Author Archives: Ginger

Muskrat Falls hydroelectric – Who buried the risk assessment report?

Muskrat Falls, Labrador. Site of a proposed hydro electric project by the governments of Newfoundland and Quebec. This is downriver from the Churchill Falls Hydro project in Labrador. Photo by Greg Locke © 2017 DCS Files

Muskrat Falls on the Churchill River, Labrador in 2006 before construction of an ill-conceived hydro-electric project by the government of Newfoundland and Labrador.  Photo by Greg Locke ©2017

ROGER BILL
November 25, 2017

ST. JOHN’S, Newfoundland — The man in charge of finishing the Muskrat Falls hydroelectric project on the Churchill River in remote central Labrador calls the venture a “boondoggle”. The Newfoundland and Labrador government has established a commission of inquiry to determine why the project is wildly over budget and years behind schedule. A good place for the Commissioner, Judge Richard D. LeBlanc, to start is to find out who buried the warning that there was a “very high risk” of a multi-billion dollar cost overrun barely four months after the massive project was green-lighted in December, 2012.

 

The warning came in the form of a risk assessment undertaken by SNC-Lavalin, the engineering company retained by the Nalcor Energy, the provincial government agency managing the project. SNC-Lavalin officials, who were responsible for construction management and procurement on the project, conducted the risk assessment when initial prices for some major construction elements came in well above the original estimates in the $6.2 billion December, 2012 budget. The experts at SNC-Lavalin warned their Newfoundland client the project could go over-budget by an additional $2.4 billion. The warning was buried for four years.

 

Some critics of the Muskrat Falls project argue that warnings were ignored long before 2013but when the SNC-Lavalin risk assessment finally surfaced in June of this year it was too much to ignore and according to Newfoundland and Labrador’s premier Dwight Ball too late to put the brakes on the project

 

 According to Nalcor Energy’s CEO, Stan Marshall, the Province is now staring at a total cost of $12+ billion to bring the megaproject in two years behind schedule and the Province wants Judge LeBlanc to inquire into “any risk assessments, financial or otherwise” and whether “Nalcor took possession of the reports” and “made the government aware of the reports and assessments”

 

Judge LeBlanc will find that, yes, there was a risk assessment done by SNC-Lavalin in April, 2013 and maybe Nalcor Energy took possession of it or maybe not, and according to the provincial Minister of Natural Resources in April, 2013, no, the provincial government was not made aware of the SNC-Lavalin risk assessment.

 

Ed Martin, former president and CEO of Nalcor Energy. Photo by Greg Locke © 2017

Ed Martin, former president and CEO of Nalcor Energy. Photo by Greg Locke © 2017

What is a matter of public record is the following: Ed Martin, Nalcor Energy’s CEO, parted company with the provincial government in 2016. Whether he was dismissed or resigned is still a bit of a puzzle, but he was succeeded by Stan Marshall, a very successful executive with the private energy company, Fortis Inc. Stan Marshall says he heard about the 2013 SNC-Lavalin risk assessment from a former SNC-Lavalin engineer, but could not find a copy of it in Nalcor Energy’s files. Finally, Stan Marshall says he asked SNC-Lavalin for a copy of the risk assessment, received it, gave it to the provincial government, and it was released by the Premier and Minister of Natural Resources on June 23, 2017 (External Link to CBC story)

 

A spokesperson for SNC-Lavalin told The Telegram newspaper and www.allnewfoundlandlabrador.com that they “attempted” to hand over the risk assessment to Nalcor. Ed Martin, the former Nalcor CEO told the media the risk assessment was never “presented” to him. Premier Dwight Ball told the media that he had been advised that the risk assessment results were presented by SNC-Lavalin at a meeting attended by Nalcor officials including Ed Martin. Obviously, either Premier Dwight Ball has been poorly advised or Ed Martin is not telling the truth or the word “presented” has a very narrow and specific meaning in the world of engineers and consultants that outsiders fail to understand.

 

The expression “attempted to hand it over” makes one wonder if an official of SNC-Lavalin held the nine-page risk assessment document in their hand and reached out to give it to a Nalcor Energy official who refused to accept it. Or, maybe there was a meeting where the SNC-Lavalin, motivated by what is described in the risk assessment as a sense of “urgency” to convey their findings verbally briefed Nalcor Energy officials on the results of the risk assessment, but did not have the report in hand. When engineers are under oath and lawyers from Judge LeBlanc rather than journalists are asking questions about who told who what and who gave what to who then the people who will ultimately pay for the “boondoggle” will know who buried what.

