Truth about Consequences
Legault tells the truth while GNL misleads
The picture from the federal government’s energy regulator. Literally.
In 2023, we are roughly half way along the bottom axis, the one that shows “years.” And interestingly enough, in 2023, we are almost halfway from the start of offshore oil production in 1997 and the forecast end of it all around 2050.
Don’t get overly excited yet.
Below is another chart from two years ago, this one for offshore oil production from the Canadian Association of Petroleum Producers with information from the Atlantic Provinces’ Economic Council.
Again: hold off on bunching up your undies.
Here’s another one from around 2015. The source is the offshore regulatory board.
All three charts show roughly the same thing. Even with Bay du Nord, offshore production in Newfoundland and Labrador will be pretty much done by 2050, give or take a year or five.
That’s what this is about. Nothing to do with global warming, the federal government’s policy, whether or not oil will still be an important part of the economy in the middle of the century. None of that at all.
This is about information and what we do with it based on the logical conclusions that follow from it.
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Lots of pictures today. Fewer words.
This chart is from a 2007 presentation by Ian Anderson of the university’s Harris Centre. There are a couple of marks I’ve added to this chart: the blue one shows where we were at the time and the burgundy one shows where we are today. You can go back to the slides above and mark the same spots.
What we are going to do with this is use the point from a column last summer about sustainability. We bring the future into the present.
You from your perspective in 2007 sitting in a government office could look at Anderson’s chart. You would see pretty easily that we could expect to be in the fat - as the sealing phrase goes - for a few years and then things would tail off. There’d be another bump when Hebron came on but there’d be a pretty steep drop in oil production after that. The fat here would be government income because government revenue from oil is tied to production levels and price.
Pretty simple stuff.
As the imaginary You goes along and looks at each chart, you can see some differences but the path played out pretty much as expected. The variation is stuff that was predictable, like when a project started production versus when we expected it to start.
The charts look like they do because they assume the companies are drawing down oil at the rate that will get the most out of it. They are not leaving oil in the ground unless they have to so they will not produce too slowly nor will they produce too quickly and risk collapsing the field.
For someone in government, there’d be a couple of logical conclusions you’d reach about what you needed to do next. One is not get into any spending that depended on oil revenues staying at the same levels as they were in 2007. Even without those charts, you’d be leery of any long-term commitments at high oil prices because we know historically that prices go up and down a lot. When production goes up and down too, your revenues aren’t stable enough to keep up those spending commitments without piling on debt, which then becomes another financial problem.
Another sensible conclusion would be to look at ways of getting more oil into production. Just as a freebie, let’s realise that the simplest thing for government to do into to get the most oil in production would be to make the overall regulatory system work as efficiently as possible. This is a well-known issue in Canada, especially in the east coast offshore.
And yet another sensible conclusion would be to figure out what other ways you could stimulate the economy to create lots of jobs that weren’t tied to oil and gas.
Before 2003, the government plans included all of that. After 2003, all of those ideas went out the window. This is not the result of some natural or inevitable truth about human nature or about the people in Newfoundland and Labrador. It was a conscious choice. It was a *consistent* choice because even when offered evidence the all-oil and no alternatives plan wasn’t working, the folks dominating politics in the province stayed the course. No matter the warning they could not be moved off the path. It’s breath-taking really and you only wonder what might happen if that same determination were applied to what makes sense instead of the nonsense of subsidizing flights no one wants to take.
On the surface, hydrogen/wind might seem like a way of developing a non-oil economy. Except it isn’t. The mad-panic for hydrogen - notice the politicians mistakenly call it “wind” all the time - just substitutes another pony to replace the one-trick-pony that appears to be dying off.
Go back to the time between 1985 and 1995, which is really the time that I am talking about before 2003, and you’ll find that we’d collectively developed a strategy that *didn’t* put all our economic hopes onto one unreliable thing. The strategy talked for the only time in our history of letting creativity, innovation, and entrepreneurship drive economic development on many fronts simultaneously rather thanlet the government drive what happens in the economy. Politicians and bureaucrats are notoriously bad at picking economic winners and the costs are enormous. Always.
That’s why the hydrogen thing is just more of the same even if the politicians pushing it think they are doing something different, that they won’t make the same mistakes of the people who did exactly the same things in the past and believed *they* were different too.
Nowhere is this more obvious than in the repeat of our favourite mistake, Churchill Falls. Last week a bunch of folks noticed a tweet from Quebec Premier Francois Legault, who met with the head of Hydro-Quebec.
