Rethink Muskrat Madness

As construction spending on Canada’s largest green energy project — the 824 MW Muskrat Falls hydro-electric project in Labrador undertaken by the provincial government’s energy agency Nalcor — continues, the profoundly harmful character of the project is becoming increasingly obvious. Here are four recent sources updating different aspects of the project that help to explain the scope of the crisis at Muskrat Madness:

– a survey of recent construction developments authored by Des Sullivan, AKA the inestimable Uncle Gnarley, (here)
– a follow-up post by Cabot Martin, a lawyer and former public servant with an investment background in geology and author of the monograph “Muskrat Madness” (here)
– a historical review of the 1969 contract between Hydro-Quebec and Newfoundland with a plea for cooperation and understanding between the provinces and a particular plea for a comprehensive review of whether to finish Muskrat Falls authored by retired Hydro-Quebec financial expert Bernard Lahey (link), and
– an analysis of the implications for power system reliability in Newfoundland arising from the August 8, 2016 Quebec Superior Court decision on the Upper Churchill contract authored sustainable energy consultant Philip Raphals (here with a slightly updated version available below).

These new documents suggest that the current official $11.7 billion cost estimate as reported by the Globe and Mail today has been overtaken by events, that the project potentially poses a risk to the downstream public and worker safety, that the dependable generation capacity likely from Muskrat is far less than official claims, and NL’s necessary partner to make Muskrat physically deliver reliable capacity — Hydro-Quebec — has a long list of reasons to prefer to not be involved.

After cancelling what was to have been a cooperative, multi-jurisdictional development program for the two long-envisioned hydro-electric sites on the Lower Churchill River in 2006, the then NL Premier Danny Williams announced in 2010 that the province would go alone on the dam development and break the “stranglehold of Quebec which has for too long determined the fate of the most attractive clean energy project in North America.” At the time, the estimated cost was $6.2 billion. The business case for the project was essentially a double-or-nothing bet on oil prices staying at the high levels seen generally in the previous few years. Rather than paying down the province’s debt, surplus revenue from off-shore oil would be plowed into a renewable energy project that would displace most of the modest amount of oil-fired generation used on the island of Newfoundland. Reducing greenhouses gases was a leading claimed justification for the federal loan guarantee when it was first announced during a 2011 election campaign stop by then Prime Minister Harper and again when the guarantee was finalized in 2012. Without a federal loan guarantee, no lenders would have backed the project. (It seems noteworthy that the only electoral success Harper achieved in NL by way of his harmful intervention was the election of the thoroughly unsavoury Peter Penashue.) The provincial government made Muskrat the centrepiece of their “turn back the tide” global warming campaign to command both the weather and the seas.

The Trudeau government’s November 2016 announcement increasing the federal loan guarantee to the project from the $5 billion promised by the Harper Government to $7.9 billion further enables self-harm by the government of Newfoundland and Labrador. Instead, I suggest it is long past due to undertake, as Mr. Lahey’s presents it, “an independent review of the Muskrat Falls project by a panel of experts should be undertaken immediately to decide whether to continue and if so, what is the plan.”

There is much misery to avert by cancelling this project now. According to Nalcor’s latest statement, the incurred cost of the project as of this October is only $5.8 billion (frustratingly, Nalcor does not report a running disclosure of its financial commitments with the project).

In June, official NL estimated that recovering the portion of Muskrat’s costs to be collected from NL power consumers will have the effect of approximately doubling power rates. The suppression of power demand from this increase is likely to be approximately equal to the usable power delivered by Muskrat to NL consumers. Muskrat Madness will “save” about as much energy as it will deliver by driving NL consumers into energy poverty (similar to the impact of wind, solar and forest-fired power in Ontario).

Sullivan’s post draws upon the federal government’s most recent Independent Engineer’s report, addressing a site visit in mid-July. The report constitutes a sweeping catalogue of how Nalcor’s Muskrat activities do not meet acceptable engineering standards across a broad range of issues. Deficiencies include a leaking cofferdam (acknowledged by Nalcor to be still leaking as of December 2nd), newly discovered geotechnical problems involving quick clay, and lack of routine quality control supervision resulting in hundreds of kilometers of faulty transmission cable installation. Sullivan also comments on Nalcor’s failure to install a protective ice boom before winter, an issue that only arose after the inspection addressed in the Independent Engineer’s report. I note that Nalcor has provided a reply of sorts to the Independent Engineer’s report, available here, the thrust of which is to note that Nalcor is paying attention to the observations of the Independent Engineer. Notwithstanding that Nalcor’s main contractor, Italy-based Astaldi S.p.A., has no previous cold weather experience, I also notice that the Independent Engineer doesn’t seem to be making site visits during winter — not keen on joining Napoleon’s Grande Armée’s march on Moscow perhaps. Notice also that the Trudeau government’s loan guarantee announcement coincided with the release of the Independent Engineer’s report but didn’t appear to reflect any implications that engineer’s report might normally give rise to from an investor perspective.