 

What does not take any clarifying are the words of Tom Marshall, the provincial Minister of Natural Resources in 2013. When the SNC-Lavalin risk assessment surfaced in June, 2017. I asked Tom Marshall if he saw the risk assessment in 2013. He said, “I never saw that report.” Asked if he had been advised of the risk assessment findings Mr. Marshall said, “No.” Did he think Ed Martin, the Nalcor CEO who he met with regularly at the time, held back the risk assessment’s findings Mr. Marshall said, “That would be terrible. I can’t fathom if that is the case.” Would it have made a difference if he had known? “It would have rung all kinds of alarm bells”

 

Eleven months after the SNC-Lavalin risk assessment warning Tom Marshall’s successor as Minister of Natural Resources, Derrick Dalley addressed the House of Assembly to reassure members that the government’s oversight of the Muskrat Falls project was “robust.” Mr. Dalley said, “senior staff with the Department of Natural Resources and Finance have met regularly with Nalcor’s CEO and their staff. As well, the provincial cabinet has had regular meetings and ongoing reports from the CEO of Nalcor”

 

For those who gamble on political affairs the question Mr. Dalley’s assurances in 2014 raise is this; what are the odds that Judge LeBlanc will hear testimony from one single senior staff or cabinet member who met regularly with the CEO of Nalcor who will recall hearing the words, “SNC-Lavalin risk assessment” or “serious concerns” or “very high risk of cost overruns” in any of those meetings?

 

Two days later the Minister again sought to reassure the members of the House of Assembly that there was no very high risk of cost overruns, “Nobody is putting my signature on a paper that costs my children $6 billion and $7 billion into the future. I can tell you the work is done. The oversight is there” he said.

 

When the Muskrat Falls Inquiry releases its schedule of witnesses make a note of the date of Mr. Dalley’s appearance.

 

