticized the failure of Nalcor and the government to sign a power supply agreement and build a $150 million power line system from the Upper Churchill to Lab West (and his mining project). Clearly, that line and power purchase agreement are crucial to the mine moving ahead. Here is an excerpt from Alderon's subsequent press release:

" We were informed of the status of power and various other files under review by the Provincial Government. Following our discussions with the Minister and his officials, we are confident that these matters are being pursued diligently and expeditiously, " says Tayfun Eldem, President and CEO of Alderon. " The Government's approval to build the power line is crucial to Alderon securing the previously announced debt financing and we are pleased that the Premier has expressed her support for the power line." 

"Is crucial..to securing...financing." Interesting. All along the story about Alderon and Muskrat Falls has been Alderon doesn't need Muskrat Falls power unless it doubles its production down the road. Now it is suddenly necessary for financing. Of course. Alderon is calling it the "line", but the bottom line is Nalcor has no excess power to send on that line, so it would have to be power created at Muskrat Falls, and relayed through the Upper Churchill, and out to Lab West (and the mine). FYI on the environmental study issue - Alderon has to pay its Chinese partners $3 million a month for each month the approval fails to come through starting January, 2014 (which is now).

So, given the heavy weights behind Alderon, and all the dollars involved, how is it that Nalcor hasn't committed to the power line and a power supply contract to Alderon yet? According to earlier statements the price pure kilowatt hour has been agreed to. The problem is in the amount of power to be supplied. The answer lies in the Power Contract of 1969, and the Water management Agreement.

All Nalcor's, and the provincial government's plans involved implementing the WMA, which would allow Nalcor to take over the operation of the Upper Churchill. With that control, Nalcor could take power almost at whim from the Upper Churchill, and redistribute it as it wanted. For Alderon that would mean a secure power source. Whether Alderon's early founders Forbes and Manhattan were sold a bill of goods on the validity of this plan is uncertain. Who sold them on it? Williams? Altius? Both? It's hard to say right now. When push came to shove, and all the glossy pictures and back slapping were done, reality hit home. 

Hydro-Quebec filed suit, which will be heard January 20, 2014. That is a suit Hydro-Quebec is going to win, and when it does, the WMA is not worth the paper it is written on. What does that mean for Nalcor? It means Nalcor will not be able to take 1 MW of power from the Upper Churchill, other than the recall they already have (and is fully consumed). Nalcor knows this. They are playing a very dangerous, and frankly stupid, game of chicken with Hydro-Quebec that we can not win. 

What does that mean for Alderon? It means Nalcor can not commit to the power supply, and therefore it means there is no rationale reason to build a $150 million power line system. Unfortunately for Alderon, it has already used the credibility of Forbes and Manhattan's Chinese connections to make inroads - and promises. Now those promises are in serious doubt. Loss of face with the Chinese is a very, very bad thing.

In some ways there is a little poetic justice here. Danny Williams, the former Premier that brought in all the legislation that is now before the Court in Quebec, is also a main player in Alderon. Now his own legislation is hurting Alderon's chances of getting off the ground. Mean while, Dunderdale and company sit on the environmental application, likely as an out for them. It's all a bit of devilish karma coming to bite some people right in the arse. It begs the question: does Alderon have a Plan B to buy power from Hydro-Quebec, and if not why not? Politics is best suited divorced from the board room.

Borrowing from Peter to Pay Paul - Nalcor, the Government of NL, and Us

The government of Newfoundland and Labrador is about to make us the laughing stock of the country - again. What's the old saying: fool me once, shame on me, fool me twice, shame on you? That is the stunning revelation written by The Telegram's reporter James MacLeod. His story, printed in this Saturday's paper  http://www.thetelegram.com/News/Local/2013-12-21/article-3552189/Power-play/1 … says it all - if you read between the lines, and it's not that hard to do.

First off, Nalcor rolls out two new names as reps for the company: Greg Jones (Marketing Manager); and Rob Henderson (Vice-President of something or other). Until now the primary spokesperson from Nalcor has been Vice-President in charge of Muskrat Falls Gilbert Bennett. The other spokesman, on a less frequent basis, has been Nalcor President Ed Martin. Secondly, the announcement comes just before the Christmas holidays, and after the House of Assembly is closed until spring. The most shocking thing though is the message - we are going to be buying power from the US.

Come again you say? We are going to be buying power from the US? Wasn't the plan to be selling power into the US market? The newest twist on the Muskrat Falls fiasco is, in reality, a stunning admission that the Water Management Agreement (WMA) is unconstitutional, and here's why.

Mr. Jones and Henderson state the plan is to allow water to build up in the reservoir, and during this period the dams would be shut down. During the shut down process the province would buy power from the US market. Once the dam reservoir is full, we stop buying power from the US. Sound familiar? It should. It is a seriously bastardized version of the whole "banking" energy plan of the government and Nalcor. Under that deal, enshrined in the WMA, Nalcor would take power from the Upper Churchill when it needed the power and then send the power back during the spring when its reservoir was full, and the dam could operate past 20% firm capacity. This "new" US purchasing of power, in theory, would replace the need for the WMA.

That raises a number of very serious questions, or it should. First, its a stunning admission that the WMA is a deeply flawed document, and the government broke the law by passing it in the first place. If the WMA was legal, Nalcor could take all the power they needed at any time, and according to Nalcor's interpretation, an extra 1500 MW a year on top of that from the Upper Churchill. Obviously, in that case, there would be no need to purchase power from the US or shut a dam down to fill a reservoir. That is the first obvious conclusion. The second conclusion to be drawn is the government is trying to get ahead of the political fire storm which will be ignited when Hydro-Quebec wins their court challenge against us on January 20, 2014. With a US purchase plan they can say that the WMA is no longer of any importance, because they can use the US power to do the same thing - so no biggy.

