Prime Minister Justin Trudeau’s pre-election bailout of Newfoundland and Labrador’s Muskrat Follies hydroelectric mega-boondoggle (pictured) was announced last week with preposterous “build-back-better” claims about creating “a healthier and more prosperous future” that will help achieve a clean and decarbonized energy system for the province and the country.
Commentary on the bailout, announced by Trudeau jointly in an elbow-bump with Premier Andrew Furey, was enthusiastically negative, with most observers rightly denouncing the $5.2 billion in new federal aid as a gross demonstration of the ability of power-seeking politicians to turn past political scams into great achievements.
The $13-billion+ Muskrat Falls generating station and associated under-sea and land-based transmission systems have been a mismanaged corporate and political boondoggle from its conception more than a decade ago.
But portraying Muskrat Falls as just another misguided megaproject plagued by unexpected cost-overruns, mismanagement, scheming executives and meddling politicians misses the overarching issue.
Muskrat Falls should be seen for what it is: a major demonstration project that reveals the financial follies, to farcical levels, behind the net-zero carbon crusade.
As recently as last August, Ottawa and the Atlantic provinces produced a Clean Power Roadmap that claimed Muskrat Falls is essential to putting Canada “on the path to net-zero.”
With the eventual shutdown of fossil fuel power stations thanks in large part to Muskrat, Atlantic Canada was said to be “leading the way to net-zero” carbon emissions for the region.
Sub-sea connections to Nova Scotia will “demonstrate the potential for collaborative transmission projects to make significant contributions toward the region’s energy resource options and emissions reduction targets.”
Given these allegedly solid green credentials, one might expect to see big-name ESG-seeking financial houses rushing to fund Muskrat “green bonds” at below-market rates to support the project’s contribution to decarbonization and the global net-zero 2050 campaign.
Not happening. Bloomberg reports that Muskrat’s big green debt actually forced Newfoundland and Labrador to pay a 38-basis-point premium when it issued bonds in April.
Another irony is the source of some of the funds Trudeau is directing to the Newfoundland bailout. A big portion will come from the federal government’s yearly net revenue from the Hibernia offshore oil project.
Instead of curbing carbon emissions, Muskrat depends on more carbon cash to proceed.
And more carbon emissions will be needed to keep the province green and clean. In January, federal Environment and Climate Change Minister Jonathan Wilkinson gave three global energy giants — Chevron, Equinor, and BHP — a green light to drill for fossil fuels off the coast of Newfoundland.
Wilkinson, who championed net-zero federal legislation through to law in June, said the new fossil fuel exploration scheme off the coast of Newfoundland “will provide economic opportunities for many Canadians and the legally binding conditions imposed throughout the life of the projects will protect the environment for generations to come.”
No mention was made of net-zero or carbon emissions.
The idea that Newfoundland and Labrador can fund green political ambitions with help from carbon was also endorsed last May in The Big Reset, a 380-page report from a special “economic recovery team” established by the premier.
One recommendation is to “Encourage Low Emission Offshore Oil and Gas Activity.” To accomplish this, the government should “review its petroleum royalty and local benefits structures in 2021-22 to ensure they encourage exploration and development of new activity in the offshore, with net-zero targets wherever possible.”
The last two words open a lot of loopholes on the way to a green future.
The Big Reset also warns, however, that big green energy projects such as Muskrat carry big red risks.
“While the development of the Churchill River is critical to [growing] the green economy, the end result of the Muskrat Falls project is potentially significant energy poverty for the people in this province.”
The risk of green energy poverty is not new. A Portland State University study found that “efforts to shift away from fossil fuels and replace oil and coal with renewable energy sources can help reduce carbon emissions but do so at the expense of increased inequality” and create “energy poverty” by rising energy costs and forcing lower-income households to pay more for energy.
Muskrat isn’t the only demonstration project for the risks inherent in trying to reorganize economic activity to meet speculative long-range net-zero objectives.
The same fate awaits British Columbia’s giant Site C green power disaster, which continues to unravel financially.
Costs have soared to $16-billion and continue to rise. The project, promoted as green and clean, is now the most expensive hydro dam in Canadian history.
Many more Canadian dams like Muskrat and Site C would be needed to eliminate fossil fuels in the future.
Vancouver energy consultant Aldyen Donnelly calculated that to offset lost fossil fuels, Canada would have to build 2.5 hydropower dams the size of the $16-billion Site C project somewhere in the country “every year for the foreseeable future” leading up to carbon elimination by 2050.
Another potential net-zero mega-boondoggle: carbon capture and storage. One estimate puts the cost of capturing carbon from the oilsands alone at $75 billion, with industry and governments scrambling to create a Muskrat Carbon Capture regime.
There’s always solar, although it seems China has taken over the solar panel market. The Wall Street Journal reports that the rise of solar power in the U.S. and elsewhere has been fuelled by a mountain of Chinese carbon-emitting coal burned to produce the panels.
Read more at Financial Post
