Inquiry into $12.7 billion Muskrat Falls 'boondoggle' set to begin in Labrador - Canadanewsmedia
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Inquiry into $12.7 billion Muskrat Falls 'boondoggle' set to begin in Labrador



It has been called a “boondoggle” by the man in charge.

The Muskrat Falls hydro megaproject, a massive dam and powerhouse harnessing the lower Churchill River near Happy Valley-Goose Bay in Labrador, is not even yet complete.

But a public inquiry begins Monday on how its cost has already doubled to more than $12.7-billion – with the bill handed to a province of just 530,000 people, or fewer than the city of Brampton, Ont.

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“Muskrat Falls in a small province with very little money is enormous,” said David Vardy, an economist and former chair of the Public Utilities Board who will testify at the hearings.

“Muskrat Falls is too big for a little province like us, particularly on the backs of the ratepayers.”

READ MORE: New power transmission towers connect Muskrat Falls, mainland Nova Scotia

The 824 megawatt hydroelectric dam, being developed by the Crown-owned Nalcor Energy, will eventually send power to Newfoundland and later Nova Scotia through subsea cables.

Former Tory premier Kathy Dunderdale spoke of the “lasting benefits to the people of Newfoundland and Labrador” when she announced that the province’s largest-ever public expenditure was officially sanctioned in December 2012.

But as construction delays and cost overruns mounted, current Liberal Premier Dwight Ball called it “the greatest fiscal mistake in Newfoundland and Labrador’s history,” and called the inquiry.

The independent inquiry led by provincial Supreme Court Justice Richard LeBlanc will examine how the Labrador project was approved and executed, and why it was exempt from oversight from the Public Utilities Board.

Piecing together the story of where the Muskrat Falls project went wrong is a sizable task, and the probe’s conclusions won’t be available any time soon. There are more than 100 days of hearings scheduled until August 2019.

Co-counsel say they have interviewed hundreds of witnesses and reviewed 2.5 million documents – some consisting of hundreds of pages – in preparation.

The final report – expected Dec. 31, 2019, just after the next provincial election – will include LeBlanc’s recommendations but will not make findings of criminal or civil responsibility.

“While we cannot undo the past, we can learn from it,” LeBlanc said when the inquiry was announced last November.

WATCH: Ottawa won’t be ‘heavy-handed’ in Muskrat Falls hydro project dispute

The first phase of hearings, opening in Happy Valley-Goose Bay before moving to St. John’s next month, is focused on the project’s sanctioning and the involvement of the Public Utilities Board. The board declined to endorse the project before it was sanctioned in 2012, citing a lack of updated information.

High profile witnesses like former premiers Dunderdale and Danny Williams are scheduled to appear before phase one wraps in December.

In the first few days, people in Labrador and watching online will also hear from Oxford University economics professor Bent Flyvbjerg, whose faculty profile calls him “the most cited scholar in the world in megaproject planning and management.”

Stan Marshall, the current CEO of Nalcor Energy who famously called it a boondoggle, is scheduled for the first few days of hearings, as are representatives from the Nunatsiavut Government, the Innu Nation and the NunatuKavut Community Council.

Nunatsiavut President Johannes Lampe recently expressed unresolved fears over the potential threat of methylmercury poisoning in local wild food sources downstream.

The Innu Nation, which has been involved in Muskrat Falls planning under an impact and benefits agreement, said in a statement from Grand Chief Gregory Rich and Deputy Grand Chief Etienne Rich that “we look forward to participating in the inquiry to help it tell the story of the Muskrat Falls project.”

Representatives from accounting firm Grant Thornton will also be in Labrador to present findings from an investigative forensic audit into the decision to sanction the project.

Phases two and three, scheduled for next year, will look at construction, oversight and policy moving forward.

As LeBlanc said, the inquiry will not undo the past, especially as the drawn-out project is now more than 90 per cent complete. But the public airing of past decisions may offer some comfort for residents who are now facing the possibility of doubling electricity rates.

READ MORE: N.L. orders report on potential Nalcor cuts as Muskrat Falls payday approaches

Memorial University political science professor Stephen Tomblin said the project was popular when Williams championed it as a form of energy independence from Quebec.

He cites the “appetite for getting back at Quebec” for the notorious 1969 Churchill Falls deal which has generated more than $27.5 billion for Hydro-Quebec and about $2 billion for Newfoundland and Labrador to date.