Then there are some further obvious questions. If the link to Nova Scotia is capable of carrying only 500 MW of power, and 20% of that is being dealt to Emera free for compensation to build the link (25% in the first five years), and Emera has a further option at market rates on the remainder, how will sufficient power be transmitted back from the US on the same line? After all, in theory only, Muskrat Falls is supposed to produce 800 plus MW a year. If say only 300 MW can be transmitted back to Newfoundland from the US, what makes up the 500 MW difference? Well one answer is likely to be: "we don't need all that power now". That seems to be a familiar refrain during this save face at any cost project. A question to that answer would be:" If we don't need that power why are we spending $8-10 billion building the dam?"

The Government of Newfoundland and Labrador is quickly becoming farcical. As we say in this province "too foolish to talk about". But we must. We must talk about it, because it's our financial future on the line. In no other province would a government get away with anything close to the gross incompetence, and spiteful stupidity this government has in this province. The fact that reporter James MacLeod fails to even connect the dots outlined above gives you a hint why they have so far. In any free society, a free and critically thinking press is necessary to hold the government accountable. It's not just up to the Official Opposition. In this province our media, with a few exceptions, simply relays the government message rather than critically challenge it. It's an all too familiar refrain here. This whole issue, including the economics of it, and the impending failure of the WMA in Quebec Superior Court, will play out in the new year. What we need is a press that does not simply repeat what they are told by the government and Nalcor, but actually dissects it. The people need to be "honestly" informed about what is happening to them now and in the future. This terrible admission that we must buy power from the US and shut dams down to fill reservoirs, proves yet again that we can not trust this government.

Muskrat Falls is a Done Deal

Those were the words I heard many times in the past from our former morning radio star, and current Mayor of Mount Pearl, Randy Simms. It's a done deal. Imagine, then, the surprise I felt when Randy, who also writes for the Telegram, came up with a story this weekend that Muskrat Falls is not a done deal. To be fair to Randy, many people around the province said the same thing. Half the time it was hard to decide if they were trying to convince you that further struggle was futile, or that they really believed nothing could stop it.

People who fought, and continue to fight, to stop the Muskrat Falls project were called "nay-sayers" or "known critics" by the government, and its mouth pieces. We were constantly referred to as "people without credibility". In Newfoundland "credibility" is code for the boy's club (the business/political backroom of the province) nod of approval. People who are "not credible" are not sanctioned and, therefore, akin to loose lipped fools - too stunned to understand the vision.

However, my education and experience gives me a whole different definition of "credible". Firstly, I try not to use the word, because it is judgmental and personal. Just because someone else has a different vision or understanding does not mean they are "not credible". To me, a person's ability to synthesize all aspects of the Muskrat Falls project, for instance, is necessary to have a "credible" opinion on the entire project - that doesn't mean they aren't a credible person.

Factors that need to be sorted through, and integrated with each other, are things like: international financial and energy trends; environmental impacts; proven science; domestic and inter-boundary demographics; Canadian and International law; provincial and corporate debt/capacities; sub sea line technology; overland line capacities; dam capacities; geology; previously existing contracts; and the list goes on. In the military we used to call it "factors that limit the objective". In other words, we have an idea, but what stands in our way from achieving it?

For two and a half years now I have been fighting the Muskrat Falls project: not out of spite as some have said; not because of personal vendettas; not to meddle; and not to be political. These are things I never evaluate anything on. They are small minded and petty. I have been fighting Muskrat Falls because from the beginning it struck me as not making sense.

The many reasons why it doesn't make sense can not all be listed here - that would take a book. The bottom line is it doesn't - albeit for different reasons than those that flagged the project to me in the beginning. So where does that leave the government - started as we are?

Well, where this government finds itself is exactly where the man whose brainchild this is left it on course to be when he scuttled out the door. Yes, this is all Danny Williams. It concerns me that frankly he put the gullible Kathy Dunderdale to take the fall for the inevitable failure while he smells like roses as the hero manager of a temporary hockey team. It may be his plan to escape the blame, but we are just as determined to remind people where the blame really lies. It's not personal. It's called responsibility to the public, that as premier, he screwed.

Now the proverbial rubber has hit the wall - the wall of reality. The PC government, Williams team, is stuck in guerrilla warfare. Dunderdale recently stated publicly that the PCs had planned for every contingency. Sorry, but that's simply not true. The legislation and laws put in place, like the Water Management Agreement are about to be blown apart. The coveted federal loan guarantee, necessary for financially downgraded Emera to raise capital is similarly doomed. It must be free of lawsuits and have all aboriginal issues settled before the feds will give the green light. Expiry date on that is December 31 - or about 2 1/2 months away. Law suits pending to date: five. Chance of settling any of them in one year: zero.

And so it goes. The nay-sayers, that small crowd of loud, non-credible, known critics have the boys club's pet project on the ropes. The boys club aren't admitting it yet, but here is one big clue: we are negotiating with Hydro-Quebec. Yep, the same folks who not more than a month or so ago Dunderdale and company were popping veins in their heads whilst they screamed such things as: revenge of the French.. well you get the idea. Necessity is the mother of invention, and a politician, and more importantly an entire boys club, will do almost anything, and talk to almost anyone, to avoid eating that much crow. Watch for Dunderdale and company to trade in some part the Old Harry oilfield to Quebec for some political accommodation on the Lower Churchill.

Here's the thing. What bothers me, poisons me to use a Newfoundland word, is how our so called "credible" group in St. John's can be so easily and obviously out flanked at every turn by Quebec and the feds - yet they refuse to listen to people who may know how to deal with these types. They are not just a danger to themselves, but to all of us present, and all of us in the future. They are so reckless, and clueless that they should have never passed the gate keepers watching the halls of power. Perhaps the gatekeepers are equally endowed.

In any case, here we are, checkmate. The new Hydro-Quebec loving premier in Nova Scotia will no doubt reopen the issue of the Maritime link, claiming the public good, and seeking "competitive" bids from Hydro-Quebec. Hydro-Quebec will likely offer Nova Scotia the complete package - a Power Purchase Agreement for all Nova Scotia's power needs - which Newfoundland and Labrador can not match. That will leave us with no market, a partially built project, and a void water management agreement ( without which Muskrat Falls dam can not run at more than 20% capacity on average). We will be in an even more disastrous place if we continue building the dam.