Copyright Roger Bill 2017

~~~

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Newfoundland and Labrador premier resigns

Newfoundland and Labrador Premier, Kathy Dunderdale hugs her finance minister and interime leader, Tom Marshall, after announcing her resignation in St. John's, Newfoundland today, Jan 22, 2014. Photo by Greg Locke © 2014

Newfoundland and Labrador Premier, Kathy Dunderdale hugs her finance minister and interim leader, Tom Marshall, after announcing her resignation in St. John’s, Newfoundland today. Photo by Greg Locke © 2014

By Greg Locke

Only three years after becoming Premier and two years since a decisive election victory, Kathy Dunderdale is stepping down as premier of Newfoundland and Labrador, Canada’s most eastern province.

First elected to the province’s legislature in 2003, Dunderdale came to power in November 2010 when Danny Williams’, one of the most popular premiers in Canadian history, stepped down and appointed her as Premier and leader of the province’s Progressive Conservative Party. As leader she won a significant majority in October 2011 over long-time rivals, the Liberal Party, and the up-and-coming, left-of-centre New Democratic Party. This secured her party’s third major election win.

Since then she’s had a fast ride downhill ride. Two years of polling numbers show a trending descent to a current all-time low of 20 percent approval ratings, down from the ludicrous 80 percent  afforded her predecessor, Danny Williams. Polls suggest her personal popularity is worse:  Dunderdale has been named the least-liked current Canadian premier. This is remarkable considering that Newfoundland and Labrador has one of Canada’s few hot economies, with big revenues coming from the oil and mining industries and their major projects in Labrador and offshore oil on the Grand Banks of Newfoundland in the north Atlantic ocean.

But while politicians, operatives and pundits are all reading the Red Rose tea leaves for the signs, the reality is her manner and tone simply didn’t catch on with the public. Some in the business of politics are saying she just had a communications problem, but the problem is a lot deeper than they are able to think. Communications is just the harbinger of a greater ill.

Despite having record GDP numbers, that “booming economy” is not translating into jobs.  The offshore oil industry does not generate many jobs and what goes into government coffers bypasses the local economy on the streets. With the province still recording very high unemployment numbers (officially at 11.1 per cent last month, which misses those who already left or are no longer seeking work), that many are still forced to migrate, mostly to the western provinces of Alberta and British Columbia, is a sore point with the voting population. (See Mexicans With Sweaters – subscriber access).

As the government and business organizations trumpeted the booming economy and the province’s elevation to the coveted Canadian status of a “Have Province,” the citizenry received a mixed and hypocritical message, as the conservative government continued to cut funding for education, health care and the public service.

The final straw in the public’s view seemed to be a recent massive province-wide power blackout and weeks of rolling black-outs that left some 400, 000 people without electricity at one point, not because of extreme weather, but due to poor equipment maintenance planning by Nalcor, a provincial crown energy company. Dunderdale’s seeming  lack of concern, compassion or leadership on this issue turned off a lot of people including members of her own party caucus who, facing a general election in less than two years, seemed to be in tune with the public in thinking it was time for a change.

Dunderdale opted to depart before a palace coup.

Another one bites the dust.

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F&O’s WEEK IN REVIEW

Downtown Corner Brook, Newfoundland on a beautiful wintery Friday night. Photo by Greg Locke © 2013.

Downtown Corner Brook, Newfoundland, on a beautiful wintery Friday night after more than 30cm of snow fell over the previous two days … just another winter day on the west coast of the Atlantic Canadian province. Photo by Greg Locke © 2013.

 

New work on Facts and Opinions – and selected reading and viewing from elsewhere in the week past:

This week Facts and Opinions welcomed aboard Jim McNiven with his new regular column, Thoughtlines, in Commentary. In his inaugural column, Bill, Shane and Jim, McNiven tells the tale of three men who changed the modern world, from the baseball field to major political campaigns, but who remain almost unknown.

International affairs columnist Jonathan Manthorpe examined the symbolism of Japanese and Indian military exercises, and their relevance to China, in a column titled Japan moves to unshackle its military as storm clouds gather over Asia. Manthorpe also turned his attention to the renewed threat of civil war in South Sudan. Excerpt:

The sickening smell of unfulfilled vengeance hangs over fighting that broke out Sunday among rival clans in the capital of Africa’s newest nation, South Sudan — and there is an awful predictability about where it will lead.

Included among several new reports in our Dispatches section is a story about an American fraudster sentenced to six years in jail for his exploits in a strikingly grotesque line of work. Excerpt of a ProPublica story:

“Joseph Caramadre saw death as a holiday, a cause for celebration, a way to make money,” U.S. Attorney Peter Neronha declared on the courthouse steps downtown. “He stole the identities of people and used it to make money from companies who should have probably done more due diligence.”

In Canada a panel of the National Energy Board gave conditional approval to the contentious Northern Gateway pipeline proposal by Enbridge, which wants to ship oil from the Alberta oil sands overland to Canada’s West Coast, and then load it on tankers bound for Asian markets. Look for an upcoming F&O feature on the issue.

Spying – or surveillance for those who prefer the sanitized word – was again in the news this week as analysts blamed America’s National Security Agency for the loss of a $4.5 billion Brazilian aircraft contract that American aircraft manufacturer Boeing was widely expected to win. Brazil, publicly irate over American spying, awarded the contract to Sweden’s Saab AB, reported Reuters. See F&O’s Dispatches section for a report on recommendations aimed at curbing the NSA by an American expert panel appointed by United States President Barack Obama.