I also recommend your attention to Cabot Martin’s follow-up post addressing dam failure risks to folks living downstream of the Muskrat site. A key point that Martin makes is that “Concern for these risks can no longer be dismissed as ‘fear-mongering’ as was the case by the Minister responsible for Dam Safety over a year and a half ago.” Martin and a handful of local citizens, including Roberta Benefiel of the Grand River Keeper, deserve heartfelt appreciation for their longstanding efforts to bring to light new information about, and a wider understanding of, the complex and hazardous unstable quick clay geology of the area. Their efforts have included bringing into active involvement Swedish quick clay expert, Dr. Stig Bernander.

Bernard Lahey has used Uncle Gnarley’s site to provide an outsider’s input to the discussion over the province’s electricity future. Lahey jumped into the debate after recognising that HQ has never really attempted to defend itself in NL and the rest of Canada, to the extent that it cares, has glibly endorsed the HQ=evil nonsense that so thoroughly pollutes the discussion in NL. Lahey has also been motivated out of concern that NL’s misguided attempts at revenge against Quebec have motivated terrible decisions — seemingly endless fool’s errands in courts trying to abrogate the 1969 contract and Muskrat Madness to pick only two examples. With stinging understatement, he observes that “HQ has a constructive business relationship with all its neighbours, except Newfoundland and Labrador.” Lahey correctly emphasizes that NL needs cooperation from HQ if it is to make Muskrat Madness function properly, a theme that I will discuss further in the context of the Raphals evidence. It is a credit to both Sullivan and Lahey that the ensuing discussion of Lahey’s work is mostly respectful and substantive. The comments to Lahey on the Uncle Gnarley site are mercifully light on the usual anger/depression/revenge/conspiracy anti-Quebec ranting that generations of NL demagogues like Williams have relied upon. I particularly admire the thoughtful comments of “Ex-military engr” (although I will repeat my distaste often presented on this site for folks unwilling to be accountable enough to provide their real name with their comments.) One particular blog comment captures the essence of what drives official Newfoundland’s approach to decision-making.

Anonymous13 December 2016 at 10:34
…..
Sorry but respectfully, with friends and neighbours like the province of Quebec who needs enemies.
… we owe it to our children and grandchildren to plow a road around our friends in Quebec and make it large enough to carry all the power from Labrador to the benefit of NLers. …

I support Lahey’s comment that somehow, NL has to come to terms with the past before they can think clearly about the future.

For a moment, let’s assume that all the construction problems Uncle Gnarley has reported on and all the geotechnical discoveries that a geologically-alert lawyer like Cabot Martin is concerned about are all magically fixed. Let’s further assume that the currently published budget and schedule also magically work out perfectly. Without getting Hydro-Quebec’s cooperation, how much reliable capacity could Muskrat Madness deliver? This website includes my concerns starting in January 2012 that Nalcor has been secretly banking on being able to grab winter delivery capacity from Hydro-Quebec’s Upper Churchill asset, which I believed at the time would violate Hydro-Quebec’s contractual rights. Nalcor’s response to my initial concerns on that issue was that its then CEO, Ed Martin (2013 co-recipient of the Energy Person of the Year award from the Energy Council of Canada), initially demanded my apology and then ignored my request for clarification of its position.

In the context of an ongoing inquiry by NL’s Public Utilities Board into the reliability of Nalcor’s blackout-prone power delivery to islanders, the aforementioned Grand River Keeper retained Philip Raphals to analyse the implications of the August 8, 2016 Quebec Superior Court decision addressing Hydro-Quebec’s contract rights for Upper Churchill as they related to the ability of Muskrat Madness to deliver megawatts of capacity on demand. What he has produced is a spectacular report. Clear writing. Powerful logic. Devastating conclusions. The updated version of the report is available here: reliability-inquiry-grk-raphals-evidence-rev.

Raphals bases his production analysis on much better data than I did initially in 2012. His analysis of Nalcor’s planned energy banking scheme for Muskrat production in light of the court decision is that Nalcor’s scheme “appears to resemble a bank account to which Nalcor can deposit, but from which it cannot withdraw.” He concludes that dependable capacity on demand available to service needs on the island of Newfoundland will, during low water level events, amount to less than a third of the capacity currently assumed by Nalcor.