Williams retired from politics shortly after announcing the plan in 2010.

Dunderdale’s government then sanctioned the project two years later with the understanding that costs would be covered by provincial electricity rates, emboldened by a healthy economy from offshore oil revenues and backed by a federal loan guarantee to the tune of $1-billion.

“Now Newfoundland of Labrador is in a period of crises and will be in a period of crises for generations having to pay for it,” said Tomblin.

Tomblin said the inquiry might bring about change, but it all depends on what Ball and his government choose to do with the findings.

“There are times when royal commission studies can make a difference … but it all comes back to political will, and it all comes back to whether premiers think they can actually use it as a tool to stay in power,” said Tomblin.

“I hope something positive comes out of it, but I wouldn’t hold my breath.”

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Canada-wide cannabis shortages to persist for years: Producers




Krissy Calkins smokes a marijuana joint at a "Wake and Bake" legalized marijuana event in Toronto on Wednesday, October 17, 2018.

Christopher Katsarov / THE CANADIAN PRESS

The supply shortages that have plagued many provinces in the first month of legal cannabis will likely persist for years, industry insiders say.

Provinces including British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, Nova Scotia and New Brunswick have all reported varying degrees of shortages.

New Brunswick was forced to temporarily close more than half its stores, while the Quebec Cannabis Corporation has reduced its store opening hours to four days a week. Labrador’s only legal cannabis store said it was forced to temporarily close after being without any product for nearly two weeks.

“Some licensed producers have been unable to deliver the volumes that they had originally committed to,” said Kate Bilney, a spokeswoman for the British Columbia Liquor Distribution Branch.

Khurram Malik, CEO of the Toronto-based cannabis company Biome Grow Inc., said the lack of supply is due in part to the tough regulations imposed by Health Canada on the country’s 132 licensed producers, and the time required by companies to develop a quality and compliant product.

He said the federal department also took too long to approve licences.

“The rules here are so difficult to grow cannabis — quite frankly more difficult than anywhere else in the world — that if you’re a new licence holder and you’ve never done this before, it’s going to take you a year, year-and-a-half, or two years to get any decent, consistent quality product out the door in any predictable volumes,” said Malik, adding it’s much easier and cheaper to grow in jurisdictions such as California.

“The good thing with that is, yes, it makes things difficult domestically, but the rest of the world looks at us as outright experts in this. They say if you can grow in Canada, you can grow anywhere.”

Malik said he suspects some companies did stockpile cannabis leading up to Oct. 17, but logistics such as packaging and shipping have held up distribution as producers navigate the red tape of a brand new sector.

“There may be empty store shelves right now in various provinces, but there’s product sitting in vaults ready to move. That will clean itself out in the coming weeks,” said Malik, whose company has facilities under development in Ontario and Atlantic Canada.

“Once that’s out of the way, then you’re going to have intermittent shortages throughout 2019 and into 2020 as people produce and ship right away.”

Health Canada said it has taken steps to improve the licensing and capacity of producers, including increasing approved production capacity from 185,000 square metres to more than 1.2 million square metres since May 2017.

The department declined a request for an interview. But a statement from spokeswoman Tammy Jarbeau acknowledged that product shortages would likely continue “in the months ahead.”

“As with any new industry where there is considerable consumer demand, we expect there may be periods where inventories of some products run low or, in some cases, run out,” said Jarbeau in an email.

“Health Canada remains confident that there is sufficient supply of cannabis overall to meet market demand now and into the future.”

The department said given the long-standing prohibition of cannabis, there were no established benchmarks to precisely estimate demand levels, or to determine which products would be in high demand.

“As the overall supply chain gains experience in the Canadian marketplace, it is expected that such localized and product-specific shortages will become far fewer in number,” she said.

Brenda and Trevor Tobin, the mother-and-son owners of Labrador City’s High North, said demand at the store currently far outweighs the available supply.

The shop sold all of its cannabis in the first three hours on legalization day, and in the weeks following, products dried up for almost two weeks.

Brenda Tobin said she continues to sell product faster than producers are able to deliver it. She said that has prompted some of her customers to buy cannabis illegally.

“A lot of them have said, ‘Well I guess it’s back to the black market’,” said Tobin. “We hate to hear that, but I’m assuming if they want their product, they’re going to get it one way or the other.”