Of course, that's going to be kind of hard to do. It's hard to raise funds in a bond market or what have you while all those lawsuits sit there. That $2.5 billion we have sitting in short term investments has been waiting along time now for the rest of the money to show up. The lack of a federal loan guarantee will also create extreme difficulty in raising cash - hence the warning this month from the markets that our provincial government is on the verge of a downgrade in its credit rating.

When I started my lawsuit against this project one year ago, I wanted to out Hydro-Quebec now. Stop them from sitting back and waiting for us to cut our own throat over one man's ego, and then swoop in to take the pickings at pennies on the dollar. I know how they work, and this is how they work. With the Quebec government you need to understand but one thing - they don't care about you - they only care about themselves - period. To believe otherwise is foolish. To act otherwise is unforgivable.

So yes Randy, Muskrat Falls is not a done deal. It never was. If all the "credible" people in the St. John's boys club listened to those "not credible" types, perhaps you wouldn't be in the nightmare your mother warned you about. Perhaps you would have out flanked Quebec first. However, that would require knowing where your flank is.

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?

The Power Contract vs. the Water Management Agreement

What most Newfoundlanders and Labradorians do not understand is the Lower Churchill hydro development is built on one foundation - the Water Management Agreement imposed by the Public Utilities Board on CFLCO and therefore Hydro-Quebec. The other thing they are not readily aware of is that when this agreement is found unconstitutional there is no foundation to build the Lower Churchill dams.
The Supreme Court of Canada, in 1984, found the Reversion Act to be unconstitutional:

"Where, however, the pith and substance (true purpose) 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 (unconstitutional because it is outside the province's powers)."

When I stood in the Supreme Court of Newfoundland and Labrador last month, challenging the Water Management Agreement (WMA), I outlined the many critical ways this agreement broke the Power Contract of 1969. I did so not to protect Quebec, but to stop our own government from delivering us to them. The following points were gone through point by point to illustrate to Madame Justice the depth of the betrayal. On this, Memorial Day in Newfoundland, I believe it is important to make these points public so the people of the province understand the sacrifice before it they are lead into it.

1. Power Contract:
"Recapture means any withholding from the power and energy agreed to be sold hereunder which may be made by CFLCO in accordance with the provisions of, and within the limits stipulated by, Section 6.6..."

WMA:
No definition for recapture.

My take: Any power generated at the Upper Churchill, except the power allocated to Twin Co that now belongs to Nalcor, and the 300 MW allocated to the province, cannot be taken from the Upper Churchill facility. Key phrase here is: "made by CFLCO".

2. Power Contract:
"Applicable Law: This Power Contract shall at all times and in all respects be governed by, and interpreted in accordance with, the laws of the Province of Quebec."

WMA:
"Applicable Law: This Agreement shall be construed, interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by, the laws of the Province (NL) and the federal laws of Canada applicable therein, and each party hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of the Province..."

My take: The Power Contract puts the rights of the contract in Quebec, and thereby all the powers of the contract. The WMA changes the location of those rights to NL, with the goal of changing constitutional jurisdiction. In other words, by way of legislation the government is attempting to alter the practical jurisdiction of Quebec over the operation of the Upper Churchill.

3. WMA
"Entire Agreement: This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, undertakings, negotiations and discussions, whether written or oral."

My take: It pretty clear, the WMA states it is now the predominant agreement, which automatically subordinates the Power Contract and forces CFLCO to recognize the requirements of the WMA over those of the Power Contract between CFLCO and Hydro-Quebec.

4. Power Contract
"The parties hereto acknowledge that it is desirable for Hydro-Quebec to have the benefit of operational flexibility of CFLCO's facilities... Accordingly... Hydro -Quebec may request CFLCO to operate the Plant (includes reservoir) so as to supply Hydro-Quebec's schedule of power requirements...Hydro-Quebec may require deliveries which have the effect of varying the amount of water to be carried in storage at any time..."
   
WMA
"The Independent Coordinator (appointed by the NL government), shall, based on the information provided by the Suppliers (Nalcor and CFLCO), and in the exercise of reasonable judgement, establish short and long term Production Schedules for all the Production Facilities on the Churchill River...The Independent Coordinator shall determine the total power to be produced...The Independent Coordinator shall determine and prepare the Production Schedules which shall specify the amount of power to be produced by each Supplier's Production Facilities in accordance with this Agreement."

My take: It's pretty clear. The WMA takes the right of control of production given to Hydro-Quebec and gives it to the "independent coordinator" who is an appointee of the NL government.

5. Power Contract
"Either party may at any time, for the purpose of safeguarding human life or protecting from major damage the storage, generating or transmission facilities of CFLCO or the Hydro-Quebec system, discontinue or reduce, but only to the extent necessary, the supply of power and energy hereunder."

Power Contract
"The Firm Capacity shall be available at all times when Hydro-Quebec has requested it. In addition whenever additional capacity can, in the opinion of CFLCO, be made available, such capacity shall also be available to Hydro-Quebec on request."

WMA
"CFLCO and Nalcor shall adhere to the Production Schedules set by the Independent Coordinator... Each Supplier shall continue to have the same rights to store water in its reservoirs as it did prior to this agreement, while at the same time recognizing the requirement to, allow Energy Banking (the taking of power from the Upper Churchill from CFLCO to Nalcor) by the other Supplier pursuant to the terms of this Agreement."

My take: Under the Power Contract Hydro-Quebec has the rights to all the power produced at the Upper Churchill, and only loses control in case of a disaster or protecting its electrical system. Because it has first rights, any power taken from it, including so called Banked Energy to Nalcor would have to be purchased from Hydro-Quebec, unless it waived its rights to that power and money - which is highly unlikely. This is simply an attempt by Nalcor to force Hydro-Quebec to use or lose the power potential of the Upper Churchill - which conflicts with the Power Contract.

6. WMA
"In no event shall the generating Capability, storage capacity, or transmission Capability available to a Supplier from all Production Facilities on the Churchill River be less than the amounts of then available generating Capability, storage capacity, or transmission Capability of the Production Facilities owned by that Supplier on the Churchill River."