An interesting development, reported widely, caught our eye in Latin America: Chile’s election of former president Michelle Bachelet on a centre-left platform that promised profound change in the South American country, including using higher corporate taxes for better education, and getting big money out of politics.

And finally, if you’re considering giving someone a new bicycle for Christmas this year, you might consider that the two-wheeled mode of transportation and fun has, at least according to one columnist, become the symbol of a new conservative front in North America’s culture wars. Yes, you did read “bicycle.” No, we’re not kidding. The title of the piece, in the Boston Globe, says it all: Conservatives’ new enemy: Bikes.

— Deborah Jones                                

 

Posted in All, Current Affairs, Gyroscope

Analysis: Japan’s military and Asian storm clouds

International affairs columnist Jonathan Manthorpe examines the symbolism of Japanese and Indian military exercises, and their relevance to China. Excerpt:

The Japanese and Indian navies are in the second of four days of joint exercises in the Bay of Bengal, an event which neatly demonstrates the gathering storm of military preparations rumbling over Asia.

Log in to read the column, Japan moves to unshackle its military as storm clouds gather over Asia.*

*F&O premium works, including our commentary, are available for a $1 site day pass, or with monthly or annual subscriptions. Real journalism has value, and to avoid the conflicts inherent in advertising or soliciting outside funding F&O relies entirely on reader payments to sustain our professional quality.

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Analysis: Conflict in South Sudan

The sickening smell of unfulfilled vengeance hangs over fighting that broke out Sunday among rival clans in the capital of Africa’s newest nation, South Sudan — and there is an awful predictability about where it will lead, writes Jonathan Manthorpe in his latest international affairs column.

He looks at the renewed threat of civil war in the country, where at least 500 people have been killed so far. “There was a sure sign today that this fighting between the Dinka tribe of President Salva Kiir and the Nuer people led by his sacked Vice-President Riek Machar is to settle old scores,” writes Manthorpe. Log in to F&O  to read the column here.*

*Please note, F&O premium works including commentary are available for a price that’s less than a coffee, with monthly or annual subscriptions or with a $1 site day pass. Real journalism has value, and to avoid the conflicts inherent in advertising or soliciting outside funding F&O relies entirely on reader payments to sustain our professional quality.

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Introducing Thoughtlines, a new column by Jim McNiven

McNiven for F&O bio

Jim McNiven

Facts and Opinions is pleased to welcome aboard Jim McNiven and to introduce his new regular column, Thoughtlines, in Commentary.

In his inaugural column, Bill, Shane and Jim, McNiven tells the tale of three men who changed the modern world, from the baseball field to major political campaigns, but who remain almost unknown.

McNiven is Professor Emeritus at Dalhousie University in Halifax, Canada, where he still teaches part time, and Senior Policy Research Advisor with Canmac Economics Ltd. He has been a Fulbright Research Professor at Michigan State University’s Canadian Studies Center and, at Dalhousie, was the R. A. Jodrey Chair in Commerce and Dean of the Faculty of Management. He has served as Deputy Minister of Development for Nova Scotia, and President of the Atlantic Provinces Economic Council.

He has also been CEO of a small technology company, served on numerous corporate and government boards, and was a member of the Canadian Royal Commission on National Passenger Transportation. McNiven, who has a PhD from the University of Michigan, has written widely on public policy and economic development issues, co-authored three books, and has a special interest in American business history.

In A Lesson Passed On, his piece in October for the Loose Leaf salon of Facts and Opinions, McNiven wrote about taking his young grandson to a museum for Cold War-era Titan nuclear-armed intercontinental ballistic missiles – and how that trip put the ghosts and goblins of Halloween into perspective.

Posted in Gyroscope Tagged |

A ballet of birds

Serendipity on the Internet: ease into the weekend with “Bird Ballet,” a gift of sound and movement by Neels Castillon, a young filmmaker in France who filmed this murmeration of starlings near Marseille.

A bird ballet from Neels CASTILLON on Vimeo.

Posted in Gyroscope

Analysis: power struggles in Beijing and Pyongyang

In the capitals of China and North Korea ‘tis the season to be merry, but only over the bodies – real and figurative –  of purged enemies and rivals.

Jonathan Manthorpe’s latest international affairs column focuses on the power struggles in the corridors of power in Beijing and Pyongyang. Log in to F&O first to read the column here.*

*Please note, F&O commentary is available to monthly or annual subscribers, or with a $1 site day pass.

 

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The Shakedown of the Century?

Alberta-OilRig-2007-09-01_016_LOCKE
Oil rig spudding a new well near Vermilion, Alberta.                                                                                                  Photo by Greg Locke © 2007.

 

Will trade deals let energy companies shake us down for $55 trillion?

 

 

CHRIS WOOD: NATURAL SECURITY
Published December 13, 2013 

“Nice little planet ya’ll have here. Ya wouldn’t want anything to happen to it.”

I found myself imagining the dialogue, in a Jersey Mob-meets-Houston drawl, as I considered two apparently incompatible facts recently.

The first came from a major investment firm, Barclays Capital. It calculates that the world’s oil companies spent $687 billion in 2013 looking for and defining new oil reserves. Next year, Barclay’s estimates, they will spend $723 billion looking for more oil.

The other fact I needed to look up again after I read the first one. But it’s this: fossil fuel companies already own four times more oil, gas and coal than we can safely burn.

So why are they hunting even more?