Avec le président d'Hydro-Québec, Michael Sabia. Nous avons discuté de grands projets au Québec en hydroélectricité et en éolien et de la négociation avec Terre-Neuve pour le rehaussement de Churchill Falls et la construction de Gull Island.
Translation: “With the president of Hydro-Québec, Michael Sabia. We discussed major projects in Quebec in hydroelectricity and wind power and the negotiation with Newfoundland for the enhancement of Churchill Falls and the construction of Gull Island.”
The last GNL media release about talks with Legault was in February 2023. It mentioned a three-member team, and merely stated: "The expert team is responsible for leading high-level discussions with Hydro-Quebec to assess whether there are meaningful opportunities for future negotiations that will ensure the best value from the Churchill Falls plant and the Churchill River for the people of the province."
Since then there’s been complete silence from the Government of Newfoundland and Labrador on the talks. At some point things changed. “…whether there are meaningful opportunities for future negotiations" morphed into discussing "the enhancement of Churchill Falls and the construction of Gull Island," all without Premier Furey or energy minister Parsons telling the people of Newfoundland and Labrador *anything* about the change. Talk about a fundamental abrogation of responsibility to the people of a province by its government.
Parsons told VOCM that “he can’t speculate on the reasons why Legault tweeted out the picture, but he says from this province’s perspective, ‘nothing has changed’.” Well, we’ve heard that story before except from Andrew Furey in the denials *before* the winter meeting at the Colonial Building and The Rooms. Then suddenly there were talks. Remember that the February statement was an effort to walk back the appearance that Furey had basically be lured into talks for which he and the government were not prepared. The appearances in that case weren’t deceiving. They were dead on.
That’s another reason why Parsons comments on the idea of building hydrogen plants at Churchill Falls, Gull Island, and Muskrat Falls as well as pipelines to move the gas to Stephenville don’t really make anyone genuinely paying attention any calmer about what’s happening. Here’s the way VOCM reported that part of Parsons’ conversation with them about energy issues.
Parsons says there are no plans or discussions underway regarding a so-called “hydrogen pipeline” something he says was mentioned as part of discussions on the province’s hydrogen potential.
He says whatever discussions might occur in future on hydro or hydrogen development in Labrador, nothing goes ahead without the involvement of the Innu Nation, “full stop.”
The last bit’s just boilerplate. Pro forma. Stuff ya gotta say but as the Innu know it can also be meaningless. We’ll never do anything without letting the Innu know but just forget all the times we did before.
The bit about no plans or discussions may be literally true at the moment. But the idea of pipelines didn’t just come out of someone’s backside and when you line up with the evidence that Parsons dismisses, his comments appear to be disingenuous. Appearances are again not likely to be deceiving.
The presentation from which the information came about the hydrogen pipeline appears to be dated sometime *this* year after talks began with Quebec. It talks not only of Gull Island but of an enhancement to Churchill Falls that would install another another 1,100 megawatts at the plant in addition to the 5,500 MW that the thing already has in generating capacity. These are not small ideas and they are 100% consistent with the reference in Legault’s tweets about enhancement of Churchill Falls. One can only conclude that Parsons’ comments were not truthful or that there is something going on he hasn’t been briefed about or isn’t able to talk about because he and his colleagues have decided to withhold information from the public. There isn’t an obvious option that isn’t as bad as any of those. Either way, that doesn’t look good for Parsons.
Nor is it good for the rest of us that the government is quite obviously taking about billions upon billions of new risks for taxpayers and nothing is in public except what we see from another province and a skimpy access to information request. The pipeline to bring hydrogen from unbuilt plants to Stephenville would cost - conservatively - something on the order of $30 billion or twice the cost of the failed Muskrat falls project. It’s a crazy idea but clearly someone inside government is talking about pipelines to link to the Risley project, which itself will need billions in government cash to get started.
Like all the rest of the windy hydrogen talk, any of these projects will come only with huge cash contributions from both the federal *and* provincial governments. The provincial ones will almost certainly involve cash gifts and tax breaks, but most importantly and building on the Muskrat precedent, they will involve the use of domestic electricity rates as one way to subsidize private corporations based outside Newfoundland and Labrador. The locals will get a few jobs. The bulk of the benefit, including the cheap energy, will go to those outside the province.
Whatever is going on and whatever comes next is not the result of change or of doing things differently. They are the consistent behaviour of government after government since 2003 that ignored the truth and the logic of the truth and, mostly recently has let another provincial government do its job of telling Newfoundlanders and Labradorians what is going on.
That truth will have its own consequences.