Power Contract
again: "The parties acknowledge that it is desirable for Hydro-Quebec to have the benefit of operational flexibility in relation to the Hydro-Quebec system. Accordingly: Hydro-Quebec may request CFLCO to operate the Plant so as to supply Hydro-Quebec's schedule of power requirements, provided that no such request shall be less than the Minimum Capacity...Hydro Quebec may require deliveries which have the effect of varying the amount of water to be carried in storage at any time..."

My take: The WMA here requires the Upper Churchill to operate at full capacity which gives Nalcor the flow of water they need to run the Lower Churchill dams. Without this clause, Hydro-Quebec could just keep running the dam for its requirements, as the Power Contract grants them the right to, and the Lower Churchill dams would be forced to run at just 20% capacity - a financial disaster.

7. WMA
"Energy Benefits: Energy Benefits for each Supplier shall be determined by the Water Management Committee, in accordance with the Agreement, for each period established by the Water Management Committee, which period shall not exceed a year...Energy Benefits means the Energy accruing to a Supplier for a period as a result of this Agreement in excess of the Energy that would be accrued to such Supplier for such period in the absence of this Agreement..."

Power Contract
Again "The Firm Capacity shall be available at all times when Hydro-Quebec has requested it. In addition whenever additional capacity can, in the opinion of CFLCO, be made available, such capacity shall also be available to Hydro-Quebec."

My take: The WMA gives the Water Management Committee the right to give power produced at the Upper Churchill to Nalcor, without a power purchase agreement with Hydro-Quebec to compensate it, at its terms, which translates into a forced recall of Upper Churchill power to Nalcor. In other words, Nalcor gets to take power that it has no right to, and doesn't pay anything for it. Great plan, except it's already proven law by the Supreme Court of Canada that this is unconstitutional and therefore illegal.

8. Power Contract
" Force Majeure: contract not terminated. No event or force majeure or of default hereunder shall give rise to, or result in, the termination of this Power Contract..."

WMA
"Force Majeure means an event, condition or circumstance or combination of events, conditions or circumstances beyond the reasonable control and arising without the fault or negligence of the party making a claim to section 14.4 of this Agreement, including, without limitation:...(iv) action of any government, legislature, court or other governmental authority, compliance with applicable law, regulation or order if a governmental authority... An Effected Party shall be excused from the performance of its obligation hereunder or liability for Damages to the other party, if and to the extent it shall be delayed in or prevented from performing or carrying out any of the provisions of this Agreement, except the obligation to pay any amount when due..."

My take: In other words, while technically the agreement says the Power Contract can not be "adversely effected" it gives both CFLCO and Nalcor an out from respecting the contract by way of this WMA. It says a government action, regulation, act, etc can be a considered a Force Majeure, technically out of  the control of both CFLCO and Nalcor, yet both are owned primarily by the government. The effect of this clause is to give Nalcor and CFLCO legal cover from being sued by Hydro-Quebec for violating the Power Contract as they are simply following legislation. This clause makes obvious the government's intention to destroy Hydro-Quebec's rights under the Power Contract.

There are any number of additional issues with the WMA including such things as maintenance of the facility, and the like that also conflict with the Power Contract. What I have outlined above are some of the main points. What any Court must decide is whether or not the WMA "derogates" the terms of the Power Contract. If it does then its unconstitutional. Derogate is defined as: " To take away; detract. To deviate from a standard or expectation; to go astray." That is the standard the Supreme Court of Canada set down in the Reversion Act case of 1984. That decision was unanimous, and therefore that standard can not be altered by any court. The quote I placed in the second paragraph of this article rings loudly. Here is the second quote from that decision that you need to know:

"even if the flow of electricity to Quebec continued at the same rate and at the same price after coming into force of the Act, it would then be in the form of a privilege rather than an enforceable right. All 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."

A few of the local press, and some PC Party operatives have suggested what I am doing by challenging this agreement is assisting Hydro-Quebec. Some of my interested friends have noted that Hydro-Quebec hasn't said a word about it. Frankly, nobody has. Why? Well in Hydro-Quebec's case they are likely mad I've tripped up their ambush of Newfoundland and Labrador - waiting as they are for us to build it and then shutting us down in court..$10 billion later. In everyone else's case, well it's like a collective holding of the breath. So far at least $800 million has been spent by our government, and people cannot comprehend such a massive amount of money would be spent on something unconstitutional and therefore illegal. This also involves the governments of Canada and Nova Scotia.

Billions are at risk. The silence is deafening, but the facts remain.

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.

Tipping Point - the End Game

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

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

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

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

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

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

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

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

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

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

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

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

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

Newfoundland and Labrador's Waterloo - The Lower Churchill

You may have noticed in the last month or so my posts have been few, and far between, as I have been embroiled in a constitutional challenge of the Lower Churchill/Muskrat Falls hydroelectric development. This challenge is ongoing, albeit sporadic at the moment. Like every battle, there are long periods of boredom interspersed with sheer moments of terror (although that is overstating it on my part, but likely not on some people's part). And in a moment of quiet I take this time to share a few thoughts.

Often in life, as is the case here, it is not what people say, but rather what they don't say that should peek our curiosity. Lies of omission rather than outright lies. The grey area between the lines. Most of us, in our day-to-day lives, simply don't have the time or inclination to truly examine the lines fed to us by  our politicians. We take comfort in the fact that they are restrained by the law, and even though we see them as self-interested at best, we believe that interest is restrained and we are safe.

In the case of the Lower Churchill project, to borrow a line from former premier Williams, " nothing could be further from the truth". The fact is Williams proceeded, like the Abitibi expropriation, with an "I'll do what I want, take me to court",  which was typical of his ego centered policy decision-making process as premier, and in some ways in his business dealings as well.His determination to reach an objective, with apparent lack of care for the inevitable consequences was admired when it came to such things as the Atlantic Accord. However, as Napoleon found out in Russia, over-reaching ambition with little or no regard to the factors limiting your goal can, and likely will, result in failure. In Napoleon's case, as in the case of every other empire in world history, the stubborn refusal to acknowledge the limitations of his power, and to become over extended, resulted in the collapse of his empire and country. The people of France paid a price the country never really recovered from. This is about to be the case for Newfoundland and Labrador.