Let me unpack that last statement of fact a little. It is based on necessarily approximate knowledge about how much of each of the major fossil fuels remains, on a heavy-handed equivalency among many different grades of coal and gas and crude oil, and — despite much scientific effort — what amounts still to only a rough guess about how much hotter our world will get for each additional ton of carbon in the atmosphere. Lastly, it is based on the arbitrary consensus of researchers and policy-makers that, considering how much disruption under one Celsius degree of average warming has already caused to familiar climate patterns, we should really try to hold eventual total warming to less than two degrees Celsius.

Allowing for that, the best minds working on the subject have calculated that to have a reasonable chance (defined as four out of five, or only a bit worse than playing Russian roulette with a six-gun) of keeping our planet within the benign climate range to which our economy, our society and all earth’s living species have adapted, we can release into the atmosphere around another 725 Gigatons (billion metric tons) of CO2.

But here’s the thing: the world’s fossil fuel companies already have on hand (in the form of known and developable reserves), enough coal, oil and gas to release something like 2,860 Gigatons of CO2.

Now, for simplicity I’ve rounded off some figures and turned the ranges provided in the original research into averages. I’ve also overlooked the fact that plenty of other activities (landfills, farming) also create greenhouse gasses, and so to keep below that 2o C threshold, only part of that carbon ‘budget’ can be allocated to burning more fossil fuels. But the fundamental point is unassailable: fossil fuel companies already possess at least several times more carbon in their reserves than the climate can absorb without alterations (rising seas, collapsing harvests) that will be catastrophic to humanity.

Which leaves the question: If the fossil fuel companies can’t burn the oil (or coal and gas) they have now, why are they about to spend three-quarters of a trillion dollars, nearly one per cent of the world’s total economic activity, to find even more oil?

Three possibilities come to mind:

  1. Resource companies don’t believe in science. A few Biblical fabulists may populate the industry’s hundreds of thousands of employees, but the activity of finding oil and gas is based on the same science that climatologists use, and whatever else corporate CFOs and CEOs may doubt, they believe in numbers. So I think we have to rule this one out.
  2. Resource companies are playing a game of chicken with humanity, eager to mint as much money as possible before desperate last-minute policy changes stop them. This one’s a little sociopathic, but sadly, certainly plausible.
  3. Resource companies have excellent attorneys who know their trade law, and believe they can force humanity to buy them off before the planet burns up.

Say again that last one?

Here’s the context: most of the world’s hydrocarbon exploration is conducted by companies headquartered in member states of the World Trade Organization, on the territory of other WTO members, or by firms from, and on the territory of, countries that have signed investment treaties with each other. A feature of WTO commitments, and the great majority of investment treaties, is that governments may not expropriate the assets of foreign investors without compensating those investors for their loss.

Now put yourself in the ergonomic leather office chair belonging to the CEO of Exxon or Shell or Statoil, and imagine that you have just received notice from the world’s governments that 80 per cent of the reserves shown on your balance sheet will have to stay in the ground.

What would you do? Exactly. You’d demand to be compensated for all that oil and gas and coal you’ve been spending a fortune (perfectly legally) to find, and now aren’t going to be allowed to dig up and sell.

A little Googling and some back-of-the-napkin arithmetic suggest the scale of the public’s liability if fossil fuel companies demand compensation under existing trade laws for reserves that should be locked in the ground if we want to preserve a survivable climate.

Based on the latest available world reserve estimates for oil, coal and gas; on the forecast that 80 per cent of each might be ‘stranded’ in the ground (‘expropriated’ in the eyes of trade lawyers); and on current prices for each of roughly $100 (U.S.)  per barrel of oil, $50 per ton of coal, and $10 per 1,000 cu. ft. of natural gas, here is what fossil fuel companies might view as compensable losses:

For locked-in oil: $12 trillion. For unburnable coal: $38 trillion. And for stranded natural gas: $5 trillion. In all: $55 trillion. Or a sum equivalent to about 60 per cent of the entire world economy. And as international trade law stands, defendant governments would have very few defences against claims that the ‘seized’ assets must be paid for.

Suddenly the rush to add even more barrels of oil, tons of coal and cubic feet of gas to unusable company inventories, at the cost of hundreds of billions of dollars, makes much more sense. Thanks to the ‘no-expropriation-without-compensation’ rule ubiquitous in trade agreements, companies can look forward to a healthy return on those discoveries even if they stay buried.

There is one way countries might inoculate themselves from such extortion—or at least cap its cost. They could issue formal advisories that additional fossil fuel discoveries made after a certain date will not be eligible for compensation in the event they are stranded by climate regulations. But no government on earth seems ready to go there, at least not yet.

Instead, we’re eventually more likely to hear some politer version of, “Yeah, nice little planet alright. If you want it to stay that way, you better come up with $55 trillion.”

Copyright © 2013 Chris Wood

Contact: cwood@factsandopinions.com

References and further reading:
Unburnable Carbon 2013: Wasted capital and stranded assets. Carbon Tracker Initiative and Grantham Research Institute of the London School of Economics.
World Energy Outlook 2011 and 2013. International Energy Agency.
Global Oil and Gas Reserves Study 2013. EYGM Ltd (Ernst and Young).

Posted in Uncategorized Tagged |

Analysis: South Africa’s nightmare

By Jonathan Manthorpe

Nelson Mandela has been praised to the rafters for promoting peace and reconciliation in post-apartheid South Africa, but there is precious little evidence on the ground that his message was heard or understood.

Read the column, The Nightmare of Mandela’s Dream in South Africa, here.*

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