Pursuant to the scope of the PUB’s reliability inquiry, the Raphals evidence focuses on the generation capacity available on demand from Muskrat. The logic that Raphals lays out would also have profound implications for the amount of usable annual energy production that can be expected from Muskrat, particularly taking into consideration the storage limitations of existing on-island generation and transmission constraints but that issue is beyond the scope of his work. Nalcor’s lawyers are current seeking to eject from the record both the Bernander and Raphals reports adduced by the Grand River Keeper.

Conclusion

It appears that Muskrat Madness may pose an immediate physical risk to people downstream. Even if dam integrity is maintained, Muskrat Madness on its current trajectory will gravely impair the economic and social future of Newfoundland and Labrador, exacerbate tensions with Quebec, undermine Nova Scotia’s off-coal program, and harm federal taxpayers. Muskrat Madness is on track to cause so much harm that it will make Joey Smallwood’s dealings around Upper Churchill appear by comparison to be inspired nation building and industrial achievement.

I believe that Newfoundland and Labrador must immediately convene an independent, expert, and public review of the Muskrat Falls project addressing its construction and contractual issues. All directly participating stakeholders need to be involved — Nalcor, the NLPUB, Newfoundland Power, Emera, the federal government, and perhaps most importantly, Hydro-Quebec. Hydro-Quebec should be invited to provide its views on options to negotiate an end to all the litigation ongoing. Indeed, every effort should be made to utilize Hydro-Quebec’s extensive background in northern engineering to address the construction issues that now hamper the project.

I was one of the Muskrat Madness critics initially encouraged by the arrival of Stan Marshall as CEO of Nalcor. After Quebec Superior Court the decision was announced, Marshall made a public statement claiming “That court case will have no major impact on Muskrat Falls whatsoever.” I was discouraged by that statement from Mr. Marshall. I am further discouraged by today’s announcement that Nalcor has settled new commercial arrangements with Astaldi because the announcement reconfirms that Nalcor is committed to barging on with its Muskrat folly.

To all the Muskrat Madness stakeholders, heed Mr. Lahey’s advice: stop and rethink.

Post script (4:15pm Dec. 21) One correspondent argued the transmission aspects of the project could have value. I should have been more careful in presenting my concerns to clarify that I am focused on the generation issues primarily, although the construction management problems Nalcor is having with transmission are also a concern. It would take careful consideration to value the benefits of the transmission aspects of the project in isolation from the generation but there is clearly substantial value from transmission alone. Benefits of interconnection with the mainland would include:

– excess spring generation now spilled could be sold,
– the cost of operating and planning reserves of generation on the Island could be slashed
– the Island could access surpluses that might be available from neighbours as well as their own Labrador recall power,
– transmission would diversifying supply to deal with droughts

The technical challenges of the submarine cable components of the project appear to be substantial.

Post script (10 pm Dec. 21) Reading this excellent analysis by Laila Yuile made me reflect on the potentially positive contribution that Dennis Browne, the new Consumer Advocate, might make to the future of NL by bringing some sense of responsibility to Muskrat Madness. https://lailayuile.com/2016/10/23/if-there-is-any-saving-grace-to-muskrat-falls-let-it-be-the-light-it-shines-on-premier-clarks-vow-to-get-site-c-past-the-point-of-no-return/

4 Comments

  1. Thank you Mike Hilson, we (Grand Riverkeeper Labrador) have been asking for that for a decade. We have demanded the new Premier Dwight Ball “open the books” on this fiasco as he promised in his campaign, but, alas, it appears he doesn’t have it in him to stand up to his committments to the people who elected him. Shame… he will be de-elected next time round if we have anything to say about it. BUT, meanwhile, the bills keep piling up. We want exactly what Tom Adams has stated above… a complete review of the project by an Independent Review Board and a full disclosure of what has been spent, what contract commitments have been made, what it will cost to break those contracts and A TRUE ESTIMATE OF WHAT IT WILL COST TO COMPLETE THE PROJECT.. Nothing Less. And, our people are ready to face arrest again, and again if this doesn’t happen. What a shame that citizens have to be named as criminals to get an open and transparent government. Where has democracy gone indeed. You are right,, ALL CANADIANS are on the hook for this! If the North Spur fails, we will have a stranded asset, a ruined environment here in my home town, no power for the Island of Newfoundland and a bill of likely $15 Billion! Young people in this province will leave in droves. Businesses will close down due to the high cost of power and guess what, Canada and Canadians may well have to foot this bill for the Newfoundland Government. Time to get the word out to Canadians.

  2. Pingback: Debating Sovereignty Implications for NL of Muskrat Falls | Tom Adams Energy - ideas for a smarter grid

  3. Pingback: Guest Post by Bernard Lahey on Muskrat Falls | Tom Adams Energy - ideas for a smarter grid

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