Since Williams came to office, and with the creation of his "Energy Plan", his focus was to use every aspect of the provinces resources to their maximum. Nothing wrong with that on its face. However, in his determination, some say ego, he refused to acknowledge that through historical mistakes the Upper Churchill was captured by Quebec. In a business decision, between Brinco (a private corporation owned by people like Winston Churchill, the Rothchilds, etc...including Joey Smallwood) and Hydro-Quebec in 1969, the power created from the Upper Churchill was sold for a seventy year pitance. This province has witnessed government after government attempt to undo the damage that one private monopoly visited upon it with the blessing of the government of the day. They have all failed.

Williams decided he would not follow that sorry record. In 2007 he ammended the Electrical Power Control Act to force water management agreements upon power producers sharing the same river. Then in 2009 Nalcor got such an order against its own subsidiary CFLCo, and thereby Hydro-Quebec, forcing in a sense an amalgamation of the Upper Churchill dam into a new Nalcor dominated operation.

The water management agreement stripped Hydro-Quebec of the operational control of the dam and gave that power instead to a water management committee. The new water management committee consists of four people - two appointed by Nalcor and two appointed by CFLCo (which is dominated by government of Newfoundland and Labrador appointees). In other words, the water management committee is now controlled by the government and it in turn controls the Upper and Lower Churchill. With this power it intends to redistribute power generated at the Upper Churchill, and take between 1500 to 2000 MW a year from Hydro-Quebec for its own use. The two power lines being built from the Upper Churchill to Muskrat Falls are capable of transmitting 2000 MW, and the sub sea link between Labrador and Newfoundland is capable of being upgraded to 1900 MW with minor alterations. Most Newfoundlanders would argue this is a great thing, and how could anyone who loved the province argue against it let alone fight it.

Here's the thing, its not legal. It's unconstitutional. Back in 1984, when Brian Peckford attempted the Water Rights Reversion Act, the Supreme Court of Canada ruled it ultra vires (outside the province's constitutional power). Bottom line, the Power Contract of 1969 was governed by the laws of Quebec, and therefore any law infringing on Hydro-Quebec's right to operate the dam and sell its power was unconstitutional, and therefore illegal. This is the great Russian winter that our modern day Napolean (tongue firmly planted in cheek) chose to ignore. In fact, way back in 1984, the Supreme Court of Canada had this to say about Newfoundland's position:

"It was argued by the Attorney General of Newfoundland that control over the power generated at Churchill Falls is essential for the effective management by Newfoundland 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...Where governments in good faith, as in this case, invoke authority to realize desirable economic policies, they must know that they have no open-ended means of achieving their goals when there are constitutional limitations on the legislative power under which they purport to act. They are entitled to expect that the Courts, and especially this Court, will approach the task of appraisal of the constitutionality of social and economic programs with sympathy and regard for the serious consequences of holding them ultra vires. Yet, if the appraisal results in a clash with the Constitution, it is the latter which must govern. That is the situation here...and it follows that the Reversion Act is ultra vires."

And so it goes here. Putting lipstick on a pig, Williams and company charged ahead with the Lower Churchill. Hydro-Quebec, as strategic as ever, sit back and wait for the prey. They know what Williams did was illegal. They know that all they need to do is let this province build that dam, using all its resources to do so, and then the moment the government tries to apply the restrictions of the water management agreement upon them they go to court, win, and CFLCo is bankrupt. They also have first right to the shares of CFLCo and they have the right to operate the dam when CFLCo goes bankrupt. Set, game, and match.

This province's gross debt at the end of 2012 was $13.3 billion. Building Muskrat Falls, the transmission system, and the link to the Island will add another $10 billion or so. By 2016, the same year the Power Contract renews for another 25 years, we will have a gross debt in the range of $25 billion. When Hydro-Quebec springs its court case, around the same time, and wins, we will be unable to continue paying for Muskrat Falls, the link, and the transmission system. The federal loan guarantee says if any one of these parts goes into default they all go into default. It also states the federal government alone is entitled to these assets in the case of default. The end result is Newfoundland and Labrador loses the Upper Churchill to Hydro-Quebec permanently, it loses the Muskrat Falls project to the federal government who can sell it to whomever (likely Hydro-Quebec), and the people of this province are left with a massive debt that, with a declining population, will permanently cripple the economy and people. This is the natural consequence of Williams actions. And this is why I fight.

A billion dollars has already been wasted. A political scandal for the ages. But, even at that, its a better scenario than continuing the madness. If only Napolean had pulled his troops back before
the onslaught of the Russian winter he may have saved his entire empire.  Yet, ego drove him forward, and in the end he left his troops to freeze to death in Russia while he escaped back to France. Today we have the tools to stop our modern day Napoleans from delivering us into a similar fate. It is incumbent on us to use them.

Lies of Omission, and Half-Truths

"Clever liars give details, but the cleverest don't." Anonomys.

Lying can take many forms. The best, all encompassing definition I could find was from Wikipedia http://en.wikipedia.org/wiki/Lie.
When it comes to Muskrat Falls, and the circumstances surrounding it, the best descriptions are:

"Lying by omission:

Also known as a continuing misrepresentation, a lie by omission occurs when an important fact is left out in order to foster a misconception. Lying by omission includes failures to correct pre-existing misconceptions.

Half-truths:
A half-truth is a deceptive statement that includes some element of truth. The statement may be partially true, the statement may be totally true but only part of the whole truth, or it may utlize some deceptive element, such as improper punctuation, or double meaning, especially if the intent is to deceive, evade, blame, or misrepresent the truth."

I, therefore have to respectfully disagree with former Premier Roger Grimes when he said this week: " Sometimes Danny Williams would not know the truth if it smacked him in the face." The fact is that Danny Williams, Kathy Dunderdale, Jerome Kennedy, etc know the truth - they just choose to lie.