She said product availability has also been restricted as producers send lists of available products, rather than the shop being able to request certain products, she said.

Authorities in B.C. and Alberta said licensed producers have not been able to deliver on the volumes they had originally committed to, but neither province provided specifics.

“While we forecasted and planned for this level of demand, we did not anticipate the supply challenges,” said Heather Holmen, manager of communications for Alberta Gaming, Liquor and Cannabis. “The shortage of product is a Canada-wide challenge.”

The Nova Scotia Liquor Corporation said it received less than 40% of the product it ordered from 14 licensed producers in August, but was able to bring in inventory from a P.E.I. producer days before legalization to help address the shortage.

The shortages meant that three Nova Scotia cannabis stores closed early a few hours early on three occasions during the first week of legalization. There have not been any closures since then.

Cannabis NB said it received 20 to 30% of its order for legalization day. It said 12 of the province’s 20 stores were forced to temporarily close in the last few weeks, but have all since reopened.

“Temporary closures are sometimes required to allow for new inventory to arrive,” Cannabis NB said in an email. “We expect supply levels to eventually normalize, however, the demand is consistent, and supply is a challenge.”

Meanwhile in Ontario — where its online store is the only way to legally purchase recreational cannabis until brick-and-mortar stores are put in place next year — the provincial ombudsman has received more than 1,000 complaints related to delivery delays, poor customer service and issues with billing.

Ontario Finance Minister Vic Fedeli said this week that the online Ontario Cannabis Store was returning to its original delivery time of one to three days, after receiving 200,000 orders since Oct. 17.

Ray Gracewood, chief commercial officer for the New Brunswick-based OrganiGram, said cannabis companies knew it would be a challenge to fulfil the demand during the first few months following legalization, and a shortage was inevitable as producers play catch-up.

“There’s a huge novelty factor and I think it probably has really captured the imagination of Canadians in general,” said Gracewood. “It’s a validation that Canadian consumers are willing to embrace regulated and legalized product.”

Gracewood said Canadian consumers have a whole new world of cannabis products to look forward to, and he expects producers will start developing product niches.

Ottawa has said it is aiming to make edibles containing cannabis and cannabis concentrates legal by next October.

Canada’s cannabis product shortage, by the numbers

Industry insiders say the cannabis product shortages that have plagued many provinces will likely persist for years. Here are a few numbers on how Canadian recreational cannabis sales have unfolded during their first legal month:

132: The number of companies licensed to produce cannabis in Canada, according to Health Canada.

78: The number of companies with a licence for sales.

191: The number of expansion amendments that Health Canada has issued, allowing licence holders to expand production capacity.

14,500 kilograms: The amount of dried cannabis licensed producers reported shipping to provincial and territorial retailers at the end of September, along with 370 litres of cannabis oil.

40%: The portion of its initial product order the Nova Scotia Liquor Corporation received leading up to legalization day on Oct. 17.

20-30%: The portion of its initial product order Cannabis NB received leading up to legalization.

340 kilograms: The amount of cannabis Manitoba Liquor and Lotteries shipped to retailers in October.

51,277: The combined number of transactions made at the B.C. Cannabis Store in Kamloops and the online store between Oct. 17 and Nov. 13.

More than 200,000: The number of orders the Ontario Cannabis Store has received since legalization day.

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Natural Resources minister says new pipelines the answer to oil price problems




CALGARY — Natural Resources Minister Amarjeet Sohi says he shares Albertan’s “frustration” at billions of dollars being lost to the Canadian economy due to oil price discounts linked to export pipeline capacity constraints.

But he says Ottawa is focused on finding long-term solutions by getting approval for new export pipelines such as the Trans Mountain pipeline expansion project it bought in August and by pursuing Bill C-69 to reform the National Energy Board.

Following a speech at an Energy Council of Canada forum in downtown Calgary, Sohi told reporters the key to building pipelines is building trust in regulatory processes and engaging affected parties early on so that approvals aren’t overturned, as was the case with Trans Mountain.

The judge that overturned that project’s NEB approval cited a lack of meaningful consultations with Indigenous people and failure to consider marine environmental impacts.

An NEB reconsideration of the identified issues is expected to conclude by February but Sohi said he won’t put a deadline on new Indigenous consultations now underway.