Danny Williams attack on Roger Grimes this week was outrageous, and cannot be left unchallenged. Williams accused Grimes of "rapping his arms around Quebec" and that Quebec was blocking this province's development of Labrador. Williams, and his then Minister of Natural Resources Kathy Dunderdale, spent five years in secret negotiations with Hydro Quebec to develop the entire Lower Churchill. The negotiations apparently failed because Williams would not compromise. Bottom line is that Quebec was willing to work with this province, but not at any cost. Williams knew Quebec was acting in good faith. Why else would he spend five years negtiating with them?

Williams also attacked Grimes for suggesting working with a potential seperatist government in Quebec City woukd be a futile and foolish effort. He conveniently neglected to qualify that statement with the fact that both Grimes and Tobin negotiated deals with seperatist governments - although both eventually came to nothing. The Upper Churchill agreement was negotiated with a strongly nationalist government. In fact, nationalist governments in Quebec are a fact of politics in Quebec. Williams should recognize this as he led one in this province.

Williams assertion that Grime's deal was a sellout to Quebec is just utterly and obviously false. In fact, the deal to develop the entire Lower Chuchill, and not just Muskrat Falls would have left the province in a much stronger financial position, and allowed it to retire debt with oil profits rather than ignore debt and in fact grow it substantially to achieve a third of the power. The only potential draw back to the deal was that we would receive only 600 mw of recall power, and it would be streched over a twenty year period. You may ask what difference that would make? Well, given that the mines in Labrador are under development, and may want over 1000 mw of power, that scenario may not have suited them. Recall if you will Dunderdale's tirade against Quebec in the House of Assembly during tbe spring when she decried leaving industrial development in Labrador in the hands of Quebec.
Also this week I raised the question why we need to build two 900 mw hvac lines to the Upper Churchill from Muskrat Falls. Vocm Nightline radio show host Pete Soucy raised the question again on his show. He actually wanted to know if it was true and if so what the lines were needed for. He received a snotty reply from PC MHA Kent that he should stop quoting me. Pete pushed it further, but the MHA would not answer. The next morning the MHA tweeted that yes there would be two lines to help maintain power in Labrador. Put aside the foolish reason put forward for a moment, and note that while he did confirm the two lines he did not identify that they were capable of carrying 900 mw each. That is 200% plus the amount of power Muskrat Falls could possibly produce. Then this week, Jerome Kennedy indicated that the power promised to Emera could come from any source and does not need to come from Muskrat Falls. You see, part truths, but other possibly damning facts left out. In other words, lies by omission, half-truths.

Unfortunately, lies by omission, and half-truths have become the norm in Newfounland and Labrador politics. There has been zero accountability and therefore zero fear to keep them going. Whether its Danny Williams and his assertion that Muskrat Falls will make this province a leader in environmental stewardship, while conveniently leaving out the fact that thermal power generation is actually going to be 2% higher than the isolated island option, or Dunderdale's demonizing of Quebec for holding back Labrador development, or even Steven Kent's sladerous assualt on Cabot Martin, the trend is the same: Clever liars give details, but the cleverest do not.

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?"

Muskrat Falls Deducted

It's important to remember that in the beginning the Muskrat Falls project was billed as Newfoundland and Labrador's green alternative to replacing the Holyrood thermal plant, and bypassing Quebec to be a major exporter of electrical power to the US via Nova Scotia. If there was any surplus power it would: "be recalled as needed for industrial development in Labrador". The word "mines" was not mentioned once in the government's press release  http://tinyurl.com/6vz2unw . Despite the fact that the government was fully aware of the many mining developments that were at various levels of development, and despite the fact that the government was assisting in those developments, and despite the fact that the government knew full well the mining developments would require massive power that was not currently available, it did not use the word "mining" even once in its press release announcing the Muskrat Falls project. So it flew under the radar.

That was 2010. Fast forward to today. Today there is no agreement between Nalcor and Emera to transmit power to Nova Scotia - the original term sheet expiry date is now some 7 months old. There is no federal subsidy, or even a mention of it, for the Maritime Link that would have seen Emera receive over $300 million to assist with the undersea cable. There in fact is no formal agreement signed between Nalcor and Emera to construct the Island Link from Labrador to Newfoundland. There is no written loan guarantee from the federal government. None of these previously crucial aspects of the original Muskrat Falls agreement are in place. That could mean several things. It could mean everything is just moving incredibly slow - slower than it takes for say many international treaties to be formed and signed. It could also mean that they were never intended in the first place.

Take the private conversation between Emera's CEO and the US consulate:

“Given that legacy, Spurr (Emera) remarked that he and his senior colleagues are equally cautious in dealing with the premier (Williams), with knowledge it makes more financial sense for N-L to do a deal with Quebec than with them.
“In fact, Spurr indicated he wouldn't be surprised if Williams 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.”

Of course Mr Spurr may have only been correct in his suspicion, but not in his conclusion. It could also be the case, knowing Williams' penchant for trying to play the federal government for funds, that the real goal was to have the federal government grant the provincial government a loan guarantee based on an "Atlantic Gateway" concept. Once the loan guarantee was granted Newfoundland and Labrador could back out of the Emera deal, and use a portion of that loan guarantee for a dam only project at Muskrat Falls. In other words, it could be that Williams' plan was not to build a link between Newfoundland and Labrador, and the same goes for the Newfoundland and Labrador/Nova Scotia Maritime Link. Knowing how Williams' tends to use the nationalist card in his dealings with the feds, it is entirely likely a threat of nationalist backlash might be used against the federal government if it did not provide a loan guarantee, at least proportionately, for a dam only project -as is happening right now.

We don't know for sure. All we can do is deduce from the evidence. Here's one bit from Williams on April 3, 2012:

" we have a federal loan guarantee worth up to a billion dollars"
Now a loan guarantee of up to a billion dollars would be insignificant on a $6-8 billion dollar project, but a dam only project could cost as little as $3 billion. A billion dollar loan guarantee in that context would make more sense, and at least have an overall impact on the financing costs. That's if you believe a dam only project could work in Labrador.