Asked about an Alberta request in October for the federal government to support crude-by-rail shipments, Sohi said the Alberta request is being examined by his department but he hasn’t actually seen it.

“My administration has been engaging with the province of Alberta, their officials and the officials from other provinces to explore options, options that can work, options that are practical to implement and options that will actually give us the ability to transport Alberta resources in a way that needs to be done,” he said.

“Those are short-term solutions but the long-term solution is making sure pipeline capacity is expanded.”

Asked then what options are being considered, he said: “I don’t know what those options are. Officials are engaging with the provincial officials.”

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Alberta ramps up pressure on Ottawa to offer more than "bland assurances" on resource bill




CALGARY – Alberta’s government is ramping up pressure on Ottawa to offer more than “bland assurances” that new legislation perceived to be harmful to the oil and gas sector will be amended.

Alberta Environment and Parks Minister Shannon Phillips said Wednesday the federal government has not done enough to deal with the province’s concerns over Bill C-69, a contentious bill currently before the Senate that industry has said would drive away new investment in the energy sector.

Phillips said ministers in Ottawa had offered only “bland assurances” that her concerns about Bill C-69 would be addressed but added she “put hardly any stock” in those assurances because it hasn’t been followed up by any action.

Bill C-69 would re-organize the National Energy Board and establish a new review process for such major natural resources projects as pipelines and mines, but which Phillips described as being like a “black box” because little information is available on which projects would be included in the new reviews.

“In this business, where things are too important to get wrong, bland assurances don’t go anywhere near far enough. We’ve asked for specific things and they have yet to deliver,” she said at an energy conference in Calgary.

Those specific things include a reinstatement of a “standing test” for who can intervene in pipeline project reviews and a list of the types of projects that would be affected by the new act.

The Alberta government also wants the impact of downstream greenhouse gas emissions left out of the new review process.

Similarly, energy industry executives say they’ve been offered nothing concrete showing that the federal government is willing to make changes they feel are necessary to the bill, Explorers and Producers Association of Canada president Gary Leach said.

“I would certainly hope Ottawa is getting the message,” Leach said, but added that industry has lobbied the government for changes while the bill was still before the House of Commons without success. It is now before the senate.

Natural Resources Minister Amarjeet Sohi declined to provide a timeline for when the project list accompanying Bill C-69 would be released but said he had a series of productive meetings with Phillips on the act.

“We have been very clear that Bill C-69 will not intrude into areas of provincial jurisdiction. It will focus on areas of federal responsibility,” Sohi said.

Alberta’s NDP government and the federal Liberal government have been aligned on a number of energy and environmental issues, including carbon taxes, but Bill C-69 is driving a wedge between the two governments.

Phillips travelled to Ottawa in October to raise her concerns about the bill, which she said are still not alleviated.

“If they feel so strongly that they’ve given us assurances, then they need to amend the act,” she said.

For his part, Sohi said amendments weren’t out of the question.

“If the Senate wants to propose amendments, we will be open to that,” he said.

I’m interested in listening to the solutions, but these solutions must be workable

Natural Resources Minister Amarjeet Sohi

Edmonton has been steadily ramping up pressure on the federal government to intervene quickly and help alleviate what is considered a crisis in the province, where Western Canada Select oil barrels sell for as much as US$50 per barrel less than the West Texas Intermediate benchmark.

The province asked Ottawa to buy new trains to help move oil out of Alberta and clear a glut of crude in the province, which has led to the wide price discounts.

Fitch Ratings released a report Wednesday that showed wider discounts for Canadian oil would persist even if domestic oil producers cut their output in an attempt to clear a glut of oil trapped in the province.

“I share the frustration many of us feel,” Sohi said of the discounted Canadian oil price, which is causing financial pain for oil companies and also for the royalty revenues pulled in by the provincial government.

He said he was also frustrated by recent delays to the construction of new pipelines, such as Keystone XL, and has listened to Alberta’s proposals for solving the problem.

“I’m interested in listening to the solutions, but these solutions must be workable,” he said, adding that “the long-term solution is building pipelines.”

If the US$40 discounts discounts persist through 2019, the Alberta government could see their royalty revenues fall by $5 billion, according to estimates by Peters & Co.

Canadian producers plan to curtail around 200,000 barrels of oil per day, which should overtime alleviate the depressed prices, Peters analysts said in a report published Tuesday.

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