Here is where more evidence comes. The greatest source of clues lately has actually been in the House of Assembly itself. Minister of Natural Resources Jerome Kennedy has laid it out there in plain language. From Hansard:

Hansard 29 March, 2012

MR. KENNEDY: "Thank you, Mr. Speaker...
We have a very small market here and the oil companies are telling us that we are not going to build an infrastructure to bring a very small amount of natural gas to power Holyrood when, Mr. Speaker, there is no market. I say to the member for - the Opposition House Leader, even if we refurbished Holyrood, what does that do for Labrador mining projects? "


Hansard 30 May, 2012

MR. KENNEDY: "Yes, Mr. Speaker
What we are doing and what we have indicated is that there will be power available with Muskrat Falls, Mr. Speaker, if it is sanctioned and developed. Mr. Speaker, there are no firm contracts signed. I have met with all these companies. There is only one company that said we are willing to buy power. We are in discussions, Mr. Speaker, with these companies and if they want to sign firm contracts, then we will guarantee the power if Muskrat Falls is sanctioned, Mr. Speaker."


MR. KENNEDY: "Thank you, Mr. Speaker.
On March 27, the Member for Cartwright - L'Anse au Clair asked the Minister of Natural Resources to table in the House any correspondence, analysis or reports that government has in relation to the current and projected demand for electricity in Labrador and how such demand can be met.

Newfoundland and Labrador Hydro, Mr. Speaker, is a Crown corporation owned by the people of Newfoundland and Labrador. Its focus is on delivering safe, reliable, least-cost power to residents, businesses, and industrial customers in Newfoundland and Labrador.

Newfoundland and Labrador Hydro, Mr. Speaker, is also mandated to ensure that adequate planning occurs for the future generation, transmission, and distribution of power in the Province. There is currently 525 megawatts of available electricity from the Churchill Falls Generating Station to meet demand in Labrador. This includes the 225 Twin Falls or TwinCo block and the 300 megawatt recall block.

Labrador industrial customers, Mr. Speaker, currently use the full 225 megawatt Twin Falls block and an additional sixty-two megawatts of firm power from the recall block. After Hydro's rural customers and industrial contracts are supplied, there is between eighty and 280 megawatts of recall power available, depending on the time of year. At peak during the winter, Mr. Speaker, in Labrador, 220 megawatts of power is required, thereby leaving eighty megawatts for other use in Labrador or for other export purposes.

Strong commodity prices, Mr. Speaker, have resulted in record levels of mineral exploration in Western Labrador resulting in the announcement of a number of new mining projects. If all projects go ahead, Mr. Speaker, there will be an estimated $10 billion to $15 billion in capital investment for mining developments in Labrador in the next ten years. These new developments will require an adequate supply of electrical power at competitive rates to proceed. So much depends, however, on the need for iron ore in China. The demand for iron ore is affected directly by the Chinese economy.

If Muskrat Falls does not proceed, Mr. Speaker, there will not be sufficient power available for all of the mining projects to proceed. Over the last number of months the minister and departmental officials have held numerous meetings with mining companies, including: the Iron Ore Company of Canada, Cliff's Natural Resources in Wabush, Alderon Iron Ore Corporation, New Millennium Iron Corporation, Tata Steel, Labrador Iron Mines, Vale, and Grand River Ironsands. These meetings have covered numerous topics, Mr. Speaker, and have included discussions regarding power requirements and transmission infrastructure.

As stated earlier, these projects are at various stages, Mr. Speaker, ranging from early stage, pre-feasibility studies, environmental assessment studies, and those that have commenced construction. The normal process, Mr. Speaker, for a new industrial or large commercial customer will be to approach Newfoundland and Labrador Hydro to identify their projects' needs and make a formal request for power.

The following companies, Mr. Speaker, have identified a need for power: IOC, Alderon, Tata/New Millennium, Vale, Labrador Iron Mines, and Grand River Ironsands. Once received, Nalcor then undertakes initial engineering studies that are required to provide the customer with a preliminary estimate of cost and timelines. There is a chart prepared by Nalcor, Mr. Speaker, which summarizes their assessment of potential new demand in Labrador. The chart is based on an aggregate of electricity demand from these projected projects. Some of the companies the department has spoken with have indicated other possible power requirements, such as multiple expansions, but formal requests for service have not yet been made. Projects currently under construction include Tata Steel, Canada's DSO project, and Phase 2 of the Iron Ore Company of Canada's Concentrate Expansion Program. Labrador Iron Mines is already in production and is exploring the potential to transition from electricity supplied by diesel units to hydropower supplied by the isolated Menihek substation.

Projects undergoing feasibility study included Alderon's Kami Project, Grand River Ironsands Churchill River Project, IOC's CEP stage three Project, IOC's Long-term Expansion Program, Tata's LabMag Project, and Vale's underground mine at Voisey's Bay.

Longer term developments included a second phase for the Kami project, the Julienne Lake Project, a second phase for Grand River Ironsands, further expansion associated with IOC, and the Paladin Aurora Michelin Uranium Project near Makkovik."

To satisfy these future mining developments in Labrador, there clearly needs to be a new source of power supplied. While our government would like to develop Gull Island, Mr. Speaker, it is not an option at present. Gull Island can only proceed if our Province can arrive at a favourable arrangement with Quebec on transmission. Gull Island, if developed, can supply an additional 2,250 megawatts of power for Labrador industrial use or export.

Muskrat Falls is an ideal source for new electricity. At 824 megawatts, Mr. Speaker, this project will meet the growing needs of the Island population, and enable us to close the expensive and environmentally unfriendly Holyrood Thermal Generating Station. It will also enable us, Mr. Speaker, to meet the growing needs of the mining industry. Approximately 40 per cent of the output from Muskrat Falls will be available to meet this energy demand. Until such time as the power is required, the excess power will be sold on the spot markets in the Maritimes and Northeastern United States.

The development of Muskrat Falls, Mr. Speaker, will also support significant regional economic development in Labrador. Power will be available for industrial expansion and development in the region at competitive rates, encouraging development, which brings further business opportunities."

The nuts and bolts of Kennedy's comments are utterly at odds. On the one hand he says power to the mines will be provided once Holyrood is replaced. On the the other hand he lists off nine plus mining projects that will require all and more of the 824 MW that Muskrat Falls could produce. Of course, that does not factor in the 20% or 165MW that have been promised to Emera in return for their investment in the Island and Martime Links. There is clearly something not right with the Minister's math. Especially considering his analysis that during the winter months, with full recall of the 300 MW from the Upper Churchill, that there was only 80 MW left for use.

Then, on the evening of May 29, 2012 Premier Dunderdale stands in the House of Assembly and does an hour or so rant of which the following is a partial transcript http://tinyurl.com/7k7z82g

"Mr Speaker we have to pay for generation of power. So if we, unless there is a huge population explosion in Labrador, Mr Speaker, something absolutely unbelievable happens in Labrador, along with the great mining developments that are going on up there now Mr Speaker, Muskrat Falls would never be developed because people would never be able to afford the electricity and the mining companies would never be able to afford the electricity. And we had a mining, the Minister of Natural Resources and I met with a mining company in my boardroom on Friday, Mr Speaker, and they are very interested in whats happening in Labrador, because they are ready to move on their project...
They need Muskrat Falls to be developed Mr Speaker...Mr Speaker, they understand that if Muskrat Falls does not go ahead what happens in Labrador from that point on lies squarely in the hands of Hydro Quebec and the province of Quebec Mr Speaker...We enable development in Labrador Mr Speaker, because we absorb so much of the costs. We are able to sell electricity power to atleast six mining developments we hope in Labrador Mr Speaker...Mr Speaker, does anyone have confidence that when mines go to Hydro Quebec looking for energy for developments in Labrador that they are going to get the best industrial rates in Atlantic Canada? Not likely Mr Speaker...All those benefits are on the horizon Mr Speaker, but they need power."

So again we can see the pattern. There are numerous mines in Labrador putting pressure on the provincial government to move forward with Muskrat Falls quickly as their developments are ready to go - or close to it. The twist in Dunderdale's comments:
 "...are going to get the best industrial rates in Atlantic Canada?"
Kennedy's comments to the Telegram were close as well:
“I have met with IOC, Tata Steel, Alderon Resources, Labrador Iron Sands, Labrador Iron Mines, and Vale Inco; they all need power. They are saying to us: where can we get the power? They want the power at industrial rates because industrial rates in Quebec and in Manitoba, you have to be competitive. So, we are still in the process of determining what those rates will be.”

To listen to, and believe the government, you would think there were mines begging for power, at competetive rates, and that at this time no decisions had been made. That any number of senior mining executives would be chewing their nails in nervous fashion over the apparent state of flux the project is in. Certainly, there is a hint of that in Alderon's annual return filed with the US Securities Commission:

"Alderon needs to enter into contract with external service and utility providers

Mining, processing, development and exploration activities depend, to one degree or another, on adequate

infrastructure. In order to develop a mine at the Kami Property, Alderon will need to negotiate and
conclude various agreements with external service and utility providers for rail transportation, power and
port access and these are important determinants which affect capital and operating costs.
The Company’s future operations will require rail transportation from the Kami Property to a sea port
(expected to be the Port of Sept-Îles) and ship berthing, storage and loading facilities at such port. The
Company has not yet concluded agreements with the relevant rail companies or port operators
necessary for the transportation and handling of the Company’s planned production of iron ore and
there can be no assurance that agreements on acceptable terms will be concluded. The inability to
conclude any such agreements could have a material adverse effect on the Company’s results of
operations and financial condition and render the development of a mine on the Kami Property unviable...

Although low cost power from a major hydroelectric development at Churchill Falls to the east is
currently transmitted into the Wabush region for the existing mine operations, the current availability of
additional electric power on the existing infrastructure in the region is limited. The solution to the current
power capacity situation is the construction of a third 230 kV line from Churchill Falls; however, no
agreements have been reached for such construction and there is no certainty it will occur. If the current
power capacity issues in the Wabush region are not resolved in time for the Kami Property’s
development, Alderon will have to investigate other sources of power. There is no certainty that the
Company will be able to access sources of power on economically feasible terms and this could have a
material adverse effect on the Company’s results of operations and financial condition and render the
development of a mine on the Kami Property unviable."

However, and in a seeming direct contradiction to that statement, Alderon's Chief Executive Officer Tayfun Eldem, states in a corporate promotional video on the Kami project http://tinyurl.com/83sghms :
"We have very cheap power available to us at competitive rates that we believe will be a great advantage to Alderon."
That comment does not seem to square up with the comments made by the government. That comment does seem to square up with the comments of  Alderon's Executive Chairman Mark Morabito when, in the same promotional video, he states:
"There is no other iron ore project in North America, and very few in the world, get to production faster than we can and particularity at our low cost. In order to create an iron ore mine what you need is access to infrastructure, because you are required to move tons and tons of material. And so you need rail, you need power, you need ports. There are alot of iron ore deposits in the world that have been identified that have none of these things and if you want to put those things in it requires billions of dollars in capital and years of time to build that infrastructure. Here we are, we've found a deposit inside an existing iron ore mining camp with rail, with power, and with port."

So, to summarize by way of deduction, we have a government desperately trying to push a hydro electric development through to supply mines with power in Labrador. That government is being dishonest with its citizens as to the intent of the development, and its reasoning does not hold up to the least amount of scrutiny. For example, somebody should ask the Premier how much power (how many MW) would Alderon's Kami project require? Or any number of the rest of them that they've admitted to being in talks with. A simple question. Then the Muskrat Math will become quite evident. Cap Ex, by way of consumption example , apparently needs around 250 MW for it's mining project in Quebec. With only about 659 MW available after Emera gets their supposed share, does it defy common sense to believe that mining operations in Labrador could be satisfied? Not even close. Does it mean that that Maritime and Island Links are likely not on the table and never were? Yes. Does it mean the vast majority of KWHs being produced by a Muskrat Falls project will be sold at 3-4 cents per KWH to mining operations? Yes.

Does that mean the taxpayers/ratepayers of Newfoundland and Labrador will be massively subsidizing mining operations in Labrador for generations? Yes it absolutely does. 

It's just a matter of simple deduction.